Impacts of Cryptocurrency on Banking

Are traditional banks concerned about the danger posed by the new cryptocurrencies?

With the development of Bitcoin, digital currency, or crypto - a new generation of internet-based currencies that have gained popularity in recent years. As a matter of fact, there has been an obvious change in the way people conduct business as well as transactions activities, with the value can be traded outside of traditional banks via online payment methods. Experts have pointed out that people who were unable to access trade and finance ten years ago can now do so, and many will be lifted out of poverty as a result. This is a significant modification when people no longer have to go to a traditional bank for financial purposes. Cryptocurrencies are growing more prevalent, and traditional banks are not the only option.

“Are traditional banks concerned about the danger posed by the new cryptocurrencies?”

BNP Paribas, the French banking giant, published research in which they explored the technology underlying bitcoin and how it may lead to the redundancy of traditional banks. A UK Banking Report also stated, cryptocurrencies do pose a threat to traditional banks, especially if they overlook new customer behaviors and preferences when it comes to how consumers transact money and the value of the currency as well. Whereas there are questions around the instability of digital monetary standards and the potential for illegal directions, their expansion implies a transition in consumer behaviors. Traditional banks should be updated with advanced mobile services as their clients are demanding.

In fact, traditional banks are aware of this new wave of digital currencies and they have a bit of a difference in terms of attitudes. Some nations are entirely opposed to it, while others feel it might give enormous opportunities. Tony Richards, Head of Payments at the Reserve Bank of Australia claims, cryptocurrencies do not pose any pressing regulatory issues as the bank’s payments policy mandates and the blockchain might create new benefits for banking systems. In contrast, England has been reported to avoid firms dealing with cryptocurrencies, and whether if a central bank issued a digital currency, it would have far-reaching repercussions for both monetary policy and financial stability. Despite this, the bank has been analyzing whether a central bank-issued currency is attainable.

Vietnam has gone so far as to prohibit digital currencies. The State Bank of Vietnam (SBV) asserts that Bitcoin and other similar virtual currencies are not currency and are not lawful means of payment. Policymakers are still cautious with cryptocurrencies. Since 2017, the Prime Minister has issued Decision No. 1255/QD-TTg on "Approving the Scheme to improve the legal framework for the management of virtual assets, virtual currencies". Accordingly, the State Bank of Vietnam was assigned to act as the focal point to review, research and propose amendments, supplements, and promulgation of a legal document on digital currencies to submit to the Prime Minister. It is also crucial to simultaneously coordinate with the Ministry of Justice and other ministries as well as branches to investigate, propose measures and promulgate legal documents on taxation on virtual assets and virtual currencies.

References

1. Jonathan. T. (2021). Is Traditional Banking Under Threat from Cryptocurrency? Retrieved from https://www.koombea.com/blog/cryptocurrency/

2. Huxley. (n.d). How are cryptocurrencies going to affect the banking landscape? Retrieved from https://www.huxley.com/en-GB/blog/2018/05/how-are-cryptocurrencies-going-to-affect-the-banking-landscape/

3. Ngoc. T. (2021). Retrieved from https://vov.vn/kinh-te/thi-truong/su-troi-day-cua-tien-so-va-bai-toan-dat-ra-cho-cac-ngan-hang-trung-uong-862317.vov