Many lofty claims have already flowed in the direction of Bitcoin and its similar digital currencies. On the other hand, it also happens to be the target of many attacks from critics of such technologies. However, if cryptocurrencies and peer-to-peer payment systems become really successful, even our wildest dreams may not be able to foresee the potential consequences of that, reads a recent article from Nasdaq.com. If you're old enough, writes economics journalist Martin Tillier, think back to the early days of cell phones, when direct video calls, built-in navigation services and mobile online shopping services seemed like mere fantasies. At times, there were also crazy comments that cameras, which were increasingly becoming standard equipment on mobile phones, would bring about the demise of even giants like Eastman Kodak, one of the world's largest photographic and film equipment companies. To many, this seemed ironic and downright absurd. However, their disbelief ended with 2012, when the company actually filed for bankruptcy protection. The same seems to be true of Bitcoin's current supporters, who say that its adoption on a truly large scale could spell the end of the banking system as we know it today. Many still laugh at the sound of such a statement, but as the Nasdaq economist points out, the least laughable thing right now is the banks themselves, who realize the gravity of the situation due to the potential behind cryptocurrency technology. Both Wall Street and the City of London have been quietly leaning into digital currencies lately - whether by investing in tech-related startups or trading cryptocurrency themselves. And now the British Banking Association, in its latest report, is warning that bitcoin could pose a growing threat to the banking system. Tillier seeks to analyze whether and to what extent this kind of threat is real. If the world suddenly started using Bitcoin exclusively, no one would make deposits in banks, and those banks would consequently collapse. However, no one in their right mind envisions such a scenario, at least not in the near future. What the current financial industry fears most, the journalist writes, is not so much Bitcoin itself as the underlying blockchain technology. Banks have become so accustomed to the easy income in the form of commissions they charge almost every time money transferred electronically changes hands that it would be hard for them to imagine life without this particular source of income. In 2013 alone, a staggering $410 trillion in non-cash transactions passed through banks, according to a report by the Boston Consulting Group. It is estimated that this figure could grow to as much as $780 trillion before the end of 2023. That's an oversized market that banks are now a part of, and blockchain as a competitor representing ultra-low fees for money transfers could be quite a worry for them. However, as Tillier writes, even the possible widespread adoption of Bitcoin need not immediately be a death sentence for banks. Profits from the transactions they were involved in in 2014 were about $425 billion. This sounds like a sizable "slice of the pie" into which blockchain technology can "bite," but let's be aware that this is only some portion of the total revenue streams of the entire banking sector. Bank of America alone reported a total profit of over $95 billion in the same year. However, what is more worth emphasizing, the mentioned $425 billion gained by banks from commissions on non-cash transactions was connected with negligible or zero operational risk for them, as well as with relatively small costs connected with processing of such operations. It is also difficult to find a greater risk or cost in charging us the equivalent of several dozen dollars for international transfer services. Additionally, let's be aware that the bank also earns interest when it holds the money for a few days - on a macro scale and in the long run it also gives a considerable amount of additional income to the institution. If we take away or seriously limit banks' sources of income of this kind, they will have to replace them with other, more expensive and associated with much greater risk, business activities. We need look no further than 2008-09 to see where this could take us. The warning from the British Banking Association may seem unwarranted to many - Bitcoin could pose a serious threat to the "easy money" that has been raining down
No comments:
Post a Comment