As cryptocurrencies grow in popularity and adoption, they are fast becoming a household term, a norm if you will. 2021 was a big year for digital assets, with the entire market cap exceeding $3 trillion, institutional investment at its highest, and countries like El Salvador declaring Bitcoin as a legal tender.
On top of this financial institutions around the world are incorporating the asset class into their balance sheets and many are exploring the concept of CBDCs (central bank digital currencies). As digital assets become increasingly integrated into our daily lives and a more popular option for the customer, it's time we harness the power of this nascent technology.
What is crypto as a service (CaaS)?
CaaS stands for Crypto as a Service and is a white-label solution for businesses and financial institutions that want to provide cryptocurrency services to their consumers. CaaS is essentially banking as a service for digital currencies.
CaaS works as a simple plug-and-play system for businesses wanting to provide their customers with digital assets trading, brokerage and custody services. Customers can interact with the services directly, without having to go through the providing company.
This infrastructure can then be used by any platform, from fintech, bank, or financial services businesses, as well as be integrated into mobile applications.
Given that asset managers manage £6.6 trillion in the United Kingdom alone, and that listed company values reach a staggering $93 trillion overall, the potential to offer traditional institutions with crypto cloud services is huge. As banking as a service has taken off, the expectation is that CaaS is going to follow its lead.
How does CaaS work?
The Crypto as a Service solution allows businesses and financial institutions, such as neobanks, to establish new revenue streams by providing a simple means for their customers to engage in crypto payments and the digital assets market. The consumer will be able to:
- Buy and sell digital assets
- Pay for goods and services using their digital wallet
- Securely store cryptocurrencies
The companies providing these services also receive access to highly secure and compliant transaction data monitoring and risk management systems. They will also be responsible for developing the global payments user interface, as CaaS functions as a back-end-only tool.
This ensures that the crypto services are entirely aligned with the brand, and do not appear to be a third party intervention. Through this interface, users can engage in crypto payments and manage crypto funds.
The main company providing Crypto as a Service will be responsible for aspects like KYC/AML, order processing, transaction monitoring, and digital assets custody, relevant to each jurisdiction.
For example, the regulatory requirements will be different in the United States and United Kingdom. This will establish the underlying trust when it comes to new customers engaging in crypto markets and other asset classes. These innovative business models are revolutionising the way in which people around the world can engage in decentralized finance without the risk.
Who would use CaaS?
Crypto as a Service allows regulated central banks and fintech firms to enable their customers to invest, store, trade, and pay in crypto. As these businesses offer cryptocurrency services they too can open new revenue streams.
The technology provider will also allow pension funds and asset managers to invest in Bitcoin and the greater crypto ecosystem on behalf of their clients. This new technology generates increased cash flow for businesses and an increased demographic of users.
Remittance firms will be able to send cross-border payments for a fraction of the cost while gaming companies, e-retailers, and brands can all begin utilizing digital wallets to allow their clients to make purchases in cryptocurrency and an overall improved experience.
CaaS is designed to assist any business looking to innovate their global payments system and enter the global market with crypto services.
Closing Thoughts
The greatest obstacle in the path to global crypto adoption is the belief that crypto is too volatile and that it lacks regulation.
While the markets are known to engage in volatile price movements, the understanding is that once regulatory frameworks are imposed this will be curbed.
Government bodies around the world are working to achieve this, as cryptocurrencies have firmly become a permanent feature on the greater financial landscape. As banking as a service (BAAS) has taken off, in light of the rise in crypto adoption, CaaS is the next step forward.
Crypto as a Service aims to provide both access and education to those looking to incorporate this crypto-centered product into their business and lives and integrate themselves into the digital asset ecosystem. Be sure to find a reputable platform that provides CaaS services with an easy-to-integrate API and high regulatory standards.
These crypto-powered products and services will assist the general public with becoming more familiar with the technology while allowing those already interested in harnessing and leveraging their crypto portfolios. After all, cryptocurrencies and the greater asset class are here to stay.
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