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Crypto banks are gaining momentum over traditional banks

The massive popularity of crypto-industry is visible in numbers. For example, the bitcoin market cap reached more than $1 billion and blockchain is expected to hit $23.3 billion. The general market cap of cryptocurrencies is expected to hit $1087,7 billion by 2026. Due to these very eye-catching numbers, crypto banks remain on the rise, while the traditional banking system already is undergoing several backlashes. 

The public survey has shown that 79% of Americans have heard of cryptocurrency and a big number of them are investing in it. One of the biggest markets coinbase has verified more than 56 million users. To compare the engagement of the website to the traditional investment management company Fidelity. According to the official statistics, they have 35 million user accounts. Cryptocurrency banks are surpassing traditional banks, but what about traditional institutions? 

Crypto banks VS Traditional Banks 

The terms such as Blockchain, AI, cryptocurrencies are the ones that are trending on almost every platform where the financial market is discussed. This is a period when we are facing significant changes and those changes are especially driven by the crypto-industry as the number of transactions is increasing not from year to year but on a daily basis. It is assumed by the financial experts that the compound annual growth rate will be roughly to say 12 % by 2024. This is when people started questioning the role or even the future of tradition. Fiat currencies,  while we have been using traditional currencies for centuries already, the massive use of cryptocurrency will help it to gain the role of technologies in our lives even more. One of the major obstacles that traditional banks are facing in comparison to crypto banks is that the transaction speed is way lower than in the case of executing crypto transactions.

Limitations of traditional banks  

The use of cryptocurrency makes the transaction and investment process way different from what we are used to during the last few decades. The global financial crisis that occurred in 2008 has shown the entire world that the banking system is also vulnerable to economic challenges. When it became clear that those financial institutions could not secure their funds, the demand for alternative ways of securing their funds was massively increased. This is when Satoshi Nakamoto invented the first-ever virtual asset, named bitcoin. 

The main advantage of it was to remove the traditional banking payment system from the process, also known as third-party involvement. Today we see that the price change in one bitcoin is wild since it has reached the historical maximum of $64,000. 

The role of decentralized technology 

The obstacles that the traditional banking system created for the people, was its own policy, regulations, and mainly, interest rates that promoted the insufficient processes for the clients. The new crypto payment system was offering them the service that not a single bank was able to provide them with, this is a customer-centric approach and they are given the possibility to hold the assets anonymously. 

The solution to the complex banking system was the decentralized banking process, which first came up in Nakamoto’s head. This new system has its own risks of course, but it also has advantages that people cannot refuse to take. 

Digital Dollar 

The Federal Reserve has announced that they are about to implement the digital dollar in summer 2021. This does not mean that the digital dollar will be cryptocurrency, neither will it be decentralized, nor will it be built on blockchain technology. It will be a traditional, fiat currency in a digitized form. 

The main reason why the government has decided to create the digital dollar is to make even economically poor Americans gain access to the banking system. This might also be an attempt to overcome the challenge that the crypto-industry has created for the traditional banking systems. Many other huge corporations that operate on the financial market, for example, Mastercard and Visa are trying to collaborate with the central banks to create a customer-oriented approach and modify the old-fashioned system. 

Crypto Banking 

There are a plethora of crypto enterprises however, crypto banking means the process of how digital currencies get introduced into the market in order to be exchanged or transacted. There are special crypto platforms created that allow registered users to hold or store virtual assets. When we say crypto banks, we mean the apps for the platforms that are created online. The users, while signing in to their accounts are able to see their secured digital wallets and execute the transactions they wish for, and all those happening just in seconds. 

It is believed that the whole crypto banking system has a bright future ahead. There are still big security challenges that not only the crypto-industry but the blockchain system has to overcome as they both have a superior nature. 

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Comments: (1)

A Finextra member
A Finextra member 31 May, 2021, 08:591 like 1 like

$1 billion & $23 billion are mentioned. What percentage of the banking market does this represent? I do not believe that either are 'massive' numbers in banking terms.