Initially seen as a shortcut to becoming a millionaire overnight and thus overhyped, crypto seems to start finding its place in the banking world. As we experience decentralized finance rooting deep into everyday transactions, there is still a long list of unregulated and unlisted crypto firms operating in the market[1]. Under such circumstances, regulated and therefore trustworthy entities rightfully stand out.

Bitwala is one of these trustworthy entities the world’s first crypto banking service[2] that got to pass the German regulator’s test. Operating together with the white-label banking provider solarisBank, Bitwala offers a crypto-friendly bank account, a debit card combined with crypto trading and secure crypto wallet options for its customers. The start-up also secured a successful financing round recently, and I am happy to talk to its Chief Financial Officer Christoph Iwaniez today; having the chance to learn more about their journey first hand, right during the Berlin Blockchain Week.

  • Thanks for your time, Christoph. Can you tell us a bit about your background? What made you convert from traditional banking into the crypto and blockchain space?

Innovation strategy had already been a core element of my role in LBBW, Germany’s 4th biggest bank and in the German Savings Banks Group. But after ten years in the traditional banking industry, I felt that it was time for the next step. For me, the decision was quite easy: I was already highly interested in blockchain topics, a customer at Bitwala, and was closely following their development. One day, the Bitwala team contacted me and I was more than interested to meet them in Berlin. We really hit it off: The smart team and the awesome team spirit convinced me right from the start.

  • You are the Chief Financial Officer of the world’s first licensed crypto banking service. What does this mean? What separates Bitwala from a typical crypto exchange?

Bitwala is superior to other crypto gateways as it enables its customers to trade bitcoin directly out of their current account, hosted by a German partner bank. We are particularly proud that many of our customers use our bank account as their salary account and that Bitwala is an important part of their daily life.

Our high legal and technical standards make Bitwala one of the safest, fastest, and most convenient ways to trade and manage Bitcoin holdings. Bitwala only charges a competitive 1 percent fee for bitcoin trading, while the current account for retail customers and the Bitwala Debit Card come free of charge. Also, Bitwala customers are benefitting from top-of-class legal and technical safeguards made in Berlin: Euro deposits of up to 100,000 Euro are protected by the German deposit guarantee schemes. To protect customers’ bitcoin holdings in a decentralised fashion, Bitwala is offering on-chain multi-signature wallets: Hence, there is no centralised list of wallet keys any hacker could steal, because the private keys remain in the hands of the individual customers who store them offline in paper form.

  • What are the conditions to open a bank account through Bitwala?

Anyone who is a resident of age in one of the 31 countries of the European Economic Area (EEA) may open an account with us. To verify residents of the EEA, a valid national ID card or passport and proof of address are required. You simply present them in a video verification process. In all, the verification only takes a few minutes, afterwards the account is instantly ready to receive and send Euros or bitcoin. About half of our customer base resides in Germany – most other European Bitwala customers live in Austria, U.K., Switzerland, Italy, or France. 

  • As a crypto bank and a licensed tied agent, you have a unique position. You’ve basically paved the way for similar business models. Can you tell us a bit more about the licensing process? How was the regulators’ initial reaction? Were there any particularities in the licensing process because you are operating in the blockchain space?

Licensing is all about tight internal processes, transparency towards the regulator and professional communication. For start-ups in the blockchain sphere it is important to approach the regulator at an early stage. Be professional at all times, have a good knowledge of any regulatory pain points and be proactive in how these can be reduced in your product. The German regulator is generally open to innovative crypto businesses from Germany. So, I’d say their initial reaction is to always be open and willing to listen to business proposals with a transparent approach.

As we were the first to operate this kind of business model, the entire process drew a lot of attention.

  • I understand that you are planning to get your own banking license soon. This will put you under the spotlight in the crypto market. Is it an option to provide white-label services to crypto start-ups in the future? 

Our business model is consumer focused, our mission is to build a bank that bridges the worlds of traditional and decentralized finance. In that, we aim to empower people to exchange value like they exchange ideas: Globally, instantly, and at the lowest possible cost. Hence, with our blockchain banking solution the focus is to provide an easy, safe and secure access to the digital economy for individual customers and in future also business customers. We do not follow a B2B-2B approach in that sense, like for example our German partner bank does.

  • If I am not mistaken, you are about to reach the EUR 11 Mio milestone. Do you think your rapid growth in the European market is peer pressuring the traditional banks to invest in blockchain banking as well? As a representative of both fiat and crypto economies, do you think these economies will completely merge one day?

