The rapid growth of cryptocurrency popularity is evident in numbers. Bitcoin’s market cap has surpassed US$1 billion and the blockchain industry is expected to reach US$23.3 billion. Several cryptocurrencies in the market have utilities that ease banking functions like faster transactions, currency conversion, and international transactions. Crypto coins like Litecoin and XRP boast faster transactions and the ability to carry on international payments. This is resulting in crypto banks taking the lead, leaving behind the traditional banking system.
The Rise of Cryptocurrency
In the financial industry, blockchain, AI, and cryptocurrencies are the buzzwords that are transforming the industry. The financial sector is going through significant changes as a result of the cryptocurrency boom increasing the number of transactions on a daily basis. According to the forecasts by financial experts, the compound annual growth rate of the industry will approximately be 12% by 2024.
At the rate at which cryptocurrency is growing and countries and companies are adopting this digital currency technology, people will start using Bitcoin, Ethereum, and Tether as a mode of payment. As their transactions speeds are sky-high compared to fiat currency, traditional banks are already dreading the challenge.
In 2008, the global financial crisis made the banking industry vulnerable to economic changes. When the demand for alternative ways to secure funds grew stronger, Satoshi Nakamoto created the world’s first digital asset, Bitcoin. The main USP of Bitcoin is the fact that it eliminated the need for a traditional payment system or any third-party involvement. The project was such a success that Bitcoin now trades at a value of US$50,000.
The Diminishing Demand for Traditional Banking Structure
In a way, the traditional banking system created challenges and restrictions for its users via its own policies and regulations like high-interest rates. The new cryptocurrency system offers users features that no bank can provide, at the moment. The convenience of anonymity and a customer-centric approach made cryptocurrencies high in demand. The decentralized banking process is being perceived as a solution to complex banking structures, with its own characteristics that are unique to anything that exists in the financial industry.
Cryptocurrency banking is the process of defining how these cryptocurrencies will be introduced in the market, exchanged, and transacted. While there are several crypto startups leading the way to a transformed industry, there are dedicated crypto platforms to enables users to hold and store virtual assets. These apps or crypto banks allow users to execute transactions through secured digital wallets within seconds. There are security challenges that need to be addressed, but blockchain technologies offer increased security at the moment than any other banking system.
The American Federal Reserve has announced that they will be creating and launching their own digital asset, the digital dollar. According to the authorities, this will be a way for the economically poor Americans to access the banking system. The American banking system will try to address the challenges put forward by the cryptocurrency industry through this digital initiative. The old-fashioned banking approach is seeing a decline in acceptance and corporations like Mastercard and Visa are collaborating with the central banks to create a customer-oriented approach that will adhere to the modern demands of financial customers.