Crypto Banks - Technologizing the Traditional Banking System
“ Innovation is the Ability to See the Changes as An Opportunity - Not A Threat “.
The digitized world is driven by more buzzwords and innovations which transform the lives of each individual of this digital world to the next level. Some of the remarkable innovations and technologies are "Blockchain", "Cryptocurrency", Artificial Intelligence, Internet of Things, Big Data, and more.
We are gathered here to look at the trending buzzword of the recent news article, "Crypto Banking".
Without any pause, let's dive in!
What is Crypto Banking?
Crypto Banking is the process through which cryptocurrencies flow continuously into the market and can be exchanged for all kinds of transactions.
Crypto Banks are banking institutes that process digital money-related activities such as deposits, withdrawal, lending, borrowing, saving, and investing in a wide range of markets.
In simple terms, Crypto Banks are platforms that allow crypto holders to store and exchange their crypto assets and utilize them for daily payments.
The notable part of crypto banking is the presence of a cryptocurrency wallet that holds the crypto assets for complete crypto banking processes such as deposit, saving, transferring, and more.
Is DeFi a Form of Crypto Banking?
DeFi, nothing but new decentralized finance is a widespread word that allows people to process all kinds of financial transactions with 100% transparency in a permissionless medium.
DeFi lets users lend, borrow, save, and invest in a completely decentralized manner. DeFi is not exactly related to banking but mimics the banking services and lags in the concept of security, which is the major valued aspect of traditional banking, Security.
Many companies and banks try to operate in the crypto ecosystem and find it harder to provide safety and regulation for their users. Thus, the DeFi space and all DeFi products continuously work on providing a complete security and safety environment for financial services.
Benefits of Cryptocurrency Banking
Cryptocurrency and Blockchain can benefit the banking sector in many ways. Listed here are some of the benefits behind crypto banking than the usual traditional banking system.
1. Reduced Costs for all financial and banking processes.
2. As crypto banks involve blockchain, the security of the overall system is improved.
3. The quality of data is improved with easy retrieve options.
4. As crypto banks involve digital currencies, the level of hacking and fraudulence will be lower.
5. Quicker and easy error handling and reconciliation.
Some of the other benefits of this digital banking system are as follows :
- Faster Transaction
- Borderless Transaction
- Higher Accessibility
- Peer-to-peer focus
- Elimination of banking fees
- Easy mobile payment & access and a lot more.
Before Crypto Banking - The Era of Traditional Banking
Traditional banks are financial institutes that administer all the money and custody deposited by the clients and banks use this money to grant as a loan to individuals or companies with the charge of interest. The main three distinct components of traditional banking are Capital, Deposits, and Loans. Traditional banking is bound by things like long-term processing procedures for loans, insurance, deposit, or withdrawal which involves entry records, long queue processing, and a lot more.
In India, Banking is considered as a fairly stable and grown sector in factors of credibility, market, and also in liquidity risks. The impact of smartphones and mobile technology has created a greater impact on the financial and banking sector as a whole. Thus, banking and payments became online which just eliminates the long waiting token system in banks with the spot transactions which are processed within a fraction of seconds from mobile banking applications anytime anywhere.
Thus, Mobile phones have the greatest impact on the growth of the banking sector. Another aspect of this digital economy, known as Cryptocurrency or digital currency has driven the banking sector to the level that benefits every account holder with permissionless, borderless, and transparent banking with greater speed & accuracy.
What Made the Arrival of Crypto Banking? - Consequences in Traditional Banking
The traditional banking system benefits people in many ways. On the other hand, people face many consequences in traditional banking which shifts them to the crypto banking system.
Here are some limitations that stop people to prefer traditional banking to crypto banking.
All the banks are centralized and involve any central authority to hold control of your assets. This centralization of the traditional banking system creates insecurity among the people.
In the traditional banking system, all the money and custodial assets are under the control of third parties which requires their involvement and approval for each transaction which lengthen the process.
Each and every transaction in traditional banking requires the direct availability of the individual to process any desired actions. This makes it inconvenient for anyone to proceed to any banking services.
