Recently, a rather remarkable event occurred in the world of Bitcoin. A block was mined in which premium 12.5 BTC
per block turned out to be less than the transaction premium of
13.4 BTC
. Of course, such situations have happened before as a result of mistakes, generosity, or various experiments on the Blockchain, but this is the first time such a situation has arisen as a result of a trend in transaction costs.
Perhaps Bitcoin requires banks or their analogues?
Bitcoin and banks
Banking systems around the world controlled money, managed currency volatility, money supply, and inflation. People could not gain independence from banks without giving up the benefits of money and going underground or bartering exclusively.
In 2009, the founder of Bitcoin managed to come up with an idea that could give people freedom, a sharp reduction in the costs that people paid banks for their work, as well as fast and geographically unlimited transactions. Bitcoin (and other cryptocurrencies following it) is becoming both a functional and ideological competitor to banks.
In September 2022, the Basel Committee published a report showing that traditional banks may be struggling due to the emergence of cryptocurrencies.
Cryptocurrencies are spreading, but finding a common regulatory framework is still very difficult, since the positions of regulators vary from one country to another.
Summary
United BTC Bank is a solution for those who want to combine the convenience of using crypto and full-fledged banking functionality. The bank is not bad even if we consider it in isolation from the cryptocurrency component, and support for cryptocurrencies makes it even more attractive in the eyes of clients. The ability to instantly exchange crypto for fiat at any time in any country in the world and receive money from a regular ATM is worth a lot.
If this is your first time encountering such an offer, you can start with the UBB Crypto Saving starting tariff. Try the crypto bank in action, and then switch to a more suitable tariff plan.
Banks' attitude towards Bitcoin and blockchain
It is necessary to separate how banks treat Bitcoin and cryptocurrencies, and how they use the blockchain.
Bitcoins and banks are fundamentally different from each other:
- Bitcoins have a limited supply, the release of each block is accompanied by complex algorithms,
- The price of cryptocurrencies is usually determined by the supply and demand for it, and it rises as algorithms are more difficult to solve and there are many people who want to own BTC or altcoins.
Some traditional banks are starting to prevent their clients from trading cryptocurrencies and are blocking accounts that receive funds from cryptocurrency sales transactions. They often associate digital coins with money laundering, online drug sales and terrorist financing and are therefore reluctant to engage with people or companies that are associated with this market.
Jamie Dimon, CEO of JP Morgan Chase & Co, called Bitcoin a scam. And large American and British banks, such as Bank of America, Lloyds Bank or Citi Group, have decided to prohibit cryptocurrency purchases using a credit card.
The measures will aim to “protect banks from the risk of default by cryptocurrency clients” if they collapse, thereby avoiding systemic risk. However, this restriction cannot be imposed on debit cards.
On the other hand, some large banks have big ambitions regarding cryptocurrencies. For example, Goldman Sachs invested in Circle in 2015. Then, in February 2022, Circle acquired Poloniex, the fourteenth largest cryptocurrency exchange in the world, for $400 million.
When someone says banks versus bitcoin or bitcoin versus banks, they often mean the collapse of the banking system and cryptocurrencies as new markets. But it’s fairer to say that now this is not a threat, but an opportunity for the banking system. The use of blockchain technologies could solve many problems and reduce costs. Here are some of the blockchain features that banks are using:
- reduce the cost of clearing and other settlements, and will save millions of dollars in the future,
- A number of central banks around the world are trying to replace some segments of their payment system. For example, UBS in Switzerland is using a "utility coin" to create a cryptocurrency that can be converted into cash deposits at central banks.
- facilitate lending. For example, now issuing a loan to a large company can take about a month. Financial conglomerate Credit Suisse used blockchain at the bank to facilitate transactions.
History of the company
UBB Crypto Bank came into being in 2016, but don't think that the team is just getting started with crypto. The team members are affiliated with a large Australian bank, so they have financial experience .
Let's go through the key dates in the history of United BTS Bank:
- July 3, 2016 – a license was received from the Republic of Mauritius , where it is registered as a limited liability company. In the same year, the crypto bank invested over $10 million in ICO , and portfolios of cryptocurrencies were formed, including Bitcoin , Ethereum , Litecoin and others. Net income for the first year of operation was $8.4 million ;
- 2017 – our own trading platform , investments in crypto are being increased. This year there has been a cryptocurrency boom, the bank is investing in new ICOs.
