The crypto world is a new frontier that would take time before many people can understand it. However, Bitcoin is the lead-pack crypto, which has continued to cause ripples on the global economic landscape. It has established its strong position in the crypto market as a trusted store of value and mode of payment. Bitcoin’s adoption into mainstream industries, including the financial sector, real estate, healthcare, and retail, rapidly increases.
Many experts believe that Bitcoin is the future’s digital currency that would eliminate the limitations of traditional financial institutions. It is imperative that banks also start thinking of ways to benefit from the crypto revolution. Contrary to what some believe, most financial institutions already have the required systems and processes for integrating Bitcoin; they need upgrading and exposure to the crypto market. Here are different ways banks can benefit from Bitcoin:
Infrastructure for Crypto Service Providers
Banks can provide the necessary infrastructure for crypto companies and offer customers direct banking services such as payments, loans, and bank accounts. Today, established crypto exchanges like Bitcoin Revolution App have processes that allow users to make deposits and withdrawals directly from their bank accounts. That enables the banks to benefit from transaction fees and commissions.
Banks could also introduce Open Banking as a separate value stream, using API services for currency exchange, processing payments, and creating new accounts. For instance, VISA recently released its API system for buying crypto and integrating it with banks.
There are various requirements regarding the building of repositories and money storage. For example, Europe has a unique way of storing digital assets in the Alps, based on a famous ancient military bunker. Banks can use a similar concept to develop the right financial and physical capabilities to store Bitcoin and other digital currencies like fiat money. Those capabilities would enable them to provide reliable and secure custodian services for businesses and individuals that own crypto.
Most of the world’s leading banking companies are currently pursuing a series of cloud-based tests on the blockchain, Bitcoin’s underlying technology. The trials mainly seek to help the banking institutions to understand how the technology operates and how it could facilitate smart contracts.
Smart contracts are technology-based protocols that can formulate, verify and enforce negotiations or agreements. That means banks can implement specific rules from asset issuance to complex financial derivatives on the platform. Bitcoin adoption offers banks the most efficient way to execute smart contracts using blockchain technology.
Implementing smart contracts would enable banks to improve efficiency and transparency in financial transactions by removing the middlemen. Doing so would also speed the processing of transactions, ensuring improved convenience to banks and their customers.
Traditional banks have regulatory legislation for assessing risks like money laundering and terrorist funding during financial transactions. However, those procedures are not robust, making banks increasingly vulnerable. Besides, cryptocurrencies are anonymous instruments that people can use to send and receive payments without disclosing their identities.
However, Bitcoin and blockchain technology can help banks avoid such risks, ensuring increased transparency in all financial transactions. Bitcoin’s shared digital ledger would enable banking institutions to conduct round-the-clock monitoring of transactions, avoiding dangers like money laundering and terrorist funding. That could save banks millions of dollars, usually lost due to the lack of proper risk assessment systems.
Many neo-banks do not usually have licenses; instead, they leverage co-brand products to offer banking services through intermediaries with the relevant permissions. That means banks could also build crypto operations around those existing partnerships with fintech companies, generating new income streams.
The global economy is facing a technological revolution and, cryptocurrencies are among the critical change makers. While it is still early to predict all the transformations, there is proof Bitcoin would create several new opportunities to facilitate the future growth and development of the banking industry.