Lack of Flexibility
The current banking system is very difficult to make flexibility in transactions and this seems to be harder for working individuals to stand in a long line to make any single transactions by visiting a bank.
Due to high autonomy, the traditional banks charge high-interest rates on each loan, financial transactions, cross-border transactions, and mortgages. This makes people move from the traditional system for banking to cryptocurrency or digital banking system.
These are the main limitations that traditional banking systems possess that crypto banking does not.
How Does The Crypto Bank Work?
In many trusted crypto applications, there will be two kinds of wallet named Custodial wallet and non-custodial wallet. Most of the users prefer non-custodial wallets, which offers them complete control over their assets.
The banking process flows as follows, if one wants to initiate the transaction, he should provide a private key that he has received while registering, as like a PIN number in traditional banking.
There will be no third party or intermediary involvement which eliminates the high-interest rates.
If the transaction should be in cryptos, he should share his public keys to initiate the transaction.
This is the transactional workflow of any kind of crypto banking.
Other banking processes like lend, borrow in crypto banking does not require any intermediates to process the loans. Thus we can lend or borrow our cryptos anytime by using collaterals such as bonds, property, or anything else.
Smart Contract takes care of the lends and borrows process and this is secured & protects high-interest rates. These smart contracts automate every financial transaction within seconds which reduces long time duration for any loans and lendings.
This is how crypto banks work better than traditional banks to provide people with faster and easier financial solutions.
Famous Crypto Banks Ruling Crypto World
Here are some of the popular cryptocurrency wallet apps and P2P lending apps that support cryptocurrency exchanges.
It is a famous cryptocurrency wallet that supports for buy, sell, and spend bitcoins. This is one of the best and user-friendly crypto banking apps trusted by many people.
CEX has both a web and mobile app which allows users to buy, sell Bitcoins and Ether with the help of fiat currencies.
A platform where lenders and borrowers connect on a peer-to-peer basis and can lend/borrow cryptocurrencies with the interest of their own.
Trust wallet is a native wallet of Binance which supports multiple cryptocurrencies such as Ethereum, Bitcoin, Ripple, and more. Users can store and manage tokens and coins through the control of private keys.
Exodus crypto wallet is a popular crypto wallet available on desktop, mobile and in hardware which allows users to send, receive, and exchange cryptocurrency anytime.
There are many in the list which provide crypto banking solutions to the people and plays a vital role in the crypto market.
Countries Favoring Crypto Banking
Listed here are some of the topmost countries that support cryptocurrency exchange and crypto banking.
- United States
- India and more.
When it comes to India, Indian Banks are preparing to provide crypto banking in all their physical banks. This allows users to buy bitcoins or any other cryptocurrencies in any bank branches with Indian Rupees.
Now India is in the process of launching crypto banking solutions in the 22 physical branches across North India. India’s First Crypto-Neo bank will offer deposits and loans from the month of January 2021. Thus crypto banking has a booming future in all the mentioned countries.
Are There Any Risks Involved In Crypto banking?
The one prominent risk factor involved in crypto banking is Legalization. Still many countries and governments are not sure about the legalization of cryptocurrencies and decentralized finance which makes it harder for cryptocurrency holders.
When it comes to cross-border transactions, the government of other countries can block the transactions anytime.
Another factor that restricts the crypto banking adoption is its security. If the smart contracts possess any vulnerabilities, all the financial transactions may get into chaos and the user may face unexpected loss which is no one's responsibility to refund.
Future of Digital Economy with Crypto Banking
The cryptocurrency and blockchain are on their way to reach safety and security, which makes the adaptation of crypto-related implementations and innovations in the near future. Thus this digital economy, the adaptation and global acceptance of crypto banking are on its way which tends to provide easy, safe, fast, and transparent financial and banking services for all the global individuals.
Crypto banks are becoming a reality which may transform the global banking sector to the next level. Thus this blockchain and cryptocurrency have the potential to drift any kind of industry or business processes to a better level. Then how come, the banking sector will be exceptional?
Let us enjoy seamless and fast banking services with crypto banking !!
Stay Tuned with us to know recent updates & innovations in the crypto world !!
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