The rise of cryptocurrencies is shifting the traditional financial landscape, challenging the banking system. Today the global banking system is transforming, with financial institutions integrating crypto assets and crypto institutional trading features into their services for clients. The reason is the growing popularity of digital assets and increasing demand for crypto-related services.
Crypto institutional adoption is seen through banks adding institutional cryptocurrency trading desks (e.g. JPMorgan Chase, JPMorgan Chase, etc.), funds incorporating cryptocurrency exposure (Fidelity Digital Assets), payment system companies adding crypto transactions (PayPal), tech companies buying Bitcoin (MicroStrategy), etc. Some financial entities join crypto market-making programs (Cumberland). What is a market maker in crypto? It is active trading on a crypto exchange to deliver liquidity and ensure a stable environment.
The Benefits of Integrating Cryptocurrency in Banking
Why are crypto assets becoming so popular and why do banks integrate them? The reason is that traditional financial systems have many drawbacks, causing frustration among bank clients. This actually made digital assets so popular – the ease at which people exchange and send money across the globe is out of competition compared with the conventional approach.
Here are the advantages crypto could bring to the financial sector:
- Accessibility. Traditional banking systems may appear to be unreliable, particularly during server downtimes. It often limits access to financial resources unless you cash out. By adding cryptocurrencies, systems could remain consistently available, ensuring accessibility anytime and anywhere.
- Low fees. High commissions for banking services are commonplace, especially when it comes to cross-border money transfers. Crypto transactions are much less expensive, and the fee charged for simple operations is minimal. Plus, using stablecoins such as USDT, banks could settle transactions pegged to the price of dollars.
- Fast transactions. It often takes too long for a bank to process transactions, especially when you send a large amount. Crypto transactions are extremely fast. There are no queues and no protocols – you can send crypto instantly.
- Decentralization. There is no human interaction in crypto transactions, so nobody can freeze or cause delays. Adding crypto banks could get rid of human biases.
Banks and crypto platforms are very much different in terms of speed, fees, and accessibility. So it makes sense for banks to use these advantages of blockchain and incorporate crypto to make transactions easier, cheaper, and more accessible. Of course, it will take time to develop a clear regulatory framework for global institutional crypto adoption. However, it is already gaining momentum as financial institutions recognize the potential benefits.