As of today, Bitstamp clients are now able to trade Euros for Dollars on the Luxembourg-based bitcoin exchange. “We are excited to announce that our clients can now use our new EUR/USD trading pair,” the company said in a statement on Monday. “The new trading pair allows for better mobility of funds and new arbitrage opportunities.”
The addition of a traditional fiat-fiat trading pair marks the exchanges first foray into the world's largest and most liquid trading market, trading national currencies.
"The foreign exchange market is the most actively traded market in the world,” states Nasdaq. “More than $5 trillion are traded on average every day. By comparison, this volume exceeds global equities trading volumes by 25 times."
While the foreign exchange market includes every country's currency, most of the volume is concentrated in a small number of them. The currencies that are traded most often are called major currencies. Of these, the Euro and US dollar are the world's largest.
“In the approaching months we will continue to add more fiat-to-fiat and virtual currency-to-fiat trading pairs in order to cater to our client's needs.”
- Bitstamp
Companies operating in both the US and Europe normally hold both the USD and the Euro minimize risk, often keeping large amounts of their net worth in forex exchanges to do so. Bitstamp will now be available to serve that market, potentially opening up an on-ramp into cryptocurrency that is far larger than any bitcoin exchange has seen before.
The 2015 FX Volume Survey, published by the Federal Reserve Bank of New York's Foreign Exchange Committee, shows that trading the EUR/USD currency pair accounted for 28% of volume in April 2015. The average daily volume in total foreign exchange instruments was $881.2 billion.
According to Euromoney FX Survey 2015, Megabank Citi has the largest market share of global FX market with 16.11%, followed by Deutsche Bank with 14.54%.
Bitstamp has a minimum allowable trade of USD $5, and EUR/USD orders have a flat fee of 0.20%. In comparison, both BTC/EUR and BTC/USD trades carry fees ranging from 0.10% to 0.25%, depending on trade volume.
Another cryptocurrency exchange currently offering EUR/USD trading is BTC-E, which charges the same fee of 0.2%. However, the Bulgaria-based exchange is run anonymously, and getting dollars in and out of it is notoriously tricky.
The exchange also expanded the ability for Bitstamp users to purchase bitcoin with credit cards recently. While the service was previously available in the UK, Slovenia, Germany, and Italy, it’s now available across all 28 EU member countries.
Allowing clients to buy bitcoins with a credit card is one of the riskiest decisions any merchant could make, as it’s very easy for the buyer to tell his or her credit card company that the goods weren’t received. Called ‘chargeback fraud,’ this kind of scam is impossible when paying with bitcoin, and one of the currencies most widely accepted advantages over legacy systems.
To offset the chargeback fraud risk, Bitstamp charges an average fee of 8%, according to Co-founder and CEO, Nejc Kodrič.
However, Kodrič expects the fees to be much lower "once we get enough empirical data to build more accurate risk model," he tweeted.
To reduce risk further, Bitstamp is working with an existing payment service partner, Vogogo, and has now added a B2B risk management service.
The Bitstamp changes flow from a recently acquired European Union Payment Institution license. On April 25th the company became the first licensed currency exchange on the continent that trades bitcoin. The following day, the exchange launched a Bitcoin to Euro trading pair for the first time.
“I believe this announcement marks a milestone for bitcoin and digital finance in Europe. Bitstamp is a most welcome addition to Luxembourg’s fintech ecosystem.”
- Pierre Gramegna, Luxembourg Minister of Finance
Originally based in Slovenia, Bitstamp primarily traded US dollars. When the exchange obtained a Payment Institution license in Luxembourg, it moved its headquarters and became the first fully regulated and licensed cryptocurrency exchange in the European Union.
“Bitstamp’s license is passportable into the 28 EU member states providing all European customers with a robust, secure platform for bitcoin trading,” Bitstamp stated at the time.
“This is an unprecedented moment for the bitcoin, and brings with it a new era of security and transparency to the industry. The news is the result of a rigorous application process with the Luxembourg financial regulator, the Luxembourg Financial Industry Supervisory Commission (known as CSSF) spanning nearly two years, which included security reviews in addition to an audit by Ernst & Young Luxembourg.”
- Bitstamp