New details have emerged about the underlying deal that helped bring Coinbase’s bitcoin buying and selling services to 13 European countries.
Representatives from Estonia’s LHV Bank confirmed that it is serving as Coinbase’s banking provider in the region as it seeks to further its own interests in the digital currency space. Notably, LHV Bank had previously announced a project aimed at exploring the potential of block chain technology.
Speaking to CoinDesk, Andres Kitter, head of retail banking in LHV Bank, framed the partnership as one that finds the bank exploring ways to leverage payments innovations.
Kitter told CoinDesk:
“Coinbase has a very strong team and we have been encouraged with their approach to risk management and how carefully they manage other sensitive issues. We have been approached by different bitcoin and cryptocurrency companies, however at this stage we still have to be very selective and rather conservative.”
Founded in 1999, LHV Bank’s relative newcomer status in country’s financial services industry is one of the key reasons it has been more willing to engage the burgeoning bitcoin ecosystem, Kitter said.
To date, LHV Bank has been outspoken about the partnership, first breaking the news via major Estonian daily newspaper Posttimees.
Coinbase has not responded to requests for comment, but has previously suggested it may have more than one banking relationship in the region.
Building on the block chain
Revealing details about its ongoing bitcoin research, Kitter indicated that LHV Bank is seeking to learn what types of services may be built on bitcoin’s underlying block chain technology.
The bank is currently experimenting with Colored Coins technology, he explained, a process that allows small amounts of bitcoin to be used as a token that represents an asset, such as a specific investment.
Kitter said:
“When we started our project, we decided not to focus on bitcoin as a currency or trading asset, we started to explore what could be built on top of the underlying technology. Colored Coins looked most relevant for the use cases we wanted to solve first, although we looked at the other possibilities as well.”
Still, he cautioned that the bank’s exploration of the technology is still in its very early stages.
Bitcoin in Estonia
In the interview, Kitter was keen to frame Estonia as a high-tech market that could serve as a great incubator for new technologies, such as mobile payments and digital currencies.
He indicated that domestic lawmakers, as well as agencies such as the Estonian Financial Supervision Authority (FSA) are taking a careful approach to bitcoin. Consumer transactions, Kitter noted are subject to VAT, while those who promote and provide bitcoin services need to follow strict trading regulations.
However, the country could benefit from dedicated domestic support groups, organisations comparable to the Bitcoin Foundation, Chamber of Digital Commerce and Coin Center in the US, he suggested.
Kitter said:
“As a country, we are at the beginning of the cryptocurrency journey and there isn’t yet a single organization who would step up and drive the conversation with regulators and lawmakers, focus on education, etc. Once that organization is in place, we would expect improvement.”
Kitter concluded that LHV Bank is still monitoring the local landscape, but that it is committed to working with digital currencies.
“We are taking small steps and working with strong partners like Coinbase,” he said.
Images via LHV Bank and Shutterstock