The Next Stage podcast by Web Summit
00:03:06 · Nik Storonsky, Alastair Marsh
[00:03:06] S2: I mean, the reality, because we partner with many banks, we partner with Visa and Mastercard as well, and they simply didn't allow us, right? Officially. So we fought very hard about it. With reality, we lost, right? And then as a result, you can only buy and sell crypto within our account. You can't load crypto, you can't withdraw. So right now we're trying to effectively make a business case where we allow people to withdraw crypto to other crypto wallets. And if we win, then next logical step will be to allow people to load crypto. And then the reason why banks and those schemes are afraid of loading crypto is obviously they're old fashioned, very risk averse. And their compliance people don't know technology. As a result, they don't know what tools to exist to, for example, to do suspicious transaction monitoring on crypto nodes. And they just tell, you can't do it. Okay. [00:04:06] S1: Another milestone or another big news point around Revolut is the application for a banking license and moving towards a bank, which you just mentioned. Can you talk a little bit about the progress with regard to that? And will having that license allow for a differentiated crypto offering from what you've just said? And obviously, you said that the existing partners perhaps complicated what you may have wanted to achieve. Will having your own banking license get over those hurdles, do you think?
00:04:06 · Alastair Marsh, Nik Storonsky
[00:04:06] S1: Another milestone or another big news point around Revolut is the application for a banking license and moving towards a bank, which you just mentioned. Can you talk a little bit about the progress with regard to that? And will having that license allow for a differentiated crypto offering from what you've just said? And obviously, you said that the existing partners perhaps complicated what you may have wanted to achieve. Will having your own banking license get over those hurdles, do you think? [00:04:32] S2: Yes. So the reason behind decision making to apply for banking license was we want to be as independent as possible. Just being an E money institution, we still rely on banks, so we wanted to have a bit more independence. So we applied for banking license, and then we looked across the whole Europe where we want to apply. And then we looked at, I don't know, UK, Germany, Luxembourg. And then the process was two years to get the license, which from my point of view is just ridiculously long. And then we chosen Lithuania because their process seemed to be faster. It was only like twelve months. And they were also pushing into fintech territory by being extremely fintech friendly. So we were one of the first companies who applied for banking license in Lithuania. And I think 10 or 20 companies from UK followed us as well. So we expect to get that hopefully by end of this year.
00:04:32 · Nik Storonsky, Alastair Marsh
[00:04:32] S2: Yes. So the reason behind decision making to apply for banking license was we want to be as independent as possible. Just being an E money institution, we still rely on banks, so we wanted to have a bit more independence. So we applied for banking license, and then we looked across the whole Europe where we want to apply. And then we looked at, I don't know, UK, Germany, Luxembourg. And then the process was two years to get the license, which from my point of view is just ridiculously long. And then we chosen Lithuania because their process seemed to be faster. It was only like twelve months. And they were also pushing into fintech territory by being extremely fintech friendly. So we were one of the first companies who applied for banking license in Lithuania. And I think 10 or 20 companies from UK followed us as well. So we expect to get that hopefully by end of this year. [00:05:30] S1: I've asked you a lot about the company thus far. Just to step back a bit and to, I guess, to get to the point of today's discussion, which is about crypto and banking. Do you think or could you share your thoughts about what a crypto bank might look like or a bank where blockchain technology and cryptoeconomics are a key variable and how it's structured and how it runs?
00:05:30 · Alastair Marsh, Nik Storonsky
[00:05:30] S1: I've asked you a lot about the company thus far. Just to step back a bit and to, I guess, to get to the point of today's discussion, which is about crypto and banking. Do you think or could you share your thoughts about what a crypto bank might look like or a bank where blockchain technology and cryptoeconomics are a key variable and how it's structured and how it runs? [00:05:51] S2: I mean, way I personally see opportunities actually in the B2B business, So I don't know whether you or how corresponding banking works. Reality is that in each country we've 10, 20, 30 banks, and then whenever they do international payments, they need to set up themselves accounts in other banks outside of their country. As a result, they have this huge corresponding network of banks having a bank account, another bank having account, another bank. It can be 10 banks in a chain. So basically, the huge opportunity now is to create additional currency, which is pegged to dollar, to euro, to pound, and so on. And as a result, you can effectively create a centralised issuer, like Central Bank, and then all other organisations, they can send or receive money through Blockchain without actually setting up corresponding banking. So I think that's a big thing that can be done using blockchain. I think someone sooner or later will get it done. [00:06:53] S1: Okay. So do you foresee a time when banks may create use... May create their own stablecoins or use them
00:06:53 · Alastair Marsh, Nik Storonsky
[00:06:53] S1: Okay. So do you foresee a time when banks may create use... May create their own stablecoins or use them [00:07:00] S2: use sometimes Yeah. In in a Farham's standard will happen because it's it's cheaper and more and more convenient. [00:07:07] S1: I see. Okay. Working for Bloomberg, I'm very interested in what we might describe the institutionalization of crypto, in particular the movement of big finance, whether that be banks or hedge funds, asset managers, into the crypto space. And I've been tracking or trying to keep a track of what the big banks are doing. And whilst we hear various things about custody and market making and various synthetic derivatives that various banks are working on. It does seem, at this point, that there's a lot of noise, but not really that much concrete action or not that many things that you could point to that really demonstrate that the banks are that heavily involved in crypto at this point beyond talking. What's your thinking on that? Do you agree with how I've just described it? And what are the key impediments for big banks getting involved in this space? [00:07:57] S2: Well, agree. Banks usually talk but don't do. So yeah, I agree with this. So we see a lot of talk about crypto. Some banks start creating trading desks in cryptocurrency. But reality so far, last eight, nine months, I just don't think it really moved much.
00:07:57 · Nik Storonsky, Alastair Marsh
[00:07:57] S2: Well, agree. Banks usually talk but don't do. So yeah, I agree with this. So we see a lot of talk about crypto. Some banks start creating trading desks in cryptocurrency. But reality so far, last eight, nine months, I just don't think it really moved much. [00:08:18] S1: Right. Okay. And it seems a lot of the offerings or a lot of things that are being discussed are kind of all arm's length. So you have a Goldman Sachs NDF, and you have Morgan Stanley talking about swaps, you have various other things. But it doesn't seem that anyone is actually trading or getting involved in the underlying markets. It's always a step removed. Is that just simply a function of regulatory worries, or is there something bigger behind that? [00:08:42] S2: I think banks are very good at following their big clients. Goldman Sachs, obviously they serve big institutional investors and big hedge funds. So unless these big institutional investors or hedge funds move heavily in the crypto world, I just don't think banks will move because they simply try to make money from their clients. If their clients want to swap some crypto or some kind of borrow crypto to sell, then they will move fast. So it seems as you know there is no interest from big institutional investors so far.