Partnership Rather Than Conflict: Our Future for Crypto
The old vision of crypto doesn’t work; the confrontational attitude of going up against the bigger brother of traditional finance with fist clenched and arms swinging is a distant memory. We now know the future of the industry lies in partnerships with the banking and regulatory community, rather than in competing with them, threatening them or avoiding them.
Like any other enterprises out there, crypto platforms need to adapt and utilise critical infrastructure in order to grow and thrive and, like it or not, they still rely on traditional banking to bring in new users and reach emerging markets. This comes at a price; it means making an effort and conforming to traditional financial services regulation and bank grade AML standards. Crypto platforms that try to go it alone will struggle to get the best seat at the table and eventually new rules governing the space will be drawn up without them.
Related: Fiat currency vs cryptocurrency: understanding the future of money and Web 2.5
The Collision of Two Ecosystems
Any successful partnership relies on trust, but in the case of banking and crypto it’s a proper collision of two worlds that have already had a strained relationship in the past. Big banks don’t want to trust crypto platforms because there’s an inherent lack of transparency, which in turn means these platforms are being denied access to emerging markets or, in the very best scenarios, are being slapped with huge premiums because they are deemed ‘high risk’.
Demand is there; there are tens of millions of potential crypto consumers in Europe alone who are currently being underserved and denied the opportunity to access the market, simply because the infrastructure doesn’t exist to support them and their crypto platforms of choice.
This has led to some of the more short-sighted crypto platforms looking for shortcuts and trying to circumvent the banks and regulators altogether, but such evasive manoeuvres only raise even more suspicion from the traditional finance ecosystem. The smart move is to look at re-writing the narrative between crypto and banking industries. It’s time to aim for a standard of transparency and accountability for individual transactions that crypto platforms can stick to and banks can trust. Ultimately, this benefits the end users of crypto and allows the entire industry to grow.
The Solution: A United Front
It’s quite clear the banks want to get into crypto, but are only dipping their toes in the water rather than knowing how deep it is and taking the plunge. Consumer appetite will continue to be a driving force, but that undercurrent of high risk and lack of transparency will always be an issue unless it’s addressed. Systemically.
You can’t really blame the banks; they still need to operate within the constraints of compliance and Anti Money Laundering regulations. Even with more robust crypto regulation on the horizon — the MiCA initiative in the European Union for example — cryptocurrency platforms fall short when it comes to earning trust.
The solution, and what we offer at Fiat Republic, is in essence a banking infrastructure aggregation platform fused with a common standard of compliance that aligns both traditional banking and crypto. We will also put individual transaction data, that unsurprisingly exists in abundance on the blockchain, to good use to help the banks make sense of the end-to-end crypto consumer journeys. Finally, tying it all together will be a consortium of major players in the crypto industry who, through a good old ‘Good Cop, Bad Cop’ approach will be encouraged and incentivised to look beyond their differences and try to stick to that single, predictable standard of compliance and transaction monitoring. This, in turn, will be recognised by the banks we partner with, making them more comfortable with crypto flows over time.
We strongly believe that such a multi-pronged, systemic approach is really the only way to remove the handicap to growth crypto currently faces, change the perception of crypto and ultimately better set up crypto platforms for a future where they are more trusted and work more symbiotically with the TradFi ecosystem.
Data Can Deliver Transparency and Speed
Existing tech in both banking and crypto ecosystems must be fused together. Bank-to-bank transfers are effortless between, say, two accounts on the same domestic or local piece of banking infrastructure, and transferring cryptocurrencies from one wallet to another can already be achieved with a single click.
However, converting fiat into crypto is still slow and clunky and can take hours, if not days. But mind you — that’s not because of a lack of options to facilitate such a conversion. These are aplenty. No — it’s because of the underlying highly manual compliance processes, typically on the banks’ side. Processes that deliberately delay or stall a transaction in order for the bank involved to get more certainty as to the source and purpose of the funds being transferred. It’s worth noting that the banks in 99% of cases stop a fiat transaction because they simply don’t know what’s going on and that in itself is too big of a risk for them to take. When that happens, typically bank compliance teams step in to investigate. Meantime the end user waits for their own money to be reflected somewhere (so they can start trading).
When the price of Bitcoin fluctuates significantly in minutes and hours, even a three-day fiat transaction ETA (as is fairly common when money travels through the SWIFT system for example) provides a terrible UX for consumers — inconvenient at best, a sizable financial risk at worst.
Fiat Republic’s fiat-as-a-service API offers embedded, highly compliant technology combining access to multiple local and international bank payment rails, with a transparent data-driven architecture trusted by the banks. To address the crisis of trust, we sit in the middle and broker critical compliance data between banks and crypto platforms to help them get used to one another and learn to cooperate.
There is no Web3 without fiat
Fiat currency is and will remain an entry point to crypto for years to come. After all El-Salvador is only one tiny country. Therefore it stands to reason that traditional finance has a crucial role to play in crypto. Through our technology, focus on compliance and the consortium model, Fiat Republic is perfectly positioned to translate Web2 into Web3 and vice versa and we look forward to a future where mass adoption of crypto is met with excitement rather than fear from the financial institutions.