Everybody today has a bank account, and every once in a while, we visit the bank to avail their services. And we all can agree that no matter what the banks say, whether it’s a government bank or private, the customer service is slow.
Every process takes a long time and work that can be done within minutes sometimes takes half an hour. But we are helpless because there is no way we can store the cash we have. The cash we have, known as fiat currency, is issued by the government and holds value because the government says so.
You can’t exchange the money for a bar of gold or a pack of cigarettes, but instead, you have to make the exchange with a person who possesses the item that you want.
Control over fiat currencies
The government uses central banks to control these fiat currencies, and they decide how they can be transferred, this allows them to keep track of the movement of the money. They choose that who gets profits from the movement, and along with this, they collect taxes on them and trace any illegal activities.
The control over the currency has many negative impacts as well as concerns. The most important one being the transparency of the system. Everything is done in a way that it never gets out in public, so we are not aware of whether the tax we pay is appropriately utilized or not.
Bitcoin over Fiat currencies
When introduced to the public, Bitcoin was used as an investment opportunity by people because of the monetary benefits it was offering. But over time, people realized the potential of bitcoin and other cryptocurrencies and how they can help people to go cashless and make things easier for them.
When you compare banking services with bitcoin, the first difference you see is how easy it is to manage bitcoin as compared to your standard bank account. With the use of bitcoin, we don’t need the existing banking system. Bitcoins are created in cyberspace with the help of “miners” who use their computers to solve complex algorithms that help to verify bitcoin transactions.
Using bitcoin may have the edge over the standard currency and banking system, but this also causes other concerns. The fees that banks earn from the services they provide helps them generate revenues and jobs.
Another advantage of using bitcoin is that if we wish to transfer a large amount, we can do that by using our phone and bitcoin wallet. Unlike the banks where we have to fill forms, provide personal information, and when this was not enough, bank charges a significant amount as money transfer fees.
The safety concerns
Everything that we use today is moving to the online platform, and this brings the question of safety of the investments we make. Almost all the banks now provide online banking services, but even they face the issues of maintenance and server problems.
On the other hand, bitcoin transactions happen quickly and easily, and the server issues are handled way before we can realize it. But people are always afraid of the hackers that might try to cause harm to our online banking accounts or portfolio wallets.
The advantage bitcoin offers is that there is various software that helps us store our investments offline in a hard drive or a USB which is encrypted by a key. Every time you want to access your finances or portfolio, you can access them by entering the key code. However, this method has the risk of accidental data removal. There is a chance that the user might accidentally clear the drive or lose the code.
Privacy is maintained
Every time we use our bank accounts for payments, the information we enter gets stored on a remote server and can be traced and accessed by the bank.
But bitcoin transfers are non-traceable, which means that you don’t have to provide any personal information to the user and make the payments.
There have been instances where bitcoins have been used for various illicit activities such as tax evasion and money laundering. This the biggest concern of the government as no control over currency transfer can lead to many illegal activities.
Why Central Banks are important
The digital era is picking up speed as we get more advanced technology with every passing day, but we need central banks as the first bank, and the ones that followed it have often helped with the funding during wars and other initiatives.
During the times of recession or when a nation is facing the crisis, its the duty of these centralized banks to help the government and people. If the government notices a sudden rise in the economy, causing prices of goods and services to rise rapidly, a central bank can increase interest rates making it hard for borrowers to access money.
For example, The U.S. Federal Reserve is given the task to maintain full employment and stable prices of goods. It is used to stabilize the financial system in times of crisis, help the nation to figure out ways to make payments and ensure the safety of nations banking and financial system using the monetary policy as a tool.
The fight against Bitcoin and Crypto
With the boom in the user base of bitcoin and other cryptocurrencies, several governments all over the world have taken extreme measure to fight back and save the centralized banking systems.
The most active participant in this fight is the United States of America. With Donald Trump tweeting about how crypto money is “based on thin air” to other officials making statements on how it is a threat to the country, and it’s centralized banking system, bitcoin and other cryptos are facing a hard time to build a stable market in the US and other countries.
Since 2013, the U.S. government has been imposing rules and regulations on the use of bitcoin, but recently bitcoin and other cryptocurrencies have seen a protest by the government. After Trump’s tweet of “not being a fan of crypto,” in the recent news, U.S. Treasury Secretary Steven Mnuchin also remarked crypto.
In a press conference, Mnuchin told the reporters that cryptocurrencies such as bitcoin are exploited to support billions of dollars of illegal activities like cybercrime and money laundering. He further added that he is not comfortable with the idea of Facebook launching its own cryptocurrency Libra.
Along with this, Fed Vice Chairman for Supervision, Randal Quarles gave his contribution to the remarks. He said that these digital currencies might not show any significant concerns at their current levels, but it can cause considerable financial stability issues if they reach a wider audience.
After seeing this, John McAfee replied with this on his twitter.
Crypto has now threatened our government so much that it has become a "National Security" issue. The "security" threatened is not that of our nation's citizens, but that of the corrupt government that has enslaved us. pic.twitter.com/qLvhGmAhtF
— John McAfee (@officialmcafee) July 16, 2019
Are you there, crypto?
Over the years, a lot of countries have banned the usage of cryptocurrencies for safeguarding their people as well as the banking systems.
There are countries such as Canada, Australia, and The Europian Union are few that support the use of bitcoin as an investment as well as a method of payment. The governments in these countries have shown a positive response to the use of cryptocurrencies.
On the other hand, there are various countries like China, India, Russia, and Vietnam that have banned the usage of Bitcoin as they don’t consider it as the right way to invest the money. They also want to avoid the possibility of people using these bitcoins for illegal purposes and to hide their black money.
Before you go cashless
The idea of not carrying money sounds good and going cashless can help people, but we have to keep in mind that the technology behind these cryptocurrencies is way too complicated for an average person to understand.
Then the prices of these currencies keep on fluctuating in a volatile manner, so it’s a risky game, but it can be helpful for some.
The banking sector is trying to improve their services, but with the strict government regulations for cryptocurrencies, the future of cryptocurrencies looks dark, but there’s always hope. If we want to improve the working of centralized banks, then we should focus on improving the technology used otherwise cryptocurrencies will take over the system.
No matter what we say, for now, central banks are the leading structure for every nation, and they are used for the management of the economy. Digital currencies have gained the interest of the people, but the adaption rate is very less, and since there is no support from the government, it gives them a hard time to function.
Governments and central banks are keeping an eye on these digital currencies, and since the cost of producing metal coins and bills is expensive, it won’t be a surprise if one day these banks issue their digital currencies.
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