Users can now buy and exchange Bitcoin, Litecoin and Ethereum through the Revolut app. But do they know what they're buying?
Somewhat inevitably, Revolut has added cryptocurrencies to its currency exchange service. There are few niches within fintech, it would seem, that Revolut is uninterested by.
The process is as simple as topping up and exchanging, and will take just 30 seconds, prompting Revolut to herald the service as the fastest and easiest way to trade cryptocurrencies. Users will be able to buy cryptocurrencies using any of the 25 base currencies offered by Revolut without incurring foreign exchange fees.
True to form, Revolut’s is besieging incumbent brokers in the crypto space, which it claims are disingenuous in their claims to offer low rates. The banking disruptor says that most services end up costing consumers an average of 5-9 per cent on each exchange.
Revolut, on the other hand, will apply a 1.5 per cent markup – with no hidden fees. Lewis Tuff, chief platform engineer at the company, explained: “We’re adding a 1.5 per cent markup, one to mitigate volatility, and on the other hand to allow users to be able to leverage the service as they wish.”
Despite a few recent wobbles, the price of Bitcoin in particular has surged in 2017, from under $1,000 in January to over $12,000 today. Speculation on cryptocurrency is rife among both professional and amateur investors.
Revolut does not typically permit its users to speculate on the price of currencies, precisely because it allows those users to exchange fiat currencies at the interbank rate (which is effectively free). The app allows users 8 exchanges per day on fiat currencies because, as Tuff explained, “if you’re constantly betting against us we’ll be losing out”.
But the app has adopted a different strategy for its crypto-trading service, seemingly in acknowledgement of the fact that many people are interested in the currencies primarily as a form of speculative investment. “They can then speculate if they wish,” said Tuff.
In a statement, Revolut founder and CEO Nikolay Storonsky described cryptocurrency exposure as “the number one requested feature” from customers.
“Despite being one of the hottest trends in the world right now, getting exposure to cryptocurrency has notoriously been time-consuming and expensive,” he said.“We’re going to open up cryptocurrency exposure to everyone, faster than any other platform on the market.”
Launched less than three years ago, Revolut already boasts more than a million customers. What might be the implications of its move into crypto?
Lilian Chovin, investment strategist at Coutts, said in a statement today that, “as an investment asset, electronic currencies like Bitcoin have nothing but sentiment backing them up, are vulnerable to government sanctions and lack the kind of data we look for to gauge value”.
Michel Rauchs, Cambridge Centre for Alternative Finance’s cryptocurrency and blockchain lead, offered a more measured view. Speaking to AltFi, he said that popular crypto brokerage services have been struggling under the weight of demand in recent weeks, with Coinbase adding as many as 100,000 users a day. Some would-be buyers have been forced to wait several days to open an account.
“This definitely makes it a lot easier for retail investors and ordinary people to get into it,” he said. But is that a good thing?
“I’m a bit concerned because a lot of these people have no idea what bitcoin really is or how it works, and they tend to just see it as a speculative asset with really high returns on investment,” said Rauchs. “You risk magnifying the impact of a crash that will come. There’s no reason to think that there won’t be corrections. It’s exactly these people who will get burned first.”
