Written by: Boaz Sobrado
Compiled by: Luffy, Foresight News
"If you don't know how to handle something, just avoid it."
DK Bank CEO Zheng YD used this phrase to explain the root cause of crypto businesses frequently having their banking services cut off. This bank is located in Bhutan's newly built GMC, Gelephu Mindfulness City, and is also the only licensed bank in the area. Its founding purpose was precisely to take on the crypto business that other financial institutions are keen to avoid.
"There has long been a significant supply gap in banking services for the crypto industry," Zheng YD stated on the "On The Margin" podcast. "The root cause is that cryptocurrencies were born from decentralized protocols, inherently carrying anonymity, and the banking industry generally lacks corresponding risk control methods. To this day, the vast majority of institutions still don't know how to proceed."
DK Bank, jointly regulated by the Royal Monetary Authority of Bhutan, is at the core of a unique financial experiment. Bhutan is a small Himalayan nation with a population of less than a million. Compared to GDP, Gross National Happiness is this country's iconic development metric. Gelephu Mindfulness City (GMC) is a special administrative zone in southern Bhutan. The project operator claims this area has independent governance rules.
"The new city is independent from mainland Bhutan in administrative, legislative, and judicial aspects," said Jigdrel Singay, Director of the Gelephu Mindfulness City Authority and head of fintech business. He describes this governance model as "one country, two systems."
They are targeting a vast market that has long lacked corresponding financial services. "South Asia has about 2 billion people but lacks a financial services hub, which is equivalent to a gap for a regional financial gateway," Singay said. He hopes GMC can become the financial services center for South Asia, much like Hong Kong is for China or Singapore for Southeast Asia.
Fiat and Stablecoins in the Same Account
DK Bank's business positioning is very clear. Zheng YD said most banks on the market that claim to support cryptocurrencies are only willing to handle the fiat business of crypto companies, while digital assets still need to be custodied on external platforms.
"These banks will only say they won't close your account because you are a crypto business, but all your crypto asset flows cannot go through their channels," Zheng YD said. "We want to be different. We have integrated fiat and crypto asset systems, launching integrated multi-currency accounts and crypto custody services. Users can manage stablecoins like USDT and USDC within the same bank account, just like managing USD, GBP, or EUR."
According to disclosed project materials, the account supports 9 fiat currencies, along with Bitcoin collateralized lending and two-way fiat-crypto asset exchange channels for deposits and withdrawals. There were two main difficulties in implementation. The first is the underlying architecture: traditional banks only process business in batches from 9 to 5 on weekdays, while the crypto market operates 24/7 with real-time trading. Zheng YD admitted that integrating the two systems required an extremely difficult technical upgrade.
The second difficulty is filtering out bad actors. Zheng YD did not shy away from the industry's issues. "We never deny that there are bad actors in the crypto industry; any industry will breed a certain proportion of non-compliant participants," he said. "Therefore, the Gelephu City Authority and DK Bank collaborate to complete risk screening from the user onboarding stage." Risk control doesn't stop at account opening: "We don't just monitor off-chain fund flows; we also track the complete on-chain trajectory, scan wallet addresses, and verify every receipt, payment, and counterparty information."
Zheng YD believes this track is worth deep cultivation, with the core judgment being that global financial services are gradually moving from off-chain to on-chain. "We believe global financial services will continue to migrate on-chain. DK Bank aims to be the financial institution that is fully prepared to welcome this transformation."
Borrowing from Singapore Law, Opening Fast-Track Licensing Channel
Gelephu City did not build its regulatory system from scratch. "At the corporate governance level, we adopt Singapore common law; for financial regulatory rules, we benchmark against the Abu Dhabi Global Market (ADGM)," Singay explained. "The reason for choosing these two systems is that they are both top-tier global standards with extremely high recognition from international investors." Companies that have already obtained licenses in Singapore, ADGM, or Hong Kong can operate here without going through the full approval process again, via a fast-track channel.
There is widespread external concern that simplified processes might lower regulatory standards. Singay clarified this: speed-up only applies to the approval process; regulatory standards will not be relaxed. Companies wanting to enjoy the city's highest zero corporate income tax incentive must have a genuine business presence. "We do not welcome companies that only register shell companies with empty offices," Singay said. "Companies need to meet physical operation requirements: hire local Bhutanese employees, set up physical office space, and provide proof of daily operational expenses. Core management personnel of the company also need to pass qualification reviews by the regulatory authority."
