Bitcoin’s popularity grows year after year. By every criteria — financial value, adoption rates, transaction volume, you name it — Bitcoin is becoming popular. Fearing its capacity to upset the financial system, banks are trying to discredit Bitcoin and cryptourrency.
However, not everyone is content. Bitcoin adoption is increasing. The banking industry, in particular, sees bitcoin’s rise as a threat and continues to fight the cryptocurrency.
It should come as no surprise that banks dislike Bitcoin. Satoshi Nakamoto’s creation is the most significant monetary system disturbance in decades. Bitcoin may render banks obsolete as a peer-to-peer network for creating and exchanging value.
Banking organizations have used the classic weapon of warfare, propaganda, to defend their position. Banks want to undermine Bitcoin by propagating misinformation, decreasing public adoption and encouraging stronger regulation.
A (Brief) History Of Big Finance’s Propaganda War On Bitcoin
Big Finance had to have known from the start that Bitcoin had the capacity to upset the financial system. However, they opted to believe that it would only be used by drug dealers, computer geeks, cypherpunks, libertarians, and other outliers.
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However, as cryptocurrency acceptance rose, panic spread throughout the banking sector, particularly among institutional investors. For the first time, the potential of “magic internet money” replacing banks was a real possibility.
As a result, banks joined together to disparage cryptocurrency. Given its status as the world’s first and most popular cryptocurrency, Bitcoin was and continues to be a favoured target.
At the World Economic Forum in Davos, Switzerland, in 2014, Jamie Dimon, the billionaire President and CEO of JPMorgan Chase, America’s largest bank, proclaimed Bitcoin “a terrible store of value.” The state of New York, on the other hand, issued licenses to Bitcoin exchanges the following year.
In 2015, Dimon repeated his skepticism of bitcoin, claiming that governments would never approve the cryptocurrency. “No government will ever support a virtual currency that goes around borders and doesn’t have the same controls,” he said.
At the 2015 Barclays Global Financial Services Conference, the JPMorgan Chase CEO was not happy and delivered his most serious attack against Bitcoin yet. He not only compared Bitcoin to Tulipmania, but he also threatened to dismiss anyone who traded Bitcoin in the company.
Dimon isn’t the only pillar of Big Finance who has tried to undermine Bitcoin. Christine Lagarde, the President of the European Central Bank, has previously criticized Bitcoin.
Lagarde called bitcoin “a highly speculative asset” during a Reuters Next Conference, saying it has been used for “some funny business and some interesting and totally reprehensible money laundering activity.” This occurred at a time when the European Central Bank was considering issuing its digital currency, the digital euro.
The ECB has also been a frequent supporter of anti-Bitcoin propaganda. The apex banker linked bitcoin price surges to the notorious South Sea Bubble in its 2021 Financial Stability Review. “[Bitcoin’s] exorbitant carbon footprint and potential use for illicit purposes are grounds for concern,” the paper added.
Even the world’s most powerful financial institutions have joined the anti-Bitcoin campaign. The World Bank, for example, refused to back El Salvador’s bid to make bitcoin legal tender, citing the cryptocurrency’s “environmental and transparency shortcomings.” The International Monetary Fund (IMF) also advised the Latin American country to abandon Bitcoin by the end of the year.
Of course, there are several such examples of traditional financial organizations fostering mistrust and propagating misinformation about Bitcoin. Regardless, all of these statements point to the same conclusion: banks despise Bitcoin and will go to any length to discredit it.
“Bitcoin Is Bad, Blockchain Is Good”
In their disinformation campaign, certain financial players have tried a new approach. This entails criticizing Bitcoin while praising the system’s underlying blockchain technology.
Banks understand blockchain technology’s potential to transform payments and want to use it to their advantage. JPMorgan Chase, a vocal opponent of Bitcoin, has invented a cryptocurrency called “JPMCoin” that runs on its Quorum blockchain.
Central banks have praised blockchain’s ability to power central bank digital currencies (CBDCs), which are government-issued and backed cryptocurrencies. Like a stablecoin, these assets are tethered to a fiat currency like the dollar or euro.
