Whats the biggest threat to crypto?

2 min readOct 31, 2018

Its not scalability, or decentralization of Asic chips, or price volatility. Its traditional financial institutions and regulation.

In modern economies, almost all money is stored with banks. Banks make a spread for providing this service. They lend out your deposits for a rate greater than the rate they pay out to you. For this fee they secure your money. This wasn’t a terrible deal (until now).

Cryptocurrencies allow you to store and transfer your money for free*. This is a serious threat to banks as they face disintermediation (getting rid of the middle man) and consequently extinction. Its not in the banks interest to allow you to freely move your money from banks to blockchains. So they try to create frictions by -

  1. Banning users who transact too much with crypto exchanges (wells fargo shut down my account because I had a weekly transfer to coinbase)
  2. Preventing credit card operations with crypto currencies

They are able to do both of the above under the false pretense of regulation compliance (KYC/AML).

The fastest route for crypto adoption is for crypto startups to reduce frictions between moving money from traditional finance to blockchain finance. Basically we need crypto friendly banks all over the world that allow transfers between crypto and traditional currencies. If this happens, crosscurrency payments will become frictionless (free!). Business payments will be almost free. Reminder — Paypal (traditional finance) charges 3% for business payments.

This is a much more severe problem in emerging countries where central banks have outlawed crypto. Thus providing a monopoly to banks and preserving central bank control over capital (your capital if you live there).

*Yes BTC/ETH transaction fees are high today, but that’s a engineering problem that will be solved over the next few years. Just as the scalability problem will be solved in the near term.




Coder and Ex-hedgefund manager. I write about finance, crypto, etc.