No, banks do not have to lose money or miss out on profits if Bitcoin gets adopted. Because Bitcoin is in some way anti-bank technology many people believe that they cant co-exist. But they actually can and could even benefit the other.
Not only could banks benefit from Bitcoin, they could even profit from it. Through their regular services, for which they charge fees. Banks could easily integrate BTC and start making a profit with services that they are already familiar with. But instead of using fiat, they could use Bitcoin.
In this article, we explore a few things about how banks could adopt Bitcoin and the question surrounding that.
Is Bitcoin a threat to banks?
Bitcoin in itself is not a threat to anyone besides fiat currencies. Even Banks do not have to see Bitcoin as a threat. But they might be forced at some point to adopt BTC. As they can not go further without it.
Those banks that keep on refusing to deal with Bitcoin or won't accept it as part of their services might see themselves starting to lose out on revenue. This of course can make a difference when we are looking at who will survive as the bigger players in the market. Because the more Bitcoin gets adopted by the people the more people will want to interact with financial instruments made by banks that can use Bitcoin. Those banks that will accept Bitcoin can expect some revenue from this. But those that keep on refusing to adopt it will also miss out on this income.
So no Bitcoin does not have to threaten the bank's business model. But as more people abandon fiat currency, banks will need to adapt to the new currency of the internet.
Will Banks take over Bitcoin?
For the banks to take over Bitcoin they would need to hold at least 50% of the mining power and nodes controlling the network. This is not only an almost impossible task but also one out of the bank's interest.
So no they won't take over Bitcoin but they might start holding a lot of BTC at some point. Although Bitcoin promotes self-sovereignty and being responsible for your own funds, not all people will do that or want that. This means that many people will still trust on 3rd party options like banks to safeguard their funds. And use them as a means of interest generation and for other financial instruments.
This in effect could make banks one of the larger BTC holders in the world at some point. However, they won't be the only ones. As second-layer contracts, miners, exchanges, and other social funds will most likely also all hold a large share of the pie. So banks will have a place in the Bitcoin space, but might not be the only gateway to the world of digital finance.
Can banks adopt Bitcoin?
Yes, banks can already adopt Bitcoin. Although some digital banks already accept Bitcoin or have BTC trading within their platform. Very few traditional banks actually accept it or have the technology to store Bitcoin for their clients.
The reason for this usually does not come from inside the bank but from the government. Because many governments around the world still have no laws and regulations when it comes to blockchain technology. This uncertainty causes banks to be careful as they do not wish to be fined by their government. But also try to avoid investing in an industry that has not been regulated yet.
Although regulating Bitcoin around the world goes extremely slow, we can expect that once this happens, more banks and other financial institutions will add crypto and Bitcoin products to their services. Sadly, those who have taken the leap already do face either heavy taxes or regulation risks if the law is to be changed.
How can banks profit from Bitcoin and crypto?
There are several ways in which banks can profit from accepting Bitcoin. They could for example offer one of the following services:
- Bitcoin wallet service
- LSP (become a Lightning Service Provider)
- Bitcoin lending markets
- Enter the Bitcoin and crypto trading markets
These are just a few. But in essence, a bank could offer all their traditional services but instead of using fiat, they could use Bitcoin.
Simply adding Bitcoin services like those mentioned above could help banks enter the crypto space. And create a lot of additional revenue. Revenue that we can see nowadays is generated by other giant crypto companies like Binance, Coinbase, Nexo, and many others. These companies already generate very large revenues which are almost unchallenged by the traditional banking space. Mostly because they have not even entered the space yet.
What Banks already benefit from Bitcoin?
Some banks and payment providers already benefit from integrating Bitcoin with their companies. With companies like:
But besides these companies that offer Bitcoin services directly to the public, there are also many investment banks that already offer a similar service to larger clients. But as with many things in the Bitcoin and crypto space we see that opening these services up to the general public is difficult. Mostly because of the lack of regulations. Making it so that Big banks that are interested in offering Bitcoin products wait to not get into trouble with the regulators. But as the demand for Bitcoin products grows and regulation is finally made. We could expect to see more traditional financial players enter the space. And finally, fill the gap for a Bitcoin custodial that can be fully insured or government-backed.
This last service might go against the ideology of Bitcoin. But many people have little understanding of how Bitcoin works. The demand for it could be higher as the general public keeps adopting it.
Why do banks not like Bitcoin?
Each bank and its owners have their own opinion about Bitcoin. But in reality, banks do not really dislike Bitcoin. But are mostly negative about it as it doesn't (yet) integrate with their business model.
As mentioned before, banks could actually profit from adding Bitcoin to their services. However, as long as they do not integrate BTC, it will be an ecosystem that takes traffic away from their own products and services. Besides that, we see that banks and their relation to the central banks and other large institutions that do not like Bitcoin are very close. Making it an obvious thing to dislike. On top of the fact that a lack of regulation makes it difficult to even consider.
It would be nice to see banks change their mind at some point. But for that to happen we will have to see a lot more education on the bank's side and a lot more regulation on the government's side. And this like many other things will take a lot of time and work. Work that the whole Bitcoin community is trying to do. Even we here at Yada try to do so by educating everyone through our articles and blog posts.
Can Bitcoin kill the central bank?
Yes, Bitcoin could kill the central bank (so to speak). Or better said make the central bank obsolete. The only purpose of the Central Bank is to print money and change interest rates. 2 things that Bitcoin does by itself.
No central bank in the world really like Bitcoin. This makes sense as when BTC reaches critical adoption, the need for a central bank will completely disappear. But for now, we see that they still can exist together. Mostly because people still mainly use fiat money to transact and BTC has become more of a savings account for those in high-inflation economies.
But the more people will eventually start saving in BTC, the more people will prefer to receive BTC. As this would save them on the conversion of currencies. This most likely will eventually start the ball rolling towards the goal of a global digital currency where people will prefer to be paid in BTC than in a fiat currency.
We are not there yet. But many people around the world are already saving in BTC. And many countries already have a circular Bitcoin economic town or region. Making Bitcoin the currency of those people that use it the most.