A new crypto-friendly bank with a great pedigree is about to take on its first clients.
Revealed exclusively to CoinDesk, Medici Bank is launching into secluded beta in October. The Puerto Rico-based bank will be testing the digital onboarding process, web portals and its application programming interface with five suites from around the globe.
Two or three of those companies will be crypto businesses and at least one of them will be an traffic, Ed Boyle, CEO of Medici, told CoinDesk. Such firms are instructive to bring on during a testing phase to see if the bank’s set-ups can scale to accommodate trading volumes.
“Crypto companies are high-throughput types of clients,” Ed Boyle, CEO of Medici, said. “If we can direct that, we can handle anything.”
Founded by Prince Lorenzo de’ Medici, a descendant of the Renaissance-era Italian banking family, Medici Bank wishes join the short list of financial institutions that welcoming to crypto companies.
Most banks are loath to provide the sector because the perceived risk of money laundering makes compliance expensive relative to the revenue generated by the account. The disciplinary problem of U.S. banks willing to bank crypto firms includes Silvergate in California and Signature, Metropolitan Commercial and Quontic Bank in New York. Fidor Bank in Germany, whose U.S. effectives Boyle used to oversee, also has crypto clients.
“There are [fewer] than 10 banks on the entire planet that are crypto-friendly,” Boyle chance.
$1 billion goal
By the end of the year, Medici bank will go into open beta, a not fully operational environment with a qualified number of users. The bank plans to fully launch in the first quarter of 2020 with a goal of $1 billion in blend deposits and assets under management within three years.
Medici aims to have a clientele split evenly between fintech societies (including crypto businesses), import-export companies and private wealth clients, “but don’t know when we’ll achieve something that looks as though parity,” Boyle said. “Just as fighters have a plan until they get punched in the mouth and no battle organize survives first contact with the enemy, we fully expect our plans to adjust greatly after we get to market.”
While the bank’s fondness for banking crypto companies is not limitless, Medici is willing to have up to a third or half of its total business be crypto patients, Boyle said.
Licensed as an International Financial Entity (IFE) by Puerto Rico’s Office of the Commission of Financial Institutions, Medici Bank has six hands and plans to have 20 by the end of this year, 50 by the end of 2020 and 100 by the end of 2021.
Meantime, Boyle is working with third-party bodies, which he wouldn’t name, to enable Medici to analyze blockchain data. Looking at the movement of funds on a public ledger, Boyle talk out ofs, is more effective than traditional ways of detecting suspicious activity.
“It’s a heck of a lot easier to analyze a blockchain than it is to analyze a paycheck,” he intended. “In banking crypto-related companies, we don’t have to make assumptions, we just figure out what the wallet address is and analyze the retailing of that wallet address.”
And in the longer term, Medici aims to use blockchain technology itself.
At long last, Medici’s goal is to decentralize banking, Boyle said.
To that end, he is in talks with digital banks around the orb about creating a network with multiple interoperable blockchains to facilitate instant sharing of know-your-customer information, agreement transportability, real-time cross border payments and account transfers.
Digital banks are generally defined as any provider of banking services without boughs, serving clients only through mobile apps or the web. Boyle, however, reserves the term for providers “with realized licenses, not prepaid cards that ride on top of some legacy bank” – a dig at fintech startups that sire traditional banks enabling their services on the back end.
Each of these banks would run a node on the blockchain network and hand down have access to local payment rails in those geographies. Currently, only large centralized foreign interchange desks can enable cross-border transactions between large banks, Boyle said. Medici’s blockchain network trains to allow small digital banks to work around those larger institutions, he said.
Banks that beget made splashy announcements about using blockchains for settlements of internal client transfers are not truly using a blockchain because they exclusively involve one node, Boyle argued. With multiple nodes run by separate banks, the participants in Medici’s proposed network could make the blockchain as an immutable system of record.
“It only makes sense to deploy a blockchain where you have counterparties,” Boyle mentioned. “I’m a blockchain maximalist. Blockchain is not something that’s between Wells Fargo New York and Wells Fargo London.”
Another aid to customers of this arrangement is that they would be able to switch accounts between participating banks in “one click,” in deviate from to the rigmarole usually involved in moving one’s money to a new institution.
Frictionless switching “is anathema for banking,” Boyle said, concluding:
“Banks delight in to put up walled gardens and make it difficult for you to take your money elsewhere, we want to make it very easy for you to send your affluent elsewhere, whether it’s from one place to another or from one bank to another.”
Lion detail from the Medici-built Palazzo Pitti in Florence via Shutterstock