Every year, Bitcoin continues to grow in stature. Bitcoin is trending in every metric—money value, adoption rates, transaction volume, you name it.
But not everyone is getting happy Bitcoin. In particular, the banking industry feels threatened by the rise of Bitcoin and continues to wage war on the cryptocurrency.
Banks’ dislike of bitcoin should come as no surprise. The invention of Satoshi Nakamoto is considered the greatest disruption of the ancient monetary system in decades. As a peer-to-peer network for value creation and exchange, Bitcoin may render banks useless.
To protect their position, banking institutions have resorted to the classic tool of war: propaganda. By spreading misinformation, banks are hoping to discredit bitcoin — reducing public adoption and encouraging tougher regulation.
A (brief) history of the Great Financial Propaganda War on Bitcoin
From the start, Big Finance must have recognized that Bitcoin can disrupt the banking system. But they choose to believe that its use will remain limited to drug dealers, computer geeks, cypherpunks, Libertarians, and other fringe items.
But with the growth of cryptocurrency adoption, especially among institutional investors, panic spread in the banking system. For the first time, the possibility that this “magic money online” could replace banks was real.
Thus, the banks launched a coordinated effort to discredit cryptocurrencies. Bitcoin has been and remains a favorite target, given its status as the world’s first and most popular digital currency.
In 2014, Jamie Dimon, billionaire president and CEO of JPMorgan Chase, the largest US bank, declared Bitcoin a “terrible store of value” at the World Economic Forum in Davos, Switzerland. However, that did not prevent the state of New York from issuing licenses for bitcoin exchanges the following year.
Dimon continued his criticism of bitcoin in 2015, saying that the cryptocurrency would never gain approval from governments. In his words, “No government will support a virtual currency that roams across borders and does not have the same controls.”
Unsatisfied, JPMorgan Chase supremo launched its biggest attack on Bitcoin to date at the 2015 Barclays Global Financial Services Conference. Not only has Bitcoin been called a Tulipmania-like fraud, but it has also threatened to fire anyone trading Bitcoin through his company.
Dimon is not the only person in the big finance world who has tried to undermine bitcoin. European Central Bank President Christine Lagarde has also been critical of Bitcoin in the past.
At an upcoming Reuters conference, Lagarde described bitcoin as a “highly speculative asset,” adding that it was used to conduct “some funny business and some reprehensible and hateful money laundering.” This is while the European Central Bank was considering launching its own digital currency called the Digital Euro at the time.
The European Central Bank has often surrendered itself to the anti-Bitcoin propaganda campaign. In his 2021 Financial Stability Review, the lead banker compared the bitcoin price hike to the infamous South Sea bubble. “[Bitcoin’s] The exorbitant carbon footprint and potential use for illicit purposes are of concern.”
Even the world’s largest financial institutions have also joined the anti-Bitcoin party. For example, the World Bank refused to support El Salvador’s plan to adopt bitcoin as a legal currency, leading to “environmental and transparency shortcomings” in the cryptocurrency. The International Monetary Fund (IMF) also urged the Latin American country to abandon bitcoin early this year.
Of course, there are many, many examples of old money institutions raising suspicion and spreading misinformation about Bitcoin. However, all of this data points to the same conclusion: banks hate bitcoin and will stop at nothing to discredit them.
“Bitcoin is bad, blockchain is good”
Some financial players have taken another path in the disinformation campaign. This includes criticizing Bitcoin but praising the underlying blockchain technology that powers the system.
Banks see the potential of blockchain technology to revolutionize payments and want to use the technology to their advantage. For example, JPMorgan Chase, an outspoken Bitcoin critic, has created a cryptocurrency called “JPMCoin” that runs on its Quorum blockchain.
Central banks have also touted the ability of the blockchain to power central bank digital currencies (CBDCs) – cryptocurrencies issued and backed by governments. These assets are pegged to a fiat currency, such as the dollar or the euro, like a stablecoin.
The Bank for International Settlements (BIS) broke into cryptocurrencies in a June 2021 report, calling them a speculative asset used to facilitate money laundering, ransomware attacks and other financial crimes. The report declared that “Bitcoin, in particular, has few public interest attributes when considering the impact of wasted energy.”
