UK group adds bitcoin to cross-border payment service.
A British digital payments company backed by Lloyds Banking Group and MasterCard is to allow its more than 1m customers to trade bitcoin and other cryptocurrencies using 25 traditional currencies on their mobile accounts.
Revolut, which allows people to transfer money across borders and to spend in 120 currencies with no fees, plans to add the option of giving its customers exposure to cryptocurrencies on Thursday.
The move is a sign of how the soaring price of bitcoin is fuelling interest from investors and companies in the trading of cryptocurrencies, despite warnings from regulators that they are unregulated and could bring serious risks.
While the price of bitcoin has risen more than 15-fold in the past year to over $11,700, most traditional banks are steering clear of the sector, fearing it is riddled with criminals and fraudsters.
Revolut, which has expanded rapidly since starting its pre-paid cards service four years ago and is applying for a European banking licence, has about half of its customers based in the UK and half in Europe.
The company, which uses Lloyds to process transactions and issues its customers with a MasterCard debit card, told the Financial Times that both its partners were “comfortable” with its move. “We wouldn’t be able to do it without their permission,” it said.
MasterCard said it approved the move on the basis that Revolut would own the cryptocurrencies on behalf of its customers, providing exposure to their price moves in fiat currency terms without them having to own them. Lloyds declined to comment.
Investor interest in trading cryptocurrencies has prompted Chicago’s two largest derivatives exchanges to go head to head in the coming weeks as both launch bitcoin futures trading.
However, Jamie Dimon, the JPMorgan Chase chief executive, recently dismissed bitcoin as “a fraud” and the US Commodity Futures Trading Commission has warned that unregistered bitcoin exchanges are susceptible to “Ponzi schemers”.
Revolut said its cryptocurrency transactions would be done through the Bitstamp and GDAX bitcoin exchanges, which both say they carry out anti-money laundering checks and sanction compliance screening on trades.
“Despite being one of the hottest trends in the world right now, getting exposure to cryptocurrency has notoriously been time-consuming and expensive,” said Nikolay Storonsky, the Russian-born founder and chief executive of Revolut.
“Cryptocurrency exposure has consistently been the number one requested feature from our customers and so we listened and took action.”
Mr Storonsky, a former investment banker at Lehman Brothers and Credit Suisse, said that “beta testing” of the service had seen about 10,000 customers trade more than $1m of cryptocurrencies.
Revolut said its users would be able to invest in bitcoin, litecoin and ether at a cost of 1.5 per cent in a transaction taking 30 seconds to complete.
They will not be able to directly pay for goods using cryptocurrencies. But if their debit card runs out of fiat currency the app will automatically convert enough cryptocurrency to cover a purchase or cash withdrawal.