Buying and selling cryptocurrency with fiat currency is still not an easy or enjoyable experience, despite being around for over a decade. In contrast, cryptocurrency to cryptocurrency trading is a lot more straightforward.
The problem arises when users want to onboard or offboard from local money to crypto (and vice-versa) – the whole process seems overly complicated and confusing. But why is this, and is there a solution?
The problem with legacy financial infrastructure
One of the main reasons for the complicated and involved nature of fiat currency to crypto trading is due to the legacy financial infrastructure. Fintech solutions to onboarding and offboarding to Cryptocurrencies have been built on top of, and are restricted by, the structures and processes already in place.
Cryptocurrency on and off ramping has evolved around the use of counterparties, such as exchanges and P2P marketplaces.
Users must give custody of their money to the counterparty and can only buy and sell on the platform. This opens them up to several risks and comes with frequently high fees charged by the exchange.
To make matters worse, to get assets onto the platform, users must deal with a whole new set of counterparties – such as foreign exchanges, the SWIFT Network, or credit card companies – all of which charge their own fees and come with associated risks and delays.
The whole process can be complicated and daunting.
How can onboarding and offboarding from fiat currency to crypto be made simpler?
Fintech companies have been working on a number of solutions, but as they are built on the traditional financial infrastructure, they have been limited by all the restrictions and fees that come with it.
Hong Kong-based fintech XanPool is trying to fix these issues with a new approach. Jeffery Liu, the CEO and founder of XanPool, explains, “It shouldn’t be so difficult to buy or sell cryptocurrency with fiat currency.
Crypto to crypto trading is easier as it bypasses the legacy infrastructure and all the problems with counterparties, asset custody risks and so on.
“The irony is that Bitcoin was created to reduce counterparties and operate as an alternative to the established legacy financial infrastructure. It was with this in mind that we built XanPool. We merged modern fintech solutions such as e-wallets and fast payment platforms with the borderless and less restricted advantages offered by cryptocurrency.”
What XanPool has created is an automated market making software which allows local buyers and sellers (liquidity providers) to automate their cryptocurrency buying and selling using their own bank accounts or e-wallets.
For example, FPS in Hong Kong, Pay Now in Singapore, and InstaPay in the Philippines. This essentially makes each individual liquidity provider a fiat-gateway. Thousands of these liquidity providers, running XanPool’s software, make up the XanPool Network.
Liu says, “The XanPool network is made out of individuals and businesses, instead of banks and payment processors. Yet, despite this peer to peer architecture, the user experience is one where the settlements are instant. All while cutting out the middlemen.”
Is the decentralized approach working?
Other competitors are working to find solutions to the problems of buying crypto with fiat currency, and some are making headway.
These include Crypto ATMs, P2P marketplaces, exchanges and Over the Counter Trading (OTC) desks. Many of these have improved and simplified many of the processes involved, but they still face issues with transfer delays and fund custody risks.
“Our approach and solution have proved popular,” Liu says. “In just three years, we’ve become the largest decentralized market maker in Asia, with hundreds of millions in decentralized liquidity. At present, XanPool has over half a million users across 12 countries.”
The company is focusing on the Asia Pacific region, but it has received a lot of attention globally. “We recently raised $27 million in Series A funding.
In total, we have raised around US$32 million. To date, we’ve partnered with over 150 cryptocurrency platforms, ranging from exchanges like OKEx to cold wallets such as Trezor.
“We are also making inroads into the traditional online-merchant space, opening up our decentralized payment network for under-serviced businesses, so that their customers are able to pay them using local payment methods. Thanks to our networked structure, Payments can be routed internationally via cryptocurrency, instantly, and without custody of client funds.”
XanPool is relatively new, and there are a lot of competitors in the sector. However, by having a liquidity network and infrastructure that allows the bypassing of existing legacy finance structures, like banks or SWIFT, they offer a service that is different from others.
It is still early days and limited to Asia, but the solution seems to solve a lot of the traditional problems. Time will tell.
