" class="no-js "lang="en-US"> EXCLUSIVE: "Rite of Passage" - Jack Ehlers, Bitstamp; Bradley Riss, Checkout.com, Megan Nilsson, Crypto Megan and Jimmy Nguyen, Blockchain For All in 'The Paytech Magazine'
Sunday, February 05, 2023
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EXCLUSIVE: “Rite of Passage” – Jack Ehlers, Bitstamp; Bradley Riss, Checkout.com, Megan Nilsson, Crypto Megan and Jimmy Nguyen, Blockchain For All in ‘The Paytech Magazine’

Bitstamp’s Crypto Pulse Report suggested earlier this year that digital assets could replace traditional investments within a decade. We asked four leading crypto industry figures if current problems in the mainstream global economy since then, could prove to be digital assets’ coming of age? 

In April 2022, Bitstamp, one of the world’s largest and longest-running crypto exchanges, published the findings from its first survey among 28,000 retail and institutional investors in 23 countries across North America, Latin America, Europe, Africa, the Middle East and Asia-Pacific. The aim was to understand the ‘attitudes, applications and ambitions for crypto, now and in the near future’.It was carried out just as the world’s stuttering economic recovery from COVID was knocked back by the Russian invasion of Ukraine. Then, the Crypto Pulse Report discovered ’an overwhelming belief in crypto’s potential… from it becoming a whole alternative to digital-first payment networks in emerging economies to a significant number of respondents in two founding members of the European project – France and Germany – believing that crypto could overtake the Euro’.

That was before the Terraform Labs’ UST and luna tokens collapse, crypto lenders Celsius and Voyager filing for Chapter 11 bankruptcy – and the FTX exchange going bust in November. But the high rate of overall confidence in crypto expressed at the beginning of the year by retail investors (66.9 per cent) and institutional investors (70.4 per cent) – just shy of their faith in traditional forms of investment – was still perhaps surprising. And Bitstamp’s Q2 report, published at the end of August and covering the onset of the so-called ‘crypto winter’ would indicate they are resilient to such shocks.

“Despite the downward market trend, the results show global trust in crypto remains unshakable,” Bitstamp said. “The percentage of retail investors around the world who find crypto trustworthy has dipped slightly – from 67 per cent in Q1 to 65 per cent in Q2. There was a similar decline among institutional investors: 67 per cent still deem crypto trustworthy vs. 70 per cent in Q1. Considering that in Q1 we were entering a crypto winter, these numbers are inspiring and speak in favour of the industry’s resilience.

“It’s very important as creators or leaders to help people understand that these are market cycles, that there is inherant value in these assets, no matter what the market is doing “

Megan Nilsson, Crypto Megan

The original report had concluded there was nevertheless more to do if digital asserts are to realise their potential to ‘overtake traditional investments within a 10-year timeframe’, and it called on industry bodies to work together ‘if we are to continue building trust and advance adoption’, through measures such as increased regulation, better performance and quality measurement regarding digital assets, and the creation of independent market information providers akin to mainstream financial ratings agencies. Here, Bitstamp’s Jack Ehlers, crypto veteran and founder of the Blockchain For All consultancy, Jimmy Nguyen, payments solutions provider Checkout.com’s CCO Bradley Riss, and independent crypto and non-fungible token (NFT) consultant Megan Nilsson (aka Crypto Megan), respond to the findings and give their own views on what the future holds for this maturing sector.

THE PAYTECH MAGAZINE: First, could you introduce yourselves and set the scene by giving a flavour of the trends you are currently seeing in this segment of the market?

MEGAN NILSSON: I’m a high-end crypto and NFT portfolio consultant, as well as helping with Web 3.0 strategy, bridging from Web 2.0 to Web 3.0, for brands, companies and celebrities. I’m currently on a world speaking tour, helping to educate and advocate for women.A lot of institutions got involved [in the crypto market] this year, and there was a lot of buzz because of major buys, like El Salvador stepping in and purchasing. And it was the year the NFT movement got bigger. People are wanting education and transparency. That’s something that I’ve been trying to preach, throughout this whole downturn. I think it’s very important, as creators or leaders, to help people understand that these are market cycles, that there is inherent value in these assets, no matter what the market is doing on a global scale.

