The Grelup Mindfulness New City in Bhutan aims to become a pioneering cryptocurrency financial center.

Written by: Boaz Sobrado

Translated by: Luffy, Foresight News

"If you don't know how to do it, just avoid it."

DK Bank CEO Zheng YD uses this phrase to explain the root of the frequent banking service interruptions faced by cryptocurrency businesses. This bank is located in Bhutan's newly built Grelup Mindfulness New City and is the only licensed bank in the area, established specifically to undertake cryptocurrency business that other financial institutions avoid.

"There has long been a significant supply gap in banking services for the cryptocurrency industry," Zheng YD stated in the podcast "On The Margin." "At the root, cryptocurrencies originate from decentralized protocols, carrying anonymous properties. The banking industry generally lacks corresponding risk control measures, and to this day, the vast majority of institutions still have no way to start."

DK Bank is jointly regulated by the Royal Monetary Authority of Bhutan and is the core of a unique financial experiment. Bhutan is a small country in the Himalayan region with a population of less than a million, and the happiness index of its citizens is a symbolic development indicator compared to its GDP. Grelup Mindfulness New City (abbreviated as GMC) is a special administrative region in southern Bhutan, and the project operators claim that this area has independent governance rules.

"The new city is independent from Bhutan in terms of administration, legislation, and judiciary," said Jigdrel Singay, director of the Grelup Mindfulness New City Management Bureau and head of its fintech business. He terms this governance model as "one country, two systems."

They are targeting a vast market that has long lacked supporting financial services. "South Asia has about 2 billion people but lacks a single financial service hub, equivalent to a blank in the regional financial portal," Singay said. He hopes GMC can become the financial service center for South Asia, akin to Hong Kong for China and Singapore for Southeast Asia.

Fiat and stablecoins in one account

DK Bank's business positioning is very clear. Zheng YD remarked that most banks claiming to support cryptocurrencies are only willing to handle fiat business for crypto companies, while digital assets still need to be hosted on external platforms.

"These banks will say that they won't shut down accounts just because you are a cryptocurrency company, but all your cryptocurrency asset transactions cannot go through their channels," Zheng YD explained. "We want to create differentiation. We are connecting fiat and cryptocurrency asset systems, launching integrated multi-currency accounts and cryptocurrency custody services. Users can manage stablecoins like USDT and USDC in the same bank account as they do with USD, GBP, and EUR."

According to project disclosures, the account supports 9 fiat currencies, accompanied by Bitcoin staking and lending, as well as a two-way exchange channel for inbound and outbound capital between fiat and cryptocurrency. The implementation process has two major challenges. The first is the underlying architecture: traditional banks only process transactions in bulk during business hours, while the cryptocurrency market operates 7×24 hours in real-time. Zheng YD admitted that connecting the two systems requires completing a highly difficult technical upgrade.

The second challenge is to intercept bad actors, and Zheng YD did not shy away from the industry's chaos. "We never deny that there are criminals in the cryptocurrency industry; any industry will have a certain proportion of non-compliant participants," he stated, "Therefore, the Grelup New City Management Bureau collaborates with DK Bank to complete risk screening from the user admission stage." Risk control will not stop at the account opening stage: "We not only monitor off-chain funds but also track the complete on-chain trail, scan wallet addresses, and verify every transaction, income and expenditure, and counterparty information."

Zheng YD believes this field is worth deepening, with the core judgment being that global financial services are gradually shifting from off-chain to on-chain. "We believe that global financial services will continue to migrate on-chain, and DK Bank is determined to be fully prepared to embrace this transformation."

Learning from Singaporean law, establishing a fast-track licensing channel

The Grelup New City has not built a regulatory system from scratch. "At the corporate governance level, we adopt Singaporean common law; the financial regulatory rules are benchmarked against the Abu Dhabi Global Market (ADGM)," Singay explained. "The reason for choosing these two systems is that they are both world-class standards with very high recognition among international investors." Companies that have already obtained licenses from Singapore, Abu Dhabi Global Market, and Hong Kong do not need to go through the entire approval process again and can operate through a fast track.

There are general concerns that simplifying the process may weaken regulatory rigor, to which Singay clarified: the acceleration only applies to the approval process, and regulatory standards will not be relaxed. Companies wanting to enjoy the new city's top zero enterprise income tax policy must have a genuine operating entity. "We do not welcome companies that are merely registered shell companies with no onsite offices," Singay stated. "Companies need to meet the requirements for physical operations: employ local Bhutanese staff, establish physical office space, and provide proof of daily operating expenses. The key personnel in core positions of the company must also pass qualification checks by the regulatory authorities."

