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Crypto is an Evolution of the Banking System

Banks vs. the Banking System

Author

Adam Blumberg
February 27, 2024

Crypto is an Evolution of the Banking System

Not necessarily of banks

In this issue, we’re going a little broad and theoretical, but still want to tie it back to you, the financial professional. You’re a part of the banking and financial system, whether you like it or not, and anything that proposes to evolve that system affects your practice and your clients.

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What is Banking?

Think about what banking's all about at its core: keeping our wealth safe, letting us buy stuff or pay someone, and making sure money isn't just sitting around doing nothing. That’s the banking and/or economic system.

But, let's be real, the big bank players have been calling the shots for a while, sometimes making things more complicated than they need to be.

And Now Crypto

Enter Bitcoin and the broader spectrum of cryptoassets and DeFi. The revolutionary aspect, in my opinion, isn't the intention to abolish the banking system but to streamline and democratize it.

They're all about making banking simpler and more direct. With blockchain technology, you can keep your assets safe, send money across the globe in a blink, and invest in cool new ventures without a middleman.

In theory this means more participants in the system globally, more transparency in assets and investments, and more investing opportunities.

While sticking with the main tenets of the banking system - store my assets, allow me to transfer, let me invest.

Not Us vs. Them

We keep seeing memes, posts, and articles from the hardcore bitcoin and crypto crowds, telling us crypto is going to overthrow the banking system. The “us vs. them” mentality is silly and misguided.

If we just keep the same main points for the purpose of the banking system, and open it up to more people, and give them more options, that’s just an evolution.

Now, that’s no easy task, and will take some time. But thinking of the shift as a movement to a more efficient system makes it more akin to the slow move from print media and cable TV to online and social media and streaming TV. It will happen, just not overnight.

What’s in it for Financial Advisors?

As financial professionals, it's vital to understand this shift. The technology now exists to perform all traditional banking functions—storing, transacting, and investing wealth—directly and securely, without relying on the traditional banking entities that have monopolized these services for centuries.

It isn’t as safe and easy as we’d like it just yet, and isn’t being used by the masses. Yet.

And it isn’t significantly impacting you just yet. Short of having all your client clamoring for bitcoin, or the spot ETFs, you probably haven’t felt the move.

But here is how you can prepare the movement from siloed databases to public networks transacting trillions of dollars.

  1. Cryptoassets: The adoption of the blockchain networks - Bitcoin, Ethereum, Solana - leads to demand for their tokens. If you want to help your clients invest in crypto now, you should understand where the value of the tokens comes from.

  2. Custody: We like to have control, and the wallets we use in crypto symbolize a move to self-custody, or at least a different type of custody with less reliance on third parties. You’ll need to help clients, and do your due diligence on custodial partners.

  3. More Investments: Just like the move to streaming TV gave us so many more choices with our entertainment hour, the move to a banking system built on crypto rails will increase the number of investment options. Best to at least understand the technology so you can understand the opportunities.

And so many more.

The point of this issue is to get you away from the crypto vs. banking mindset often employed by crypto-natives, and into the mindset of a gradual evolution to a more efficient technology, which will perform the same basic functions we’ve always needed from the banking system.

You don’t have to see the value of the bitcoin to understand the evolution of technology. You’ve lived that evolution in so many aspects of your life, and now the financial system is just catching up.

We Launched a Podcast!

Years ago we had a podcast about crypto and DeFi, and we decided to re-launch the Interaxis Podcast. Now we’re talking about the happenings in crypto, and how they affect you, the financial advisor.

If you’re enjoying this, tell your friends. Always something happening in crypto and we’ll break it down for you.

See you next week!

-Adam