A new London-based software company, Knabu, is trying to achieve what many have deemed impossible – become the eight clearing bank in the UK in 250 years and one that serves crypto firms. The company focuses on blockchain solutions for the Fintech industry and is determined to fill a serious void in the crypto arena – providing banking services for small to medium-sized crypto companies. It recently launched a 30-day pilot program with its major blockchain platform partner, US-based Factom, Inc.
Gabrielle Patrick, founder and CEO at Knabu, stated the purpose of his firm’s pilot, as reported by Cryptofundinsider.com:
The purpose of the pilot is to start proving some of the efficiencies that blockchain brings – specifically as core infrastructure for a bank. The average cost of regulatory compliance for a bank is about 30 percent of its budget. We’re a blockchain-first company and felt that it was necessary to demonstrate the features that can remodel that.
The firm’s website plainly states:
We are building a digital financial institution designed to support the Fintech ecosystem. This institution will enable domestic and international payments and provide products and services aimed at enabling more efficient trade and transactions.
They essentially wish to become a utility bank for the crypto community, clearing fiat currencies for underserved crypto firms.
Patrick’s executive team feels certain that they can lower the costs of regulatory compliance and achieve other efficiencies that will allow them to provide service to “both small-and-medium-sized enterprises (SMEs) and Fintech firms, as both of them are underserved business entities. Hakim Mamoni, CTO and co-founder at Knabu, added:
We wanted to avoid repeating the same KYC, KYB and AML checks. [Traditional financial institutions] don’t have the same flexibility in terms of having access to the data.
Knabu has assembled a consortium of service partners, each with a specific role:
- Factom, Inc.: Blockchain platform provider, which can easily be integrated with the Bitcoin and Ethereum blockchain networks;
- EthBits: Provides secure trading support for users between their bank accounts and crypto wallets;
- IdentityMind: Will perform KYC and KYB checks according to Knabu algorithms;
- DMG Blockchain: Will use specialized Distributed Ledger Technology forensic tools, including Blackseer and Walletscore, to monitor for possible money laundering situations arising from Bitcoin or Ethereum wallets.
Factom has elected to go with the two most established and secure networks, i.e., Bitcoin and Ethereum. Knabu will send data through an API, and Factom’s blockchain will build the data chains that will eventually be backed up to the BTC and ETH blockchains. Carl DiClementi, VP of Product at Factom, explained:
This allows us to be able to borrow the security that you get from the power of the bitcoin and ethereum blockchains to verify that your data is what you claim it to be.
Knabu management have definitely discovered a “niche” that needs to be served, but establishing a new bank in any jurisdiction can often be problematic. The preliminary approval period can take several years before regulators are comfortable, which may be extended due to previous statements made by UK officials. The company’s target market may also be of high risk, if the forecasts from analysts of major consolidations within the industry begin to “cull the herd”.