Why Are Banks Against Bitcoin? Crypto Vs Traditional Finance

Large banks, corporations, and governments decide the economic destiny of the entire world in a centralized and authoritative way. Economic politics influence the lives and freedom of citizens and allow governments to control the population. But let’s be clear: Why are banks against Bitcoin? One of the biggest reasons banks are against Bitcoin is that it grants individuals exclusive sovereignty over their funds, making it impossible for banks and governments to control individuals' funds and earn from it. With Bitcoin being blockchain-based and decentralized, they can’t earn from people’s bank deposits, and they lose control of the economic system and people's funds. Additionally, since Bitcoin is limited in quantity to 21,000,000 million coins and is infinitesimally divisible, it could be both a good currency and a safe haven.

Banks rule the world, influence politicians and governments, and indirectly decide the allowed lifestyle of common people. Additionally, quantitative easing policies elaborated by central banks are considered risky and not sustainable in the long term. We can see this through the high inflation of the last few years and the reduced purchasing power of people.

According to Malthus's theory, already elaborated in 1798, population growth, if not limited, is exponential, while food growth is linear. This is another reason why governments and banks need to keep control of factors that determine the growth of the population and economy. A world in which the people gain sovereignty over their own funds may be more unstable, but it will be more fair. Banks don’t like it and want to keep control of the financial system. At PlasBit, we aim that cryptocurrencies can give people financial freedom, and we’re working on the first line to educate and provide the best services to empower our mission. Education is the first step, so let’s learn more.

Economic Control: From Centralized Banks to Decentralized Networks

Banks are the foundation of our economy, and they see the crypto ecosystem growth as a threat to their financial and political control. With cryptocurrencies, the economy would be regulated by code laws without intermediaries, and banks would lose their power and importance. Why are banks against Bitcoin? What would imply the replacement of traditional finance with a Bitcoin-centered decentralized global ecosystem?

Centralized Banks vs. Decentralized Finance

The current financial system based on fiat currency is relatively new; it was adopted in 1971 when the US left the Bretton Woods system, and the dollar started to be unpegged to gold at 1:1 ratio. Since that moment, banks’ power has grown because, basically, they set the game’s rules, deciding how much money will be printed every year. With cryptocurrencies, banks are just unnecessary intermediaries. Crypto exchanges can provide better services, and by combining them with self-custody wallets, people can gain their financial freedom, for the first time in history. Self-custody wallets and exchanges can definitely replace traditional banks in the long term.

Benefits & Disadvantages of Decentralized Systems (Blockchain Networks)

Implementing decentralized systems based on blockchain networks instead of banks could allow for more democracy and financial justice. Let’s explore benefits and disadvantages more in detail.

