A recent meeting within the Federal Reserve took place to establish new Volcker rules that banks need to adhere to. However, Weiss Cryptocurrency Ratings suggested that these new changes are indicative of the inescapability of cryptocurrency taking over the banking system of as a safer option.

The Volcker Rule is a part of legislation that are included under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which were written after the financial crisis of the U.S. in 2008. The biggest issue in the crisis was due to large corporations being irresponsible and sometimes criminal in their management of profits. Taxpayer money was used to get them out of their rut, and the Dodd-Frank Act helps the government to discipline the companies accordingly.

The Volcker Rule wasn’t added until much later, but it kept companies from getting into investments that would use their customers’ money for personal gain. On May 30th, the Federal Reserve plans to reconvene, where members want to change the rule to keep banks from using funds used for deposit insurance to get involved in dangerous markets.

Weiss Ratings doesn’t see this change as a positive move, saying that the actions towards banks could end up directing consumers to join the cryptocurrency world. In their words:

“U.S. banking regulators are getting ready to water down the Volcker rule.” In a blog post, they continued on to say, “They want to make it easier for megabanks to take big risks with other people’s money – our money. They want to give banks the green light to trade more of the same kinds of assets that helped cause the 2008 debt crisis.”

The fear that they express is over the fact that this is just another way that the financial industry hasn’t learned from the mistakes of the past. Most people take the time to put their money into banks because they believe that their money is safer in one central place to store it.

In reality, there’s a great risk involved, because there could easily be unsavory business practices taking place that essentially gambles with the money that is rightfully the customers. While the western hemisphere puts a lot of trust in their banks, even Third World countries avoid banks entirely, since there’s no hiding of how poorly banks manage their accounts.

Cryptocurrency is seeming increasingly safe, because of pricing and security. Most platforms express the importance of transparency and how straightforward the blockchain is, and banks have many struggles to face before they can offer the same. According to Martin D. Weiss, from Weiss Ratings:

“Unless they adapt to the cryptocurrency revolution, it’s hard to imagine a world in which banks in their current form retain custody of people’s assets. And it’s easy to imagine one in which crypto platforms disrupt banks like Uber or Lyft disrupt taxis.”

Not everyone believes that cryptocurrency is more secure. In a speech with other financial leaders from the governor of Banco de España, Luis María Linde, he said:

“In my opinion, their current use presents more risks than benefits: they have low acceptance as a means of payment, suffer extreme volatility, present multiple operational vulnerabilities, and have been related to fraudulent or illicit activities in many cases.” He sees the growing and helpful technology of the blockchain, but he calls the tokens “spurious novelties that do not provide significant improvements and that should be tackled as soon as possible.”

After the economy in the United States went through their housing bubble, banks took major losses, and the Weiss Ratings team believes that cryptocurrencies are still the answer. In a joint statement between the leaders of Weiss, they said:

“There was, and still is, an over-reliance on megabanks – not only as depository institutions and custodians, but also as a major source of liquidity for global and capital markets:”

They continued on with a solution, which they suggest should be cryptocurrencies to preserve savings:

“Cryptocurrencies do such a fundamentally better job as a safe depository, it’s difficult to envision a world in which this technology does not become a game-changer for money and banking.”

In recent research, the millennial generation supports this opinion, since 65% of them actually find Bitcoin to be a safer option than a savings account that is controlled by a bank.

Unfortunately, most banks are very confused by the Volcker Rule as a whole, so the meeting on May 30th should be a rewrite to be clearer for consumers and the banking industry alike. Unfortunately, it is highly unlikely that a repeal or partial repeal of the rule will occur, despite the desires of regulators.

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