Born out of the thriving tech sector in Lithuania, Nexpay is looking to birth a movement of fiat-to-crypto payments by building banking infrastructures to businesses across Europe. 

Nexpay CEO, Uldis Teraudkalns, spoke to Payment Expert on how the firm enables businesses to adopt digital currencies via its API, how Lithuania’s fintech sector works hand-in-hand with its crypto space, and the impact central bank digital currencies will have on the wider crypto economy. 

Payment Expert: Could you explain how Nexpay’s Banking API helps businesses transition from fiat to digital currencies and the benefits it provides to merchants?

Uldis Teraudkalns: We provide API integration to our business payment accounts. Our services are popular with clients in digital assets, forex, gaming, payment processing, and many other industries. 

Nexpay API allows businesses with huge payment volumes to easily handle day-to-day transactions. For example, some of our clients are crypto exchanges with thousands of daily transactions, which would take considerable time and effort to handle manually. 

PE: Has Nexpay seen a rise in crypto payment adoption from its clients and other businesses? and why are more companies installing crypto payment terminals?

UT: We can observe a particular cyclical nature of Bitcoin, which means its popularity rises strongly in growth periods, and in slower periods, the drop isn’t as drastic. 

Until now, we haven’t seen an increase in crypto for physical payments. The delay in processing is a big reason for this due to the need to wait while the ‘block’ is finished and approved. For example, there could even be a 15 minute delay for Bitcoin. 

For online crypto payments, there is a much easier flow, therefore, adoption for e-commerce use cases is much more popular than offline. Automatisation is a big trend among our customers as well – many are serving significant e-commerce companies with crypto payment flow. 

Crypto payments are seen as a complex service for which even the big players don’t want to spend the resources to develop this service in-house, and it’s easier for them to outsource these services.

PE: Central Bank Digital Currencies (CBDCs) are becoming a potential route for governments. Will CBDCs stifle innovation from external cryptocurrencies and if so,  what are some of the challenges cryptocurrencies like Bitcoin will have to face against a CBDC?

UT: CBDCs can only be labelled as competitors for stablecoins, as almost no other crypto currently has a purely transactional objective. Bitcoin is used as an investment, some others for speculation etc. 

There shouldn’t be a significant effect on Bitcoin, as the value propositions are totally different. Bitcoin is used as a value store between the other cryptocurrencies, and CBDCs will have a purely transactional use case. 

The closest to what we have currently for purely transactional aim is stablecoins (maybe some privacy coins), and they might lose some appeal once the CBDCs become more widespread. The existence of CBDCs alone doesn’t affect whether the project will be successful; it all depends on how good and convenient the overall experience will be. 

That being said, algorithmic stablecoins could become more niche, as CBDCs will be a close and better alternative with backing. The only thing why some players might steer away from CBDCs is because they fear the consequences of more considerable country control.

PE: Lastly, with crypto regulation a major hurdle in the way of crypto adoption, could you describe some of the European countries already embedding crypto payment regulations in its financial sector and how has this benefited the populations?

UT: Regarding the latest major legislative framework, the 5th Anti-Money Laundering Directive, Estonia ranked first as the country with the most advanced regulation and a more straightforward system. Thanks to the Estonian e-residency, registration and the requirements for operators have been simplified.

The following most extensive European cryptocurrency regulatory mechanism will be the Markets in Crypto-assets (MiCA) bill, which is due to come into force in 2024. It will deal not only with the AML aspects but also include provisions for investor protection, market manipulation, etc. 

MiCA is supposed to be ‘passportable’: by registering in one country, you will be entitled to provide services in all EU countries. To provide crypto services, a company technically has to be registered in every country, which is not feasible even for the most prominent market players.

There will be countries which react to the regulation first and become passportable, like Lithuania with the fintech regulation. It will be a big race to determine who owns the crypto regulation market. The main criteria the winner needs to have is clear rules, progressive regulation, and a convenient setup. 

Currently, several countries might be the front runners for this – Malta, Cyprus, Lithuania, Estonia, and Latvia all want to be in the race but need a lot of homework to prepare for MiCA successfully. 

PE: Lithuania currently has a thriving fintech sector, are there any similarities to the country’s crypto sector, what can it learn from fintech, and vice-versa?

UT: Firstly, in Lithuania, there is one AML law for crypto and fintech. This puts a high-level of accountability for crypto companies operating in this market, allowing them to work within a more transparent legal framework than in other jurisdictions.

Experience in risk management and the ability to navigate the regulatory environment are just some of the skills that are valuable in both the fintech and crypto industries.

If you look at it from a talent search perspective, people with experience in the fintech industry are better equipped to work in the crypto industry than people from other sectors, especially founders and C-level executives are better placed to navigate the crypto industry if they have a background in fintech. 

PE: Why is collaboration between the fintech sector and the digital currency sector so crucial, and how can a thriving fintech sector contribute to the growth and evolution of digital currency in Lithuania?

UT: The Bank of Lithuania has increased competence in supervising current financial services due to a large number of participants in the fintech sector who have established or moved their businesses to the country because of the developed regulation. This competence may extend to the crypto sector as well.

Overall, the Lithuanian fintech sector has created a recognisable and trustworthy brand, and the government has shown itself to be fintech-friendly in terms of regulation along with the entire ecosystem. 

This, in turn, has brought in investors. As such, there is hope that not only fintech but also the crypto sector can attract investment, partly perhaps from existing players. At the same time, since Lithuania is a cryptocurrency-friendly European country, we also expect investments from new players.