A Swiss neobank is planning to upend the banking industry with the revolutionary new technology it is developing. Zurich-based Fiat24 has developed the first-ever core banking system built entirely on the blockchain, an innovative technology that has been dubbed the “bank killer” by innovators.
Company co-founder Yang Lan has a background in the traditional banking sector, with many years of experience working for top firms such as Commerce Bank, Deutsche Bank and UBS, but he eventually grew tired of the traditional banking industry and launched his crypto career in 2016.
The company uses smart contracts to automate many of the tasks currently managed manually by banks or tech giants, such as executing and verifying transactions. A blockchain-based process lends itself to being leaner and far more efficient then its traditional counterpart, and what’s more, it removes the need for any third parties or traditional gatekeepers. By virtue of its decentralised nature, the blockchain, the Web3 “database” on which cryptocurrencies are stored and traded, has no need for intermediaries and runs transactions entirely automatically in a trust-less way.
When you apply these measures to the banking world, employing blockchain technology has two crucial implications: one, payments can be made and executed immediately, across different countries and between different banks, regardless of borders or countries or limitations set by banks that occur when transferring different currencies; and two, this means cutting costs across the board, by a significant margin.
Fiat24 is one of only four companies in Switzerland to be granted the blessing of a FINMA licence. Following a lengthy two-year process, the Swiss financial regulator granted the venture a FinTech licence allowing it to introduce its clients to the rapidly-expanding world of decentralised finance, where investments and trades are managed by code instead of people.
Fiat24’s mission is to give its customers total ownership and control over their digital assets, and in doing so, it’s also tackling one of the most challenging issues in the industry, known as the on/off ramp dilemma.
Widely viewed as the most significant barrier which lies in the way of widespread adoption of cryptocurrencies, as well as to the development of the metaverse and other blockchain-related technologies, the on/off ramp dilemma relates to the complicated and cumbersome process of converting fiat into cryptocurrency.
Those who wish to convert fiat currencies into crypto, and vice versa, often face a number of issues when trying to do so, which ultimately discourages them from going through with it.
But for the first time, the technology developed by Fiat24 enables the start-up to offer a secure bridge between traditional fiat currencies and cryptocurrencies, so that the neobank’s customers can finally and easily buy cryptocurrency with the fiat currency of their choice, including USD, GBP, or EUR. Fiat24’s dApp offers clients multi-currency cash accounts directly on the blockchain. It uses what is known as a layer 2 solution wallet protocol (Ethereum, Arbitrum) that can be topped-up by peers, through bank transfers, and a crypto-to-fiat top-up.
“Fiat24 doesn’t hold any client assets and therefore they are stored in their own crypto wallets. As a company, we don’t even touch their unhosted crypto wallet,” explains Yang. “What we do instead is offer a seamless interface on top of the crypto asset to make the whole user experience when it comes to managing their assets much smoother. What we do to identify our client is issue an NFT to each of them. That NFT will then be associated with the client’s profile, which enables us to have an overview of who our client is and who transfers money to who.”
Fiat24 empowers customers to trust and use the latest technology by complying fully and transparently with regulations. And while the core idea behind Web3 is that the users are completely independent of any centralised third-party, it’s important to note that this does not mean it will live outside of legislation. “Many people believe that cryptocurrency means a payment system that is anonymous,” Yang continues, “however, even using blockchain technology, we can still define or identify who is the eventual beneficiary owner of the address.”
Web3 relies on the protocol at the core of the system, which is ensured by mathematics, not people. “Technology is far more trustworthy than human work,” Yang concludes. Well, if it means cheaper, faster, more secure and efficient banking systems, count us in.”
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