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How to Build a Crypto Bank in 2024

02 Apr 2024 updated
11 min

Table of content

Amid the revival of interest in cryptocurrencies, many Web3-oriented businesses and banking institutions have started considering crypto banking projects. Thus, the market that equaled only $1.49 billion in 2021 is expected to turn into a $2.5+ billion industry by 2029. The CAGR of crypto banking is currently at 6.8%, but the pace of its development may accelerate with new regulatory improvements.    

This niche naturally attracts investors as user adoption and transaction volumes consistently increase around the globe. However, creating and launching crypto banks is a challenging process because of licensing and crypto bank regulation issues. Such platforms are still highly vulnerable to security breaches and fraud, market volatility, and skeptical user perception. 

Yet, the trend is gradually shifting to more positive estimates of the crypto future, and a crypto bank may readily become your next lucrative business idea.

So, what is a crypto bank? In simple words, it is a form of digital asset banking that allows access to blockchain-powered financial services. Unlike traditional banks that introduce centralized oversight of transactions and deal with fiat currencies, crypto banks allow transactions with crypto assets in a transparent, secure, and decentralized manner enabled by blockchain. 

All transactions occur in the public ledger networks without intermediary fees, so the costs are minimal. That’s why crypto banks are rapidly gaining popularity as user-friendly, affordable banking options. 

How to start a crypto bank? This article will cover all the vital aspects of crypto banking you should know before launching such a project and will clarify the step-by-step process of developing it without critical errors. 

Benefits of Starting a Crypto Bank in 2024 

Along with the persisting skepticism and doubt surrounding crypto banking, many traditional banks have started looking into this business opportunity. This change is not surprising, as crypto banking is a new and relatively unexplored niche that offers the following benefits: 

  • Service diversification. While the traditional finance market is already mature and saturated, adding crypto to the service portfolio is an investment in new, developing niches with immense potential. 
  • Adaptation to changing consumer preferences. Users are increasingly positive about crypto, and including this service in your service range will keep old clients and attract new ones. 
  • Access to new markets. The crypto industry is large and diverse, with exchange, lending, and staking niches worth serious consideration in terms of potential revenue. 
  • Satisfaction of growing demand for crypto. Cryptocurrencies are adopted at the individual and institutional level, so offering them to clientele is a win-win situation in the changing financial world. 
  • Digital modernization. Integration of blockchain architecture in any banking service is a step forward in the massive digitalization of modern days. 

Types of Crypto Banks 

Based on our comprehensive cryptobank market research, we at 4IRE have singled out the following types of crypto banks you can explore as a business idea: 

  • Traditional banks with a crypto license. 
  • Crypto-native banks. 
  • Digital banks with a crypto license. 
  • FinTech/crypto/digital asset platforms. 
  • FinTech super apps with crypto features. 

Key Features of a Crypto Bank 

Like any other digital banking project, a crypto bank app should provide a mandatory minimum of services to users. These features make it a safe and functional banking option that users will choose because of its relevance to their daily needs. The list includes: 

  • User authorization. Users should be able to register new accounts and log into them to perform their banking activities. 
  • User-friendly profile layout. The user profile should be well-organized, with all data, records, and assets visible to the client. 
  • KYC/AML. You should always build a crypto bank with full respect to KYC/AML regulations, as non-compliant banking apps face huge fines and are prohibited from operation in multiple jurisdictions. 
  • Admin dashboard. You should have access to all vital metrics and user activity records via a functional dashboard. 
  • Multi-currency support. Users should be able to exchange crypto assets and store their funds in multiple currencies. 
  • Multi-factor authentication. Biometric verification, two-step passwords, and other innovative security measures will help protect your users’ accounts from unauthorized access and theft. 
  • Cryptocurrency transactions. Your users should have access to all kinds of operations with their crypto assets, such as storing, sending, and receiving cryptocurrency, from the comfort of their mobile apps
  • Access to trading platforms. You should link your bank to reliable and secure exchange platforms via API to give your customers access to cryptocurrency exchange on good terms. 
  • Virtual cards. The issuance of virtual cards is a popular feature that many digital banks offer to improve customer loyalty and allow users to pay with crypto for services and goods. 

crypto bank solution mobile

Besides these features that form the core of crypto banking services, forward-looking businesses can also include a variety of fancy, trending functions in their crypto banking software. They may be regarded as perks to improve user satisfaction and make the crypto bank more appealing in the competitive market. Consider adding the following to your bank’s USP: 

  • Crypto donates. You may allow users to donate to their favorite crypto projects or collect donations from their followers directly in their bank accounts. 
  • Crypto invoicing. Those who work with crypto-friendly businesses can benefit from automated invoice generation and processing features. 
  • Referral programs. Referrals allow existing clients to earn money by inviting people from their social networks and close surroundings to your bank. 
  • Crypto staking. An opportunity to receive passive income from stored funds is at the heart of digital asset banking
  • Investment portfolio. Crypto investments are a great option for growing the user’s capital and earning a passive income. 

