Crypto assets continue to be some of the most promising instruments traded in 2020. To better understand this growing space, Finance Magnates spoke with Konstantin Anissimov, Executive Director at UK cryptocurrency exchange, CEX.IO for his perspective.
CEX.IO Has Become One of the First Exchanges to Onboard Institutional Clients. What Was the Impetus behind This Strategy and What Are Your Goals in Doing So?
I’ll start by saying that the strategy for onboarding institutional clients is related to the situation in the market. More and more corporate and institutional investors are moving towards crypto as an alternative investment asset.
And in doing so, they are looking for trusted, reliable partners. Our strategy has been to create the tools and the platform for institutional clients which provides a way to invest in crypto assets that is trustworthy, secure and in-line with their expectations for compliance and effectiveness.
In terms of our goals within this strategy, at CEX.IO we feel that the institutional space is going to grow tremendously in the next 2-3 years, and we plan to be at the forefront of this growth.
Our goal is also to further balance out our portfolio with institutional investors so that we can offer more efficient markets and better pricing for all the user categories.
Can You Tell Me about Your Expertise and Role within the Company?
I joined the company at the beginning of March 2020, just before the lockdown. So, my first month at CEX.IO was rather unusual. I managed to attend a couple of events in the crypto industry just before the lockdown started in the UK. So, I was quite lucky to have made my first connection at that time.
After that, I had to adapt to working remotely like everybody else. Unfortunately, since many members of my team are in different parts of the world, it is still complicated to meet people face to face and that was quite challenging to start with.
However, I’m glad to say that the crypto industry is very tech-savvy, well-connected and adaptive to the new ways of conducting business.
Ultimately, it turned out to be extremely easy to foster relationships, and I’ve already made many friends in the industry. It’s been a great experience so far. The overall industry sentiment is thoroughly positive of further growth and further development of the crypto space.
In terms of my expertise, my experience has been very broad in the past. I started my career as an electronics engineer and then acted in a management role for over 5 years.
I was in charge of full-cycle product development of embedded electronic sensors and control systems. This also entailed the explosive environment safety certifications (ATEX), so I can say that the role involved plenty of responsibility.
From there I moved on to corporate sales. The previous company I worked for had offices pretty much across all continents.
Through that, I was immersed in an abundance of different cultures and a variety of 'business acumen'. I received an introduction on how to conduct B2B relations and how to engage with other corporations worldwide.
The outcome of that was that I became the Group-level CTO for an AIM-listed PLC company, and my commercial responsibility levels increased tremendously.
I was responsible for the growth and sales of EU, South-East Asia, China, Australia, South Africa and CIS regions in this role.
This level of responsibility is what led me to pursue an Executive MBA degree at Cambridge Judge Business School. I wanted to have a solid business management and administration knowledge foundation, so that I could be certain that I was making commercial business decisions not only based on my personal experience but also on the best practices approach.
While undergoing the Executive MBA course, I gained the experience of working with a startup on a physical gold provenance platform, which was built on an Ethereum private permission Blockchain .
I helped the start-up launch the first MVP. In doing so I built an Ethereum based private permission blockchain network which was able to anonymously track the movement of physical gold bars.
This is when I saw the strength and scale of innovation that Blockchain technology could bring to the world. Ever since then it was my goal to move into the cryptocurrency and blockchain world.
Since Arriving at CEX.IO How Have You Made Your Mark on the Company?
As for my role within the company, it is primarily B2B-sales partnerships and collaborations with other businesses in the institutional space. In terms of what I have achieved so far, there have been several major breakthroughs.
One of them is that we’ve managed to increase our rating on CryptoCompare through effective communication between the CEX.IO and CryptoCompare teams which I lead and facilitated. As a result, we rightfully received a Top-10, Grade-A cryptocurrency exchange status.
In addition to that, I created a partnership between CEX.IO and Worldpay (part of FIS), who is the number one payment processor in the world.
We’ve been live and processing some of our card deposit flow with Worldpay since September. This partnership will allow CEX.IO to offer best-in-industry acceptance rates and practically worldwide coverage. This is positioned as a long-term partnership between Worldpay and CEX.IO.
In the last six months, I was also in charge of establishing our new office in Singapore. Within a very short period of time, we were able to incorporate a business, find our new executive director, Richard Carrick who used to work as the APAC Regional Head of Financial Crime Assurance at Barclays Bank and apply for regulatory approval with the MAS.
I am positive that we will receive the license by the end of 2020. Singapore shall be a very strong base for us to expand into the Asian market at full speed in Q1-Q2 2021.
What Are the Company’s Long-Term Plans for Development within the U.K. Market and Have the Challenges Seen in 2020 Slowed This Direction?
