Over the last few years, cryptocurrency has grown significantly as the users and transactions of digital currencies like Bitcoin has been growing rapidly year by year. These currencies are independent from central banks, and the risk of them infiltrating the conventional financial systems. The adoption rate of cryptocurrencies is already growing at a striking pace, making it a US$200 billion industry. Bitcoin is the most famous cryptocurrencies and has already enabled businesses and individuals to develop and flourish, while many rely on trading as their source of income.
Today, most people across the world do not have access to basic banking services to fulfill their personal financial needs. And as they are already financially disadvantaged in most cases, they typically find alternatives lending practices that are doubtful and risky. This, as a result, leads to more instability among the people who requested the loan. Cryptocurrencies play here a pivotal role with their high volatility and accessibility. Currently, there are a number of apps and platforms that make the use of cryptocurrencies and bring them closer to the larger audience.
Cryptocurrencies, particularly bitcoins, can certainly be very valuable to the global economy and society in general. The costs associated with these currencies’ transactions are very low as the use of cryptocurrencies and blockchain does not rely on an actual physical space to exist. Bitcoin has already created numerous sub-sectors that have enriched many companies and people. Today, there are more than 5,000 cryptocurrencies in circulation, with many built on innovative applications and use cases as the ecosystem rapidly evolves.
At The Future of Money event in Dublin, Jeremy Allaire, Founder and CEO of Circle, the company that recently acquired cryptocurrency exchange Poloniex, unveiled the considerable impediments that traditional banking institutions are putting in the path of the crypto industry. According to him, banks have pretty systematically limited companies’ ability to operate in this space, and that really is a challenge. Jeremy further said, he thinks part of that is regulatory uncertainty and part of it is just hostility to a technology which basically threatens to eliminate a lot of their profit margin and business models.
Allaire believes the solution lies in the establishment of crypto-native banks that will work closely with both crypto companies and central banks to provide the connectivity that is urgently needed.
In order to respond the cryptocurrency fad over the recent times, banks and financial institutions now have to decide how they will handle customers, investors, and internal voices calling for increased institutional investment in blockchain assets. In 2017, the crytocurrency applications and blockchain saw a rising interest from businesses, institutions, and governments. However, the finance industry has the most to lose from the rise of digital currency.
Given to this uncertainty, financial institutions need to reconsider cryptocurrencies as most financial companies look bitcoin as a scam. In a CNBC Global CFO Council survey, roughly a third of CFOs said they do not know enough about the cryptocurrency to have an opinion, while nearly 30 percent see bitcoin as a fraud. Meanwhile, just 14 percent said it is real and still going higher in value.