What Are Crypto Banks and How Do They Work?

By Scallop

Decentralized Finance is one of the biggest USPs of the cryptocurrency industry as it raises cryptocurrencies from just a digital token to an entirely digital banking system. DeFi, as the name suggests, is decentralized, which means it is not governed by any centralized entity. 

DeFi in itself has grown to become a full market with its own Crypto Banks, institutions, governance mechanisms, yielding mechanisms, loan services, and more. However, not unlike the traditional banking system, even DeFi relies on Crypto banks to provide traditional banking services to the crypto world, without any intermediaries, unfair restrictions and better accessibility. 

What are Crypto Banks?

Crypto banks or blockchain banks are unique financial institutions that offer banking services with cryptocurrencies as the primary currency. These institutions tailor their services to fit the needs of the crypto world and offer a wide range of facilities like traditional banking systems. However, these banks are completely decentralized, governed by the token holders, and powered by DAOs for complete transparency and equality.

Here are some key services and features associated with crypto banks:

• Crypto Banking Accounts: Like traditional banking accounts, users can also open crypto banking accounts with crypto digital wallets. These wallets facilitate transfers and storing of cryptocurrencies and can support a range of cryptocurrencies. These accounts are also paired with additional features such as cold storage options, multi-signature security and integration to different DeFi platforms. 
• Fiat-Crypto Integration: Several crypto banks also allow fiat-crypto integration to bridge the gap between traditional and decentralized finance. This also allows for easy adoption and helps users become comfortable with digital currencies.
• Crypto Payment Solutions: Similarly to traditional banks, crypto banks also offer payment solutions directly using cryptocurrencies. From crypto ATMs to Kiosk services, crypto banks offer a range of payment services that are both online and offline.
• Lending and Borrowing: Crypto banks can also facilitate lending and borrowing services by keeping some tokens or digital assets as collaterals for loan services. Moreover, investors can lend their assets to earn passive income or stake them for higher interest rates.
• Investment Products: Like in the traditional stock market, there are several trading and investing opportunities for investors. From crypto funds, index funds, and tokenized assets to ICOs, etc crypto banks offer a range of services. 
• Security: Considering the digital nature of cryptocurrencies, crypto banks implement various security measures and authentication features to ensure the safety of all banking accounts. 

These are some of the features of a crypto bank. Let’s take a look at why these digital banks matter.

Why are Crypto Banks Important?

All of these features and more crypto banks have made them extremely popular. Moreover, these banks eliminate several shortcomings of traditional banks such as unfair joining processes, poor interoperability, outdated services, etc., to offer an optimized, global and accessible digital banking system. 

For instance, a traditional banking system is restricted by borders. A user will have to pay a conversion fee when converting one currency to another and lose its value. However, crypto banks allow quick and fee-less conversion of cryptocurrencies to fiat and are not restricted by any borders. Moreover, traditional banks are difficult to access as they have guidelines to allow a user to open an account and use the services. However, with cryptocurrencies, anyone can create an account in a crypto bank and start availing of the countless services.

Crypto banks are extremely important for mass crypto adoption as it instils a familiar factor for the users. As crypto banks mimic traditional banks with additional features, users can easily avail of these services while also trusting the new era of digital currencies. These crypto banks help conjoin the world of decentralized finance and traditional finance while ensuring the safety, accessibility and freedom of the users are not sacrificed.

Over time, there have been several crypto banks that have optimized the DeFi and taken it a step further. These crypto banks are not only facilitating mass crypto adoption but also making it more accessible to users. Now cryptocurrencies have become an accepted form of payment in a variety of high-end and local stores. One of the crypto banks that have made a wave in the DeFi and fiat industry is Scallop. 

Scallop and DeFi

Scallop is a licensed & regulated banking institution offering a comprehensive suite of innovative banking products. The crypto projects aim to simplify digital money and have key banking features such as:

• One Account: Users can store their crypto and fiat in one place to spend them easily.
• Ultra-Fast: Users can spend any digital token in real time without conversion or top-ups required.
• Insured Account: All Scallop accounts are secured and insured.

Scallop Bank operates on a regulated, low-fee banking blockchain called Scallop Chain, which is also the world’s first licensed secured infrastructure that provides a suite of banking products. Powered by Scallop Coin, here are some of the banking features offered by Scallop:

• Scallop Accounts: Users can open GBP and IBAN accounts for daily personal and business use.
• Scallop Cards: Metal cards for users to pay with crypto or fiat, in online or offline stores.
• Scallop Pay: A payment gateway which allows users to send and receive all major currencies and tokens. Users can even make payments or transfer assets using this app.
• Scallop Exchange: An online exchange for instant transactions and conversions between crypto and fiat.

Scallop sets an impressive example of the potential of crypto banks and crypto banking. With several features such as crypto wallets, cards, accounts, etc., Scallop is paving the way for the mainstream adoption of crypto banks. With the ease of use and the ability to use these crypto accounts as traditional accounts when shopping or making daily payments, Scallop is the perfect example of how crypto banks operate.

Conclusion

Cryptocurrency banking is the new wave that has taken over the entire world. From investment to real-world usage, cryptocurrency banking has been one of the most influential factors in mass crypto adoption. With the help of crypto banks, users are now able to do humanitarian, personal and professional transactions without worrying about accessibility.

Author Bio

Scallop: Your trusted crypto banking app. Manage your digital assets securely and enjoy seamless transactions with our advanced platform.