Possibility of Bitcoin replacing traditional banking

[Wakate]

These threads pop up every now and then. I remember a megathread which lasted for years, "Can Bitcoin make banks disappear"

But they are based on a big misunderstanding. The main purpose of banks is not "to custody our fiat", even if many use banks for this purpose. Their main function, instead is to mediate between people who need money, and people who want to invest money.

The part "people who need money" is usually done via lending (traditional loans or things like bonds). And lending in a P2P or decentralized fashion is a problem that has not been solved in the Bitcoin/crypto world. For sure, you have DeFi lending. But for that to work, you must deposit one crypto-asset (cryptocurrency or token) as a collateral. So it doesn't help at all if you need money, e.g. to build your house.

You could of course start a private ICO if you need money. But I don't think you would have that much success if you need the money for a private endeavour, such as building your house.

There may be decentralized concepts which could work, but they would still need experts who can evaluate your credit risk. And while you need these experts, banks will still excel in that business.

Banks could hypothetically shrink a bit in the mid to long term if the need to "deposit fiat" without a real "investment" purpose decreases because people use crypto as a currency (currently that's a niche). But probably they would be using first stablecoins while Bitcoin stays volatile, and stablecoin issuers are also very similar to banks, or they are even issued by traditional banks (e.g. Societé Generale's stablecoins).

Wow, this is quite cool and I am very convinced that people will stop being misleaded by ideology that banks will be outdated soon because of the Bitcoin adoption and the digital era we are entering that will make fiat currencies to be thing of the past. Very soon each country could have their own digital currency and dump the fiat system that requires you to make transactions using paper money.

The primary responsibility of the bank is to protect customers funds keeping them as safe as possible. If a bank is robbed, the customers of such bank will bear no responsibility for the lose incurred by the bank because it is seen as a safe house for finance.

The bank act as a mediator between the government and it's customers. The bank collect taxes on behave of the government, enforce KYC compliance through the government mandate and confirm transactions for customers. If we assume that the bank will not be in existence as a result of Bitcoin adoption replacing the local banks, who will do the job of the bank for the government. I think the bank is self sufficient and can switch to any mode at anytime.

The bank is a very important aspect of any country and their is no way Bitcoin is going to replace banks because of the digital era the world is switching into. Banks have more roles to play for the growth of a country than what we might think.

[Zaguru12]

Wow, this is quite cool and I am very convinced that people will stop being misleaded by ideology that banks will be outdated soon because of the Bitcoin adoption and the digital era we are entering that will make fiat currencies to be thing of the past. Very soon each country could have their own digital currency and dump the fiat system that requires you to make transactions using paper money.

Do you think it is possible to actually eliminate the use of paper money? For me I think it is still very early to see this happening because the advancement of technology although has grown this far is still very not that deep to that extent because there places that still lacks this technology ability and using digital currency is still a thing. Even banks are yet to get it right on digital currency, the government had CBDC introduced and so far of looks like a total failure.

The bank is a very important aspect of any country and there is no way Bitcoin is going to replace banks because of the digital era the world is switching into. Banks have more roles to play for the growth of a country than what we might think.

It is even a wrong assumption that bitcoin wants to replaces banks because even the founder(s) specifically said that the invention is here to provide an alternative for bitcoin, which is what it will be, bitcoin has many advantages and use cases but definitely cannot fully replace banks but its adoption growth will definitely reduces reliance on the use of banks. For local transactions banks will still be greatly use in fact government will fight it out to have banks replaced totally because the freedom it will present to people is something they wouldn’t like them to have, that’s why they are even looking for ways to actually regulate some part of it

[noonriver]

Unlikely to fully replace banks soon  but Bitcoin can and will disrupt many banking functions (payments, settlement, custody). Expect coexistence: BTC/Layer‑2s to erode fees and settlement roles, while banks keep handling credit, fiat rails, and regulated services.

[Akbarkoe]

Bitcoin indeed challenge the option of centralized banking, but the idea of it total replacement of banks in 15 years time seems really unlikely. Governments, the regulation system, and the need for stability will make replacement difficult.

