It’s well-known that big banks don’t like cryptocurrency. But the future is coming whether they spread misinformation about it or embrace it.
As blockchain technology grows in popularity, mainstream financial institutions are offering advice and opinions – which is rather laughable. While they have extensive experience in finance, they are still struggling to understand cryptocurrencies, blockchain technology, and its implications.
“It’s a bubble.”
“It’s going to fund terrorism.”
“It’s drug money.”
Those were the initial warnings the big banks threw at their customers. Since then, most discerning investors are past that fear, and the banks are supposedly doing more research. Unfortunately, the results are superficial simply because the banks don’t understand this new technology.
For example: the China Electronic Information Industry Development (CCID), which is the research wing of China’s Ministry of Industry and Information Technology (MIIT), recently published a blockchain report (its second report). The study intended to “evaluate the development level of global public-owned chain technology [and] accurately grasp the trend of blockchain,” put EOS, a highly controversial startup, at the top of its cryptocurrency list (completely ignoring the messy drama and challenges EOS is currently struggling with). The report focused only on what EOS is (“a blockchain operating system designed for commercial distributed applications”) but failed to mention that its mainnet launch has been delayed, critical vulnerabilities were discovered in its blockchain, and that EOS is embroiled in controversy surrounding its “on-chain governance” model. In other words, the report misses the point by ‘researching’ the EOS marketing statements, but failing to ‘study’ the platform in-depth.
For example: Swiss-based Bank of International Settlements (BIS) stated in a report that Bitcoin was an “environmental disaster” and questioned its utility as currency. The report backed its claims with old research and completely dismissed the diversity and innovative solutions offered by more recent technical advancements. The BIS focused on criticizing Bitcoin as a means of exchange due to high fees and slow transaction times (but hang on… isn’t that what banks are famous for?).
The Reserve Bank of India (RBI), India’s central bank, has issued warnings to citizens about the risk of investing in cryptocurrencies. This position ultimately led to a directive to all Indian banks to immediately stop doing business with cryptocurrency exchanges. Unfortunately, this ban was not the result of thorough research.
Since many people are used to taking the words of big banks as gospel, it’s important to know that their positions are not based on research. They’re just opinions designed to maintain the status quo.
The big bank’s paranoia is justified in one sense: that banks fear they may eventually become obsolete. But hey… that’s progress. We rarely carry cash anymore, we don’t use rotary phones anymore, and we certainly don’t need a middleman to conduct our transactions. The banks would better serve their customers by embracing cryptocurrency and blockchain technology, and finding ways to evolve instead of thrashing about like dying dinosaurs in the tar pits.
While the crypto space is still developing and there really are quite a few things to be genuinely critical about (including hacking), it’s irresponsible of the big banks to fuel misinformation and issue statements based on who-knows-what instead of legitimate academic research.