Kraken, a cryptocurrency exchange which is located in San Francisco, is becoming a bank. Once Kraken becomes an official chartered bank, the currency exchange will be able to offer much more banking and funding options to its customers. Kraken already gives SWIFT and FedWire funding to its US customers, but it is possible thanks to Silvergate Bank who is proud to cater to 880 digital asset clients depositing $1.5 billion with the bank. Based on this successful model, more banks will embrace the huge cryptocurrency potential and join the market. For instance, Coinbase and Gemini, two famous cryptocurrency exchanges, are now customers of JPMorgan.
Their customers will soon be able to embrace full banking services, including both crypto and fiat currency services. This means other banks must be aware of the fact that they are lagging behind in this new trend.
Banks need Investigative Tools
The encrypted nature of blockchain gives it a huge advantage, but also, it makes KYC an issue too. Banks need to find the origins and destinations of transactions. In order to do that with cryptocurrency, banks are going to need blockchain explorers and risk scoring tools. These tools will help banks to go a step further than the level of services available to them now.
The technology for such forensics tools is already here which employs techniques like clustering and heuristics. Investigators can use these tools to follow digital paper trails across addresses, wallets, transactions, blockchains and other digital entities. There are cloud-based companies working on this field enabling investigators to detect and unmask the criminals. It is going to be much easier as, honestly, fiat currency is the currency of money laundering.
What will happen if banks don’t join the party?
In less than 2 years, 18 months to be more precise, any bank that has not yet embraced the full score of the cryptocurrency market will plunge quite badly. Banks all around the world must understand now, and it is important to insist on now, that traditional fiat banks soon become obsolete; the future of banks are crypto and fiat services combined.
Let us just mention here that even the governments are working on their own government-backed cryptocurrency to introduce to the world. Our children will walk into a bank, open their savings account or investment account which has both crypto and fiat currencies. This is not just some far-fetched futuristic vision; the grounds are being prepared.