What's more true is that Bitcoin and other digital assets may operate side by side traditional banking, while in some countries with less currencies or insufficient banking infrastructure, crypto may have a huge part to play. Though banks are now adapting with digital currencies and blockchain combination.

Usually people turn to other casinos because of a successive defeat, based on the rationale that +maybe in other places we are more fortunate "there is always logic like and I think it does not only happen to me who is upset with defeat and defeat without any hope of winning, or on the other hand there is a problem with the casino so that it makes us switch to other casinos.

I only suggest that keep gambling responsible, whatever your goals, whatever your motives come then the solution is to gamble responsibly, whether you switch casinos or not.

[sunsilk]

Unlikely to fully replace banks soon  but Bitcoin can and will disrupt many banking functions (payments, settlement, custody).

It already does, there's a disruption that has been happening already and many still don't realize that it's there all of the time.

Expect coexistence: BTC/Layer‑2s to erode fees and settlement roles, while banks keep handling credit, fiat rails, and regulated services.

This is actually what will happen, banks and bitcoin will co-exist.

Before, we thought of it that the banks will be eliminated by bitcoin but it seems that's not the route that likely to come in reality.

[AmaGold70]

Bitcoin indeed challenge the option of centralized banking, but the idea of it total replacement of banks in 15 years time seems really unlikely. Governments, the regulation system, and the need for stability will make replacement difficult.

What's more true is that Bitcoin and other digital assets may operate side by side traditional banking, while in some countries with less currencies or insufficient banking infrastructure, crypto may have a huge part to play. Though banks are now adapting with digital currencies and blockchain combination.

It is very impossible for Bitcoin to replace our traditional banks because it is a decentralized currency and a digital investment and a lot of people need physical currency to operate their daily life and Bitcoin isn't a physical currency, the only way that Bitcoin is likely to replace fiat currency is only if the old generation that doesn't understand Bitcoin are all wiped out from the earth and the government we have now replaced by the new generation then Bitcoin will be given the space it needs to replace fiat currency without any interruptions or complain from anyone. Even in the next 20years I don't see Bitcoin replacing Fiat currency.

[Maslate]

Bitcoin is decentralized while traditional banking is purely centralized, so how can bitcoin be allowed replacing traditional banking in the future? If ever there’s chances for replacing traditional banking, that would be digital currency that is centralized in nature as well, that is obviously created by the centralized government and not by any decentralized in nature.

So there’s no any possibility for bitcoin to take the position of traditional banking. But if bitcoin will gradually turn centralized, maybe there could be a chance for it.

[JiiBs]

Bitcoin is decentralized while traditional banking is purely centralized, so how can bitcoin be allowed replacing traditional banking in the future?

Something we fail to take note of or give much concerns is the various functions for which traditional banking systems do provide to a working economy. It’s not simply the dispensing and saving of fiat for sure, it goes to provide several services that continue to prove useful in our world, services that we are most likely not going to have with Bitcoin.

The banking system and the Bitcoin innovation is complementary and would be of great advantage to have both of them working at it’s optimum.

[mirakal]

No chance for replacing banks, but there’ll be high chances that both will co-exist. Not because it’s the right thing to do, but because that’s what the people deserved to have, to choose on what service they’ll be more comfortable and convenient of.

Let’s stop thinking that bitcoin is here to compete with fiat and banks. That’s not the original goal of bitcoin. Yes, it offers us financial independence away from banks and government, but let’s also look at a more positive and productive side, that may happen once bitcoin and banks co-exist and serve the people.

[9ja Amaka]

Bitcoin indeed challenge the option of centralized banking, but the idea of it total replacement of banks in 15 years time seems really unlikely. Governments, the regulation system, and the need for stability will make replacement difficult.

What's more true is that Bitcoin and other digital assets may operate side by side traditional banking, while in some countries with less currencies or insufficient banking infrastructure, crypto may have a huge part to play. Though banks are now adapting with digital currencies and blockchain combination.

