A community bank in the United States will soon make it possible for companies to use the first blockchain-based, real-time payment network that is completely integrated into the US financial system. This bank is doing this to keep up with an increasingly digital economy. Cogent Bank was established in May of 2018, and it now has eight branches around the state of Florida.
The bank’s primary mission is to provide services that are adaptable, inventive, and forward-thinking. Mark Hindley, the managing director of blockchain innovation at Cogent, resides in the Naples area, but he spends a substantial amount of time in the Tampa Bay area since Cogent has offices in Clearwater and Tampa, as well as because the region’s fintech business is expanding at a fast rate.
The cooperation between Cogent Bank and TassatPay is scheduled to be live on June 20. This will make it possible for companies to make payments that are both quick and safe and are enabled by blockchain technology, even outside of the regular banking hours.
Hindley stated “To the best of my knowledge, neither Tampa nor Clearwater has a financial institution that can compete with the scope of what we will be able to provide.”
Following the acquisition of Pinnacle Bank, which Hindley described as being “in some crisis,” by a group of investors using the resources provided by the Federal Deposit Insurance Corporation, Cogent was established (FDIC). He believes that the total assets of Pinnacle were lower than $50 million at the time, but the current value of Cogent is “in the ballpark” of $1.3 billion.
Hindley described the expansion of Cogent over the past few years as “quite spectacular,” and he said that the bank sets itself apart from competitors by having an in-depth grasp of the blockchain and cryptocurrency sectors. This necessitates having a solid understanding of the dangers, dynamics, money flows, decentralized institutions, integration of blockchain technology, protocol creation, and node framework.
Hindley said “As a result, we have been able to devise internal rules and methods of risk mitigation that not only enable us to bank with certain types of blockchain and cryptocurrency firms but also encourage us to do so. We are extremely convinced that we have been able to reduce the risks that are connected with working with customers of this kind, despite the fact that there are some dangers involved with working with clients of this type.”
According to Hindley, Cogent is working hard to improve its infrastructure in order to better serve its customers that operate in the blockchain and cryptocurrency industry. The recent agreement with TassatPay accounts for a significant portion of this development. The Tassat Group, with headquarters in New York, is responsible for the development of the payment platform known as TassatPay. This platform was recognized with a 2021 Google Cloud Customer Award for its innovative contributions to the financial services industry.
The business introduced the nation’s first real-time Digital Interbank Network in December 2021, making it possible for financial institutions to carry out instantaneous money transfers by using blockchain technology. According to Tassat, the network functions as a highly protected, confidential platform for payment instructions and settlement that can only be accessed by member institutions.
Hindley said “When a bank is able to provide a blockchain payment rail, we believe there will be significant benefits for the bank. The most important factor is undoubtedly going to be accessibility.”
Hindley made the observation that blockchain payment rails do not depend on either the federal wire system or the Automated Clearing House (ACH) system in order to function continually. Settlements made using blockchain technology cannot be altered, in contrast to those made through wire transfers or automated clearing house transactions. In comparison to older systems, blockchain transactions, according to Hindley, are not only more accessible but also more secure. Blockchain transactions also have a lower overall cost.
Hindley further stated “When compared to the cost of sending a wire transfer, our solution has much lower fees. Regarding its potential as a payment rail, we have a very optimistic outlook.”
According to Hindley, businesses operating in the blockchain and cryptocurrency industries are required to carry out deals and settlements involving digital assets in a manner that is immediate. Blockchain payment rails, in contrast to conventional systems, do not place any restrictions on the amount of money a business is able to transfer outside of normal banking hours.
According to what he stated, uncapped and open availability is an appealing choice for business-to-business payments in the supply chain, import-export, and real estate industries, all of which are sectors in which the speed of transactions and the finality of deals are very important.
Hindley also pointed out that quick settlements are possible with blockchain-enabled smart contracts since it is not necessary to have a variety of staff examine and approve payments.
He opined: “There will be no cheques, wire transfers, statements that “it’s in the mail,” or trips to the mailbox. It is instant, and it comes with all of the advantages of the blockchain.”
Even though these are the first advantages of using the new payment rail for business-to-business transactions, Hindley from Cogent has said that the company is looking at additional projects, such as digital asset custody management. According to him, once the bank is in possession of the digital assets, it would be able to provide an automated mechanism for borrowing money. Hindley said that the existing procedure for obtaining a loan is laborios, since it requires a substantial quantity of documentation and input from a human hand. He said that conventional approaches are much less effective when compared to the possibility of borrowing against cryptocurrency and digital assets.
Hindley stated “We believe that being the first to market and having that leading-edge advantage, not only in blockchain payments but also with digital asset merchant acceptance, is a really strong combination. This is because both of these advantages come from being the first company to enter the industry.”
“In addition, I believe it is of the utmost significance to be aware of the fact that we are a community bank when one considers the scale of our financial institution.”
Hindley said that while being a locally based banking organization, Cogent provides individualized attention and service while also providing new solutions. Despite the fact that its primary emphasis is on the applications of blockchain and cryptocurrencies in business, Cogent continues to provide conventional banking services that are specifically adapted to the needs of those firms and their workers. According to Hindley, Cogent provides wealth management services for startup founders in addition to personal mortgages, lines of credit, and checking accounts. The company also has “some really amazing lending products that were created more for the fintech types,” he added.
Hindley further said “That is something that we consider to be our specialization and our value proposition. Being the high-touch, white-glove bank for the blockchain sector and for the companies and individuals who are creating in the area.”
According to Hindley, Cogent has a banking connection with BlockSpaces, which is situated in Tampa, as well as numerous other companies that are focused on blockchain and cryptocurrencies all across the Tampa Bay area. He has high aspirations of continuing to cultivate ties with businesses located around the area that are engaged in all facets of the industry. He said, “we are available for business for customers that suit our risk profile, and those clients surely do.” He was referring to the clients in question.
Because the blockchain ecosystem develops more rapidly than the regulatory framework can keep up with, according to Hindley, there is not a lot of clarification from the regulating bodies in regard to federal legislation.
Hindley said that the Financial Crimes Enforcement Network (FinCEN) is the primary source of direction for Cogent, in addition to the comprehensive study that the company does in collaboration with regulatory partners, consultants, lawyers, and advisers. He went on to say that Cogent has a high level of confidence in the fact that its rules and processes go beyond what is necessary.
Despite the fact that he is aware of the concerns that members of the blockchain and Web3 communities have about laws, he is of the opinion that more clarity would be beneficial to the sector.
Hindley said “If all goes according to plan, it will serve just as a significant driver of expansion. In light of this, I cannot wait to see what the regulatory landscape will look like in the not too distant future.”
According to Hindley, there is a significant shortage in the market of financial institutions that are ready, willing, and able to collaborate with blockchain-based businesses. He shared the details of a recent phone call he received from a person whose bank checked his business account and stopped it because the title of the account included the term “crypto.”
According to Hindley, blockchain is the future, and banks should stop treating connected firms like the outcasts of the fintech sector. He is certain that Web3, the metaverse, and “the approaching blockchain revolution” will usher in a new era in which everyone’s lives will be improved.
He said “If a teeny-tiny bank in Florida can have any part to play in it, then what an incredible opportunity it is for our clients, our workers, and our shareholders. To be one of the first companies in the United States to launch these sorts of goods and services is really exciting for our company.”
