Cryptobanks in the Global Financial System: the Future is Already Upon us

The crypto industry is entering a new phase in its development. The appearance in Malta of the first decentralized cryptocurrency bank this summer may finally unite the blockchain market with the traditional banking sector, bridging the gap between legacy financial systems and the cryptocurrency economy. This latest step forward is likely to trigger the rise of innovative digital banks around the world.

The news that the owner of the major cryptoexchange Binance, bitcoin billionaire Changpeng Zhao, invested funds in the creation of the world’s first decentralized cryptocurrency bank in Malta was met very warmly by the blockchain community. And why not? Such a massive and important project as this will work in the interests of crypto enthusiasts worldwide, ensuring the globalization of the digital currency industry.

Malta’s cryptobank will be called Founders Bank, reflecting the entire essence of the project: it will operate based on a blockchain-based crowdselling platform, and its clients will simultaneously become its owners through the purchase of tokens. According to initial estimates, the capital of the first decentralized bank will equal $155 million.

It’s no accident that Binance chose Malta for the launch of its project. Favorable legislative regulation and an extremely open-minded policy toward crypto backers immediately places this European country in the global vanguard when it comes to accelerating the development of the blockchain industry. Local authorities make no bones about their desire to turn the country into one of the most crypto-friendly nations on the planet by creating a real “blockchain island.”

Overall, it appears the number of digital banks is likely to steadily increase. Major, promising players are already appearing on the market. For example, the Crypterium project - which I believe represents an absolutely revolutionary solution in the crypto industry - effectively offers a full range of ordinary banking services and solutions, from payments and transfers to currency exchange and lending, all adapted for the needs of the crypto ecosystem. The project was tremendously popular during its ICO, proving its services are in high demand on the market.

In the wake of this successful ICO, the move of the former general director of Visa UK & Ireland, Marc O'Brien, to Crypterium is not surprising in the least. He will direct the development of the project’s mobile application to ensure users can make crypto payments with the same ease as plastic cards, or systems such as Apple Pay, Samsung Pay or Android Pay.

“People want and are already willing to use their cryptocurrency assets in their everyday lives, which is why cryptobanks such as Crypterium have a bright future,” says Keith Teare, Founder of TechCrunch and a Crypterium Advisor. “Considering the advancements being made in digital payments and the growing recognition of cryptocurrencies, it can be said that the market for this product continues to expand. For example, with the launch of the Crypterium app people will be able to pay for goods and services using cryptocurrency just as easily as with credit cards. This service has every chance to become, at the least, the Visa of the digital currency world.”

Another interesting player, Singapore-based cryptobank CrowdBank, is also primed to appear on the market in the near future. It is designed to combine a whole range of services and applications that will bring the blockchain industry even closer to the traditional banking system. For example, it will have an electronic wallet for storage of both fiat and cryptocurrencies, a P2P lending platform that makes it possible to borrow or lend money against collateral or on a person-to-person basis, and its own currency exchange able to connect to any other cryptocurrency exchange. The bank will also be one of the first on the blockchain market to offer 6% annual interest on crypto deposits, which will be completely insured against a fall in prices.

“We are building a global ecosystem that will dovetail various services. So far, most of our competitors only have one or a few working parts of this ecosystem,” states CrowdBank representative Malcolm Tan. “We will link traditional debit cards to our ecosystem, to make them more convenient to use. Our cryptobank also works with ordinary banks, using their licenses to support various transactions and services between the crypto industry and fiat. We are currently in negotiations with several banks on the purchase of their licenses to expand our capabilities.”

The question is whether cryptocurrencies will be recognized not only by cryptobanks, but also as legal tender in the global financial system. This question, among others, was discussed at the CoinAgenda Europe 2018 conference, which concluded a couple of days ago in Malta. Well-known English entrepreneur, investor, business angel, CEO and co-founder of BankToTheFuture Simon Dixon expressed an interesting opinion on the further course of events in a conversation with me. He believes that the central banks of small countries will be the first to start working with cryptocurrencies – a process that poses less risk for them than for the major players on the global market.

“If bitcoin becomes a truly stable currency, the central bank that has the most assets in this cryptocurrency will become a real superpower capable of restraining the largest players, such as the People’s Bank of China, the US Federal Reserve, the Bank of England, and other major central banks,” predicts Dixon. “In this case, the smaller banks will not even worry about the bitcoin price, they will simply try to get their hands on more of it. As a result, the central banks that elected not to work with cryptocurrencies will put themselves behind their competitors in terms of the value of their assets and their financial solvency. The earlier they understand this, the higher the chance that they will succeed with bitcoin.”

Crypto enthusiasts are also anxiously awaiting the appearance of a full-fledged cryptocurrency banking system to unite all global participants in the industry, with the goal of simplifying interactions between digital currency holders and the traditional banking sector.

“I believe that in a few years decentralized banks will be as integral a part of the global financial system as ordinary banks are right now. When that happens, the exchange of cryptocurrencies for fiat and vice versa will only take seconds, and these transactions will take no more effort than an online transfer from card to card today. As a representative of the crypto industry, I can say that we are really, really looking forward to this,” commented Toshiki Tashiro, project manager of the Module blockchain, an innovative blockchain-based platform for the creation of decentralized applications (DApps), which experts are already calling a potential alternative to such reputable market players as Ethereum, EOS, and Stellar.

Sectors from all across the blockchain and crypto spectrum are also anxiously awaiting the appearance of a fully-fledged cryptocurrency banking system to unite all the participants in this industry worldwide and simplify their interactions amongst themselves and with representatives of the traditional banking sector.

“There is a sea change happening in the crypto space, and frankly it’s a positive step for the entire planet,” says Rick Burnett, Founder and CEO of LaneAxis, a blockchain-based freight and logistics management platform which recently launched an ICO to build out its system. “After years of being marginalized or outright dismissed, the crypto and blockchain sectors are finally emerging from the shadows. The rise of crypto-based banking adds much-needed and long overdue legitimacy to the industry. This will undoubtedly fuel rapid development of ambitious blockchain projects such as the one we are building at LaneAxis.”

Just some 30 years ago, Internet was a wildly new phenomenon for most of the world, but now we can hardly imagine our daily lives without it. The same is bound to happen to cryptocurrencies: it is futile to try to stop the march of technological progress. The market is moving headlong in the direction of blockchain technology, which is making people's lives more convenient and connected. It would appear that cryptobanks have a central role to play in this brave new world.