r/CryptoCurrency • u/mybraincantfunction • 20h ago
DISCUSSION How much of a threat does cryptocurrency,especially Bitcoin, actually pose to the traditional financial system?
I’ve been trying to understand the potential economic impact of cryptocurrencies such as Bitcoin, particularly in relation to traditional banks, financial institutions, and government-issued currencies.
If cryptocurrency adoption continues to grow, could it eventually pose a serious threat to the traditional financial system? For example, could widespread use of Bitcoin reduce reliance on banks or weaken the role of official currencies? Or is Bitcoin still too volatile, limited in its practical use, and too small relative to the overall financial system to pose a genuine systemic threat?
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u/HotInTheseRhinos123 🟩 0 / 0 🦠 19h ago
Bitcoin has become part of it so it offers no threat anymore.
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u/JustStopppingBye 🟩 0 / 0 🦠 17h ago
Bitcoin is just one asset among hundreds of thousands of others. It has nothing to do with the traditional financial system.
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u/HotInTheseRhinos123 🟩 0 / 0 🦠 15h ago
There are ETFs that follow the spot price of BTC, making it part of the system.
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u/JustStopppingBye 🟩 0 / 0 🦠 15h ago
....Thats a product within the system.
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u/HotInTheseRhinos123 🟩 0 / 0 🦠 14h ago
Exactly. It’s a part of the system.
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u/JustStopppingBye 🟩 0 / 0 🦠 14h ago
Bitcoin is a completely separate network. Its an asset that tradfi interacts with, its not a component of tradfi infrastructure/system.
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u/HotInTheseRhinos123 🟩 0 / 0 🦠 14h ago
I know, and as soon as it became a popular asset that tradfi trades, it lost its power as a disrupter.
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u/newMoneyStyle 1h ago
Kinda agree, once ETFs started tracking spot BTC it basically got absorbed into the system it was supposed to challenge.
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u/JustStopppingBye 🟩 0 / 0 🦠 14h ago
It was never a disrupter.
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u/kissthesky303 🟩 0 / 2K 🦠 19h ago
fiat is the main benchmark for crypto, you are supposed to pay taxes on crypto in the most countries, and if it doesn't go to zero, it will be exchanged into fiat eventually, or exchanged for goods representing a value given in fiat. It is fully embedded in the common system, and I don't see any chance for crypto to reverse this.
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u/Guccimayne 🟩 0 / 0 🦠 19h ago
The big boys with the money would never let it happen. They now control crypto like they do regular currencies
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u/mercuryy 🟦 0 / 0 🦠 19h ago
Miniscule threat, if at all.
Bitcoin especially because widespread use would need overhauls for faster, easier and safer transfers and then cap out at 7 transactions per second. Thats not even enough for Starbucks alone in europe which isnt one of the bigger chains there, just to put that in proportions.
And then there is volatility in top. No currency profits of such volatility. There are multiple reasons, some named here why the experiment in El Salvador was such a failure and most citizens rejected it either outright, or after trying.
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u/FocusFlukeGyro 🟦 89 / 90 🦐 19h ago
Thank you for your helpful answer. Is the a different crypto (coin/token) that could handle the necessary bandwidth for enough transactions per second to realistically work, potentially with improments to the network/blockchain?
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u/jekpopulous2 🟩 619 / 3K 🦑 19h ago
If you look at the current landscape ETH is the primary settlement layer for pretty much everything and most high-speed execution happens on L2s.
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u/digital__bits 🟩 0 / 0 🦠 12h ago
Yes they actually exist. One of them is Monero, that works just like cash.
It also exists Bitcoin Cash, who has almost the same properties as Monero but with the limited emission of coins.
Answering your questions about bandwidth, both have an algorithm for block size which regulates by itself depending on demand. Basically, block size is not limited as Bitcoin Core or in the other side excessively abysmal like the shitty BSV.
I recommend you trying both by yourself.
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u/PropaneInMuhUrethra 🟩 0 / 0 🦠 8h ago
BCH doesn't have any of the properties of monero...it's just a fork of bitcoin. Still 10 min blocks, same emissions and halving schedule. It's got the capacity for many more txn in a block than bitcoin yeah, but it has never been utilized. So for the same reason bitcoin can't replace cash, BCH won't either.
Monero is slightly better with 2 min block times but you still get the odd bad luck with no blocks for around 10 mins or so. It's much better for privacy which is the selling point for people who use it.
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u/digital__bits 🟩 0 / 0 🦠 7h ago
Yeah, that's why each one has their own unique properties.
Regarding usage, actually BCH has an increasing number of users in Tacloban, PH, and dozens in Argentina. On the other side, Monero usage is more niche but is not limited only to the dark markets. There are legal alternatives like xmrbazaar.
The idea of Bitcoin is not to replace cash, is to give an alternative for people to transact freely without permissions.
Let me ask you this, then: what’s your favorite/preferred crypto?