Benefits of Decentralized Systems

• Shift control from banks to people: If Bitcoin replaces fiat currencies, the banks and governments lose power over citizens’ funds. In fact, in traditional finance, the banks act as an intermediary and custodian of people’s funds. However, it comes at a high cost. The people actually don’t have the authority and sovereignty over their funds, and governments and financial institutions can block bank accounts or seize people’s funds. With cryptocurrencies, on the contrary, people have full access and authority over their funds, just remembering their seed phrase. Crypto requires a little bit of initial knowledge, but it allows you to gain financial freedom.
• Accessibility and Inclusion: If you’re living in a rich country, you might not understand this point. But let’s imagine you live in a small rural village in a poor country: You probably don’t have access to banking services, or you have limited and uncomfortable choices. With crypto, you just need a mobile phone and an internet connection to create a crypto wallet and start using, trading, and transferring cryptocurrencies. This is a revolution and makes it easy for everyone to manage and store their own funds. Additionally, crypto allows easy access to financial instruments, like trading, earning yields, and advanced investment strategies.
• Transparency and Security: Even if a lot of people believe cryptocurrencies allow anonymity, this is not true. In most cases, including Bitcoin, crypto allows users to use pseudonyms to make transactions, but you can unveil who the original owner of the wallet is with advanced analytics tools like what Chainalysis uses. But crypto also allows for strong security. They prevent the problem of double-spending (an issue in digital currencies where a user tries to spend the same unit of currency more than once, because they are basically just data), and the transactions are registered in an immutable way on the blockchain. This means that transactions cannot be altered or canceled, making the system inherently secure and safe.
• Lower transaction costs: If you need to make a big transaction to the other side of the world, it comes with notable costs and time. The transfer, especially if the amount is consistent, would probably need the approval of various intermediaries before being executed. This comes with considerable costs and hidden fees, wasting a lot of time with mostly unnecessary intermediaries. On the contrary, if you want to transfer Bitcoin to the other side of the world, it’s easy, has relatively low fees, and it arrives in a matter of minutes. However, the most important point is that nobody can stop it, and no intermediaries are needed.
• Reduced dependence on intermediaries: As we just mentioned, without intermediaries, you can gain financial freedom. With crypto, in fact, you are the only one who has authority over your own funds. If you memorize your seed phrase in your mind, nobody can steal your assets in any way. This means that your transactions cannot be stopped or controlled by third parties. However, this freedom comes at one cost: Education and willingness to learn. A lot of people lose large amounts of money by forgetting or losing their seed-phrase and access to funds. If you’re the only one who can control your own funds, you need to take responsibility for that by studying and learning about crypto security and best practices.

Disadvantages of Decentralized System

• Potential for criminal activities: Even if blockchain transactions, in most cases, can be linked to a real owner, sometimes this technology is used to perform scams and money laundering. This is a problem, but the trend is decreasing since investigators have developed tools to unveil the identity of people behind blockchain addresses. However, some specific privacy coins, exchanges, wallets, and new technologies can hide people’s identities, and, unfortunately, cryptocurrencies are also used for illegal activities.
• Unregulated nature: Crypto cannot be regulated because governments have no authority over people’s crypto wallets. They can’t impose automatic taxes, financial sanctions, spending limits, fees, and so on. Most importantly, banks and governments cannot stop, block, or alter blockchain networks. But, even if the financial markets could be more unstable, they would probably be more fair. People can choose and gain financial freedom, but it may bring chaos and disorder. We’ll figure it out.
• Market instability and volatility: With Bitcoin, markets could be free of manipulation and control. The decentralization of Bitcoin ensures that no single authority or entity can consistently influence the network and the prices. However, this causes mass phenomena caused by cognitive bias and mass habits. As you may imagine, people influence each other, making the markets not rational. Markets reflect people’s emotions and sentiments, and this leads to market instability and volatility. In cryptocurrency, this phenomenon is amplified, and it’s common to see high volatility and price swings. This is not easy to accept for a traditional or conservative investor. It’s even more crazy for a common person that does not use cryptocurrencies, but the case of Venezuela makes me think. Maybe Bitcoin is better than Venezuelan pesos, don’t you think? Check the price performances of both.

A Case Study: The 2008’s Financial Crisis

If you want to understand some of the inherent problems of the current traditional financial system, the 2008 financial crisis is a good case study. This is probably the main case study since the financial system based on fiat currency is relatively new; it was born in 1971 when the US left the Bretton Woods agreements. Since that moment, the system has been based on fiat currency and trust in centralized entities like central banks and governments. So, let’s understand our case study better and the causes behind the last big financial crisis.

