As the BFSI (Banking, Financial Services, and Insurance) industry changes, users are getting the tools they need to take control of their assets. Crypto banks are a big draw for venture capitalists who are looking for start-ups and businesses in the same space as crypto banks.
So, if you want to start a bank that works with cryptocurrencies, now is the right time to use digital asset bank development services to get into the market.
Why Does Cryptocurrency Banking Matter?
Crypto banking means that all banking services are offered and paid for in cryptocurrencies. Compared to traditional paper money, these have a lot of advantages.
First of all, crypto banks are available to everyone in the world, no matter where they live. How? Because there is no need for a physical infrastructure. All banking services can be used anywhere in the world by anyone with an internet connection.
In many countries, economic growth is slowed down by things like a lack of banking infrastructure, hyperinflation, remittance fees, and natural or political disasters or war.
Crypto banks are protected from these kinds of risks.
Next, crypto banks are open around the clock. This may sound easy, but it makes a big difference. When it comes to crypto banks, there are no set business hours.
For example, if your customer plans to ask for a loan on the weekend, the smart contract-driven protocol would make a decision right away and release the loan based on the qualification checks. In the same way, it takes no time at all for a user to send money from a digital wallet to a third-party investment platform.
How Do Crypto Banks Work?
Know Your Customer (KYC) checks are required by traditional banks, but crypto banks may or may not need them. It's easy to tell the difference. KYC and all formal processes are needed for a centralized crypto bank that just lets people use cryptocurrencies for different services.
The only difference here is the money. But the KYC isn't needed for a decentralized crypto bank, also called a "DeFi" bank. This is because a DeFi bank on different nodes is run by a smart contract and a group of "stakeholders."
After boarding, a user must get crypto money in order to use the banking services. For a crypto bank, whether it's centralized or not, the user must first use a p2p crypto exchange development to turn fiat money into crypto. Now, most platforms for crypto banking have an exchange built right in. If not, their wallet should be able to connect to an exchange run by someone else.
During the development of your digital asset bank, you can either make your own cryptocurrency wallet or add a popular wallet to your platform. For transactions like taking money out, putting money in, or sending money to someone else, you need a wallet. It is in the user's best interest to have a wallet already built in.
This means you don't have to install any more apps.
From now on, users can use a crypto bank for all of their banking needs. Crypto banking has a wide range of uses, from setting up and managing a savings account to getting loans, making investments, and more. But the ease of use and success of a crypto banking product will depend on how well regulators accept crypto payments from the public.
Some of the most important parts of a bank, which you should also look for in your white label banking software, are:
Savings Account
The number of people who want to use savings account services will determine how well digital asset banks develop. For the average user, this is the most basic and useful service. This is true for both traditional banking and blockchain banking.
You can make a type of account called a "crypto interest account" as you build your crypto banking platform. That is, giving users a set amount of interest for keeping their money in a crypto savings account. You could then use the money for different things, like investing.
Traditional banks do the same thing with their customers' savings accounts, but they charge a ridiculously low interest fee. They sometimes offer an annual percentage yield (APY) of less than 1%.
When people use a crypto bank, they want to earn more interest, which makes it a good way to make money.
Lending & Borrowing
A big draw for people who use crypto banking is that they can get loans right away. Annual inflation that can't be stopped is a threat to savings in fiat currency, and this is where crypto finance comes in. Users of your product could get a higher APY from it. Also, it's important to understand what arbitrage means.
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 pays to the lender's savings account.
Borrowers like crypto banks because they can use the money to trade in ways that give them high returns. Because of this, they can give higher interest rates to crypto banks than to regular banks.
Putting cryptos up as security for loans
One of the best things about crypto banking services is that you can use crypto assets as collateral for loans. Cryptos are a better choice as collateral than traditional banks, where the user is forced to sell assets that are going up in value. This is because they don't need time-consuming background checks, which saves a lot of time. This would let you give out loans whenever you want, with flexible terms.
For example, a borrower might lock up their crypto assets like BTC or ETH and look for loans in a stable asset like USDT. The users will also have to keep a certain loan-to-value (LTV) ratio. If the price of the collateral asset goes down, users would have to add more cryptocurrency to keep the value of the locked asset stable.
During the development of a digital asset bank, you can also add other features.
Crypto Bank Development with Suffescom Solutions
As was explained above, crypto banks offer consumers and businesses many ways to lock in long-term growth.
In this age of fast-paced digitization, it is inevitable that crypto finance will be a success.
At Suffescom Solutions, they have a full range of crypto exchange development services to help you build a banking platform that works with cryptocurrencies from the ground up. They also offer a "white label" banking solution with all the features of a bank, such as onboarding users, credit/debit cards, lending/borrowing, and more.
