Negative rates are becoming exceedingly popular among central and local banks around the world, and the trend extends in Germany with the start of 2020. Amid this, Bitcoin’s pre-programmed inflation rate raises the question if it could serve as a full-on alternative.
Simply put, having negative rates means that instead of receiving interest income on cash deposits, the banking institutions charge a fee for storing the money. The general idea is to incentivize banks to lend more funds freely, which ultimately should benefit the local (or global) financial situation. However, many people believe that this is an act of desperation that will hurt the economy in the long run.
One person that supports this idea is the former CEO of the two largest banks in Switzerland, Oswald Gruebel. He criticized the introduction of negative rates in his home country, saying that “money is not worth anything anymore.”
Another example came just a few days ago from the JP Morgan Chase CEO, Jamie Dimon. Speaking at the World Economic Forum in Davos, he noted that his main concern about the current market situation is the growing acceptance of negative interest rates.
Negative Rates In Germany 2020
Germany, the world’s 4th most powerful economy by GDP, maintains the negative rates trend this year as well. According to information compiled by Verivox Financial Comparison, at least 16 new institutions have introduced such rates since the start of 2020.
The report indicates that this would affect only new customers. As far as already existing clients go, the banks would have to request their permission individually. This raises a legitimate question – who would agree to start paying fees for storing his funds?
CSU finance politician, Hans Michelbach, predicts that negative rates will keep expanding, saying that “the spiral will continue to turn.” Moreover, he believes that it will hurt people’s confidence in the traditional banking system.
Banks have been the most trusted and utilized financial service establishments for many years. Yet, it’s worth noting that there hasn’t been a real alternative. As people’s belief in the current system may be fading with the continuous introduction of negative rates, Bitcoin emerges as a viable alternative.
The largest cryptocurrency is uniquely pre-programmed to have a preset inflation rate. Currently, it’s around 3.6%, but in just a few short months, it will go down to 1.8% after an event called Bitcoin Halving. The protocol can’t be tampered with, hence why no central authority can control the inflation rate.
Other significant advantages are worth pointing out, as well. For starters, last year, the Bank of America closed the bank account of Ex-PayPal CFO after twenty years of being a customer. Most banks have a fine print in their Terms of Service, where it says that they can shut down an account without any explanations, which is precisely what happened.
This can’t happen with Bitcoin. Its distributed nature means that there’s no central point of authority, which draws another serious benefit – censorship resistance. In other words, anyone can use Bitcoin’s network, and no one can have a say about it, regardless of wealth, ethnic, political, or whatever else status there is.
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Source: Crypto Potato