How Cryptocurrencies will Replace the Traditional Financial System

By Kapil Gauhar

In the past gold and silver have been replaced with fiat currency, now cryptocurrencies are on their way to replace the fiat currency and traditional financial system. Cryptocurrencies are free from central banks’ influences and they can be used by anyone in any corner of the world. Cryptocurrencies offer the flexibility of instant transfer without any trusted third party or intermediaries. Cryptocurrencies such as Bitcoin, Bitcoin Cash, Ethereum and others are resolving the limitation of traditional financial systems. Cryptocurrencies are decentralized assets which means they are not controlled or managed by any single entity including central banks and governments. Cryptocurrencies are the new way of safeguarding money and privacy.

In a recent research Imperial College of London and trading platform eToro found that cryptocurrencies have the potential to perform the roles of traditional financial institutions in a better and effective way. Now cryptos have become more mainstream. Cryptocurrencies are not only becoming popular online but also people started using them physically. Currently, there are over 1,400 Bitcoin ATMs in all over the world. Let’s see how digital currencies will influence the traditional financial system in coming years.

Cross-border payments without the involvement of third parties

With cryptocurrencies such as Bitcoin, Ethereum, and others the process of international money transfer has become simple, and instant. Now people do not need any third party for cross-border payment and also have no need to pay high commission on money transfer. Foreign exchange service offered by traditional payment processors are not only costly but also time taking.

Faster and cheaper international transactions

Traditional payment system takes around seven business days for cross-border payment and also charge heavy transaction fees while with digital currencies payment is almost instant, easier, cheaper, and more secure. Ripple has emerged as a cheaper way of sending and receiving money locally as well as internationally.

Available for everyone

The only requirement for a crypto transaction is internet. The people who have internet access can use cryptocurrencies for payments. While to access the traditional banking system people have to qualify some preset criterions. Currently, there are millions of people all over the world who do not have the access to banking system but they have internet access. With cryptocurrencies in place, anyone can be a be a part of the crypto ecosystem.

Fraud prevention

Cryptocurrencies are decentralized means they are not controlled by the central bank, government, or any other entity. Cryptocurrencies are fraud-proof as no one can alter any record in the system. Though there are chances of cyber hacks but these can be prevented by a strong security system.

Volatility

High volatility in cryptocurrencies is a threat for crypto users like in 2015 Bitcoin was trading at $333, in 2017 it rose to $20,000, and now it is trading at $6,428. As the volatility is incredible in a such a short period, this is the main reason that individuals prefer traditional banking system over digital assets. Currently, most of the individuals argue that despite the inefficient traditional financial system they are more comfortable in keeping their money in banks rather investing in highly volatile cryptocurrencies.

Cryptocurrencies are offering better financial services than traditional banks. Still, people have trust in the traditional banking system but to remain in the competition banks have to adopt new technologies so that they can make their process efficient, faster and cheaper. Cryptocurrencies also have some limitations and it will be hard for them to overpower the traditional financial system.