Whether you are running a subDAO or operating in the decentralized finance (“DeFi”) space, banking and other traditional finance (“TradFi”) products will be essential to the successful operations of the company. Accessing TradFi can be complicated in the crypto and blockchain industry, especially because the typical legal entities used by subDAOs may be unfamiliar to TradFi players.

‍

Welcome to the first edition of a new series of blog posts that will give you an insider look into the ins and outs of running a subDAO. We will share our insights and best practices to help you succeed in your subDAO journey!. 

‍

Why does a subDAO need access to TradFi? 

Bank Accounts and Credit Cards

Bank Account: Although service providers in the web3 space may be able to accept crypto payments,  non-web3 vendors often only accept fiat payments through bank transfers, including law firms. A bank account is crucial for engaging such service providers. 

‍

Credit Cards: Online services (such as for internal operations and infrastructure) generally require a credit card for payment, including Slack and Google workspace.

‍

Options for accessing TradFi? 

While onboarding processes can be lengthy with heavy-duty KYB and AML screenings, there are viable options for accessing TradFi products as a subDAO. We recommend using a few different providers so that your subDAO does not have a single point of failure.

Credit Cards: Rain and Reap

Both Rain and Reap enable spending USDC via a credit card. Both providers also offer bank transfers but such transfers are generally more expensive than bank transfers with traditional banking service providers. 

‍

The benefit of using Rain or Reap is that they are crypto-native and understand the concept of subDAOs. Speaking the same language creates a more streamlined onboarding process, especially when explaining answers to KYB and AML screening questions, compared to many traditional banking service providers, 

‍

Bank account with private bank

Don’t hesitate to use the resources and connections around you! For example, with the help of our accountants, we opened a traditional bank account with a British private bank. This bank account allows our subDAO to save bank transfer transaction costs because they don’t charge fees on transfers. 

‍

Important factors to consider – fees, reliability, and usability

The top 3 most important factors when considering different TradFi products are fees, reliability and usability which may vary depending on how you plan to use these solutions.

‍

While costs are an unavoidable consideration, usability and reliability should remain top of mind depending on your specific use case and the needs of each legal entity. For example, the DOS, our operating entity, uses Rain as its primary credit card and Reap account as a secondary option. On the other hand, the DOT, our trust entity, uses Reap as its credit card provider because Reap’s pricing is more suited for the limited usage needed by the DOT.

‍

Obtaining a bank account is generally an arduous process as a subDAO because it is difficult to explain the source of your funds – which often come from a community treasury — to traditional banking service providers. Initially, the DOT had a bank account that cost approximately $1,500 per month and funds were only permitted to remain in the account for less than 30 days. Because of the high costs and low usability, we switched to Reap for bank transfers in the interim until our private bank account was set up. 

‍

Accessing TradFi 

Make sure you budget plenty of time to set up TradFi access because of the lengthy onboarding time and screening process.

Onboarding time (4 - 8 weeks) 

On average, it took 4 and 8 weeks to onboard to each vendor. This lengthy time took us by surprise but it is fairy standard in the web3 industry. 

KYB and AML screening

Completing a successful KYB and AML screening is essential for onboarding with any TradFi service providers. You can shorten this process by ensuring that all necessary documentation is submitted and explained in detail. For example, to reduce the number of follow-up questions and back-and-forth communications, it is important to not assume that the service provider understands crypto or blockchain concepts and explain everything from the ground up – for example, the service provider may not know what DAOs, subDAOs, community treasuries or stablecoins are. 

‍

If you have question about the topics discussed in this blog post, you can reach out to the author via blog@dydxopsservices.com!

‍

Disclaimer

The content of this document (this “Document”) is provided for general informational purposes only. This Document represents the views and opinions of the author of this Document, and does not necessarily represent the views or opinions of the operator of this website or its affiliates (collectively, the “Ops subDAO”). Reference to any specific strategy, technique, product, service or entity does not constitute an endorsement or recommendation by the Ops subDAO or any of its agents or representatives. Use of any strategies, techniques, products or services, or engagement with any entities referenced in this Document may involve material risks, including risks of financial losses arising from the volatility, operational loss or non-consensual liquidation of digital assets.

The content of this Document does not constitute, and should not be considered, or relied upon as, financial advice, legal advice, tax advice, investment advice or advice of any other nature, and you agree that you are responsible for conducting independent research, performing due diligence and engaging a professional advisor prior to taking any financial, tax, legal or investment action related to the foregoing content. The content of this Document is not an offer, solicitation or call to action to make any investment of, or purchase, any financial or crypto instruments, assets or related services, of any kind. The Ops subDAO makes no representation, assurance or guarantee as to the accuracy, completeness, timeliness, suitability or validity of any information in this Document or any third-party websites that may be linked herein.

By accessing this Document and taking any action in connection with the information contained herein, you agree that the Ops subDAO is not responsible, directly or indirectly, for any errors, omissions or delays related to this Document, or any damage, injury or loss incurred in connection with use of, or reliance on, the content of this Document, including any specific strategy, technique, product, service or entity that may be referenced in this Document. dYdX Chain services and products are not available to persons or entities who reside in, are located in, are incorporated in, or have registered offices in the United States, Canada and other restricted jurisdictions (in accordance with the Terms of Use).