Why Revolut chose Cyprus for its European crypto operations base

In 2022, UK neobanking giant Revolut chose Cyprus as the headquarters for its European crypto operations.

Recently speaking to GOLD magazine, Costas Michael (pictured above on the left) and Christos Drakos, the CEO and CFO of Revolut in Cyprus, revealed the thinking behind this move and Revolut’s approach to crypto and explain how the Markets in Crypto-Assets Regulation (MiCA) will reshape the industry.

What’s the goal of Revolut?” Costas Michael asks. “To provide everything you need – banking, financial services, insurance, loans, you name it – all within our app, delivered in the most efficient and user-friendly way. Crypto is just another product we are offering.” Beside him, Christos Drakos gives a subtle nod. The two men had been carefully handpicked by Revolut’s head office to build a local base of operations for the neobank’s crypto business, with Michael acting as CEO and Drakos as CFO.

Revolut in Cyprus – officially Revolut Digital Assets Europe Ltd – is the first Crypto Asset Services Provider (CASP) to get the go-ahead from the Cyprus Securities & Exchange Commission (CySEC), one of the first watchdogs in the EU to carve out a regulatory framework for CASPs. “Choosing Cyprus was a huge exercise from the head office. Obviously, we needed to check all the possible options within the EU,” Christos Drakos explains.

What made Cyprus HQ location of choice

The reasons behind the choice of Cyprus as Revolut’s European crypto base would not come as a surprise to anyone familiar with the country’s financial sector. Cyprus has a well-established ecosystem, which was considerably revamped after the 2013 financial crisis, and today contains a range of sub-sectors, including investment funds, retail brokers and payment institutions, which have equipped governing bodies – CySEC and the Central Bank – with a nuanced understanding of crypto services, the innovation surrounding them and emerging products. Costas Michael speaks highly of CySEC. “We are happy with the regulator, which was a determining factor. They showed knowledge and professionalism and are proactive and willing to engage and build a proper industry,” he notes. Cyprus’ financial sector growth also meant that Revolut could tap into a sizeable pool of talent – Michael and Drakos themselves are prime examples.

Michael began his career as a manual trader, steadily moving his way up to heading operations and then to a director’s role. Over his fourteen years in Cyprus’ CFD industry, he’s made only three career moves, each a careful choice, reflecting a measured approach to finding the right fit.

On his part, Drakos started in professional services, working in risk management before pivoting into the local CFD world. There, he helped set up a Cyprus entity for a UK-based investment firm to continue serving European clients post-Brexit. Then he joined another to implement a corporate structure and build all the departments from scratch. Along the way, he explored launching his own crypto mining hub but NVIDIA chips went out of stock, forcing him to abandon the plan.

Why Bitcoin’s rise isn’t just speculative

On Wednesday, 6 November 2024, as President Donald Trump celebrated his re-election, his vow to make the US “the Bitcoin capital of the world” saw Bitcoin’s price soar past US$75,000 – a record high that left crypto executives excited about the industry’s future. But not everybody joined in the celebrations.

A recent paper entitled The Distributional Consequences of Bitcoin, co-authored by Dr Ulrich Bindseil and Dr Jürgen Schaaf, both top economists at the European Central Bank, warned that if Bitcoin’s price keeps rising based on collective belief – a phenomenon they described as a belief-equilibrium divorced from logical thinking that humanity has been capable of sustaining for millennia, as shown from various religions – it will have a destabilising effect on the society. Why? Because Bitcoin’s limited supply means that wealth will continue to flow into the hands of early adopters, creating a zero-sum game. It’s a scholarly jab at Bitcoin’s appeal as an asset and its role in modern economics.

For Costas Michael, though, Bitcoin’s rise isn’t just speculative but reflects its profile as digital gold; a store of value. While he acknowledges that the wealth effect benefits early adopters, he argues that this pattern isn’t unique to Bitcoin. Indeed, similar issues can be found in equity markets and real estate. “And different assets have different purposes,” he goes on. “There are a lot of other tokens that provide a lot more utility.” On whether crypto appears to be the preferred currency of criminal entities and other bad actors, Michael doesn’t mince his words. “These actors are simply replicating behaviour that’s already been seen in the banking and investment industry since the beginning of time,” he says.