Why is a Small Country Building This Infrastructure Now?
Bhutan is not the only small sovereign state focusing on this track. Xin Yan, CEO of the sovereign crypto infrastructure company Sign, has been deeply involved in this field for two years, shifting his service target from crypto users to national governments, with Bhutan being one of his partner countries.
"Governments are the gatekeepers of all business, data, and assets in the real world," Xin Yan mentioned on the podcast. "Government decisions are very pragmatic; they won't blindly chase concepts like Bitcoin or crypto just for the sake of it. There is only one core demand: solving their own development problems." He pointed out that countries generally face risks of external dependence. "The current mainstream global financial infrastructure is dominated by China and the United States. Once these two countries restrict cooperation for geopolitical reasons, the financial systems of related countries will suffer impacts."
Neo, founder of the Swiss-licensed on-chain neo-bank UR, bluntly stated that many current Web3 projects have superficial models. "Today, both Web2 and Web3 industries are taking shortcuts: issuing USDC stablecoins, launching payment cards, and calling themselves digital banks. It looks glamorous, but there is no substantial change in the underlying architecture."
Neo explained that the Swiss Financial Market Supervisory Authority (FINMA)'s regulatory approach is centered on on-chain data. Regulatory authorities directly read the blockchain, checking quarterly fund flows and portfolio sizes of various wallet addresses to determine if a company is compliant and issue the next stage of operating permits. Zheng YD said DK Bank adopts a similar regulatory logic, simultaneously monitoring on-chain wallet flows and fiat funds to safeguard the financial security of the entire new city.
Mining Since 2018, and Hedging Bitcoin Risk
Bhutan's crypto layout is not a spur-of-the-moment decision; Bitcoin mining operations leveraging hydropower resources have been running for years. Singay said mining operations started in 2018. Zheng YD added: "National-scale mining began in 2019. Long before most countries understood Bitcoin, Bhutan was already deeply involved in the crypto ecosystem." Singay attributes this to the country's long-term vision. "Our industry accumulation is the best proof; we are early pioneers in the industry."
Both leaders are unwilling to bet the country's development on a single crypto asset. When asked if Bhutan would launch a native cryptocurrency similar to the Trump token, Singay said the focus is on institutional-grade full crypto industry chain: mining, custody, asset management, and prime brokerage services. "At least Gelephu City will not proactively layout speculative tokens targeting retail investors."
When asked how they would cope if Bitcoin's price crashed and failed to recover for a long time, Zheng YD answered with a banker's risk control mindset: "Running a bank requires anticipating all kinds of risks; theoretically, extreme market conditions are all possible. If Bitcoin experiences a deep drop, how do we respond?" His solution is diversification, not relying solely on Bitcoin: "Blockchain is the underlying technology; Bitcoin is just one application on it. We focus on Bitcoin but also push forward in other blockchain tracks like stablecoins and real-world asset tokenization."
Project implementation is subject to time constraints. The crucial international airport mentioned by Singay will be managed by the operator of Singapore's Changi Airport, with overall planning by the renowned architectural firm Bjarke Ingels Group (BIG), expected to be completed by December 2029. As for the digital nomad visa for overseas remote workers, Zheng YD said it is still in the testing phase. This newly planned city, focused on human-nature coexistence, exempts foreign nationals from personal income tax, with monthly rents as low as $400 to $500. However, currently, there are only complete planning blueprints and DK Bank in operation.
Whether this crypto bank can create value depends on a common industry question. Wojciech Kaszycki, founder of the digital asset firm Mobilum, explicitly stated the necessity of sovereign crypto infrastructure: "I believe every country should establish its own native digital asset reserve institution."
Zheng YD gently elaborated on the value of small countries laying out crypto finance with a personal anecdote. "When I first visited Bhutan, the entire capital city had only one traffic light," he said. "It wasn't because there were few cars; the local car ownership rate is not low. But people yielded politely and orderly, so traffic lights weren't needed. When traffic jammed, everyone waited quietly without honking. In today's increasingly chaotic global environment, this kind of inclusive and restrained thinking is precisely the trait urgently needed by the global financial industry." While most countries still ignored blockchain technology, Bhutan had already started Bitcoin mining; now, this small Himalayan country is going a step further, building a dedicated, compliant crypto bank.
