Dragonfly Capital’s partner Alex Pack once said, “The goal of DeFi is to rebuild the global banking system and create an open and permissionless operating environment.” In the financial world of DeFi, cryptographic assets are structured on the blockchain, enabling efficient transfer of assets and real-time value circulation through various protocols, such as self-custody in Metamask wallets, asset trading on Uniswap, lending on Aave & Compound, and value anchoring on MakerDAO.

While we can see the value of DeFi and the immense imaginative space brought by the composability of on-chain protocols, before rebuilding the global banking system, it is necessary to first connect the global traditional financial markets, which are over 300 times larger than the crypto world. Fiat24 is attempting to bridge the gap between the crypto world and traditional finance through its Protocol.

In this article, we had the privilege of engaging in an in-depth conversation with Yang, Co-founder of Fiat24, a Swiss Web3 Fintech company. We explored how, in the crypto-friendly regulatory environment of Switzerland, the Fiat24 Banking Protocol, driven by smart contracts and built on blockchain, is revolutionizing traditional banking, finance, and payment systems.

(Fiat24.com)

1. Fiat24: Web3 bank

SR Saphirstein AG is a financial technology company regulated by Swiss banking law. Fiat24, launched by the company, is the first decentralized application (DApp) to fully integrate banking logic onto a public blockchain (Arbitrum), driven by smart contracts. It provides users with a range of Web3 banking services including deposits, crypto-consumption payments, savings, transfers, and currency exchange.

（https://twitter.com/Fiat24Account/status/1716356543073923523）

Unlike traditional banks, Fiat24 caters to numerous non-custodial wallet users, identifying them through NFTs. Fiat24 can be envisioned as a fiat protocol layer for DApps, such as the Fiat Layer Banking Protocol built on top of Uniswap.

Within the fiat protocol layer, Fiat24 offers Fiat24 NFT Accounts and Fiat24 Swiss Bank Accounts (Cash Accounts) for KYC-verified users. On one hand, it integrates Web3 payment services, allowing users to conduct deposits and crypto-consumption payments through their Fiat24 NFT Account connected to their crypto wallet. On the other hand, Fiat24’s Swiss Bank Account is directly linked to the Swiss National Bank, the European Central Bank, and the VISA payment network, providing traditional banking services such as fiat savings, currency exchange, and merchant settlements.

（Temperature Check - [Issue a Visa Card with Uniswap Logo ]）

The innovative blockchain banking architecture of Fiat24 seamlessly integrates traditional banking services with Web3 blockchain payment innovations, enhancing convenience while also strengthening security and avoiding the risk of single points of failure. Through Fiat24, customers can withdraw, exchange fiat currencies, and make everyday cryptocurrency payments using encrypted assets stored in MetaMask or any other non-custodial cryptocurrency wallet, allowing their cryptocurrency assets to be accepted anywhere that VISA is accepted.

For users who wish to incorporate cryptocurrency assets into their daily transactions, this revolutionary ability to convert cryptocurrency wallets into payment solutions represents an innovation in traditional banking, finance, and payment systems.

2. Born in Switzerland’s Crypto-Friendly Regulatory Environment

On January 1, 2019, the Swiss Federal Council, in an effort to promote financial innovation, introduced the Fintech Licence under the existing banking regulatory framework. This license can be understood as a “lite” version of the high-threshold traditional banking license, aimed at lowering the market entry barriers for innovative enterprises interested in engaging in fintech business. It allows license holders to attract public savings but prohibits them from using these public deposits for investment, lending, and other interest-bearing activities.

The introduction of the fintech license, guidelines on ICO activity regulation, and the Distributed Ledger Technology (DLT) Act in the Swiss regulatory environment have all brought about significant opportunities for business model innovation in fintech, especially in the fields of blockchain and cryptocurrency. Fiat24 was born against this backdrop of regulatory friendliness.

(Fiat24.com)

The founding team of Fiat24 initially worked in traditional banking and kept a close eye on the development of blockchain and cryptocurrency assets. It wasn’t until the introduction of the financial technology license in 2018 that they entertained the bold idea of architecting traditional banking logic on the blockchain.

