Banks and Bitcoin: Love Hate Relationship

cryptocurrency

Ronny Martelli |  There is a big difference between bitcoin and banks. Banks are centralized and deal with money printed by governments while Bitcoin is a different kind of currency. Bitcoin is a finite digital asset. It’s mined, decentralized and gains value at a much higher rate. Owing to its unique nature, some banks are not happy with the cryptocurrency. Some banks, by contrast, foresee a future in the Bitcoin network, creating a love hate relationship never seen before.

Banks and Bitcoin Differences

Cryptocurrencies are revolutionizing the current economy, causing changes in the way banks operate. Bitcoins allow a digital transaction to take place without a central controlling system. The transaction data is recorded on the blockchain, a public ledger accessible by anyone. This enhances transparency of bitcoin operations.

Transactions between the sender and the recipient are not reviewed. This is to enhance anonymity of the bitcoin users. The exchange of the bitcoin is only reversible once the bitcoins are changed to cash. This mode of controlling the transaction has caused an uproar in the banking sector. People are beginning to trust the cryptocurrencies more than the financial institutions. Read here for more details.

Bitcoin users’ transaction records and personal information are protected from third-party interference, something that banks are still struggling to curb.  This has been a significant challenge for banks as people are finding it hard to trust banks with their information. Some people are increasingly investing in bitcoins and using them to make daily payments.

Interest Rates

The interest rate for saving money in the fixed account in a bank is approximately 1% to 8% annually, but it depends on the amount of money you are saving. The enormous amount of money you deposit, the higher the interest rate. On the other hand, within spam of one year for a person who has invested in bitcoins, he will get huge rewards as a return.

The vast returns associated with bitcoins is making the bank owners shiver whenever they hear a bitcoin summit. People are easily convinced of the way bitcoins will make them wealthy within a short duration. The value for a bitcoin in January 2015 was $ 170, and in April 2018 it trading at $7000. Compared to bank investments, investing in Bitcoins is seen as a better way to make money.

Legal Issues

The value of bitcoins is kept high and continues to grow as time goes by due to heavy trading. However, bitcoins are not well regulated. The cryptocurrency is often used as a means of payment in the Dark Web to maintain the anonymity of the parties involved. In many instances, bitcoin has been abused to purchase drugs and other illegal substances. The Dark Web is not readily accessible not unless you are using special software such as Tor Browser.

Banks have a central bank that controls all its operations thus keeping away all illegal business. They keep the clients’ transactions records to enable scrutiny. Banks are not glad about the way bitcoins can carry out all their transactions without being scrutinized. They are free from scrutiny while the banks are harassed by the central banks and the government to give details where a particular client got his/her money from.

Freedom

The freedom to buy and sell bitcoins anytime anywhere has made people choose bitcoins over the banks. Banks involve many commitments since you have to explain where you obtained all the cash you deposit. There is no anonymity in the bank so in case of any illegality the culprit can be easily accessed.

The bitcoins and Ethereum have created a new market that is not controlled by anyone. The transaction of the bitcoin cost is near zero value while banks charge transaction fees. The low cost has made bitcoin superior to the traditional money we are used to. The banks are not happy with the new market created. They were used to handling all the conventional money.

The banks are plotting on how to shun the bitcoin before it destroys them. Word on the street says the Chinese government has announced crushing of cryptocurrencies. Bitcoins have the potential to replace the traditional currency. Once that happens, central banks and the government will lose some benefits such as money printing, and the ability to control and manipulate the economy. This is a risk the government and the banks are not willing to take.

Banks and Bitcoins Love

As much as there is tension between the banks and the bitcoins, there is no apparent speculation of who will emerge the winner and how the market will evolve. Some banks have decided to work with the bitcoins, they are planning on how they can keep some funds on electric wallets or invest them in bitcoins which have a high value. We all enter into business with the idea of making as much profit as we can. Banks also have the same motivation and are finding a safe place to invest funds in bitcoins.

Some banks enable their clients to buy bitcoins directly from their accounts through credit cards. The process is simple involve paying relatively low transaction fees.

To buy bitcoins, you must first create an account on an exchange that sells bitcoins for cash. Some of the most popular exchanges where you can purchase bitcoins using real cash include Coinbase, Coinmama and localbitcoins.com.

These exchanges accept both Credit card payments and direct wire transfers. In most cases, it may take several days to complete a payment. The exchanges for one have to do a background check as part of their anti-money laundering efforts. Wire transfers also take several days to complete. However, in the end you can trust to have bitcoins within a week.

Conclusion

While some banks are still adamant that Bitcoin is an illegitimate payment network, some see it as the currency of the future and are warming up to it. The creation of networks that specifically help banks complete payment fast like ripple is helping improve relations with Bitcoins. But until that time Bitcoin becomes accepted by a higher range of industries, it’s likely that the relationship between banks and Bitcoins will be a love hate relationship.

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