According to the Harvard Business Review (HBR), blockchain technology will make the financial system what the Internet has done to the media. In the mid-1990s, people were making fun of the idea of reading news mostly online, but it happened. When cryptocurrencies were made known to the public, they were also considered a passing fad, but they are not. Cryptocurrencies change not only our way of doing business, but also our way of seeing money.
In recent years, Blockchain technology has spread very rapidly and cryptocurrencies and ICOs have become very popular. There is no doubt that the world is curious to see how this promising technology will influence or shape the future of the banking sector.
As you probably know by now, blockchain technology has the advantage of being decentralized – no one person or authority has ultimate control over it. All cryptocurrency transactions are open source, code-controlled and rely on peer-to-peer networks. Most bank currencies in circulation are now controlled by a centralized government and regulated by a third party.
Perhaps you could ask: what will Blockchain do for the banking sector? What is the Blockchain space in the banking sector as the technology matures and gains ground in the world of finance?
Warehousing and Banking Walls becomes Obsolete
Thanks to Bitcoin, we can now see that this warehouse service and banking buildings were in high demand because of physical and non-fundamental factors. Bitcoin has all the attributes of traditional currency but adds two advantages: it does not weigh and does not occupy physical space. Cryptocurrencies do not need any entity to keep your money. Everything is maintained for you in the cloud thanks to blockchain technology. This is one of the reasons it might seem that banks will disappear in a world dominated by cryptocurrency. Money is “stored” in the cloud in blockchain. The personal wallet performs the function of providing access via dual-key cryptography. If you have your private key (and it may be on paper or on a device that is not even connected to the Internet), it has everything you need to set up your own private banking. Anyone in the world can do this without trusting relationships, personal identification or credit history.
The policies are not structured by intellectuals and politics, it is solved by the market, provided that technology allows individuals to pay for goods and services with money, without space or weight, without the need for storage and bank walls.
Cryptocurrency reproduces exactly this financial agreement between two individuals from any part of the world. Banks and financial institutions can generally implement Blockchain technology to reduce costs and speed up the transfer of funds between banks. Independent financial analysts and large financial companies agree that it is very likely that blockchain technology will soon replace the SWIFT bank transfer system.
Loans and credits markets
There is a direct relationship between banking, financial services and loans. However, it has been shown that the banking system is extremely unreliable and vulnerable, even in the most developed countries. State regulators use traditional currency to secure deposits of private banks. A distributed system of loans and deposits based on blockchain ledger technology is not only decentralized, but also safe from bankruptcy, since a specific organization does not control deposits. It would also eliminate the moral hazard of imprudent borrowing or securitization of debt securities without adequate documentation, as was the case during the housing bubble.
During the central bank era, we have seen interest rates drop inexorably and credit issuance conditions have been drastically altered to favor longer duration and fewer collateral. In cryptocurrency-based credit markets, we will likely see an opposite trend: shorter terms, higher collateral requirements, clearer titles delineating uncontested property rights, and compliance with the terms and conditions embedded in the loaning protocols.
Traditional insurance can also be significantly improved by automating payment in insurance cases. Implementing smart contracts automatically will eliminate long bureaucratic delays that involve a large number of managers, allowing people to receive payments instantly.
The introduction of cryptocurrency ATMs will lead to an increase in the massive adoption and subsequent use of many cryptocurrencies. There are currently approximately 1,400 cryptocurrency ATMs in the United States. These 1,400 ATMs account for more than half of the total number of cryptocurrency ATMs in the world.
In the case of Coinsource Bitcoin ATMs, Bitcoin holders wishing to exchange their digital assets for cash will only need a cell phone. Users simply download the Coinsource Bitcoin Wallet application to send and receive Bitcoins by scanning a QR code with a camera from a cell phone.
Users can also purchase Bitcoins for cash or change them to receive cash through one of Coinsource’s cash machines. All that is required is a cell phone number and an active bitcoin wallet.
Possible Future: Policymakers Hold the Key
We observed a differentiated reaction of some regulators / legislators towards cryptocurrencies. Most countries initially underestimated the potential of Bitcoin and allowed cryptocurrency with little resistance, but governments are now looking at how cryptocurrency and Blockchain technology will affect future labor markets, digital infrastructures and financial institutions. .
While many countries may be regulating and restricting the use of cryptocurrency, European financial actors are also conducting research and development of Blockchain technology for institutional and general adoption in the virtual markets.
Some countries have also introduced favorable regulations for cryptocurrency taxes, such as Japan, which would have eliminated the consumption tax on Bitcoin trade in 2017. Others, according to some reports, have banned them, such as Bolivia. To date, European authorities have mainly asked investors to be cautious about cryptocurrencies. We believe that if the market is to develop, it will require excellent regulatory control and could be on the agenda of the G20 or other supranational organizations. Some of the main risks that regulation may attempt to address include consumer protection, prevention of illegal activities and central bank support.
Many central banks are paying close attention to cryptocurrencies and exploring the potential for creating a cryptocurrency backed by the central bank. Japanese group Mitsubishi UFJ Financial Group, Inc. (MUFG) has announced plans to launch a Japanese yen-related cryptocurrency exchange and Venezuela intends to start selling oil-related cryptocurrency on Feb. 20 , each currency being valued in a barrel of Venezuelan crude oil. In some markets, we believe that a government-supported framework could stimulate uptake by the general public and that the cryptocurrency could be used as a medium of exchange or currency rather than as a class of investment assets or a speculative instrument.
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