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u/FocusFlukeGyro 🟦 89 / 90 🦐 11h ago edited 7h ago
EDIT: I've removed my comment as, upon researching the matter, I was unable to locate reliable sources to confirm my assertion.
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u/digital__bits 🟩 0 / 0 🦠 11h ago
Any verified sources? Or you’re just making things up?
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u/FocusFlukeGyro 🟦 89 / 90 🦐 11h ago
There were some higher profile vulnerabilities (https://mashable.com/article/bitcoin-cash-bug-found-bitcoin-dev#ZD8JbDnMSkqV) discovered however, upon looking into it, it seems have been able to patch them. It's also possible I was thinking of Bitcoin Classic, from years ago, and how people were buying it up because it was cheaper.
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u/mercuryy 🟦 0 / 0 🦠 19h ago
In my opinion there are a lot of cryptos that shaped their narrative as "the future of finance" but also have these and other problems doing just that.
The two areas where there might be some future and integration is stablecoins and private ledgers for either private settlement or tokenisation, like the system Visa and MasterCard started to create.
XRP might be the loudest candidate hailing itself into imminent adoption by its fans for a while, but for any coin to be useful as tokenisation item its absolutely not helpful of these tokens have much value of themselves. Like with RFID tags in food containers, on pallets or in clothing that tokenize those items, this gets unsustainable the second these tags her expensive. Nobody would buy,or even try to build and sell, a tub of yoghurt for 80$ because that tag in the bottom costs 77$ now.
Any coin or chain used for any meaningful adoption of settlement needs to be stable with less volatility. Anything tokenizing must never get expensive. All these "XRP will be at 1000 soon because banks must buy ours" tales never were realistic.
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u/cosmic_censor 🟦 161 / 162 🦀 19h ago
The value of the blockchain's native currency would not effect the cost of tokenization expect for the transaction cost to validators. When you create an NFT on ethereum it is not pegged to the value of ETH, as an example.
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u/LuckyWinds 0 / 0 🦠 14h ago
Bitcoin especially because widespread use would need overhauls for faster, easier and safer transfers and then cap out at 7 transactions per second.
Bitcoin could (and I really mean COULD, not WILL) be the backbone for currency worldwide.
Similar, but ideally better, then what gold is today. While we aren't on the gold standard, large gold reserves (and other large asset holdings) do prop up a countries currency. The same could be said for bitcoin.
You don't need to buy coffee on the blockchain to be supported by bitcoin.
But this is thinking decades into the future. I'm talking 50-100 years.
These things take a long time. Think about something that is different, but was equally unlikely at the time. Say someone said in the late 1800s that the US Dollar would be such a strong currency that other countries would use it as their currency. You'd be ridiculed. You'd be told how stupid you are. But you wouldn't be wrong, just the timeline would be so far in the future that you would never know you were right.
Thats not even enough for Starbucks alone in europe which isnt one of the bigger chains there, just to put that in proportions.
USD can't even handle this. We rely on businesses to do this for us.
Bank accounts, online banking, credit cards, credit card machines, etc. are all products. They aren't USD.
When you pay by credit card you are not spending US dollars directly. You are borrowing money from a third party financial intuition which is then sending over an IOU to the merchant's credit card procession company (another third party institution) which is taking a 3% cut of that and then in 1-2 business days depositing that into the merchant's bank account (that bank account is a financial product offered by another third party financial intuitions). Then at a later date you pay back that loan.
We literally need multiple third parties (often 4 or more third party businesses) and 1-2 business days plus 3% to buy that cup of coffee.
So it's really ridiculous to talk about all transactions being on the main bitcoin blockchain when we literally don't do that today with fiat currency. Who only uses cash and nothing else? (in modern society)
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u/CryptoDeepDive 🟩 0 / 0 🦠 19h ago
Not a threat at all. Bitcoin failed as a currency. If it was an actual usable currency for every day consumer it could have posed a serious threat, but it isn't.
Since now it is being used as a "SOV", it is no more a threat than paper gold, since all Fiat off ramps are controlled by governments.
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u/digital__bits 🟩 0 / 0 🦠 11h ago
All started when companies like Steam decided to reject payments due to congestion and high fees.
Thankfully the project is still alive and running since 2017 💪
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u/ThomasToIndia 52m ago
People were not going to pay in fractions using a deflationary currency. Become rich by holding it and also use it to buy coffee. Which would be the equivalent to holding a gold bar and making gold filings to pay for stuff.
Inflation may be theft but it's also a feature not a bug if you want people to use it.
It's actually worse now, after years I am now discovering in canada that liquidating BTC can be consdiered capital gains.
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u/Nice_Material_2436 🟩 0 / 0 🦠 19h ago
No, bitcoin can't be used as a currency.
What is happening tho is that the US is actively leveraging crypto to buy US debt, most money locked up in crypto is used to buy US treasuries via stabecoin issuers and exchanges being mandated to buy them.
