Cryptocurrency analyst. Founder and editor at btcpeers.com
Much has changed in crypto and blockchain after the first peer-to-peer exchange was launched over 11 years ago. Bitcoin Markets was the first rudimentary ramp allowing early Bitcoin enthusiasts to exchange coins. No other coins had been conceived at that time. However, it provided a base for the cryptocurrency scene to develop, evolve, and meet the increasing demands of present-day traders and investors.
In 2020, there are over 400 exchanges a trader can choose from. Out of these, different exchanges take various routes in matters of compliance, sophistication, and token support. Overly, cryptocurrency exchanges can take one of the three forms: centralized, decentralized, and hybrid. The latter takes aspects from both centralized and decentralized crypto ramps, launching a product that appeals to some traders.
Decentralized exchanges are an option. Most use the blockchain as the base layer where transactions are settled without an intermediary. The trader retains control of his/her funds and all transfers are completely peer-to-peer.
CoinMetro is a centralized exchange based in Estonia. Its native token is XCM founded by Kevin Murcko, the former CEO and founder of FXPIG, a regulated fx broker. The exchange supports spot and margin trading and several investment vehicles including Trade Mirror (TraM). CoinMetro is now licensed in the EU and registered with Fincen in the US and AUSTRAC in Australia.
In today's Q&A session, Kevin will provide clarity on the crypto development across the globe and what he thinks is needed for adoption.
Andrey Sergeenkov: Most people are confused about a variety of things. Crypto is one of them. We have governments, regulators, and all cracking down on rails and penalizing blockchain innovators. But here we are. Why crypto is special and what drove you to launch CoinMetro?
Kevin Murcko: Modern regulation in financial markets is built on a system of trust. Regulatory oversight, Intermediaries, the 4-eye principle, custodians, this entire infrastructure is there in an attempt to build a trust layer so that there is no one single point of failure. What we have proven is that this system is flawed and the main reason it is flawed is, well, humans. We as humans are the weakest link. Crypto in a broad sense is special because it and its underlying technology give us the ability to remove the human element from the equation and thus remedying a litany of related problems that have plagued the financial system since its inception.
And why CoinMetro? I have been in retail finance for a long time. And one thing never changes; retail traders and retail clients are always underserviced. They are charged more than their institutional counterparts for the same services, they are not given access to the same tools as their institutional counterparts, they are forced to work with multiple service providers to handle what should be simplistic tasks. And above all else the UX or user experience of retail finance is and always has been terrible. Our vision statement is WE are the future of finance. And we in this context is not just CoinMetro, it is everyone, we feel that the world is at a pivotal point in time, on the cusp of changing the way financial markets work and how they will be defined in the next 100 years. Exciting stuff to say the least. This is why CoinMetro.
Andrey Sergeenkov: There are over 400 cryptocurrency exchanges now, why do you think CoinMetro stands a chance? Why now?
Kevin Murcko: I touched on a bit of this already. This is always one of the first questions in any interview I have ever given after starting my first fintech company back in early 2008. I will give you the same answer I always give… If, as an entrepreneur, the decision to start a new enterprise is weighed by the fact that there is competition in the market… you have already failed. Knowing your competition is important but knowing your clients and what they want is far more important still. My counter question would be, if there are 400 other businesses in the same market and the market is still immature and underserviced, what are they doing wrong and how can I capitalize on that and bring a better service offering to my own clients?
CoinMetro started from a belief that the market was moving in the wrong direction. We feel that the retail market is every bit as important if not more so than its institutional cousin and we see the current crypto market as pre-AOL internet in the mid 90’s. Bad UI, even worse UX. When clients feel that they cannot use a service because they don’t understand it, that is a UX problem. AOL solved this for the internet in the early days and CoinMetro is looking to solve this for the crypto, tokenization, and the broader DLT in the finance market.
Andrey Sergeenkov: What innovations does CoinMetro bring to the table?
Kevin Murcko: We recently launched a digital securities marketplace on the back of a Sandbox License we received from the Capital Market Authority in Montenegro. In doing so we partnered with another company called ignium who built a CSD or Central Securities Depository on DLT technology. Together we launched the world's first end-to-end digital securities issuance which means we issued the digital security, a bond in this case, we put it up for a primary sale, and very soon we will distribute it and open a secondary market for said asset, and yes the doors are open for retail investors around the globe.
Very soon, on the 30th of this month, CoinMetro will launch its own Bond issuance using the same platform. This is something we have been working after since our ICO back in 2017. It is a giant step forward and it shows one of the truly innovative solutions that DLT can provide to solve real world problems, more specially the inability for capital to flow freely cross-border and for investors and issuers to connect.
