The news: The crypto exchange Bybit plans to introduce bank accounts on its crypto platform in February. It will roll out a retail banking feature allowing users to hold and move fiat money alongside crypto. In the US, the accounts will be sponsored by local banks, such as Georgia's Pave Bank. Bybit plans to let users hold and use 18 fiat currencies.

How it works: To move money into and out of crypto, users often need to move it from a traditional bank account to an exchange account to buy crypto, and reverse the process to convert it back into fiat currency. The idea is that customers would set up direct deposits with their accounts, use them for daily banking tasks, and stay within Bybit’s crypto ecosystem.

Implications for banks: Crypto and traditional banking services are increasingly intertwined. Industrywide, it goes beyond just moving money into and out of exchanges: Erebor, for example, plans to accept virtual currencies as collateral for some loans and hold crypto off its balance sheet to facilitate payment operations. In October, the Office of the Comptroller of the Currency granted it conditional approval for a national charter.

Mixing crypto and traditional banking is probably beyond the comfort zone of most financial institutions (FIs). However, they will need to contend with the growth of stablecoins as a payment mechanism and their popularity as an asset Gen Z consumers favor for a number of different banking uses. The day is coming when FIs can no longer ignore the blending of the crypto and traditional financial systems.