The Role of Traditional Financial Intermediaries in a Cryptocurrency-Driven World

It’s evident that, in the short term, cryptocurrencies won’t be replacing traditional finance. However, the ongoing transformation suggests incredibly promising directions. In this global context of high inflation, savers are seeking ways to protect the value of their capital. Even in developed countries, politics occasionally overlooks Milton Friedman’s rule for controlling inflation – Friedman, a Nobel Prize winner in economics for his contributions to monetary theory, emphasizes that the growth of the money supply should align with economic growth.

In the world of cryptocurrency, political turmoil holds minimal significance. The rules are straightforward: supply and demand determine the value of a crypto asset, with programmed scarcity, particularly evident in Bitcoin, acting as a check on inflation. While market volatility presents a significant challenge – prices can fluctuate dramatically within minutes – it’s not an insurmountable obstacle. We’ve explored this topic extensively in various articles – we recommend delving into our insights on stablecoins and the FOMO phenomenon.

“The only thing missing, but which will soon be developed, is a reliable electronic cash, a method by which funds can be transferred on the Internet from A to B without them knowing each other”.

-Milton Friedman.

Decentralization, innovation, and efficient transactions are among the advantages provided by the crypto world. We can confidently state that Bitcoin and other cryptocurrencies have emerged with the mission of transforming the global economy, providing reliable and efficient alternatives for value exchange and financial services. In contrast, traditional intermediaries continue to face longstanding government hurdles. However, it’s worth noting that many entities – banks, insurance companies, investment funds, and others – have realized that they now must compete against the crypto space. Consequently, they must adapt and take note of innovations associated with blockchain technology and even consider forming partnerships.

Future breakthroughs will arise from synergy between new and established finance

Although we frequently highlight the innovative and independent potential of cryptocurrencies, interesting changes in the financial sector have stemmed from the collaboration between this technology and traditional finance. Our intention has always been to educate users to choose the most decentralized path possible. However, it’s also crucial to address these issues from a broader perspective and provide details on everything that’s being done.

It is worth highlighting collaborations established between financial institutions and blockchain technology companies, or directly showcasing blockchain solutions adopted by prominent companies.

1. Mastercard and Blockchain: the credit card network giant has been exploring the potential of blockchain technology for years to enhance its payment and transaction services. Mastercard has collaborated with R3 – a company specializing in blockchain technology – on projects related to cross-border payments and digital asset management; it has also partnered with companies like BitPay and Consensys.

In BitPay’s case, in 2020 they even launched a prepaid card that allowed customers to convert their crypto into fiat currency and spend it anywhere that accepted Mastercard – this program ended in May 2023. As for Consensys, in August of last year, it was announced that Mastercard is joining forces with seven blockchain service providers, aiming to provide a better understanding of the benefits and limitations of central bank digital currencies. Among these providers are Ripple and, precisely, Consensys.

2. Ripple and multiple banks: In May 2023, it was revealed that Ripple Labs, the company responsible for XRP, unveiled a platform called Ripple CBDC to enable governments, central banks, financial institutions, and other state agencies to issue their digital currencies. According to the company’s announcement, the ecosystem aims to take the digitization of financial services to a new level, promoting access to millions of unbanked individuals. James Wallis from Ripple emphasized that the team’s idea was to propel the platform through the XRP Ledger (XRPL) blockchain, “allowing users to comprehensively manage and customize the entire life cycle of the cryptocurrency, its transactions, and its distribution”.

3. JP Morgan Chase: Another company that has been exploring the benefits of blockchain technology for years. In fact, in June 2023, a partnership with six Indian banks – ICICI Bank, Axis Bank, HDFC Bank, IndusInd Bank, Yes Bank, and JP Morgan’s subsidiary in Gujarat – was announced to launch a blockchain platform aimed at streamlining interbank transaction processing in USD. According to Kaustubh Kulkarni, a senior executive at JP Morgan, the creators intended for the involved banks to process instant transactions 24/7. Their current settlement system resulted in operations taking several hours, and to compound the issue, the system was not available on Saturdays, Sundays, and holidays.

4. IBM: Let’s go back to early 2019 when IBM Blockchain World Wire was launched, a payment network based on blockchain and the Stellar protocol: an open-source framework that simplifies the management of international transactions across numerous currencies. IBM Blockchain World Wire enables users to make payments quickly and transparently by eliminating intermediaries, leading to reduced settlement times. According to Stanley Yong, former CTO of IBM Blockchain for Finance, the first transaction took place on March 8, 2019.

Over the years, alliances have been formed proposing solutions that could substantially change how many people manage their assets. From integrating Blockchain into the services of companies like Mastercard and Ripple to the launch of platforms like IBM Blockchain World Wire, there’s no doubt that the global economic landscape is undergoing significant expansion, with the coming years appearing very promising. We’ll be here to educate on all things Blockchain and crypto while continuing our work on Hamza.biz, the first Web3 e-commerce powered by the Loadpipe protocol. Be sure to follow us on our social media channels and stay updated on our roadmap.