The banking system in the Netherlands is very efficient. I remember marveling at the system compared to many other westernized countries, some years ago. The system has even improved over time as well. It has entered the age of mobile and digital banking. The bigger retail banks like ING and ABN Amro bank etc. but there are newer banks such as Revolut and Bunq offer internet banking. In addition, there are mobile apps where payments and transfers can be made in a matter of seconds using the phone.
In supermarkets and shops contactless payments with mobile phones are made quickly and smoothly. There are no issues at all. The use of bank notes is nearing its end. The country is almost cashless. One could argue whether that is a good or bad thing. However, this is the reality. The populous has embraced mobile and digital banking because it is convenient, fast and easy to use.
From what I have outlined the banking system here seems ideal and very efficient so what is the difference with crypto? Why would anyone want to convert their cash into crypto and save their funds via digital assets?
Government regulations
The first major reason would be decentralisation - no centralised body as overlords. Money in a bank fall under government regulations and oversight. If the government/banks do not like our behaviour our account can be blocked. This is demonstrated very frequently worldwide. For instance the truckers in Canada
Crypto
With crypto in one’s wallet the holder has their own bank.
Liquidity
WIthdrawal of large amounts from one’s own bank account is not possible on demand. Sometimes there is a wait of a few days.
Crypto
This is not the case - one’s funds are available 24/7.
Monitoring/Accessibility
If there is a transaction over Euros 10K then the bank will have questions. If this occurred over the weekend or on holiday then the transaction must be stopped to await clarification during regular opening hours. From ATM one can withdraw up to euros 5k but in reality it is not easy to get euros $1000. In addition, transactions over euros 100 were being monitored by the bank for money laundering (the minimum might have changed in the interim)
Crypto
Transfers are unlimited - it'sbased on your balance and can access it 24 hrs 7 days per week. You are indeed your own bank!
Financial inclusion
Bank personnel will decide who can and cannot open a bank account etc.
Crypto
Anyone can have a crypto wallet - banked and unbanked.
Bail-ins
In simple terms, our savings in banks are actual loans to the bank (read the fine print). As a result, they are allowed to lend out depositors funds and receive interest. If the bank runs into financial difficulties they can also default on the loan to us (of our own funds). We gave them our funds and only return a portion of our funds. This is called bail-in. Of course there migh be a government insurance which refunds part of our funds but it depends on the amount one has saved.
Crypto
I will repeat - we are our own masters and bank managers.
Security
A bank can be hacked but crypto can be hacked as well.
Crypto
Private wallets are less proned to being hacked unless one gives away or carelessly store one's keys.
Bank fees
Bank fees can be large for some cross border transactions.
Crypto
Arguably selecting the wrong blockchain platform to transfer funds can lead to large fees as well but there are options.
Rewards
Interest on savings in a bank account can be up to 0- 4% annually. It is not very attractive.
Crypto
The interest earned, on this platform, for HBD is saved is 20% APR currently. That is a very large return.
Additionally, some cryptos can “moon” and the rewards are astronomical compared to banks. However it is not guaranteed.
Are there any cons?
It would appear that the positives outweigh the negatives for putting ones saving in cryptocurrencies. However, as there is not yet mass adoption - cryptocurrency values fluctuate a lot more than one would desire. At the moment, crypto investment is still extremely risky. However, with crypto there can be large rewards much larger than bank interest earn. Unfortunately there can also be large losses.
In addition, as crypto is not legal tender - it is not accepted everywhere. As a result, exchanging crypto for fiat currency is still necessary for most purchases. As governments/banks could prevent conversion to fiat, having all one’s funds in crypto could prove problematic - then liquidity could become an issue.
I do not have all my savings in crypto currency because until crypto operates with a legal or financially regulated framework - it would be extremely risky. I know this is what we wished to escape from but we cannot escape the inevitable. Since learning how banks leverage our funds and can bail-in - I feel as though I am between "a rock and a hard place". That is not comforting at all. We have seen people defrauded of their crypto funds in the past year via failed cryptocurrency/exchanges - the largest recently being FTX and Terra Luna. One can spread the risk by diversifying - having funds in crypto assets, real estate, precious metals, stocks and fiat. With all the uncertainty, it might be best to remain diversified thus spreading the risk.
This is my response to HiveLearners - #hl-w72e2
The photo is my own
