Cryptocurrencies captured the interest of investors and tech-savvy people all across the globe a while ago. The crypto business has crossed the one trillion USD market cap in 2021 and reached an all-time high of more over three trillion USD in the same year, owing to its tremendous expansion. With rules in place, banks are becoming more interested in using cryptocurrencies in their product offerings.
Services Provided by Crypto Banks:
For years, banks have been hesitant to embrace cryptocurrencies in their offerings, but there are now a variety of choices available. The financial industry has progressed from prohibiting crypto-related user transactions to embracing cryptocurrency exchanges, keeping digital assets for its customers, and many more.
Crypto Banks vs. Cryptocurrency Exchanges:
Previously, anyone interested in cryptocurrencies could either buy them on cryptocurrency exchanges or mine them using computer hardware. Because mining hardware is prohibitively expensive for most people, buying cryptocurrency with debit and credit cards was the only option unless your bank expressly prohibited you from using them for crypto transactions.
But nowadays, most banks do not prohibit such transactions, and many have even streamlined the process of integrating supported exchanges and banking services. Direct ways for acquiring large cryptocurrencies such as Bitcoin and Ether are also available at modern institutions. Fintech firms have also enabled banks to include cryptocurrency exchange services in their offerings, albeit with a more restricted variety of coins and tokens than specialist exchanges.
Loans Backed by Cryptocurrency:
Because of the popularity of cryptocurrencies, several banks have begun to issue crypto-backed loans. Some major US banks, including Goldman Sachs, are exploring Bitcoin-backed institutional loans. These work in the same way as any other sort of loan, with the digital asset serving as security, just like a car or house would in a car loan or mortgage.
With the crypto business now worth billions of dollars, it stands to reason that banks with other income streams and FDIC-insured deposits would be willing to make bitcoin-backed loans. This technology provides several benefits to banks. Because cryptocurrencies operate on a worldwide scale, users may locate lenders wherever they are supported.
The national average interest rate for fiat currency savings accounts in the United States is 0.06 percent. Some financial institutions provide roughly a 10% savings rate on BTC or ETH. These are not FDIC-insured accounts and should be treated as investments rather than savings accounts. You will increase the quantity of cryptocurrency you own, and if you feel it will retain or improve in value, it is a terrific method to diversify your crypto portfolio.
Advantages of Cryptocurrency Transactions:
No matter where the intended receiver is located, cryptocurrency transactions have cheap costs and are practically immediate. International money transfers have become significantly more economical and simple as a result of technological advancements. According to the Office of the Comptroller of the Currency (OCC), public blockchains and stable coins can assist accelerate transaction and payment operations. The technology provides several advantages for clearinghouses in terms of transaction processing.
Smart contracts are self-executing programmes that may be utilized when two parties sign into an agreement and are placed on a public blockchain. Banks might strengthen confidence by acting as a third party and providing smart contracts for loans, mortgages, lines of credit, and any other financial agreement.
Bank’s Reluctance to Adopt Cryptocurrency:
Despite the obvious benefits, there are a number of reasons why cryptocurrency consumers are hesitant to use the services of crypto banks and for banks to offer goods related to this technology.
Cryptocurrencies are intended to be decentralized and to function independently of a single financial organization. They were developed as an alternative to the traditional banking system, which contributed to the 2007-2008 global financial crisis.
When cryptocurrencies are utilized through regular financial institutions, like as banks, their primary benefit is gone. That is one of the reasons banks are hesitant to enter the market in a greater scale. Furthermore, central banks regard cryptocurrencies as a threat to their power to manage the money supply.
Cryptocurrencies are either completely or partially anonymous. Peer-to-peer transactions are recorded on the public ledger, but they are not associated with a specific person, but rather with a public wallet address. This raises a problem for banks who believe such transactions would be difficult to control and trace, especially since banks must comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements.
Banks must change to stay up with the developments. This entails adopting crypto technology and figuring out how to incorporate it into their offering so that consumers may enjoy the best of both worlds: traditional and crypto banking. Banks that have already begun to use cryptocurrencies cater to investors who are unfamiliar with the technology and its fundamentals. They assist their clients in investing and securing digital assets by holding custody of the crypto wallet, which offers another degree of security for those who are still learning how the crypto market operates.
Frequently Asked Questions (FAQs):
Is there a crypto bank?
Wirex, Ally Bank, Barclays, JPMorgan, and Goldman Sachs (to mention a few) are examples of crypto banks lists since they all allow to administrate digital currencies and support cryptocurrencies. Crypto banks work in a manner similar to how traditional financial institutions manage stocks and cash for investors and clients.
Which banks use cryptocurrency?
Cryptocurrency Accepting Banks in the United States:
Ally Bank- Connecting your bank account to Coinbase allows you to buy Bitcoin with an Ally Bank debit card.
Chime Bank- Bitcoin purchases are authorized via Paxful.
Goldman Sachs- Introduced a new cryptocurrency trading desk and altcoin product offerings.
What is crypto bank account?
A crypto interest account is a service provided by a cryptocurrency platform that allows you to earn interest on digital assets that you have purchased. This is similar to how bank savings accounts work: You put money in, the bank lends it out, and you get it back plus interest. In most cases, you can withdraw your money at any moment.
Can I buy crypto from my bank account?
You cannot. To purchase Cryptocurrencies, you’ll need to visit dedicated crypto exchange.