Introduction

As blockchain technology and cryptocurrencies evolve, traditional finance and Web3 boundaries are becoming increasingly fluid. Positioned at the intersection of these two worlds, crypto banking services are reshaping the financial landscape and unlocking new avenues for innovation. In this evolving paradigm of “co-opetition,” emerging players like Best Wallet are rapidly gaining traction with cutting-edge solutions, while established financial institutions such as Standard Chartered and Goldman Sachs are leveraging their institutional strength to accelerate blockchain payment adoption and stablecoin issuance.

Meanwhile, innovative mechanisms such as “crypto deposit insurance funds” present novel strategies to mitigate risks like those witnessed in the FTX collapse. This article will provide an in-depth analysis of the current landscape in this sector and offer projections on the integration of cryptocurrencies into mainstream financial products by 2025.

Traditional Banks vs. Crypto Banks

Traditional finance prioritizes regulatory compliance and security, but is often hindered by slower transaction speeds, higher operational costs, and limited user sovereignty over capital. In contrast, Web3 crypto banks emphasize decentralization and autonomy and offer faster transaction processing and enhanced asset control for users. However, they contend with challenges such as regulatory ambiguity and technical vulnerabilities.

Looking ahead, the convergence of CeFi and DeFi is likely to emerge as a prevailing trend, exemplified by traditional financial institutions integrating blockchain-based payment solutions and DeFi protocols progressively adopting compliant KYC mechanisms to enhance security and market legitimacy.

Development Timeline

From 2017 to 2025, crypto banking evolved from Compound lending protocol (2018) to Anchorage which received approval for a national trust bank license (2021), and then to traditional finance giants like Visa and PayPal that entered the market. It progressively achieved compliance and mainstream integration.

In 2024, with the rise of Bitcoin Layer 2 protocols and other new technologies, it is anticipated that more crypto banks will receive regulatory approval by 2025. This will deepen the integration between traditional finance and crypto finance.

Representative Projects

Here are some representative projects in the crypto banking field. Each combines blockchain technology with traditional banking services to offer decentralized, secure, and efficient financial solutions.

AMINA Bank

Introduction:

AMINA Bank is the world’s first crypto bank to receive a full banking license from the Swiss Financial Market Supervisory Authority (FINMA), headquartered in Zug, Switzerland. It was established in 2018 with a mission to combine traditional finance with the crypto economy.

Features:

Offers storage, trading, and management services for crypto assets, and supports major cryptocurrencies such as Bitcoin and Ethereum.

Provides compliant digital asset banking solutions for institutional investors and high-net-worth individuals.

Emphasizes security and regulatory compliance, and utilizes cold storage and multi-signature technology to protect user assets.

Significance:

AMINA marks the recognition of crypto banks within the traditional financial system. It paves the way for institutional funds to enter the crypto market.

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Source: AMINA Group

Sygnum Bank

Introduction:

Sygnum is another crypto bank based in Switzerland, also licensed by FINMA for banking and securities trading. Founded in 2018, it positions itself as a “digital asset bank.”

Features:

Provides custody, trading, lending, and tokenization services for crypto assets.

Launched the world’s first regulated digital asset banking platform, and enables businesses to tokenize traditional assets (e.g., real estate, artwork).

Collaborated with Swiss Post to issue the Digital Swiss Franc (DCHF), exploring the Central Bank Digital Currency (CBDC) sector.

Significance:

Sygnum is innovative in asset tokenization and institutional services. It drives the integration of crypto technology with the real world.

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Source: Sygnum

Crypto.com

Introduction:

Founded in 2016 and headquartered in Singapore, Crypto.com is a global leading crypto financial services platform with a mission to promote the adoption of the crypto economy.

Features:

It provides storage, trading, lending, and payment services for crypto assets and supports various currencies, including BTC and ETH.

Users can pledge crypto assets for instant loans with flexible repayment terms.

Issues Visa prepaid cards for global use.

Utilizes cold storage and multi-signature technology to ensure asset security. \

Significance:

Crypto.com bridges traditional finance and the crypto economy through its payment and lending services, facilitating the widespread use of digital assets.

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Source: Crypto.com

Dukascopy Bank

Introduction:

Dukascopy Bank, founded in 2004 and headquartered in Geneva, Switzerland, is an innovative online bank regulated by FINMA. It specializes in foreign exchange trading and financial services.

Features:

Offers trading services for forex, stocks, crypto assets, and more, and supports JForex, and MT4/MT5 platforms.

