So we have entered 2022 and traditional banks and banking systems have survived for decades despite the ominous predictions of crypto enthusiasts. The only ending that happened was when Vitalik Buterin announced the new Ethereum 2.0 roadmap late last year.

Although the crypto industry will change for the better with this roadmap, 2021 clearly shows us that cannot destroy or crash central banks, just like banks. Traditional goods cannot kill cryptocurrencies. Why?

To be fair, the war between the two sides was just as brutal. Many crypto enthusiasts have been shouting about the imminent apocalypse of the world’s financial systems, describing a bright crypto future where anything can be bought with Bitcoin. Bankers, on the other hand, rushed to defend the traditional role of the banking system, blaming blockchain technology for underperformance and lack of compliance.

Unfortunately, neither side can accurately predict (DeFi and CeFi).

The game is inconclusive

Luckily, neither cryptocurrencies nor traditional banking were destroyed, although they wished the same would happen to the other. On the other hand, large crypto projects tend to network closely with banks. US-based exchange Kraken obtained a banking license and IPO process on Coinbase, claiming to be 100% compliant with the rules of the banking/financial system. Most of the top projects use the services of just a few banks: Signature, SilverGate, Bank Frick – with a focus on establishing and enforcing banking principles for working with cryptocurrencies.

Additionally, the banking community is creating an internal ecosystem for crypto projects. Visa launches consulting services to help partners navigate the crypto world. Amazon Web Services (AWS) wants to “become the AWS of crypto”. Switzerland offers a variety of banking services to work with this emerging asset class. SolarisBank even provides APIs for digital currency projects. The largest US banks and exchanges will launch crypto-related services. In El Salvador, bitcoin is accepted as a means of payment, which theoretically implies that international financial institutions should be ready for bitcoin payments with El Salvador.

What stopped cryptocurrencies from bankrupting?

It’s human. Throughout human history, many new technologies have not escaped the eyes of government agencies through direct or indirect corporate control. Radio, television, internet, social media – it all started with the idea of ​​free dissemination of information and eventually came under total control. The same story is currently happening with blockchain and it is unlikely to change in the future.

Top 10 Technologies Used by Top 100 Organizations | Source: BlockData

Often people try to exaggerate the risk and reduce the likelihood of a good outcome. This is the reason that has prevented people from accepting. But this way of thinking is human nature.

But why does centralization beat decentralization? Over time, governments around the world have come to understand that blockchain technology is not only a problem, but also a powerful tool to assert political interests. So, blockchain was originally conceived as a powerful tool for freelancers, but it was implemented in exactly the opposite way, turning into a money control tool on a previously unthinkable level. Like nuclear technology – people use it for both peaceful and military purposes – blockchain has both advantages and disadvantages.

One step back, but ten steps forward

On the face of it, cryptocurrencies need to take a step back against restrictive regulations. In turn, it is recognized, widely used and has a significant number of users around the world. This seemed like a fair reward and win for those who predicted the impending doom.

The significant development of related regtech technologies (to speed up the compliance process and possible audits) has pushed traditional finance to accept cryptocurrencies. The fact that these projects have KYC/AML (Identity Verification/Anti-Money Laundering) implementation solutions shows the reaction of cryptocurrencies to banks: some companies like Chainalysis, Onfido can build KYC operations more efficiently while maintaining full legitimacy of the processes .

Startups cannot go down the compliance path with low efficiency in banks. This is a bug in almost every process. However, to conduct business in a legal area, they are more compliant on their own, but more efficient.

CBDC Awareness | Source: Visa

On the other hand, will CBDCs destroy cryptocurrencies? Instead of constantly talking about the possibility of wealth destruction, let’s think about the potential in the future. Central bank digital currencies (CBDCs) have many problems to solve, most notably the issue of interoperability. Since CBDCs released in different countries are not compatible, switching between them will not be easy. Coupled with the slowness of many regulatory processes, it can be difficult to find an effective solution that resolves everything quickly.

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