Crypto Needs Banks

Access to traditional banking services is important for any company — crypto companies included.

Photo by Etienne Martin on Unsplash

One of maybe the least talked about topics, but most relevant is the need for crypto companies to actually use banks (or at least traditional payment service providers). Companies operating in the crypto arena are still companies at the end of the day.

Imagine trying to run a company without access to corporate banking accounts to pay employees, places to store your money, quick access to liquidity when needed, etc. Could theoretically be done without banks, but certainly becomes more difficult and arguably more costly.

Recently, if you’re in the web3 news circles, you’re probably see headlines like:

Source: Blockworks

Source: Wall Street Journal

Source: Bloomberg

While certain jurisdictions like the United States and the United Kingdom appear to be cracking down on the traditional banking sector’s relationship with crypto, there is an apparent shift to more welcoming jurisdictions like Hong Kong, Singapore, Japan, United Arab Emirates, etc.

But, why are these banking services so valuable to these companies? Let’s look a few reasons (non-exhaustive) why:

1. Corporate Banking Accounts: access to a bank account to both store and run your corporate finances like payroll, cost of goods, etc.
2. Customer Deposits (Custody): certain exchanges will work with regulated banks to store customer deposits on their platform
3. Fiat On / Off Ramps: operating in crypto, you typically are handling a lot of crypto — however, you need to convert that into local fiat currency when operating with non-web3 companies and / or your consumers
4. Payment Processing: depending where, this could be handled by a payment processor, but essentially this allows your crypto company to process and settle payments for goods and services
5. Liquidity: banks inherently operated in the space of providing liquidity when needed, and crypto companies are no different in that they have both short-term and long-term liquidity needs

I’m sure there are other benefits to working with traditional banks, but these are some of the key reasons why this is so important and why companies want that access, especially as they scale. Seems pretty important, right?

With the collapse of several notable crypto companies last year, alongside the recent banking debacle of crypto-friendly banks — signals globally seem to indicate it’s increasingly harder for crypto companies to get access to banking services. This will most likely continue to be a reality for companies operating in certain jurisdictions; however, as digital asset regulation rolls out across the globe — look to where governments and regulators are encouraging banks to provide these services (take the Hong Kong example above).

For those working in crypto — let me know what else I’ve missed!

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