Buy a coffee with crypto
KASTELO: FSP TEAMS UP WITH MASTERCARD
The company currently accommodates four cryptos that can be linked to the card.
The test for a crypto which 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 been cleared by Cape Town-based Kastelo, which teamed up with its various South African banking partners and Mastercard to offer the first “crypto card” in the country.
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 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 which 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 one million transactions per second, which 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 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 rands to your newly created account.
The company currently accommodates Bitcoin, Ethereum, USD Coin (backed 1:1 by the US dollar) and the rand-backed Kastelo Community Token.
“We have stuck to the more popular cryptos for the time being, 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 SA as a financial services provider with the requisite approvals from the Financial Sector Conduct Authority and the Reserve Bank.
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 fiat or crypto, and Kastelo will honour any transaction at any pay point worldwide where Mastercard is accepted.