Crypto Banking Startups Look to Luxembourg

Luxembourg is quickly becoming the country of choice for disruptive “challenger banks” that integrate cryptocurrency with a range of traditional banking services. Revolut has by far the biggest headstart, but BABB are building steam as an alternative bank more explicitly linked to cryptocurrency.

Revolut launched in July 2015 and has amassed 2.8 million customers, generating $3 billion worth of transactions per month. In April 2018, Revolut secured $250 million in funding through Hong Kong’s DST Ventures, giving the fintech startup a valuation $1.7 billion. Initially winning new customers with its promise of high-speed and low-cost international transfers, Revolut added cryptocurrency trading to its platform early-on among many other services that founder Nikolay Storonsky told Forbes was part of its efforts to create “the Amazon of banking.”

Where Revolut has moved from traditional banking services into cryptocurrency, BABB has taken the opposite path. Built on Ethereum, BABB completed an ICO of 20 billion BAX tokens in February 2018, generating funding in excess of 16,000 ETH – roughly equivalent at the time of sale to $16 million.

Both startups began in London, but both have applied for banking licenses in the tiny EU member state of Luxembourg as uncertainty over Brexit remains unresolved.

Explaining the move in a Medium post touting their official invitation to apply for a Luxembourg banking license, BABB wrote:
“Our research flagged Lithuania as an ideal jurisdiction for BABB, as it’s open to institutions using new technologies to innovate. In particular, the regulators in Lithuania adopt a warmer stance on the use of blockchain than other markets, and are aligned with our proposition.”

In a recent Financial Times interview, Storonsky revealed that Revolut has decided to apply for a banking license in Luxembourg rather than the UK to ensure Brexit doesn’t impair their ability to offer their banking services across Europe.
Revolut allows customers to make purchases of major cryptocurrencies including Bitcoin, Ethereum, and Ripple through the platform’s app. However, users are severly restricted in what they can then do with these cryptocurrencies. Revolut doesn’t allow users to directly transfer funds out of the app into an external cryptocurrency wallet. And users are also unable to transfer funds into their account. All Revolut cryptocurrency transactions are locked within the platform, making it a far more restricted crypto environment than typical centralized exchanges.

BABB’s Black Card allows users to spend both fiat currency and the platform’s BAX token. As BAX is tradeable on cryptocurrency exchanges, the platform offers its users a way of indirectly moving funds between cryptocurrencies and fiat.
Revolut may add the ability to interact with external crypto wallets, mentioning on their website that: ”This is something we are working to improve upon, and we hope will be available in the future.”

Neither Revolut or BABB yet offer seamless integration between fiat and crypto, but as both platforms expand their userbase and operations, it will be interesting to see how their support for cryptocurrencies develops.