Are Banks afraid of cryptocurrencies?

Blockchain and cryptocurrencies are getting more and more recognition and adoption. People are pouring their life savings and banks saving in cryptomarket. This started to crumble the whole foundation of the modern banking system. That is why banks are starting to consider cryptocurrency a material risk to its business.

Bank of America posted an annual filing in Edgar with the Securities and Exchange Commission. They admitted cryptocurrency poses a competitive threat to its business on more separate occasion in the document. The bank said there is a risk that its customers could turn to cryptocurrencies. It added that, “Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies.”

The bank realizes the adoption of cryptocurrencies and new payment systems comes at cost. It could force the company to invest money to expand their offerings in order to remain competitive. The “widespread adoption of new technologies, including internet services, cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and services,” it said.

The bank also pointed to the other difficulties cryptocurrencies pose. Like when it comes to tracking funds as part of its responsibility to follow legal requirements. Like those on foreign corrupt practices, overseen by the Office of Foreign Assets Control, and other anti-money laundering regulations.

“Emerging technologies, such as cryptocurrencies, could limit our ability to track the movement of funds,” it said. “Our ability to comply with these laws is dependent on our ability to improve detection and reporting capabilities and reduce variation in control processes and oversight accountability.”

Ethereum co-founder Vitalik Buterin stated that it could take two to five years for public blockchain networks to scale with two-layer and on-chain scalability solutions.

But bitcoin will scale to a capacity in which hundreds of transactions can be settled per second. Lagarde explained the decentralized nature of bitcoin could provide general consumers with a more efficient, robust, secure, and cost-efficient financial network. That will be an alternative to the global banking infrastructure.

The mainstream adoption of bitcoin and cryptocurrencies would have a massive impact. It would result in the decrease of power of central banks and leading financial institutions. Fiat currencies would no longer be of any value as central banks and local financial authorities would not be able to manipulate the value of assets.