Banks will be instrumental in bringing about wider cryptocurrency adoption. Without their involvement, the general public will continue to view crypto as a less-than legitimate part of the world of finance.
Admittedly, the vast majority of financial institutions still view bitcoin (BTC) and other cryptocurrencies with suspicion. That said, some are slowly starting to embrace crypto and blockchain, which in turn is likely to pressure their rivals to follow.
And according to a range of experts, once banks embrace crypto more fully, they’re likely to provide the seamless user experience and easy fiat on/off-ramps that are currently in short supply in crypto.
By providing such services, they could be the key element in paving the way for wider adoption – or even hyperbitcoinization.
Why Bitcoin Need Banks
According to Guardian Circle founder and crypto author Mark Jeffrey, “there are two things missing from crypto.” These are “fiat on and off ramps” and “great user interfaces.”
Jeffrey tells Cryptonews.com,
“The cooperation of someone is required for the fiat on- and off-ramps. Right now, it’s exchanges, which aren’t really legacy banks or legacy financial service firms. But the exchanges are too difficult for most people to use.”
Jeffrey concludes that either the crypto sector needs the cooperation of banks or crypto-currency exchanges have to provide a better and more accessible service overall. Jeffrey says,
“We do see them trying – things like Proton and MetalX or Nash Pay are headed this direction.”
Providing an easy way of purchasing cryptocurrencies is perhaps the biggest hurdle to greater adoption. At the moment, however, many banks – particularly in nations such as the UK and the US – actively prevent their customers from buying cryptocurrencies using credit and sometimes even debit cards.
“Crypto purists find themselves in a tricky position,” says Glen Goodman, the author of The Crypto Trader.
“They would love to see cryptocurrencies destroy the traditional banking system, ushering in a decentralized financial utopia. But, unfortunately, they need the cooperation of banks to drive crypto adoption, as most people only buy crypto if their bank or credit card provider allows them to transfer money to a crypto exchange.”
Arguably, having banks put up various barriers to buying crypto is a significant block on wider cryptocurrency adoption.
By prohibiting credit card purchases, or by slowing up transfers to or from exchanges, they send customers the message that crypto isn’t for the mainstream.
Slow But Steady Movement
For some within the crypto industry, this shouldn’t necessarily be a problem.
According to Scott Melker, a crypto trader at TexasWestCapital, bitcoin and other decentralized private cryptocurrencies were designed to circumvent the banking system anyway.
Asked whether cooperation from banks is necessary for bitcoin’s wider adoption, he tells Cryptonews.com,
“Absolutely not. Bitcoin’s greatest value proposition is a hedge against bad actors, namely central banks. Cryptocurrencies bank the unbanked.”
At the same time, Melker is reluctant to generalize as to whether banks worldwide are receptive to crypto, and perhaps even to investing in crypto themselves.
“Banks operate in various jurisdictions and countries, at different levels from national to local and with completely different rules. I would generally say that the legacy banking system is extremely far from accepting bitcoin in general. Those that are open to it are few and far between for now.”
That said, there has been a slight yet noticeable uptick in banks willing to enter the crypto arena in recent months.
“Most banks still regard crypto companies with suspicion. But JPMorgan, despite Jamie Dimon’s anti-crypto comments of the past few years, has been increasingly crypto-friendly.”
In May, JPMorgan opened accounts for two of America’s biggest crypto-exchanges, Coinbase and Gemini. Jeffrey believes this could open the gates for big banks to follow, and for the banking industry to become more cooperative for crypto traders.
“I think we will see banks move slowly until one of them suddenly leaps ahead of the other with bitcoin and crypto products – probably JPMorgan or Fidelity – and the rest will scramble to follow. And then it will happen very fast,” he opines.
Glen Goodman largely agrees, noting that major high street banks “have been given a kick up the ass by newer fintech banks like the UK-based Revolut, who offer crypto-investing as a service to their account holders.”
According to Goodman, fintech firms and challenger banks may be key to driving the banking industry towards crypto.
“Fintechs are often more relaxed about working with the crypto industry, and threaten to usurp the lumbering traditional banks by experimenting with new business models,” he adds. “Traditional banks are well-aware of this threat.”
Aside from the few banks and fintech firms that are moving towards crypto, what would it take for the banking sector as a whole to embrace bitcoin and other cryptocurrencies?
“Bitcoin needs to prove itself as a gold-like store of value,” says Jeffrey, who also notes that current world events “have compressed that proving from years into months.”
In addition, Jeffrey thinks that banks will embrace bitcoin once they learn how to make money from it, in the same way that they make money from fiat by issuing loans and credit.
Once they’ve reassured themselves that they can profit from BTC, they will dive in. Then, wider adoption will follow, perhaps even to the point where bitcoin becomes a major global currency.