Bitcoins and Banking: The UBS view on Bitcoin

A very detailed 31-page report has been released by UBS detailing the banks’ opportunity to implement Bitcoin into their system to make use of its technology, which was previously considered a bank-killer.

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Bitcoins and Banking: The UBS view on Bitcoin
A very detailed 31-page report has been released by UBS detailing the banks’ opportunity to implement Bitcoin into their system to make use of its technology, which was previously considered a bank-killer.

A firm that specializes in global finance services, UBS evaluated Bitcoin as not being a threat in such scenarios where they continue to work as alternative currencies. However, if banks were to embrace cryptocurrencies as part of their financial systems, they may be able to reap substantial benefits. 



Positive side of things

Although the world where cryptos and banks work together for the common cause is still utopic (for financial institutions at least), the concept is pretty clear.

The main idea can be summarized in a quote from the report, which has a decentralized block chain described as a framework offering “a robust and secure way of storing consumer funds”. For that to happen, though, there are major changes which have to be made.

Remodeling

The most dramatic example of such a change is using fiat instead of Bitcoin. Despite the fact that this would greatly reduce the duality of the current cryptocurrency’s position, I can’t even begin to imagine how hardcore Bitcoin enthusiasts would begin to wail if something like this happened. 

However, specialists from UBS suggested how the potential new financial system would operate: “Customers have control of their private keys, possibly with the option of authorizing their banks to handle their keys for them as well, while keeping the customer front-end broadly similar (i.e. with bank account numbers, etc).”

Most appealing for the banks, though, is the scenario where latter would use Bitcoin as an investment trust, pointing out the Winklevoss’ Trust. This way, banks would be protected from the money laundering risks or other possible fraud.

As a reaction to the banks’ firm grasp, despite its wild rebellious spirit, Bitcoin would likely settle down, reducing its volatility to a significant degree. Users’ trust in Bitcoin would inevitably grow as the global financial system would render it legal and safe to use. 

The risks

Keeping the aforementioned state of affairs in mind, think about the most likely technology to fall by the wayside once Bitcoin completely takes its place. You guessed it; credit cards will go down hard if what is stated in the report is at least half true. 

Bitcoin defeats credit cards in competition over “what is the better money handling volume?” in almost all respects. 

First, its speed. Compared to cryptocurrencies, traditional cross-border transactions take ages to complete. Second, the cryptocurrency isn’t called “crypto” for nothing. It is already much more secure than traditional digital money.

The only reason why plastic cards are still afloat is that they are so deeply rooted into our everyday lives and infrastructure that, at least in the short term, banks would lose much more than they would be able to gain. 
“A possible incentive for banks to develop such a system would be increased money transfer volumes sufficient to offset decreased fees, or if costs are lowered enough to still boost profits, but any such projection would be highly speculative at this stage.”

Little threat from Bitcoin 

UBS, criticizing Bitcoin for existing in the “regulatory vacuum”, reported there much to be gained from it. Even though Bitcoin is a wild card that could break a country with some serious economic issues, the latter could wound even the strongest players.

However, according to the global finance firm, Bitcoin is not exactly a problem but more of a natural occurrence which was bound to happen, although further predictions remain hazy. 

UBS decided to leave it on a “to be or not to be” note. In the event of serious economic meltdown, either crypto will perish or the bitcoin bank will emerge and if this is bound to happen, then I’m opting for the latter. 


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