What are crypto banks? Do they act like the intersection of traditional finance and decentralized finance? Let’s dive in to understand!

The popularity of cryptocurrencies is growing at staggeringly unprecedented rates. Over the course of the last decade, cryptocurrencies have risen from the shadows of skepticism to adoption in mainstream use cases. Most important of all, the results of the growth of the cryptocurrency space have also become quite clear in recent times. With more than 300 million crypto users all over the world right now, one can expect a lot of promising opportunities in the crypto landscape. 

However, it is also important to wonder about the instruments to access crypto and the possibilities of crypto banks as replacements of conventional banks. Does the concept of a bank fit in the overall vision of cryptocurrencies? The basic focus of cryptocurrencies was the introduction of decentralization in the conventional financial landscape. So, how can you think of intermediaries in the crypto space again? Let us find out more in the following discussion.

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Cryptocurrency and Its Applications

Amidst all the hype and raging discussions about the immense potential of cryptocurrencies, people often ignore the most important thing. How can you use cryptocurrencies? How can people use cryptocurrencies to obtain the value of financial freedom and empowerment? First of all, you should note that cryptocurrency adoption is still in the early stages. As a matter of fact, cryptocurrency is currency in the early adopter phase in the technology adoption lifecycle. 

So, where do crypto banks come in? Without easy accessibility and a promising user experience, cryptocurrency adoption would continue to struggle. Even if you can go through a lot of educational resources for getting started with cryptocurrencies, you have to encounter many difficulties in using cryptocurrencies. Most important of all, you would need a massive investment of time and effort to use cryptocurrencies to your advantage. 

Therefore, people need to look for accounts of crypto banking and decentralized finance explained properly for identifying possibilities of a new financial system. The financial system should enable people to use cryptocurrencies just like regular financial assets and instruments. 

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Innovations in the Crypto Space

The diverse innovations in the crypto space have also been one of the prominent reasons for focusing on crypto banks and DeFi alongside the possibilities associated with them. Some crypto users want to borrow, lend and even earn interest as well as access many other financial tools. DeFi provided the necessary support for crypto users to access various financial services. However, the learning curve with DeFi is quite steep in comparison to learning about using a centralized exchange or crypto wallet

While innovation in the world of crypto is opening new opportunities for transforming conventional financial services it is difficult to understand. Many of the innovations in crypto are available as layers of integrations and solutions. Therefore, crypto banks have emerged as the solution for a comprehensive banking experience rather than a distributed approach.       

Must Read: Different Types of Crypto Wallets – Explained

Rise of Crypto Banks

The various options in the financial ecosystem available right now can confuse any individual. You can find the primary routes for traditional and crypto finance ranging across a wide range of alternatives, including high street banks as well as emerging banks. In addition, fintech apps alongside crypto-first solutions like DeFi, non-custodial wallets and crypto exchanges are also widening the prospects for accessing and using crypto. Let us understand crypto banking and decentralized finance explained properly for a detailed impression of their significance for crypto users. The definition of a crypto bank could help you anticipate its significance in encouraging the mainstream adoption of cryptocurrencies.

Read More: Custodial Vs Non-Custodial Wallets – Key Differences

Definition of a Crypto Bank

As you know, the basic reason for the arrival of crypto banks and DeFi, i.e., improving accessibility to financial services and crypto, there is little left to offer the definition of a crypto bank. In the simplest terms, you can think of a crypto bank as a digital asset institution geared towards reducing the gap between crypto and traditional banking services. 

You can discover the same type of services and features in crypto banks which you can find in traditional banks. A crypto bank can let you hold assets alongside lending and borrowing funds. You can also enjoy the facility of spending money through credit or debit cards with the help of crypto banking. 