JIMMY NGUYEN: Until recently, I was president of the Global Association for Bitcoin SV, or BSV. I’ve now formed my own firm, Blockchain For All, to focus on making blockchain useful by providing advisory, education and technology solutions, working with digital asset and blockchain ventures, funds and groups worldwide.This last year has forced the industry, and retail and institutional investors, to ask questions I’ve always posed, like ‘where is the real value in digital assets, based on their utility, and that of the blockchains they’re based on?’. I’ve felt, for many years, that the digital asset world has not focussed enough on that, and coins’ worth has been inflated into value that’s not inherent.

I don’t begrudge people making money, but this year’s collapse in crypto prices was triggered by overly-aggressive digital world practices. We had the collapse of Terra Luna, based on an unrealistic algorithmic stablecoin; of Voyager and Celsius due to inflated guaranteed loan interest rates on lending and overleveraging of the coins, and, related to this, some exchanges collapsed.I don’t wish this on the industry, but it’s good that it has led investors – especially everyday investors – to ask ‘why did the value of some of my coins disappear so quickly?’, and that’s caused a reckoning because it’s not good for any of us. We need an industry that consumers and investors have confidence in. 

For years, we’ve been trying to get the industry and BSV ecosystem to focus on the real utility of assets, so that they gain more inherent value and become less volatile, because they have much more high-volume usage in daily life.

BRADLEY RISS: I’m CCO at Checkout.com, but spend most of my time focussed on Web 3.0-related activities. We grew up as a full-stack payments organisation, serving some of the largest brands in the world, like Netflix and Samsung, but for Web 3.0 we also act as a bridge, helping to move value from fiat into crypto, and from crypto back to fiat. So, we are the back end of most of the largest exchanges and onramps in the sector.If you look at the headlines and the price of Bitcoin, it’s easy to say this year has been one of general negativity, but this is also reflected in other asset classes around the world. On the conference track it’s the rampant optimism that has surprised me. In fact, Jeremy Allaire [CEO of digital currency company Circle], kicking off Circle’s Converge22 event, said in his opening address that ‘this will be remembered as the age when we moved from speculation to utility’. They say bear markets are for building and this behind-the-scenes trend of optimism maybe isn’t obvious if you’re just looking at the price of Bitcoin or Dogecoin. But people are now focussing on fixing problems and answering the question ‘what are we trying to solve for?’, which is really important for the value of the underlying technology to be realised in real-world scenarios.

JACK EHLERS: I’m the chief operating officer for Bitstamp and general manager for our European business. We have run a crypto exchange for 11 years and have recently noticed retail and institutional investors resetting themselves in terms of the kinds of investment cryptocurrency and cryptoasset portfolios they want. As a result, we’ve also seen more interest from people looking at making these investments, and a need for more education, transparency and disclosure in the sector, and greater regulation around what is offered, how it’s offered and the kind of security people should expect. We’ve seen crises and blow-ups in the industry but, overall, the future of blockchain, cryptocurrency and crypto assets stays positive.

TPM: If we take valuation out of it, for a minute, and just look at how crypto has fared recently in terms of trust, are we starting to see that evolve?

MN: A lot of people who were on those exchanges Jimmy mentioned that collapsed, got burned, which is making them ask questions like ‘why did this happen, how could I prevent this and is decentralisation the future?’. During the bull markets anybody can basically pick a coin and make money. However, the markets are cyclical, we’re going to have these bear markets.