- 2018 – the crypto bank was rebranded . But the changes affected only the design of the website and personal account; the company’s policy remained the same. The emphasis is on blockchain technology and working with crypto.
And some statistics - the turnover exceeds $750 million , more than 35,000 people have opened accounts here, and more than 1,000 corporate clients .
Banks working with cryptocurrency
Bank of America supports Bitcoin. Many exchangers have partnered with this bank for bank transfers when selling/buying BTC. However, not so long ago the bank stopped supporting it; now only clients of the Investment Trust investment fund can conduct transactions.
Bank of England is considering whether or not to issue its own cryptocurrency and is currently conducting research on the matter. The Bank does not consider BTC a risk to the financial system.
Bank Frick is a bank from Liechtenstein that is the first to allow clients to make direct investments through cryptocurrencies. It also provides its customers with protection from potential hackers through cold storage wallets. Frick allows you to trade five digital currencies, including Bitcoin Cash, Bitcoin, Litecoin, Ripple and Ether.
Russian banks have taken a wait-and-see approach to cryptocurrencies, but are actively talking about their developments in the field of blockchain.
For example, Sberbank opened its own laboratory, which will study and create products on the blockchain. The company also reported on transactions through HyperLedger Fabric. In addition, Sberbank participates in the regulatory sandbox for ICOs in Russian jurisdiction and has submitted an application to the Enterprise Ethereum Alliance.
Alfabank is also actively working with blockchain:
- back in 2016, the bank carried out a letter of credit transaction through a smart contract,
- joined R3 in 2022 and will use Corda for work,
- works closely with Sberbank in some projects,
- participates in the development of Masterchain.
The use of blockchain in Russian banks does not lag behind their Western colleagues. But as for bank accounts for cryptocurrencies, there is no such experience in the country. This is primarily due to the lack of regulation of the industry.
They also do not offer to invest in cryptocurrencies through investment offers on their websites, since the risks are difficult to assess.
To the question of which banks work with cryptocurrency in Russia, we can add that transactions on bank cards are not checked if the amounts are small (less than 600 thousand rubles). In principle, if you buy/sell cryptocurrency occasionally and payments from the buyer come from a normal and not a compromised card, then there should be no problems. Russian banks do not provide direct brokerage services.
Background
In 2016, it would seem, nothing foreshadowed trouble; transactions were cheap and cost $0.15 per transaction (50 Satoshi per byte). Note: in bitcoin, the volume of a transaction in currency is not important, only the size of the transaction is important, so a transfer of $1,000,000 costs the same as a $1 transfer
. Some enthusiasts thought, including myself, that the network should work without mining, when transaction fees bring more than mining. This moment has come, but everything turned out not so rosy.
It is important that the main reason for the increase in transaction costs is not the increase in the cost of Bitcion, because when comparing blocks we see that the price per byte increased in BTC, from 50 to 1250 satoshi (during the rush period). That is, if we take the tenfold increase in Bitcoin in $, we get that the transaction price increased from $0.15 to $21.7. Obviously, this growth was speculative and there were those who could afford to pay such a price for the transaction. But what about those who expected to pay Bitcoin in a store or use it for micropayments? Even those who would happily switch to other cryptocurrencies were trapped: in order to trade on the exchange, they would need to make at least 1 transaction.
Bitcoin bank account?
Some people still have the misconception that bitcoin deposits are kept in some kind of bank account. But BTC and other cryptocurrency wallets are a little different. Theoretically and practically, you can place a cold wallet in a safe deposit box. For example, a laminated piece of paper with private keys.
Opening a Bitcoin account is one of the first steps in investing in Bitcoin. This article explains how to create a Bitcoin wallet so you can start trading Bitcoin.
Ultimately, it is a digital account that allows you to store and process Bitcoins. It does not have most of the features of a traditional bank account. It is not managed by the bank. You do not receive an ATM card. There are no checks for verification.
But this wallet can be linked to a plastic card through additional services.
Also, some sites allow you to purchase bitcoins and other cryptocurrencies with fiat pairs through a bank transfer. We have collected the available options in a separate article. Often this method will not incur any commission at all.
A bank account in bitcoins can be opened in b2bPay and some other processing systems (they link the cryptocurrency wallet and bank account with government money).
