Traditional banks warn against cryptocurrencies (like Bitcoin and Ethereum) for several reasons related to financial, legal, and technical risks. Here are the main reasons:
1. Severe value fluctuations:
- Cryptocurrencies are known for their sharp price volatility over short periods, making them **unstable** as a means of saving or as a safe financial asset. These fluctuations can expose investors to significant losses, especially for those who lack sufficient experience.
2. **Lack of regulation and oversight:**
- Most cryptocurrencies are not subject to government oversight or international financial institutions (like central banks), which increases the risks of **fraud** or **scams** or market manipulation. Traditional banks operate in an environment subject to strict controls, so they see cryptocurrencies as a threat to the regulated financial system.
3. **Cybersecurity risks:**
- Digital platforms and wallets are frequently exposed to hacking, leading to theft of funds without any compensatory guarantees for users. Banks have advanced security systems and provide legal protection for customers in case of theft, which is often not available in the world of cryptocurrencies.
4. **Potential for use in illegal activities:**
- Some cryptocurrencies are used in **money laundering** or financing criminal activities due to the ability to conduct semi-anonymous transactions. Banks are obligated to follow anti-money laundering (AML) rules and know your customer (KYC) regulations, so they refuse to deal with assets that may expose them to legal accountability.
5. **Threat to the traditional financial system:**
- Decentralized cryptocurrencies reduce the role of banks as financial intermediaries, which may affect their profits and influence. For example, cryptocurrencies allow for fast and low-cost international money transfers compared to banks.
6. **Lack of consumer protection guarantees:**
- In the event of losing cryptocurrencies (like forgetting a password or damaging a digital wallet), there is no central party that can recover them. In banks, there are recovery procedures for accounts and deposit protection.
7. **Environmental risks:**
- Mining some cryptocurrencies (like Bitcoin) consumes vast amounts of energy, raising environmental criticisms. Banks that adhere to sustainability standards may refuse to associate with these assets for reputational reasons.
8. **Legal ambiguity:**
- The laws regulating cryptocurrencies vary between countries and may be abruptly banned (as happened in China or India). This ambiguity makes banks cautious for legal and investment reasons.
9. **Systemic risks:**
- If the cryptocurrency market grows significantly without controls, it may create a financial bubble or affect the stability of the global financial system in the event of its collapse, as happened with previous financial crises.
Traditional banks view cryptocurrencies as a new technology with potential but prefer to wait until they are fully regulated and their risks are reduced. In contrast, some major banks have begun exploring the adoption of "blockchain" technology or central bank-issued digital currencies (CBDCs) as safer alternatives.