Ironically, the Bank for International Settlements called for digital central bank currencies in the same report. This is an excerpt:
Central bank digital currencies present a unique opportunity to design a technologically advanced representation of central bank money, one that offers the unique features of endurance, liquidity and integrity.
These currencies can form the backbone of a new, highly efficient digital payment system by enabling broad access and providing robust data management and privacy standards based on digital identity.”
“Bitcoin is bad, blockchain is good!” Font has become the material of choice for banks and fintech operators in response to the popularity of Bitcoin. As always, this argument misses the point.
Without a decentralized Bitcoin architecture, blockchain-based cash payment systems are useless. Authorized blockchains like Quorum suffer from centralization and single points of failure — problems that Nakamoto sought to correct with the creation of Bitcoin.
The same issues have plagued CBDCs. As I explained in a recent article, centralized control of the digital dollar or pound causes the same problems seen with fiat currencies. With central banks controlling every inflow and outflow of money, it would be very easy to conduct financial control, implement unpopular monetary policies and exercise financial discrimination.
The biggest problem with this line of argument is that it fails to take into account Bitcoin’s greatest strength: the crypto-economy. Satoshi’s biggest contribution has been the new combination of economic incentives, game theory, and applied cryptography necessary to keep the system safe and useful in the absence of a central entity. Centralized blockchains with weak incentives are just as open to attack as any other legacy system.
Why are banks afraid of bitcoin?
Traditional banks have long made money by charging users for storing and using their money. The average account holder pays account maintenance fees, debit fees, overdraft fees, and a host of fees designed to make a profit for the bank. All the time, the bank lends the money in the account, while giving users only a small part of the interest earned.
However, bitcoin poses a threat to the banking industry’s revenue model. With cryptocurrencies, there are no institutions that help users store, manage or use their money. The owner remains in complete control of his bitcoins.
But wait there is more.
Better and cheaper transactions
Bitcoin makes it possible to transfer funds to anyone, instantly, regardless of the amount involved or the location of the recipient. Users can do this without relying on an intermediary such as their local bank.
On average, transactions powered by Bitcoin are faster and cheaper than transactions through banks. Keep in mind the amount of time it takes to process an international transfer and the exorbitant fees charged by banks.
Except for miner fees, people don’t pay anyone else to process transactions on the Bitcoin blockchain. Quantities of any size, large or small, can be transferred without the usual routine. In less than 10 minutes, Bitcoin processes the transfer of funds irreversibly. Banks simply cannot match that.
store of value
Banks help clients arrange long-term investments in gold, bonds and other assets, to secure the value of their money. They charge a fee for custody, investment advisory, and portfolio management.
But what happens when people realize that they don’t have to rely on banks to store value?
Due to its intrinsic properties, Bitcoin is quickly emerging as a preferred store of value. Bitcoin is scarce (only 21 million units will ever be produced), but it is also exchangeable and portable. This makes it better than traditional stores with values such as gold.
Since anyone can easily buy Bitcoin and HODL, banks can no longer make money from shilling asset management schemes. Banks, such as JPMorgan, have adapted by selling bitcoin-based investments like futures — but that won’t save them.
tamper resistance
Banks have long survived by manipulating the financial system for private gain. The 2008 financial crisis resulted from fraudulent dealings by some of the world’s largest banks, including Lehman Brothers, which subsequently declared bankruptcy.
For example, banks Always They lend more money than they have in what is called leverage. If everyone decided to withdraw their money from the banks, the entire industry would inevitably collapse.
Bitcoin allows people to be their own bank. The funds in the Bitcoin wallet cannot be manipulated or used by anyone other than the owner. For the first time, people now have the power to control they Capital.
Banks Can’t Kill Bitcoin
The intensity of the information war in the banking industry shows how much they fear Bitcoin – as they should. It is only a matter of time before Bitcoin penetrates every financial sector – offshore settlements, collateral, payments, asset investments and more.
When that happens, banks will be the last victims of technological disruption. Just as Netflix has replaced video rentals and Amazon has replaced libraries, Bitcoin will replace banks. No amount of skepticism and misinformation will do the opposite.
This is a guest post by Emmanuel Awosika. The opinions expressed are their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.