Revolut is plotting a move into crypto derivatives, a move that would see the fintech navigate a retail ban on the product by UK regulators were it to roll out in its home country.
Derivatives are financial products which allow traders to speculate on the future price of assets without having to own assets directly. In traditional financial markets, they’re used to hedge financial risk, such as fluctuations in prices and interest rates.
But in the volatile world of crypto, they largely serve the opposite purpose and are used by traders to control positions much larger than the capital held. Since 2021, the UK’s Financial Conduct Authority has banned crypto derivatives for retail traders, which Revolut’s group lead legal counsel for crypto Konstantinos Adamos criticised earlier this year.
At the time, the FCA said these products were “ill-suited” for retail consumers due to the harm they pose and a lack of adequate understanding among retail investors to safely trade with the product.
But that’s not stopping Revolut — the fintech is recruiting for a general manager to build out a crypto derivatives product from zero to scale into “one of the most trusted, scalable and profitable derivatives offerings in the world."
Revolut is hiring for the role in London, Barcelona and Dubai. It’s not clear where the financial superapp will seek to debut its crypto derivatives product yet but the job listing lists familiarity with EU financial market and cryptoasset regulations as a “nice to have”.
“If Revolut targets the UK market, regulatory buy-in would be difficult unless the product is restricted to professional clients,” says Daniel Arroche, partner at Paris-based blockchain law firm D&A Partners. “But in the EU or in jurisdictions like Dubai, where licensing regimes exist and retail access is possible under regulation, securing approval is achievable.”
A first mover in crypto
Founded in 2015 by Nikolay Storonsky and Vlad Yatsenko, Revolut was one of the first mainstream fintechs to push into digital assets and allowed users to buy, hold and exchange crypto since 2017.
After reporting record profits earlier this year, Revolut is now aiming to expand its crypto offering according to three job listings posted on its website. The job listings hint Europe’s most valuable fintech is looking to attract institutional customers in addition to its core retail offering as the UK fintech expands its digital asset offering globally.
“Crypto already contributes double-digit percentage points to Revolut’s P&L but we’re still just scratching the surface,” Emil Urmanshin, Revolut director of crypto and new bets said on LinkedIn last week.
"We can confirm we're hiring to expand our expertise in crypto products and services across several markets, particularly for institutional clients, but we're in the early stages of recruitment and don't have additional details to share at this time,” a Revolut spokesperson tells Sifted.
Revolut has previously relied on crypto to reach profitability. The financial superapp first reported pre-tax profitability in results covering 2021, largely thanks to an uptick in crypto trading on the platform. A year later, however, the company sank back into the red for results amid a wider pullback in the digital asset market before returning to operating in the black in 2023.
In Revolut’s most recent results, the company wrote: “Wealth revenues grew 298% YoY, driven by increased crypto trading activity as observed throughout the industry and the launch of the Revolut X crypto exchange.”
Crypto for institutions
Revolut’s push to serve institutional clients in the crypto space follows several key developments.
At the beginning of last year, the US Securities and Exchange Commission (SEC) approved eleven bitcoin ETFs (exchange-traded funds), which enable retail and institutional investors to have direct and regulated exposure to the world’s first blockchain-based cryptocurrency. In the same year, the European Union also passed its landmark Markets in Crypto-Assets (MiCA) regulation. In the UK, the Financial Conduct Authority (FCA) is currently consulting on new rules for cryptoassets.
Urmanshin believes Revolut can “at least double current numbers” by pursuing crypto derivatives business, launching services for institutional clients and expanding globally.
The crypto derivatives space has gained momentum as of late. Last month, crypto exchange Coinbase acquired Deribit, a futures and options trading platform listing derivatives, in a $2.9bn deal.
“It’s good business when it’s between institutions,” says Charles Kerrigan, a partner at law firm CMS who heads up its digital asset practice. “And the regulators aren’t typically concerned about that.”
It’s also one of the more profitable segments in the digital asset space, says D&A’s Arroche, with revenue streams including trading and margin fees along with charges on leveraged positions.
And under the EU laws on financial instruments and digital assets, regulation is clearer in the EU, he continues. At the tail end of last month, crypto exchange Kraken rolled out a regulated crypto derivatives trading platform to both institutional and retail customers across the European Union.
“Unlike the UK, which still maintains an outright ban for retail and is only in the consultation phase for broader crypto regulation, the EU provides a clearer path for firms wishing to offer crypto derivatives, including to retail users,” says Arroche.
