Traditional Banking Vs Cryptocurrency: The 5 Major Differences

Welcome to the war of Banks vs. Crypto. Cryptocurrencies have been booming in recent years, and recently, some banks are starting to take a stance against them. This is worrisome for people who depend on cryptocurrencies for their work. Here’s what you need to know about cryptocurrency and how it can help your activism efforts.

Banks and crypto are two of the most talked-about subjects in finance. The question is can banks compete with crypto? It’s not just a simple answer. Banks have been around for centuries and offer many conveniences that make them attractive to consumers. On the other hand, crypto is relatively new and provides different benefits to consumers who may have an advantage over traditional banking institutions.

Centralized And Decentralized

A central bank is an institution that plays an integral role in the world’s interlinked economies. It provides financial and banking services to commercial banks and the government. It may or may not be controlled by the government but has the privilege to formulate the country’s monetary policy.

Central banks are non -competitive and politically independent institutions and control money production and distribution across the countries. A central bank is a lender of last resort to other commercial banks as it offers loans to banks experiencing severe financial difficulty.

Central Banks VS Commercial Banks

They are given several responsibilities, including printing and issuing notes and coins, and setting monetary policy and interest rates on loans. Although these central banks seem like a magic tree, printing money whenever required. But the problem is when a central bank fabricates new money, the real value of a unit of money decreases, and inflation increases.

In the United States, Federal Reserve was established like other central banks to stimulate economic prosperity. Its primary function is to keep the prices stable and prevent them from rising or falling abruptly.

Federal Reserve keeps the inflation rate of 2% per year by influencing interest rates. When inflation is high, it increases the interest rate to slow the economy, bring inflation down, and vice versa.

Need To Know About Crypto

Will I be able to use it for my banking needs? The answer is yes. We will explain why crypto and banks are not mutually exclusive entities and offer a breakdown of how they compare regarding accessibility, cost, security, convenience, and more.

While there are some drawbacks to using cryptocurrency as your primary form of payment (such as limited accessibility), the benefits far outweigh these cons.

Suppose you’re an activist who wants to remain cashless and wants the security that only a bank can offer. In that case, you should consider looking into cryptocurrencies or at least downloading a wallet app so that you can store funds yourself rather than relying on the banking industry.

Many companies are successfully relying on cryptocurrencies, such as Bitcoin, as their source of trade. With the success of digital coin exchange worldwide, the global economy is shifting to adopt digital currency.

Federal Reserve Digital Dollar

The Federal Reserve plans to build a digital dollar. Virtual currency is a decentralized or global digital currency. Decentralization means banks or the government would not control it, and trade can be made freely across the borders.

It involves only the sender and receiver without a third party monitoring your transactions. It is easy, safe, and 24/7 functional, regardless of weekends and holidays.

Cryptocurrency might be the best option if you perform many monthly transactions, as there would be negligible or no charges for transactions. It allows people to transfer virtual money without banks or exchanges through the internet.

Another advantage of cryptocurrency is an encryption technology that allows the transactions to operate without a single point of failure to protect them from hackers. All the blockchains and cryptocurrencies are digitalized, and they can be tracked. Once you transfer, virtual money can not be reversed and manipulated, reducing the risk of fraud.

Bitcoin Investment Boom

The past century witnessed a considerable swing towards digitalization. Being more convenient and efficient, it has successfully swapped our traditional outlook on life. Considering the positive impacts of digitalization, many firms and people also started investing in digital currency, especially bitcoins.

With its enormous advantages over physical currency, bitcoin has been experiencing a steady surge since the end of the last decade. Even its rising value urged several companies to accept payments through cryptocurrency.

Major Companies Investing In Bitcoin

Considering the growing interest in digital currency, America’s oldest bank, BNY Mellon, also decided to add bitcoins to its business model.

The bank announced the formation of a Digital Assets unit, helping clients hold, transfer and issue digital assets, including cryptocurrency.

According to Roman Regelman, the CEO of Asset Servicing and Head of Digital at BNY Mellon, they are the first to announce such a digital asset platform. Mr. Roman also confirmed that the Digital Assets unit is expected to offer its solutions and capabilities later this year.

