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The dynamics in the banking sector are set to change with leading banks considering the introduction of digital currencies in a bid to prevent disruptive players from gaining a monopoly in the market.
FREMONT, CA: Cryptocurrencies have been around for some time now, but until recently, they did not enjoy much popularity. Even governments and central banks did not pay attention to the emergence or use of cryptocurrencies. However, the scenario is changing now. Cryptocurrencies are getting into the spotlight, and enterprises that offer services related to these digital currencies are emerging. Thus, central banks now have to start making some difficult choices regarding their stance on cryptocurrencies. As customer expectations change and disruptions rise, banks are expected to expand services to cover cryptocurrencies. The extent to which the banks will change their business models is now under constant speculation.
Apart from the growing incidence of digital payments, banking services are also facing issues regarding security. Overall, the use of cash in on the decline, while customers turn towards the safer alternative of digital currencies. When compared with conventional cash, cryptocurrencies perform better on several parameters. If banks offer their own digital currencies, they will be able to facilitate faster and more efficient transactions. Functioning on the blockchain allows significant cost savings, as well. So, banks supporting digital currencies will be able to enhance services while reducing the costs of operation.
Although the threat from companies offering cryptocurrency-related services is not much at the moment, things might change rapidly. According to reports, banks in several countries have already started experimenting with cryptocurrencies. These efforts can be seen as a response to some global technology companies’ aggressive introduction of proprietary cryptocurrencies. If leading tech companies begin taking control of cryptocurrencies, banks will be left behind. Thus, to stay competitive in the future, banks have to make policies that prevent monopoly in cryptocurrency-related services.
Since banning or ignoring the rise of cryptocurrencies does not have any incentive for leading banks, the banking sector should look forward to developing its own cryptocurrencies, and regulations. This way, banks can stay relevant while regulating standardized digital currencies effectively.
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