Former CEO of Coinbase Custody Ryan Bozarth’s new startup, Dakota, has launched publicly, aiming to provide crypto startups and foundations with a reliable, crypto-native banking solution.
The platform promises to address the mounting difficulties that crypto organizations have faced in accessing traditional banking services, something that became brutally apparent with the collapse of Silvergate Bank. Many cryptocurrency companies, especially international foundations, have traditionally struggled to find banking partners as the crypto sector continues to wrestle with regulatory uncertainty.
According to Bozarth, the firm's co-founder and CEO, Dakota is positioned to solve existing issues by offering crypto firms a way to access traditional banking services.
"Crypto foundations are largely overseas entities, so international," said Bozarth to The Block. "Because they are international and affiliated with crypto, they have an extremely hard time and limited options in getting a bank account."
He estimates that thousands of crypto foundations with billions of dollars of capital are struggling to use conventional banking services.
"What we saw over the last few years is that we had a banking system and a kind of regulatory position that made it quite hard [for crypto organizations] to get access to bank accounts," said Bozarth. "What Dakota solves, and what we set out to do … we can work with a series of bank partners under the hood to basically decouple some of the banking."
Dakota operates as a "crypto-native" internet banking platform, allowing clients to make U.S. dollar transfers without incurring common fees such as ACH, Fedwire, SWIFT or SEPA charges. Additionally, customers can earn rewards on U.S. Treasury holdings, with their deposits fully backed by Treasurys.
When clients open an account with Dakota, the platform automatically converts the funds into an “on-platform” stablecoin backed by U.S. Treasurys, said Bozarth, "So you send in a dollar that automatically, and under the hood, is converted to a Treasury that's held onchain."
The on-platform stablecoins function only within Dakota’s ecosystem, an element that Bozarth helps avoid any potential risk of depegging.
Additionally, customers can earn rewards on U.S. Treasury holdings since their deposits are fully backed by the bonds. While Dakota is only now widely available, it already has over 200 customers, said Bozarth.
"It’s a night-and-day difference from what we've experienced with other bank accounts," said Tyler Butts, a partner at Webslinger Advisors, which is a Dakota customer.
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