UK fintech Revolut’s losses nearly doubled last year, despite the year-end cryptocurrency boom.
The company – founded by former Lehman Brothers trader Nik Storonsky and chaired by former Standard Life Aberdeen boss Martin Gilbert – said it made Â£ 39million on its cryptocurrency investments last year, while that growing demand for its crypto trading services helped drive revenue 34% to Â£ 222million in the 12 months leading up to December 31.
It follows the meteoric rise in the price of the leading cryptocurrency bitcoin, which jumped nearly 300% to $ 28,500 in 2020, before reaching an ephemeral peak of over $ 64,000 in mid-April. of this year. Bitcoin was down 8.5% on Monday, to around $ 32,500, after reports that the Chinese central bank demanded a tougher crackdown on the use of cryptocurrencies.
While the company said it was finally profitable in the last two months of the year – coinciding with one of the highest demands for cryptocurrencies in 2020 – additional investment in engineers and payments based on actions for employees pushed Revolut to a pre-tax loss of Â£ 207,875 for the last time. year. That’s almost double the loss of Â£ 107,680 in 2019, according to the company’s annual report.
Its chief financial officer, Mikko Salovaara, said the company experienced “very strong profitability in the first quarter” of 2021, but would not confirm whether it was heading for its first annual pre-tax profit on record. “We are not giving forecasts, but so far everything is fine,” he said.
Revolut was launched in 2015 with a prepaid card aimed at offering free currency exchange to customers. It has grown into one of the UK’s most valuable fintech startups, worth around $ 5.5 billion, expanding overseas to 34 other countries and adding business accounts, investments and payday advances to its financial services. Unlike UK banks, the company has leaned into the cryptocurrency frenzy.
The Canary Wharf-based company, which claims crypto services account for around 15-20% of its revenue, allows customers to buy and sell nearly 40 different cryptocurrencies, including bitcoin, ethereum, and, more recently, dogecoin., which is based on an internet meme of a shiba inu dog.
But the success of Revolut’s crypto business could complicate his ambitions to secure a UK banking license, which he applied for earlier this year.
Earlier this month, global regulators from the influential Basel Committee on Banking Supervision said cryptocurrencies such as bitcoin should come with the strictest bank capital rules to avoid endangering the market. financial system as a whole if their value suddenly collapsed. If this proposal, which is submitted for consultation, is adopted, UK lenders could be forced to set aside enough capital to cover 100% of potential losses. This could prove to be costly for a crypto-friendly company like Revolut.
Meanwhile, Chinese regulators have banned banks and payment companies from offering their customers services involving cryptocurrencies and have warned of the risks involved in trading cryptoassets. In the UK, the Bank of England and the Financial Conduct Authority have told investors that they should be prepared to lose all their money if they buy cryptocurrencies because they are not covered by protection programs. of consumers.
A Revolut spokesperson said it was keeping a “close eye” for regulatory announcements and supporting regulations that protect retail customers and reduce the risk of cryptocurrencies being used for illicit purposes, “provided that regulation is balanced and does not stifle innovation unnecessarily “.
âWe believe that good crypto regulation is essential to make crypto a common and useful technology in the future,â they said.
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