Cryptocurrency and its usage in all developmental sectors today is in actual, the progress and growth of technology and innovation. As science and technology is constantly working on to make our lives more convenient and easier, a very big sector which has still not embraced the concept of crypto currency and financial technology is the Traditional financial sector.

As for financial technology or Fin-tech, it is the financial technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. In other words, it uses technology to improve and simplify the financial activities. So is cryptocurrency is an extension of financial technology? Yes it can be said that in a broader aspect but financial technology has still a long way to go and crypto currency is just another product of technology and innovation which serves as a part of the whole picture of futuristic technologies.

Therefore today, this blog will discuss the potential risks that poise for financial sector for not embracing Fin-tech and crypto currencies in their operational frameworks. It is not a surprise that today, one can buy real estate with cryptocurrency, so it is high time that financial sector also realizes the need for tech-novation in its system for its betterment and growth.

3 potential threats for financial institutions from holding back from Tech-novation

1. Treating Fintech &Cryptocurrency as a Threat rather than an opportunity

The first and major threat that poises for the traditional financial institutes is its mindset. The traditional financial system believes that allowing innovation to enter its world will bring up bad consequences. The financial system looks at Innovation in general as a threat rather than seeing it as an opportunity to grow, learn and diversify. As discussed earlier, cryptocurrency is being used to buy real estate. Major cities like UK, USA and Dubai have embraced the system of digital currencies and allow property transactions to be performed through them.

On the contrary, the school of thought for traditional financial sector is trying to neutralize FinTech startups and is trying to propose tougher regulations and administration over them to give the already established institutions an edge over these upcoming competitors. Furthermore, the mindset of traditional financial sector revolves around this fear that new things will bring up bad consequences for them. Also, it is happy in performing its repetitive tasks ever day by proposing a sense of difficulty in fitting new technology in to its existing regulatory frameworks. Therefore, seeing innovation as a threat in general is the actual and first major threat for financial institutions from holding back from Tech-novation.

2. Government’s Intervention

As it is a given that the State’s major component is its Government. The Government’s intervention in the progress of Fin-tech and its collaboration with new technological modes of operations is the second major threat in this list. By all means, Government has the right to make regulations and laws for every sector and it is the duty of the people to abide by them. But in doing so, it diminishes its ability to welcome new and emerging concepts that could benefit the whole state overall. As aforementioned, The Government finds it difficult to embrace innovation and technology and incorporate them in its existing system because it is used to the familiarity of the mundane and outdated operational frameworks. The biggest example of the government’s resistance to new technology is its refusal at welcoming crypto currency in its system.

Although this trend is slowly changing. For instance, Governments are seeking help of Fin-Tech institutions to undergo and complete some sustainable and “green” projects that are essential in achieving national and international climate safety goals. This means that crypto currencies will also become a part of the Great Financial System in the next two decades but we still have a long way to go.

Another extension of Government’s Intervention point in this regard is that by setting up regulations and interfering too much in the operations of financial institutions, it instills a fear in the people of their privacy’s destruction. For example, FinCen’s recent proposal regarding virtual and digital currencies allow Banks to gather information not only on the customers, but on their counterparts and all other third parties involved in transactions. This proposal, if accepted, could force away the activity and people’s tilt from financial institutions because naturally, they will look for those systems which guarantee their privacy’s protection.

3. Exceeding and Complex Regulations

The world of technology and innovation is transparent and clear. With regulations, rules and laws, a ton of complexities also accompany the whole package. Therefore, the third potential threat for financial institutions from holding back from Tech-novation is the complexities of their own rules and regulations which will keep growing and getting more complex with time.

The lack of “Regulatory Orbit” around Fin-tech and cryptocurrencies is the main reason for its booming fame and global interest, its framework is easy and quick in its performance. On the contrary, the traditional financial institutions involve a ton of prerequisites, paperwork, legalities and other complex regulations which have to be followed to perform a single transaction. Therefore, the third potential threat for these financial institutions is their own complex rules and regulations which will keep piling up with new rule-books with time.

Conclusion

The recent speech by Hester M. Peirce who is a pro-crypto Commissionaire at US Securities and Exchange Commission referred the traditional legal financial system to her pet shrimps at home which only swim in a sealed and secure environment without knowing anything about the outside world.

The traditional financial system’s lack of ability to accept and embrace Tech-novation in its system is what keeping it from growing and from achieving new heights. It is high time that it realizes its mistake and opens its doors for Fin-tech and cryptocurrencies along with other digital products that come with a promise to make our lives and the whole System simpler, convenient and informed above all.