Yang remarked, “Blockchain technology, also known as decentralized ledger technology, is inherently designed for accounting purposes. When we worked in banks before, each bank had a back-office team of hundreds of people to reconcile payments. Because there are thousands of banks worldwide, each with its own ledger, the demand for synchronizing these thousands of ledgers perfectly and without error is extremely high. The atomic swap property of blockchain perfectly solves this problem, eliminating the need for internal reconciliation departments in banks, which greatly improves the efficiency of banking and financial institutions and saves labor. It’s like Uniswap, with just a few dozen employees, can handle the same transaction volume every day, while centralized exchanges require hundreds or even thousands of employees.”

As the cryptocurrency market continued to evolve, the Fiat24 team also recognized that DeFi, as a natural on-chain financial infrastructure, could fill the gap left by the restrictions of the financial technology license on operating interest-bearing businesses. Moreover, the DLT Act, with its friendly regulatory environment in Switzerland, paved the way for compliant expansion of cryptocurrency assets.

After three years of continuous communication with regulators and the practical conversion of core banking operations to smart contracts on the blockchain, Fiat24 finally obtained the financial technology license from the Swiss Financial Market Supervisory Authority (FINMA) in 2021. It became the first bank driven by smart contracts, fully architected on a public blockchain, to offer services such as deposits, cryptocurrency consumption payments, savings, transfers, and currency exchange to users as a Web3 bank.

Fiat24’s innovative blockchain banking architecture seamlessly integrates traditional banking financial services with Web3 blockchain payment innovations, gaining favor from numerous top-tier capital investors. It also received the honor of being named the Best Emerging Bank (Neobanks & Specialized Players) in 2022 by Qorus and Accenture.

（Qorusand Accenture Announce Winners of 2022 Banking Innovation Awards）

3. Web3 Banking Services Based on Blockchain Smart Contracts

In the preceding Web3 payment research report, we can see that various Web3 financial infrastructures, with payments as their core, are gradually taking shape—from payments, custody, wallets to stablecoins. With industry giants like Paypal, Coinbase, VISA, Metamask, and Telegram deeply integrating their businesses with Web3 (especially payments), how to bridge fiat and cryptocurrencies, and how to leverage the advantages of Web3 payments to build business scenarios, have become crucial.

Fiat24 fully leverages the advantages of the Swiss financial technology license, innovatively constructing banking logic on the blockchain and smart contracts. It bridges the gap between on-chain wallet accounts and off-chain bank accounts and accesses most real-world payment scenarios through VISA payment channels, creating business scenarios for Web3 banking, finance, and payments. The core account system of Fiat24 includes on-chain NFT Accounts and off-chain Swiss bank accounts (Cash Accounts).

3.1 Pathway between NFT Account and Swiss Bank Account

Users can access Fiat24 through their encrypted wallets, obtaining a Fiat24 NFT (unregistered guest mode). Only Fiat24 NFT users who have registered and passed KYC verification can use this NFT Account to connect to their Swiss bank accounts. This practice of setting KYC real-name parameters at the NFT level and using the NFT Account to represent user identity completely abandons traditional bank accounts and passwords, which is revolutionary for traditional banks.

Once this NFT Account is registered and KYC is completed, Fiat24 will simultaneously open a Swiss IBAN bank account with a CH prefix for the user. This account is hosted by Fiat24 and regulated by Swiss banking laws, providing the same basic functions as traditional bank accounts, such as deposits, transfers, and currency exchange.

(Fiat24.com)

3.2 Implementing Web3 Payments through Smart Contracts

Fiat24 binds the NFT Account with the Swiss bank account, further integrating blockchain technology into the traditional financial system.

Deposits and Withdrawals: In a scenario involving ETH withdrawal, there are roughly two steps: (1) ETH is converted to USDC, (2) USDC is withdrawn as USD through the payment channel. Fiat24 first swaps ETH for USDC by calling the Uniswap protocol. Since Fiat24’s banking logic is built on the blockchain, the next step can directly call its own withdrawal channel to complete the withdrawal. Both of these steps are implemented through smart contracts.

Cryptocurrency Payments: Fiat24 provides registered KYC users with a debit card co-branded with VISA, thereby connecting to VISA’s network of over 40 million merchants and third-party payment channels like Apple Pay and Google Pay. Therefore, in a scenario involving further ETH cryptocurrency payments, Fiat24 can directly exchange ETH for USDC through smart contracts, withdraw USD to the Swiss bank account, and settle fiat currencies for merchants through payment channels.

（Temperature Check - [Issue a Visa Card with Uniswap Logo ]）

Fiat24’s encrypted consumer payment scenario, which connects cryptocurrency wallets and bank accounts, can be seen as an iteration of traditional banking and payment services. It integrates multiple services, such as Swap on Uniswap, withdrawal of USDC to fiat currency, settlement payments to merchants, etc., and drives this entire process through smart contracts, thus achieving a seamless user experience from cryptocurrency to fiat currency.