Causes of 2008’s Financial Crisis

The real estate US sector is the main protagonist of this case study. Risky practices and mismanagement of top managers and corporations characterized a long period of the US real estate economy, and it caused a big housing bubble. The main causes are:

1. Real Estate Boom: For a long period, most people in both the US and Europe thought (and some are still thinking) that buying a house is always a safe investment and that the asset class could be considered a safe haven. This is false. Low, excessively stimulating interest rates, credit-access incentivization policies, and growing confidence in the housing market fueled a frenzy of home purchases and an exponential increase in housing prices. Additionally, especially in Europe, low birth rates create a gap between demand and supply, and the price of real estate asset class could decrease in the future.
2. Spread of Subprime Mortgages: There was a wide diffusion of home loans granted to people with limited possibilities and no money collateral to pay them monthly. In brief, big loans were made to individuals who could not pay their debts.
3. Securitization of Mortgages: Complex financial products (derivative securities) allow banks to transfer the risks associated with subprime mortgages to other investors. This mismanagement directly exposes other asset classes and the whole economic system to the risky practices of unsustainable loans.
4. Excess of Debts among Common People: Easy loans led to easy debts. The high availability of debt money increased the inherent problems of the corrupt financial system. This created a debt bubble ready to explode, vulnerable to any potential financial shocks. People couldn’t live with this high level of debt and insufficient salaries to pay it monthly, and debts increased.

The Bubble Explodes: The Real Estate is Not a Safe Haven Like Gold (And Bitcoin?)

In 2006, housing prices in the US began to decline, triggering a series of events that led to the 2008 financial crisis. Additionally, the bankruptcy of Lehman Brothers diffused fear and panic in the financial market and economic system, leading to a liquidity crisis and a severe economic recession. This caused an increase in unemployment, the collapse of the financial markets, a severe credit crunch, and a rise in public debt that caused a severe economic recession. But the question is: Why did it happen? The banks took advantage of the needs, good thinking, and sometimes ignorance of people. On one side, the banks allowed easy loans to people who could not pay them, earning interest. On the other side, they created complex financial products that increased and spread the crisis. Anyway, even if most people believe that houses are safe havens, this is not true in the end. But that’s not the point. The point is that large banks and corporations played “dirty” with innocent people’s funds. Recognizing these problems, Bitcoin was born during the crisis.

BTC’s Limited Supply vs Quantitative Easing of Fiat Currencies

Quantitative easing is a practice that central banks use to make the economy artificially grow through the creation of new money (debt). They increase the supply of fiat currencies by creating new money and buying financial assets. It causes severe inflation and decreases the purchasing power of common people, while incrementing the power of financial elites, banks, and corporations, and this is the monetary policy behind the 2008 bubble. It’s a new practice that was born that year and the results are not so good. It was in this period that Satoshi Nakamoto created Bitcoin. Its inherent limited supply (21,000,000) and the intrinsics characteristics make it a potential safe haven asset and inflation hedge, if it will be decorrelated from traditional financial markets. So, if BTC has such positive factors, you may wonder why are banks against Bitcoin? Because Bitcoin’s power lies in the fact that it can’t be controlled by central authorities, and gives people full sovereignty over their funds. Bitcoin’s mechanics can’t be controlled by central banks, and risky quantitative easing practices cannot be applied to Bitcoin.

The Response of Banks: Slow Adoption and CBDCs

However, central banks and government institutions are now focusing on blockchain technology too, but not in a way that aims to give back to the people their financial freedom. In fact, financial institutions are developing central banks’ currencies (CBDCs). Even if they may have some positive advantages compared to traditional currencies (such as blockchain security and transparency), they don’t prevent banks from printing as much money as they want. Nothing would change in the financial ecosystem if banks switched from traditional fiat currencies to CBDCs: The power still fully remains in the hands of corporations and central banks, and people still wouldn’t have full authority and sovereignty over their funds. For me, CBDCs are just negative variations of the concept of fiat currencies, and they don’t solve real problems. They may just increase the totalitarian power of central banks since, with CBDCs, cash will be deleted, and the transactions will be completely controlled by banks. That’s not the solution that Satoshi Nakamoto was aiming for. Bitcoin is different, and it may be the only fair solution based on decentralization and healthy financial principles.

