Definition ∞ A banking system comprises institutions and regulations facilitating financial transactions, credit provision, and asset management. It represents the established infrastructure for monetary exchange, savings, and lending within an economy. This system typically operates under centralized control, involving intermediaries that verify transactions and maintain ledgers. Its primary functions include deposit taking, payment processing, and capital allocation for individuals and businesses.
Context ∞ The traditional banking system faces ongoing challenges and comparisons with decentralized finance (DeFi) ecosystems. Debates often address the efficiency, accessibility, and transparency disparities between centralized financial services and blockchain-based alternatives. A critical future development involves how existing regulatory frameworks will adapt to or integrate with digital assets, potentially leading to new hybrid financial models or intensified competition.
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