In recent years, big banks around the world are beginning to see cryptocurrency as a threat. In fact, most experts believe that digital money meets all the expectations and requirements of both individuals and organizations. And, with these traits, cryptocurrency could potentially entirely replace traditional money such as the Dollar or the Euro.
Banks tend to claim that they are the most established and secured institutions in the financial sector. And, the existence of a better, more interesting alternative is a threat to their financial activities, which is one of the main reasons why banks are opposed to developing the use of digital currency.
Most banks believe that cryptocurrency endangers the trust that their clients have in them and their financial services. Which, is precisely why they tend to hate cryptocurrency and are now waging a full-on frontal attack against the technology.
Recently, at a conference held at Goethe University in Frankfurt, Germany, the director of the Bank for International Settlements (BIS), explained that Bitcoin and its decentralized nature prove that it has all the characteristics of a speculative bubble, an environmental disaster, and a Ponzi scheme.
A Very Volatile Money
Cryptocurrency’s volatility and the ease with which it can be used for money laundering are two issues that banks often call into question to justify their opposition. Still, it’s important to know that banks aren’t always as innocent as they seem and in fact, banks often accompany their clients in committing tax evasion.
Also, its volatile nature is indisputable, especially when seen by cryptocurrency extravagant price surge in 2017 and then its crash in 2018. But, this is a common trait for a developing monetary system and is not necessarily a bad thing for investors who use this to their advantage. For traders, the ups and downs are of the market can be a good thing, if they make sure to convert their cryptocurrency into fiat currency before the price fluctuates and drops.
Therefore, it’s clear that, even though Blockchain technology is still being developed, it already has the potential to shake up and traditional world of finance.
“Scam” or “Pyramid Scheme”
Blockchain technology continues to grow and attract new users. And, banks like to compare the new system and its practices to a Ponzi scheme. Regardless, it is true that cryptocurrency is not backed by any assets or forms of wealth and in general, it is new investors that are financing the profits of the first investors.
This argument seems to reappear each time there is a correction on the market or a bear market. The idea behind comparing cryptocurrency to a Ponzi scheme is to instill a FUD (Fear, Uncertainty, and Doubt) in cryptocurrency novices.
Still, in the past, there have been some exchanges, namely Bitconnect, who were shown to be a pyramid scheme. But, they have since been denounced by their competitors and have nothing to do with Bitcoin, whose functionality is based on the laws of supply and demand.
An Ecological Disaster
In addition, the activity of mining cryptocurrency constitutes a massive consumption of electricity by its users. And, this has unprecedented repercussions on the environment since the exploit of fossil fuels is still predominant around the world.
However, some believe that cryptocurrency encourages the hoarding of wealth, which, in turn, reducing the over-consumption of energy. In other words, cryptocurrency users tend to hold on to their digital currencies during a bull market to see their capital evolve. And, also, they tend to HODL during bear markets for fear of losing their money.
So, cryptocurrency is more of a savings account, rather than over-consumption.
Still, unlike traditional money, cryptocurrency does not require the printing of bills, the minting of coins or any sort of delivery, which counterbalances the enormous amounts of energy needed for miners.