The digital currency insurgency is presently moving into banking. As digital currencies reshape the manner in which individuals acquire and save. The development of Bitcoin and thousands of other cryptocurrencies has changed the definition of money in just over a decade – and given birth to a parallel universe of alternative financial services, allowing crypto businesses to move to traditional banking.
What alternative banking services do crypto businesses offer?
Most notably, lending and borrowing. Financial backers can acquire interest on their advanced cash property. Often they are much more than they can borrow with crypto as a cash deposit or loan repayment guarantee in a bank. Crypto loans usually do not have any credit checks because the transactions are supported by digital assets.
How are crypto offers different from banking services?
Externally, some look the same. Take a blockchain interest account, where consumers deposit cash or crypto and earn monthly interest like a bank. But the big difference is the interest rate. Depositors can earn up to 100 times more than the average bank account at BlockFi.
Those rewards bring risks. Withdrawal or transfer may be a temporary or permanent suspension order. “Cyber attack, extreme market situation, or other operational or technical difficulties”, the company warns in fine print. Some regulators and lawmakers are concerned that these warnings are not significant enough and require strong consumer protection.
What is a central bank digital currency?
Central bankers are exploring the possibility of issuing cryptocurrencies issued by the government. It would theoretically provide crypto with the reliability of money controlled by a central bank. Many countries are considering developing a central bank digital currency institutional finance. This is because the goal of a stablecoin is to digitize which provides a stable value for government money. A US digital dollar could weaken private money miners in the cryptosphere.
Stablecoin issuers say the government will not be able to innovate in the market year after year. In the meantime, the system will become more dependent on stablecoin, and it is unclear whether the markets will abandon those assets altogether for potential Fedcoin.