On the heels of facing long challenges in opening bank accounts of crypto operations funding, there arises the need for crypto firms to have. Recently, BitPay, which is a Bitcoin and cryptocurrency payments company completed paperwork with the United States Office of the Comptroller of the Currency (OCC) to register a national bank, called the BitPay National Trust Bank.

This bank bid follows the revealed plans by the OCC boss, Brian Brooks, who said there is a move to empower payment companies to operate across the states in the country with a single set of rules while the applications are set to be received.

However, the world is already adjusting to the new financial innovation that came in through cryptocurrency. With it, concepts like Bitcoin, blockchain, crypto, etc have been put in the spotlight to become a daily discourse. As we are experiencing a digital revolution, cryptocurrency capitalization has been on the increase in that regard.

As Bitcoin is gaining momentum with a tilt at being a potential substitute for traditional banks, this feat has not been achieved as of 2021. This is owed to the fact that some financial experts do not tout Bitcoin as a full-fledged currency.

But, this narrative doesn’t translate to the number of cryptocurrency operations between traders and customers dwindling. Credit to blockchain technology, cryptocurrencies have become very popular today, as they are being likened to traditional banks.

In clearer terms, cryptocurrency is defined by a platform that performs traditional banking operations (transfers, loans, exchanges, etc) with cryptos. Decentralized finance (DeFi) is an area of decentralized services that form a linkage to defi development, loaning activities, and making records on a blockchain.

Traditional Banks Vs. Cryptocurrency

Though these took some semblance, there are some nuances of features in the traditional banking system and the crypto sphere.

1. Scalability And Scope

Just as a rule, traditional banks count a bit more. In the traditional bank setting, customer’s money being deposited can be used to conduct different operations, although there is a varying incentive for activities like loans (small, big, instant, mortgages, etc), currency exchanges, disposal of finances, goods exchanges, international and local money transactions, and numerous significant operations and services.

While cryptocurrency is shaping up as investment funds, in suggesting crypto investment to people, a miniature cryptocurrency operates loans and interest payments.

2. Human And Knowledge Resources

The greatness of human and knowledge resources is also a distinguishing factor between traditional banks and cryptocurrency. It is safe to infer that the operations of the traditional banking systems are more prevalent than cryptocurrency. This is because traditional banks have been around for centuries, but the emergence of cryptocurrencies has just been for 13 years.

The sphere of traditional banks is characterized by a huge workforce in every country of the world. In the case of cryptocurrency, it is still at its early stage, hence lacking specialists and experts in the field.

Meanwhile, there is a possibility of beholding a synergy between traditional banks and cryptocurrencies. Today, adroit financial analysts are emerging to enrich the crypto world.

3. Safety And Insurance

Safety and insurance are important in traditional banking and maybe, in a cryptocurrency. Many people that operating with traditional banks is considered safe. The rationale behind this is due to the assets being insured while having an efficient security framework.

In the ugly event of a traditional bank being robbed, customers do not lose thief money because of the robust insurance system that has already been put in place.

On the other hand, cry to currencies function in a relatively different way. The crypto wallet protection is at the prerogative of the user. So funds can be easily stolen when information is lost. This means that your cryptocurrency is at the risk of loss when your wallet is lost.

4. Legal Recognition

The fundamental distinction between a traditional bank and cryptocurrency is their legal base. Countries like Switzerland have already given a crypto bank a license, which is in a way applicable to what the United States has done, making cryptocurrency legal on a federal level.

However, there is a preponderance of countries still rigid in their resolve towards a structured crypto-related regulation. While this is going on, some nations have outrightly placed a ban on cryptocurrencies.

The entirety of the traditional banking system forms a linkage to the government, from exiting laws to an institution being overseen by the central bank.

With this legal recognition, there is more safety towards the protection of customers’ assets sustainably. Although we can not shy away from the complications that come from the legislation. This can link to the rigidity and dependence of traditional banks, compared to cryptocurrency.

Even at this, there are few exceptions, whereby people in some countries are not restricted from crypto services.

Merits And Demerits Of Cryptocurrency And Traditional Banks

For us to envisage appropriately the transformation of cryptocurrency into a full substitute for the traditional banking system, there is a need to assess the merits and demerits of these two systems.

Pros Of Traditional Banks

  • Provides physical and digital presence for its users
  • Legal basis
  • Large specialist base with much experience
  • Huge possible operations with a flexible approach.

Cons Of Traditional Banks

  • Bank transactions are relatively low
  • Banks rule over the money of customers
  • Banks’ dependent on the government is high
  • It acts as the mediator between two parties conducting a transaction.

Pros Of Cryptocurrency

  • Blockchain technology reduces the number of mediators
  • Crypto transactions are fast and safe
  • Blockchain technology is very stable
  • There are varying safety measures but are stringent.

Cons Of Cryptocurrency

  • They are still treated as assets and not currencies by governments
  • Cryptocurrency doesn’t have many possibilities like traditional banks
  • It is more difficult to acquire a legal basis for cryptocurrency
  • Auxiliary services like insurance do not exist in blockchain

It is crystal clear that there is quite a several complications as far as the conflict between cryptocurrency and traditional banks is concerned. So it is dicey to deduce cryptocurrency as the potential substitute for traditional banking.

Conclusion

We can see how cryptocurrency is becoming trendy in the financial world. Similar to how the traditional banks operate, the crypto world is recording new users all the time, as they also provide customers with options like deposits (storage) and loans.

However, it is important to note that the traditional bank is bound to win in the competition between the two financial systems. This can be said to continue until the people and governments uphold the relevance of cryptocurrency as the potential substitute for fiat currency (money).