Why is a small country now building this infrastructure?

Bhutan is not the only small sovereign nation focusing on this sector. The sovereign crypto infrastructure company Sign's CEO Xin Yan has been deeply entrenched in this field for two years, with services transitioning from cryptocurrency users to various government entities, and Bhutan is one of its partner countries.

"Governments are gatekeepers of all businesses, data, and assets in the real world," Xin Yan mentioned in a podcast. "Governments in various countries are very pragmatic in their decision-making; they will not blindly pursue Bitcoin or cryptocurrency concepts, with one core demand: to solve their own development issues." He pointed out that many countries face a risk of external dependence, "Currently, the global mainstream financial infrastructure is dominated by China and the U.S., and if the two countries limit cooperation due to geopolitical reasons, the financial systems of related countries will be impacted."

Neo, founder of the licensed on-chain bank UR in Switzerland, candidly stated that many current Web3 projects are superficial. "Both Web2 and Web3 industries are taking shortcuts nowadays: issuing USDC stablecoins and launching payment cards, and calling themselves digital banks; it seems glamorous, but the underlying architecture has not undergone substantial changes."

Neo explained that the Swiss Financial Market Supervisory Authority (FINMA) focuses its regulatory approach on on-chain data. Regulatory authorities directly read the blockchain to check quarterly fund flows and holding sizes of various wallet addresses to determine whether a company is compliant and to issue the next stage of business permits. Zheng YD stated that DK Bank adopts similar regulatory logic, simultaneously monitoring on-chain wallet flows and fiat funds to safeguard the financial security of the entire new city.

Started mining in 2018 and hedged Bitcoin risks

Bhutan's cryptocurrency layout is not a spur-of-the-moment decision; its Bitcoin mining business has been operational for many years, capitalizing on hydro resources. Singay stated that the mining business began in 2018, and Zheng YD added, "From 2019 onwards, nationwide large-scale mining commenced. Even when most countries had not yet understood Bitcoin, Bhutan had already deeply engaged with the crypto ecosystem." Singay attributes this to the long-term vision of the national layout, "Our industry accumulation is the best proof that we are early pioneers in the sector."

Both leaders are unwilling to bet the country’s development on a single cryptocurrency asset. When asked whether Bhutan would launch a local cryptocurrency similar to the Trump coin, Singay emphasized focusing on a full institutional crypto industry chain: mining, custody, asset management, and primary brokerage business. "Speculative tokens aimed at retail investors will not be proactively laid out in Grelup New City."

When asked how they would respond if Bitcoin prices plummet and do not recover for a long time, Zheng YD answered with a banker’s risk control mindset: "As a bank, one must anticipate various risks; extreme scenarios can theoretically happen. If Bitcoin experiences a deep decline, how do we respond?" His solution is diversified布局, not solely depending on Bitcoin: "Blockchain is a foundational technology, with Bitcoin being just one application. We focus on Bitcoin but also emphasize stablecoins, real asset tokenization, and other blockchain sectors."

The project implementation is subject to time constraints. The crucial international airport mentioned by Singay will be managed by the operator of Singapore Changi Airport and will be overall planned by the renowned architectural firm Bjarke Ingels Group (BIG), expected to be completed by December 2029; the digital nomad visa for remote workers is still in the testing phase, according to Zheng YD. This newly planned city, focused on human-nature symbiosis, exempts foreign individuals from personal income tax, with monthly rents only ranging from 400 to 500 USD, but as of now, there are only complete planning drawings and DK Bank operations established.

Whether this cryptocurrency bank can create value depends on a common issue in the industry. Wojciech Kaszycki, founder of the digital asset company Mobilum, explicitly pointed out the necessity of sovereign crypto infrastructure: "I believe every country should establish a local digital asset reserve institution."

Zheng YD gently articulates the value of small countries engaging in crypto finance through personal experiences. "The first time I visited Bhutan, there was only one traffic light in the entire capital," he noted. "It's not that there are few vehicles; the local car ownership rate is not low, but the people are orderly and courteous, traffic does not require guidance from traffic lights; during traffic jams, everyone quietly waits without honking. In today's increasingly chaotic global environment, this kind of inclusive and restrained thinking is precisely what the global financial industry urgently needs." While most countries still ignore blockchain technology, Bhutan has already launched Bitcoin mining; now, this Himalayan small nation is taking a further step by creating its own compliant cryptocurrency bank.