Initially developed as a way of replacing conventional money and the existing financial system, cryptocurrencies have since grown in popularity. Because of the 2008 financial crisis, there has been a growing need for a decentralized asset or financial system that is secure, anonymous, and easy to use. Bitcoin, the world’s first cryptocurrency, was created a decade ago by a mysterious figure known only as Satoshi Nakamoto, who published a white-paper describing the technology behind it. As a result of the introduction of blockchain-based decentralized digital currency, the rest was history.

Nobody can suppress the rise of cryptocurrencies. The colossal industry’s appeal is reflected in impressive numbers as Crypto banks are steadily becoming a new and viable reality in contrast to the struggling traditional banking system, with about 12,000 unique assets, 400 exchanges, a market cap of almost $2 Trillion, and a daily trading volume of over $91 billion.

According to a public survey, about 80 percent of Americans had heard of cryptocurrencies, with roughly 30 percent of those polled actually putting their money in these digital currencies. The bitcoin exchange Coinbase has verified more than 56 million users on its platform, while Fidelity, the country’s biggest conventional investment management business, has certified just 35 million subscribers.

The cryptocurrency market and the multitude of assets that hold it allowed the market to once exceed the $2 trillion level, with Bitcoin sitting at a market valuation of almost $1 trillion. Despite a huge decline in the market, Bitcoin, Ethereum, and other cryptocurrencies are displaying eye-catching figures, allowing Crypto banks to create headlines and represent a threat to the traditional banking system.

Due to the rise of Decentralized Finance, which was propelled and enabled by cryptocurrencies, anyone with an internet connection now has the ability to access financial services without being subjected to the restrictive and discriminatory constraints that traditional financial institutions place on them. Decentralized Finance has brought to the masses a multiplicity of options that constitute a serious threat to established financial services, one of those options being lending and borrowing money.

What are Crypto banks?

Blockchain, cryptocurrency, decentralized finance, and cryptocurrency exchange are just a few of the terms that are being bandied around on the internet right now. Today, blockchain-based cryptocurrencies are dictating the headlines and sections of every financial news outlet, and for good reason. The global financial system is experiencing a significant transformation.

For the first time, we’re seeing widespread financial inclusion and individual financial security. Around 2.2 billion people do not have access to financial services, according to a Global Findex survey. Because they are found ineligible to have a financial account, they cannot use any of the services available to them. 2.2 billion people make up about one-fourth of the world’s total population. To put things in perspective, that’s the population of both India and China combined!

Existing traditional banking institutions tend to exclude people of all backgrounds. However, the emergence of cryptocurrencies, blockchain technology, and decentralized finance is transforming our views on money and the way we use it.

Centralized systems currently manage almost every element of banking, lending, and trade, and they are supervised by a variety of regulatory organizations and gatekeepers. To get everything from loans and mortgages to stock and bond trading, users must first deal with a multitude of financial intermediaries. Financial authorities in the United States, such as the Federal Reserve, the Securities and Exchange Commission (SEC), and Congress, exercise much too much control over the rules, limiting consumer access to money and financial services.

It is impossible for most people to avoid financial intermediaries like banks, exchangers, and lenders who profit from each transaction in the financial sector.

As an alternative to the current centralized financial system, crypto banking empowers the general public through peer-to-peer trading, disempowering intermediaries and gatekeepers in the process. With crypto banking, anyone will be able to perform things like lending, borrowing, and trading that are currently done by banks, exchanges, and insurers.

Here are a few advantages of using cryptographic financial systems:

Instant cross-border transaction

Instantaneous cross-border transactions are now possible due to the availability of both fiat and cryptocurrencies.

Access to an expanding ecosystem

With direct access to the Blockchain ecosystem, cryptocurrency holders now have a whole new market for financial solutions.

Multiple accounts

Financial systems cannot function without currency exchange and circulation. Due to the introduction of new cryptocurrencies, crypto banking consumers now have a greater need than ever for money conversion services.

Verification of identity and compliance

Manage in-house client verification as a regulated financial service, or utilise simple API endpoints to enable any third-party verification service that is outsourced.

Bank account management

Customers can get virtual and verified debit and credit cards by installing an additional server programme that connects to a third-party debit card provider or activates an in-house solution, which is quite easy to do.

