Enabling frictionless crypto spending: why we invested in Kulipa
By Sep Alavi, General Partner, and Marthe Naudts, Associate
Stablecoin adoption continues to grow, largely unphased by other cryptocurrencies’ comparatively volatile adoption cycles. The cumulative supply of the top stablecoins reached over $150bn this year, and over $7tn was settled last year in dollar-pegged coins like USDT coins like USDT and USDC, surpassing even the settlement value of Mastercard, which processed around $2.2tn value.
In our opinion, this is due to:
a) consumers preferring exposure to the dollar over their local currency
b) crypto trading being denominated in USD, and
c) it being easier to pseudo off-ramp into USDC than completely into USD.
With limited options to earn a yield on holding stablecoins, users are incentivized to spend their cryptocurrency and stablecoins on products and services, similar to their fiat holdings. The largest payment companies, including Mastercard and Visa, are taking notice — underscoring the opportunity. And yet, payment technology supporting this new currency has not fully taken off.
The success of day-to-day payments in crypto has historically required not just the evident demand from consumers, but also the willingness and ability of merchants to accept cryptocurrencies. For them, cryptocurrency payment service providers (PSPs), analogous to Stripe, act as pseudo-acquirer banks, hadnling KYC, fraud management, and currency settlement. This model requires merchants either accept crypto directly, or integrate with a PSP that enables fiat settlement.
Card issuers and processors, by contrast, are distributed through wallets and, by extension their consumers. This means that if they are connected to existing Mastercard and Visa’s 80m and 30m merchant networks, and their stablecoin settlement schemes, they enable consumers to spend their cryptocurrency wherever they choose, and leave it to the processor and card schemes to convert to fiat if the merchant so wishes.
The two options for the flow of funds/information are shown below:
Whilst crypto card issuance has proliferated, the vast majority have been attached to custodial wallets, such as Binance Card and Coinbase Card where the related exchanges are able to pull funds from Binance and Coinbase wallets respectively.
However, this has only served custodial wallets (a third party controls the user’s private keys) rather than self-custodial wallets like Metamask (only the user has control over private keys and in turn their cryptocurrency), as this requires the user to permission the transfer of funds out of their wallet every time they wish to transact. Some self-custodial card issuer and processor companies have therefore emerged, which replace Marqeta and Pomelo in the above diagram. These, however, require a pre-paid model in which the user encounters significant friction in needing to pre-load an external card such that the processor can act as a pseudo-issuer bank on the customer’s behalf.
Enter, Kulipa: the only crypto card issuer/processor enabling smooth, frictionless spending from self-custodial wallets at any of the 37 million merchants connected with the Mastercard network.
Kulipa is building the crypto-native settlement capabilities for traditional payment cards.
Their product is two-fold:
- Issuer as a service: for non-issuer customers, Kulipa will provide their full issuing infrastructure and their regulatory issuing capacity, to equip their customers with white-label cards. In this model, Kulipa will operate as a card-as-a-service platform. This means they will allow other businesses, such as crypto wallets, exchanges and companies to launch their own debit card that can be used with existing Mastercard and Visa merchants. The cards will both be issued as virtual and physical cards. In this model, Kulipa will charge both processing fees and interchange fees.
- Issuer processor: for regulated business customers, Kulipa offers crypto-native issuer processing capacity, enabling crypto settlement for customer cards. Processing fees are charged for facilitating settlement.
Kulipa allows users to connect their card to a crypto wallet, enabling direct crypto payments for day-to-day purchases.
Their value proposition was immediately clear to wallets, including Argent, who announced and demoed at EthCC last week that they were using Kulipa to issue their card, powered by zero-knowledge technology from Starknet.
We have been consistently impressed with the highly relevant experience and team synergies of the Kulipa founding team. Axel Cateland, the CEO, is the former Head of Banking and CEO at Spendesk Financial Services, as well as former VP of Mobile Payments at Mastercard. Michael Shynar, the CTO, is a highly impressive engineer, having worked for 8 years as an engineer and engineering manager at Google, and then 4 years at WhatsApp. Combined, we knew they were the perfect team to launch a B2B2C fintech product with strong relationships with Mastercard.
After a year of working closely with the team, we’re excited to announce that White Star Capital co-led Kulipa’s seed round with Fabric Ventures. We can’t wait to see where the team will take this next, as they solve one of the biggest problems facing the crypto industry today.
If you’re in the market for a crypto card, or would like to learn more, please reach out to us or the team directly at axel@kulipa.xyz.
