Comparing Traditional Banks to Bitcoin and Cryptocurrency: A Regulatory Perspective

Banking has long been an essential component of finance, ensuring secure and regulated money custody and transmission. However, with the emergence of Bitcoin and other cryptocurrencies, a new class of digital currency that operates independently from traditional institutions was developed. Pros and drawbacks were discussed since regulated banks guarantee stability and security while cryptocurrencies allow for decentralized transactions and the possibility of financial independence. Go if you are serious about learning investing and that too from experts. Register now and start learning.

What are the risks involved in Cryptocurrencies?

The creation of Bitcoin was intended to reduce dependency on brokers, banks, and other third-party payment methods. As a result of the direct connection between parties made possible by Bitcoin’s underlying technology, the job of financial middlemen has changed in modern times to one of providing trust. Utilizing cryptocurrency trading websites has made obtaining Bitcoins uncomplicated. Nowadays, the majority of platforms adhere to AML (Anti-Money Laundering) and KYC (Know Your Customer) regulations.

Users must provide their identity information when registering on such platforms following these. A few even let Bitcoin transactions within certain bounds while keeping usernames secret. Since the inception of cryptocurrencies, the security of Bitcoin, connected to blockchain technology, has been a hot topic. Due to its partial anonymity in the early years, Bitcoin attracted attention for potential misuse in unlawful operations, raising hacking worries.

However, it is now widely accepted and even considered a viable financial opportunity. Bitcoin’s network and blockchain technology support its strong security. Blockchain-based distributed cryptography makes transactions extremely secure. The Bitcoin network has not been directly hacked. Ponzi schemes and other insecure platforms, as well as human errors like phishing, are the sources of problems.

Bitcoin is more likely to be used for cybercrime than for money laundering, according to the UK Treasury. The UK Undersecretariat of Treasury covered cryptocurrencies, particularly Bitcoin, in a report on monetary policies. They cited the National Crime Agency research that looked at the usage of Bitcoin in crime. The research stressed that using Bitcoin for money laundering is not a good idea.

What are the risks of traditional banks?

Five well-known banks were accused of money laundering as a result of recent FinCen data dumps: Deutsche Bank, JP Morgan, HSBC, Bank of New York Mellon, and Standard Chartered Bank. These official documents exposed the laundering of almost $2 trillion. Financial organizations began to question AML regulations as a result of this incident, but illicit monies are still entering reputable international banks. Real-time transactional risk must be expertly managed by modern financial institutions to protect customers without sacrificing their experience. To do this, it takes a combination of in-depth knowledge and focused tactics, including machine learning, artificial intelligence, quick data analysis, and industry-wide collaboration to find any potential wrongdoing.

These actions become crucial in preventing financial crimes and related illicit activities like human trafficking and funding for terrorism by investing in technology and the necessary procedures. While following the rules is important in preventing financial crime, it won’t work right away, especially in a field that is developing quickly. To safeguard their consumers, financial institutions must think about the dangers they face and take action to lower those risks.

What does the survey show?

According to the survey, opinions among respondents are split on whether Bitcoin represents a risk or an opportunity. The opinions of those who are actively involved in the cryptocurrency industry differ significantly from those of the government and the financial sector. The cryptocurrency industry contends that compared to conventional financial transactions, bitcoin transactions offer greater transparency. The results of the study, according to the survey’s co-author Rick Mcdonell, “give a unique global insight into how respondents and the crypto industry itself think about cryptocurrency’s advantages and disadvantages.”



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