Decentralized and traditional finance tried to destroy each other but failed

The year 2022 is here, and banks and the traditional banking system are still alive despite decades of threatening predictions made by cryptocurrency enthusiasts. The only ending that happened: a new Ethereum 2.0 Roadmap that Vitalik Buterin published at the end of last year.

Although with this roadmap, the cryptocurrency industry would change for the better, 2021 showed us that cryptocurrencies did not destroy or harm central banks just like traditional banking did not kill cryptocurrencies. Why?

To be fair, the fight between the two was equally brutal on both sides. Many cryptocurrency enthusiasts were screaming about the coming apocalypse of the world's financial systems and described a bright crypto future ahead where every item could be bought with Bitcoin (BTC). On the other hand, bankers were quick to defend the traditional role of the banking system, accusing blockchain technology of poor performance and lack of compliance.

Both sides were wrong in their predictions.

game equality

Fortunately, neither crypto nor traditional banking was destroyed, although they wished to be. For one thing, none of the major crypto projects have steered clear of closer integration with banks. The United States-based cryptocurrency exchange Kraken received a banking license and the Coinbase IPO Process speaks for itself as it is a 100% game, according to the rules of the banking/financial system. Most of the major projects use the services of only a few banks: Signature, SilverGate, Bank Frick, which concentrate settlement and impose banking principles of working with crypto.

On the other hand, the banking community created internal ecosystems for crypto projects. Visa introduces crypto advisory services to help partners navigate the world of cryptocurrencies. Amazon Web Services (AWS) wants “to be the AWS of cryptocurrencies”. Swiss proposes banking services to work with cryptography. SolarisBank even offers an API for crypto projects. The largest US banks and exchanges are launching crypto-related services. In El Salvador, Bitcoin is recognized as a means of payment, which (theoretically) implies the need for international financial organizations to be prepared for settlements in Bitcoin with El Salvador.

Related: What is really behind El Salvador's 'Bitcoin Law'? The experts answer

What stopped cryptocurrencies from destroying banks?

Humanity. Throughout all of human history, many new technologies could not be immune from being controlled by state authorities directly or indirectly through corporations. Radio, television, internet, social networks, all started with the idea of ​​free dissemination of information and finally ran into the fact of total control. The same story is happening now with blockchain, and there is no chance that it will change in the future.

For the most part, people try to exaggerate the risks and reduce the probability of a good outcome. In my opinion, that is the reason that has severely limited and continues to limit the acceptance of cryptocurrencies by people. But, as I said, this way of thinking is part of human nature.

Still, why does centralization beat decentralization? It took some time for the world government to understand that blockchain technology could be not only a problem, but a powerful tool to achieve political interests. So the blockchain, originally designed as a powerful tool of freedom, received a complete reverse implementation, becoming a tool for money control to an extent previously unthinkable. Like nuclear technology, humans use it for both peaceful and military purposes; the blockchain has two sides of good and evil.

Related: Decentralization versus centralization: Where is the future? The experts answer

Although not a loss

At first glance, the crypto had to take a step back from the initial “hawks” positions. In return, it received wide recognition, distribution, and a considerable number of users around the world; it seems to be a just reward and a victory over those who predicted imminent demise.

I think the significant growth of related regtech technologies, designed to speed up compliance processes and all possible controls, has led to crypto acceptance by traditional finance. These projects with the solutions to perform Know Your Customer (KYC) / Anti-Money Laundering (AML) showed a cryptographic response to banks: companies like Chainalysis, Onfido can build KYC operations more efficiently while maintaining the total legality of the processes .

Related: Banks vs. DeFi battle is a win for individual crypto investors

The newly created startups could not go down the path of low-efficiency compliance in banks, which is a break in almost any process. Still, to conduct business in a legitimate field, they complied on their own, but more efficiently.

But will CBDCs destroy cryptocurrencies? We should stop talking about the destruction of anything and think about future potentials. Central Bank Digital Currencies (CBDCs) have unresolved issues, particularly interoperability issues. With the incompatibility of CBDCs issued in different countries, the ability to convert between them, and the slow pace of many government-related processes, we will not be able to speak of a quick fix.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.

The views, thoughts, and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.