SA fintech Kastelo teams up with banks and Mastercard to give the country its first ‘crypto card’. From Moneyweb.
The test for any crypto that claims to be a form of money is whether you can use it to buy a cappuccino as easily and cheaply as you would, say, using a Visa card.
That hurdle has just been cleared by Cape Town-based Kastelo, which teamed up with its various SA banking partners and Mastercard to offer the first ‘crypto card’ in South Africa. Several companies offer crypto-based payments services, such as VALR and Binance, but Kastelo is the first to tie payments to a card.
How well does Kastelo pass the cappuccino test?
If you look at the fees charged, they are negligible in SA (about 20c if your account isn’t funded in rand), rising to about R7 if you are transacting in Brazil or Europe. These fees are in line with what the banks currently charge for fiat-based card transactions.
Bitcoin (BTC) handles just seven transactions a second, which is nowhere near the scale required to claim any heft in the world financial system. This pales alongside Visa’s 24 000 transactions per second capacity. Mastercard’s capacity is estimated at 5 000 transactions per second.
Bitcoin is able to scale up its transaction volumes through some fancy technology called the Lightning Network that sits on top of its blockchain. The Lightning Network allows users to create payment channels with any number of vendors and transact almost instantly at a fraction of the cost of transacting on the main Bitcoin network. Lightning can handle an astonishing one million transactions per second, which definitely brings it within the realm of a global payments system.
After its recent technology upgrade called The Merge, the Ethereum blockchain is reportedly capable of scaling to 100 000 transactions per second – which is why it is considered a likely contender for backbone of the new global financial system.
Fiat or crypto?
“The main difference with our crypto card compared to other payment offerings is the ease of ease of on-boarding and off-boarding from fiat to crypto,” says Nicholas Burke, chief operations officer at Kastelo.
To get a card, you have to sign up at the Kastelo website and transfer crypto or ZAR to your newly created account.
The company currently accommodates four cryptos – Bitcoin, Ethereum, USD Coin (backed 1:1 by the US dollar) and the Kastelo Community Token (a rand-backed coin issued by Kastelo).
“We have stuck to the more popular cryptos for the time being, including our own coin, but we will expand the number of cryptos that can be linked to the card, depending on what customers demand,” says Burke.
Here’s a good question …
How is it that Kastelo, a relatively low-key player in the crypto space, managed to snag a partner like Mastercard?
“We’ve flown under the radar and focused on developing our infrastructure for the last four years, while moving in the traditional arbitrage space,” says Burke.
“One of the key things we focused on was digital safety, and making sure we had security standards equal to the best in the world.
“You cannot operate in this space without making sure your clients’ funds are secure against hacking and online attacks.”
The company was founded by two PhDs – Mark Burke (CEO) and Francois Liebenberg (director) – and now has offices in several countries.
It is registered in South Africa as a financial services provider with the requisite approvals from the Financial Sector Conduct Authority (FSCA) and the South African Reserve Bank. In addition to cryptos, Kastelo offers individual algorithmic trading, foreign currency sales, various other financial products, and now cards.
Read: Sarb to banks: Get with the crypto programme!
Crypto regulation imminent in South Africa
Gone are the days when you couldn’t have different currencies on your card, adds (Nicholas) Burke.
You can purchase your cappuccino in Brazil, Paris or Johannesburg using either fiat or crypto, and Kastelo will honour any transaction at any paypoint worldwide where Mastercard is accepted. To do this you have to load your Kastelo account with funds – whether fiat or crypto.
“It’s just as safe as any of the cards of the big banks – possibly even more so, as our technology is more up to date and modern than that used by the banks.”
How does the exchange work from crypto to rand, and can it also be exchanged into other currencies?
“It happens automatically, based on two things,” says Burke. “Firstly, what you have in your account – for example rands, dollars, or bitcoin, and, secondly, wherever you may be, for example Europe, America, South Africa, and so forth.
“As soon as you pay, we can determine in a fraction of a second where you are, what the balance in your account is and then convert it for you to the currency you require.”
Read: 5 tips for first-time crypto investors
Kastelo’s involvement in algorithmic trading extends beyond SA to several other countries where exchange controls limit local residents’ ability to purchase and export local currency.