Users can obtain loans by pledging crypto assets. It provides high-net-worth clients with the option to borrow up to 50% of their asset value.

Issues multi-currency bank cards (virtual and physical) for global payments.

Emphasizes security with cold storage and multi-signature technology to protect assets.

Significance:

Dukascopy Bank combines the rigor of Swiss banking with crypto financial innovation, and offers secure and flexible trading and banking services to global clients.

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Source: Dukascopy

Anchorage Digital

Introduction: Anchorage Digital is a U.S.-based crypto bank founded in 2017 and headquartered in San Francisco. In 2021, it became the first federally chartered digital asset bank approved by the U.S. Office of the Comptroller of the Currency (OCC).

Features:

Focuses on institutional-grade crypto asset custody, and offers a security solution combining cold storage and hot wallets.

Supports crypto asset staking, governance, and financing services.

Emphasizes compliance, and serves institutional clients such as hedge funds and family offices.

Significance:

Anchorage’s federal banking status signifies U.S. regulatory recognition of crypto banks, advancing the adoption of crypto assets in mainstream finance.

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Source: Anchorage

MakerDAO (Example of a Decentralized Crypto Bank)

Introduction:

MakerDAO is a decentralized finance (DeFi) protocol based on Ethereum. While not a traditional bank, it operates similarly to a crypto bank by issuing the stablecoin DAI through smart contracts.

Features:

Users can lock crypto assets (e.g., ETH) in Maker Vaults to borrow DAI, which is pegged to the U.S. dollar.

Operates without intermediaries, and is fully governed by code and community.

Provides decentralized lending and savings features. \

Significance:

MakerDAO represents the concept of a decentralized crypto bank and demonstrates how blockchain can reshape traditional banking services.

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Source: MakerDAO

Best Wallet (Decentralized Wallet + Trading Function)

Introduction:

Best Wallet is a decentralized cryptocurrency wallet established in recent years. It aims to provide users with a convenient tool for cross-chain asset management and trading. It supports over 60 blockchains and integrates a decentralized exchange (DEX), which makes it an ideal choice for users who want full control over their assets.

Features:

Supports over 60 blockchains (such as Bitcoin, Ethereum, Solana, etc.), with an integrated DEX offering low-cost cryptocurrency exchanges.

Introduces tokenized credit cards, and allows users to directly use their crypto assets for purchases without converting to fiat currency.

Emphasizes decentralization, with users fully controlling their private keys. Transactions are transparent, without intermediaries. \

Significance:

Best Wallet represents an innovation in decentralized finance (DeFi) in the wallet space. Its tokenized credit card breaks the barrier between cryptocurrency and everyday spending, which promotes the practical use of crypto assets while providing users with secure and autonomous asset management.

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Source: https://bestwallettoken.com/en

Nexo (Crypto Lending + Asset Appreciation)

Introduction: Nexo, established in 2018, is a platform based in Europe that provides cryptocurrency lending and asset appreciation services. By integrating blockchain technology and financial services, Nexo offers liquidity and earning opportunities. It has become one of the leaders in the crypto lending space.

Features:

Users can obtain instant loans by collateralizing assets like Bitcoin and Ethereum while retaining ownership of their assets.

Offers deposit interest yields from 6% to 26%, e.g., USDC at a 12% annual interest rate. Supports flexible conversion between fiat and crypto.

Operates in compliance with regulations, has financial licenses in multiple countries, and offers insurance protection for users’ assets. \

Significance:

Nexo combines traditional lending models with crypto assets. It opens up new avenues for holders to access liquidity and earnings. Its compliance and high-yield features promote the standardization of crypto financial services, which attracts more investors into the space.

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Source: https://nexo.com/earn-crypto

Revolut (Traditional Finance + Cryptocurrency Integration)

Introduction:

Revolut, established in 2015, is a UK-based fintech company that initially focused on traditional banking services and gradually integrated cryptocurrency functions. It provides a comprehensive platform for users to manage fiat currency, cryptocurrency, and stocks, and has become a choice for millions of users worldwide.

Features:

Provides an all-in-one service, including cryptocurrency trading, fiat currency exchange, and stock investments.

Allows users to use cryptocurrencies for everyday payments and offers cashback rewards for transactions.

User-friendly interface combining Web2 experience with Web3 asset management.

