Banking
April 6, 2023

The Role of Lending in the Future of Cryptocurrency: A Banker's View

The Role of Lending in the Future of Cryptocurrency: A Banker's View
Banking
April 6, 2023

The Role of Lending in the Future of Cryptocurrency: A Banker's View

Ignacio Gassó
Co-founder & Chief Operation Officer
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Cryptocurrency has been a subject of controversy for a while now. Some people see it as a revolutionary way to store and grow their money, while others remain skeptical about its potential. One such skeptic is a banker who believes that cryptocurrency cannot replace the traditional currency system until it figures out lending.

According to the banker, the money supply is based on the money multiplier effect, where a bank only keeps some of the money on reserve and lends the rest out, creating liquidity and money supply that are crucial to the overall economy. However, crypto hasn't solved this problem yet. In the banker's opinion, a crypto bank would have to invest or lend the deposits to make money since charging fees on keeping people's deposits alone is not enough.

The banker cites the FTX situation where a crypto bank invested the money, saying that it's what banks do. However, until crypto can figure out lending, it cannot replace the currency system. This is because banks take deposits and lend or invest in low-risk securities, which a crypto bank would have to do the same. Until then, the banker remains skeptical about the benefits of crypto compared to the traditional currency system.

Despite the banker's skepticism, he acknowledges the potential benefits of blockchain, which is the underlying technology of cryptocurrency. He believes that it has a lot of other applications, and he finds it interesting. However, until crypto figures out lending, he does not see how it can replace the traditional currency system.

In conclusion, the banker remains divided with his young adult children when it comes to cryptocurrency. While he acknowledges the potential benefits of blockchain technology, he remains skeptical about crypto's ability to replace the traditional currency system until it figures out lending. The debate about cryptocurrency is ongoing, and only time will tell if it can revolutionize the financial industry or not.

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