The year 2022 has arrived, and banks and the traditional banking system remain alive despite decades of ominous predictions made by crypto enthusiasts. The only endgame that happened – a new Ethereum 2.0 roadmap that Vitalik Buterin released late last year.
Even though with this roadmap the crypto industry would change for the better, 2021 has shown us that crypto has not destroyed or damaged central banks, just like traditional banking has not killed crypto. . Why?
To be fair, the fight between the two was equally brutal on both sides. Many crypto enthusiasts were screaming about the coming apocalypse of the global financial systems and describing a bright future for crypto where every item could be purchased with Bitcoin (BTC). On the other hand, bankers have rushed to defend the traditional role of the banking system, accusing blockchain technology of poor performance and non-compliance.
Both sides were wrong in their predictions.
Fortunately, neither crypto nor traditional banking was destroyed, although they wanted to. For one thing, none of the major crypto projects have stayed away from the tightest integration with banks. US-based crypto exchange Kraken has received a banking license and the Coinbase IPO process speaks for itself as it is 100% gambling, by the rules of the system banking/finance. Most of the best projects only use the services of a few banks: Signature, SilverGate, Bank Frick – concentrating settlement and imposing the banking principles of working with crypto.
On the other hand, the banking community has created internal ecosystems for crypto projects. Visa introduces crypto advisory services to help partners navigate the world of crypto. Amazon Web Services (AWS) wants to “be the AWS of crypto.” Switzerland offers banking services to work with crypto. SolarisBank even offers an API for crypto projects. The largest US banks and stock exchanges are launching services related to cryptocurrencies. In El Salvador, Bitcoin is recognized as a means of payment, which (theoretically) implies the need for international financial organizations to be ready for Bitcoin settlements with El Salvador.
Related: What’s Really Behind El Salvador’s ‘Bitcoin Law’? Experts answer
What Stopped Crypto From Destroying Banks?
Humanity. Throughout human history, many new technologies have not been able to escape being controlled by state authorities, either directly or indirectly through corporations. Radio, TV, internet, social networks, everything started from the idea of a free dissemination of information and finally came up against the fact of total control. The same story is happening now with blockchain, and there is no way that will change in the future.
For the most part, people try to exaggerate the risks and reduce the likelihood of a good outcome. In my opinion, this is the reason that has severely limited and continues to limit the acceptance of cryptocurrencies. But, as I said, this way of thinking is part of human nature.
Yet why does centralization go against decentralization? It took some time for the world government to realize that blockchain technology could be not just a hassle, but a powerful tool for achieving political interests. Thus, the blockchain, originally conceived as a powerful tool for freedom, has received a completely reverse implementation, transforming itself into a tool for controlling money to a previously unthinkable extent. Like nuclear technology, humans use it for both peaceful and military purposes; the blockchain contains both sides of good and evil.
Related: Decentralization versus centralization: where does the future lie? Experts answer
Not a loss, however
At first glance, the crypto must have taken a step back from the initial “hawk” positions. In return, it received wide recognition, distribution and a huge number of users around the world – it seems like a just reward and a victory over those who predicted its impending demise.
I believe that the significant growth in associated Regtech technologies, designed to speed up compliance processes and all possible checks, has led to the acceptance of crypto by mainstream finance. These projects with the solutions to conduct Know Your Customer (KYC) / Anti-Money Laundering (AML) have shown a crypto answer to banks: companies like Chainalysis, Onfido can build KYC operations more efficiently while maintaining the full legality of the processes .
Related: The Banks’ Battle Against DeFi Is a Victory for Individual Crypto Investors
Newly created startups couldn’t go down the path of low-efficiency compliance in banks, which is a breakdown in almost every process. Yet, to do business in a legitimate field, they complied themselves, but more efficiently.
But will CBDCs destroy crypto? We should stop talking about the destruction of anything, and instead think about future potentials. Central bank digital currencies (CBDCs) have issues to address, including interoperability issues. With the incompatibility of CBDCs issued in different countries, the possibility of converting them mutually and the slowness of many government-related processes, we cannot speak of a quick fix.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Alex Axelrod is the founder and CEO of Aximetria and Pay Reverse. He is also a serial entrepreneur with over a decade of experience in leading technology roles. He was director of big data at the research and development center of JSFC AFK Systems. Prior to this role, Alex worked for Mobile TeleSystems, the largest telecommunications provider in Russia, where he led the development of anti-fraud and cybersecurity systems.