The very first thing I want to bring up here is that CEX.IO has always been a U.K. business – we were established in the U.K. in 2013. Apart from maybe the last couple of years, the U.K. has been our top market. This has been overshadowed by the USA market recently, but the U.K. is a top-tier country for CEX.IO nonetheless.
As far as our aspirations and goals are concerned, we want to become a top-three U.K. cryptocurrency exchange. We would like CEX.IO to become a household name and be the business the U.K. population associates cryptocurrency markets with.
We want the brand name CEX.IO to resonate with the public as a top-tier supplier of cryptocurrency services as well as a trusted partner for both retail and institutional clients.
In terms of whether 2020 has slowed us in any way, I would say that the market sentiment has been very good so far, and we are growing fast at the moment.
There have been some challenges. For example, with the opening of the Singapore office, many processes that the regulators rely on are based on physical presence, which during a travel ban into Singapore, is challenging. I am sure, though, that it is the same for everybody else within and outside of the cryptocurrency industry.
There is a similar situation with the FCA, the HMRC and other governmental organizations. I think it has been more of a challenge for them to adapt to the new format of working from home and the new rules than it has been for the incumbents of the cryptocurrency industry since this industry has always been internet-driven, global and with a strong virtual presence.
Regulation Is always a Hot Topic Issue in This Industry. Will Regulatory Concerns Plague This Industry or Help Improve It Moving Forward?
I believe that regulation is very important. Without regulation, it is very hard for any industry – especially a new one, like the crypto industry – to build trust with the households of the country, with the retail investors and with the non-professional investors.
This is why it is a hot topic because it is very hard for the regulators to adapt to the pace at which the crypto world is developing.
You only have to look at DeFi (decentralized finance), to see how the whole framework of financial institutions is being built in a parallel DeFi universe.
This is not just distributed exchanges, but automated market making, lending and even insurance projects, all done in a completely novel way and without a registered company in charge of any of this.
How do you even start to regulate something that doesn’t have a place of jurisdiction and a legal entity?! It has happened with Cryptocurrencies to an extent, but I believe that with DeFi things will be even more challenging.
However, in order to build reputable, trustworthy businesses, it should comply with some rules, and customers need assurance that their funds are well-protected.
And, ideally, are protected by the government, up to a point – like with the bank deposit protection schemes, for example. So I think that there will be quite an acceleration in terms of regulation of cryptocurrencies worldwide.
We are seeing it now in the U.K. and other countries: France, Germany, Austria, etc. We have also recently seen the leaked EU-wide cryptocurrency regulation draft - MiCA, which I believe has already been submitted to the European Parliament for the first iteration of the review.
The flip side to the security aspects of regulation is that it will get harder for the small market players to survive. I personally foresee a period of mergers and acquisitions between the medium and small exchanges.
I also think that after that there will be a process through which regional leaders will emerge – maybe the top 10-15 market players for the whole of the EU region - which will keep on growing.
The regulation will bring stability, trustworthiness and security to the market, at the cost of losing some of the competition, making this less of a free market.
At CEX.IO we have been taking the route of a trusted and regulated market participant for many years now. This is why we now have MTL (money transmitter licenses) in almost all of the States in the USA, we are FinCEN registered and hold a DLT license in Gibraltar.
We are also in the final stages of the FCA registration in the U.K. In addition to this, our applications are being reviewed in Singapore, Germany, Austria, the Netherlands, France and Canada.
Many Experts Peg Crypto as the Future of Investing. In What Ways Are These Assets Going to Eventually Define This Industry?
What I would like to say to this is that I am a strong believer that, in the near future, cryptocurrencies will become a full-blown asset class within the investment industry.
In my mind, it will probably be somewhere close to high-risk equities or high-risk FX currencies to start with.
This assumption is devised partially due to the progress in regulation, partially due to how the markets are deforming and the fact that the interest rates and yields of other investment instruments are very low or negative.
More and more institutional investors and funds have to find new investment opportunities in order to make the ROIs that their investors (LPs) expect from them.
Will cryptocurrencies dominate the financial industry – I really doubt it for the near future. The reason is that, unless the majority of the countries in the world decide to use blockchain technology to issue bonds, shares, and other financial instruments, I don’t see how cryptocurrencies can challenge the status quo.
Blockchain technology may be able to, but it will probably have to be a mixture of private permission and public blockchain technology and we are still far from that right now.
I’m more of a believer that cryptocurrencies are now very close to becoming a full-blown investment asset class. What I personally would love to see is for pension funds to be allowed to change their memorandums and to permit small proportions of their investments to flow into cryptocurrencies.
I think this would be the trigger, after which we can say that the cryptocurrencies have been fully indoctrinated into the financial investment world.
