I'm involved in quite a lot of start-ups, ICOs and funds these days, and have decided to start a mini-series of interviews with them, as I think it will be of interest to readers of my blog.
In the first of this series, I'm interviewing Tokenbox.
Please introduce yourself and how you came to be involved with Tokenbox?
The Tokenbox system was inspired by the experiences of Viktor Shpakovsky and Vladimir Smerkis, co-founders of The Token Fund which, though only six months old, is already one of the most successful collective investment vehicles in the cryptocurrency market, having achieved a 380% increase in portfolio value since startup.
Vladimir: “We quickly recognized two things, First, we needed competitors. There have to be other funds against which ours can be measured. Investment is all about expertise. We have our expertise. But our clients need other funds to look at, based on other people’s expertise. And secondly, it is really not easy setting up an investment fund in the cryptocurrency field, amid volatile values and as regulations evolve.”
Victor: “The growing interest of conventional fund managers was another key factor. We were getting a lot of approaches from institutional investors and hedge funds looking to white-label our system. They wanted an easy entry-point to the cryptocurrency universe. We realized that, with the appropriate resources, we were in the unique position of being able to provide it. So Tokenbox will be that platform.”
What is Tokenbox, what problem do you solve and what are you trying to achieve?
What problems do funds and traders have? No tokenization. No smart contracts. Legal issues. Not much professional software. Little or no money under management. What problems do investors have? Shady funds and traders. Hidden portfolios. Lack of choice. Security issues. No fiat gateway. Tokenbox is an ecosystem aiming to solve all these issues at one place.
Traders and funds will be tokenized through the system’s web interface and be legalized through the system’s umbrella license. They will then gain access to a large community of already Know-Your-Customer, or KYC, authorized investors. Meanwhile, for their part, investors will get access to a wide range of funds and traders, which have already gone through all the Tokenbox’s strict due-diligence procedures.
How far have you got so far in terms of customers and investors?
Initially we have been receiving requests from institutional investors and hedge funds looking to white-label our system. They were the first participants- to-be of the platform. Apart from that, we have started receiving feedback from the Fund’s investors who felt a potential of growing into portfolio managers themselves. We listen for them carefully and training to implement the functionality they need into our platform.
For now the number of participants is still quite modest, but it is growing along with the market itself.
Talking about the investments received, The soft cap for the project would be one million USD - it was the number one task for us at this stage - and it has been already reached. Our hard cup is only 20 million dollars - we are quite modest compared to some other projects currently on the market. Yet, since we already have the minimum to start with, we will be doing the project in any scenario.
What would you like readers of my blog to learn from this interview?
Cryptos and the crypto markets desperately need more stability, we in Tokenbox advocate “model regulations” that could be adopted by national authorities.
Tokenbox is a comprehensive system designed to supply all the trading and compliance infrastructure necessary to easily create new investment funds specializing in the fast-evolving cryptocurrency asset class
And if you could wish for one thing to happen in the next year, what would it be?
Here’s the problem. Many of these new crypto entrepreneurs are attracted to financing their business ideas via ICOs precisely because there is no effective regulation. They didn’t need to spend six months meeting investment bankers, conferring with securities lawyers or talking to accountants. At the moment, there is a ready market because lots of people are flush with bitcoin or ether windfalls earned as a consequence of this year’s price spirals. But that won’t last.
The positive spin on this is that it has attracted a whole new generation into the retail investing space. But many will waste their windfalls on no-hope ICOs.
What needs to happen, and is already happening, is a movement by conventional investors -- hedge funds, institutions and family offices -- into the crypto space. That will not happen at scale until ICOs are regularized and regulations are developed to build confidence.
We do not believe tokens -- which investors receive in exchange for their funds -- are securities, but that does not mean they should escape regulation and oversight. We need to clear out the scams and, frankly, make it impossible for a guy in the back bedroom to dream up a business idea and float it unfiltered in a day.
More swiftly than many others in my industry recognise, professional investors are going to move into the crypto asset class and demand that the infrastructure they are accustomed to -- complete with investment banks, market makers and the rest -- get involved. It will be a steep learning curve for all of them, but no less steep than that awaiting today’s crypto entrepreneurs.
At some point, sooner rather than later, there will be a consolidation amongst the hundreds of cryptocurrencies currently circulating. While bitcoin itself may survive, if only because it has become a benchmark currency, others will wither away. Some will be replaced by sovereign coinage, cryptocurrencies issued by central banks. Russia, Japan, Iceland and others are contemplating that already. The efficiencies of digital coinage and security of blockchain-based contracts will be retained. We should all welcome this.
Universal application of KYC requirements will be essential and practical -- as we know from our development of Tokenbox, a tool to apply compliance at both ends of the fund creation and fund investment process.
Ultimately, the crooks and scam artists will be sidelined and the current hysteria will subside. This is starting to happen now. The evolution will be at lightning speed, as befits anything digital. Jamie Dimon is 61 now. Before he retires, I am confident he’ll be making speeches explaining how he got all this wrong.
Finally, at a macro level, what do you think are the most interesting FinTech things that are happening today?
Crypto-funds keep popping up, and we think that the world needs more of them since they benefit the entire market. There is of course the issue of legality: it's hard to legalize them completely. We're planning to solve this problem by registering an umbrella fund that will sublicense to other funds and individual traders. Traders and other funds that want in will have to pass KYC verifications etc., so it's not going to be like eToro where anyone can start their own fund or become a trader on the system. Our approach solves this issue.
Now, on the tech side of things. It's obvious that terminals like MetaTrader that are used in classic trading aren't suitable for crypto-trading. There's also the issue of liquidity. Crypto exchanges set rather tight input/output limits, even after KYC checks -- can be as low as $25,000. When we're talking about large players that want to be in this business, this amount is laughably tiny, and this is a real problem that we solve. Of course, there's a global issue of fiat money input and banking transactions within the economy. We're planning to solve that, too. So, we're talking tech, legal issues, market liquidity, and tokenization.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...