"It's a great development if Coinbase succeeds in offering this service."
Coinbase which continues to grow despite being subjected to aggressive action by the United States (US) regulator has caused Ripple (XRP) board member Asheesh Birla to predict that the crypto exchange will offer banking services supported by digital assets.
Through Coinbase's mission, vision and value proposition, Birla said that the exchange plans to build a digital asset economy, where all users can benefit from an efficient, transparent and fair crypto-powered financial system.
While he also revealed Coinbase's first quarter report 2023 the revenue generated by the exchange is mostly deposits that come from interest income, custody fees and blockchain rewards.
In addition, institutional trading revenue which registered a jump of 67% has been the reason why Coinbase's revenue is mostly derived from institutional users rather than user transactions.
Birla also wonders if now is the time for consumers and institutions to switch to alternative services following the recent banking crisis that has reduced public trust in the traditional financial system.
Citing Bloomberg Opinion by Matt Levine titled "Nobody Trusts banks Now", he has explained the banking strategy in two ways, firstly banks borrow short to lend long and secondly borrow long to lend long.
In the first strategy, banks use customer deposits to buy bonds and loan funds while in the second, banks apply customer deposits that can be withdrawn in the short term to buy bonds and finance loans.
Since the strategy relied only on customer deposits, Levine concluded that the banking business was inherently risky and had the potential to collapse if all depositors simultaneously withdrew their money.
