Can Bitcoin Replace Banks? Exploring the Financial Accessibility, Security and Economic Stability

Ever since crypto came to the scene more than a decade ago, phrases like ‘be your own bank’ have not ceased to be popular.

Ever since crypto came to the scene more than a decade ago, phrases like ‘be your own bank’ have not ceased to be popular. The idea is that, with crypto, you have more control over your financial future than traditional finance. Of course, one of the reasons many people have been turning to Bitcoin is its decentralized framework.

This is why the currency’s price has actually been increasing. In fact, according to a recent BTC price chart, its value has seen exponential growth, hitting highs of more than $87,000, up from $1 more than a decade ago. Even though this is a significant decline from its value a few months ago, the question of whether it could fully replace banks continues to soar. Let’s try to answer it by exploring the following key areas.

Everyone can agree that financial inclusion is critical in the furtherance of any economy. In fact, according to the World Bank, it could help attain seven of the global sustainable development goals.

But as it is now, FinDev Gateway thinks that only 76% of the world can access official financial accounts. While this is a significant improvement, there is still a notable percentage of the world that’s excluded financially.

And at a time when discussions around this subject are increasing, nations could turn to Bitcoin to stay ahead. Since it operates on a decentralized network, anyone can send and receive funds without the help of an intermediary.

This could be the reason certain traditional institutions are becoming crypto-friendly. JPMorgan, for example, just rebranded its blockchain with plans to expand and tokenize it. It’s also expected to adopt on-chain foreign exchange conversions this year (2025).

By eliminating intermediaries, Bitcoin reduces transaction costs, which makes it more appealing to businesses grappling with rising operational expenses. This approach also ensures payments are processed quickly. Surprisingly, 64% of companies are already experiencing challenges with delayed payments, which may cause up to 80% of potential discounts to go unclaimed.

However, Bitcoin’s volatility poses a challenge. A single transaction could dramatically fluctuate in value within minutes, making it less reliable for everyday purchases. Plus, not all merchants accept Bitcoin, limiting its practical use compared to a standard bank account. While stablecoins (cryptocurrencies pegged to traditional currencies) offer a solution, they still rely on existing financial institutions for stability.

At a time when cybersecurity has become a hot topic, the need to ensure the safety of transactions has become very apparent. And you would rather not imagine that about 39% of financial institutions that encountered ransomware incidents spend about $1 million.

Worse still, you might need at least $5.9 million to recover from a data breach in this industry. This means that a technology that promises to improve security is always welcome, giving Bitcoin the advantage.

It uses a much stronger hash algorithm, SHA-256, to encrypt data and prevent unauthorized access. To decrypt the data, you’ll not just need many computational resources—you’ll also need the specific key used to encode the data. Such an arrangement may help to reduce hacking consequences.

Despite these advantages, Bitcoin still lacks certain features. Remember, traditional banks have consumer protections and insurance on deposits so that if your account is compromised, you can have legal recourse and assistance in recovering lost funds. On the contrary, Bitcoin operates under a self-sovereign control mechanism. You manage your funds through private keys, which may be empowering but risky at the same time.

When you lose a private key, you won’t be able to access your Bitcoin permanently. And unfortunately, there’s never a central authority to help you recover it. Interestingly, such an arrangement is not uncommon in the crypto industry.

A recent Chainalysis report noted that about 20% of the existing 18.5 million bitcoins were lost or stuck in accounts that could not be retrieved. Plus, despite Bitcoin being more secure, it has also experienced attacks in the past, causing several people to change their thoughts regarding it.

For Bitcoin to replace banks, it must also replace fiat currency—something it hasn’t fully achieved yet. Central banks manage economic policies such as interest rates and money supply, which help stabilize economies. Without such mechanisms, Bitcoin’s fixed supply could lead to deflationary spirals, making it difficult to function as a primary currency.

Don’t also forget that governments depend on fiat currency to collect taxes, fund public projects, and manage monetary policy. So, for this token to replace banks fully, governments would need to find alternative financial structures.

However, the legislation has not stopped some countries from trying these crypto-based features. For example, at the end of last year, the UK parliament introduced a new bill that considers Bitcoin and other digital assets as personal property. If it is passed, asset owners will enjoy more legal protection.

Well, based on this discussion, Bitcoin offers some important benefits that may make it a financial alternative in the coming