A Crypto-friendly bank | UK set to capitalise on a major market opportunity
The cryptocurrency space is a digital space — supposedly a disruptor space — yet how come it is still not digital enough to succeed?
The original cryptocurrencies and associated organisations evolved partly out of the desire to disrupt the traditional banking model and fiat currency system. Ironic then that these tech pioneers now desperately need bank accounts for fiat deposits in order to continue their upward trajectory.
Whilst the crypto ecosystem continues to develop at lightning pace, most of the established banks maintain their hostility towards the space although there is some improvement on 2014 and reports of bank accounts being frozen simply for trading the asset class.
A crypto bank is a transparent bank
Despite the fact that the biggest global financial scandals have nothing to do with crypto, it still carries the ‘dodgy’ label. Why so? Especially given that crypto assets are digital and permanently traceable on the blockchain. This makes them the obvious solution to dirty money, not the problem. By linking legitimate traditional financing to the crypto world, we can develop all the safeguards that exist in traditional banking with the total transparency that crypto brings.
Developments in the space such as coin forensics mean fears over money laundering and the use of crypto currencies for illicit activities are not as justifiable as they once were. Many regulators are starting to sound positive notes on distributed ledger technology and some smaller jurisdictions such as Malta have seized the opportunity and moved rapidly to embrace the crypto sector.
Fudge and frustration
Despite the obvious benefits, the banks continue to turn down perfectly reputable actors in the space. Sonny Singh, CCO of Bitpay, has stated that even though the company now has a former chairman of the SEC, Arthur Levitt, as an advisor, it still struggles to get bank accounts. Depriving crypto companies of the fiat facilities they need is negatively impacting and missing a major market opportunity.
The evidence is clear that the underbanked crypto market is large and growing. California’s Silvergate Bank is one of the few operators in a reputable jurisdiction to actively engage with the crypto sector. It has taken roughly $1.7 billion in deposits from crypto companies and estimates the addressable market for fiat currency deposits related to digital currencies alone is worth approximately $40 billion. This is set to grow with increased adoption of distributed ledger / blockchain technology.
A UK-based solution for the crypto bank conundrum
Until now the UK has shied away from the considerable opportunity. Today, DAG Global is aiming to solve these problems for UK businesses and is currently well advanced in conducting a seed round on Crowdcube. In parallel, DAG is using the expertise of its own team members of working with UK regulatory authorities in obtaining licenses in the past to secure its own UK banking license. Before the end of the year, the new business should be able to bank companies operating in the cryptocurrency space, as well as fintechs and other SMEs with the aim of becoming the UKs first “crypto friendly” bank.
Choosing to be fully-regulated by UK authorities, as opposed to obtaining a banking license in a smaller jurisdiction gives DAG another significant advantage. London is the financial capital of the world and the UK ranked 3rd last year by funds raised via ICOs. Britain needs a bank that can bridge the gap between traditional finance and the emerging digital assets ecosystem. We also anticipate the need for banks regulated in financial capitals will grow, as large institutional organisations such as Fidelity take an interest in the space. We strongly believe that firms of this standing will not want to conduct the majority of their banking operations in offshore jurisdictions.
Know the risk, reap the reward
Since the banking crisis, much of current banking regulations is structured around the reduction and management of risk. This has helped to increase safeguards but has also led to most banks stepping away from perceived marginal business — including risk-taking on any smaller and medium-sized clients. As a result, issues around risk have effectively put the brakes on investment on both a national and global scale. By understanding the risk, we believe that we can make the investment into SMEs flow by using the benefits of digital assets and cryptocurrencies. DAG intends to support the efficient pricing of risk through our banking activities.
Rather than fear the future, DAG Global will be a new kind of bank that embraces the cryptocurrency sector and provides a much-needed boost to the emergence of the digital asset sector. This is a rapidly growing area of finance and we are in prime position to service it.