Why MiCA could spark a wave of innovation

The Markets in Crypto-Assets Regulation (MiCA), set to come into full effect in early 2025, will consolidate the regulatory fragmentation across the EU and EEA by allowing CASPs to passport services, while enforcing rigorous safeguarding arrangements to limit bad actors and unethical behaviours.

Christos Drakos anticipates that MiCA will also spark a wave of innovation by providing companies and organisations with the confidence to build crypto products within a clearer regulatory framework. Although such a structure might clash with the original decentralised vision, both Drakos and Michael see the safety and reassurance it will bring as unlocking an entire world previously hesitant to embrace crypto, including regulators themselves – CASP licences, after all, do not carry the same weight as fully-fledged financial services licences. “So, MiCA will formalise the situation,” Michael says, highlighting that the regulation aligns well with Revolut’s proactive stance on compliance, as the neobank has invested substantially in building solid internal processes around risk management and compliance. For Michael, this readiness ensures that they are well-prepared to navigate new regulations – there will always be new regulations, after all.

How Revolut stays well-prepared for new regulations

This approach, the duo explains, is why Revolut offers only around 200 tokens, a relatively limited selection compared to traditional crypto exchanges. Each token they list goes through a rigorous internal governance and risk assessment process, evaluating factors like market risk, volatility and project fundamentals. Besides buying and selling crypto assets within the Revolut app, clients can purchase crypto directly in their wallets through partnerships with leading industry names such as MetaMask and Ledger. Other products include Revolut X, a desktop-based trading platform released in the UK earlier this year to compete with other crypto exchanges.

“We have recently switched to tier pricing,” Drakos notes, referring to their fee structure, which is also a bit steeper than other exchanges, “which depends on the trading size and the type of subscription.”

Despite Revolut recently reaching 50 million clients – with millions investing in crypto and holding billions in assets – it isn’t necessarily the first name that comes to mind among crypto exchanges. “There are a lot of competitors,” Michael acknowledges, “offering a huge range of products, significantly more than we currently offer. I don’t see that as competition. I see it as a different product for a different type of client.” He adds that any product expansion will always be drilled through their internal process. “This doesn’t eliminate the risk for clients but at least it mitigates and reduces it. I believe that, at some point, Revolut will be the first crypto exchange to come to people’s minds.”

Why tech advances will help crypto use grow

In 2021, El Salvador made a bold move to adopt Bitcoin as a legal tender, which, in part, aimed to include the country’s unbanked in the financial system. However, by mid-2022, Bitcoin’s notorious volatility led to the Government’s holdings losing half their value, and surveys suggest that the initial enthusiasm for Bitcoin has since waned. El Salvador is not alone; the notion of Bitcoin as a practical, everyday payment method has yet to take flight. So, why can’t we buy coffee from a local shop with crypto, yet? For Christos Drakos, it’s simply a matter of when. “If you remember, at least in Cyprus,” he says, “you needed cash everywhere; then the vendors switched to accept cards and now some entities only accept card payments.” As technology advances and simplifies, he argues, it will make it easier for vendors to accept cryptos and usage will grow alongside it. “Things are changing at an exponential rate these days,” Michael chimes in, referring to the fact that, although currencies like gold and silver took centuries to become established as mainstream payment methods, such a gradual evolution might not apply to cryptos. Interestingly, Drakos argues that the European Central Bank’s move to work on creating digital currencies could prove beneficial for crypto. “We will see a greater adoption of blockchain technology, centralised by the EU, which will help build trust and other altcoins will gain,” he explains.

While the local office is relatively small, with 16 full-timers and a couple of non-executive directors (with another one pending), the duo seems poised for growth, expecting to fill another eight positions by the first quarter of 2025. For Michael, this expansion represents much more than just a financial investment. “We are pushing the boundaries when it comes to actually offering crypto through Cyprus because, right now, most of the industry is still within a walled garden,” he says.

(Original photo by TASPHO)

This interview first appeared in the November edition of GOLD magazine. Click here to view it.