Investing on a massive scale

For digital bank account users that have access to the digital banking system, access to Blockchain smart contracts technology opens up various opportunities for modest and large-scale investments

How Crypto Banking is the future of lending and borrowing money?

Crypto Banking makes it much easier to borrow money using your cryptocurrency assets. When asking for a bank loan, you can simply borrow money using your crypto holdings as collateral, just as you would with traditional currencies or assets.

Furthermore, unlike traditional bank loans, which may be fairly discriminating in and of itself, certain Crypto Banks loans just demand a minimal amount of paperwork. Interestingly, on certain centralized exchanges, users can borrow up to $100,000 without a credit check.

The Finance Industry will dramatically evolve thanks to crypto banks. By allowing financial institutions to depend on the data they already have, limit risk, and gain confidence in their decisions, crypto banking will improve accuracy, transparency, and process efficiency, helping the industry to realize the digital transformation more swiftly.

Furthermore, Crypto banks’ plethora of capabilities, such as smart contracts and other DeFi products, will play a vital part in the future of financing by tracking collateral and payments. Bitcoin and cryptocurrency banks are quickly gaining ground on conventional financial institutions, thanks to their efficient, accessible, inclusive, and optimized Crypto Interest Accounts, which offer a smooth and trustworthy car financing option.

Here are a few scenarios in which Crypto Banks could provide significant value to both consumers and financial institutions:

  • Requirements for Know Your Customer (KYC) Programs
  • The Financing of Dealer Floorplans and the Auditing of Dealer Floorplans
  • Blockchain Foundation for Securitization
  • The loan application process, providing verifiable credentials.
  • Smart Contracts allow and digitization of manual processes.
  • The V2X and Securitization
  • Issuance and Investor Impact Reporting for Green Bonds

Keep reading if you want to know how Financing works in Crypto Banks.

Crypto Banks and Financing

Crypto-financing enables crypto investors to borrow money in cash or cryptocurrencies by holding their crypto holdings as collateral. Crypto lending allows users to stay owners of their assets while lending their assets. During the lending period, however, the crypto supplied as collateral cannot be used for trading or dealing.

Crypto investors who intend to HODL (Hold On for Dear Life) their crypto assets and do not intend to sell them anytime soon might lend them and earn money during that time. The interest is referred to as “crypto dividends.” It’s a straightforward concept for crypto investors to earn passive income by lending their assets.

A crypto loan is a kind of secured loan that may be acquired through a cryptocurrency exchange or a crypto-lending platform that accepts cryptocurrency as collateral. You may think of a crypto loan as a hybrid of a mortgage and a vehicle loan, with the exception that instead of using your car or home as collateral, you use your crypto assets to obtain loan money instead.

Crypto Banks also offer the ability to earn interest through crypto interest accounts, which are functionally comparable to normal bank savings accounts but offer far higher returns than those offered by traditional financial institutions. Keeping some of your crypto assets on one of the many different platforms that provide such services is all it takes to earn interest on your cryptocurrency.

Some of your crypto holdings are put to work and lent out to other platform users when you hold some of your assets on different platforms. Users, in this case borrowers, pay a centralized provider an interest rate for borrowing, which is subsequently passed on to users as a percentage of the interest.

Thanks to Crypto Banking the entire process of obtaining a crypto-backed loan is easy, quick, and intuitive; it’s the polar opposite of traditional lending. Because no extensive credit checks are required, all you have to do is sign up for services and request for a loan.

Users of Different Crypto banks can utilize either BTC or ETH as collateral. Some Banks may even allow users to use BTC, ETH, DASH, and XEM to deposit collateral.

When it comes to withdrawals, most platforms tend to accept Bitcoin (BTC), Ether (ETH), Tether (USDT), NEM (XEM), and Dash (DASH) (DASH). You can also easily make a transfer to your bank account (if supported) if you want to withdraw in fiat.

Concluding thoughts

As more crypto-based loan alternatives enter the market, the average user’s ability to make the proper decision will become increasingly important. Before signing up for the services, consider the LTV ratio, interest rates, repayment plan, and customer support services to make the best selection possible.