The Digital Bank

What does the bank of the future look like? What does it lend? What are its operating units? What loans does it originate? What collateral does it use?

These seemingly traditional questions have no obvious answers anymore.

As digital currencies and NFTs gain prominence, the operating fabric of traditional banks comes into question, and a number of legacy bank operating models, including related operations are looking more redundant than ever, or likely better performed by non-bank companies have better systems to manage these tasks anyway (e.g. credit risk is better performed in an actuarial data provider in a systemic manner, rather than within a given banks' Credit Risk utility desk).

Depository Accounts?

Replaced by crypto wallets which will expand into crypto banks.

Commercial Lending?

Digital Currencies like $COMP.X or Stellar or several others provide automatic borrowing and lending capabilities already.

Wire/Money Transfer?

This should be the first one to go; simply waiting for a fiat-crypto exchange like Wyre etc to gain steam.. USDC can already form the basis of a low-cost, high-sped transfer.. (Of course, India still needs to revamp it's crypto currency regulatory posture aka lift the ban; and, China needs to provide consistent and formal regulatory guidance)

Fee-for-service models that banks use will not last in an eco-system that does not use a transaction processor. Long term, will these 'money-center' banks be relegated to only managing the money supply in the nation? What, if anything, do you think survives in the legacy banking model?

I think the financial markets will inevitably use and be underpinned by a basket of crypto currencies - whether SDRs or crypto pegged currencies. This opens an opportunity for a fundamental re-write the banking and financial industry, with “legacy” banks being relegated to implementing monetary policy and ensuring stability of nation-wide money supply, while consumer and commercial banking will move to crypto currencies.

Amrish Kaushik

Amrish Kaushik