This is really the tip of the iceberg for CoinMetro. We have already built some of the best retail crypto trade tech in the industry, like our exchange platform, which has dozens of features you cannot find anywhere else, our margin platform, and our unique copy trading system we call the TraM. With direct fiat on and off ramps in EUR via SEPA Instant, in GBP via Faster Payments, and in USD via instant ACH we are building a better user experience from the ground up on the back of a compliant and licensed business.
Andrey Sergeenkov: There is fear, right now, that US regulators are closely monitoring the space and ready to strike. Some companies in the US also plan to move away citing the absence of clarity..in the current state, what do you think are the top reasons slowing down the adoption of cryptocurrencies?
Kevin Murcko: If you are a crypto exchange, wallet provider, DEX, or any business that moves money or assets, digital or otherwise, from or to third parties and you built your business on in a country where regulatory clarity was a prerequisite for your future success, well, welcome to the real world, my name is Kevin, nice to meet you. If you set up shop in the most regulated country on the face of the planet and now you feel you need to exit you probably need a history lesson and a reminder that google is your friend. I do not believe regulation or the lack of clarity is slowing adoption, in fact it is quite the opposite. Smart and clear regulation create standards to protect business and their end users. And financial regulation is already here and the cross over into crypto is relatively clear. This builds confidence and allows larger players to enter the market. Look at the recent news around large companies adding bitcoin to their balance sheets or paypal stepping into the frey. None of this would have been possible before due to an unwillingness of participants to engage with the market due to a lack of regulatory oversight. Clarity is nice to have but anyone with experience in financial markets understands that clarity is usually not something you can hope for especially in a nascent marketplace.
From a user standpoint one thing is abating adoption; user experience. The learning curve to get involved in the crypto market is too steep. As I said previously this is akin to dial-up internet pre-1995. If you weren’t a hobbyist you weren't on the net.
Andrey Sergeenkov: The CFTC chairman recently said DeFi was revolutionary and could help stead the global economy, do you think he is right?
Kevin Murcko: In its current form… no. Finance will decentralize. No doubt about it. However they won't be talking about yield farming or food tokens or rug pulls. Like the ICO craze DeFi is, at its core, revolutionary. The former made it easy for SMEs to raise capital globally, proving that there is untapped liquidity hidden in the wallets of retail investors, and the later has proven that systems can be created that can create yield opportunities for individuals and that access to these opportunities should not be restricted. Having said that like the ICO bubble burst so will the current DeFi bubble, but on the back of the pop we will start to see a more mature and scalable Decentralized mechanism that allows for the creation of truly stable and accessible passive income vehicles for the mass populous.
Andrey Sergeenkov: Estonia was among the first countries to provide crypto guidelines and that is where you chose. From your experience in regulations, compliance, risk management, and reg-tech, do you think the lack of regulatory clarity is a big hindrance for crypto in 2020?
Kevin Murcko: No. In 2017 I spoke in London about the roadmap for regulation and some people laughed it off. What I said is not a reality. Old school professionals saw the writing on the wall. Clarity is a great goal, but what we are doing here is creating new asset delivery systems and digitising already existing asset types. People are over complicating what crypto is and as a result they are expecting new laws and new regulations where they really are not needed. Granted old regulations may need to be adapted and old restrictions and oversight may need to be reduced given the new technology, but this is always something that happens on the back of market wide changes. We saw this in the 90’s when markets were dematerialized and we are seeing it now as markets become digitized.
Andrey Sergeenkov: There are valid concerns about how cryptocurrency exchanges run their businesses. Just recently, OKEx suspended coin withdrawals causing a backlash. Earlier, the founder of QuadrigaCX passed on with private keys holding coins in the excess of $180 million...are you in support of the steps taken by Japanese regulators forcing cryptocurrency exchanges to register?
Kevin Murcko: 100% in favor. While regulation and oversight can be seen as a hindrance by some, the setting of clear protocols, capital adequacy program, insurance funds, and other regulatory standards help mature the underlying market. In the same light as an Exchange owner I would welcome the ability to see and share information about hacks and security issues that happen at other exchanges in an effort to ensure that the industry as a whole learns from our collective mistakes. This is not really possible now as there is no real willingness by other players in the market to get it done and no regulatory body setting such requirements. If we want this market to grow we absolutely need structure and the market has proven that it is unable to provide this structure without oversight.
Andrey Sergeenkov: Talking of concerns, cryptocurrency exchanges are said to be sitting ducks and soft targets for hackers...millions if not billions are presently lost through hacks, what is CoinMetro doing to differentiate themselves? Do you think users are right to migrate to DEXes like Uniswap?