9 Steps to Build Your Own Crypto Bank 

Once you decide to build a crypto bank, the process may seem unclear and cumbersome at first. Yet, by developing a logical step-by-step approach to this project, you can create a robust software solution without flaws. 4IRE experts have extensive expertise in crypto bank design and blockchain consulting services, so we’ve developed the following algorithm for developing a crypto bank from scratch

#1 Define Your Strategy 

To start a crypto bank, you should first realize where you are heading and what you want to achieve in the end. Thus, a strategy is vital. Existing financial institutions already have a solid foundation in the banking sector, so they can take advantage of what they can do well and extend those strengths to crypto banking. You should also decide whether you will buy ready-made software or develop a crypto bank on your own. 

#2 Understand All Risks 

Digital asset banking is a relatively young financial area that encompasses regulatory, business, and market risks. Thus, it would help to consider the full scope of risks to understand how the risk inherent in crypto operations is consistent with your business’s risk profile. Crypto bank regulation is still only in the making, so there will be a certain degree of regulatory uncertainty for several more years. Thus, you need to study crypto bank regulation in the jurisdiction where you plan to start a crypto bank and take all regulatory requirements into account when building and operating this banking project. 

#3 Choose the Right Partners 

The question “how to start a crypto bank” often relates to finding the right development partner, which will make this project fail or fly. You need a team that is well-versed in innovative blockchain technologies and able to deliver state-of-the-art software solutions. Besides, you should establish partnerships with third-party providers in the Web3 space so that your crypto bank is integrated into the broader crypto ecosystem and provides a wide diversity of services to users.  

crypto bank cta

#4 Develop and Design the Bank 

This stage involves the actual software development (front-end and back-end) and its further linkage into a consistent, functional platform. This task is performed by your development team, which uses your project specifications and the approved design to build your bank from scratch. 

#5 Take Care of KYC/AML Tools 

Next comes the compliance aspect of bank development. You need to incorporate the KYC and AML procedures of user identification to prevent regulatory penalties and fines. Projects that fail to ensure KYC/AML may be closed for assistance to terrorists and criminals, and that’s the last thing you want for your project. 

#6 Explore Funding Opportunities 

Crypto banks are costly projects, so you can consider engaging investors or venture capital funds. To attract their attention and win their trust, you should have a detailed business plan and a whitepaper that communicates your project’s unique features, business value, and revenue potential. 

#7 Promote Your Product 

Marketing and branding are also essential in the final stages of crypto bank development. You should let the crypto user community know about the upcoming project so that they anticipate its launch and register quickly. This way, you can grow your user base fast and start earning reasonable revenue from this banking app. 

#8 Launch a Crypto Bank 

Now that your software is tested and ready for operation, it’s time to launch a digital asset bank by opening its doors to interested users. You will surely have a loyal follower base by this time if your marketing campaigns are effective enough. 

#9 Update and Support Your Bank 

Don’t forget that the moment you start a crypto bank is not the end of your collaboration with the development team. Instead, it’s only the beginning of your long partnership. Make sure your developers are ready to provide 24/7 support, maintenance of the system, security controls, and regular system updates. 

Pitfalls to Avoid During Crypto Bank Development 

Naturally, not all crypto development projects go smoothly. You may get into unexpected bottlenecks or suffer extra expenses if you fail to prevent the following blunders. 

Poor UI/UX 

It’s very short-sighted to underestimate the value of stellar UI/UX in modern digital products. Usability is a clue to users’ loyalty and adoption, and only intuitive, customizable projects survive in the modern digital space. 

Neglect to Risk Management 

Risks are plentiful in the crypto space, from security concerns to cryptocurrency volatility to taxation and accounting implications. Besides, the regulatory landscape is still far from established. Thus, you should have a detailed strategy for addressing all these risks as they surface at various stages of your project’s development and operation. 

