Last Updated on 3 months by John Piper
The collapse of three crypto-friendly banks has made it harder for cryptocurrency firms to find legal banking options.
Accessing traditional banking services is a challenge for crypto firms. Banks are reluctant to partner with crypto exchanges or firms due to regulatory pressure, perceived risk in the industry, and traditional finance being viewed as an alternative. Crypto companies are left with few options to manage their finances.
Are crypto-related issues likely to be addressed by’shadow banks’
Molly White, a software engineering expert, suggests that crypto firms may need to look at more risky alternatives for banking services. White, a critic of Web3 development and a crypto critic, spoke on a panel called “Popping The Web3 Bubble” at South by Southwest in Texas. She suggested that some crypto firms may be forced to work “underground”:
“There were very few US banks willing to accept crypto clients. Silvergate and Signature are now gone. I believe that this will have a huge impact on the crypto industry. It still needs access to traditional finance .”</em.
“Without these banks, I believe the crypto industry will be having a difficult time.” Either they will have to find new banks willing to work with them (which was already difficult) or they will have to look to the shadow banks em>
What are the banking options available to crypto firms?
There are several options available to crypto firms if they can’t access banks. These alternatives might not be suspicious. They might be able to work with regional banks and credit unions. The industry’s ‘risks are more attractive to smaller banks. The downside is that smaller banks may not have the same understanding of cryptocurrency as larger institutions.
Some crypto firms may also partner with specialised financial institutions that are focused on the cryptocurrency industry. These companies offer a variety of banking services. These “crypto banks”, which are also known as crypto banks, offer customized solutions for cryptocurrency companies, including custody, trading and lending.
Take banking out completely
Decentralised finance (DeFi), platforms might be an option for cryptocurrency companies. These platforms offer financial services that are not available through traditional banks and are built on blockchain technology. DeFi platforms allow for trading, lending, and borrowing without the need of banks.
Some cryptocurrency companies might consider working outside the traditional banking system. This would mean that cryptocurrency is used exclusively for all financial transactions. This approach offers a high level of independence and control but can be difficult to implement in practice. Although more and more merchants accept cryptocurrency for payment, it is not yet widespread enough to make this an ideal option.
The post What will crypto firms do to banking options? Coin Insider first published this article.