Are we still having this debate in the forum?

We (Bitcoin enthusiast) have seen and tried every possible means to replace the traditional system which has not been possible. It is proving that both need one another. The traditional banking system can still operate without Bitcoin but without the traditional system, it is difficult to purchase Bitcoin. We all need FIAT to buy Bitcoin. Which means, the traditional system cannot be replaced.

[Marvell1]

But if bitcoin will gradually turn centralized, maybe there could be a chance for it.

If Bitcoin gradually becomes centralized or shifts toward centralization, it will become useless and no one will need it anymore. Because creating a centralized currency or a centralized system is not that difficult, and with the potential of the government. If they wanted to, they could do it in the blink of an eye, there's no reason they should have to use a centralized system created by someone else.

The core element that has given bitcoin its value so far is its decentralized nature. So if it loses that core element, Bitcoin will become useless and trash like many altcoins.

[retreat]

Bitcoin was developed as a payment alternative to centralized banking. It doesn't directly replace the traditional banking system, but rather provides a more open, transparent, and intermediary-free financial option, allowing people to conduct cross-border transactions without relying on a central authority and allowing them to manage their assets with full control. And it seems likely that Bitcoin and banking will co-exist, as governments are unable to completely stop them.

[ancafe]

Something we fail to take note of or give much concerns is the various functions for which traditional banking systems do provide to a working economy. It’s not simply the dispensing and saving of fiat for sure, it goes to provide several services that continue to prove useful in our world, services that we are most likely not going to have with Bitcoin.

The banking system and the Bitcoin innovation is complementary and would be of great advantage to have both of them working at it’s optimum.

This relates directly to people who run businesses, and to this day they still need banking as a medium to support their businesses in cross-border transactions. I prefer it if people say the two can coexist so there's no competition in terms of implementation. We know that the banking system still has many problems, and some may see it as unsustainable, but if we're honest, banking is still quite necessary for some people today.

I agree with your argument, as the banking system and the innovations generated by Bitcoin can complement each other, allowing their benefits to function optimally and be used by those who need them. If not we will likely see one of the two being abandoned in the future as people start to see the more profitable side.

[fuguebtc]

Bitcoin is decentralized while traditional banking is purely centralized, so how can bitcoin be allowed replacing traditional banking in the future?

Something we fail to take note of or give much concerns is the various functions for which traditional banking systems do provide to a working economy. It’s not simply the dispensing and saving of fiat for sure, it goes to provide several services that continue to prove useful in our world, services that we are most likely not going to have with Bitcoin.

The banking system and the Bitcoin innovation is complementary and would be of great advantage to have both of them working at it’s optimum.

Yes, it is no coincidence that banks are considered the lifeblood of the economy. You are right, banks are more than just places to distribute and store fiat money. They provide core services such as financial intermediation to facilitate business growth and regulate cash flow to balance and stabilize the economy. From there, create a favorable environment for people like us to work, develop and achieve our financial goals.
Without banks, the economy would stagnate, even collapse, and what would we do if we had no jobs, no income, no goods to consume?
Can Bitcoin help us do these things? Obviously bitcoin can't do any of the above, so it would be naive and ignorant to think that bitcoin can replace banks.

[Die_empty]

Bitcoin was developed as a payment alternative to centralized banking. It doesn't directly replace the traditional banking system, but rather provides a more open, transparent, and intermediary-free financial option, allowing people to conduct cross-border transactions without relying on a central authority and allowing them to manage their assets with full control. And it seems likely that Bitcoin and banking will co-exist, as governments are unable to completely stop them.

Bitcoin was not created to replace the fiat system; rather, it exists to serve as a viable alternative. There are so many benefits of using or investing in Bitcoin, but I also think that fiat will always have a place in the global financial system. Bitcoin adoption has increased because many people now see it as a means to avoid the effects of inflation and a viable means of payment in transnational trade. But its volatility might be one reason why it might not be used as a currency. But it seems the coin is gradually getting stable, and it might achieve that in the future.  

