Digital bank N26 launches crypto trading service amid bear market

European digital bank N26 announced on Thursday that it is launching a crypto trading service, starting with Austria as the first market for the product.

The service, called N26 Crypto, is set to become available to N26’s Austrian customers in the coming weeks and will initially include 100 tokens, including bitcoin and ether. N26 plans to roll out the feature to users in other markets over the next six months and eventually expand the token offering to include a total of 194 coins.

Gilles BianRosa, N26’s chief product officer, told CNBC that the bank’s crypto brokerage feature allows users to “dip their toes in the water in a way that isn’t frothy.”

To make a trade, users select a coin and specify how much they want to buy or sell. Once they have completed their order, cash is deducted from their main account balance and displayed next to their chosen token. Customers can also “drag and drop” funds from their main account to the crypto portfolio, or vice versa, N26 said.

Berlin-based N26 is a bit of a latecomer to the crypto rush. Fintech rivals PayPal and Revolut has long offered its users the opportunity to buy and sell digital assets, and payment leviathans Visa and MasterCard also sells its customers crypto and so-called “Web3” services. On Wednesday, the Brazilian digital bank Nubank launched its own token, called Nucoin.

“Our users are extremely interested in crypto,” BianRosa said in an interview. “That interest is still super high, even in a bear market.”

N26’s crypto attempt could have been better timed. Bitcoin and other tokens are deep in the red this year after investors fled the market due to fears of higher interest rates and liquidity constraints. While high street banks have steered away from crypto due to concerns over its sharp volatility and involvement in fraud, N26 – which holds an EU banking license – is dipping its toes into the space, believing it to be more than “just a fad”. “

“We want to take a pretty long-term view on this,” BianRosa said. “It’s not like we’re trying to time the launch on how the market feels.”

N26 charges a 2.5% fee on buy and sell orders for all cryptocurrencies – except bitcoin, which it offers at a reduced transaction fee of 1.5%. For subscribers to their paid Metal accounts, which cost 16.90 euros ($16.54) a month, the transaction fee is 1% on bitcoin and 2% for all other tokens.

The feature is powered by Bitpanda, the Austrian crypto and stock trading app that shares N26 backer Peter Thiel as an investor – with Bitpanda taking a commission on every trade processed through N26. N26 said it plans to support trading in other asset types over time.

The move could cause discomfort for regulators, who have become much stricter in their approach to crypto following the wipeout of $2 trillion in the market this year. The EU in particular has sought to crack down on the “Wild West” of crypto, with incoming rules expected to improve investor protection around digital assets. N26 has previously been restricted on its growth by BaFin, the German financial watchdog, due to alleged flaws in its fraud prevention systems.

“We have a very strong relationship with all the regulators, so of course we inform them of our plans, they are aware and we have covered all the regulatory needs we have for this market,” BianRosa said.

A BaFin spokesperson said the company does not comment on individual banks, but that “banks in general must comply with all statutory obligations to prevent money laundering and all other banking supervisory requirements also when doing business with cryptoassets.” The Austrian Financial Markets Authority, which oversees the market where N26 is first launching its crypto service, said any questions on the move should be directed to BaFin.

Notably, N26’s crypto service does not include support for escrow wallets, meaning customers cannot move their assets off the platform. Platforms such as Robinhood and Revolut have introduced features that give users more control over crypto assets recently.

BianRosa said this creates a “closed-loop investment loop” where users’ assets are sealed in a controlled environment. It’s a feature some of crypto’s biggest proponents might say is at odds with the technology’s decentralized roots. But N26 claims that this provides greater protection for users. Clients must meet identity verification checks before becoming eligible to make crypto trades.

“It’s not like you can convert these bitcoins and buy something from the dark web with these assets from your wallet,” N26’s product manager said.

N26 is one of Europe’s largest fintechs, and scored a valuation of 9 billion dollars in its last funding round last year. However, like other fintechs, the firm loses money. N26 posted a net loss of 172.4 million euros ($168.8 million) in 2021, a 14% increase from the previous year.