Tuesday, August 6, 2019

Banks Vs. Bitcoin

Banks don't have much to fear from bitcoin itself.  Bitcoin is more like gold than currency.  Most people who invest in it are either trying to trade it quickly to get rich, or to invest for the long term as a hedge against inflation.

Bitcoin isn't practical as a currency, because the value is too volatile.  If, for example, bitcoin was used to pay monthly expenses (such as groceries or rent), the price would fluctuate too much from month to month, since jobs aren't paid in bitcoin.

Also, since bitcoin is not regulated by any government, holders of bitcoin risk losing their money in the case of hacks, forgotten passkeys, or exchanges shutting down.  There was a case last year where bitcoin owners holding their money in a Canadian bitcoin exchange lost it all when the operator suddenly died, and his wife didn't know the password.

Meanwhile, bank deposits are guaranteed by the government, and banks offer interest, and services such as loans, credit cards, mortgages, checks, wires, etc.

Indirectly, however, new financial technologies (fintech) such as bitcoin threaten banks because, through competition and better technology (blockchain in the case of bitcoin), they threaten to reduce the fees that banks charge for handling money.

© 2019 Praveen Puri

Praveen Puri is the Strategic Simplicity® expert who has delivered over $400 million in value. He helps clients "weaponize" simplicity and bridge the gap between strategy and execution. Visit PuriConsulting.com

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