“People work on incentives, and if you provide them with a cheaper, more cost-efficient, safer way to do anything, they will move towards it organically “

Bradley Riss, Checkout.com

BR: There have been bad actors and bad behaviour and we crypto natives need to police ourselves better, especially the NFT sector, and the rug-pulls that have happened haven’t been healthy. Trust has definitely been shaken, but hopefully, long-term, this means people won’t go back to the highly speculative  parts of this industry and we’ll instead see a return to the theme of utility, based around asking ‘what problem are we solving using this technology?’. I have no issue with a digital artist making a lot of money by creating a very expensive jpeg, but the underlying technology has huge power to increase trust because it is an immutable chain. The emerging markets are where trust is being built, where we’re not comparing Dogecoin to the Fed, but crypto assets to high-inflation markets like Argentina, where, historically, they have locked up customers’ funds in banks for over a year. Crypto can enable people to self-custody assets with a broader array than their own, highly-inflated currency, That’s where it is solving real-world problems and trust is higher.

TPM: Could the fact that the worldwide economy is in a downturn, due partly to the failure of more traditional models, make crypto look more attractive, in line with the report’s quoted seven-point increase in the percentage of people looking to invest in crypto since the slump started?

JE: It’s difficult to give advice on whether this is the right time to get in or not. We try to provide retail and institutional investors with opportunities by carefully selecting our coins, and only offer between 70 and 80 coins and crypto assets, rather than the 300 or more available from other exchanges.There’s a lot of selling happening in crypto and traditional markets. Sentiment suggests people haven’t given up on the sector, as part of their overall investment objectives. [But] I think we will see regulation increase to support greater trust and security, ask those tough questions and come up with different policies, approaches and licensing regimes.

The European Commission’s new Markets in Crypto-Assets regulation, which is going to the UK Parliament later and will change the regulatory landscape for those involved in providing crypto-asset services, should help drive more trust by setting a very high bar. Such controls are growing, from the BitLicense in New York to Virtual Asset Service Provider regimes, all aimed at giving retail and institutional investors more trust in providers of coins and platforms.

“There’s a lot of selling happening in crypto and traditional markets. Sentiment suggests people haven’t given up on the sector as part of their overall investment objectives. I think we’ll see regulation increase to support greater trust and security “

Jack Ehlers, Bitstamp

TPM: Is crypto competing against the whole fiat economy, in general, as it tries to establish a more credible position?

JN: The typical retail investor invests some money in the hope of getting rich. They’re taking a big gamble, almost like going to Las Vegas, using money they wouldn’t invest in traditional assets. For institutional investors, it’s an alternative asset class that they are allocating money to that would otherwise go into more traditional assets within their portfolio.BR: Bitcoin, especially, has the potential to be ‘digital gold-esque’. It hasn’t really been that during this current downturn, but then nor has actual gold! Be it stimulus cheques on the retail side or institutional interest, looking for alpha, a lot of money flowed into Bitcoin – hedge funds and institutions, especially from 2021 onwards, had a lot of action in this area

They don’t view crypto as a standalone class; they view it as part of a broader portfolio, and definitely a risk-on asset.If you compare the price of a tech stocks like Nvidia this year, with the price of Bitcoin, the graphs are almost identical, which shows the sentiment around these sorts of asset classes – they are basically high-risk tech stocks. But that’s a lot better than the way people viewed them five years ago, and the emergence of utility and composability will assign more underlying value. If Bitcoin starts stabilising against currencies, it becomes interesting. One sign of this happening was a flight from GBP to Bitcoin in the days following the UK Budget, which wasn’t well received. Maybe Bitcoin is now reaching maturity – which we want; smaller fluctuations, with people viewing it and the other principal alternative coins as real stores of value and a long-term part of their portfolios.

JN: The fundamental problem lies in what these digital currencies were created to be. We’re now talking about them as investment asset classes but Bitcoin was just meant to be a more efficient, peer-to-peer electronic cash system, and we’ve attached monetary value to it.That’s what makes this so confusing to anyone trying to understand why Ethereum’s or Dogecoin’s price went up to here and then down to there. We’re making it up as we go along, seeing how the market responds to trading assets, which weren’t intended as stores of value.