On the blockchain with the B2B Pay service, you can have money in your bank account in BTC and at the same time have access to cryptocurrency or fiat. Security is also maximized through contracts and KYC on the blockchain. The site cooperates with the Barclays conglomerate.
Cryptobanks
There are many projects that can be described as blockchain banks or cryptocurrency banks. Let's divide them into the following categories:
- sites that buy a banking license to facilitate some operations within the project;
- decentralized banks that are trying to replace traditional solutions,
- HYIPs and pyramids that promise growth for storing cryptocurrency within the system, sometimes these can simply be funds that borrow cryptocurrency and are not an outright scam (but they are difficult to recognize).
Startup Circle (a wallet and investment platform) has applied to register as a federally licensed US bank. This step is necessary to trade tokens defined as securities, as well as to circumvent the difficulties of registering the site as a cryptocurrency company: and the rules still vary in different states of America.
Binance invested in Founders Bank, buying a 5% stake in the company. It is a decentralized bank based on blockchain. And this is not the only project of this kind.
The Bankera project is strongly associated with blockchain banking, which you can read about in the article.
A few more projects that are promoted under this heading (we cannot recommend these projects, since we have not studied them in detail):
- FORTY-SEVEN (an ecosystem that offers banking functions in cryptocurrency),
- Aurora (deployed on the Ethereum blockchain, specializes in loans),
- PAYPRO (more like a regular exchange wallet),
- Crypterium (ecosystem with banking services),
- Miroskii (proven scam),
- Polibyus (little information, except for custom articles),
- Datarius (social crypto bank).
The bank must meet the following criteria:
- security, so that a person has a reason to take money to the bank and not keep it at home,
- efficiency to easily pay for services, take out loans or brokerage services,
- passive income for storing cash.
If we ran our own crypto bank, could we effectively replace these three areas? Can we consistently earn interest and passive income from our own funds? Not all projects answer this question. And, unfortunately, many cryptocurrency banks are pyramid schemes, and the interest on storage comes from new users.
Ideally, a decentralized bank is a platform with all the functions of a regular bank, replaced by smart contracts and p2p, and supplemented with artificial intelligence and machine learning to operate independently of a third party. Such banks can scale, are independent of bureaucracy, and make access to finance easier for people around the world.
The main problem people say about banks is that we don't pull money out of thin air. For the majority of the population, the cost of money is high: time, health, and part of earnings in taxes. And the borrower receives bank money at interest.
Cryptocurrencies do not prohibit the creation of money out of thin air (as the state does), but allow everyone to create money out of thin air. The big problem here is getting people to accept your money.
There is such a model of decentralized banking as a “debt report”. You buy coffee at a coffee shop. With your electronic wallet in a still unknown system, you transfer to the seller a promissory note for 350 rubles. You have a certain period for payment. If earnings appear in your system (an accrual from an employer or a gift), you repay the debt and the obligation ends. And all this is done automatically using smart contracts and blockchain. Since this digital exchange system is not a currency and is not directly used to store or exchange any money, none of the existing laws and regulations for banks apply to it.
The current monetary and banking system arose because it was a radical technological advance over the economic technologies that existed before it. They made growth and prosperity possible. But the path of banking development does not stop there.
Investment portfolios from UBB
In your personal account, under the Investments tab, you will find a description of the portfolios available for investment.
Cryptobank offers portfolios:
- Raw materials – in 2022 it grew by 71.66%. Here, United BTC Bank analysts include commodities with the greatest growth potential. The portfolio consists of energy resources, agricultural products and other goods (cattle, agricultural fertilizers, wool, etc.);
Commodities investment portfolio - Global Brands – client funds are invested in the stock market. The portfolio is balanced, it includes both shares of top companies with high reliability, and risky securities with potentially high returns. The balance of the portfolio is evidenced by the result for 2022 - it grew by 48.43%;
Global Brands investment portfolio - Foreign exchange – there is no universal solution; the composition of the portfolio is tailored to the client. The total costs are 0.55%, which is considered a small commission.
Currency investment portfolio
There is also a crypto-portfolio, in which investments are made in electronic money.
All types of investment portfolios are a good way to invest if standard bank interest rates are not satisfactory. Growth, of course, cannot be 100% guaranteed, but at UBB the portfolios are well compiled and the balance between risk and profitability has been selected.
