The Block: UK regulator suspends Wirecard's subsidiary that issues Visa crypto debit cards

The U.K.’s Financial Conduct Authority (FCA) has suspended Wirecard’s subsidiary, Wirecard Card Solutions (WCS), which issues Visa crypto debit cards.

The FCA on Friday said WCS “is no longer permitted to conduct any regulated activities” and “must not dispose of any assets or funds.”

“There are ongoing events in Germany concerning companies closely linked to Wirecard. Wirecard’s parent company, Wirecard AG based in Germany is currently the subject of law enforcement interest and insolvency proceedings,” said the FCA.

The regulator added that it is working closely with Wirecard U.K. and other authorities over the past few days to take action that protects consumers. "We are continuing to do this and on 26 June, we took additional measures to require the firm to cease all regulated activities in order to further protect customer money. This now means customers money cannot be accessed."

Crypto connection

WCS issues Visa crypto debit cards for firms such as Crypto.com, TenX and Cryptopay. Crypto.com CEO Kris Marszalek said the FCA has "effectively shut down" WCS. "Our EU/UK cards will stop working today. All customers will receive 100% credit back to their crypto wallets within 48 hours. We’re moving the card program to a new vendor," Marszalek added.

TenX and Cryptopay are yet to announce a move. The Block has reached out to the firms for comments and will update this story should we hear back.

Wirecard's other subsidiary, Wirecard Singapore, also issues crypto cards. Singapore's regulatory authorities are yet to take action.

The Wirecard saga began last week when the company’s auditor EY said it is unable to find evidence for $2.1 billion worth of cash on Wirecard’s accounts. Wirecard at the time said “spurious” balances may have been provided by a third party “in order to deceive the auditor.”

Wirecard later acknowledged the issue, and soon after, its CEO Markus Braun resigned. He was then arrested and later got released on bail .

Wirecard yesterday filed for insolvency at a Munich court. The company at the time said it is evaluating whether insolvency applications have to be filed for its subsidiaries.

What next?

David Parker, director at London-based payments consultancy Polymath, told The Block that someone could take over WCS, meaning it may not go out of business.

WCS may provide payment services or e-money activities in another European Economic Area (EEA) country, said the FCA. "This is called ‘passporting’. Passporting when a business carries on activities and services regulated under EU law in another EEA country on the basis of authorisation or registration in its home country. The activities may be carried out in the host country using a branch or a local agent / distributor or, on a cross-border services basis without a physical presence in the host country for example, a website," said the FCA.

"Wirecard is passporting its services into all EEA countries and has established some agents and distributors in those countries," the FCA added.

It remains unclear what would be WCS's move. The Block has reached out to the company for comments and will update this story should we hear back.

Update: This story has been updated to include comments from Crypto.com CEO Kris Marszalek

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