Cryptocurrency and the Incompatibility with the Current Banking System: CRYPTOCURRENCY

By Thomas C. Gaidukov

A Reality Check 

 

Cryptocurrencies are a threat to the banks, governments and lenders. "Why?" You ask. "Didn't the crash of 2007 teach us that banks were Too Big To Fall (TBTF)?" Everyone knows the answer. Cryptocurrencies are a threat that can destabilise and bring down the entire financial system. Cryptocurrencies bypass banks, governments and lenders to provide a decentralised and unregulated 'unbank' ecosystem. 

 

Cryptocurrencies can't be frozen by a bank, which means they can't be artificially limited. And when you try to remove money on an exchange you will find it gone because cryptocurrency transactions don't require third-party checks.

 

But how do cryptocurrencies fit into our existing banking system? Cryptocurrency is not a financial instrument, so it doesn't fit in with traditional banking systems for matching funds with borrowers, or for intermediaries like brokers or dealers in securities. Cryptocurrency offers solutions to all of these issues. 

 

Cryptocurrencies are a threat to the banks because they don't fit in with their existing model. Banks monitor and store data on all our activity, but they can't spy on our transactions because cryptocurrency transactions don't go through third-party financial services.

Who sets exchange rates? The government through the Central Bank.

 

Cryptocurrencies don't need financial institutions or hard money like precious metals, so they bypass the established model of how interest rates are set and how prices are set. But cryptocurrencies don't have that vulnerability. To understand how incompatible cryptocurrencies and fiat currencies are, we'll first need to understand what money is and how the governments print it out of thin air. 

 

 

 

• Language: English
• Publisher: Thomas Corlett Gaidukov
• Release date: Aug 1, 2021
• ISBN: 9798201420178

Book preview

A reality check

Cryptocurrencies are a threat to the banks, governments and lenders. Why? You ask. Didn't the crash of 2007 teach us that banks were Too Big To Fall (TBTF)? Everyone knows the answer. Cryptocurrencies are a threat that can destabilise and bring down the entire financial system which banks created from around 1000 AD. Cryptocurrencies bypass banks, governments and lenders to provide a decentralised and unregulated 'unbank' ecosystem.

Cryptocurrencies can’t be frozen by a bank, which means they can’t be artificially limited. And when you try to remove money on an exchange you will find it gone because cryptocurrency transactions don’t require third-party checks.

But how do cryptocurrencies fit into our existing banking system? Cryptocurrency is not a financial instrument, so it doesn't fit in with traditional banking systems for matching funds with borrowers, or for intermediaries like brokers or dealers in securities. Cryptocurrency offers solutions to all of these issues.

Cryptocurrencies are a threat to the banks because they don't fit in with their existing model. Banks monitor and store data on all our activity, but they can't spy on our transactions because cryptocurrency transactions don't go through third-party financial services.

Who sets exchange rates? The government through the Central Bank. Cryptocurrencies don’t need financial institutions or hard money like precious metals, so they bypass the established model of how interest rates are set and how prices are set. But cryptocurrencies don't have that vulnerability. To understand how incompatible cryptocurrencies and fiat currencies are, we'll first need to understand what money is and how the governments print it out of thin air.

CHAPTER 1: UNDERSTANDING MONEY

Money is an instrument of exchange, a store of value and a unit of account. The more widespread the acceptance of any one medium, the greater its liquidity (meaning that it can be converted into other things). Money has always emerged from a barter system where goods were exchanged directly without going through money. The first money was simply some substance that everybody valued for its own sake at first, such as cattle.

The most common forms of money are coins and paper notes issued by governments. Banks also create money in the form of credit – new digital numbers in your bank account or on your monthly statement – by lending you money to buy houses and cars, which is then pooled with everyone else's money to fund loans to businesses or individuals.

Banks and governments create money from nothing by selling debt instruments known as IOUs. These financial products are usually backed by collateral such as mortgage-backed securities, treasury bonds or gold. But there is no mechanism for reaching a consensus over the value of these instruments. Governments and banks themselves never agree on the value of currencies. They merely permit each other to sell them at whatever price they choose.

The free market for money

In commodity money like gold and silver, each holder can connect with other holders using an exchange rate set voluntarily by the market participants, such as 'the price of gold in dollars'. This is known as the market for money.

The market sets the price of