Today, let’s talk about crypto bank on our blog.
New technologies are rushing forward, everybody is discussing how cryptocurrencies could replace standard fiat governmental currencies. Yet they still lack many features that are quite necessary to become a real alternative to an existing monetary system. One of these features is banking system. What we need are dedicated crypto banks.
Assessing the situation
Despite being a very dangerous institution, that has too much money and a strong desire to earn even more being the cause of the last global financial crisis of 2008, banks are the necessary evil. They serve as an intermediary layer between central banks and citizens or organizations, they store money, they give loans to people, they process payments, including the smallest ones, when you buy a gum stick in the local mall, and the biggest ones, when Facebook buys Instagram. If you close all banks today, it could crush the society. I don’t think we can use furs or gold bars, like in old times. Or pay to a carpenter with bread, if you are a baker. That’s not possible today. But instead, we could use cryptocurrencies, in theory. In practice, we can’t. Let’s see what features crypto must have to be a substitute for standard money.
What we have now
Now, all we have is a volatile market. Hundreds of projects, hundreds of coins and tokens, aiming to become a new world’s currency. Some coins already have a market dominance, like bitcoin, some are forgotten already, like many other coins will be. But only a few have a real use. The most important use of money is paying, right? Nowadays you can pay with bitcoin in some stores in some countries and some online stores worldwide. You can pay with bitcoin in many places in Japan.
Retailers don’t want any crypto
But most retailers don’t want to accept any crypto because 10,000 dollars you accept today from a customer can become 3000 dollars tomorrow. That’s not a good business model. We have no infrastructure to make the revolution happen. So we can definitely say that the two biggest problems are volatility and lack of usability and these two problems are directly connected. Volatility is great for traders and speculators. But it’s not great for everyday users. But there’s a lot of solutions.
Crypto banks as Solution to problems
What must be done to solve the problem and make cryptocurrencies useful for ordinary people? To solve problem number one, there should be a stable coin. This coin should not change its price and be the standard, being backed by some real assets. Dollars, gold, platinum, or some real estate, it doesn’t matter. Its fluctuations should not be higher than 5%. We see Tether USDT as a stable coin, but the assets behind it are still in question because there’s no confidence they have that much money on their accounts.
There’s also Maker project with Dai tokens that are also pinned to USD but aren’t so popular. The Digix project sells the tokens that are equal to gold bars. But this project also lacks market adoption. Why pin the price to fiat if you want to replace fiat system? The truth is you can’t replace it completely, you can only modify it, and there must be a transitional period. Hence there must be a standard.
The lack of adoption
The second problem is the lack of adoption. To accept crypto, retailers must be connected to a processing company, that performs all underlying operations before the seller gets money on his account. And the thing is, this account can be opened in the usual bank or can be opened in the crypto bank. We don’t wanna talk about big banks here because we want to tell you more about crypto banks.
The way you store money
Crypto banks aren’t different from ordinary banks aside from the fact that they let you use both fiat currencies and cryptocurrencies. A good crypto bank must have such features as:
1. The possibility to pay with fiat money, converting it from crypto
2. The possibility to pay with crypto money, converting it from fiat
3. The possibility to pay with crypto money
4. The possibility to pay with fiat money
Four options. In the same time, all conversions must be seamless. A customer shouldn’t worry about the process, just open his wallet, withdraw a card and pay with it.
Crypto bank and credit card
In addition, don’t forget that all banks offer credit cards to their customers. There’s a high demand for credits in the world, so crypto should be able to offer the same options and services if it wants to replace or get some market share of fiat money. And keep in mind that loans must be lent in stable coins, otherwise you can imagine the consequences of taking a loan in bitcoins that cost 10k dollars, and if bitcoin price rises twice you owe twice the money you’ve taken or 20k dollars.
The absence of Crypto banks
What crypto banks do we know? So far, there are no such banks yet. But we know something about very promising projects. One project that seems interesting to us is Cryptoforce. Cryptoforce has a solid roadmap, that includes issuing crypto cards, that let customers pay with any currency they want, installing ATMs, and then by 2019 building a crypto bank that would solve many problems that we were talking about in this article. Does this model have a future? Of course.
There’s no doubt that cryptocurrencies will have a strong influence on the world economy, and will change the way how many companies work. Financial institutions aren’t an exception. So the projects that build a foundation right now, will thrive later. And if you do your research Cryptoforce looks like a good foundation for a bank. Right now they are in the process of crowdfunding the project. It’s not an encouragement to invest, of course, it’s not. But if you had the opportunity to become one of the first stock owners of JP Morgan, knowing where they are, would you refuse?