The Bank of America (BAC) issued a warning about cryptocurrencies, citing as one of the key risk factors to competitiveness and profits.
This is not a new suggestion. It has long been debated that bitcoin and similar assets that are not based on any real-world objective valuable may not so much threaten the established financial system but topple it all together.
Despite the peer-to-peer, electronic cash, which promises to completely, overhaul how we trade money, arguably quicker and more securely, still seems like a topic in a sub forum rather than a real-world investment tool that can be relied upon to prop up anything a financial world system.
But BAC is not the first institution or industry expert to have noticed this disturbing trend. Still, publications in the Financial Times and exerts own account are not as ominous as the real-world applications may seem.
More specifically, BAC focuses on three possible ways in which cryptocurrencies may undermine the established economic order
Number one, they can devaluate FIAT currencies while not proving much of a substitute themselves.
Number two, clients may choose to start trading in speculative assets because their business partners do. This, BAC considers may lead to a downward spiral.
Lastly, cryptocurrencies have another major drawback, which is often cited as their strength. Because these cryptocurrencies are not regulated by anyone, nobody knows what their origin is. Subsequently, nobody can guarantee if they are coming from a legitimate source. Moreover, only a handful of all people involve in cryptocurrencies have been paying any sort of tax on top of their earnings, which may get them into hot water with the IRS.
Price volatility is another major concern of the cryptocurrencies that needs attention.
Trust the Technology, Not the Replicas
The bigger issue today is whether the technology that underpins those dodgy assets is still applicable on a larger scale. Fintech companies who are also sanctioned by government and monetary unions, including the European Union, are now slowly gaining traction and endorsement.
In other words, there is a good chance that Blockchain will stay and continue to develop its offshoots, but cryptocurrencies’ future is not as bright. Should bank figure out to use blockchain technology to allow individuals to transact money safely and securely, these putatively new form of money may peter out as quickly as it came to life.
The new platforms that have been appearing in the world of cryptocurrencies are mostly an imitation of what we know about the established financial order. Still, they offer some flexibility, but are not yet proven to be as efficient and secure as their incumbent counterparts.
But crypto exchanges have proven less than reliable in recent years. For starters, a handful of those that were thought impenetrable were picked clean through low-secure wallets.
It’s truly unbelievable that an operation that manages millions worth of crypto tokens would leave something so banal penetrate their defence when the first thing any cryptowallet would advise you is to keep your information in a secure, and possibly, off the grid wallets.