Growing Institutional Interest in BTC and ETH

Even if banks are against Bitcoin and cryptocurrencies, if they can speculate on them, they do it. As you may know, the limited quantity of Bitcoin makes it an inherently scarce asset, with the potential for great appreciation in value if adoption keeps growing. All those who “join early” Bitcoin have a significant advantage in potential profit, and financial institutions understand this very well. So, even if the biggest corporations in the world, in the last few years, have publicly said that they don’t support cryptocurrencies, they bought them early. Larry Fink, the CEO of the biggest financial corporation in the world - Blackrock -now says that tokenization is inevitable and that it’s the future of every financial asset. In 2024, there was a great shift in financial institutions’ approach to cryptocurrency. In early January, the first Bitcoin ETFs were approved, and it means a great capital inflow in this asset from the most authoritative and rich financial institutions. Blackrock, Bitwise, Greyscale, and other major corporations created their own Bitcoin ETFs and started advertising crypto products. A little bit incoherent, isn't it? That’s not all. Recently, probably due to the US political campaigns for November 2024, the SEC also started the procedures to approve the ETH ETFs, underscoring a significant shift in financial institutions’ approach. Here lies the evil.

The Double Face of Financial Corporations

On the one hand, they have demonized crypto assets for years, prompting many investors and ordinary people to stay away from this asset class. On the other hand, while they talked negatively about it, they amassed large amounts of Bitcoin and Ethereum, accumulating a competitive advantage and great potential for profit over those joining later. One more reason that underscores the corruption of traditional financial institutions.

PlasBit Vision: Empowering Financial Freedom with Security

In this context of wild finance and regulations, at PlasBit, we pride ourselves on always being coherent and supporting people’s financial freedom. We built our platform with one only mission: To give people privacy and sovereignty over their own funds. We do not disclose your information to third parties, and we’re not dependent on other companies or financial institutions. We use only our own funds to create PlasBit, and we never promoted or asked for investments or fundraising. Our manifesto is clear: We want to liberate individuals from the grip of the banking system and government oversight. Through our autonomous and independent ecosystem, you can have all the tools and privacy features that allow you to gain financial freedom and peace of mind.

With our crypto wallet and exchange, you can start using cryptocurrencies without providing detailed and personal information. Additionally, with our crypto debit cards, you can easily bridge the gap between traditional finance and cryptocurrencies, allowing you to spend your crypto for daily transactions while prioritizing your privacy and security. We believe that we can forge a new, more fair financial ecosystem based on decentralization, privacy, security, and, most importantly, freedom. We cannot accept that people are the slaves of the current economic system, forced to work hard to get a minimum salary that allows them only to survive. If you are tired of just only “surviving” as a slave, and you want to gain your financial freedom by “living” a life as a free citizen, PlasBit could be the right choice for you. Break the chains of financial slavery and start gaining your financial freedom with our tools and services.

A Final Outlook: Banks are Gradually Losing Power

We started this research by asking ourselves: Why are banks against Bitcoin? This is a fundamental question that everyone needs to ask. Banks are against Bitcoin because they cannot control it or its financial ecosystem. Bitcoin is decentralized, limited, and based on math and code rules that cannot be altered by centralized institutions. Banks, with Bitcoin, lose power and control. This is the reason why they have started investing in cryptocurrencies; they want to keep as much control as they can over Bitcoin and cryptocurrencies. The earlier you enter the crypto ecosystem, the more advantages you have against financial corporations.

As we explored, for example, in the 2008 financial crisis case study, banks and financial institutions always try to manipulate the market, speculating and altering the value of people’s funds. That’s not acceptable anymore, and we are here to make the difference and help you exit the Matrix. The Bitcoin revolution is here, and it can enhance a more fair economic system. We need to see the situation objectively: Our current traditional financial system is relatively new (1971) and has a lot of inherent problems and fractures. It doesn’t allow citizens to have sovereignty and autonomy over their funds, and we cannot accept it anymore. We’re struggling to build a new economic model, and we are at the front of this revolution, offering privacy-focused solutions that allow you to gain financial freedom for the first time in human history.