Meanwhile, the world’s largest digital currency, bitcoin, has taken over the cryptocurrency market. It traded below $11,000 in Oct 2020 and sky rocked $42,000 on Jan 9, 2021. But what caused the bitcoin to shoot?

Tesla Invested in Bitcoin

Bitcoin prices continue to shatter all previous records after Elon Musk’s Tesla revealed a $1.5 billion investment in bitcoin on Feb 9. Tesla also announced its plan to start receiving bitcoins as payment for its car in the future.

The announcement triggered investors, causing the bitcoin value to shoot above $48000 on Tuesday morning. It was the first time since March 2020 when bitcoins managed to gain over 1000% profit.

According to Tesla, the board in January decided to update its policy so it’s flexible and helps diversify and maximize returns on its cash. The company also signaled to invest in alternative reserves assets such as gold bullion, digital assets, and gold exchange-traded funds. 

As Tesla announced to hold some of its idle cash in the form of bitcoins rather than physical currency, other companies also rushed to amass bitcoins, driving its price to an all-time high.

Companies Integrate With CryptoCurrency

MasterCard announced the integration of cryptocurrency in its payment network. MasterCard also announced integrating crypto payment in its payment network later this year, tracking the customers’ inclination towards digital currency.

According to Mastercard, it will go along the digital currency, complying with anti-money laundering laws while ensuring customer information and data security.

However, the company has not specified what kind of crypto it will accede to. So, experts wonder whether a currency meeting all requirements exists or if a new one is coming out soon?

Bitcoin “The Internet Currency”

Twitter CEO Jack Dorsey and American rapper-entrepreneur Jay Z collaborated to set up an endowment trust named “₿trust” in India and Africa. Dorsey said, “Btrust will be formed as a blind irrevocable trust taking zero direction from us.”

The fund will help develop cryptocurrency’s adoption initially in India and Africa. According to Dorsey,  he and Jay envisioned making Bitcoin “the internet currency,” so they pledged to invest 500BTC($23.7million)  into the fund.

The announcement came after the Indian government introduced its digital currency, banning all other cryptocurrencies, including bitcoin. So, let’s see what comes up next?

Bitcoin’s Performance

According to Michael Novogratz, the cryptocurrency firm Galaxy Digital, bitcoin will continue to perform well. He said the digital coins’ prices are anticipated to exceed $100,000 this year as the big firms get in.

No doubt, bitcoin, referred to as the “gold of crypto coins,” draws more and more stockholders to invest in it, but it has limited availability.

There are only 21 million bitcoins that can be mined; 16.9 million (88%)are already in circulation. Once miners have unlocked the total, the supply will be exhausted.

Investors believe once the supply runs out, bitcoin’s price will only boom further. So they are looking for another digital currency to make a profit. In this scenario,  there are chances that a new cryptocurrency might be coming out soon.

As Tesla revealed its investment, the digital coin price continued to surge, and according to bitcoin bulls, it is just the beginning. On Tuesday, the CEO of social Capital told CNBC that bitcoin would not stop. It’s going to hit $100,000, then $150,000 and then $200,000, in next 5 to 10 years.

Investors Concerned: Bitcoins

However, many investors are still baffled by this hype to buy bitcoins,  believing it is too risky and prone to fraud.

James Ledbetter, the fintech newsletter FIN editor, said bitcoin is a highly volatile and risky investment. He said, digging into the past reveals that its value collapsed quickly after reaching a peak several times.

For example, in 2017, bitcoin reached a spike of $20,000.However, it dwindled to$3,122 in a single day of 2018, erasing billions of dollars from the digital coin market. So, if you are investing in bitcoins, you must be financially and mentally strong enough to bear the loss.


Since the start of 2021, cryptocurrency has bound its spell on the financial market around the world. In this scenario, the world’s most stable cryptocurrency, bitcoin, has become a lucrative option for stockholders to invest in.

Especially after Tesla disclosed that it bought bitcoins worth $1.5 billion, its value went through the roof. Several global firms announced embracing digital currency as a payment option for their operation. Still, some firms are hesitant to stockpile crypto coins; calling is highly volatile and risky.


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