Traditional banks are quite slow when it comes to adapting to the needs of the future digital economy. The start-up world is certainly a lot more flexible and fast-paced than the traditional banking sector. For traditional banks to move into blockchain topics, a much broader adoption in the masses is needed. At Bitwala we are building the bank to bridge the conventional financial system and the blockchain economy. Our mission is to offer our customers a secure, fast and easy gateway to cryptocurrencies and decentralized financial products. This will pave the way for mass adoption and will eventually cause the two economies to merge.

  • Considering your ambitious growth plans, how do you plan to reach that fraction of the society which is still somewhat skeptical? Especially in countries like Germany, where people are not so experimental with their banking products? 

Mostly people are overwhelmed by the complexity of the crypto ecosystem. They have a hard time understanding how cryptocurrencies work. Our unique integration of Euro and bitcoin in one platform enables everyone to playfully learn more about cryptocurrencies while benefiting from a German bank account at the same time. In Germany, we have one of the strictest cryptocurrency regulations in the world, the fact that we are completely in line with these regulations will in future even convince the biggest sceptics.

  • What is your take on the global crypto regulations? What kind of approach from the regulators would propel an ecosystem to the top of the list?

To this day there is no globally harmonized approach to cryptocurrency and digital asset regulation. Each country has her own regulations and regulatory approaches may differ drastically, making it very difficult to build a compliant business that operates on a global level. The Group of 20 need to push for a harmonization of regulations.

  • Speaking of regulations – how do you expect AMLD5[3] to impact Bitwala’s operations?

The proposed new law is positive for Bitwala, as any trading of cryptocurrencies without a banking setup is now illegal. For example, crypto ATMs that are run by non-banking providers are not legal. At Bitwala we have chosen exactly the right setup for trading in Germany.

What is more, with Bitwala the customer holds the private keys so no custodianship under the AMLD5 is involved. But for unregulated and non-German providers of crypto services, especially custody wallets, this is now a barrier to enter the market.

On the one hand, the regulatory approach is regarded as strict and negative from a free-minded crypto community perspective. But, on the other hand, for adoption in the future mass market the regulation will provide new investors in crypto assets more stability and safety for their investments.

  • You were exhibiting in Istanbul recently – what were your observations on the local ecosystem?

Turkey has a very vibrant and growing crypto community with a much broader adoption of cryptocurrencies than many other countries. This is partly due to the economic fundamentals. Unfortunately, Turkey is not part of the EWR and therefore Bitwala is not available in Turkey – but Bitwala is an interesting product for the many people with a Turkish background living in Germany – as it is for anyone who wants to send Bitcoin around the world. Again, if you are a (non-US) regular resident in an EWR country, you may open an account with us – citizenship is not a condition.

  • Lastly – what are your predictions for the crypto market? Is crypto becoming mainstream (wide-spread) or scarce (only addressing particular friction of people)?

Crypto adoption will increase step by step and decentralized financial products will become more important. The key for this to happen is easy access to this new digital economy. That is where Bitwala comes into play: we aim to bridge the traditional and decentralized financial worlds. By offering people a quick, easy and safe gateway to cryptocurrencies, digital assets and other decentralized financial products we will play an important role to pave the way for the mass market. We witness it every day by the high number of customers joining Bitwala, that the acceptance and understanding of crypto is increasing day by day.

[1] Back in 2017, the percentage for unregulated crypto exchanges were reported to reach 14% by Coinfirm.

[2] Deposits at Bitwala are protected by the German Deposit Insurance Scheme (up to EUR 100.000).

[3] Directive (EU) 2018/843 (5th Anti Money Laundering Directive).

Gazi University Faculty of Law graduate Ş. Elif Kocaoğlu Ulbrich has degrees in Private Law from Galatasaray University and MBA from WHU – Otto Beisheim School of Management, and is also a fellow of Jean Monnet, Joachim Herz Stiftung. After working as a lawyer in various international law firms in Istanbul and Ankara for more than six years, Denizbank A.Ş. He started his banking and finance career in 2013, specializing in business development, project management, FinTech regulation and lobbying activities at FinTech startups (FinLeap, Cringle, Lendico) in Hamburg and later in Berlin. Co-author of The PAYTECH Book, The AI ​​Book and The LegalTech Book, which are planned to be published in 2020 in cooperation with FINTECH Circle and Wiley, Kocaoğlu Ulbrich has been providing consultancy, training and publishing services since 2019 through Berlin-based Contextual Solutions, which she is the founder of.