As of now, the services which bridge the gaps between the infrastructure of traditional banking and the diverse financial possibilities associated with crypto have the exact capabilities of a crypto bank. However, the services have not received legal recognition as ‘crypto banks’ and are known as digital asset institutions. The notable digital asset institutions include Celcius, Nexo and BlockFi. Such types of institutions work like banks offering the traditional financial services in one platform. You can also find options for staking and other DeFi services with the help of such institutions. 

Also Check: Staking Vs. Yield Farming Vs. Liquidity Mining – Key Differences

Feasibility of the Crypto Bank Concept

While the concept of a crypto bank seems favorable, it is important to reflect on the feasibility of the idea. One should have a clear idea about the centralization in crypto banks, just like with traditional banks. Therefore, it is reasonable to wonder about missing out on the basic elements of decentralization promised by crypto. With a crypto bank, you might have to worry about the impact of a banking collapse, attacks or hacks on your money. At the same time, it is also important to identify the possibilities for financial autonomy associated with crypto. 

You can come across many conflicting responses for “Are crypto banks a success?” while finding out prospects for their feasibility. The credible aspect of such institutions is the assurance of regulatory standing and legal compliance. Any crypto bank would be a legal entity under the influence of laws and legislation, which are continuously evolving. Therefore, digital asset institutions have become the favorites of newcomers to the crypto space. Some of the other factors which might work in favor of crypto banks would include, 

  • Seamless user experience. 
  • Easier integrations with popular financial platforms. 
  • Trustworthy regulations. 
  • Varied financial options in crypto.

With all these elements in the right places, you can expect positive responses for “Are crypto banks a success?” albeit to a certain extent. A crypto bank needs something more to impose pressure on the monopoly of traditional banking systems. 

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Challenges for the Traditional Financial System

The troubles in the traditional financial system have irked Gen Z and millennials. They want new ways for managing money and thus emerged challenger banks for addressing the needs of Gen Z and millennials. The challenger banks have transformed banking into a completely digital experience. With the rising demand for financial independence, challenger banks are leveraging the market shifts for tailoring user-first experiences. However, the new forms of banking have stumbled upon the issues of operating with old pounds, euros and dollars. Therefore, crypto banks can easily bridge the setback by bringing crypto to the equation. 

Another prominent concern in conventional financial systems which might affect the development of a crypto bank is perception of cryptocurrencies. It has different properties such as immutability, volatility, staking and exceptional growth potential. However, you cannot just have a crypto bank by adding these features in a challenger bank solution. 

Must Check: How To Become A DeFi Expert?

How Can Crypto Banks Grow?

The primary focus of attention in accounts of crypto banking and decentralized finance explained in detail reflects on possibilities for growth of crypto banks. Many would be quick to assume that introducing new features in the digital asset institutions can offer better adoption. However, a crypto bank has to introduce the services and features without affecting the user experience. In addition, a crypto bank should also disclose the details of transactions to clients to ensure transparency. Such types of challenges in the development of a crypto bank creates formidable setbacks for their growth in the long term. 

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Final Words

The final note on crypto banks directly points to their significance for simplifying crypto use and accessibility. Even if the whole world is talking about cryptocurrency, the limited instruments and platforms for accessing and using crypto present a formidable setback. Learning about cryptocurrencies and using them might take a long time, which not everyone would love to do.

Therefore, people would need something similar to traditional banking systems, which would help them use cryptocurrencies. In such cases, the notion of a crypto bank is a favorable proposition on various grounds. The crypto banks can help in streamlining access, use and management of cryptocurrencies. 

However, the concerns regarding “Are crypto banks a success?” would continue to be relevant for a long time. In the initial stages of crypto adoption, it is inevitable to wonder about deviating from the basic tenet of decentralization. With a crypto bank, you would basically give up on the premise of excluding intermediaries in crypto transactions. 

On the other hand, a crypto bank might be the best possible solution for enabling almost everyone to access crypto. As the assortment of crypto-based financial services continues to expand further, the concept of a crypto bank becomes quite inevitable. Learn more about the possibilities associated with crypto banking and the top platforms in this field right now.


*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!