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Mongolia's Largest Bank to Offer Crypto Services

Mongolia's Largest Bank to Offer Crypto Services

December 24, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Mongolia's largest bank, Trade & Development Bank, plans to offer crypto services. The report by DDaily shows the bank will offer a wide range of crypto services. Among the crypto services will include custody, loan, deposit, remittance, and crypto asset management. 

The bank is partnering with various entities to help it achieve new services. Top of the partners is the blockchain company, Hexlant. The company is a creation of former white-label tech firm Delio and former Samsung developers. 

The bank is also open to several other partners. It is looking to include other crypto mining companies in the country. Mineral resources and blockchain company MDKI will join the park. 

The move by the TDB bank will spur crypto uptake in the country. The bank is currently ranked highly among the other banks. It thus has a commanding market share, which it will get to use the cryptos. 

Part of the crypto services by the bank is the uptake by institutional investors. Among the bank's clients are over 400 Mongolian companies. These companies trust it for all their financial services. It offers them trade loans, financial consulting, among others. The companies would not hesitate to take up the crypto services into their portfolio. 

Hexlant also has a wide range of clients on its books. It provides them with blockchain smart contract development and verification. It also has wallet development services. The current clients would not find it any hard to embrace the new TDB bank crypto services. 

Mongolian's Crypto State 

Mongolia is one of the top crypto-friendly jurisdictions in the world. Like any other place, it has had an evolving relationship with digital currencies. Tied with the China regulations, the government banned all types of crypto activities. 

It, though after some time, realized that it could not stop crypto. The virtual currencies were becoming more acceptable with various traders. Mongolia had also become a major illegal Bitcoin mining location. 

The country has some of the lowest electricity rates in the world. The miners would take advantage of these rates. It's land rates, and temperature also favours crypto mining.  This happened with the government missing out on the revenue. They had no option but to legalize crypto mining. 

The government soon started a crackdown on illegal crypto mining. The inspection by the central government was to ensure a centralized crypto sector. It would get to determine the mining and supply of all the digital currencies. 

The government provided a circular to that effect. All crypto services and mining operations needed registration. They also needed to meet the regulators' guidelines. Still, the companies meeting the regulations would become limited companies. 

Government involvement led to increased fintech market growth in Mongolia. It was soon leaving the cash-based financial system to embrace the new payment system. It announced the first digital currency in September 2018.

The Mongolian central bank allowed Candy as a state-approved digital coin. Even though it started in a single city, the services spread to the other parts of the country. 

The TDB bank offering crypto services is a step toward a cash-free financial system. It helps the country fast track its goal of adopting digital currencies. 

China at large is also embracing crypto assets. It is in the advanced stages of developing a national digital Yuan. It seeks to draw the world from reliance on the US dollar

The USD has been the world reserve; thus, America controls world trade. It also can impose economic sanctions on countries. Virtual currencies are the only way to economic inclusivity. 

The Future of Banks and Cryptos

Banks and cryptos have not had the best of relationships. The traditional commercial banks have always viewed digital currencies as a threat. This follows their operational differences. Traders are moving away from the central bank-controlled fiat currencies. They are looking for the decentralized virtual currencies without a central authority.

The banks have always sought ways to discredit digital currencies. For example, a survey confirmed banks believed cryptos aid illicit transactions. They also argued that the crypto markets were not doing enough to curb the concerns.

The banks also took some time to view the digital currencies as assets. They, in the process, discouraged their clients from investing in them. For this, they cited issues like volatility and lack of any physical backup. The banks concluded that virtual assets could not become any money.

The Mongolian bank offering crypto services is the start of a new relationship. After a period of development, the banks have to recognize Bitcoin and other coins as viable. They have to allow their clients to invest in them as they become mainstream. The coins are already attracting professional and institutional investors.

Even as digital currencies become mainstream, there is still a need for investor protection. The cryptocurrency exchanges struggle with cases of hacking and other losses. Commercial banks hope to protect their clients by offering cryptocurrency services.

The Future of Traditional Currencies when banks offer crypto services 

The banks have avoided cryptos due to their threat to fiat currencies. Most people would prefer digital currencies due to ease of access. The cryptocurrencies are also affordable to transact in. They are globalized and don't need any forex exchange. 

It seems ironic when banks embrace virtual currencies. It now looks like they don't have an ideal position. After campaigning against digital assets, they now offer the same. Still, there is more to it. The banks might claim they are after investor security.

The other possible reason is laying the foundation for future currencies. The fiat currencies are likely to become digital. This follows the possibility of central bank-backed digital currencies (CBDCs). It means the future of fiat is digital.

Bottom Line 

Mongolia's TDB embracing cryptos is a step towards centralization. It shows the prospects of more institutional investors and professionals in cryptos. Offering crypto services also signals the change towards a digital fiat currency

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