Fintelum’s Liza Aizupiete: “Crypto to remain very much a niche sector”
Coin Rivet: Since we last spoke, the crypto space has been on a rollercoaster ride. What are your key takeaways from the past 12 months?
LA: For someone who was ousted, along with my team, from a project of nearly five years, we have been busy re-establishing ourselves and building Fintelum – our next venture. The end of 2018 was incredibly tough. The cryptocurrency price volatility and subsequent fear from the market was noticeably present and added to the pressure.
Many young and established companies, including miners and wallets, had to reposition themselves and face the new reality of a prolonged down market. The last time we saw such low sentiments was in 2014-2015. But the volatility is to be expected from a social and financial experiment that only started 10 years ago. For us at Fintelum, this year marks the beginning of a new business, pursuing the same ideas of promoting the cryptocurrency industry at large.
Coin Rivet: Do you believe that widespread crypto adoption is coming or will it remain a niche thing for the foreseeable future?
LA: When I was invited to speak on a radio show recently, I realised that the mainstream media and public at large have very little idea or understanding of what cryptocurrencies are and what role cryptographically secured financial products may play in the future.
There is much work to be done in reaching out to the general public with useful products and services that bring actual everyday value to the people. So, it is my prediction that in the immediate future, crypto will remain very much a niche sector, despite interest from institutional market participants.
The institutional interest peaked in 2017, when investments across all (including failing ICO projects) was yielding in excess of 10 times multiple for returns. That’s when the speculative interest coincided with institutional advances. Every large banking institution had, by that time, a running “blockchain lab or sandbox”. And despite all the effort, Bitcoin Core and Ethereum remain the most robust blockchains in terms of adoption, distribution and thus security.
This may change with the advent of new competing chains, proposing to solve certain deficiencies in scalability. Alternatively, the proven legacy chains will upgrade and continue to persist as the most secure and distributed systems. Time and development effort put into each project will ultimately show which systems are better geared to stay the course in the long-term.
Permissive crypto activity will not guarantee investor protection. The only way investors are protected is by tackling outright fraud – and we have existing laws for that
Coin Rivet: Alibaba Group’s DAMO Academy recently commented that, “while the hype over the prospects of blockchain technology has cooled down, the deployment of its commercial applications is expected to speed up. We expect more and more blockchain applications to emerge, ranging from cross-border remittances, supply chain financing, electronic invoices to tamper-proof judicial records.” Would you agree with this POV?
LA: A “blockchain application” can be many things. For example, a web application that uses an Ethereum-based payment system is as much of a blockchain application as is an Ethereum-based token, that powers a service of a business, like a loyalty system, also a utility token. A private blockchain can be used to record data, yielding nothing more than a permissioned database structure. Whereas records made on a public blockchain perform the same function in a ‘permissionless’ way, which is publicly accessible to all.
Indeed, a private blockchain application does not differ from an application of a non-blockchain database shared with a permission for entities of choice. It is yet to be seen, if it makes economic sense for companies to create private chains to perform the same functions as is done now on company servers.
Whereas, if companies and governments start using already economically incentivised systems that work in a decentralised way, then we will see a natural growth in distributed systems across all kinds of record-keeping. The bottom line is blockchain is a way of keeping records in a distributed, non-enforced, free choice-powered incentivised way. The tamper-proof records are viable only if the system is distributed and sufficiently decentralised.
There is much work to be done in reaching out to the general public with useful products and services that bring actual everyday value to the people
Coin Rivet: The UK Treasury Committee recently labelled Bitcoin and other cryptocurrencies a ‘Wild West’ industry and called for regulations in order to protect investors. What’s your take on regulation in this space?
LA: The cryptocurrency industry, including the ICO phenomenon, has been the ‘Wild West’ for a while now, and it has been both beneficial in terms of innovation and detrimental in some aspects, for overall financial security. Although I am a proponent of free markets, where work, teams, and ideas are judged by the markets, regulatory scrutiny is on the rise.
The crypto revolution has come as far as to prompt regulators from all corners of the globe, looking to fit the crypto phenomenon into some regulatory bill or framework. One example is the European Securities and Markets Authority (ESMA) which has called to interpret Europe’s revised Markets in Financial Instruments Directive (MIFID II) to include some cryptocurrency products such as securities-like ICOs among transferable securities or other types of financial instruments.
On the one hand, it is a good sign that the crypto industry is being legitimised by regulatory oversight. On the other hand, permissive crypto activity will not guarantee investor protection. The only way investors are protected is by tackling outright fraud – and we have existing laws for that.
But most importantly, there is only that much a regulator can do; there is no central way of regulating a decentralised entity. In the meantime, the EU has adopted the 5th AML Directive which covers crypto-to-fiat exchanges and wallet service providers as obliged entities for AML and KYC purposes. More recently FATF has been calling to cover crypto-to-crypto exchanges for the same purposes.
Coin Rivet: What can we expect to see from Fintelum in 2019?
LA: Fintelum is open for business under the tag #TokeniseYourAssets.
By advancing tokenisation of assets and businesses, we are precipitating change in capital markets and the financial industry as a whole.
Fintelum is an operator of a compliant token issuance platform, where participants are on-boarded and continuously served. For tokens deemed to be securities, it ensures ownership transfer agency between whitelisted, and if necessary professional/accredited investors. Similarly, for utility tokens, Fintelum provides compliance and token issuance services.
It is a KYC/AML compliant platform for investor profiling and a comprehensive administrative back-end solution for token issuers. Going forward, we are working on providing both a custodian and non-custodian wallet service for everyone, as well as moving OTC token trading into an open-orderbook trading facility.
2019 will be an exciting time for us to grow and promote the crypto crowdfunding industry that was born in 2013 with the Mastercoin ICO event. We are grateful to our community of supporters and will endeavour to reward the loyal ones for their support.