Significance:

Revolut represents the integration of traditional finance and the crypto economy. Its convenient services lower the entry barriers for ordinary users into the crypto market, promote the use of cryptocurrencies in everyday payments, and lays the foundation for the widespread adoption of Web3.

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Source: https://www.revolut.com/crypto/

Juno (Crypto + Fiat Fusion Accounts)

Introduction:

Juno is an emerging financial service platform established in recent years. It aims to provide users with a financial experience by merging fiat and crypto accounts. It is particularly suitable for individuals and freelancers who wish to use crypto assets in daily life.

Features:

Allows users to receive salaries in crypto (e.g., USDC), pay bills, and exchange between fiat and crypto.

Offers high-yield deposit returns to enhance asset appreciation.

Simple operations that lower the barriers to using and spending crypto assets. \

Significance:

Juno represents a new trend of integrating cryptocurrency with the fiat economy. Its innovative account model promotes the use of stablecoins in everyday transactions, offers users a financial tool that combines practicality and profitability, and accelerates the adoption of the crypto economy.

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Source: https://juno.finance/

Traditional Banks and Blockchain Services

Traditional financial institutions have not remained passive during the crypto wave, but instead actively embraced blockchain technology to strengthen their competitiveness. For example, Standard Chartered and Goldman Sachs are accelerating their adoption of blockchain payment systems and stablecoin services. They aim to build new financial infrastructure in the Web3 era.

Standard Chartered has recently tested a blockchain-based cross-border payment solution. It uses Distributed Ledger Technology (DLT) to reduce intermediaries and significantly enhance transaction efficiency. For example, its blockchain payment pilot with the Monetary Authority of Singapore has reduced cross-border payment times from several days to mere seconds. Additionally, Standard Chartered launched Zodia Custody, a compliant digital asset custody service for institutional clients.

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Source: https://zodia-custody.com/uk/

Goldman Sachs focuses on stablecoins and asset tokenization. It is exploring stablecoins pegged to fiat currencies like the US dollar to offer low-volatility crypto assets to institutional clients. It is also developing a blockchain platform for asset tokenization, which will enable traditional financial products (e.g., bonds, stocks) to be traded on-chain. This meets the needs of institutional investors and opens up new growth areas for Goldman Sachs.

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Source

JPMorgan Chase (JPM) launched JPM Coin to enhance interbank payment efficiency and further expand stablecoin payment scenarios through its Onyx platform. Meanwhile, institutions like Citigroup are exploring compliant stablecoins to challenge the market dominance of USDT and USDC, and drive their application in international trade settlements.

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Source

Unlike decentralized crypto banks such as Best Wallet, traditional banks tend to adopt the “permissioned blockchain” model, thus ensuring compliance and centralized control. While this sacrifices some decentralization, it is more compatible with existing regulatory frameworks. However, traditional banks’ innovation pace and flexibility still lag behind Web3-native projects, creating a nuanced relationship of competition and collaboration in terms of technological applications.

Crypto Deposit Insurance Fund

The fall of FTX has raised a critical warning: security flaws in centralized exchanges (CEX) led to billions of dollars in user losses, which undermine the trust that the entire industry is built on. In response, the idea of a “crypto deposit insurance fund” has started to take shape, which aims to offer users a safety net akin to traditional bank deposit insurance (FDIC).

The core of this mechanism is the establishment of a reserve fund, which can be used to compensate users for losses in the event of exchange bankruptcy or hacking. Several main models have been explored in the industry:

Decentralized insurance protocols (e.g., Nexus Mutual): Automatically compensates based on smart contracts, which avoids human intervention and enhances transparency and fairness.

Exchange-built insurance funds: Established by exchanges using part of the trading fees as emergency compensation funds.

Industry joint insurance: Multiple institutions jointly establish a risk fund to share losses and improve overall risk resilience.

While this concept offers a safety net for the market, its implementation still faces numerous hurdles, such as ensuring the fund’s sustainability, meeting regulatory requirements, and navigating the complexities of Web3 decentralized governance models. The operation of insurance funds would need to rely on smart contracts and community governance to maintain transparency and avoid the centralized pitfalls of traditional financial systems.

A well-established crypto deposit insurance fund can boost user confidence and may become an important step toward gaining regulatory recognition for crypto banking services. Its improvement will help bridge the trust gap between traditional finance and Web3, which lays the foundation for the long-term healthy development of the crypto industry.

Representative Projects

Nexus Mutual

Introduction:

Nexus Mutual is a decentralized insurance protocol running on the Ethereum blockchain. It uses a mutual insurance model.

