What makes Bitcoin unique is the fact that it operates from a decentralized system void of government control. This has always been the fundamental reason why people prefer bitcoin to fiat currencies; the fact that the inconsistencies if banks do not affect bitcoin in any way. Well, it seems we may have to look for a different reason to still love bitcoin because banks are about to join the climate. Isn’t this ironic, considering the fact that the banks have always found a way to ridicule the concept of bitcoin and digital currencies from the onset of things? The move of banks to join the sector is hypocritical. But then, maybe they’ve come to the realization that nothing can change the existence of bitcoin because it has received worldwide acceptability. From another perspective, this may be a subtle move by the government to try and regulate the use of bitcoin in the crypto space. We cannot really say for certain which it is but what we do know is that there are a few dominant factors that will play out. And when they do, it will have a tremendous effect on the ecosystem and economic conditioning of the crypto market. Let’s take a look at some of them.
Fractional Reserve Banking
This is one of the popular methods used by banks to realize massive profits with the inflow of cash coming into the sector. Banks typically do not keep all the monies of their customers. As a matter of fact, they trade with most of it and reserve only a little for customers who’d come to withdraw. This practice would have a negative effect on bitcoin if banks are finally allowed to hold bitcoin. The reason for this is that many countries would want to make their fiat currencies more valuable than the bitcoin in the forex market. In the long run, this would depreciate the value of the bitcoin. Also, it’s an open secret that banks trade against their initial positions in the forex market in order to trick people into losing their money. While it is true that this is a harmless legitimate trading tactic. It has made a lot of people lose their capital in the forex market and such people only find solace in trading bitcoin and solid minerals like gold. If banks are allowed to hold bitcoin they will be given control over the entire forex market to banks.
It is no news that banks have the Constitutional liberty to freeze a customer’s account when an order is given from the government or a court of law. This is something that ordinarily cannot take place in the crypto space. However, if the banks are allowed to hold bitcoin, the reverse would be the case. Every transaction would be closely scrutinized and there would be no anonymity. Much worse, he banks would become middlemen and may charge a ton of cash to effect a transfer.
Safety of the System
The blockchain security system would be compromised if the banks are given custody of the bitcoins belonging to individuals. This is because such custody has the potential of giving access to more than 50% of the accounts of users in a region. If the bank is hacked, this could compromise the entire system.
Limit on Transactions
Currently, there is no limit to how much you can send via bitcoin. But this could change if the banks are given custody of bitcoins. The banks could place a ban on transactions exceeding a particular limit.
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