Why more fintechs and institutions should offer crypto products – Tearsheet
As of March 2021, the global cryptocurrency market cap had reached $ 1.7 trillion, putting crypto’s dominant status beyond doubt. The largest banks that have recently partnered with Paxos to launch crypto trading services, have benefited from an accelerated increase in revenue, user engagement and customer retention. Financial services firms that took an early leap of faith to activate crypto services in recent years have benefited significantly:
- Square generated $ 3.51 billion in bitcoin revenue in the first quarter of 2021, which generated $ 75 million in gross profit over the same period.
- 17% of Robinhood’s total revenue also came from cryptocurrency transactions in the first quarter of this year
- SoFi CEO Anthony Noto said, “Feedback from our members has made it clear that a significant percentage is not only interested in learning more about cryptocurrencies, but is also already buying and selling crypto.”
- Revolut CEO Nikolay Storonsky said: “We have been amazed at the incredible demand for our cryptocurrency functionality.”
Companies that expand their financial service offerings to include crypto products and trading have a lot to gain.
Companies that have integrated crypto capabilities into their product offering have unlocked new revenue streams, attracted new customer segments, and increased user engagement and revenue per user among existing customers. In the first quarter of 2021, 9.5 million customers traded cryptos on Robinhood Crypto, up 458% from 1.7 million in the previous quarter. Square tells a similar story, stating: “Bitcoin has helped increase engagement in our larger ecosystem, as bitcoin assets use other products, such as cash card and direct deposit, more frequently than the average customer of the Cash application. ”
However, offering crypto products and trading requires navigating a complex regulatory landscape.
Companies offering crypto buying and selling to U.S. customers must have at least one Money Transfer License (MTL), which is issued state by state. Other regulatory licenses are also available – such as a Charter of Trust or BitLicense from the New York Department of Financial Services (NYDFS) – but these designations are often more difficult, time-consuming, and expensive to secure. Alternatively, if a company does not have an MTL, BitLicense, or NYDFS Trust charter, it can also partner with a provider such as Paxos who has the appropriate license to offer crypto services to clients.
As the world’s premier regulated trust company, Paxos also offers solutions to its partners that leverage its custodial services, turnkey APIs, and trading on their own digital asset exchange – allowing any business to financial services to offer the buying, selling, holding, sending or receiving of cryptographic capacities to their own customers.
When looking for a company to hold your clients’ crypto assets, the safest and most secure option is a regulated trust company. A regulated trust company like Paxos (which uses a combination of cold and hot wallets) offers the highest standard of custody for three reasons.
- First, trusts are qualified custodians and, as such, are legally required to securely hold cash, cryptocurrencies, securities, and commodities on behalf of clients.
- Second, client assets held by trust companies are protected from bankruptcy, which means they are held independently of the operations of the business and protected from bankruptcy proceedings.
- Finally, since the assets are held in FDIC insured bank accounts or in instruments guaranteed by the US government, their value is guaranteed.
With Paxos Crypto Brokerage, powerful APIs make it easy for any financial partner to add crypto capabilities to their desktop, web, or application platform. Paxos manages the complexity of creating and sustaining these markets while its partners can manage the customer relationship and in-app experience. Executing trades can also be made much easier with Paxos’ itBit digital asset exchange, which features the best blockchain monitoring software and institutional grade systems designed to prevent market manipulation.
Want to learn more about getting your own crypto offering to market quickly? Click here to find out how Paxos can help you.