The year 2022 is here, and banks and the traditional banking system are still alive despite decades of threatening predictions made by cryptocurrency enthusiasts. The only ending that came was the new Ethereum 2.0 roadmap that Vitalik Buterin published late last year.
Although with this roadmap the cryptocurrency industry would change for the better, 2021 showed us that cryptocurrencies did not destroy or harm central banks, just like traditional banking did not kill cryptocurrencies. Why?
To be fair, the fight between the two was equally brutal on both sides. Many cryptocurrency enthusiasts were shouting about the coming apocalypse in the world’s financial systems and describing a bright cryptocurrency-related future ahead in which all items could be bought with Bitcoin (BTC). On the other hand, bankers were quick to defend the traditional role of the banking system, accusing blockchain technology of poor performance and lack of compliance.
Both sides were wrong in their predictions.
I play on equal terms
Fortunately, neither cryptocurrencies nor traditional banking were destroyed. On the one hand, none of the major cryptocurrency projects have shied away from closer integration with banks. United States-based cryptocurrency exchange Kraken has received a banking license and Coinbase’s IPO process speaks for itself as it is 100% gambling by the rules of the banking/financial system. Most of the major projects use the services of only a few banks: Signature, SilverGate, Bank Frick, concentrating settlement and imposing banking principles of working with cryptocurrencies.
On the other hand, the banking community created internal ecosystems for cryptocurrency projects. Visa introduces cryptocurrency advisory services to help its members navigate the world of cryptocurrencies. Amazon Web Services (AWS) wants to “be the AWS of cryptocurrencies.” Switzerland proposes banking services to work with cryptocurrencies. SolarisBank even offers an API for cryptocurrency projects. The largest US banks and exchanges are launching crypto-related services. In El Salvador, bitcoin is recognized as a means of payment, which (theoretically) implies the need for international financial organizations to be prepared to make settlements in bitcoin with El Salvador.
What has stopped cryptocurrencies from destroying banks?
The humanity. Throughout the entire history of humans, many new technologies have not been able to have immunity from being controlled by state authorities directly or indirectly through corporations.. Radio, television, Internet, social networks… everything began with the idea of the free dissemination of information and ended up running into the fact of total control. The same story is happening now with blockchain, and there is no chance that it will change in the future.
For the most part, people try to exaggerate the risks and reduce the probability of a good outcome.. In my opinion, that is the reason that has limited and continues to limit people to accept cryptocurrencies. But, as I said, this way of thinking is part of human nature.
Still, why does centralization beat decentralization? It took some time for government globally to understand that blockchain technology could be not just a problem, but a powerful tool to achieve political interests.. So the blockchain, originally designed as a powerful tool of freedom, received a complete reverse implementation, becoming a tool for the control of money to an extent previously unthinkable. Like nuclear technology, humans use it for both peaceful and military purposes; the blockchain contains two faces of good and evil.
It’s not a loss though
At first glance, cryptocurrencies had to take a step back from the initial positions of the “hawks”. In return, he received wide recognition.distribution and a considerable number of users around the world, which seems like a just reward and a victory over those who predicted an imminent demise.
I believe that the significant growth of related Regtech technologies, designed to streamline compliance processes and all possible checks, has led to the acceptance of cryptocurrencies by traditional finance. These projects with Know Your Customer (KYC) / Anti-Money Laundering (AML) solutions showed a cryptocurrency response to banks: companies like Chainalysis and Onfido can build more efficient KYC operations while maintaining the total legality of the processes.
Newly established startups couldn’t go down the path of low-efficiency compliance in banks, which is a break in almost any process. Still, to conduct business in a legitimate field, they did the fulfillment on their own, but more efficiently.
But will CBDCs destroy cryptocurrencies? We should stop talking about the destruction of anything, but think about future potentials. Central Bank Digital Currencies (CBDC) have problems to solve, especially interoperability. With the incompatibility of CBDCs issued in different countries, the ability to mutually convert them, and the slow pace of many government-related processes, we will not be able to speak of a quick fix.
This article does not contain investment advice or recommendations. All investments and trading involve risk, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Alex Axelrod is the founder and CEO of Aximetria and Pay Reverse. He is also a serial entrepreneur with more than a decade of experience in technology leadership roles. He was director of big data at the research and development center of JSFC AFK Systems. Prior to this role, Alex worked for Mobile TeleSystems, Russia’s largest telecommunications provider, where he led the development of anti-fraud and cybersecurity systems.
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