Web3 banking offers numerous benefits tailored to the unique needs of high-net-worth individuals (HNWIs), providing enhanced financial flexibility, privacy, and opportunities for wealth management in the decentralized economy. However, a final stance on the regulation of Web3 is still pending, and security remains a common concern. There is no doubt some financial institutions in the space are untrustworthy, while others may face security vulnerabilities or flaws, which is equally valid for traditional banks.
Individuals seeking to avail themselves of the exciting opportunities that Web3 offers can take measures to ensure that their assets are safe. Legitimate platforms comply with anti-money laundering and know-your-customer rules and hold licenses from the financial authorities in their operating regions, such as FINMA in Switzerland, DFSA in Dubai, and MAS in Singapore. Luxury banking platforms like WELF, which caters to HNWIs, adhere closely to all three.
Advanced cryptographic tools ensure fund safety
Reliable digital banks use strong encryption to protect data transmission and secure personal and financial information. Reliable, modern cryptographic security protocols include homomorphic and biometric encryption as well as multiparty computation. Homomorphic encryption is a computation method that involves processing data without the need to decrypt it first. One of its most promising features is the ability to secure data in transit or in use.
Biometric encryption binds biometrics like facial scans, fingerprints, or voice to a cryptographic key in such a way that malicious entities cannot retrieve the biometric or the key from the stored template. Recreating the key is only possible if the original and live biometrics are presented for verification.
Multiparty computation is a crucial cryptography subset, which distributes work across numerous servers. The method makes sure that no single server has all the encrypted data at the same time. In sum, Web3 introduces a new trust model: minimizing trust and placing it in technical processes.
Investigating the platform’s financial stability
Potential clients of Web3 banks should investigate financial health, such as the bank’s funding sources, profitability, or backing by strong investors. Certifications like ISO 27001 demonstrate adherence to global security standards. In addition, the institution should regularly be undergoing third-party audits and sharing reports on its operational and financial performance.
These efforts are encouraged in light of the potential benefits that exposure to crypto and blockchain brings. While Web3 doesn’t always rely on cryptocurrencies and blockchain, the concept is nearly indistinguishable from the technologies behind it. Exposure to cryptocurrencies, NFTs, and tokenized assets diversifies portfolios and opens pathways to new markets. Decentralized finance platforms offer staking, lending, and liquidity provisioning with attractive yields compared to traditional banking.
Tokenization of real-world assets, such as real estate and art, allows fractional investments and liquidity in these traditionally illiquid assets.
Global access without borders
Unlike traditional banking, Web3 banking operates around the clock, ensuring instant access to funds anywhere in the world. For example, WELF’s high-limit credit and debit cards offer global access, advanced security, and concierge services. Clients get access to secure, modern digital platforms while benefiting from transparent advisory services. WELF’s platform builds the bridge between bleeding-edge technology and the reliability of traditional banking, ensuring the very best for its clients’ wealth. Its increasing impact in the Web3 space is reflected in the upcoming sale of its native token, $WELF, which will subsequently be listed on a centralized exchange. The token will serve as the ecosystem’s cornerstone, facilitating platform governance, transactions, and access to premium services, ultimately helping integrate blockchain technology with conventional wealth management tools.
Safeguarding against economic uncertainty
Web3 wealth management platforms provide a hedge against inflation. High-market-cap cryptocurrencies like Bitcoin and Ethereum or stablecoins pegged to fiat currencies can preserve wealth. Access to decentralized ecosystems ensures liquidity even in times of financial crises.
Tailored wealth management strategies
Programmable smart contracts can execute wealth management strategies or inheritance plans automatically. Onboarding for HNWIs is streamlined, but not at the expense of maintaining privacy and regulatory compliance. Web3 protocols can be customized to meet specific needs, like multi-signature wallets or family office integrations.
Eliminating intermediaries
By doing away with middlemen, Web3 banking reduces fees associated with traditional banking services like asset management. The blockchain ensures direct ownership of assets, eliminating counterparty risks from third-party custody. Tools like zero-knowledge proofs enable private transactions without compromising transparency.
Exclusive access to premium services
Some digital banking platforms offer premium services like membership in elite DAOs and token-gated services. HNWIs can take part in exclusive decentralized autonomous organizations tailored to their unique needs and requirements, offering networking opportunities and shared investment strategies. They gain access to exclusive investment opportunities based on ownership of specific digital assets.
Web3’s role in furthering philanthropy
Web3 platforms enable traceable and efficient charitable contributions, a frequent consideration for wealthy donors, who get the most significant tax breaks from philanthropic initiatives. The direct taxpayer subsidy for charity is estimated to amount to several hundreds of billions a year if one is to include the total value of capital gains and estate tax reductions. The wealthier the individual, the higher the taxpayer subsidy for their donation because affluent donors face considerably lower tax obligations, including income tax, estate tax, capital gains, and gift taxes.
First-mover advantages
HNWIs are uniquely positioned at the forefront of Web3 innovations, potentially enjoying first-mover advantages. In 2014, Tim Draper made headlines for buying approximately 30,000 BTC during a US government auction. At the time, 1 BTC was worth $632. He was wealthy before that but became even wealthier.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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