Initially, cryptocurrencies and the entire crypto community came up trying to repeal and replace the conventional fiat currency system. However, crypto exchanges are gradually looking more and more like banks. The exchanges must reinvent themselves to become more than mere trading venues if they want to source more customers.

Letting Users Have Their Way

In 2019, the rise of Decentralized finance (DeFi) championed a new category of investment in the crypto sector. All that happened as a result of an intensified search for yield in the cryptocurrency native money markets. Not all users want to use complicated dApps or run a browser wallet to access lending markets like dYdX and Compound.

Crypto exchanges now can open themselves up to more services. This new development will most likely enable the companies to attract new customers and enhance their position with their current users.

Lending markets let users earn money passively while maintaining their capital in Stablecoins. Thus, it eliminates the exposure to unwanted volatility which is synonymous with the wider crypto market. The new proxy savings accounts allow traders to earn yield while on the sidelines waiting for a perfect opportunity to pounce on the market.

Margin lending is already available on many of these exchanges. Nonetheless, the rates are significantly low to attract any meaningful capital. Launching money markets where the users can lend and borrow crypto is a major step in the right direction. However, to get a true savings account experience, crypto exchanges consider implementing something resembling the DAI Savings Rate that is offered by Maker.

Recently, Coinbase unveiled a similar product that let users deposit USDC in a temporary savings account. Dharma is a functional dApp that operates like a savings account on top of the Compound. Thus, crypto exchanges can develop a similar interface to give their users smooth access to yields.

Value-Added Crypto Exchange Services

Dealing with taxes is a complex venture for crypto investors. Thus, it is another chance for the crypto exchanges to come in strongly and set up an extra revenue source. This opportunity is similar to the monthly invoices that are sent by the traditional financial market brokers to their clients.

Tax management and accounting would become quite easy for regular investors who would no longer require to log all their trades manually. The opportunities in the world of taxation include other activities like offering advice regarding the harvesting of losses to minimize taxable gains.

Most of the crypto exchanges joined private networks to enhance payment finality for Bitcoin. Hence, customers can move their funds at a quicker pace without needing to pay high fees for their transactions to get confirmed in the next block. Although some of the solutions that came up like Liquid have not gained meaningful traction, the product was integrated across big exchanges like Bitfinex, BitMEX, and Huobi.

The Lightning Network promised a similar strategy. However, its proposition comes with many more possibilities as the adoption of the protocol keeps growing. It appears reasonable to expect that this being the most widely accepted solution might come from a non-competing entity that has no exchange services. That would be similar to how SWIFT was developed as a bank agnostic solution.

In that context, it is evident that the cryptocurrency exchanges are on the verge of a major paradigm shift. This shift will ensure that they further solidify themselves as an essential component of the crypto ecosystem. Nevertheless, the way exchanges see and approach the proposed changes will be important in determining who dominates the market in the next several years.

Alliances

Last year, some of the leading crypto exchanges formed alliances with state-backed entities. For instance, Huobi joined a group of Chinese telecom players last December to become members of the popular blockchain consortium Blockchain Services Network (BSN) that is state-backed. The BSN is an industry alliance that was initiated by the State Information Center(SIC).

China has taken a positive stance towards blockchain but it still insists that crypto activities are still illegal within its jurisdiction. Through blockchain, China aims to develop smart cities that are expected to drive part of its economy in the coming days.

With crypto exchanges joining such initiatives, they might find a soft spot among regulators and authorities opposed to crypto activities. Hence, a middle ground can be reached to enable the platforms to thrive at any place with minimal restrictions since they will be open for scrutiny and viable regulations.

As governments and regulators dive deep and explore the advantages of blockchain, crypto exchanges will have a chance to operate freely and introduce new products to new markets.

The Crypto Exchange Is Changing: Banking, Interest, Taxes 1
About the author

Wanguba Muriuki is an Editor at Large for E-Crypto News and author of the book- "The Exploitative Intrigues of Cryptocurrency Scams Explained." He is also a passionate creator who sees every aspect of life from a written perspective. He loves Blockchain, Cryptocurrency, Technology, and Traveling. He is a widely experienced creative and technical writer. Everything and everyone is describable. The best description is written.

