First of its kind, a crypto bank will open its virtual doors for the emerging digital assets industry in early 2021. The Avanti bank will be launched by the Avanti Financial Group with Blockstream as technical partner. It will be based in Wyoming, US. According to the company’s tweet, the seed funding round has been closed and they are preparing charter application. The name “Avanti” has Latin origins meaning “forward” or “ahead”. It will be protocol neutral, that it will not favor any particular protocol, but its focus will be on Bitcoin.
1/ INTRODUCING AVANTI BANK, a new US #bank to serve #digitalasset industry, offering new products & svcs not currently available in USD mkts along w/ tech partner @Blockstream. #Wyoming-based. We’re preparing long process of charter application & aim to open early 2021. @AvantiBT pic.twitter.com/fpnN6qBBhW— Caitlin Long 🔑 (@CaitlinLong_) February 24, 2020
The Case For A Crypto Bank
Cryptocurrencies and crypto-assets have come a long way and they have a total market capitalization of hundreds of billions of dollars, which will only go up from here. The research and development is in full swing and whole finance industry is being created around it. Apart from the retail investors, a lot of institutional investors are interested in getting involved also.
However, due to all the financial crime which has plagued the industry plus the high barriers of entry, people and institutions feel hesitant to involve themselves with it. A crypto bank will fill the huge need of a custodian with high fiduciary standards. However, it must act as a special custodian (possession is temporarily entrusted however the service provider can’t use it for its own benefit) rather than the creditor/debtor principles of traditional banks.
What Powers The Avanti Bank?
The legislative and regulatory environment in Wyoming is conducive to creation and operation of such an entity. Wyoming recently enacted a new law called Special Purpose Depository Institution (SPDI), which allows optimal provision of financial services around crypto. However, it requires fulfillment of extensive requirements, such as 100% reserve for FIAT deposits (traditional banks operate on fractional reserves) and the condition that assets can’t be rehypothecated. The requirements are strict and consumer protective. It asks for asset custody via bailment, that is temporary and limited custody.
Since it will largely deal with the needs of institutional investors and is slated to act as a bridge between crypto world and traditional finance, the Avanti bank will operate in compliance with all applicable laws including know your customer (KYC) requirements, anti money laundering (AML), counter terrorism funding etc.
Not Your Keys, Not Your Crypto Concept
According to the tweets, Avanti bank will honor the principle of not your keys, not your crypto. The institutional custody services will include multi sig (where the crypto bank will be one of the authorizing signatories) including some special services from Blockstream. The exact details and scope of operation will be revealed later.