Crypto’s Identity Will Be Altered By Legacy Financial Institutions – Why That’s Not Such a Bad Thingbr>
Due to the boom in cryptocurrency popularity among average investors, traditional financial institutions such as Goldman Sachs and Fidelity Investments have announced plans to enter the crypto space. Participation from these institutions would bring major changes to the crypto market – some positive and others negative. While cryptocurrency was originally established to circumnavigate regulation from big banks and governments alike, involvement from these heavy-hitters in the finance world could fuel widespread growth for the entire crypto industry. Cryptocurrency is in danger of losing its original identity, but maybe this is not a bad thing after all.
Downsides of Rapid Growth in the Crypto Industry
To start, let’s explore some of the negative consequences that could result from increased participation from traditional financial institutions and the growth it will accelerate. The main downside of the crypto industry growing at such a rapid rate is the influx of low-quality projects. This means more ICOs with unclear goals, inexperienced founders and incoherent white papers. As a result of this proliferation of low-quality projects, it will be easier for high quality projects to go unnoticed. Additionally, the industry could attract more bad actors with nefarious intentions. They too might creep through the crypto world unnoticed due to a high volume of traffic in the cryptosphere. “Bubble mania” is another situation the industry could face, as inflated prices could lead to a cataclysmic collapse. While these are all potentially damaging consequences, I believe that the positive outcomes that come about from bank involvement in crypto will outweigh the negatives.
Benefits of Rapid Growth in the Crypto Industry
As the crypto markets grow, so too does the level of innovation. Innovators want to bring disruption to booming industries, so growth in the crypto space will absolutely attract luminaries from across the globe. Increased innovation, in turn, will lead to more funding in the space from a variety of players. No longer will crypto be considered a clandestine industry reserved for those with technical know-how. Widespread interest in the crypto industry will lead to increased adoption of crypto as a legitimate form of payment, which is critical for long-term growth and stability. And of course, big banks’ adoption of cryptocurrency will lend itself to mainstream consumer adoption, as most people use banks to store their money. In this way, large financial institutions adopting cryptocurrency will facilitate stable growth for years to come.
For Crypto to Truly Flourish, It Needs the Cooperation of Banks
There are a few reasons the cryptosphere needs cooperation from banks. Crypto is years away from being fully adopted as a global payment mechanism,if indeed that ever happens. And until then, crypto-to-fiat conversions will still be necessary to a certain extent, because you can’t pay for everything using crypto. Not only are banks necessary for enabling fiat conversions, but they will also bring an influx of fresh capital into the crypto industry.
As traditional financial institutions adopt crypto, investors will feel more comfortable investing in digital currencies. Adding crypto trading desks to big banks would bring in new capital and liquidity, which would grow the crypto space considerably. Additionally, big banks could recommend crypto assets to customers in their private wealth management division, which would raise token prices while simultaneously stabilizing some of the heavy volatility seen in the crypto market.
It should also be noted that since some of crypto’s initial identity has been tied to illegal activity, it’s not necessarily a good thing for crypto to keep its entire identity intact. For example, Bitcoin was a form of payment on the Silk Road, an online black market notable for the sale of illegal drugs. Money laundering, hacking, tax evasion, and all other criminal activity would be lessened considerably if big banks entered the scene and allocated some of their extensive resources towards negating criminal activity.
All in All, The Pros Outweigh the Cons
The pros to rapid growth in the cryptocurrency industry absolutely outweigh the cons. The key is for the crypto industry to grow in a healthy way and distance itself from cybercrime, which will remain a constant threat to mainstream adoption due to cryptocurrency’s innate privacy features. As traditional financial institutions enter the space, the identity of the crypto industry will evolve in a positive way. In turn, this will lead to everyday investors and consumers embracing crypto and fueling sustainable growth.