3.3 Compatibility with Traditional Banks and Payment Channels

With the support of the financial technology license, Fiat24 has been approved to join the Swiss Interbank Clearing (SIC) payment system and holds a settlement account within the Swiss Central Bank. Additionally, it can connect to global payment settlement systems such as SWIFT, SPEA, VISA, etc., and all real-world payment interaction data is recorded on the Arbitrum blockchain.

In addition to settling payments through Swiss bank accounts, Fiat24 users can not only transfer funds to their Fiat24 Swiss bank accounts via international remittance or transfer to other bank accounts but also sell their cryptocurrency assets and withdraw them as fiat currency stored in Swiss bank accounts, all of which are implemented through smart contracts.

Interestingly, Fiat24 can provide currency exchange services through its Swiss bank accounts, and these foreign exchange fiat currency exchanges are realized through tokenized deposits.

According to Yang, Fiat24 initially created a USD/EUR trading pair on Uniswap to support its currency exchange business. However, due to factors such as the need to combine oracles to anchor exchange rates in real-time, as well as limitations on trading volume and currency types, Fiat24 ultimately decided to tokenize its bank deposits and capture interbank exchange rates through Chainlink to achieve 24/7 real-time currency exchange. We can see from Fiat24’s description that currency exchange requires Gas payments.

(Fiat24.com)

The architecture used by Fiat24 seamlessly integrates banking financial services and blockchain innovation, fully realizing the operations of traditional banking backend systems by architecting banking logic on the blockchain and driven by smart contracts. On the business level, on one hand, it achieves perfect integration of Web3 payments (including deposits and withdrawals, encrypted consumer payments) through its NFT Account and Swiss bank account system. On the other hand, it also connects to important functions in traditional banking finance such as payments, currency exchange, and transfers through Swiss bank accounts.

4. Fiat24: Serving as the Fiat Protocol Layer for DApps

“Just like how Chainlink positions itself as the infrastructure for decentralized oracle networks, Fiat24’s positioning is as the infrastructure for decentralized digital banking networks—a Fiat Protocol Layer for DApps,” Yang stated. “We believe that in the future, DEX will replace CEX. However, compared to CEX, which can facilitate deposits and withdrawals through its own payment channels, the biggest drawback of DEX lies in the fact that traditional banks cannot be compatible with a protocol, nor can they open APIs or accounts for a protocol. Fiat24, on the other hand, can precisely connect protocols on-chain via its NFT Account and Swiss bank accounts, linking protocols on-chain and traditional finance off-chain, providing a perfect solution.”

Since Fiat24 operates as a DApp through protocols, for users, they can directly access www.fiat24.com through non-custodial wallets (such as MetaMask or Uniswap wallets) to enter the Swiss bank’s electronic portal. Additionally, the operation of setting KYC real-name parameters at the NFT level enables users to remain anonymous in other DApps.

For DApp developers, since it involves Protocol-to-Protocol cooperation, they can directly call Fiat24’s Protocol for integration. This essentially opens up Fiat24’s Swiss bank online banking account for their own DApp, addressing many of the missing fiat currency services for DApps.

(Fiat24.com)

Currently, Fiat24 is actively collaborating with cryptocurrency wallet teams to add a fiat currency protocol layer to these non-custodial cryptocurrency wallets, achieving seamless integration of on-chain cryptocurrency assets with off-chain Swiss bank assets.

This is highly desirable for wallet users as it allows them to not only acquire a prestigious Swiss bank account (the minimum deposit requirement for a regular Swiss bank account is at least 500,000 Swiss francs) and enjoy banking services, but also to conveniently make encrypted payments using the VISA payment channel provided by Fiat24.

Fiat24, as the fiat currency protocol layer for DApps, can seamlessly integrate with various DApps through protocols, also applicable to scenarios such as DeFi, DEX, GameFi, and others.

Imagine a daily consumption scenario: through Fiat24’s DApp (accessed through its signature NFT), users can use the encrypted assets stored in MetaMask or any other non-custodial cryptocurrency wallet to purchase Starbucks coffee before going to work in the morning, or to make any purchases at bars that accept VISA payments after work, achieving “morning coffee, evening alcohol”.

