In April, Charlie Lee, the creator of Litecoin, exchanged comments on Twitter with Derek Capo, the general manager of the payment processor TokenPay. The conversation soon became a friendly exchange of direct messages, in which the two crypt enthusiasts realized that they shared a common problem: banking.
Both the Litecoin Foundation and the Capo company located in the Virgin Islands have encountered difficulties in securing bank accounts, a situation that the industry has been facing for some time.
"We had a lot of problems" on that front, Lee told the Blockchain portal and CoinDesk crypts.
Capo explained: "Some banks close bank accounts if they have anything to do with the crypts. We saw many competitors with similar offers being cut because they did not own the bank and they were not in control. "
But Capo was working on a solution for TokenPay when trying to buy a bank. And he realized that this plan, if successful, could solve another problem for Lee.
"Why do not we talk about having a Litecoin debit card so you have a real solution?" He recalled having told Capo. "Because, you know, they had worked hard to get a Litecoin debit card ... I said, why do not we talk?"
That's how the Litecoin Foundation ended up owning 9.9 percent of WEG Bank AG, a hitherto obscure German financial institution, in a surprise transaction revealed this week.
But the foundation did not put money; TokenPay previously acquired the participation and offered it to the non-profit organization in exchange for technical support in the future. TokenPay also acquired another 9.9 percent (the maximum allowed in Germany without prior regulatory approval) from WEG and is seeking green light to buy up to 80 percent.
If everything goes according to plan, TokenPay and the Litecoin Foundation will not only have a reliable banking partner, but will also transform WEG into a gateway for consumers around the world who want to exchange fiat for cryptocurrencies or pay for goods and services. with crypts.
But owning a bank, by itself, will not necessarily solve the crypto banking problem, according to compliance experts who have worked in both fields. Even if the regulators approve the pending takeover, Capo and Lee may face new challenges operating in a highly regulated industry.
Despite this, Capo and Lee have ambitious plans to start a new wave of cryptobanking services.
While transactions in cryptocurrencies can be frictionless, converting dollars or euros to crypto and vice versa is not. Buying crypts through an online exchange can mean registering a credit card with an exchange platform, then waiting for days, sometimes longer, to complete the transaction.
Meanwhile, most merchants accepting crypts distrust price volatility and generally employ a payment processor like BitPay to convert them into fiat. All these options include processing fees.
That's why Capo wants to offer crypto debit cards and the ability to convert Litecoin to euros directly through a traditional bank account, to make it a more fluid experience for cryptocurrency users who transact in a fiat-dominated economy. It expects to offer such services within nine months after receiving regulatory approval for the acquisition.
"Connecting cryptocurrencies to the rails of fiat money is very useful," said Lee, who told CoinDesk he aspires to join the WEG board as a representative of the Litecoin Foundation.
"We will have an influential voice for the bank to work on crypt projects," he said.
Eventually, after dealing with debit cards and payment processing, Capo and Lee plan to integrate banking services directly with the TokenPay decentralized exchange platform eFin, which offers peer-to-peer cryptocurrency trading.
If the traders surpass all the requirements of KYC and AML of a cryptocuenta bank, they will be able to exchange to perfection TokenPay token, known as TPAY, for money fíat in eFin, besides buying or selling currencies like Litecoin without delay.
"EFin will have LTC. We will help them with it technically, "said Lee. "And they will also distribute tokens ( airdrop ) to Litecoin users."