Revolut CEO Nik Storonsky says the company lost its fight with Visa and Mastercard, so customers still cannot withdraw crypto to outside wallets.
Storonsky says Revolut's crypto business is under 10% of revenue and that investors cared little about it when the company raised money.
Storonsky expects banks to move into crypto only once large institutional clients do, and predicts fintechs will dominate the space meanwhile.
Revolut's CEO says risk-averse banks are stalling crypto
Revolut's CEO argues that crypto is a sideline for a company that sees itself as a bank, and that it is held back less by technology than by risk-averse banks, card networks and compliance teams. The real openings are cheaper business payments and an inefficient market, while incumbents wait for their biggest clients to move first.
Takeaways
Crypto is a small part of Revolut. Revolut launched crypto about ten months ago. Volumes this year run at 20% to 30% of December's level and under 10% of revenue comes from crypto. Investors barely cared, since Revolut pitches itself as a bank.
Card networks blocked crypto transfers out of Revolut. Revolut fought Visa, Mastercard and its partner banks over withdrawals to outside wallets and lost, so customers can only buy and sell inside their accounts. Storonsky blames compliance teams that do not understand the technology. Revolut is building a business case to reopen it.
Lithuania offered the fastest route to a licence. Revolut wants a banking licence for independence from the banks its e-money status still relies on. The UK, Germany and Luxembourg took about two years, which he calls ridiculously long, while Lithuania took about twelve months. Ten or twenty UK firms followed.
Blockchain's biggest prize is business payments. Each country has 10, 20 or 30 banks, and international payments can pass through chains of ten correspondent banks. A central issuer could create currency pegged to the dollar, euro and pound and let organisations send money without correspondent accounts.
Banks follow big clients into crypto slowly. Banks have talked more than acted. Goldman Sachs offers an NDF, and Morgan Stanley reportedly has Bitcoin futures swaps ready, waiting on demand. Institutional funds' compliance departments hold clients back, and BlackRock's Larry Fink said no customers asked for crypto.
Immature crypto markets reward professional traders. Crypto startups and fintechs do not know how the financial world works, so the market is inefficient. Exchange arbitrage can yield 5% a trade, and people from hedge funds or high frequency firms could make a lot early on.
Banks should price crypto risk, not refuse. Compliance treats crypto firms as extremely high risk, and 99% of banks do not take their applications. Storonsky says banks avoid them on risk and reward and should charge more instead. Serving them is a big opportunity.
Storonsky's predictions
Revolut expects its Lithuanian banking licence by the end of the year.
Banks will use or create their own stablecoins because they are cheaper and more convenient.
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On this episode 3
Show 1
Fintechs will dominate crypto while banks fail to catch up, though banks will move once big institutions and hedge funds do.
Consumer crypto use is still largely speculative, but 2019 may bring some everyday use cases.