Interview with CEO and Founder of Singapore based Virtuse Exchange, with 20+ experience in financial services and trading. Ras Vasilisin explains why regulation is the scale-up killer for crypto, and how multinational corporations are fearing of new innovative projects. However, as Ras stated, it is is not possible to stop the blockchain revolution. He estimates the Bitcoin price could be hit $100,000 within the next 5 years. As the most favored country for crypto projects right now he marks the Singapore, where he is launching globally-first Crypto-Commodities platform.
The bitcoin price kicked off on a smaller rally in April when it hit over $5,000. Since then, it has been keeping up on a careful growth curve with little hesitation ($ 8K at the time of publishing). Did we finally get out of the downturn?
– The current development is not only based on fundamentals but also in technicals, some long term resistance lines have been breached. I see it as an overflowing steam pot. Now that I have an opportunity to attend and speak at many blockchain conferences, I can observe how much talent and funding is being poured into cryptocurrency and blockchain technologies. We can quickly draw a parallel with the development stage of the Internet in the early 1990s.
Nevertheless, many world-renowned investors, such as Warren Buffett do not believe Bitcoin. Why?
– Again, looking back to the ’90s, I was on Wall Street at that time, and I remember how the traditional investors, media, corporations, and the banks viewed the Internet. They touted the notion that the Internet is a tool for pedophiles, terrorists, and criminals. The same propaganda is being used to Bitcoin.
It is also essential to ask ourselves why is the establishment so terrified of Bitcoin. When in doubt, always follow the money trail. When you have all the regulations, funds, and politicians on your side, you don’t want any competition. You’d want to keep things the way they are.
Do you think Bitcoin could again attack the $20,000 levels?
– Absolutely! But also we have to look at the price of bitcoin from the perspective of the long-time horizon. In 2016, the price was about $200, at the beginning of 2017 it was already $600, and at the end of the same year, we reached a record high of $20,000. Then the value crashed to almost three thousand. There’s no doubt that we experienced a market bubble. Once during an interview, Warren Buffett invariable claimed that if you have a five-year time horizon, you don’t have to know what the market’s going to do over the next year or two. Even if you bought bitcoins at the top, you still have a high potential to make money.
So you advise to HODL?
– We’re still holding. Based on Virtuse non-linear model, we assume the price of bitcoin in 5 years is estimated to reach the level of $100,000. The same model also predicts that the price could reach $1m by 2031.
Which cryptos are the most interesting to have in a portfolio?
– We have about ten cryptos in our portfolio, of which Bitcoin has the highest allocation and accounts for about 60 percent of the portfolio. It’s not easy to pick a winner, but it’s much easier to spot the losers. Take the birth of the auto industry, for example. At one stage, there were more than 2,000 separate auto manufacturers in the US. Even if you had bought shares in all of them, you would not have lost money. It was virtually impossible to know which would fail and which would succeed. However, it was elementary to see who would undoubtedly lose out – horses. The best investment strategy would, therefore, have been short of horses. There were 20 million horses in the US in 1900. Today, there are just 4 million.
You have mentioned the initial exchange offering as a new fundraising method. How do you see its potential?
– I think the IEO could be similar gamechanger for crypto markets as Reverse Takeovers (RTOs) for Wall Street. As we all know, due to the rumbling of the regulatory crackdown from major jurisdictions, the ICO is practically dead. Many well-funded proponents of the security tokens proclaimed security token offering (STOs) would be the next wave of a tsunami for cryptos. But, after a year and a half of wishful thinking, it’s fair to say that the STO market has failed to create more security token platforms than the actual security tokens.
I have always hoped that crypto markets will adopt the more disruptive back-door nature of Wall Street’s Reverse Takeovers (RTOs). Under the RTO, a company does not need to pay expensive fees for setting up an initial public offering (IPO) but gets direct access to liquidity by listing on the exchange.
In my view, IEO is a crypto version of RTO, and it could become a similar gamechanger for crypto markets as RTO has for the traditional finance.
We have already seen many attempts to regulate cryptos in some countries. Did it help or hurt?
– Regulations are usually a scale-up-killer. Wherever you apply stringent regulations, you stifle innovation. The best tech companies in the modern era like Facebook, Skype, Uber, Airbnb have largely benefited from the absence of regulations.
Regulations, in most cases, is hidden taxation for the markets. It stifles the innovation by putting barriers to entry for the new entrants. In a free market, not a socialist market, regulations are redundant. The free market is, by definition, self-regulated.
