While hate might be too strong a word, it is true that the banks are a bit worried about the rapid development of crypto currencies. And this is surely one of the reasons why many countries are dragging their feet when it comes formulating regulations for crypto currencies. The crypto world is new, it is unchartered territory for everyone and at this moment, it is only the technical minds that know what is happening.
In the formulation of policies and regulations to deal with crypto currencies, banks happen to be major stakeholders. At this point they would prefer to remain on the sidelines or engage in stalling strategies. We would need to understand the basics about a crypto currency to get to comprehend the mindset of bankers.
A crypto currency could be basically defined as a ‘virtual currency’. The process to issue, buy and sell it would be developed on a blockchain platform. The objective of deploying a crypto currency is to facilitate peer-to-peer payments.
If Sam in South Africa had to pay Yong in South Korea, the normal process would require steps to convert currencies. It is quite possible that Sam would need to convert his currency to USD and sent it across to Yong. This would happen through the banking system, Yong would receive the USD in his Korean bank account and convert it to local currency. So you have two banks and possibly three currencies to deal with. Banks don’t work for free and converting currencies also involves an expense. Depending on the transaction between Yong and Sam, the expenses would be borne by either one of them or shared by both.
Now let us presume that there was a crypto currency with global acceptance, let’s refer to it as ‘GLOBEBUCKS’. Sam in South Africa would add the required GLOBEBUCKS to his crypto wallet, fund the purchase with his bank account or credit card and pay a very small fee to get that done. He would then make the required payment in the crypto currency to Yong in Korea. Once received in Korea, Yong could for a very nominal fee download the GLOBEBUCKS as regular cash into his bank account. It would also be possible to keep the crypto currency as it is and use it to pay for his business or personal expenses.
Let’s stop thinking about Sam and Yong and currencies and focus on the banking system. With no formal currency conversions involved and no bank involvement called for to transfer the funds from South Africa to Korea, banks would have lost a significant element of income. If you visualize the business community as a whole, this would be a major loss of revenue for the banking system.
Crypto currencies are buzzing with activities but, few countries have actually formulated clear cut policies to deal with them. So should we put the entire blame on the banks, the answer is surely ‘NO’. But in the near future, banks will put up stiff resistance and even list problems like money laundering, security etc to further strengthen their stand. The interesting thing is that, many of these problems have actually existed within the conventional banking system for decades.
As GLITZKOIN moves ahead with its project to develop a blockchain based diamond trading platform, the project plan includes self-regulatory measures to operate the crypto currency that, will be implemented as part of the project.