Coinfloor, the U.K.’s longest-running crypto exchange, has teamed up with electronic money institution (EMI) Enumis to deliver bank-like accounts to crypto firms, a perennial pain-point across the industry.
Under the partnership, Enumis will pay Coinfloor a fee for referring reputable crypto-facing businesses that successfully set up current accounts (the U.K. equivalent of checking accounts).
“Being insiders in the crypto space we are aware of crypto companies operating as good and compliant custodians and so now we will vet and review these and recommend them to Enumis for onboarding,” Obi Nwosu, CEO, Coinfloor told CoinDesk. “I think ‘brokering’ is technically the wrong word, but we are working in partnership with Enumis and introducing clients to the offering.”
After getting its own current account with Enumis at the start of the year, the firms realized that “together we can do more,” Nwosu said.
Aside from the fees, Coinfloor is hoping that the access to fiat accounts will be another draw for startups to use the exchange. The company, founded in 2013, currently has 50,000 customers, aims to become the premier fiat bridge for the U.K.
“Obviously we think it will bring people to the exchange and we tend to be the best price anyway,” noted Nwosu, adding:
“But this also about helping firms who are doing things the right way to succeed: something we are doing even if they are ostensibly competitors. We would argue that if we are all succeeding it’s beneficial to everyone.”
Getting and holding onto a bank account is a longstanding challenge for any business that handles cryptocurrency. There have been a few notable exceptions in the U.K., such as Barclays banking Coinbase and Circle, but it’s a rare occurrence, and the arrangements are normally clandestine. Banks, for their part, fear the headline risk of being even an arm’s length from crypto that may have been involved in hacking events, crimes and so on.
Next best thing?
To be clear: Enumis isn’t a bank, though it offers many similar services. Founded in 2010, it is authorized as an EMI by the U.K. Financial Conduct Authority, from which it also holds a consumer credit license. Importantly it is wired into payment networks such as Mastercard, the U.K. Faster Payments Service, CHAPs and BACs.
Similar to U.S. money transmitters, EMIs need to hold 100% of customers’ deposits in reserve and can’t lend them out like a bank would.
Through its partnership with Coinfloor, Enumis is offering firms current accounts with online banking and API capabilities, with a debit card that gives a 0.2% rebate on usage at Coinfloor.
“I have to be careful with my words because we are obviously not a bank,” said Ali Latif, CEO and founder of Enumis. “We issue electronic money, but from the perspective of someone using the facilities, you are effectively getting the same sort of functionality.”
With Brexit looming, Enumis is looking for ways to win over European crypto exchanges and payments firms, tapping the clearing systems they use across the EU’s various member states. Latif said. “We are currently in talks with the Lithuanian central bank for integration to SEPA, the pan-European payments system.”
Coinfloor’s Nwosu stressed that its recommendations to Enumis do not guarantee an account.
“It’s possible that we could review a firm to the best of our abilities and Enumis may look at it from a different angle with access to different data than we do and may come to a conclusion that they are not comfortable,” he said. “It’s definitely not by any stretch a passport.”
Rather, candidates’ compliance practices will be rigorously vetted. “We want to find the diamonds in the rough,” Nwosu said. “Enumis are part of a very short list of players providing this option, who are willing to put the time – because it does take a lot of time.”
Obi Nwosu at Consensus: Invest 2018 image via CoinDesk archives