BR: Cryptocurrency, today, doesn’t need to be a digital asset outside of stablecoins, but things like Ether are almost futures contracts you’re betting on. I’m starting to see this through the lens of proof-of-stake networks, which provide a consistent fixed income you can build other things on top of. I’m placing a bet that people will build cool stuff on top of Ethereum, as a new kind of ledgering programming language, which is why I hold Ether. It’s an investment with no price-earnings ratios, like investing in tech stocks, as the balance sheet doesn’t exist.

MN: It’s going to take a lot of time, but we’re in the changing of a world order. I take a lot of insight from [venture capitalist and Shark Tank star] Kevin O’Leary, who says it’s like investing in a software. You’re putting a certain percentage of your portfolio behind softwares you believe will help build or create something and be valuable to the ecosystem. I’m helping people understand how they can get involved in building within that ecosystem, with the value and talent they have, including celebrities who can unlock new experiences with their fans. A lot of people start off in this crypto world through the investment possibilities, understanding that this is one of the biggest generational opportunities we’ll have in our lifetimes.

“I don’t begrudge people making money, but this year’s collapse in crypto prices was triggered by overly-aggressive digital world practices “

Jimmy Nguyen, Blockchain For All

TPM: Many people say they would invest in crypto if they understood it better. What can the industry do about that?

JE: People’s knowledge of crypto certainly lags behind their understanding of other types of assets. A lot of the exchanges have learning centres, but they are inconsistent, and of varying quality. What makes more sense, longer term, is having more accountability and specific disclosure for crypto assets, and a prospectus-driven flow of information on new coins, currencies and crypto-assets, like what has built up over decades in the securities market.

JN: The challenge is there’s too much to educate about, because the digital asset/blockchain industry is developing so quickly and it’s relatively easy to create a new blockchain or coin. Long term, I think the industry will consolidate, and the current 18,000 or 19,000 cryptocurrencies, and hundreds of chains, won’t survive, making education easier.

MN: People are bewildered and overwhelmed. What helps with trust is community and I’ve seen a shift in the way people are learning. NFT communities are ramping up their efforts to get fintech and traditional finance onboard, and understand that bridge, and are so helpful when somebody is learning.The responsibility rests with exchanges and industry leaders to have conversations and run podcasts or YouTube videos explaining things like smart contracts.

TPM: What does the future hold for crypto and how can the industry make it more accessible for retail and institutional investors alike?

BR: That hygiene factor is not yet met; people don’t know how to self-custody or not click on the wrong link, and there is no regulatory framework. In the coming year, we may see stablecoin definitions in certain major jurisdictions. This should be the precursor to a regulatory framework, and to allowing traditional financial institutions to custody things like USDC and USDB, opening the floodgates to helping us solve real-world problems. But, for many people, we also need to make Web 3.0 look a little bit more like Web 2.0, and improve the first-mile and last-mile experiences, especially if we think crypto could be used as a currency. Because my MetaMask UX and my Apple Pay UX are not on the same page yet. Likewise, if I send money around the world as USDC or Bitcoin, I need to spend that, irrespective of which market I’m in, and uniting the two worlds is still the biggest barrier. People work on incentives, and if you provide them with a cheaper, more cost-efficient, safer way to do anything in their lives, they will move towards it organically.

JN: A big focus of our BSV ecosystem has been making mobile apps that are super user-friendly, where people don’t need to use long addresses to send coins, just a short handle name or email address that’s converted in the back end to a Bitcoin wallet address. Making those experiences easier and more enjoyable, will make crypto more accessible. And there’s nothing that makes it easier to educate someone about digital assets than allowing them to see them at work, such as using coins or reward tokens in a game they’re playing, to exchange payment in a Metaverse environment or receive a reward token from Starbucks they can convert.

MN: Accessibility is key. I sometimes sit down with high-end clients, to set them up with a DeFi protocol, and it takes an hour to show them everything. No one in their right mind would do that in the mainstream world. That disconnect is insane and we need to make the user interface more accessible. We also need major companies to step up, engage in crypto and start piquing people’s curiosity. 


 

This article was published in The Paytech Magazine Issue 25, Page 74-78

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