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Banks and Cryptocurrency: A Short Comparison

Cryptocurrencies are gradually entering our lives, with institutional investors, financial corporations, and banks tapping into crypto institutional trading during the last few years. As digital currencies gain popularity, traditional banks are exploring ways to integrate them into their services.

This introduction explores the impact of cryptocurrencies on banks, touching upon areas like competition, efficiency, and the potential transformation of financial systems. In this article, we will discuss how banks integrate crypto and the possible changes that crypto might bring to the banking sector in the future.

Crypto Institutional Adoption by Banks

The terms “crypto banking” and “crypto-friendly banks” are different. Take a look at the table below to differentiate these terms:

CharacteristicsCrypto BankingCrypto-Friendly Banks
DefinitionBanking services for crypto assetsBanking integration with crypto
AudienceCrypto business and enthusiastsCrypto users and bank clients
RegulationSpecific crypto regulationsBanking regulations plus crypto compliance
ScopeCrypto-related servicesTraditional banking plus crypto
OfferingsPayment solutions with cryptoCustodyTrading platformsWalletsIntegration with exchangesCrypto-fiat swaps Connecting traditional bank accounts with digital wallets
IntegrationIndependent of conventional bankingIntegration with banking infrastructure
AccessibilityPlatforms and crypto desks dedicated to crypto assets and operationsConventional banking services with crypto integration

Here are some crypto-friendly banks:

  • Revolut has become – a US-based FinTech bank, allowing buying Bitcoin directly from the Revolut app on Android and iOS. 
  • BankProv – offers a range of crypto-banking services and allows clients to manage their funds via the BankProv platform.
  • JPMorgan Chase – offers traditional banking and crypto banking services for some crypto exchanges and digital asset firms. Launched its own crypto – JPM Coin.

How Will Cryptocurrency Affect Banks?

Cryptocurrencies are likely to have several impacts on traditional banks:

  • Disintermediation. Cryptocurrencies allow for peer-to-peer transactions without the need for intermediaries like banks. This may reduce the reliance on traditional banking services for certain financial activities.
  • New competition. Crypto institutions and fintech firms are entering the financial space, providing services such as digital wallets, crypto lending, and decentralized finance. This introduces new competition for traditional banks.
  • Cross-border transactions. Cryptocurrencies facilitate faster and more cost-effective cross-border transactions, challenging traditional banking systems that may be slower and involve higher fees for international transfers.
  • Financial inclusion. Cryptocurrencies can provide financial services to the unbanked or underbanked populations, reducing reliance on traditional banking infrastructure.
  • Challenges in regulation. Regulatory uncertainties and challenges may arise as cryptocurrencies become more prominent. Banks will need to navigate evolving regulatory landscapes and ensure compliance with new rules.

Conclusion

Cryptocurrencies are likely to challenge and transform traditional banking in various ways, from introducing new competition and payment systems to promoting financial inclusion. The extent of the impact will depend on regulatory developments, technological advancements, and how effectively traditional banks adapt to the changing financial landscape.