Please tell us about yourself – your background and the your experience thus far…
I started my career in financial markets as a high frequency trader at a proprietary trading firm where we achieved quite spectacular returns. As a Chief Investment Officer I was responsible for development of trading strategies together with a small team of traders and developers. Being in that role was a great experience – not only that I learned the intricacies of financial markets, how exchanges work from a technical and operational perspective, but I was involved with all aspects of growing the company.
After macro news high frequency trading became too competitive for such a small team with limited budged, we scaled down, and my focus shifted to developing quantitative investment strategies, one of which I used for launching a first quantitative fund in the region. I grew that fund from zero to 2 million Euros in AUM with zero marketing budget in a super competitive retail market. Every single investor in the fund knows me either from a meeting, media, TV, my online and offline lectures, articles or my book.
As a quant, I was always deeply involved with the technology and its intersection with financial markets. When I first time read about bitcoin I was skeptical that it could become a true currency in the developed world. On the other hand I immediately understood the potential impact of blockchain on the capital markets, especially primary markets and settlement layer in secondary markets. I wrote a research piece about it in 2016 and hosted a couple of events where I explained the technology and investment opportunities and risks to investors.
In 2017 my interest in the space became more formal as I was part of Hedge Project, where we created first institutional-grade crypto indices and did an ICO where we raised $2.1 million. The team was small with no clearly defined roles, but enthusiastic about the vision. And then it happened. Parity multi-sig wallet hack.
A bug in a smart contract of a popular wallet provider called Parity was exploited and 513,000 ETH then valued at $164 million was locked forever, including our $2 million. The team was devastated. It was obvious for me to step up, take the leadership role as a CEO, and continue with the mission.
We bootstrapped the company and expanded our vision – since the whole crypto markets space was unregulated, in-transparent, full of security issues and vulnerabilities, we saw that our mission is not only to be an index provider, like S&P is for “old financial markets”, but to bring regulation, transparency and highest levels of security to this rapidly growing market by developing and operating a regulated exchange within this new ecosystem.
Tell us about Blocktrade and its beginnings – the challenges, gaps you identified and are now solving.
We saw a huge opportunity in building a fully regulated, institutional-friendly crypto asset exchange, which would bring crypto markets closer to large institutional investors and traders while bringing additional liquidity to previously illiquid assets, like startups, real estate, crypto and VC funds, all of which could be tokenised and put on the blockchain. Given my background and feedback from speaking to dozens of large institutions it was quite obvious to identify what was missing in the crypto markets for them to join: a regulated trading venue with highest levels of security, reliable and fast connectivity, fast performance, institutional-grade clearing and settlement, and with new asset classes listed (like cryptocurrencies, security tokens and other tokenised assets) that also have a regulated custodian.
We are solving the problem that regulated investment firm have with accessing the crypto markets by creating for them a regulated trading venue with a level play-field, full compliance with MiFID II, easy connectivity and reliable t+0 settlement system, where crypto assets are listed and traded.
Can you please describe how the platform works exactly?
If you go to trade.blocktrade.com you can open a trading account and start trading with a user-friendly interface to our exchange with possibility to trade cryptocurrencies and later also security tokens, crypto funds and other tokenised assets. But this front-end is only a small part of the whole system that we are building – as an exchange, we operate a central limit order book and a matching engine, with reliable and performant APIs that connect to it. Anyone can build on those APIs to create their own interface to the exchange or even leverage our order management system. What is important for institutional members of Blocktrade (brokers, investment banks, etc.) is that we have created a seamless clearing and settlement system where we can guarantee the efficient and fast settlement between members.
What is the core target audience for the Blocktrade platform like?
In this first stage when we launched our crypto exchange, retail and professional traders can start trading with top 5 cryptocurrencies (BTC, BCH, ETH, XRP, LTC). As we are in the process of obtaining our MTF (multilateral trading facility) license, we are finalising the integrations with primary market partners like Securitize, Polymath, Neufund, Own, and others, which will enable simple listing process for issuers (after our due diligence team approves listing).
Can you tell us briefly about the BTT token and its use?
To incentivise users we have our own utility token which gives owners 50% discount on membership and other fees. We are working on other features and use-cases of the token in Blocktrade ecosystem.
BTT tokens are quite unique as after they are used for payment of the service, they are “burnt”, meaning, they can be used only once and then disappear from circulation by being sent to an Ethereum wallet from where they can’t be moved again.
Why did you choose Liechtenstein as your base? What are your observations about the local regulations specific to blockchain and cryptocurrencies?
Besides the team, our strategic location gives us an edge. Blocktrade is incorporated in Liechtenstein, which is part of European Economic Area and also has bilateral agreement with Switzerland. This means that we fall under European legislation, like MiFID II, which gives us the ability to offer services across the whole of Europe, but also to Switzerland as Liechtenstein has special deals with them. More importantly government and regulator in Liechtenstein are very open and friendly towards usage of blockchain technology in financial services – their new law will enable regulated investment firms, funds and banks to invest into crypto assets, but these assets must be traded with regulated trading venues. The law defines tokens just as containers or wrappers – if you tokenise a stock, regulation that governs equity markets apply. By being MiFID II compliant and taking the opportunity of this new law, Blocktrade will be the first trading venue to offer trading with security tokens and other tokenised assets including ETFs.
Please tell us a bit more about the local fintech and blockchain ecosystem in the region…
While regulatory advantage is clear in Liechtenstein compared to other European countries like Malta or Gibraltar, location of our operations was also chosen strategically. Slovenia has the most successful ICO per inhabitant, and most importantly the oldest cryptocurrency exchange in EU – Bitstamp. While the rest of the world mostly heard about cryptos in 2017 when there was the ICO boom, Slovenia had its first wave of euphoria in 2013. There is a large talent pool available because of this – developers have started writing smart contracts soon after Ethereum was released, many have been developing algorithmic strategies for trading, and even many lawyers have specialised in blockchain.
What are your future goals for yourself and the company in the next few months?
With the launch of crypto exchange we have successfully shown that our IT systems operate in compliance with MiFID II. We will focus on finalising the development of the trading system, on integrating our Omega architecture that handles high volumes with low latency, and acquiring the MTF license. In the following month our marketing will be focused on retail and professional traders who want to trade cryptocurrencies and utility tokens on a transparent, secure, performant and reliable exchange, while our focus will shift to institutional traders and brokers after the license acquisition.
To scale the business on all fronts (retail, professional and institutional) we are doing our first external fundraising by offering preferred equity in the company.