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How crypto uses open banking


| Article by: Laura AasheimProfile Image Laura Aasheim

Bitcoin created the world's first decentralised alternative currency in 2009. 9 years later, governments finally joined the race. Venezuela issued the first sovereign digital currency in 2018. Today, there are close to 8,000 crypto currencies in existence and many countries have been piloting their own digital currencies.

 

Crypto is changing

We are currently seeing the third generation of crypto currencies. The third gen of crypto is working to address the issues found in previous generations- scalability, interoperability and sustainability. This next crypto cycle milestone is based on proof-of-stake (PoS) blockchain rather than proof-of-work. PoS is faster and uses a technique that makes it highly scalable. PoS is sustainable due to consuming much less energy in order to maintain the blockchain network. 

Third gen crypto companies are aiming to develop a blockchain that can seamlessly move assets across multiple chains. However, there is still some way to go before the issue of interoperability is solved.

 

What is open banking?

Open banking is a banking practice that securely shares financial information, such as consumer banking transactions and other financial data, to third-party financial service providers. Sharing data is done through the use of application programming interfaces (APIs) and only with the consent of customers. Open banking is the driver behind both innovation and competition in the financial industry. 

 

Why does crypto use open banking?

Crypto needs to be secure and seamless, and open banking allows for a frictionless customer experience when dealing with funds. 


Open banking verifies users’ identities and bank account numbers before authorising a payment or withdrawal of funds without the need to send bank statements. Additionally, open banking prevents fraud through authentication and verification of validity of data.

 

Some crypto companies you should know about

Coinbase is an American company that operates a cryptocurrency exchange platform. They use open banking to improve the customer experience by making it easy to connect bank accounts. Open banking is also used to prevent fraud and help verify balance for transactions. 


MoonPay is a financial technology company that provides payment solutions for cryptocurrency. MoonPay uses open banking payment APIs to enable frictionless crypto payments for millions of users. 


Blockchain.com is a cryptocurrency blockchain explorer service, as well as a cryptocurrency wallet and a cryptocurrency exchange supporting Bitcoin, Bitcoin Cash, and Ethereum. Blockchain.com uses open banking to allow their customers to fund crypto wallets directly from their bank accounts without sharing card details. 

 

What’s to come?

Even though more and more merchants are accepting cryptocurrencies, they are still in the minority. In order for crypto to become widely used, they must gain widespread trust and acceptance among consumers. That being said, many experts believe that crypto is not going anywhere soon and that it will be the future of online transactions. And with Mastercard indicating that it will start supporting cryptocurrencies along with PayPal already allowing its users to buy, sell and hold crypto, the idea that crypto will go mainstream looks promising. 

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