The Rise of Crypto Banks - Decentralization is the destination — but regulation might just be the road that gets us there (24.04.2025)
In a world built on the idea of decentralization, why are some of crypto’s biggest players acting like... banks? The financial landscape is undergoing a profound shift. Leading cryptocurrency companies are making bold moves into traditional banking, a development that could revolutionize our understanding of money, transactions, and financial infrastructure. Industry heavyweights like Coinbase, Circle, BitGo, and Paxos have formally applied for bank licenses or charters—ushering in what many are calling the dawn of the "Crypto Banking Era." While cryptocurrencies and blockchain technology were born to disrupt traditional finance, a growing number of crypto firms are now seeking US banking licenses. Those Companies are blending the disruptive ethos of crypto with the trusted framework of traditional banking. So what gives? Let’s dig into why crypto banks are headed toward regulation — and why that may not be such a bad thing.
✨Get a Dissertation Research Proposal on this Topic
Fill in the form and we will shortly create and send you the research proposal on "The Rise of Crypto Banks - Decentralization is the destination — but regulation might just be the road that gets us there " for free.
The Rise of Regulated Crypto Banks
Despite the decentralized promise of blockchain, the crypto industry has realized that to achieve mass adoption, some structure is necessary. Here´s why crypto-native firms are knocking on the doors of US regulators:
Legitimacy & Trust
Crypto still struggles with its reputation — from the collapse of FTX to rug pulls and scams. Becoming a licensed bank under US law offers credibility and helps firms attract institutional clients and mainstream users. Example: Kraken Bank, approved in Wyoming, is set to be the first US crypto exchange to function as a fully regulated bank. It signals safety, compliance, and a commitment to transparency.
Access to Core Financial Infrastructure
Banking licenses offer access to payment systems like ACH, Fedwire, and potentially the Federal Reserve. This allows crypto firms to cut out middlemen, improve efficiency, and reduce costs. Example: Paxos has conditional approval from the OCC (Office of the Comptroller of the Currency) to form a national trust bank. This move positions Paxos to issue tokenized assets and stablecoins while accessing traditional rails directly.
Bridging Fiat and Crypto
People still live in a fiat world. Crypto banks serve as bridges, offering seamless conversion between USD and digital assets. Example: Circle, the issuer of USDC (a widely used stablecoin), has applied for a full-reserve banking license. Its goal? Become a crypto-native national commercial bank — fully regulated and integrated with the US banking system.
Expanded Services
A banking license allows crypto firms to offer savings accounts, lending, and custodial services legally — much like traditional banks. Example: Coinbase has made moves toward becoming a financial services super-app. While not yet a bank, it offers custodial services, staking, a crypto debit card, and is actively exploring banking-style licenses globally.
Institutional Demand & Custody
Big institutions want exposure to crypto — but they need compliant, secure, and insured custody. Example: BitGo, one of the largest crypto custodians, was approved to operate as a trust company in South Dakota. It serves institutional investors, providing regulated custody and compliance tools.
Summary: Is This a Betrayal of Crypto’s Ideals?
Not really. It’s an evolution.
Yes, blockchain was designed to cut out middlemen. But most people aren´t ready to be their own bank. They want convenience, safety, and integration with the real world. Crypto banks offer a hybrid model: decentralized infrastructure, centralized user experience. By seeking licenses, firms like Coinbase, Circle, Paxos, BitGo, and Kraken are building bridges between the decentralized future and today’s regulated financial reality.
About ECEBiS
At ECEBiS you are going to understand what will change the trajectory of the financial industry. You will develop a transversal view on the forces that are shaping the future financial industry.
From payments and lending to investment and money management, tech providers are actively shaping the future of the financial landscape - even pushing the boundaries of currency itself. You might evaluate the impact of robo-advising on health management and examine portfolio recommendations from a diversified set of RAs and attempt to identify the factors behind proposed splits between asset classes.
ECEBiS is a platform in academic research on new business models and innovative products. We investigate in fast moving sectors that are reshaping the financial world of tomorrow and pioneering new ways of doing business. We want to attract outstanding ECEBiS students in finance with experiences and exposures, who intend to
Doctorate of Business Administration (DBA) in Finance (online, 3 years part-time)
develop knowledge on challenges that shape the future of financial industry
engage with a program that offers the convenience of online learning with the benefits of accreditation and global reach.
raise awareness on the importance of fintech and sustainability in finance
identify the best practices in the financial industry to spread positive changes
Go beyond the virtual classroom and network with other ambitious executives and entrepreneurs as you expand your credibility and expertise in the world’s most transformative fields.