Silly crypto enjoyers are actually lending money to the US government and getting no interest in return, if that's not hilarious I don't know what is.
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u/foreveryoungperk 🟩 65 / 65 🦐 14h ago
it is a threat to banks and those who make money off transaction fees (especially giant transactions overseas) and holding your money. some companies make money off transaction fees but thats not even pennies compared to the amount that gets cut out when that middleman is gone and bitcoin (or other cryptos) is used instead.
also if people were smart enough you wouldn't need to pay outrageous fees to do anything with crypto but its also easy to scam people
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u/mickalawl 🟩 0 / 0 🦠 13h ago
Crypto is well and truly a tool of the wealthy to extract even more wealth. It is part of traditional finance already.
In terms of utility if every chain were to vanish overnight nothing bad would happen. Crypto is not a backbone of the traditional finance world (outside crime and sanction evasion). Fiat and existing payment methods remain superior. It's more about gambling and speculation and using social media to drive fomo or doomerism.
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u/FlagFootballSaint 🟩 0 / 0 🦠 19h ago
None. The idea of overthrowing the legacy finance system via crypto is dead. Crypto has become legacy as well.
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u/Ornery_Web9273 🟩 0 / 0 🦠 19h ago
Not much. As long as each crypto transaction is a taxable event it won’t supplant a currency.
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u/AJSE2020 19h ago
Not a threat
More near a joke
99% crypto are scum or useless
Nft is massive joke
Bitcoin as investment is stuck in a price loop for multiple years now
And the loomimg threat for quantum computing
Would release all of those million of bitcoins including satoshi
By that point we would be back in sequare 1 circa 2020
Sub 10k btc
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u/MaybeOnFire2025 🟩 0 / 0 🦠 18h ago
None, because it will never get beyond the crank/gadfly support stage.
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u/anon1971wtf 🟧 0 / 0 🦠 15h ago
Until USD hyperinflation I expect more or less status quo
Correctly managing private keys has high tech barrier, majority of Bitcoiners entrust coins to other people to store long-term, thus Bitcoin adoption stalled. I don't think that before the main problem is solved, hyperbitcoinization could happen first
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u/Ill_Mousse_4240 🟦 0 / 0 🦠 14h ago
The financial system, printing fiat paper money 24/7, 365, is its own threat.
No others need apply!
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u/pernilla1zf 10h ago
Maybe in some magic scenario where scalability and fees and speed were all solved and it could easily be used for payments on layer 1 (even if deflationary). Idk about now
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u/Less-Consequence1823 9h ago
None. It won't replace traditional finance no matter how hyped people get about it. All fiat currencies decline at some point - but not because another one becomes too successful. Simply because people in charge make horrible decisions trying to kick the can down the road (print to infinite among other things the US gov is currently doing). People eventually start to abandon that currency but bitcoin would have to displace EVERY currency in the world, plus gold, and a ton of other things would have to happen for crypto to become the only form of money.
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u/MelangeBot 8h ago
So a guy has his money deposited with a bank. He buys Bitcoin. 3 years later another guy that has money with that same bank buys Bitcoin while the first guy sells it. No money has changed. The bank updated their ledger and that's it. No work was done, no growth. Nothing.
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u/Ok_Future_9019 1h ago
btc has an etf now. that's not storming the gates, that's getting a guest badge.
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u/Useful_Calendar_6274 14h ago
not a lot. fiat money eventually does go to 0 but then they just make another. people not demanding fiat mught have some macroeconomic effects but nothing that the government can't adapt to
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u/Affectionate_Ad_8483 0 / 0 🦠 13h ago
Zero threat. Pure fantasy. I teach financial literacy for a living for whatever that is worth. That’s why they shift to store of value narratives .
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u/zoppaTheDim 18h ago
It is legalized money laundering and tax evasion.
You hold traditional banks to standards to stop such crimes, while bitcoin owners are allowed to skim profits off of money laundering.
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u/ThomasToIndia 42m ago
How is it legalized? Most countries require you pay taxes on it like stock. You could hide it, but it's literally easier to hide fiat cash and not pay taxes on it.
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u/Significant_Copy8056 🟩 213 / 214 🦀 18h ago
Bitcoin has no use case or solve any problem. it's basically a store of value, which can either rise or fall. It also takes a lot of energy to mine 1 bitcoin, and there's only a certain amount that will ever be minted. Unfortunately whatever bitcoin does, affects the rest of crypto. When a specific crypto, which is close to actually happening, becomes an actual tradeable currency, then it won't necessarily take over the financial system. but it will definitely put it on a blockchain. The time to settle a transaction would decrease drastically and therefore would be the preferred method of payment. Not to mention any fees associated with that transfer would be less than what it currently is. So it will eventually phase out paper money.
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u/islanda_1973 🟦 570 / 570 🦑 19h ago
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