‘Crypto banks?’, who would have thought of that a decade ago. When crypto came first to the surface in 2008, only a few individuals understood it well. There were no rules in the crypto world. Many people suffered and lost trust in crypto in the initial stages.
However, after some hard lessons, the crypto community is now incorporating regulations. It is a need of time as the mainstreaming of crypto is impossible without the integration of traditional financial institutes. The first massive leap in this direction was the United States giving approval of crypto custody to federally chartered banks. Crypto banks are the second big move.
You walk into a bank for leveraging financial services. The bank offers you investments, credit, and saving account options not only for fiat assets but also for crypto. Sounds far-fetched right? Well, not actually so. It is a matter of a few years only before crypto assets become a necessity for banking services.
In September, Kraken became the pioneer cryptocurrency exchange to charter a bank in the United States. Previously, Kraken was only a cryptocurrency operating in Wyoming. Nonetheless, with this move, it will become an epitome of success for all other crypto businesses. Now Kraken will offer additional funding and banking recourses to customers. Besides, there will be no need to comply with state laws when operating in different jurisdictions.
Silvergate bank is another leading company offering cryptocurrency options. It boasts innovation in fintech. Currently, Silvergate has 880 digital asset companies utilizing its services. Those companies have deposited close to 1.5 billion dollars in the bank. Kraken has also partnered with Silvergate to offer FedWire and SWIFT services to customers. So, there is a symbiotic relationship promoting fintech.
What to Expect?
There is a conundrum here. If the future holds the promise of crypto banks then what about defi? Essentially, defi is a vital aspect of the cryptocurrency world. It possesses a lot of potential. However, for average customers, banks are a place for sorting out financial matters. Therefore, defi might present competition in decades to come. For now, the survival fight is between crypto banks and non-crypto banks.
The fusion of the fintech industry and the crypto industry is something surprising and delightful. It makes it possible for consumers to enjoy all the services under the roof of banks. Hence, there is a positive change over the horizon. Nevertheless, banks that are still lagging in the adoption of crypto will see their customer base reduce sharply within the next five years. The change in the financial landscape has to be embraced and not turned down.
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A monetary economist John Paul Koning wrote on twitter on Sep 17th,
Go far enough down the bitcoin rabbit hole and you’ll tumble out the other side as a state-chartered bank with direct access to the Fed.
This perfectly describes the journey of cryptocurrency. People have had multiple misconceptions about bitcoin and crypto. Nonetheless, crypto has stood the test of time. Both governments and individuals are coming to terms with considering crypto as a legitimate form of asset. Hence, crypto banks are essentially a step in the right direction.