Industry Analysis

Growth of Bitcoin: A deadly sign for the global banking system

Bitcoin has always been the banking system’s worst threat

A new form of digital asset like Bitcoin is a very bad sign for the Global banking system, according to the Basel Committee.

The banking supervision forum has stated that cryptocurrencies and crypto assets have become popular despite their exposure to high volatility and risk throughout the years.

According to the committee, this new financial instrument is still immature and even then, it still presents a lot of risk to the global banking system.

Throughout the years, it has brought threats to liquidity, markets, credits, banking operations, money laundering, terrorist financing, along with some legal and reputable risks.

In a news letter the committes stated that:

“While the crypto-asset market remains small relatives to that of the global financial system, and banks currently have minimal direct exposure, the committee is of the view that the continued growth of crypto-assets trading platforms and new commercial products related to crypto-assets has the potential to raise financial stability concerns and increase risks faced by banks.”

The decentralisation of the Banking system

This notice coming from the Basil Committee comes at a time when the growth of cryptocurrency speculation has brought a lot controversy around the Blockchain industry.

Major bitcoin activists have put the digital currency technology as a messiah against the corrupt banking system as the banking systems belief a decentralized asset technology would distribute wealth more evenly and more openly than the regular banking system. Which is currently creating money just by printing it with the backing by “faith”.

This belief has brought the global financial and banking system nothing but problems, suffering and has continuously torn down societies and cultures across the world.

Also, this has led many to embark on the crypto-enabled financial wave for years sparking a revolution which is in flames. This evolving protest is aiming to replace the global financial reserve system, the Fiat dollars (EURO,US YEN etc.) with an asset whose supply is limited and backed by Math and methodology.

The goal is to make more people join such a demonstration, as such, they will eventually dump the government-issued money for a mathematically-born scare asset. This will automatically lead to the devaluation of the established financial system.

However, despite this global anti-establishment stance, most people involved in cryptocurrencies are speculators trying to maximize profits off crypto investments.

Nonetheless, the lack of regulation and excessive price volatility in crypto asset markets have been posing a risk to banks that do business with these nascent markets.

An individual’s exposure to Cryptocurrency

According to the Basel committee, they are monitoring the developments in crypto assets, including direct and indirect exposure to banks in order to clarify how this technology will protect the banking system from its own high risks.

The Committee stated that:

“The Committee will in due course clarify the prudential treatment of such exposure to appropriately reflect the high degree of risk of crypto-assets. It is coordinating its work with other global standard setting bodies and the Financial Stability Board.”

The committee suggests that banks conduct a comprehensive analysis of the crypto-related risks and banks should employ a clear and robust risk management framework that will protect them from crypto asset exposure and related services when things really start heating up.

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coinmag

My occupation is the Research of blockchains and their practical applications in the economy. I have graduated through various levels of education, including electrical technique, Business, Psychology, and innovative technologies.

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