Do you think it is possible to actually eliminate the use of paper money? For me I think it is still very early to see this happening because the advancement of technology although has grown this far is still very not that deep to that extent because there places that still lacks this technology ability and using digital currency is still a thing. Even banks are yet to get it right on digital currency, the government had CBDC introduced and so far of looks like a total failure.

Poverty, poor infrastructure, and a high rate of illiteracy are some of the reasons that will reduce the quick use of Bitcoin as a currency. Many people in developing nations can't use online banking because they don't have access to phones, the internet or can't read. 

[Porfirii]

"Chancellor on brink of second bailout for banks"

I'm afraid that the philosophy behind this phrase engraved in the genesis block by Satoshi has lost a lot of strength in recent years, and the possibility of Bitcoin replacing traditional banking fades away as new hybrid ways of doing things are devised. Banks aren't only embracing the blockchain technology as a convenient system without a single point of failure, but also Bitcoin as a new product to offer in their portfolio.

[irhact]

What's more true is that Bitcoin and other digital assets may operate side by side traditional banking, while in some countries with less currencies or insufficient banking infrastructure, crypto may have a huge part to play. Though banks are now adapting with digital currencies and blockchain combination.

In the future, the banks and Bitcoin will still be operating side by side but it'll be happening more often than how it's happening now because the Banks isn't going into extinct and neither is Bitcoin because the both of them will find a way to function together. I think the banks will soon adopt the technology of Bitcoin because it's going to benefit them more. Banks are old school and need newer technology for them to be able to continue operating. We shouldn't be bothered about the banks not existing again or Bitcoin failing to overthrown the banks because that wasn't the Idea behind Bitcoin creation.

[CageMabok]

Bitcoin indeed challenge the option of centralized banking, but the idea of it total replacement of banks in 15 years time seems really unlikely. Governments, the regulation system, and the need for stability will make replacement difficult.

What's more true is that Bitcoin and other digital assets may operate side by side traditional banking, while in some countries with less currencies or insufficient banking infrastructure, crypto may have a huge part to play. Though banks are now adapting with digital currencies and blockchain combination.

Banks that recognize Bitcoin as a superior asset that can operate on par with other valuable assets will certainly seek to create combinations aimed at leveraging blockchain. However, they will also be unwilling to abandon their legacy systems, which are known to lack transparency, so the combinations banks will use will be hybrids aimed at their own benefit. Bitcoin itself is not actually challenging any bank in the world; it simply introduces a transparent system so that everyone is aware that the banking system is very different from Bitcoin.

[DanWalker]

Are we still having this debate in the forum?

I don't even remember how many threads like this I've been on, but it's amazing how many people still think bitcoin can replace banks.

The traditional banking system can still operate without Bitcoin but without the traditional system, it is difficult to purchase Bitcoin. We all need FIAT to buy Bitcoin. Which means, the traditional system cannot be replaced.

This happened because bitcoin has deviated from its original purpose. Instead of using it as a currency, we turned it into an investment. And like other assets, to own them we need to depend on banks to buy them.

But this is not the main reason why bitcoin cannot replace banks, as some others point out, banks provide many important financial services that bitcoin cannot. Bitcoin cannot replace banks even if it is used for its original purpose.

[Catenaccio]

"Chancellor on brink of second bailout for banks"

I'm afraid that the philosophy behind this phrase engraved in the genesis block by Satoshi has lost a lot of strength in recent years, and the possibility of Bitcoin replacing traditional banking fades away as new hybrid ways of doing things are devised. Banks aren't only embracing the blockchain technology as a convenient system without a single point of failure, but also Bitcoin as a new product to offer in their portfolio.

It's there.
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks[1]"

Bitcoin Genesis Block. It's a kickoff of Bitcoin blockchain and it opens a new era in human history with success of blockchain technology that motivates more developments, applications of blockchain to human civilization in many countries since 2009.

The Times 03 Jan 2009