Cryptocurrency Exchanges Will Have Banking Functionality By 2027

Cryptocurrency is already redefining how we spend money. Increasingly, people are moving away from traditional financial services and their providers to the convenience and decentralized systems that cryptocurrencies provide. The emergence of innovations such as crypto loans, crypto savings accounts, and Bitcoin wallets has spiked conversations about the transformative potential of cryptocurrency-based financial tools within exchanges.

Recent developments in the global crypto landscape, including a push for friendlier regulatory frameworks, the increasing financial influence of GenZ, and improved access to crypto loans, are accelerating the transition toward a more integrated financial ecosystem. With more regulatory clarity and growing adoption, cryptocurrency exchanges' involvement in this evolution is inevitable. This suggests that by 2027, many digital asset platforms could become full-fledged financial institutions, providing services like interest-earning accounts, crypto-collateralized loans, and seamless payment solutions. 

Increasingly Streamlined Crypto Regulations 

One of the major regulatory milestones for the crypto market in 2024 was the approval of Bitcoin spot ETFs by the US Securities and Exchange Commission (SEC) in January. This was followed in July by the approval of spot Ethereum ETFs, allowing people to trade the two largest cryptocurrencies as financial instruments in the traditional financial world. 

Donald Trump's election win and subsequent pro-crypto statements, along with initiatives offered by the new presidential administration, significantly influenced crypto regulations in late 2024. 

However, the most transformative changes are expected to take place around 2026-2027, as multiple countries align their strategies for taxing cryptocurrency transactions. G20 sets 2027 as the year in which its members can tax crypto transactions. Globally, 48 countries have committed to adopting a tax transparency standard by 2027, introducing the automatic exchange of information between jurisdictions to combat tax evasion on cryptocurrency platforms.

Other countries like the UK already have plans for their crypto regulation regime to go live in 2026, establishing clearer rules for digital assets and crypto exchange operations. Similarly, South Korea is preparing to implement crypto taxation policies by 2027. 

Simultaneously, traditional financial institutions will likelo deepen their involvement in the crypto sector. Beginning in January 2026, banks will be required to disclose their exposure to digital assets, signaling a closer integration of traditional finance and cryptocurrencies.

Banking the Unbanked 

Despite the various developments in traditional finance, financial inclusion is still a mirage due to the many limitations the average person experiences. For instance, banks are centralized and they have rigorous processes that make them favorable to some than others. For instance, Bank of America has a minimum opening deposit of up to $100, depending on the type of account you choose. Other banks may charge various fees, including transaction fees of up to 3%, monthly maintenance fees, and wire transfer charges that eat deep into people's savings. 

However, not everyone still gets access to these financial services, as many banks, including JP Morgan Chase and Wells Fargo, still primarily operate in urban or metropolitan areas and have limited remote service options. According to the World Bank, 1.4 billion people (17% of the global population) had no bank accounts as of 2021. That's where cryptocurrencies and decentralized finance as instruments for inclusive financing methods come in. 

Decentralized Loan and Investment Services 

Traditional banks and lenders offer various loan products. However,  it's almost impossible to access loans in some countries because of their strict paperwork, bureaucracy, and record-high interest rates. For instance, Zimbabwe and Argentina have a lending interest rate of 170.29% and 97% respectively, making loans impossible for individuals and businesses in the country. The average lending rate offered by banks in 2023 based on 83 countries was 14.19%, while the general average lending rate across all tokens and crypto platforms is approximately 6.06%. ​​

Currently, decentralized protocols and platforms offer crypto loans and investment services like yield farming and crypto lending to users. These DeFi features are similar to what's obtainable in traditional banking, allowing customers to get collateralized crypto loans. 

However, these decentralized crypto loans are more convenient to get. They require no paperwork or credit score checks. They are also disbursed instantly, making them more accessible. For instance, the average loan approval rate on DeFi protocols is nearly 100% if the demands are met. Conversely, big banks only approved about 13% of loans for small businesses in 2023. 

The Expanding Role of Crypto in Payment Systems

Businesses are increasingly integrating crypto payments into web platforms to introduce secure, cost-efficient transactions. The Crypto Payment Gateways Market, valued at $1.2 billion in 2023, is projected to grow at a CAGR of over 15% from 2024 to 2032. 

A notable development occurred in May 2024, when Coinbase Commerce partnered with Crypto.com Pay to launch a web-based crypto payment gateway for e-commerce, gaming, and financial services. This system increases transaction efficiency, converts crypto to fiat seamlessly, and reduces operational complexity, reflecting the broader adoption of cryptocurrency in daily operations.

McKenzie analysts predict annual revenue growth in the crypto payments sector of about 10.3%, with the global digital payments market itself growing at 25% annually through 2027. By then, cryptocurrencies will likely to account for a meaningful portion of alternative payment methods globally.

With an increasing role of crypto wallets and exchanges in handling such transactions, 2027 will see direct support for digital asset platforms to act as second banks to users, making it possible to receive funds directly, send them across different banks, and operate within a synchronized hybrid banking system. 

The Gen Z Influence

The existing banking structure revolutionized wealth management for Baby Boomers (people between 60 and 78 years old). However, Millennials and Gen Z adults consider these banking structures obsolete, expensive, and slow. As a result, the new generation seeks banks and crypto brokerages that are less clunky and opaque. 

Reports from Coinbase reveal that 55% of GenZ adults prefer to move their funds on-chain instead of using digital banking platforms. Similarly, a Bitget survey conducted between January 2022 and January 2023 found that 21% of the GenZ group are active crypto holders. This trend is driven by the group's inclination toward modern technologies like blockchain and digital assets, coupled with their lack of exposure to the financial crisis as they were born after the 2008 economic meltdown.

According to a survey by Tink, 31% of Gen Z said their bank was at risk of losing them as a customer if digital tools and services weren't upgraded. That's why they boast a higher number of crypto wallets than their older counterparts. 

The future of finance is already being shaped by GenZ users who by 2025 are expected to make up over 25% of the workforce. Their preferences for digital financial alternatives are driving increased competition between traditional banks and cryptocurrency exchanges, compelling both sectors to introduce hybrid solutions that blend traditional and digital finance elements.

The Future and Banking Functionality 

Looking beyond 2025, one of the biggest anticipations is the expansion of cryptocurrency exchanges to support better financial inclusion in the future. Currently, crypto exchanges have already incorporated elements of traditional finance into their services such as crypto savings accounts, crypto credit cards, and loans. Many of them are on the rise as they give users increased accessibility and flexibility. 

These services operate similarly to what you'll find in the conventional world, showing the massive potential within the crypto industry. With clearer regulatory frameworks and better support for cryptocurrencies, cryptocurrency exchanges will have more freedom to create new use cases for digital assets. 

For instance, we could see more hybrid financial structures with exchanges providing a mix of crypto-based or fiat-related services. These will create room for stablecoins and tokenized assets to act as alternatives to fiat money. They can be used for collateralized loans, competitive interest-earning accounts, and other everyday banking functions. Additionally, cross-border payment solutions offered by cryptocurrency exchanges would make transactions instant and low-cost, reducing remittance fees to under 1%, compared to the traditional average of 6.3%. By addressing these pain points, centralized exchanges could reshape public perception, positioning themselves as efficient and cost-effective solutions in the financial ecosystem.

We can already see cryptocurrency exchanges obtaining bank charters in certain regions, showing the future of the union between exchanges and traditional banking. As these possibilities shape up, one thing is clear — the future of cryptocurrency and digital asset exchanges will take a big leap following regulatory support and other potential reforms in the industry.