Cryptocurrency has seen a significant rise in its adoption in the past few years. It should be fair to admit the fact that traditional credit or debit cards have propelled this growth by enabling the masses to get their hands on the digital currency. Few traditional banking services are sceptical about this new form of currency and perceive it as a threat. On the other hand, a few saw the bright side and began adopting the digital ledger technology laying a cornerstone for the new phenomenon called Crypto Banks.
In this short essay, ChangeHero reveals to you how the financial sector is adopting the blockchain technology.
Bitcoin came into existence from a bare idea of eliminating the middlemen and enable peer-to-peer transactions. Blockchain protocol functions as the means of processing these transactions without any intermediaries. The protocol is independent of the Bitcoin and can be used for a major portion of the traditional banking services. Many bright-minds have exploited the blockchain technology and put it to a great purpose busting the misconceptions about the protocol being exclusive for conducting transactions.
A conventional bank offers a wide variety of banking services such as payments, custody, credit cards, loans and many others. Most of them can be achieved on the blockchain via smart contracts, thanks to Ethereum, a trailblazer in the second generation of the digital ledger technology. To keep it simple, Crypto Banks are the institutions that can offer the above-stated services but with the incorporation of the cryptocurrency and with legal clearance from the regulatory bodies in the economies.
The Young Guns
Legislations pose challenges as few governments are dubious about the digital currencies and some even have laws banning the usage of the cryptocurrency. Bitwala is one fine example which has successfully embedded the cryptocurrency into the traditional banking services. The startup claims to offer the world’s first cryptocurrency bank account which includes a traditional bank account, bitcoin wallet, and trading interface on a single platform. The company is licensed by the German government and also offers a Mastercard Debit Card for global spending.
Spot 9 is another interesting project which is analogous to Bitwala and offers an identical set of services but with perks of earning rewards. MyCryptoBank is in works of launching a similar service that combines both the crypto and regular banking services. Two Swiss companies, namely, Sygnum and SEBA are moving in the same path of converging both industries and were recently awarded Swiss banking licenses. The favourable conditions for the crypto might probably have driven Facebook to set up the Libra association in Switzerland.
Vets jumping into the field
A few market leaders in the crypto industry are testing the waters in the blockchain finance. Coinbase Custody, for instance, offers secure cold-storage of the digital assets and are regulated by the New York Department of Financial Services (NYDFS). BitGo is another service offering custodian services but with a diverse selection of coins and tokens. Though these companies pose to be a bank, they cannot be used to make the purchase of goods or pay bills like the traditional ones.
Malta is arguably the most happening place in the crypto world, thanks to the Virtual Financial Assets legislation which makes it the place to go for crypto entrepreneurs. Founders Bank based in Malta which aims to be the world’s first decentralized blockchain bank is set to open its doors to the customers in 2020. It has raised $10 million with Binance being one of its major investors. Likewise, Litecoin Foundation and Token Pay have acquired a cut in the crypto-friendly bank WEG Bank AG which is in works to start processing crypto payments in the year 2020.
Many developed nations recognise the usage of this new technology. A number of traditional banking giants are leaning towards the crypto and adopting it. We have seen an example where a fintech startup Circle acquired cryptocurrency exchange Poloniex way ahead of others in 2018 and interestingly, the startup is backed by the Goldman Sachs. In another scenario, Japanese firm SBI Holdings has launched its cryptocurrency exchange. Conversely, we have witnessed cases like China and India, where the policymakers took a stance against the digital currency. Regardless of the tight regulations and price surges, a number of companies are optimistic and foresee it as a major driver for the future economy.
Sum and substance
It appears that the brick and mortar banking services have been ambivalent to cryptocurrency growth. While some of them were forbidding, the rest were adopting and moving ahead. With many startups picking up the turf in this niche, it would be a stringent task for the traditional banks to dive-in later. Traditional financial services have to up their game in order to stay alive in the future. Either way, this New Economy would be beneficent to the consumers and has the potential to change the way we spend and manage money.
So, what do you guys think about crypto banks? Do you think there would be a day where you can walk-in to a conventional bank and make transactions in crypto? Let us know in the comments.