While many got swept up in the early days of the DeFi asset hype machine, others who saw its true potential began quietly plotting the path the space would need to get there.
They knew robust infrastructure would be the critical element, and they set out to build it.
FV Bank’s cross-border, foreign currency payments facility is an important step, its CEO Miles Paschini said. It allows users to make compliant payments in multiple currencies and bypass conversions.
Based in Puerto Rico, FV Bank is a licensed bank and digital asset custodian. Its offerings include depository accounts, payment services, digital asset custody, and VISA card issuance. Recently announced, its digital asset custody and settlement service allows for the settlement of digital assets and fiat deposits. FV Bank partners with Circle to enable customers to receive USDC in their bank account and have it immediately converted into USD without needing a wallet or exchange.
Fintech bank or banking fintech?
Paschini has spent his career in payments and startups. He founded WaveCrest, a digital payments provider. Their cryptocurrency-linked debit cards attracted 60 million customers in 70 countries by his exit. It was an early recognition of the importance of linking DeFI with TradFi.
“The reason we founded FV Bank was that we believe that fintech companies and blockchain companies needed a partner that was building an ecosystem for those entities to work with,” Paschini said. “Our view is that this is going to be a highly regulated space, that being a bank and a trust was going to be the type of entity that you would need to be to do things like manage custody of assets and provide on ramps and off ramps, so we got a banking license.
“We subsequently got a trust license and started building a platform. You can look at it two ways. We’re a bank building a fintech platform or a fintech company that owns a bank charter. We’re building an ecosystem to help fintech and blockchain companies build products and services.”
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Providing security and confidence through infrastructure
For all the hype about reinventing the system, Paschini knew that if DeFi was to reach its potential, incumbents needed the assurance of knowing the proper guardrails were in place before they integrated with a new system. That’s true for domestic users, and it’s true for international ones too.
Paschini said 80% of FV Bank clients are based outside the United States. They tend to settle most of their accounts in USD but also need to pay some expenses in other currencies. To meet the needs of global actors, a bank needs to provide more payment and custody services.
A critical decision was to focus on local payment networks for delivery, Paschini said. By converting USD to British pounds, for example, customers can get their funds in a few minutes.
“In SEPA, we’re about 30 minutes to settlement,” Paschini said. “We’re trying to give as much of that real-time payments experience as possible in the local market. We took that route because we think it created a better experience for our customers, especially if you’re paying payroll or paying out local merchants. The ability to pay quickly was important.”
The DeFi upside of the crypto downturn
Even though recent events have caused some to sour on anything blockchain-based, Paschini said FV Bank ultimately hasn’t wavered in looking for ways such technologies can make lives easier through increased service capability. Their offerings include digital asset custody and stablecoin deposits directly into accounts.
The upside of the recent downturn is how it highlights the need to regulate operators, Paschini said. Entities managing digital assets should be qualified custodians. There’s a flight to safety, with those on the fringe and the unregulated headed to irrelevancy.
“We think we’re well-positioned for any regulation that’s going to be clarified in the marketplace,” Paschini said. “I think we’re well-positioned to deal with that because we’re already a highly-regulated entity.”
New technologies to watch in DeFi
FV Bank is serious about international stablecoins, Paschini said. Sending a large payment to an Asian factory, for example, takes a couple of days by wire or 20 minutes via stablecoins. It’s secure and non-reversible.
He’s also watching AI for ways it can improve content and servicing. AI allows providers to gain more knowledge about customers. That allows for a better, quicker, and deeper level of service.
“That’s something that we’re interested in from a customer service and market positioning perspective,” Paschini said. “We think there’s just lots of automation and opportunities there.”
Chat GPT has helped with some human resource and customer service functions. Given a good prompt, Paschini said an effective job description could be produced in seconds.
FV Bank is one of the few banks that has integrated USDCs into its ecosystem. Paschini sees them contributing to better, faster versions of SWIFT, FedWire, and FedNow.
“If the U.S. comes out with a stablecoin, we would happily integrate it,” Paschini said. “It would take a lot of friction out of a multi-party payment system. Most people don’t realize how many hops it has to take if you send a payment from the U.S. to Argentina.”