The REAL Reason Big Banks Are Scared of Crypto

Big banks and financial institutions are freaking out about crypto — and for good reason.

That’s because crypto has the power to change everything about how we interact financially. Most importantly, crypto cuts out the middleman, leaving the big guys with less money in their pockets.

But one of crypto’s biggest shake-ups of all is happening right now in the world's biggest market: foreign exchange (forex).

Are you paying attention?

$7.5 Trillion USD Per Day! What Is Forex?

The forex market (short for the foreign exchange market) is the global over-the-counter market for trading currencies. That makes it the largest financial market in the world, with a reported daily turnover of over $7.51 trillion USD back in 2022.

It operates 24 hours a day, five days a week, and facilitates the exchange of different currencies — determining their relative values in the process.

Key players in the forex market include central banks, commercial banks, other institutional investors like hedge funds, multinational corporations, and retail traders.

These participants are involved in forex trading for purposes ranging from hedging currency risk, speculative profit-making, facilitating international trade and investment, and trying to influence exchange rates through monetary policy.

How Do Banks Make Money in Forex Markets?

In the forex market, large banks and institutions often act as intermediaries or "middlemen" between buyers and sellers of currencies.

They facilitate forex transactions for a wide range of clients, including other financial institutions, corporations, governments, and retail traders.

Here's how it works:

1. Big banks play a crucial role in keeping the forex market running smoothly by acting as market makers. They set the buying and selling prices for currency pairs and are always ready to trade with clients and other traders.
2. Banks and financial institutions serve as liquidity providers. Thanks to the massive volume of their transactions, they guarantee there's almost always someone on the other side to complete a trade.
3. Finally, banks and financial institutions also serve as brokers for both retail and institutional clients. In exchange, they collect revenue in the form of both fees and commissions.

In this system, billions of dollars is going directly into the pockets of middlemen. But what if there were a way to give that back to the people?

That’s where crypto comes in.

How Crypto Is Cutting Out the Middlemen

Blockchain protocols and the decentralized finance (DeFi) applications built on top of them have the ability to remove the need for middlemen from these types of global trades.

For example, the DeFi industry is home to automated market makers (AMMs), which replace the banks and financial institutions that are otherwise needed to complete forex trades.

These AMMs typically have predetermined — and modest — fees for liquidity providing. Best of all, they usually have no barrier to entry for participation, so they can be leveraged by virtually any crypto user.

Blockchains and DeFi also let you keep custody of your own money.

Rather than relying on brokers, as is the case in the traditional retail market, DeFi promotes direct ownership. Here, it’s the users themselves who have direct access over how their money is used.

Sorry Guys, Crypto Can't Be Stopped

With everything that DeFi and crypto has to offer everyday people, it's the big banks and institutions that have a lot to lose. If crypto succeeds in cutting them out of the process, even a little, it means middlemen will take a hit to their giant cash cow.

That’s why these institutions are so eager to stop crypto, through practices like lawfare and censorship.

But for all their efforts, they’ve only managed to delay the inevitable. The truth is that DeFi is here right now, and more and more people are catching on and choosing to cut out the middlemen for good.