After rising 900% in value across the last year, Bitcoin hit a new record last week, surging beyond $50k for the first time in its history.
Crypto’s gone mainstream and, for startup Bitwala, which allows people to invest directly in cryptocurrencies from their bank accounts, it’s meant users increased by nearly 50% across 2020.
The Berlin-based bank now has €100m in assets under its management, it’s operationally profitable and, in terms of the number of customers it has, it’s the third biggest neobank in Germany, behind fintech giants N26 and Revolut.
Its next task: can “the bank for the blockchain economy” convince customers that, beyond the high-risk highs of Bitcoin, it can offer customers safe, lower risk investment opportunities?
Bitwala was started in 2015, in a time when, as CEO and founder Ben Jones puts it, Bitcoin was “super nerdy — something for the cyberpunks, the anarchists and people who thought we shouldn’t have any kind of centralised government.”
“It was kind of seen as ‘the bank killer’ that was going to take over Visa, MasterCard, PayPal and central banks. We were a little bit different, we thought it could be a way of upgrading the existing system rather than replacing it.”
“A bridge between the old and the new”
Bitwala now offers customers a standard bank account with a Visa card, as well as access to “crypto wallets,” where they can send and receive either bitcoin or ether.
With its interest account, crypto customers earn an average of 4% on their coins — which are handed over to London-based Celcius Network, a crypto loans provider. Bitwala has paid out 20 coins in interest to customers so far.
“You can think of us as being the bridge between the old world and the new, banking and blockchain currency, and we monetise that bridge,” says Jones. “When a customer crosses over, then we charge a fee.”
That fee is currently 1%, and it’s been the key to Bitwala reaching operational profitability — something it achieved in January this year. This makes it a rare case in the fintech world: banks like Monzo and Revolut reported losses of £115.4m and £107.3m respectively in 2019, for example.
In 2021, Bitwala expects to reach revenues “of at least eight figures,” Jones says, and it’s looking to add 40 people to its 100-strong team.
The need for more staff was highlighted across the last year, as Bitwala struggled with the influx of new customers.
“We were, unfortunately, too slow in replying to some customers,” he says. “It’s happened in a lot of Bitcoin startups, it’s something that, as a small company, if you experience a jolt of growth, then it can take a while to react.”
Bitwala also hired Alessandro Avagliano, formerly at Rocket Internet, to run its security, and Jones is assured that it’s running a secure setup. The company runs a ‘non-custodial wallet’ — meaning customers hold their own private keys, so even if Bitwala was compromised, a hacker still couldn’t move any funds.
What goes up…
In general, crypto becoming more mainstream makes it a surer investment, Jones says.
“In 2018, we had this crazy bull run, which was really fuelled by consumer hyperbole, now there’s a little bit of that, but the foundations are stronger and we see companies like MicroStrategy and Tesla buying into Bitcoin.”
As asset classes become more mainstream, its volatility tends to widen out too, but Bitwala is aware that putting everything into Bitcoin remains a risky strategy for customers.
“Bitcoin is risky and you would want to diversify,” Jones says. “We want to become the bank account to grow your wealth, and cryptocurrencies are just one part of that.”
Across the next year, the company plans to develop an investment wallet that still uses blockchain technology but offers other products, including ETFs and a euro savings account product too.
“You can think of Bitcoin as being the most rudimentary application on a blockchain,” he says, and across the next few years, Bitwala aims to offer more and more advanced use cases of the tech to everyday customers.
“Blockchain means you have this new way of doing things where you can send value over a decentralised network. And that allows us to actually disrupt finance, not at the distribution level, but at the foundation level.”
Freya Pratty is Sifted’s news reporter. She tweets from @FPratty