Decentralized finance attractive for the banking sector
Governments continue to work to protect their citizens investing in cryptocurrencies. However, writing the right scope of regulations is difficult due to the volatility of the market and new issues with which we have not had contact so far. Nevertheless, even the introduction of new regulations will not protect investors from unfair practices.
The collapse of FTX showed that even big players are not exempt from mistakes. Many cryptocurrency exchanges have been trying to find a way to help restore confidence in the cryptocurrency industry since this event. One of them is to provide a method for checking the reserve through verification in Merkle Tree. Experts say greater transparency will be a lifesaver for cryptocurrency exchanges. However, it will take some time and the industry will recover, then it will come back stronger.
Such a cryptocurrency crisis benefits banks that acquire customers by putting security first. Banks are interested in cryptocurrencies and blockchain solutions. BNY Mellon has already unveiled the latest Digital Asset Custody Platform, which allows institutional clients to store and transfer Bitcoins. JPMorgan, on the other hand, proposed that blockchain could be used to carry out faster cross-border transactions. The previous attempts were successful and the transactions turned out to be cheaper and faster than those offered by traditional banking.
Banks also receive more and more inquiries from their clients about cryptocurrency transactions. These are both individual and institutional clients, looking for a safe partner to buy and sell cryptocurrencies. It is clear that if banks do not adapt their offer to market demand, customers will look for another solution and turn away from them.
Traditional finance, however, must redesign the financial market infrastructure to match the needs of the blockchain. Service providers that can offer a comprehensive offering from storage to exchange to sale of cryptocurrencies are needed.
Bank customers and the banks themselves are afraid of the still unknown legal framework and regulations. Therefore, banks are taking a pragmatic approach to cryptocurrencies and are not going to rush to introduce new blockchain-related services. It should also be mentioned that this condition is not affected by the current bear market of cryptocurrencies. A more important argument would be to definitively establish business practices and regulatory oversight. The American banking association Clearing House believes that banks cannot yet engage in cryptocurrencies at the level of cryptocurrency exchanges for security reasons.
Combining the advantages of virtual assets with the credibility of the existing banking system would be satisfactory for both customers and banks. It seems that it is only a matter of time before the two ecosystems merge.
