Effect of cryptocurrencies on the banking system

Living in the era of the fourth industrial revolution there is no way that there is no technological advancement in the field of currency. Old paper notes and coins are very old. Crypto is the major breakthrough. Cryptocurrency is a currency that is used as normal currency to buy and sell. It can be a service or a product, totally depending upon the type of work you deal with.  It is secured by cryptography that ensures the safety of cryptocurrency. Cryptocurrency is powered by Blockchain that manages the transactions. We are not far away from the time when old currency notes and coins will disappear and digitized currency will come into play. There are various cryptocurrencies working at the moment. Most famous and renowned as Bitcoin. Following it comes Ethereum, Binance, Dodgecoin, XRP etc. All have their own market and consumers.

While crypto coins gain value at rapid speed they lose their value at the same pace as well. So this is also a fact that to see crypto as a currency, it needs to be stable. To buy crypto an online wallet is needed to hold your currency. Majority use an exchange to store the currency. They can be bought by exchanges like Binance.US, Coinbase, Webull, Gemini etc. All of these exchanges have their own access to different cryptocurrencies. Which can be risky as well at times, keeping in view that crypto is not legalized worldwide but the green time is yet to come. China has banned crypto while in the US it is legal. So one super power is ignoring it while the other is accepting it seems to have a good insight about the future of crypto.

Initially Crypto was started in 2009 when bitcoin was created. With the passage of time more and more coins were created and today we can see every second person trading in crypto and earning well. Yes, it is a threat to banks because it gives new ways of banking and financing. At the moment there is not much put on by the banks on Crypto but they would have to consider how to use this new evolution in currency.

Due to the decentralized nature of crypto, it is believed that it would undermine the authority of central banking systems and would be unable to control the flow of money. A totally peer to peer system of cash flow would cut the role of financial institutes resulting in sending and receiving directly. So this limits the flow of money. There is no way to track flow of funds. But currently the threat is negligible. On the other hand, crypto coins also have flaws of their own like they can control only limited transactions per second.

It is not stable and if one accepts a salary in crypto he is taking a huge risk as it is not stable. People can also not trust crypto as they trust U.S dollar, also it is a major point to be noted that crypto currencies transaction fee also varies and is not constant, causing many problems to people dealing with crypto.

It is true that in a digital age it is necessary for consumers to just check their smartphones to know what is going on. There is also a chance that central banks issue their own digital currency as well. So, centralized and big banks won’t be able to get away with these practices for long as new technologies make it easy to reach everybody.

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