B.Y.O.B. - Be Your Own Bank

Traditional banks are mostly old world relics, slow to move and conservative in action. Ever since the financial meltdown of 2008 and the banking and lending scandals which were at the root of the fiasco, the general public’s faith in such institutions crumbled. Uncorrelated to the gold standard decades ago, the United States dollar stays relevant and is valued only on the basis of belief. With our trust in the banking system and modern day financial systems flagging, purchasing power may also decrease causing fluctuations with inflation, stressing the entire system. In fact, failing centralized government fiat has been a hot topic in the news as countries such as Venezuela are watching their currency value go up in smoke. It is for these reasons that more and more people are turning to the digital age for answers.

With the rise of cryptography and blockchain technology banking, transferring wealth, and trading has become much more personal. Just as email surpassed the postal service so too is Bitcoin undermining, overriding, and changing the banking world. Yet even 10 years after the birth of Bitcoin we are still in the early adoption phase. Big banks believe that cryptocurrencies are still too volatile, that this new technology is vulnerable to hacks, and that it does not yet play a function as money. While there is truth to their fears, one of the biggest advantages of cryptocurrency is their decentralized nature, questioning the relevance of centralized banks, their 3rd party fees, and regulation. Cryptocurrency inflation also ceases to be an issue as most “coins” have a coded hard cap or maximum supply which means that more cannot be simply created or increased artificially. Furthermore, power and control are given back to the individual as it is the user who has access to the personal wallet and private key. All this with the ongoing improvements in blockchain technology have also made transaction speeds increasingly faster and the costs involved with transactions decrease. The question is not if blockchain technology will ever be able to wrest power away from the traditional monetary system and fiat money, the inevitable question is how and when they will adopt it. We are already seeing how many countries are turning to cryptography as a solution, improving upon their monetary system.

Words you may not hear often in the crypto sphere: Jamaica, Kenya, Uruguay, and Panama, yet these are just a few of the countries playing host to a growing group of venture-backed bitcoin companies that are using blockchain technology to tackle their national payment challenges. Even the government of Argentina, one of the richest countries at the turn of the 19th century, has defaulted on debts in the past. The result was that anyone saving in the Argentinian currency lost everything, their money becoming worthless because faith in the government was gone. Wall Streeters may see Bitcoin as tulip bulbs for millennials, but for the long-suffering citizens of Venezuela or Zimbabwe, the cryptocurrency is emerging as a safe haven. Developing markets within second or third world countries, with high government debt levels and a sense of eroding currency value are ripe for the transparent, peer to peer system that Bitcoin and blockchain technology represents. Blockchain is a digital ledger in which all transactions in are chronologically and publicly recorded. Countries with rapidly growing populations and dynamic economic growth are increasingly considering the use of Blockchain to solve the problem of institutional inefficiency. In Haiti, it was used to rebuild a nation where property ownership information was lost after a catastrophic earthquake in 2010 and in Georgia, it was used to move land registry records from state institutions to Blockchain ledgers; and in many vulnerable countries it is being used to better track the flow of humanitarian aid and finance. Central, South American and African countries are embracing cryptocurrencies and using them daily for payments for goods and services. Kenya, in fact, is the world leader in digital and mobile money with over 75% of the adults in Kenya using a digital currency called M-Pesa. Hundreds of millions of developing-world residents are educating themselves to embrace digital currency bypassing their outdated banking systems. Yet still, over 2 billion adults remain unbanked.

While much of institutional money may fear smaller countries political unrest, domestic volatility, and supposed unskilled workforce, it is the former that blockchain technology can ease and the later that is untrue. Governments’ old world mentalities are failing while the people themselves are hungry for change, excited for the opportunity, and becoming more and more qualified. 3rd world coding boot camps, shifting awareness and increased inclusion will bring countries long forgotten by silicon valley to the forefront. Furthermore, it will be these emerging markets that will catch up to the rest of the world quickly and without hesitation.

While tradition banks drag their feet there are several of new hybrid banks gaining attention and making waves as they seek to bridge the gap between the fiat and digital worlds. Banks such as B52 are establishing the world’s first bank which allows regulated access to blockchain-based banking with any assets or currencies thereby facilitating an ecosystem which creates collaboration, services, smart data, and network effects. The current crypto community is disconnected from basic banking services while at the same time traditional banking users are interested as never before in cryptocurrencies. B52 is in the process of acquiring an existing European Bank, fully licensed under the European Banking law. There’s clearly a large demand in the banking market, where banks are simply not addressing all of modern customers needs: that is to use conventional fiat currencies, cryptocurrencies and the combination of both, using digital means to transact for tailored banking services. Other banks are wanting to capitalize on this opportunity of reinventing the new banking paradigm. Already live with a banking license and aimed towards supporting cryptocurrency in retail are Bankera, Crypterium, Polybius Bank, FIINU, and BABB. Bankera was founded in early 2018 after raising $100M in an ICO and acquiring Pacific Private Bank for an undisclosed amount. They are building a digital bank for the blockchain era. Crypterium raised $51M in their ICO and is developing a mobile app that allows instant payments in cryptocurrency using existing payment infrastructures such as NFC terminals or QR codes. They will allow their users to issue a virtual card, bind it to their crypto account, link it to Apple Pay, Samsung Pay or Android Pay, and pay with crypto by simply using a smartphone. Polybius Bank will combine features of modern banking, IoT, Big Data and Blockchain-based technologies while also meeting security and UX requirements. The Digital Pass technology, developed by HashCoins and implemented into Polybius Bank, will serve as an automation and digitalization ecosystem, allowing them to not only integrate single companies but entire industries enabling access to financial and industrial services. In mid-2018, Babb raised $22M in their ICO. The first world bank for the micro-economy: a global marketplace for human innovation, financial autonomy and wealth creation. BABB App Ltd is an authorized payment institution by the Financial Conduct Authority.

A new generation of banks is poised to capture the imagination, not to mention the accounts of the millennials and future thinking generations who want out from under the centralized fee filled thumb of traditional banks and banking systems. These new tokenized hybrid banks are making banking more personal, liquid, and decentralized than ever before. Old world banks will have to run and not walk in order to keep up with the swift winds of change that will inevitably blow away the ancient system currently in place.

-Gabriel Francisco

www.gabrielfrancisco.com