Portugal was once considered a haven for crypto exchanges due to the banks not imposing capital gains tax on crypto-related earnings. But this is no longer the case as of earlier this year. So as they try to take their hands off some crypto-related services citing “risk” as the main reason, we start to think how exactly traditional finance and cryptocurrency can coexist harmoniously.
The birth and purpose of cryptocurrency itself is an attack on the current and traditional financial systems in our society. Cryptocurrency is meant to be an unregulated and flexible method of payment. It offers an escape from the layers of fees and taxes that usually come with standard bank transactions.
For the majority of people that are still in the cloud of confusion regarding the whole concept of cryptocurrency, it is hard to imagine the exchange of value using the digital currency without grounding it in the physical money that we are used to. However, for those with adventurous spirits, easy access to cryptocurrency by connecting it to our current banks does give that extra push to finally dive into the digital money world. Furthermore, since cryptocurrency is, in essence, digital, we see the rise of applications, digital banks, and other services that make the transition from physical money to cryptocurrency easier.
However, cryptocurrency is decentralized, flexible, and unregulated. This is the perfect recipe for what people call a “risky investment,” something the banks are usually wary of. Innovations of this magnitude will come with their own set of scams, security issues, and the potential for fraud. Especially nowadays, involvement in cryptocurrency has become a status symbol, and prominent icons and celebrities hold some influence on the crypto trend. An example of this is Elon Musk and his tweets promoting cryptocurrencies like Bitcoin and Dogecoin.
Along with the hard effort of understanding what exactly crypto is and how its value is decided, we must never forget that to be involved in it, one would have to invest real money into it first. This must be the position where the banks draw the line. Current dips and turmoil in the cryptocurrency world are not necessarily a good thing for fiat currencies. It is not an either-or situation. As much as we continue to exchange and create value in the digital landscape, the real value will still always be grounded on concrete objects. We can buy all the digital art and invest in all the newest and most promising cryptocurrencies, but at the end of the day, in the most basic forms of transaction, cryptocurrency still cannot stand on its own yet.
Much like the footsteps taken by Portuguese banks, it would be better for both those in the cryptocurrency world and traditional banking to come up with fair regulations for crypto investors. There must first be fairness and transparency for more people to adopt innovation. If the goal is to promote the use of cryptocurrency, then fiat currency is not a rival but, instead, an ally.