Cryptocurrencies are increasingly becoming popular as people see them as an alternative way to store their wealth. This comes in direct opposition to storing money in banks. These financial institutions are not taking this lightly, because cryptocurrencies are seen to be a potential bank replacement. However, exchanges supporting and enabling crypto trades rely on banks. This is leading banks to start closing accounts belonging to the exchanges, or even refusing to do business with them. Here are some of the reasons why bankers are against the crypto markets:
Increase in Cryptocurrency Value
Over the years cryptocurrency markets have seen massive growth. During this time, several digital currency prices exploded at a 1,000% rate, something that cannot happen in banks. Even though the price of currencies, like Bitcoin, are dropping in price, it is still very high in comparison to where it was a year ago. Well-known bankers like Jamie Dimon, CEO of JP Morgan, criticized Bitcoin saying it was a fraud before later withdrawing his comments.
Decentralized Nature of Cryptocurrency
The nature of cryptocurrency does not allow third parties to verify transactions. This is different from centralized platforms where banks have to confirm a transaction before approving it. The fact that people can control their money using cryptocurrency is causing unrest among bankers. They fear that all customers may eventually use these digital currencies, and thus run them out of business.
Cryptocurrency’s Underlying Technology
Digital currencies run on blockchain technology. It is very complex and difficult for many to understand. At the start, banks were against the technology, but in an effort to stay ahead of the curve, they are beginning to adopt blockchain tech. This is happening event though blockchain is the main driving force behind digital currencies.
If cryptocurrency takes over all transactions, then banks will run out of business and close. That means that people will lose jobs. This factor alone worries bankers and is definitely one of the reasons why they are fighting digital currencies with every opportunity
Another thing is that the nature of blockchain technology which operates digital currencies, but does not require anyone to approve transactions. Therefore, it does not require employees. Transactions like reconciliations, which banks do, are not required in cryptocurrency transactions since all finances are decentralized.