Features:

Automated payouts through smart contracts, enhancing transparency and fairness.

Users can purchase insurance coverage for risks such as smart contract vulnerabilities or exchange security incidents.

Community governance model, where users holding NXM tokens participate in risk assessment and decision-making.

Significance:

It represents an innovative attempt at decentralized insurance and provides security guarantees for the DeFi ecosystem.

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Source: nexusmutual.io

Coincover

Introduction:

Coincover, founded in 2018 and based in the UK, is a centralized service provider offering insurance solutions for cryptocurrency companies.

Features:

Provides insurance for wallets, exchanges, and other services against hacking and private key loss.

Does not directly serve retail users but works with businesses (e.g., crypto exchanges), offering a “Coincover Protected” certification.

Partners with traditional insurance providers (such as Lloyd’s) to ensure payout capabilities.

Significance:

It represents the integration of traditional insurance with the crypto industry and provides compliance guarantees for institutional clients. \

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Source: coincover.com

Blockchain Deposit Insurance Corp. (BDIC)

Introduction:

Founded in early 2025 and headquartered in Bermuda, BDIC aims to provide global cryptocurrency insurance for digital wallets.

Features:

Plans to apply for underwriting status with Lloyd’s and develop customized crypto insurance products.

Covers risks associated with wallets holding specific cryptocurrencies and focuses on financial security.

Has branches in Switzerland, Hong Kong, and other regions, targeting global service.

Significance:

It represents the efforts of emerging specialized crypto insurance institutions, driving industry standardization.

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Source

Etherisc

Introduction:

Etherisc is a blockchain-based decentralized insurance platform focused on parametric insurance products.

Features:

Claims are automated via smart contracts, such as crop insurance based on weather data.

Supports users to invest in insurance funds and earn returns, as well as participate in claims processing.

Open-source modular design applicable to various scenarios.

Significance:

Shows blockchain insurance’s flexibility and inclusivity and expands the application scope of crypto insurance.

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Source: https://etherisc.com/

Looking Ahead

By 2025, cryptocurrencies are expected to achieve deeper integration into mainstream financial products, especially in areas such as mortgages, pensions, and insurance. With rising global inflation pressures and increasing uncertainty in monetary policies, the demand for diversified asset allocation will further drive the adoption of cryptocurrencies.

Three Key Drivers:

1. Technological Maturity and Regulatory Progress:

The development of blockchain payment systems and stablecoins has paved the way for easier integration of cryptocurrencies into traditional financial systems. For instance, Ethereum smart contracts can automate the issuance and repayment of mortgages, cutting costs and boosting efficiency.

1. Accelerated Institutional Capital Inflow:

Traditional financial powerhouses like Goldman Sachs and JPMorgan are slowly making their way into the crypto market, adding credibility to the space. Pension funds might also start allocating small portions to Bitcoin or stablecoins as a hedge against inflation.

1. Increased Consumer Acceptance:

Convenient crypto payment tools (e.g., Best Wallet) are driving cryptocurrency adoption in daily consumption, which strengthens public trust and usage habits with digital assets.

Possible Cryptocurrency Financial Applications by 2025:

Mortgages: Some U.S. fintech companies (e.g., Figure) already accept Bitcoin as collateral, and more banks may follow suit in the future.

Pensions: Institutions like Fidelity have allowed users to allocate part of their pensions to Bitcoin, and more companies are expected to offer crypto asset allocation options.

Insurance: Blockchain-based insurance protocols will keep evolving to improve the stability of smart contract execution, thereby boosting trust in the industry.

By 2025, cryptocurrencies could account for 10%-15% of mainstream financial products. The mortgage market might see pilot projects based on crypto assets, and pension fund allocations to cryptocurrencies could increase from under 1% to 3%-5%. However, this trend faces ongoing challenges, including regulatory hurdles, market volatility, and technological security concerns. Long-term industry growth will require collaborative efforts and continuous improvements.

Risks

Analyzing the risks facing crypto banks from the perspectives of technology, market, and compliance can help gain a more comprehensive understanding of the challenges these projects may face:

1. Technological Risks:

Hacking and Security Vulnerabilities: Crypto banks and DeFi platforms are frequent targets for hackers. If a security vulnerability (e.g., smart contract flaws or system malfunctions) occurs, it can result in stolen funds or loss of user assets.

