The Crypto Bank: from Centralization to Curation

September 14, 2020
Samantha Fields

Right now, we are seeing an unprecedented investment in decentralized finance, or DeFi, the movement that aims to unbundle financial services offered by banks thanks to decentralized applications on the Ethereum blockchain. Although some may write this off as a bubble or a fad, at Multis we believe that crypto and DeFi will lead the way to financial services that are faster, cheaper, more equitable, and more innovative than current legacy offerings. Skeptics might cite the statistic that fewer and fewer people change their banks. Indeed, according to JD Power's 2019 U.S. Retail banking satisfaction survey, switching banks is at an all-time low for Americans. But just like the dozens of industries that have been disrupted by game-changing technology, inertia shouldn't be confused with satisfaction...

"Crypto bank" or "DeFi bank": a contradiction in terms?

The tenets of DeFi are similar to those held by the larger crypto and blockchain communities: a bias against centralization, a skepticism around institutions, and an open-source ethos. This puts the system philosophically at odds with traditional banking structures that prize extreme centralization, institutional approval, and select access.  Can you create a crypto bank in the age of a Bankless movement?

We think so. As more and more businesses use crypto for paying salaries, accept crypto as a means of payment, and hold crytpo currencies as a form of investment- the need for services that are curated for these businesses has emerged.

The crypto bank: from centralization to curation

We've said it once, but it bears repeating....

Just as the ancestors of today's modern central banks emerged in Renaissance Italy to finance a growing merchant class, banks today should be evolving to meet the needs of businesses that are more agile, globalized, and fully digital. The only problem is that for today's banks this is structurally impossible to do.

For example, cross-border payments are a necessity for a growing segment of SMBs who are increasingly international. However SWIFT payment rails haven't evolved since the 1970s. The steps that go into making a cross-border payment depends on banks on either end of the transaction having a prior relationship, or barring that, having a relationship with a "correspondent" bank. Meaning that SWIFT transfers are riddled with long verification time that can last from a few business days to several weeks. The blockchain infrastructure makes cross-border payments as fast as sending an email. Yet, there are almost no traditional business banks that offer this service to clients.

At Multis, we saw the value of building our banking accounts on the Ethereum blockchain because it's where some of the most exciting financial services are being developed, and because we can curate the best ones and integrate them into our accounts. Although "banking" can have a negative connotation (and rightly so!) for people in the blockchain community, our banking accounts are wholly decentralized. We are non-custodial, users have access to their funds at all times, and we curate the best DeFi services to make the most relevant banking stack for businesses. These services include:

And many more!

The next step: Integrating traditional currencies

Although we think that crypto is the future, we know that US Dollars and Euros aren't going anywhere. This is why we believe that the next logical step is to integrate these functions for a true neobank experience. While we're on the subject of neobanks- they may provide a better UI than traditional banks - but they are still built on legacy banking infrastructure. True banking disruption will come from what's currently being built and tested on the blockchain. We think that the end of centralized banking and the beginning of a curated banking stack that leverages the speed, reduced cost, and openness of blockchain protocols can only help a greater number of people- and businesses- create and share value as quickly as it would take to send an email.

Get the Guide!
Breaking Legacy: A CFO's Guide to DeFi & Digital Assets
Decentralized Finance (or DeFi) and digital assets aren't just a fad or a bubble. They have the potential to provide value to people typically underserved by traditional banking systems, in particular small and medium sized enterprises. Learn how SMEs can leverage decentralized financial services including:
High interest savings accounts that earn more than traditional bank accounts
Accepting payments in digital assets before incorporation
Receiving instant loans
Invoice financing solutions
Paying salaries instantly in digital assets with no cross-border payment fees
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