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The transformation in the BFSI (Banking, Financial Services and Insurance) industry is empowering users to take charge of their assets. Apart from the already explosive fintech industry, crypto banks are an attraction for VCs who are looking for start-ups and enterprises in this space.
Therefore, if you are planning to launch your crypto-friendly bank, this is the right time to avail of digital asset bank development services to enter the market.
Why Does Crypto Banking Matter?
Crypto banking involves offering and consuming all banking services in cryptocurrencies. In comparison to traditional fiat money, these have extraordinary benefits.
First things first, crypto banks are accessible to the global population regardless of their geographic location. How? Because there is no brick-and-mortar infrastructure needed. Only an internet connection can provide all banking facilities to global users.
In many countries, factors such as lack of banking infrastructure, hyperinflation, remittance charges, or other natural/political reasons such as natural calamities or war are leading hindrances in economic growth.
Crypto banks enjoy fortification from such uncertainties.
Next, crypto banks are available 24×7. This may sound simple but creates a major impact. With crypto banks, there are no business hours restrictions.
For example, if your customer plans to request a loan on a weekend, the smart contract-driven protocol would make a decision instantly and release the loan based on the qualification checks. Likewise, if a user wants to send funds from a digital wallet to a third-party investment platform, the process is instant.
How Do Crypto Banks Work?
Unlike traditional banks wherein a Know Your Customer (KYC) is, mandatory, crypto banks may or may not require it. The difference is simple. A centralized crypto bank that simply enables the use of cryptocurrencies for different services requires KYC and all formal processes.
Here, the only difference is the currency. However, in the case of a decentralized crypto bank or simply a DeFi bank, there is no need for the KYC. This is because a smart contract and a community of stakers govern a DeFi bank across nodes.
After boarding, a user has to acquire crypto money to avail of banking facilities. For a crypto bank, whether centralized or decentralized, the user first has to convert fiat money into crypto using an exchange. Now, most crypto banking platforms have an integrated exchange for this purpose. If not, their wallet should be able to integrate with a third-party exchange.
While working on your digital asset bank development project, you can either create your crypto wallet or integrate an existing popular wallet into your platform. A wallet is essential to perform transactions such as withdrawing, depositing, or transferring funds. In the best interest of a user, it is beneficial to provide a built-in wallet.
This eliminates the need to install additional apps.
Going forward, users can avail all banking facilities from a crypto bank. From opening and managing a savings account to seeking loans, making investments and others, there is a huge scope of crypto banking. However, the scope of ease and success of a crypto banking product depends upon the regulatory acceptance of retail payments in cryptos.
The essential features of a bank, which you should also ensure in your chosen white label banking software, include the following:
- Savings Account
The success of digital asset bank development depends on the number of users seeking savings account services. That is the most basic and most useful service to the common user. This holds in both the traditional banking and crypto banking areas.
While building your crypto banking platform, you can create a specific account type known as the crypto interest account. That is, rewarding the users with a set interest rate for holding money in their crypto savings account. You could then utilize the funds for varied purposes including investing.
That’s exactly what traditional banks do with customers’ savings accounts with a ridiculously lower interest fee. They sometimes offer a lower APY of less than 1%.
With a crypto bank, users have an attraction to earn more interest and thus it turns out to be a lucrative business model.
- Lending & Borrowing
The ability to seek instant loans is a major attraction for crypto banking users. The uncontrollable annual inflation levels are a threat to user savings in fiat and that is where crypto finance enters. You could offer higher APY to users through your product. Besides, it is also important to understand the concept of arbitrage.
Arbitrage, as we all know, is the difference between the interest rate that a borrower pays to the crypto banking platform and the interest rate that the platform further pays to the lender’s savings account.
Borrowers prefer crypto banks because they avail the opportunity to use the capital for generating high returns on trades. Therefore, they can higher interest rates for the crypto banks rather than traditional banks.
- Collateralizing Cryptos for Loans
One of the major benefits of crypto banking services is the ability to collateralize crypto assets against loan sanctions. Unlike traditional banks, wherein the user is bound to sell appreciating physical assets, cryptos as collaterals are a better pick. This is because they don’t require tedious background checks thereby avoiding valuable time. This would enable you to issue loans on-demand on flexible terms.
For example, the borrower locks their crypto assets such as BTC or ETH etc and seeks loans in a stable asset such as USDT. Furthermore, the users will have to maintain a certain LTV (loan-to-value) ratio. In case the price of the collateral asset goes down, the users would require to add more crypto to stabilize the locked asset value.
Apart from these, you can add other features during digital asset bank development.
Crypto Bank Development with Antier Solutions
As detailed above, crypto banks have various opportunities for consumers and enterprises to lock in sustainable growth.
In this era of hyperactive digitization, the success of crypto finance is inevitable.
At Antier Solutions, we offer comprehensive services to help you build your crypto-friendly banking platform from the ground up. In addition, we provide a white label banking solution with all banking features – from user onboarding to credit/debit cards, lending/borrowing, and more.
Schedule a free demo of our white label banking software or connect with our subject matter experts to share your business needs.