What do you mean by low innovation?
– The biggest innovation in the last 20 years in the banking sector is that you no longer need to swipe a credit card into the terminal but just wave it above the reader. You save two calories in the process, but the centralized nature of the payment system is unresolved. Bitcoin and blockchain has brought meaningful disruption in finance by eliminating the middlemen. For the first time in history, you can send a payment across the planet without involving a third “trusted” party.
China has been probably the most stringent when it comes to regulation.
– Unfortunately, the wave of regulation in the crypto world has been triggered all over the world, and it cannot be avoided. But when it comes to China, it’s been the most terrifying. There are, however, the two sides of each coin. When you realize that whatever Beijing banned, it’s become a huge success. Let’s take, for example of Skype, Google, Facebook, YouTube, or Airbnb. So, when China banned cryptocurrency or crypto mining, I remained calm.
Has the ban harmed Bitcoin at all?
– I visit China regularly, and I can see that the locals continue to buy Bitcoin. In addition, you can’t actually ban it.
Will there be another wave of cryptocurrency regulation?
– Unfortunately, It’s coming. I expect regulators to focus on exchanges and fundraising. Something is going on in the US, Europe, but heavy regulations are imposed in Asia as well. We closed follow every update to stay compliant everywhere.
However, regulators should be conscious of the fact, that, if they impose the strict regulation, investors will quickly relocate to another less stringent jurisdiction. Moving blockchain business to another country is quite straightforward and painless as opposed to traditional industries. The switching cost is low and only a matter of days or weeks.
Which state apply regulation carefully, and we can mark it as bitcoin and blockchain-friendly?
– Although Malta still aspires to be the country of choice for crypto companies, it seems to be too over-regulated now. The favorable regulatory framework in the EU has already formed in Estonia. And of course, being Singapore-based, we’re anxiously expecting more guidance from MAS in Singapore.
What benefits have the crypto industry produced for common people and consumers so far?
– For now, Bitcoin is the best. But let’s take a look in the ’90s and go back to the Internet era. The “killer app” like email or iPad was not available to the public either. We’re still expecting some revolutionary applications.
How do you look at Bitcoin? Is it money?
– Bitcoin is not only the money but also permissionless electronic cash, network, and technology that allows the transfer of funds between users without the interaction of central authority as banks. Bitcoin works purely electronically based on a mathematical equation and is not a part of any corporation, and it does not have offices or employees. It’s future money.
You have opened a new crypto exchange. There are dozens of those in the world. Isn’t it enough?
– They are up to about 250. But, not all are real, functional and liquid. Maybe the first 50 are. We believe that the best use case for blockchain is to democratize investing and make it available for all, no matter what passport you are holding or how much you have in the bank account. We use cryptocurrencies more than a tool for democratizing investments. So, we decided to build our own exchange where we could bring financial and commodity assets to everyone, not only to accredited 1% of investors.
But nowadays, people can invest quite easily.
– Yes, if you live in the developed countries. I frequently visit countries like Indonesia, the Philippines, or India. Globally, 2.5 billion people have zero access to banking, living in a complete cash and barter society. An additional 2 billion have only limited access to banking, living in a single currency system with no ability to send or receive money across the border. Even in the US, 18% of the population has no bank account, which is about 60m people.
Do you think today’s financial world is about to collapse?
– That’s just a matter of time. When you invest in crypto, your assets can be stored in the hard wallet; therefore, no bank can take a “50% haircut” on your money in case of crises.
How do you distinguish yourself from competing exchanges?
– We are not a cookie-cutter crypto exchange that only deals with cryptos. We use crypto as a bridge to trade traditional assets and commodities. So you get Bitcoin to invest in just oil, the US S&P 500 or Apple shares.
What mistakes do Bitcoin and other digital currencies have?
– As I see it, there are three big hurdles to solve. First is the technology hurdle. Blockchain is still very slow and naive. Ethereum network can support 15 TPS, BTC 3-4, while Visa manages 65,000 TPS. You can’t even build a scalable business; you are at the mercy of the protocol. Second is a legal hurdle, only 1-3% of the population are accredited investors, that can freely invest in any asset. The third is liquidity hurdles. The entire crypto market is less than $300 billion. What will happen if you have trillions flooding the market from pension funds and other large institutions? There is a long journey ahead of us.