Businesses worldwide are facing growing demand from customers, prospects and partners to incorporate cryptocurrencies into their operations and treasury functions. Mainstream banks have been slow to respond. Meanwhile, existing crypto platforms only serve the extreme ends of the customer spectrum – that is, either small-scale retail customers or multi-million dollar institutional clients.
The idea behind BVNK is to address this banking gap. Through the single BVNK banking platform, businesses can manage treasury, payments, yield, and foreign exchange between fiat currencies and digital assets, according to their unique commercial needs and appetite for growth.
Jesse Hemson-Struthers is a serial cryptocurrency entrepreneur. He spotted the market opportunity for BVNK’s services while trying to find third parties that were able to facilitate digital asset banking requirements. He is also known for founding Coindirect, a cryptocurrency payment platform that provides businesses with cross-border payment solutions for emerging market operations.
What has been the traditional company response to financial technology innovations nationally?
Traditional banks have a poor reputation when it comes to the quality of their service typified by excessive and opaque fees, clumsy authentication processes and lengthy-time spans for completing standard services like transactions and payments.
However, customer demand for intuitive, digital-first personalised financial services is driving the emergence of new providers and transforming the sector. We have already witnessed this sea change with so-called neo-banks that have been steadily acquiring millions of customers around the world.
In reality however, open banking and neo-banks have changed very little about the underlying banking systems. Much of the innovation has happened at the user interface or application level. The services are still being built on top of the outmoded, pre-digital banking infrastructure.
For example, SWIFT, the global network for international payments, laid down the foundations of its systems in the 1970s. Transfers can still take four days to arrive, unnecessarily slowing the movement of money, goods and services around the world.
How has this changed over the past few years?
What we’re seeing now in the cryptocurrency sector is innovation based around a rethink of how blockchain and digital assets can transform core banking – where and how it can make processes and systems quicker, more efficient with lower costs. Blockchain and digital assets make it possible to facilitate instant, decentralised, cross-border exchange with low fees for example. And this is just the beginning.
That potential for innovation is already starting to be applied to some areas of core banking, eliminating bottlenecks and the inefficiencies of legacy structure. As a result, blockchain and digital assets are serving as a catalyst for businesses to rethink their capital management. This innovation is particularly evident in emerging markets where the fiat banking infrastructure presents more obstacles.
Digital asset lending markets are also now running in parallel to their fiat counterparts and are well on their way to becoming an established part of global financial systems. Businesses are waking up to the fact that digital asset markets offer high yields that rival the low to negative yield fixed-income investments offered by the less dynamic traditional financial world.
Is there anything that has created a culture of change inside the company?
The ability to prosper amid, and capitalise on rapid change is central to the BVNK proposition. Agile responses to new technologies, shifts in market requirements and the strengthening of regulation are key.
We believe that the worlds of traditional finance and digital assets are converging. As that happens we are enabling our business customers to bridge between fiat and cryptocurrencies to manage treasury, payments, yield, and foreign exchange.
This means that many of the solutions that we are building are new and deliver banking experiences for both crypto-native and crypto-curious businesses. . For instance, BVNK Yield offers diversified funds across a number of leading institutional lending counterparties. Business customers can access institutional crypto lending with a much lower capital requirement, and earn yield without direct exposure to the volatility of cryptocurrency markets.
What fintech ideas have been implemented?
For us, in order to keep at the forefront of industry and deliver the solutions that our customers are looking for, we’re less focused on building everything ourselves and more on partnering with best-in-class providers of custody solutions, lending desks and liquidity pools.
BVNK recently partnered with Copper, a company that provides insured end-to-end secure custody architecture for digital assets by integrating Copper’s custody via its ClearLoop feature into BVNK’s flagship Yield service.
What benefits have these brought?
The integration with Copper’s ClearLoop means that our clients can deploy digital assets to lending counterparties to earn returns, typically between four and eight per cent, without them ever leaving the protection of Copper’s secure custody.
This not only diminishes counterparty and settlement risk but also allows for instant completion of transactions and access to funds.
Do you see any other industry challenges on the horizon?
BVNK closely follows regulatory developments. When new technologies emerge and authorities look at how to regulate them, it is more often the case that they attempt to fit them into existing regulatory frameworks. In the US we’re seeing that this approach is leading to several authorities with different remits staking a claim to regulating the crypto sector. This piecemeal approach is unhelpful and is hobbling progress.
The situation in Europe is far more straightforward with a pan-European Union approach. The EU may not be able to match the entrepreneurial energy and investment muscle of the US but, in taking a consistent approach to regulation on a continent-wide basis, it has the potential to shape a hospitable environment for the development of the sector.
In the UK, it’s encouraging to see the formation of the Crypto and Digital Assets Group, composed of UK MPs and members of the House of Lords, working to make sure that new rules for the digital asset industry support innovation.
As we look ahead to 2022, we see momentum in the digital asset space continuing and we aim to be at the forefront of developments.
NFTs, the metaverse, Web 3.0 are all signs of where the industry is heading with blockchain underpinning these developments and all that it can do to automate agreements and exchange, along with the ability to manage, monetise and record ownership, distribution and usage rights.
Businesses innovating in this space (crypto-native companies) need a banking provider that can bridge the gap between fiat and cryptocurrencies. Whilst those companies that are increasingly eager to take advantage of the growing array of digital assets (crypto-curious companies) need the financial products that support them with their treasury, investment and payment objectives.
More and more traditional venture capital firms, for example, are setting up crypto funds and pouring billions into these crypto companies and a growing number of mid-market businesses are joining the cryptocurrency fray. This capital needs an adequate banking infrastructure to be mobilised and the financial products to make its movement dynamic, fluid and secure.