Cryptocurrencies have impacted mainly the banking and insurance industry, but the effect is considerably smaller than other industries. For example, Bank of America states that cryptocurrencies are not a threat at this point, while Lloyd’s of London warns about fraudulent activities associated with Bitcoin.
The article below provides insight into how banks and insurance companies deal with cryptocurrencies and is based on a report by Homeland Security Today.
Banking and insurance industry impact:
The interviewees from Bank of America, Lloyds Banking Group, and Swiss Re were skeptical about the possible dangers that cryptocurrencies may pose to their institutions. For example, the Swiss Re representatives claimed that it would be challenging to deny Bitcoin’s potential in such a competitive market.
Moreover, at least 80 per cent of the global GDP is expected to depend on insurance and reinsurance providers by 2020, which means that cryptocurrency may also become an integral part of this industry.
The Lloyd’s Banking Group acknowledges the existence of risks associated with digital currencies. Still, at the same time, it claims that these features are “more reflective of the bubble-like hype around it rather than its substance.”
Bankers’ opinions on cryptocurrencies:
Most interviewees agree that Bitcoin is not taking over the financial sector just yet, although there are way too many red flags to ignore. For example, Mark Grant, a chief strategist at Hilltop Securities, claims that Bitcoin is “a fad” and banks and insurance companies do not need to be bothered.
However, many bankers agree that cryptocurrencies will evolve into the future of finance, and traditional institutions would benefit from taking them seriously. For example, Jeremy Millar at Magister Advisors noted that “governments (and central banks) will ensure that the public has access to a complete record of financial transactions.”
The answer is the interest of banks and insurance companies to explore their integration possibilities with digital currencies. But, first, they need to keep up with modern trends, and second, it would be profitable for both parties involved.
As Bitcoin and other cryptocurrencies become more accessible worldwide, financial institutions must stay up-to-date with blockchain technology and its potential applications. For example, Bank of America could revise its earlier statement about Bitcoin not posing any threat to traditional banking and insurance operations.
According to Homeland Security Today:
“If cryptocurrencies can be transferred safely and securely, they pose a ‘new avenue for cybercriminals who seek to steal money.”
Some other threats that could affect the banking industry are hackers hijacking Bitcoin accounts to make transactions. This way, they would avoid tracking while disguising themselves as legit users of this currency.
Also, cryptocurrencies still lack the necessary infrastructure for financial institutions to work with them. However, considering that Bitcoin records transactions on its blockchain ledger, it may very well become an issue of cybersecurity risk management if banks don’t stay on top of digital currencies.”
Five ways in which Bitcoin is a threat to the banking as well as the insurance industry:
-Digital currency may become a disruptive force for the banking and insurance industry.
It is easy to send or receive them from individuals, but it isn’t easy to declare their origin.
-Banks and financial institutions need to keep up with blockchain technology as this cryptocurrency becomes more accessible and famous worldwide.
-Cryptocurrencies lack the necessary infrastructure for banks and insurance companies to work with them, but this may change in the future.
-Cryptocurrencies are not regulated, which means that banks and financial institutions can lose a lot of money if they choose to work with them.
Because people aren’t required to declare their origin when sending or receiving digital currency, it is difficult for banks and insurance companies to ensure any money laundering activities are involved.
-Bitcoin records transactions on its public ledger, making it increasingly difficult for banks to protect customers’ data.
-Financial institutions need to integrate blockchain technology into their operations to stay up-to-date with modern trends. If you are interested in bitcoin trading check the bitcoin as the future of online payments
The banking and insurance industries haven’t been affected by cryptocurrencies, but some manifestations of this influence are starting to show up. Bankers of America stated that they don’t perceive Bitcoin as an “existential threat” or a competing currency. They also admitted that blockchain technology could become a “disruptive” force in traditional banking and insurance operations, but not for another ten to twenty years.