Kevin Murcko: It's all about protocols. Setting them, following them, and amending them on the fly when needed. Most people think of a hack as being perpetrated by some anonymous individual behind a dozen screens speed typing nefarious code as he or she penetrates large institutions and magically compromises their infrastructure. Well this is not what usually happens. Most ‘hacks’ are done using social engineering techniques, where someone persuades someone else to give them information they need to access a system. Essentially someone impersonates someone else, say the CEO, and asks an employee to give them a password, a key, or to simply move assets to some new destination. All under what appears to be the CEO’s email, phone number, or some other identifier that has been spoofed or faked.
CoinMetro has gone through a lot of effort to ensure we are protected, like most well-run and regulated exchanges. What people fail to see however is that if a well-run and regulated exchange is hacked they normally take ownership and cover the losses. Why? In some cases due to a regulatory requirement, but in most cases they need to continue their business and do so in order to maintain operations. And while CEX hacks happen so do spear phishing and phishing attacks on digital wallets connected to DEXs. And I would venture a guess that the occurrence rate and total value of those hacks is rising exponentially in correlation with the recent surge in DEX volumes. In the traditional world bank robbers rob banks because, well, that is where the money is… but people’s homes and business are still burglarised at an alarming rate, the same analogy works in the crypto. The fact is most people who get into crypto will not go through the process of understanding the technology enough to hold their own keys and many that try will be a victim of some type of attack, and when it happens to their own individual wallet who will come to make them whole again? The DEX they were attempting to connect to? Probably not.
I think users should make use of any technology they feel comfortable with, simple as that. Some users will go the DEX route, others will go the CEX route, and still others will look for a hybrid approach, perhaps centralized order books with decentralised settlements (P2P). I don’t see anything wrong with this approach, all options have pros and cons. CoinMetro believes that a hybrid is probably what the future holds for the vast majority of users considering the AML and broader regulatory issues with a true decentralized approach. And yes… we are already working on this.
Andrey Sergeenkov: Can you tell us a little bit about the CoinMetro roadmap and why users need the XCM token? Which coins and tokens do you plan to add? Are there more features aside from TAM and Crypto ETFs ready?
Kevin Murcko: We release quarterly roadmaps to our community and we have one of the most transparent and well knit telegram communities in crypto. I myself do an AMA every friday and I have been doing so since before we even launched the company. Our current roadmap is focused a lot on the launch of USD via instant ACH and domestic wires in the US (SWIFT options launching shortly thereafter) and the launch of the CoinMetro Bond. We are also planning some very interesting passive income opportunities with staking and collateral being offered in tandem, meaning you can stake and still use an asset for collateral on margin or TraM, on several assets across the exchange including our native utility token XCM.
XCM is what fuels CoinMetro. We are paid in XCM on all exchange commissions and we vault all the XCM we receive. We also built a comprehensive rewards platform where users can receive discounts, maker fees, and early access to primary issuances, like the CoinMetro Bond for example, on our digital securities marketplace. Our tokenomincs are solid and correlate the token’s demand with increased volumes on the exchange.
TraM has been out for some time now and the ETCFs are planned for next year as we have seen some regulatory changes since our initial whitepaper brought that product into the light. The Digital Security Marketplace I have spoken about is by far the most exciting piece of the ecosystem to date for me personally but there is so much we still have planned that I have no doubt my favorites list will continue to grow with the company.
Andrey Sergeenkov: What’s your take on the crypto market health? Do you think Bitcoin is ready for $20,000?
Kevin Murcko: The crypto market is still immature. Price is still driven majorly by hype. We have made big strides in the past two years and I expect we will continue to make big strides in the years to come. Traditional finance is not going away but alternative finance and digitisation will be a new epoch and it will change how financial markets look, work, and are governed. Bitcoin started it all and is the liquidity leader at the time of this interview and thus it maintains its place at the head of the table. Economic theory would tell me that a scarce asset that is in demand would catapult in price given the recent macroeconomic events that have happened globally. Economic theory however is theory for a reason. I do believe the synthetic bitcoin market was created too soon. The underlying is still illiquid and still hype driven and as a result the boon in synthetic volumes has limited the upside of the underlying asset. 20k may be in the cards but I do not believe that substantial upside will be seen in the short term given the already priced in news around large scale institutional adoption and the uncertainty of the upcoming US elections and the potential large scale profit taking that may happen should the election swing to the left.
Having said that…. Every talking head in crypto likes to give predictions. I don’t. My advice is to diversify, do your own due diligence, and be smart enough to make your own decisions. In the long run it is far better to bet on yourself and be wrong than to follow others and be right.
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