Over the years, there has been an increase in the awareness and reach of cryptocurrencies among individuals globally. For many people, cryptocurrency has come to stay and is even a preferred transaction method compared to traditional banking systems. Cryptocurrency is a digital currency backed by cryptography for its security and is independent of the traditional central financial system.
Central financial systems have been the mainstream for a long time, but the advent of cryptocurrencies has provided a disruptive force in this system and has gained momentum in recent years. Below, we will explore how cryptocurrency is changing the financial system. Let’s begin.
A shift in the nature of finance
The traditional banking system has been the mainstay of finance for over a century. Running on a centralized system, they use a vast network of intermediaries to ensure financial stability, facilitate transactions, and manage risk. However, the introduction of cryptocurrency has brought about an entirely new finance system called decentralized finance (DeFi).
Cryptocurrency and blockchain-distributed ledgers record the transitions through many computer networks. With this, no central authority exists; as a result, the financial system is transparent and open. If you wish to understand this shift in finance further, you can study an MBA online that offers comprehensive courses on blockchain technology and modern financial systems.
More accessible
In traditional financial systems, opening a bank account requires various levels of documentation and verification, physical proximity to any branch, and a minimum balance. This act usually excludes many of the world’s population, especially those with reduced access to a traditional financial system.
However, cryptocurrency offers an accessible entry that requires only your smart phone and internet connection. With this, many people who are excluded from traditional banking services for various reasons can partake in cryptocurrency. For example, even people in remote areas that lack bank facilities can access cryptocurrency transactions like BTC to USD. They don’t need to travel long distances.
Speed
Transferring money from bank to bank is sometimes slow and can be inefficient if it involves a large sum. For example, international transfers are subject to several levels of checks, which makes the transfer take time. The long duration of a bank transfer is usually due to how the traditional financial system is designed. This makes it quite inconvenient for the customers and logistical for banks.
On the other hand, cryptocurrency transactions are usually completed almost immediately. Additionally, it doesn’t cost much compared to the fees on transfers from banks. This is due to the peer-to-peer system in blockchain technology. The efficiency of cryptocurrency can change the way payments are made internationally.
Cryptocurrency can make it easier and faster for individuals and businesses to conduct cross-border transactions. Think about sending money overseas as effortless and quickly like sending a message on your phone.
Endnote
The advent of cryptocurrency is changing the banking system, but this doesn’t mean the traditional banking system will be eliminated. Experts foresee a future where the best characteristics of both are combined for a faster and more effective service. There might be more collaborations between banks and cryptocurrency companies to ensure legal compliance and custodial services.
