The year 2022 is here and banks and the traditional banking system remain alive despite decades of threatening predictions by crypto enthusiasts. The only final game that happened – a new plan for Ethereum 2.0, released by Vitalik Buterin late last year.
Although this plan would change the crypto industry for the better, 2021 showed us that crypto did not destroy or damage central banks, just as traditional banking did not destroy cryptocurrency. Why?
To be fair, the fight between the two was equally brutal on both sides. Many crypto enthusiasts have shouted about the coming apocalypse of global financial systems and described the bright crypto future ahead, where every item can be purchased with Bitcoin (BTC). On the other hand, bankers rushed to defend the traditional role of the banking system and blamed blockchain technology for low capacity and inconsistencies.
Both sides erred in their predictions.
Fortunately, neither crypto nor traditional banking was destroyed, even though they wanted to. On the one hand, no major crypto project has stayed away from the closest integration with banks. The US-based Kraken cryptocurrency exchange has received a banking license and the Coinbase IPO process speaks for itself, as it is a 100% game according to the rules of the banking / financial system. Most high-end projects use the services of only a few banks: Signature, SilverGate, Bank Frick – concentrating settlement and enforcing banking principles of working with cryptocurrencies.
On the other hand, the banking community has created internal ecosystems for crypto projects. Visa is introducing cryptocurrency consulting services to help partners navigate the world of cryptocurrencies. Amazon Web Services (AWS) wants to “be AWS cryptocurrency”. Switzerland suggests crypto banking services. SolarisBank even offers an API for crypto projects. The largest U.S. banks and stock exchanges are introducing cryptocurrency-related services. In El Salvador, Bitcoin is recognized as a means of payment, which (theoretically) means that international financial organizations must be prepared for Bitcoin settlements with El Salvador.
Related: What is really behind the Salvadoran “bitcoin law”? Experts answer
What prevented cryptocurrencies from destroying banks?
humanity. Throughout human history, many new technologies have not been able to have immunity from being directly or indirectly controlled by government agencies through corporations. Radio, TV, the Internet, social networks – it all started with the idea of free dissemination of information and eventually came across the fact of complete control. The same story is happening with blockchain now and there is no chance that it will change in the future.
Mostly people try to exaggerate with risks and reduce the likelihood of a good outcome. In my opinion, this is a reason that has severely limited and continues to limit people in accepting cryptocurrencies. But, as I said, this way of thinking is part of human nature.
Nevertheless, why does centralization beat decentralization? It took some time for the world government to understand that blockchain technology could be not only a problem but also a powerful tool for pursuing political interests. Thus, the blockchain, originally conceived as a powerful tool of freedom, got a completely reverse implementation and turned into a tool for controlling money on a previously unimaginable scale. Like nuclear technology, people use it for peaceful and military purposes; the blockchain has two sides of good and evil.
Related: Decentralization versus centralization: where is the future? Experts answer
But not a loss
At first glance, the cryptocurrency had to take a step back from the initial positions of the “hawks”. In return, it has received wide acclaim, distribution and a significant number of users around the world – it seems to be a fair reward and victory over those who predicted imminent death.
I believe that the growth of the connected is important Regtech technologies, based to speed up compliance procedures and all possible verifications, has led to the adoption of crypto by traditional finance. These projects with Know Your Customer (KYC) / Anti-Money Laundering (AML) solutions have shown a crypto response to banks: companies like Chainalysis, Onfido, can build KYC operations more efficiently while maintaining complete legality of processes.
Related: The banks ’battle against DeFi is a victory for individual crypto investors
The newly established startups could not follow the path of low compliance efficiency in banks, which is a breakthrough in almost every process. Nevertheless, they have taken care of compliance in the legal field themselves, but more efficiently.
But will CBDCs destroy cryptocurrencies? We should stop talking about destroying anything, but think about future potentials. Central currencies (CBDCs) have problems that need to be addressed, in particular interoperability issues. Due to the incompatibility of CBDCs issued in different countries, the ability to convert them to each other and the slowness of many government-related processes, we will not be able to talk about a quick solution.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk and readers should do their own research when making a decision.
The opinions, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect 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 leading technology roles. He was Director of Big Data at the JSFC AFK Systems Research and Development Center. Prior to this role, Alex worked for Mobile TeleSystems, the largest telecommunications provider in Russia, where he led the development of anti-fraud and cyber security systems.