N26, a European digital bank, announced that it will launch a cryptocurrency trading service, with Austria as the first market.
The N26 Crypto service, which will initially include 100 tokens such as bitcoin and ether, will be available to N26’s Austrian clients in the coming weeks. N26 intends to roll out the feature to users in other markets over the next six months, eventually expanding its token providing to include 194 coins in sum.
According to Gilles BianRosa, chief product officer at N26, consumers can “dip their toes into the water in a non-frothy way” using the bank’s cryptocurrency brokerage service.
To make a trade, users choose a coin and enter the amount they want to buy or sell. When they finish their order, cash is deducted from their main account balance and appears alongside their chosen token. Customers can also “drag and drop” funds from their main account into their cryptocurrency portfolio, according to N26.
N26, based in Berlin, is a latecomer to the crypto rush. PayPal and Revolut have long allowed their users to buy and sell digital assets, and payment behemoths Visa and Mastercard also offer their customers crypto or so “Web3” services. Nubank, a Brazilian digital bank, launched its own token, Nucoin, on Wednesday.
Their users are very interested in cryptocurrency, BianRosa stated in an interview. Even in a bear market, that interest remains extremely high.
The timing of N26’s crypto venture could have been better. This year, Bitcoin and other tokens have seen significant losses as investors fled the market due to concerns about rising interest rates and liquidity constraints. While traditional banks have avoided crypto due to concerns about its high volatility and involvement in fraud, N26, which holds an EU banking licence, is dipping its toes into the space in the hope that it is more than “just a fad.
They want to take a long-term approach to this, BianRosa said. It’s not like they are trying to time the launch based on market conditions.
N26 charges a 2.5% fee on buy and sell orders for all cryptocurrencies except bitcoin, which has a lower transaction fee of 1.5%. The transaction fee for subscribers to its paid Metal accounts, which cost 16.90 euros ($16.54) per month, is 1% on bitcoin and 2% on all other tokens.
The capability is provided by Bitpanda, an Austrian cryptocurrency and stock trading platform in which Peter Thiel, one of the investors who supports N26, has invested. Bitpanda receives a commission for each trade executed via N26. N26 has stated that it plans to support trading in other asset classes in the future. The move may irritate regulators, who have tightened their stance on cryptocurrency since the $2 trillion market crash earlier this year. The European Union, in particular, has attempted to rein in cryptocurrency’s “Wild West,” with new rules anticipated to enhance investor protections surrounding digital assets.
BaFin, the German financial watchdog, previously restricted N26’s growth due to alleged flaws in its fraud control systems.
They have a very strong working relationship with all of the regulators, so they obviously inform them of their plans, they’re aware, and they have covered all of the regulatory needs they have for this market, BianRosa explained.
But generally speaking, a BaFin spokesman stated that “banks must comply with all statutory obligations for the prevention of money laundering and all other banking supervisory norms also while conducting business with crypto assets. The company does not comment on specific banks. Any inquiries on the move should be directed at BaFin, according to the Austrian Financial Market Authority, which regulates the market in which N26 is introducing its cryptocurrency business for the first time.
Support for custodial wallets, which stops users from taking their assets off the network, is a notable omission from N26’s cryptocurrency service. Platforms like Robinhood and Revolut have recently launched tools that give users more control over their crypto holdings. By confining consumers’ cash in a controlled environment, this creates a “closed-circuit investing loop,” according to BianRosa. Some of cryptocurrency’s staunchest backers would counter that this feature is incompatible with the technology’s decentralised roots. According to N26, this offers its users greater protection. Clients who wish to trade cryptocurrency must successfully complete identification verification processes.
It’s not like you could use those assets from your wallet to convert those bitcoins and purchase items from the dark web, according to the product chief of N26.
N26, one of Europe’s largest fintech firms, was valued at $9 billion at its most recent financing round last year. But like other fintech businesses, the company is losing money. 2021 saw a 14% increase in net losses for N26, totaling 172.4 million euros ($168.8 million).