Related Posts

E-Crypto News Executive Interviews



bitcoin
Bitcoin (BTC) $ 43,719.00
ethereum
Ethereum (ETH) $ 3,067.27
cardano
Cardano (ADA) $ 2.20
tether
Tether (USDT) $ 1.00
binance-coin
Binance Coin (BNB) $ 372.31
xrp
XRP (XRP) $ 0.97763
solana
Solana (SOL) $ 144.84
polkadot
Polkadot (DOT) $ 30.71
usd-coin
USD Coin (USDC) $ 1.00
dogecoin
Dogecoin (DOGE) $ 0.219633
USD
EUR
GBP
bitcoinBitcoin (BTC)
$ 43,719.00
ethereumEthereum (ETH)
$ 3,067.27
tetherTether (USDT)
$ 1.00
bitcoin-cashBitcoin Cash (BCH)
$ 534.70
litecoinLitecoin (LTC)
$ 158.55
bitcoinBitcoin (BTC)
37.280,28
ethereumEthereum (ETH)
2.615,54
tetherTether (USDT)
0,852725
bitcoin-cashBitcoin Cash (BCH)
455,95
litecoinLitecoin (LTC)
135,20
bitcoinBitcoin (BTC)
31,934.54
ethereumEthereum (ETH)
2,240.49
tetherTether (USDT)
0.73045
bitcoin-cashBitcoin Cash (BCH)
390.57
litecoinLitecoin (LTC)
115.81

Automated trading with HaasBot Crypto Trading Bots

Crypto Scams

Crypto Scams
Crypto Scams Still Persistent In 2021, SEC Warns About Red Flags To Watch
September 9, 2021
Poly Network
Here’s How Hackers Stole Over $600 million in the Poly Network Attack
August 12, 2021
The World’s Most Infamous Crypto Hacks and Scams
July 31, 2021
Cryptocurrency Exchanges
Cryptocurrency Exchanges and the Plague of Scams and Bans
June 29, 2021
What Role Do Cryptocurrencies Play In The Era Of Ransomware Attacks?
June 9, 2021

Blockchain/Cryptocurrency Questions and Answers

Beginner’s Guide to Investing in Cryptocurrency
August 9, 2021
Short-Sell Cryptocurrency
How to Short-Sell Cryptocurrency: A Brief Overview
July 17, 2021
Klaytn
What Is Klaytn (KLAY) And How Does It Work?
July 16, 2021
Cryptocurrencies
Our Crypto Roundup Interview Asks- Do Cryptocurrencies Have a Future?
July 15, 2021
Solana
What Is Solana (SOL) And How Does It Work?
June 26, 2021


CryptoCurrencyUSDChange 1hChange 24hChange 7d
Bitcoin43,637 0.44 % 3.35 % 9.44 %
Ethereum3,073.6 0.31 % 5.68 % 14.53 %
Cardano2.200 0.65 % 4.50 % 11.99 %
Tether0.9986 0.03 % 0.08 % 0.23 %
Binance Coin371.45 0.44 % 3.36 % 13.60 %
XRP0.9789 0.38 % 5.90 % 12.52 %
Solana144.62 0.52 % 11.77 % 8.82 %
Polkadot30.87 2.19 % 17.29 % 10.73 %
USD Coin1.000 0.27 % 0.15 % 0.10 %
Dogecoin0.2199 0.47 % 5.04 % 11.08 %

bitcoin
Bitcoin (BTC) $ 43,719.00
ethereum
Ethereum (ETH) $ 3,067.27
cardano
Cardano (ADA) $ 2.20
tether
Tether (USDT) $ 1.00
binance-coin
Binance Coin (BNB) $ 372.31
xrp
XRP (XRP) $ 0.97763
solana
Solana (SOL) $ 144.84
polkadot
Polkadot (DOT) $ 30.71
usd-coin
USD Coin (USDC) $ 1.00
dogecoin
Dogecoin (DOGE) $ 0.219633