Opinion: Banks need to offer custodial, safe and secure crypto account systems for the general masses to adopt it
Cryptocurrencies, since its inception over a decade ago, are still relatively new technologies that, at its core, aim to offer a decentralised asset that has some value. Its purpose is to do-away with government-issued or any sort of centrally controlled assets; rather an asset that works via a democratic consensus of thousands or millions of users around the world. It’s the people’s control, really.
But perhaps, in order for it to succeed, there has to
be some sort of custodial account system for the everyday user. Think about
this: When you use your bank’s app on your phone to send or receive money, all
you care about is if the intended recipient has successfully received the
amount; you don’t really know or care about how your bank has talked
with the other person’s bank, or how banks really work in general. And in the
case where something goes wrong, banks can relocate the money / it cannot be
permanently lost. In legal situations, banks can freeze funds if say, a
criminal, steals your money.
Now yes there is certainly a place for non-custodial wallets
to co-exist, as perhaps most of you (myself included) would not keep crypto in
a custodial account. We are the type of people who want full control over our
crypto, as decentralisation is the motivating factor behind cryptocurrencies in
the first place. But all I am saying is, there should also be centralised
options for those that are perhaps not very tech savvy, or just simply want to
hold their cryptocurrencies without the risk of say, losing their private keys.
Cryptocurrency exchanges are not an example of this,
as there have been numerous reports of people’s accounts being frozen for often
vague reasons. Largely due to a lack of legislation in most places in the world,
crypto exchanges often have lots of free reign, compared to banks.
What not to do - Commonwealth Bank of Australia
Interestingly enough, one of the biggest banks in Australia,
the Commonwealth Bank (or Commbank for short) is planning to launch a system
similar to what I’ve described above; but with one major caveat.
Commbank plans to partner up with Gemini, a cryptocurrency
exchange, which will help Commbank implement cryptocurrency services directly
into their banking applications. This essentially provides Australians a fast,
easy, and quite a secure route to purchasing crypto. Sounds great right? A
major bank offering cryptocurrency services is certainly one step closer to
mass adoption. The problem is, they do not plan on letting users withdraw their
cryptocurrencies to non-custodial wallets. In other words, while you have a
certain amount of crypto in your name, you don’t actually own the private-key
rights to it.
The purpose of crypto, at its core, is to offer
decentralisation and this defeats the purpose of that. Perhaps the vast
majority of users would like their banks to secure their crypto for them, and
that’s fine; but as a principle, users should be allowed to withdraw their
cryptocurrencies to their non-custodial wallets.
Banks over the globe know they cannot do anything about
cryptos due to their decentralised nature, and you have many banks that don’t
allow payments to crypto exchanges in an effort to prevent people from buying
cryptocurrencies. Commbank, on the other hand, took a different route and will
offer the cryptocurrencies themselves, and this way they get to essentially
keep control of people’s cryptos.
A better solution
Instead of ‘locking’ people’s crypto onto platforms, people
should be allowed to withdraw their tokens to non-custodial wallets. This, of
course, would come with warnings and waivers that if it is lost, there’s
nothing the bank can do, and that this is not recommended for everyday users.
But if it’s not recommended for the average person to
withdraw, how would they send / receive cryptocurrencies from others?
The solution to this is simple really. Banks would have some
sort of common inter-bank platform in which users can register and safely send
crypto to the other user. This way, purely bank to bank transactions between
centralised entities would be recoverable in case something went wrong.
Concluding thoughts
Cryptocurrencies are inevitably the way of the future; and
while it might not replace fiat, it will certainly live alongside it, perhaps in
harmony. Given the decentralised nature of it, proper centralised
infrastructure to complement decentralised systems will certainly help with the
mainstream adoption of cryptocurrencies. While many banks are blocking bank
transfers to crypto exchanges, others are adopting them, and hopefully we see
more adoption as time goes on.
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