Traditional Banks Striving to Compete with Cryptocurrency
With the popularity of cryptocurrencies like Bitcoin and Litecoin on the rise, big banks are beginning to express concern about their ability to keep up. With central banks striving to compete with cryptocurrency, many are choosing to start holding these digital currencies on their balance sheets. This could act in a similar way to gold and foreign currency reserves when it comes to absorbing market shocks.
Bank of America Reacts
High-level Bank of America officials have already been expressing concern that their establishment will be unable to keep up with evolving industry standards and consumer preferences regarding cryptocurrency. This industry giant has already received a patent for a proposed exchange system; however, currently, it is falling behind when it comes to accommodating customer interest in cryptocurrencies. In fact, Bank of America recently came under criticism for blocking its credit card clients from purchasing cryptocurrency on their cards.
The same report details a concern that increased competition in the field of non-depository transactions may reduce Bank of America’s net interest margins and revenues from fee-based services. Accommodating the widespread adoption of cryptocurrency technologies may also require that Bank of America and other industry leaders expend substantial amounts of money to modify their existing products and services in order to keep up. Of course, Bank of America isn’t the only financial institution that is expressing concern about the growing global obsession with cryptocurrencies.
JPMorgan Chase Responds
Other extremely high-ranking financial institutions such as JPMorgan Chase have also expressed a growing concern about the risk factors that come along with the widespread adoption of cryptocurrency technologies. In its annual 10-k filing this bank noted that financial institutes across the globe face the serious risk that their payment processing services will be disrupted. As this document notes, cryptocurrencies require no intermediation, which effectively removes the need for traditional banks and financial institutes.
Like Bank of America, JPMorgan Chase intends to invest significant amounts of money into modifying and adapting its services in order to attract and retain new clients. It’s clear that this industry giant understands the growing necessity of competing with technology companies as well as traditional financial institutions. Goldman Sachs has reported similar fears.
Historically, JPMorgan Chase’s executives have believed that the cryptocurrency market was destined for eventual collapse. While they have certainly not ruled out impending collapse as a possibility, it’s clear that banking executives have begun to reconsider whether or not they should be concerned about competition from technology companies. As cryptocurrency has begun to gain in popularity and concerns about money laundering and regulations regarding anonymity have begun to wane, the future of cryptocurrency appears brighter than ever.
One South Korean bank has already begun to incorporate cryptocurrency technologies into its banking operations via a crypto-based remittance network known as Ripple. Ripple’s network in Japan and Southeast Asia has already become quite extensive, and it shows no signs of stopping given that multiple local and international banks have already begun to introduce this technology into their operations.
When it comes to Banks and Ripple, full integration isn’t expected until at least 2019. The fact that serious industry players are beginning to make use of this technology speaks to the future of cryptocurrency and the fears that traditional financial institutions have regarding their ability to remain competitive. Ultimately, many of these banks will have to adapt or face the serious prospect of becoming obsolete.
The Role of Online Banking
Internet professional banks are set to lead the pack when it comes to adopting cryptocurrency and blockchain technologies, so it’s no surprise that the majority of banks pushing for Ripple integration are online providers. Their brick-and-mortar equivalents will likely be facing similar changes in the near future, so it’s a good idea for consumers who want to be in the know to keep on top of current industry trends.