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The Digital Adventure of Banks in Crypto Markets

The Digital Adventure of Banks in Crypto Markets

The Digital Adventure of Banks in Crypto Markets

Nowadays, the mainstream of financial systems, banks, are looking for a brand new step in crypto markets. Traditional banks, new age exchange platforms, and chcallenger banks (aka neobanks) will be the new players in Crypto Markets. They not only raise capital but also complete their integrated digital and traditional investment platforms. With the expansion of digital product and service offerings, they aim to lend capacity for new clients and expansion into new markets. The new trend in fundraising is tokenising all shares if any blockchain law is applicable in the home country! Besides fundraising, traditional banks are setting up exchanges for digital assets, including cryptocurrencies, which will be used for tokenisation, trading, or custody services for institutional and accredited investors. In general, all these processes will be built on blockchain technology which provide a platform for asset tokenisation and secondary trading of digital assets. Stakeholders expect massive tokenisation of all types of assets around the world and more exchanges will be built by banks or other players of financial markets to deal with tokenised assets.

Another benefit of the above digital venture is from the central bank digital currency (CBDC) perspective. We already touched upon the main framework about the next big thing, CBDC, in our last article. The central banks of countries are now focusing more on digital banks not only for new regulations but also for testing out the use of CBDC for interbank settlements. The regulatory authorities (eg. European Central Bank - ECB), find it more feasible to test digital currencies through private partnerships instead of launching it directly via monetary policies. This new attitude boosted digital currency implementations around the world as well.

Another part of this venture is neobanks. These banks (eg. Revolut, Monzo and Starling in England and N26 in Germany) have emerged in the last decade. They generate income from interchange fees and they are aggressively expanding into other areas of finance like investment of business banking. Even if digital banking sees a dip in revenues in the early period of the pandemic, the business and gross margins have improved significantly during the rest of the year 2020 compared to pre-Covid levels. Since they are ‘digitally-born’ or ‘digital natives’, they have all the necessary processes to originate financial products in digital forms. One of main motivations of all these digital ventures is the concept of tokenisation. With tokenisation, rights to an underlying asset class such as shares of unlisted companies and private equity funds become eligible for trading. As tokenisation will maximise security and accessibility of all kinds of investment vehicles and decrease operational costs, stakeholders can integrate their APIs (Application Programming Interface) and start building their own digital asset products without any intermediaries. Tokenisation is still a ‘No-man Land’ for many parts of financial bodies however, it brings limitless opportunities and investors would like to catch these opportunities in the early stages.

In conclusion, the main motivation behind all this effort is having a sustainable investment performance. Being sustainable is the new black in crypto markets and we will touch upon more points about this new standard. For any further questions, please reach us via or visit our CryptoIndexSeriesTM Platform for a better analysis of the crypto market space.     

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