Is Crypto a threat to the Central Banking System?
If you were to say three years ago that cryptocurrencies are going to bring down the central banking system, central bankers would have laughed at you. But not today.
Now many bankers agree that the traditional centralized banking system is becoming irrelevant and insufficient for the rapidly changing global economy, and it could be replaced by cryptocurrencies.
How Cryptos Offer A Better Financial System
Cryptos are not controlled by financial institutes or central banks. They are digital currencies that are challenging the conventional financial system by providing an open-source decentralized alternative to everyone in the world.
By using blockchain technology and smart contracts, cryptocurrencies are offering payment protocols with advanced trading, saving, or lending products. Decentralized finance (DeFi) is growing swiftly. It has already revolutionized the financial world by taking out the role of central and commercial banks.
Cryptos are not only cheaper and faster they also offer essential freedom from all kinds of central authorities. Traditional finance has become too intrusive due to extremely strict regulations from central banks that require all kinds of personal data.
Financial elites and central bankers have disillusioned the general public, who don’t feel that the system is working for their benefit. Cryptos provides the connection to the financial industry, which in turn could lead to complete financial freedom.Is there a threat to the central banking system from cryptocurrencies and other decentralized financial services? This article analyzes this question and explains why this threat is real and could end up changing the financial… Click To Tweet
If you are in Iran or Venezuela, there is no way for you to transfer money in or out of these countries using the traditional financial system. Due to severe sanctions, these countries are cut off financially from the rest of the world. However, you just need an internet connection in these countries to get connected to the decentralized financial world.
This is the power of trustless financial protocols. You don’t need a central bank to verify the payments, blockchain will do that for you. Therefore, crypto services have the power to provide a better global financial system that is cheaper and more efficient.
What options do central banks have?
One option is that central banks could issue their digital currencies. But at this point, it seems unlikely that they will be able to compete with the decentralized currencies. Besides, centralized digital currencies will still not have all the benefits that decentralized currencies have.
Another option is that central banks themselves would embrace cryptos and provide effective regulations to streamline them. This is the more likely scenario. We see today many central banks are already working on crypto regulations instead of issuing competitive central bank digital currencies.
If you want to learn more about crypto, then read this article about the top 5 crypto exchanges in the world.
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