Smart Contract Errors: In decentralized finance platforms, smart contracts are core technologies. If the smart contract code contains bugs, attackers may exploit these flaws to initiate attacks, leading to asset loss.

Technical Failures and System Issues: Crypto banks that fail to ensure system stability may face crashes or delays during periods of high transaction volumes. This can affect user experience and the liquidity of funds, thus damaging the bank’s reputation.

Case Study: In August 2022, the DeFi platform Ronin Network (linked to Axie Infinity) was hacked, with a vulnerability in the bridging protocol exploited to steal around $625 million in crypto assets. This incident highlighted the security risks involved in managing cross-chain assets within crypto banks and DeFi platforms, particularly when smart contracts and system designs are inadequately audited.

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Source

1. Market Risks:

Cryptocurrency Price Volatility: The extreme volatility of the cryptocurrency market presents a significant risk to crypto banks. The substantial fluctuations in asset values may affect crypto bank asset management, especially in lending and custody services. If assets’ value declines rapidly, borrowers may fail to repay loans, which can lead to liquidation risks for the bank.

Stablecoin Risks: Many crypto banks rely on stablecoins for daily transactions and deposits. If a stablecoin loses its peg (e.g., USDT, USDC, or DAI), it could trigger market panic and undermine user trust in crypto banks.

Liquidity Issues: Due to the relatively low liquidity in the crypto market, crypto banks may face liquidity crises when large-scale redemptions or investor withdrawals occur, thus making it difficult to redeem customer funds in time.

Case Study: In May 2022, Terra’s algorithmic stablecoin UST lost its peg, dropping from $1 to below $0.10. LUNA nearly became worthless. This triggered a DeFi liquidity crisis. The funds pool became unbalanced, Anchor Protocol collapsed, and billions were lost. LFG sold $2 billion in Bitcoin, causing a $2,000 drop in price and dragging the market down. This exposed the systemic risks of stablecoin de-pegging and the interconnected nature of DeFi.

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Source

1. Compliance Risks:

Regulatory Uncertainty: The regulatory policies for crypto assets and crypto banks vary across countries, and some regions lack clear regulations, which creates compliance pressures for crypto banks. Rapid changes in regulatory policies may force crypto banks to adjust their operating models, and they may even face the risk of compliance failures.

Legal and Tax Issues: Due to the absence of a comprehensive global tax and legal framework, crypto banks may face different compliance and tax challenges compared to traditional banks. In some regions, unclear regulatory policies may lead to government investigations, fines, or business suspension for crypto banks.

Licensing and Permitting Risks: While some crypto banks have obtained financial regulatory licenses, the revocation of these licenses or the expiration of their validity could restrict their operations. For example, some crypto banks have faced the risk of license cancellations for failing to meet regulatory requirements promptly.

Example: The U.S. OCC emphasizes reserve transparency and bank-led frameworks, with flexible but complex compliance. In contrast, the EU’s MiCA provides a unified regulatory framework, which requires strict compliance standards and legal enforcement, particularly focusing on consumer protection and financial stability. These differences show that the U.S. encourages innovation but faces higher risks, while the EU prioritizes compliance and safety.

Conclusion

As blockchain technology and cryptocurrencies evolve rapidly, the lines between traditional finance and Web3 are becoming more blurred. Crypto banks, positioned at this intersection, challenge traditional financial systems while also creating new opportunities for their upgrade.

Innovative crypto banks like Best Wallet lead digital finance with cross-chain asset management and tokenized credit cards. However, their compliance and widespread adoption still require time for validation. Traditional financial institutions like Standard Chartered and Goldman Sachs are also ramping up efforts in the crypto space, but their innovation speed and adaptability lag behind that of Web3 projects.

With the rise of new mechanisms such as crypto deposit insurance funds, market security and user confidence are likely to improve. However, the risks highlighted by centralized exchange failures like FTX continue to serve as a warning to the industry. Ensuring effective regulation and safeguarding user funds will remain a major challenge for the future of crypto banks.

As this transformation unfolds, the integration of CeFi and DeFi will likely become a key trend. While the use cases for cryptocurrencies are steadily growing, the volatile market, technological vulnerabilities, and the absence of a mature regulatory framework pose significant challenges for crypto banks in entering mainstream financial markets.

Looking ahead, we can expect cryptocurrencies to gradually gain a larger foothold in mainstream financial products. However, their risk management and compliance challenges will need further improvements to ensure sustainable growth.