Are cryptocurrencies better than banks?
Cryptocurrencies were designed to challenge the established financial services industry. Where banks are centralised and strongly influenced by governments, cryptocurrencies are decentralised and controlled by no one. Where banks act as middle-men in numerous transactions, cryptocurrencies allow two parties to transact with minimal friction.
So, is it fair to say that cryptocurrencies are better than banks? Overall, the answer is that it depends what you want to do. If you want to withdraw cash so that you can shop at the supermarket, then a bank is still better. If you want a quick, cheap way to transfer money to someone in another country, then cryptocurrencies probably offer a better deal than banks.
With that in mind, here’s a look at the advantages and disadvantages of both.
Banks are not known for their constant availability. Indeed, in Britain, nationwide days off are known as ‘bank holidays’. Even in the connected world, exchanges close for the night and banks have downtime. Cryptocurrencies don’t, so you can trade 24/7.
The lack of centralisation means that a government cannot simply seize your assets the way they can with a traditional bank account. Though cryptocurrencies are increasingly being eyed by regulators, they still retain their autonomy.
When making a transaction in the traditional banking system there is always a risk of identity theft. A dishonest shop worker could make a copy of your card, or your information could be stolen from a retailer’s database in a cyberattack. With a cryptocurrency transaction, your identity data is not transmitted when a purchase is made.
Another important advantage is that cryptocurrency is open to everyone. This is significant when large sectors of society are excluded from banking. Workers in the ‘gig economy’ for example, such as drivers for car-hailing services or food delivery drivers, often cannot get bank accounts because they don’t have a regular income. Similarly, in some countries, access to banking services is very limited, while most people have a mobile phone and internet access – making cryptocurrency a viable option.
Though there have been incidents of banks collapsing, most countries regard banks as “too big to fail” and will bail them out when they are in danger. This preferential treatment is one reason why many have argued that the financial system needs to be shaken up, but in the meantime, it offers protection for your money.
Banks are also more widely available as mentioned above. Most retailers will accept your bank card and you can withdraw cash from almost any ATM. This is not yet the case with cryptocurrencies.
Finally, banks are considered reputable by virtue of the fact that they have been in existence for a long time and are a regulated industry. If someone steals money from your bank account, most banks will reimburse you. In contrast, if money is stolen from your cryptocurrency exchange account, then there is often little you can do.