Banks Are Feeling The Crypto Threat
"Blockchain but not crypto."
That is the idea the banks had. Jamie Dimon was the poster child for that concept. It was the mantra out of the banks about a year ago.
Now, the threat is so severe, some of the banks are taking the "if you can't beat them, join them". Dimon's bank is going to be one of the first with its own currency. This is being built on a blockchain, jobs that the company is already advertising.
The banks are threatened at losing the cross border payments. Anyone who sent money internationally knows how expensive it can be. The banking system cleans up with the fees that it charges.
Cryptocurrency is a major threat because it does not care where the money is going. A crypto transaction is a peer-to-peer payment from one wallet to the other. Geographic boundaries are meaningless.
The fees to send the transaction are also a fraction of the cost of the banking system. Even at its peak, when Bitcoin got up near $100 for a transaction, this is still peanuts compared to sending $50,000 internationally. The banking system charges a percentage of the total. Depending upon the country, this can be over 10%, especially in small amounts.
Facebook made a lot of noise with their proposed solution of the Libra. With over 1B users, there would be an instant user base to access. This is a major threat to the banking system.
We now see another entrant as Google announced its own payment system. While not going the cryptocurrency route, it seeks to exploit the existing user base that is already on its platforms.
Ultimately, all the centralization might end up sinking all these options. In the meantime, the behemoths will try to outdo each other. The banks, unfortunately for them, operated for so long with a monopoly, that they might have a tough time keeping up with the mega-tech companies.
In the end, my feeling is distribution is what is going to matter. Providing a platform through which people can transfer money or make payments is terrific if people have money. None of these options solves the issue for those who are feeling the effects of income inequality and a system that keeps pushing wealth into fewer hands.
I am personally very happy with what I am seeing in the cryptocurrency world and what is taking place. As time passes, the infrastructure for crypto improves. At the same time, I see a lot more problems arising for the existing system. This is going to keep taking a toll on the present institutions.
Altering systems that have powerful players and are well-established can take some time. The cryptocurrency world is still rather young. In fact, we still do not see the proper pieces in place to mount a serious challenge at what is operating. That is changing though.
As more people are exposed to the merits of cryptocurrency, we will see an increase in adoption. It is vital to remember the Internet did not take off overnight either. There were a number of years where adoption was rather slow. Ultimately, we saw the pace increase to where 200M now are joining every year.
Will we see the same with cryptocurrency? I cannot say for certain but it looks like the process will be very similar. If we can see a bit more ease of use in the development, adoption will increase at a faster pace.
All in due time though. This industry is not going away.
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