In a June 2021 study, the Bank for International Settlement (BIS) slammed cryptos, calling them speculative assets used to support money laundering, ransomware attacks, and other financial crimes. “Bitcoin, in particular, has few redeeming public interest attributes when also considering its wasteful energy footprint,” the research stated.
The BIS, ironically, supported CBDCs in the same study. Here’s an excerpt:
“Central bank digital currencies represent a unique opportunity to design a technologically advanced representation of central bank money, one that offers the unique features of finality, liquidity, and integrity.
Such currencies could form the backbone of a highly efficient new digital payment system by enabling broad access and providing strong data governance and privacy standards based on digital ID.”
In response to Bitcoin’s growth, banks and fintech companies have adopted the slogan “Bitcoin bad, blockchain good!” This argument, as usual, misses the point.
Blockchain-based payment monetary systems are meaningless without Bitcoin’s decentralized architecture. Permissioned blockchains, like as Quorum, suffer from centralization and single points of failure, which Nakamoto hoped to address with Bitcoin.
CBDCs face the same problems. Centralized control of a digital dollar or pound, produces the same problems as fiat currencies. It would be all-too-easy to perform financial surveillance, enforce unpopular monetary policies, and commit financial discrimination if central banks controlled every input and outflow of money.
A major issue with this line of reasoning is that it ignores Bitcoin’s strongest suit: cryptoeconomics. Satoshi’s most significant contribution was a revolutionary combination of economic incentives, game theory, and applied cryptography that allowed the system to remain secure and useful in the absence of a centralized body. Like any other legacy system, centralized blockchains with insufficient incentives are vulnerable to assault.
Why Are Banks Scared Of Bitcoin?
Traditional banks have historically profited by charging customers for the storage and usage of their funds. Account maintenance fees, debit fees, overdraft fees, and a slew of other charges are all designed to benefit the bank. Meanwhile, the bank lends out the money in the account, paying consumers only a fraction of the interest earned.
Bitcoin, on the other hand, poses a revenue threat to the banking industry. There are no institutions that assist users in storing, managing, or using cryptocurrency. The owner maintains exclusive control of their bitcoins.
But hold on, there’s more.
Better And Cheaper Transactions
Bitcoin allows anyone to send money to anyone else instantly, regardless of the amount or the recipient’s location. Users can do so without relying on a middleman, such as their local bank.
Bitcoin transactions are, on average, faster and less expensive than bank transactions. Consider the length of time it takes to complete an overseas transfer and the high costs charged by banks.
Apart from miner fees, no one else is paid to process transactions on the Bitcoin system. And any sum, big or small, can be moved without the usual paperwork. Bitcoin completes an irreversible money transfer in less than ten minutes. Banks can’t compete with that.
Store Of Value
Banks assist consumers in securing the value of their money by arranging long-term investments in gold, bonds, and other assets. Custodianship, investment advice, and portfolio management are all fees.
But what happens when individuals realize they don’t need banks to deposit their money?
Bitcoin is quickly becoming a preferred store of wealth due to its inherent features. Bitcoin is both limited (only 21 million units will ever be produced) and fungible (it can be used anywhere). This distinguishes it from traditional value stores such as gold.
Banks can no longer profit from selling asset management plans since everyone can buy bitcoin and HODL. Banks, including as JPMorgan, have reacted by selling bitcoin-based investments like futures, but this isn’t enough to save them.
Resistance To Manipulation
Banks have traditionally made a living by manipulating the financial system for their own benefit. Underhanded dealings by several of the world’s largest institutions, including Lehman Brothers, which later filed bankruptcy, caused the 2008 financial crisis.
Banks, for example, usually lend out more money than they own, a practice known as leveraging. If everyone decided to take their money out of banks, the entire business would collapse.
People can use Bitcoin to become their own banks. Aside from the holder, no one can alter or utilize the money in a Bitcoin wallet. People now have control over their money for the first time.
Banks Cannot Kill Bitcoin
The banking industry’s information war demonstrates how much they fear Bitcoin, which is understandable. Bitcoin will soon permeate every financial industry, including offshore settlements, escrow, payments, asset investments, and more.
Banks will be the latest victims of technological upheaval if this happens. Bitcoin will replace banks in the same way that Netflix has replaced video rentals and Amazon has replaced bookstores. And no amount of spreading doubt or misinformation will change that.