The past decade has seen an ever increasing trend of virtual being in every phase of life, and the same holds relevance in the talk of cryptocurrency. During the recent years, individuals have seen a rapid increase surrounding the utilization of the cryptocurrency, which has resulted in fewer bank transactions together with the reduced banking activities. This is because individuals are investing across the virtual assets instead of banking payment or availing their unique services. Crypto currency is not regulated by any government as well as can be traded freely without any regulations or restrictions.
This makes it easy for anyone to buy and sell it without risk. Therefore, a lot of people prefer to invest in this type of asset rather than traditional ones such as stocks and bonds. Henceforth, this does not come out to be a surprising story that several financial institutions have released their own cryptocurrencies. However, these institutions are hesitant to invest in Bitcoin.
This may be due to a lack of knowledge of the cryptocurrency or it could be due to the fact that banks are reluctant to adopt something that could potentially replace them. This article will discuss the reasons why financial institutions do not want to invest in the bitqt. and how they can benefit from doing so.
The use of crypto currency has also resulted in an increase in money laundering cases, which can lead to government regulation on banks and other financial institutions. Due to this reason, many banks have stopped accepting cryptocurrency because they do not want to be associated with illegal transactions. However, this move has led some investors into thinking twice before investing their hard earned money into digital assets. Financial institutions are not in favour of crypto currencies.
They are against it because people are investing their money in crypto currency instead of banking investment opportunities. This is adversely impacting the work cycle and revenue chain system of the the people involved in these activities as it is nothing but promoting the investments in virtual assets over the edge of banking instruments, making it lag behind.
Table of Contents
This article discusses the impact of crypto currency on financial institutions. The study reveals that the decrease in financial institutions was due to the lessening of bank transactions, reduced banking activities, and people investing in crypto currency instead of banking investment opportunities.
a) Lessen bank transactions
Due to the investment in crypto currency, bank’s transaction have become less. These reduced transactions are decreasing the level of accountability and reliance of individuals over the banking infrastructure in the country as large masses of individuals step ahead of the crowd to engage in digital assets owing to a variety of monetary grounds that assist at the forefront.
b) Effect on revenue of bank
As the bank transactions have become less so it also affects the income of the bank. The revenue of banks becomes low. The main reason why financial institutions are against investing in cryptocurrencies is because they are afraid that it might affect their revenue. Financial institutions get their revenue from the fees they charge for various banking activities and services.
For example, if people were to start using cryptocurrencies instead of banks to make payments, the fees that banks charge would decrease significantly. This would have a big impact on their bottom line.
c) Reduces banking activities
As people prefer to invest in cryptocurrencies rather than bank they also reduce their banking activities.
d) People are investing in crypto currency instead of banking investment opportunities
People are investing in cryptocurrency because there is no involvement of any financial institution and they do not have to pay tax on their investment. Another issue is that banks are worried about the security of this new form of currency, which is understandable. It’s sometimes hard for consumers to trust the bank with their money because there have been so many security breaches in the past; adding another layer of complexity doesn’t make things easier for them.
Thus, such kind of activities and people continuously showing higher inclination towards digital assets has reduced the level of bank transactions and reliability. This is making the normal functioning of banking institutions get disturbed as they are nothing but coming on the back foot.
Also read: Myths About Bitcoins Debunked!