Do Cryptocurrencies Spell The End Of Traditional Banking?
November 20, 2019
There seem to be more and more companies than ever before that are willing to accept cryptocurrencies as payment for products and services. When companies such as Microsoft, Subway and Expedia are willing to accept Bitcoin, for instance, it may be a sign of changing times – but the question is – are these companies at the vanguard is a revolution in the way that money is treated – are traditional banks and payment methods now under threat due to the rising popularity of cryptocurrencies?
Firstly one should review exactly what these companies are offering in exchange for Bitcoin. Microsoft will allow customers to ‘top-up’ their accounts using Bitcoin, Subway accepts Bitcoin payments at some of their outlets and Expedia (one of the world’s leading online travel booking companies) will accept Bitcoin under ‘strict conditions. The common thread that runs through Bitcoin acceptance is the fact that these leading companies that will accept cryptocurrencies will do so in certain tightly controlled circumstances. To the layman at least it may seem as if these organizations are testing the waters to see if cryptocurrency payment is a viable option that would suit their strategic goals and business imperatives. Learm more from an ATM machine manufacturer.
Part of the attraction (and danger) for these companies when it comes to cryptocurrencies is that they can fluctuate wildly in value. They are not tied to physical assets. They are not dependent on a financial institution’s holdings – nor on a country’s balance of payments or macroeconomic performance (that said most currencies have no ‘concrete’ backing since the demise of the gold standard). Cryptocurrencies have value because they are used. It is the community of users who, by purchasing and through the pressures of supply and demand for cryptocurrencies that sets the value. A company that accepts Bitcoin, for instance, will be betting that the value will stay stable – or increase, a net positive on the books. However – at the same time they rely on the fact that they will, at some point be able to convert that currency into a cash – or use it to fuel the growth of their business. However – it’s a gamble. A wildly fluctuating currency is not a business-friendly one.
However, that said, cryptocurrency use is becoming easier. By way of example, there are Bitcoin ATM’s around where currency can be exchanged for Bitcoins.
Does the use of cryptocurrency spell doom for financial institutions? That is doubtful in the medium term. Is cryptocurrency a threat to the traditional banking system in the long term – the answer is yes. BNP Paribas, the French banking giant released a report saying that their experts believe that the technology behind cryptocurrencies could make’traditional’ banks redundant. There are a number of reasons for this. One of the most important drivers behind the future wide acceptance of cryptocurrencies by consumers is the fact that in the age of the Internet they have become disenchanted with the delays in processing times, in the age of the Internet consumers want ‘real-time’ service. Consumers are also disenchanted with the charges levied by banks and the opaque nature of the charges that are levied.
It is clear that cryptocurrencies such as Bitcoin are gaining ground when compared to traditional currencies and the technology behind these online currencies is a threat to traditional financial institutions. those institutions need to pay much closer attention to the wants and needs of consumers. Ignoring cryptocurrencies may mean that they are consigned to the dustbin of history sooner rather than later.