I think the a lot of the dream from there is to make it possible to electronically transfer cash. This is currently impossible with conventional money -- the best we can do is transfer deposit records electronically. To make this work we treat deposit records as surrogate cash, and take on a huge amount of systemic risk into the monetary system, which we basically backstop with unlimited government guarantees.
With Bitcoin, at least in theory, we can offer an alternative system. That's not to say that a system can't arise of banks that hold bitcoin deposits and allow you to transfer these deposit record between banks, but the banks need to price in the risk of failure to meet their obligations, so hopefully we can have some mechanism of discounting bank-deposit-bitcoin vs. held-in-wallet-bitcoin. But I think this dream is dying -- there will come a day when you can only buy something with bitcoin, but only with bitcoin deposited in a bank, because it's "easier" and can be unwound, etc., because of correspondence arrangements, and then you'll have the Federal Reserve, that can basically artificially create new "bitcoin deposits", and banks will only let you withdraw 0.01BTC per week, so you'll never notice that they are insolvent, and we'll basically be right back where we started.
On a systemic basis it is slightly more dangerous than cash just because it reinforces the notion that bank deposits are valued at their face value and are thus a cash equivalent. But banks can fail or become insolvent, and because the money sovereign has decided that bank deposits are equivalent to cash, it is obligated to maintain that (through bailouts or other support), while at the same time banks are for-profit enterprises that are taking non-negligible risks (and sometimes explosively tail-heavy risks) to earn income based on their deposits.
Crypto is an asset class that has cultivated a tremendous amount of interest over the years. Banks want to support crypto in the same way they do other asset classes, but doing so is a minefield.
Offering regulatory clarity here is a good thing. This is not an attack on crypto, nor is it about control. Regulators are just providing a framework to allow banks to work with / hold crypto.
Even darkweb markets have turned to escrow services.
Also, the risks associated with physically holding substantial wealth in bitcoin cannot be ignored. It's just like storing lots of cash at home. We should have the option to store it at a bank if we want to.
You can outsource to an exchange/bank but that gives you an IOU only, and not Bitcoin. The IOU is permissioned, censored, and prone to seizure.
There's a secondary market in "offshore accounts for everyone", via the shadow-banking stablecoins like Tether.
Wealthy, envious of seeing their assets outcompeted by crypto are now hoping banks can allow them to further privatize the gains while socializing the losses.
One of the biggest problems that crypto hasn't figured that banking is great at is transaction reversal and fraud-prevention. The banking system uses wire transfers that can be reversed if necessary, bitcoin has nothing like this. If an attacker gets your bitcoin wallet ID and key, say goodbye to your coin. That's it, you have no recourse, and frankly, placing all of the responsibility on consumers to safeguard their digital assets without any sort of recourse is pretty ridiculous.
The crypto community loves to talk a bunch of trash about financial regulation, and some of it is true, but a fair amount of regulation actually benefits consumers in ways that crypto just isn't capable of at this time.
My point is that the speed and cheapness a crypto system comes at a pretty significant risk.
Another major benefit to the banking system is that all solid banks are insured by the FDIC, meaning that if the bank fails, the FDIC guarantees all accounts held by the bank for up to $250k. In order to do this, banks have to meet capital liquidity requirements set out by auditors and meet certain benchmarks. Again, another thing that doesn't exist in crypto but should.
When everything goes smoothly, crypto works great. But if the day ever comes that a big company like Coinbase gets hacked and crypto is exfiltrated, it'll be a real test for the community because these are problems that have been solved for decades.
> In addition crypto exchanges and services have proven pretty reliable.
Look at the mt gox hack, millions upon millions in crypto was stolen in that hack, and there was no recourse for any of those folks. Who knows what is going to happen with Tether? You don't have look that hard to find the kind of financial criminality banking is so often accused of persisting in the crypto community as well.
You want reversibility and fraud prevention? Use an intermediary.
You want irrevocable finality and no intermediaries? You can do that too.
You're free to choose, nobody is forcing you to use one or the other.
MT Gox was the biggest exchange in the world when it was hacked in 2014 and billions in bitcoin was stolen, it's account holders were totally left to dry. The freedom of choice is nonsense in an immutable, decentralized system where stuff like this can happen. If someone gets your private key from you directly or through a hosted exchange, that's it.
[1] https://www.commonfund.org/blog/is-currency-an-asset-class#:....
Currencies are universally listed at the top of any balance sheet, small or large company alike.
2) Banks need Bitcoin though, because long-term everything else is going towards zero in Bitcoin terms.
This would only affect you if operating an exchange on behalf of somebody (eg Coinbase)
Various world governments have been taking potshots at crypto currencies. It’s pretty obvious they can’t control them, so instead they try to undermine them, but thanks to their own incompetence they actually make crypto more attractive (and intractable) in the process.