How banks help crypto firms succeed in new markets

12 Oct 2022

How crypto companies can harness the strengths of banks in their expansion strategy and grow responsibly.

Cryptocurrency started out as a nascent sector when it first surfaced in 2009 and was embraced by a small group of supporters who recognised it as an innovative store-of-value currency and electronic peer-to-peer cash system.

Fast forward to today and the crypto industry has reached a market capitalisation of USD1.02 trillion, with more countries introducing or proposing new laws to regulate digital assets to protect investors and bolster their economies by attracting foreign direct investment.

The surge in investors is being driven by a handful of key crypto hubs, including Singapore, Japan, and the UAE, which have adopted regulations overseeing virtual assets to ensure responsible growth in the sector.

However, numerous challenges remain for crypto players navigating new markets and varying regulations as they ramp up their global expansion strategies to tap into new segments of the world’s population.

How can governments maintain control but encourage freedom to innovate?

Quite a lot of regulators in many jurisdictions are still at that formative stage of understanding how it works and the mechanics of the different parts of the crypto ecosystem, according to Danielle Szetho, Head of Fintech Client Advisory at Standard Chartered.

This ranges from basic trading to crypto as a payment mechanism and a store of value, as well as DeFi and other types of protocols, such as swaps and transfers. But markets like Singapore, Japan, and the UAE embraced this quickly and created the regulatory frameworks and clarity that actually help the industry quite substantially.

Transparent partnerships are a critical complementary component

Laws overseeing the digital asset sector are key for partnerships between traditional banks and crypto companies as they form a bridge between two regulated entities. This helps banks and crypto firms to develop a close, transparent partnership that leads to responsibly expanding the industry to a wider demographic of investors in new markets, Szetho says.

Eric Anziani, Chief Operating Officer of Crypto.com – one of the world’s fastest-growing crypto platforms serving 50 million users across 100 markets – agrees, saying it is critical that partnerships between banks and crypto companies share a common vision.

For Crypto.com, which has partnered with Standard Chartered for its banking services, that vision also includes the belief that cryptocurrencies can support broader financial empowerment and inclusion through the power of blockchain technology.

“We recognise more and more that through strategic banking relationships, we will be able to open global commerce for a whole new segment of the population that has not had access to it before,” Anziani says.

“We see tremendous opportunity to leverage the technologies of today through a path of responsible innovation to create a financial system that is more affordable, efficient, inclusive, and secure,” he adds.

Banks are necessary in the crypto ecosystem

Needless to say, while crypto companies and banks are competitors in the new economy, traditional banking services are the underlying factor for crypto companies to operate in any market.

That said, the crypto industry is unique in that there probably is no other industry which witnesses real-time transactions happening 24/7 as much, and therefore where the provision of virtual accounts and API could not be more critical in enabling a business.

Crypto companies rely on banks to facilitate the speed of transfer of funds necessary to meet customer needs through the use of API, and track and reconcile transactions efficiently through virtual accounts, thereby allowing crypto companies to send credit notifications to clients and credit funds to customer wallets as soon as transactions are carried out.

Regulations are vital for responsible expansion

Compliance was the top priority for Crypto.com to secure its licence to operate in Singapore and the UAE, with the company required to undergo stringent regulatory review processes in both countries.

This included an assessment of Crypto.com’s governance structure, qualifications and experience, ability to comply with obligations such as safeguarding investors, technology risk management, audit arrangements, as well as its initiatives in educating customers to invest safely and be aware of potential scams.

“The Monetary Authority of Singapore sets a high regulatory bar and we appreciate that because we believe it cultivates innovation while also protecting consumers. Singapore is setting an example of how regulators can prioritise both aspects,” Anziani says.

Another regulatory requirement was for banking partners to be regulated in the country. Working with a bank like Standard Chartered that has a wide geographical network and in-country knowledge allows crypto companies to mimic its success from one country to another more easily and seamlessly.

And this was exactly the case for Crypto.com who secured an in-principal approval for a Major Payment Institution Licence from the Monetary Authority of Singapore and subsequently a provisional approval for a Virtual Asset License from Dubai’s Virtual Assets Regulatory Authority. The company is currently expanding across Europe after receiving approval to operate in Italy, Greece, and Cyprus.

What does the future hold?

There is no doubt that digital assets are here to stay, and the crypto sector has grown to become an important part of the Web 3 economy and global financial ecosystem.

And while innovation is a key driver of success, it is also imperative for crypto companies to build a culture that prioritises compliance and understands regulatory requirements.

To this end, crypto companies will be looking for banking partners who can support them in their growth plans.

As Anziani says, “We are committed to accelerating the adoption of cryptocurrency responsibly and empowering the next generation of builders, creators, and entrepreneurs to develop a fairer and more equitable digital ecosystem, and we look for banking partners who recognise that same promise and potential that we do.”

“Standard Chartered’s efforts to collaborate with key leading partners like Crypto.com takes us steps closer to that future and means that we have already established considerable experience and leadership in this space,” Szetho adds.