To some, Malta-native Paula Pandolfino may seem like a walking contradiction: bitcoiner and banker.
After personally investing in bitcoin in 2016, she’s now co-founder of the upcoming Founders Bank in Malta, scheduled to open in 2020.
“Crypto will take over the world, and we need full banking services,” she told CoinDesk. “We want to be that pillar of banking for the ecosystem to support how it gets done. If anything, [we’re learning] how to wean off traditional banking and getting crypto to be that platform.”
Pandolfino said the bank raised $10 million so far and is looking to raise $30 million more in the near future. The bank’s leading investors include the crypto exchange Binance (also based in Malta), the hedge fund Polychain Capital and the Czech firm Carduus Asset Management.
Polychain president Joe Eagan told CoinDesk the investment was inspired by personal experience since his fund struggled to find banking partners in 2016. Today more institutions – from Silvergate Bank in California to Metropolitan Bank in New York to WEG Bank AG in Germany – serve the crypto industry. But Eagan said there’s still a dearth of providers open to crypto projects.
“Many of our portfolio projects, we’ve seen, still have difficulty accessing banking partners,” he said, adding:
“We need to bring in new users beyond the original users of bitcoin. And to do that we need to institutionalize the rails and structures of our space, adding services like institutional custody and banking support.”
In a press statement, Binance CEO Changpeng Zhao said his company will be one of the bank’s first clients as soon as it opens. Indeed, Pandolfino said that while her team is waiting for its European Union banking license, they are busy learning from their investors precisely what products and services the sector might need.
“Having Binance as a seed investor,” Pandolfino said, “has allowed us to build everything knowing what the pain points are for complex organizations within the crypto space and how to solve those problems.”
All of this poses the question of which bank shareholder will be the first to transition from crypto entrepreneur to bank chairman. For now, Pandolfino said European regulators are requiring board members have over a decade of experience in traditional finance.
“It seems to me like there will be some overlap between traditional banks and decentralized finance as the space continues to grow,” Eagan said.
Lessons learned
And yet, the road toward launching a crypto bank has been paved with challenges.
Originally, Founders Bank planned to raise capital with equity tokens. That plan was quickly shelved in order to avoid complications during the licensing process.
Pandolfino said the bank might explore compliant ways to work with tokens in the more distant future. After all, she was one of the advisors who contributed to Malta’s Virtual Financial Assets legislation. That process took more than a year. But it eventually created a European gateway, as Pandolfino put it, for compliant innovation in the crypto space.
“Our secret sauce is centered around building a know-your-customer, anti-money-laundering platform which is fintech-focused,” she said, describing Founders Bank.
TokenPay founder Derek Capo, whose startup is a WEG Bank AG shareholder, told CoinDesk he still believes his German bank will have first-mover advantage when it comes to serving European crypto companies.
“Today, [WEG Bank AG] is already operating and has corporate crypto clients with plans for business-to-customer services,” Capo said. “Things always take longer than expected.”
But Eagan said there are still too few crypto-friendly banks to worry about any single player dominating the regional market.
“We are proponents of regulation which will make our industry more successful in the long run,” Eagan said, adding:
“There is still more banking that will be needed as our space continues to grow and institutionalize.”
UPDATE (Oct. 2, 14:15 UTC): This article has been updated to remove mentions of Dr. Abdalla Kablan, current director of the Malta Stock Exchange, who was approached by the Founders Bank project but declined to join the bank’s board.
Paula Pandolfino image via Founders Bank