As cryptocurrencies are becoming undeniably popular, banks are starting to adopt cryptocurrencies. Over the past few years, the number of crypto investors and people using cryptocurrencies to pay for products and services has drastically increased. This has been a wake-up call for many industries to acknowledge that cryptocurrencies will have a profound influence on the present as well as the future of the financial sector. Recently, several banks announced their willingness to adopt cryptocurrencies.
Banks follow a centralized method with an individual or a group of individuals standing as an authority for all the functions of the bank. On the other hand, cryptocurrencies are decentralized. They do not have a person or a group to control the network. Banks were against63[ this model of cryptocurrencies and considered them to be a threat to society.
Several governments across the world have completely banned the mining, ownership, and sale of cryptocurrencies in the concept of keeping their native currency as the one and only form for transactions. Algeria, North Macedonia. Ecuador and China have banned the use of cryptocurrencies. Vietnam and Russia are trying to prevent the use of cryptocurrencies.
The relationship between banks and cryptocurrencies is problematic even in countries where the use of cryptocurrencies is legal. However, some banks are trying to change their attitude towards digital currencies. Below are the reasons for this change.
- The rise in the demand for cryptocurrencies
It is not a secret that the demand for cryptocurrencies is increasing along with the need for services. Industries worldwide are trying to accept digital currencies to stay along with the trend. The statistics showed that the US economy had about 6% of Bitcoin investors which made the banks understand that cryptocurrencies will be playing a major role in the economy of America. In October 2021, the US Bank came up with a Bitcoin custody service to help the managers of institutional investment. Wells Fargo also announced that they will be offering crypto funds to their richer customers. America has several examples where banks offer crypto-friendly services to attract cryptocurrency users.
The ownership of cryptocurrencies drastically increased in 2018, which suggested that younger generations are interested in the changing trends. This has encouraged several banks to accept crypto-friendly services. Royal Bank of Scotland is an example. In the countries where cryptocurrencies are legal, banks are trying to strengthen their role in the economy.
- Many countries are legalizing cryptocurrencies
Most countries still focus on traditional currencies like Dollars, Pounds, Euros, etc for transactions. But there are a few countries that accept cryptocurrency as their major currency for transactions. These are countries where the national currency is crashing or are relying completely on outside financial sources.
El Salvador was the country that adopted cryptocurrency nationally. As the country was completely relying on their residents working outside, they had to pay significant fees to the intermediaries and the country had to face a loss in their overseas income from this. Venezuela is another example followed by St. Lucia and Grenada.