Integration of Cryptocurrency in Traditional Financial Markets

What are the challenges in integrating cryptocurrency into traditional financial markets?

            More companies are finding that important clients and vendors want to engage by using crypto. Consequently, your business may need to be positioned to receive and disburse crypto to assure smooth exchanges with key stakeholders. As a result, Cryptocurrencies were born, and now they function more efficiently than the banking systems. They also offer even better financial systems than banks. Currently the biggest drawback of cryptocurrencies is its volatility, as seen in the crypto fear and greed index. This makes cryptocurrency unable to be used in daily day to day transactions. This issue is widely expected to be resolved once cryptocurrency gains widespread popularity. Why cryptocurrencies should strive beyond what banks can offer in the financial scope. Cryptocurrencies came to solve the issues within the current banking systems. Therefore, they should do better in creating a more effective financial ecosystem in the world. Below are some of the ways how cryptocurrencies can offer better financial services than banks.

Cryptocurrencies are digital assets that function like traditional money and can serve as means of exchange. They are usually bought through crypto exchange platforms and stored in safe crypto wallets. These digital currencies are decentralized, and they operate in a very secure way with minimal human interactions. As a result, many now classify them as the future of the finance sector.

Luckily enough, they are already doing it. Cryptocurrencies have very intact security systems that are encouraging to investors. They also offer reliable transactions at better speeds than the traditional features. As a result, they are proving to be vital in ushering a better and cashless financial age. However, there is still more that cryptocurrencies need to do to fill all loopholes from traditional banking systems.

While we are only beginning to see the impact of cryptocurrencies across multiple industries, it is hard to ignore the attention they have garnered. Deemed a “Disruptive Force,” the “Next-Generation Gold,” “A Permission-less Innovation”, and “The Future Currency of International Business”, surely cryptocurrencies – and the technology underpinning them, blockchain, – are here to stay.

An increasing number of companies worldwide are using bitcoin and other digital assets for a host of investment, operational, and transactional purposes. As with any frontier, there are unknown dangers, but also strong incentives. Explore the kinds of questions and insights enterprises should consider as they determine whether and how to use digital assets.

How do traditional financial institutions view cryptocurrency?

Although the world of cryptocurrency is steadily expanding and gaining popularity, traditional banks are hesitant to adopt the use of these digital assets—believing that their inherent risks outweigh their potential benefits. However, regulatory agencies such as the Office of the Comptroller of the Currency (OCC) are working to change banks’ perception of digital currencies, believing that these assets could positively drive financial institutions to a new era of innovation and efficiency.

Of course, they have reason to be cautious. Some financial services leaders remain skeptical of the value that cryptocurrency has as an asset class, and individual cryptocurrencies have lost market capitalization at times (including this year). During the COVID-19 crisis, cryptocurrencies have experienced volatility, and their reputation has been tarnished by the association of Bitcoin, the most prominent cryptocurrency, with criminal acts such as the Twitter hack of July 2020.

Financial institutions should also shift from thinking of crypto as a competitor to that of a partner. Banks can actually play a significant role in the crypto industry, adding some much-needed assurance and security to the largely unregulated environment. Adopting cryptocurrencies and blockchain technology overall can streamline processes and take banking into the next generation of efficiency and innovation.

Banks may be wary of cryptocurrency, thinking that transactions involving these assets present heightened risk and require lengthy and expensive due diligence. But digital currencies can offer many benefits to financial institutions and their customers, they just need to take the leap. A cryptocurrency that’s managed by a central bank diminishes the appeal of the asset in the first place, so some banks don’t believe that they’ll be able to enter this space successfully. The decentralized nature of the currency is seen to undermine the authority of central banks, leaving some to believe that they won’t be needed anymore, or they’ll be unable to control the money supply.

If you want to learn more about this topic, feel free to leave your valuable comments. We are happy to assist you. All the best for your future.

(All the material in this article are only the views of the author, and couldn’t be taken as “Financial Advice”)