Lack of Transparency 

Project transparency is at the heart of building trust in users and investors. If your project looks ambiguous and doesn’t offer a clearly mapped trajectory of work and development, you will hardly win a loyal following. 

Neglect to Liquidity 

Liquidity is a major barrier to crypto projects’ smooth functioning. Projects with poor liquidity are infamous for huge slippage, which makes the exchange and transaction processes unpredictable and costly. Thus, it’s important to take care of the liquidity pool at the stage of the bank’s development. 

Substandard Development Team 

Developer expertise will make a real difference to your project, as only qualified blockchain engineers and architects can create a safe and functional crypto bank. Thus, you should research the market and choose only reliable companies with a long track record to build your banking app. 

cryptobank report cta

Monetization Strategies for Crypto Bank 

Now that you have a crypto bank, how will this project earn you money? In fact, this platform has many exciting monetization options. 

  • In-app ads. You can partner with a large number of crypto projects to buy ad space on your resource and get money from commercials. 
  • Transaction fees. You can set a minimal commission fee for users and create a steady revenue stream from on-site currency conversions and transactions. 
  • Sponsored events. You can aid young projects’ entry into the crypto space by holding their promo campaigns in your app and getting remuneration in their native tokens.  
  • Crypto lending. You can set up a crypto lending service that will issue loans to users and earn on the lending interest rates. 

crypto bank solution web

Where to Start? 

Since the crypto banking industry is developing fast, it’s time to consider this business idea seriously right now. We recommend starting with a detailed business plan and project roadmap, which will help you find an appropriately skilled development team and attract investors. Once you understand where you are heading and have a detailed plan, it’s much easier to turn your vision into reality. The 4IRE team is always ready to help you on this path. 

FAQs

How are crypto banks different from traditional banks?

The main distinctions between regular and crypto banks are the type of assets they deal with and the underlying technology of financial transactions. Crypto banks are powered by blockchain and work with cryptocurrencies, while traditional banks utilize traditional digital technologies and deal only with fiat currencies.

What are the essential features of a crypto bank?

Every crypto bank should enable hassle-free, safe registration of new users, multi-step login to user profiles, multi-currency operations, the ability to deposit and withdraw assets, data analytics, crypto trading, and staking options. Crypto banks should also include KYC/AML verification procedures as a vital step to accessing the bank’s full functionality.

How can I obtain a license for a crypto bank?

Since crypto banks are not treated as banks in the straight sense of the word, they only need to obtain a crypto license. Licensing procedures vary by jurisdiction, so you should check the rules in your specific location. For instance, UK crypto projects should turn to the FCA and meet its licensing requirements, while many EU countries, like the Czech Republic or Lithuania, are known for crypto positivity and minimal licensing demands. It’s also relatively simple to get a UAE license by registering as a crypto service provider with the UAE DMCC.

What are the key roles and expertise required to build a successful crypto bank?

You should have a blockchain development team with extensive expertise in banking, FinTech, and crypto on board. It’s also important to engage crypto regulation experts and lawyers so that your bank is built in compliance with the existing legal landscape.

How much does it cost to build a crypto bank?

The issue of cost is highly significant for all business owners planning to start a crypto bank. Unfortunately, there is no accurate answer to this question, as all projects are different, and the final price depends on the underlying technology, the number of features, and your bank’s architectural complexity. The location and size of your development team will also make a huge difference in terms of the project’s budget. Overall, you may expect to build a crypto bank for anywhere from $100,000 to $350,000+ for such a project.

What partnerships are vital for the success of a crypto bank?

First, you should find a qualified and reliable development agency that will handle all technical work on the bank’s design and development. Second, you will need skilled marketers who will promote the project before it sees the world to build strong visibility and attract users. Third, you will benefit from third-party integrations of related crypto services, such as crypto trading, robo-advising, etc.

How do digital asset banks handle digital currency conversion and international transactions?

Digital currency exchanges are made possible by connecting to the crypto exchange platforms. International transactions are much easier via crypto banking than they are in traditional banks, as all operations occur on a globally accessible blockchain. Thus, only the user’s wallet or account ID is needed to transfer funds from one place to another on-chain at minimal costs.

Why build a crypto bank with 4IRE?

4IRE is an experienced crypto bank and crypto wallet app development company with 250+ qualified blockchain experts on board. We have helped dozens of clients with their crypto projects and blockchain-based solutions, and our extensive expertise in blockchain engineering guarantees flawless product quality. By turning to us, you get access to top-tier international talent, next-gen technologies, and a customer-centric team mindset.

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