For users who wish to incorporate encrypted assets into their daily lives, Fiat24’s innovative Web3 banking architecture design, along with its seamless Web3 payment solutions, are revolutionary.

5. Future Prospects of Fiat24

Currently, Fiat24 only covers users in the European Union and Switzerland, and supports only three currencies. However, Yang stated that with the continuous expansion of the market and the surge in user demand, Fiat24 will expand its coverage to users in Southeast Asia and the Americas in early 2024, and support more currencies.

5.1 Outlook for Wallet Entry

Fiat24, based on its positioning as a decentralized digital banking network infrastructure - the fiat protocol layer for DApps, will integrate more cryptocurrency wallet entries. Through cooperation between protocols, it will seamlessly connect B-side cryptocurrency wallets and other partners, similar to embedding a Fiat24 Swiss bank’s internet banking into DApps.

In addition, Fiat24 can also provide co-branded cryptocurrency payment cards (Debit Cards) for cryptocurrency wallet service providers, helping users access more cryptocurrency spending scenarios and enabling cryptocurrency wallet service providers to empower users further.

In fact, we can already see that large wallet entries like Metamask have integrated numerous Web3 financial infrastructures, and are already capable of providing all basic functions similar to exchanges, such as Buy, Sell, Swap, Bridge, Stake, Send, etc. After improving the user experience of cryptocurrency wallets in the future, there may be possibilities for overtaking on the curves. This is also why OKX attaches great importance to its OKX Wallet.

5.2 Token Economy Planning

While continuously connecting cryptocurrency wallet service providers and expanding product coverage capabilities, Fiat24 will launch a token round of financing at the end of the year or early 2024. By then, Fiat24’s positioning will be clearer - as the fiat protocol layer for DApps, becoming an important infrastructure for the Web3 ecosystem.

The launch of the F24 Token is to further connect many participants in the Fiat24 ecosystem. As a utility token, the F24 Token can empower participants in its ecosystem. For (1) customized individuals and enterprise clients, the F24 Token can meet their customized demand for bank card number segments, and provide more generous payment quotas and fee discounts through the consumption of F24 Tokens; for (2) wallet service providers, they can provide account opening and internet banking convenience to their users by consuming F24 Tokens.

In terms of token economy, the F24 Token follows a deflationary token model. According to its whitepaper, 50% of the token supply will be allocated to community participants to support the sustainable development of the Fiat24 ecosystem, 20% of the supply will be allocated to early teams and investors, and the remaining 30% will be retained in the project vault to support project operations, development, compliance, external cooperation, etc., collectively driving the long-term development of the Fiat24 ecosystem.

6. Conclusion

There is no denying that a revolution is unfolding in the global financial payment arena, led by the transformative power of Web3 driven by blockchain technology. This revolution is gradually permeating traditional banking, finance, and payment infrastructure through payments, wallets, custody, stablecoins, just as industry giants are currently making a full-scale attack on Web3 payments.

For traditional banks, digital banking has become a catalyst for the digital development of traditional finance, but there are still many shortcomings that can be improved by leveraging blockchain technology. Users access their bank accounts based on outdated usernames and passwords, while transaction confirmation codes are typically obtained via SMS. These cumbersome processes make the system prone to human errors and manipulation, thereby compromising security. Additionally, ledger records and processing logic are often managed in the backend systems of banks, making them susceptible to single points of failure and exposing sensitive information.

Innovative financial technology companies like Fiat24 are attempting to revolutionize the underlying principles of traditional banking, finance, and payment systems. Similarly, traditional financial giants such as Paypal and VISA are also making various attempts in Web3 Fintech. Through collective efforts, the fundamental principles of banking, finance, and payment systems will undergo a transformation, using groundbreaking technological architectures to enhance security, efficiency, and enable permissionless access to global banking, finance, and payment networks.

The transformation of traditional banking, finance, and payment systems cannot happen overnight, as it involves the interests of too many stakeholders. However, Fiat24 is pioneering a new way of value transfer through the advantages of blockchain and smart contracts, connecting the on-chain and off-chain worlds through a single DApp. Fiat24 is driving forward through the Web3 approach of blockchain and redefining the meaning of global banking, finance, and payment applications.

Statement:

1. This article originally titled “专访 Fiat24：架构在区块链上的 Web3 银行” is reproduced from [Web3小律]. All copyrights belong to the original author [ Will 阿望]. If you have any objection to the reprint, please contact Gate Learn team, the team will handle it as soon as possible.

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