Era Of Cryptocurrency: Do We Still Need Banks?

We’ve reached a point in conversations around making this time the era of cryptocurrency. It’s beginning to feel natural to think that crypto could one day replace standard currency. But, what if it could overthrow our entire financial system, including banks?

The financial industry isn’t seen in a favorable light. Consumers hold very little trust in banks and the financial sector. Many witnessed the greed and obfuscation that led to the 2008 economic crisis. The public may be open to replacing banks with a better system. But, could that better system really lead to the era of cryptocurrency?

The Functions of Banks

Let’s start with a primer on what functions banks are responsible for handling even in the era of cryptocurrency:

  • Currency storage and security. Banks hold your checking and savings accounts. They’re chiefly used as repositories for your currency when it’s not in use. Because most are FDIC insured, you can rest easy knowing that money is safe.
  • Transaction management and recordkeeping. Your bank takes charge of managing your transactions, whether it’s processing checks and debit card activity or transferring between accounts. They also keep detailed logs of all these transactions.
  • Conversion and exchange. You can withdraw money from your bank in almost any form. This includes cash from an ATM. At some banks, you may also be able to exchange one type of currency for another.
  • Borrowing and financing. Banks are responsible for facilitating borrowing, financing, and other financial products. Without banks, you wouldn’t be able to get a mortgage for your house or a line of credit for your business.
  • Underwriting and supervision. Investment banks serve functions distinct from those of commercial banks. They aid in underwriting. Also, they may help businesses make important decisions like whether to move forward with a merger or acquisition.
  • Financial stability. Central banks are typically government entities that oversee interest rates. Therefore, they attempt to control inflation. Also, central banks carefully control how much currency is printed and distributed at any given time.
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