There are two major developments happening within the crypto industry that may help to bridge the gap between legacy financial structures and the cryptocurrency companies of the future.
Morningstar Credit Ratings is planning on releasing a debt security evaluation system that will apply to tokenized debt. This will serve to make this asset class more credible to investors, even though it is still an emerging asset with little history.
$117 trillion of debt securities are planned to be migrated to a decentralized financial network. Right now, these securities are being administered by trustees, and this would be a much more efficient process. As the Chief Operating Officer, Michael Brawer, said:
“We’re looking to see how we can also provide credit opinions, whether it’s a credit rating or different types of credit data and credit analytics that accompany those debt instruments, and we’re also looking to provide our services on a blockchain.”
With publicly available ratings and a premium custom service for internal evaluations of investments, Morningstar is set to bring more credibility to the space. This will all occur at the same time as they save approximately 500 basis points by making it simpler to connect lenders and borrowers on these transactions.
Founders Bank to Serve Crypto Customers
From within the crypto world, we are also seeing Binance, Polychain Capital, and Carduus Asset Management team up to fund a Maltese cryptocurrency bank. The Founders Bank of Malta is scheduled to open for business in 2020.
The founder, Paula Pandolfino, is a Maltese national who has a history in banking and sees the massive opportunity present due to cryptocurrency banking services being quite rare. Crypto may allow for a sovereign version of personal banking, but there will still be a need for banking services in this space. Rather than waiting for the incumbent banks to start providing these services, Founders Bank wants to be the first there.
Pandolfino says, “We want to be that pillar of banking for the ecosystem to support how it gets done. If anything, we’re learning how to wean off traditional banking and getting crypto to be that platform.”
At this point, $10 million has been raised, and the goal is for an additional $30 million in the near future. The interesting aspect of this funding is how many of the customers are putting money into the company due to their previous inability to find comparable services. Polychain Capital president Joe Eagan has since commented on how many of their projects have trouble attaining banking support.
The same applies to Binance. They intend to be one of the first customers of Founders Bank, and that will help the bank to quickly flesh out what services need to be developed and provided to complex organizations in the space.
What This All Means
The infrastructure of the legacy financial system is part of why investors and the general public have so much trust in it. You could even argue they have too much trust when you look at how they never questioned things until the financial crisis of 2007, but that’s a topic for another time.
So now, with two major developments that will bridge the gap between the infrastructure of the crypto industry and the current financial system, hopefully we will see more trust go to crypto assets.