Bitcoin's bull run is blurring the line between fintech and crypto

Last week, online-only brokerage Robinhood announced plans to let customers deposit and withdraw cryptocurrencies from the app.

Fresh off a period of acute turbulence keyed by frenzied retail trading, Robinhood is currently advertising five job openings focused on crypto — three of which are engineering roles. The job description for Robinhood’s crypto-focused head of engineering role states that the team "will plan and build the next set of features" on the startup’s crypto roadmap.

The popular trading platform has long allowed users to trade crypto. But the move to add what amounts to crypto-banking chimes with a wider rush among big-name fintech firms to strengthen their crypto products.

This is not a one-way street: crypto companies are eyeing traditional fintech services, too. And it appears that the blurring of the lines between fintech and crypto has picked up pace more or less in step with bitcoin’s recent bull run — one that has inspired many traders to jump into crypto for the first time.

Colliding worlds

A number of mobile app providers that, like Robinhood, have simplified access to a range of financial services — whether they be stock trading or banking and payment services — have invested in new crypto goodies recently.

Last week, mobile banking firm MoneyLion said it would launch a range of crypto products this year, including allowing users to trade, round-up, earn rewards in digital assets and use a crypto wallet for P2P payments. Then, The Block revealed that London-based investment apps Freetrade and Plum are hiring teams to build new crypto products. Plum co-founder Victor Trokoudes called this a natural addition to Plum’s existing products (investments in baskets of stocks arranged by theme).

Back in October, Revolut, the $5.5 billion digital bank, enlisted the help of crypto security firm Fireblocks to lay the foundations for new crypto products — although it would not say exactly what those products are.

Michael Shaulov, CEO at Fireblocks, told The Block he sees "fintech apps expand into crypto at break-neck speed," listing PayPal, CashApp, Chime Bank and Wealthfront as examples.

Fireblocks wants to help these companies with the storage of digital assets; access to liquidity via links with a network of exchanges, custodians, banks, trading desks and market makers; and settlement.

Even PayPal, part of the old guard of fintech, caused quite the stir when it unveiled its new dedicated crypto unit in early February. The company first enabled crypto purchases through a partnership with Paxos in October 2020. CEO Daniel Schulman recently noted that the people who signed up for the service have been opening the PayPal app twice as much as they did previously.

At the same time, certain crypto firms are branching out into more traditional financial services.

Bitpanda, for instance, is currently working towards the launch of stock trading. The Peter Thiel-backed, Vienna-based crypto exchange already offers precious metals trading and savings products in addition to a crypto exchange, which is the main money-spinner.

Bitpanda’s co-founder and co-CEO Eric Demuth told The Block that the business is in a good position to launch lower-margin, old-school products precisely because of its background in crypto: a higher-margin, more volatile asset class.

"I would prefer to go that route than building a company, putting VC money in every year and having a run rate, and then trying to upsell to a new product," he said.

Demuth added that he sees strong similarities in the long-term strategies of many of the market’s leading fintech firms. His suggestion is that as these startups expand the services they offer, it becomes harder to distinguish between them from a product standpoint.

While jumping from crypto trading to stock trading is not necessarily a huge leap, crypto-native firms are also threatening to encroach on markets that have been fintech stomping grounds for a decade or more.

Peer-to-peer payments, cheap and easy money transfers and lending — these are all things we have come to associate with fintech firms like TransferWise, Venmo and Monzo. Projects such as Diem, the stablecoin spearheaded by Facebook, and supporting wallets (like Facebook’s Novi) represent a new source of competition in fintech.

Indeed, on February 16 Revolut’s partner Fireblocks, in cahoots with First Digital Asset Group, announced the launch of a new secure wallet and infrastructure that would allow financial institutions to connect to the Diem network when it launches.

The very fact that such tools are being primed would suggest the much-maligned stablecoin project is, at last, nearing a launch date.

DeFi(ntech)

Even the world of DeFi has matured to the point that certain projects are eyeing the lunch of traditional fintechs.

Valora, a peer-to-peer payments and mobile remittance app, officially launched on February 10. Valora is built on the decentralized network Celo. On the same date, the project announced that it had raised $20 million from investors including Andreessen Horowitz.

Valora staged a beta launch in September 2020 and has since amassed tens of thousands of users from more than 100 countries. The app can be used to send and receive funds globally with seconds-long transaction times, and the business advertises fees of as little as $0.01 per payment.

Sound familiar? Comparisons with a disruptor that is now a little longer in the tooth (TransferWise) are not lost on Celo founder Rene Reinsberg.

"I actually think that’s a much better benchmark for us,” he told The Block when Valora launched. "Those neobanks have done a nice job in terms of just making mobile banking a lot more frictionless."

That may not mean, however, that Valora will become a competitor to such businesses. On the contrary, Reinsberg said that Celo has been talking to neobanks — two in the US and “all of them” in Europe — about whether their users can hold balances in Celo Dollars (the network’s stablecoin) and using it to earn yield.

"I think 2021, my general prediction, not just Celo specific, is that many of these neobanks will start experimenting with these crypto rails," he added.