Bitstamp CEO Reveals Why He Chose Acquisition Over Tokenization
- Nejc Kodrič speaks on Bitstamp's future, EU regulations, and the current culture of the crypto industry.
When it comes to being an ‘old’ company in the cryptocurrency industry, relativity is key. After all, Bitcoin was only invented ten years ago--therefore, no cryptocurrency company can be older than a decade.
Most of the companies that were born out of the cryptocurrency industry appeared sometime within the last three years, born in the time leading up to or directly after the hype that took the cryptocurrency industry by storm in 2017. Even among those companies, many have already disappeared.
Therefore, it’s rare that a company has truly had the chance to become “wisened” within the cryptocurrency industry. However, if there’s any company that’s truly had the chance to earn its stripes, it’s BitStamp. Founded all the way back in 2011--just two years after Bitcoin was created--Bitstamp is one of the oldest cryptocurrency exchanges in existence.
Recently, Finance Magnates spoke with Bitstamp co-founder and CEO Nejc Kodrič about the exchange’s past, future, and the ways that the cryptocurrency has changed over the past ten years.
Two Guys and €1000: “We Had No Assurances that We Would Be Successful”
Bitstamp’s origin story is analogous to many within the cryptocurrency industry, including Coinbase--almost no start-up capital, a small team, and a lot of ambition.
“Before I founded Bitstamp with Damian Merlak, I ran a computer shop,” Kodrič explained. “One day, Damian came in and asked for a computer with the worst CPU, almost no RAM, but the best possible GPU. I was curious why he needed a machine like that and he soon introduced me to the concept of crypto mining. Back then, it was much harder to buy bitcoin in Europe.”
“We soon realized that we had found a business opportunity and started Bitstamp out of a garage, with €1000, a server and two laptops. We had no assurances that we would be successful, but that didn’t matter. We were just happy to pursue our love of technology and felt that cryptocurrency would grow and have a place in the future.”
Now, Bitstamp is regarded as one of the oldest and most reputable cryptocurrency exchanges in the business. The exchange has been hacked--in 2015, $5 million were stolen. But the exchange’s reaction to the hack contributed to a positive culture of what should be done when a hack strikes an exchange.
“Bitstamp has been around for a while,” Kodrič said. “It’s been a long journey from our humble beginnings in 2011 to becoming a globally renowned crypto exchange.”
”A Cyclical Adaptation Towards Traditional Finance”
Because Bitstamp has been operational for longer than most cryptocurrency companies, Kodrič has a particularly acute awareness as to how regulations in the EU are changing when it comes to crypto.
When we asked which direction that Kodrič sees crypto regulations are headed in, he answered that “rather than a direction, I see it as being a reaction to the challenges presented by the market.”
“Just a couple years ago in 2013/2014, the industry faced its first wave of mainstream attention due to staggering user growth,” he explained. “That’s when compliance in terms of KYC and AML became growing concerns for regulators.”
Kodrič said that the companies who have taken the EU’s regulatory directives seriously are the ones who have managed to survive. “Some companies addressed these concerns and built automated systems to operate at scale, implemented policies and defined procedures,” he said. “Others didn’t. Most of those who didn’t are gone now.”
“Those of us who did are now anticipating new challenges in terms of protecting our customers and preventing market abuse,” Kodrič continued. “This is the process through which our industry is maturing. It is a cyclical adaptation towards traditional finance.”
”Timing, Interest, Vision, Offer”
As such, Bitstamp seems to be taking every effort to become as “traditional” as possible, in a regulatory sense. “Bitstamp Europe SA holds a payment institution license, which we obtained in Luxembourg and passported to all the EU member states,” said Kodrič.
“All other entities in the Bitstamp Group follow the same practices, standards and policies. We also work with the regulator to establish best practices and standards for the industry. We’re working on getting licensed in the US as well.”
“We’ve embraced self-regulation since our beginnings and are part of the Virtual Commodity Association, an industry-sponsored, self-regulatory organization.”
However, Bitstamp may have surrendered some of its control over its own destiny when it was acquired by Belgium-based investment firm NXMH in October, although Bitstamp assured its users that “it is business as usual here.” But why did Bitstamp choose to be acquired rather than holding an IPO or tokenizing?
According to Kodrič, the “short answer” consists of four words: “timing, interest, vision, offer.”
ANNOUNCING: Bitstamp was acquired by Belgium-based investment company NXMH. Our team, leadership and vision all remain the same. We believe this is the logical next step on our mission to be the most trusted digital currency exchange on the market: https://t.co/UxjNpDeKNR pic.twitter.com/3MUoQtdXFn
— Bitstamp (@Bitstamp) October 29, 2018
“It was the right offer that came at the right time, with an honest intention to help us grow and fulfil our vision,” he explained. Tokenizing was never even considered. As for the IPO, it takes too much focus and time. If it’s carried out, it also adds a lot of rigidness, which is not ideal in our industry right now.”
In Bistamp’s statement announcing the acquisition, the move was said to have been made to “Bridge Bridge The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service its clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Metat The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service its clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Metat Read this Term the gap between traditional finance and crypto.” Kodrič explained that this was “a reassurance of our mission.”
It means that, even with the change of shareholders, we are staying true to our mission of ‘bridging the gap between traditional finance and crypto.’”
Bitstamp is also working to bridge the gap between crypto and the traditional financial world by making users more aware of what crypto is all about. “We realized early on that there’s a need for better crypto education, even more so now that crypto is becoming more mainstream,” Kodrič said.
“We’ve been offering educational content to our users for a while, with regular educational posts on our social media channels. We started with more entertainment-based content aimed at those willing to learn the basics and are now working on more in-depth educational resources.”
FOLLOW THE LINE: Investment terms 101 ? #cryptobasics #cryptotrading pic.twitter.com/liNQEB2k28
— Bitstamp (@Bitstamp) March 1, 2019
“We are also working on improving our user interface, which will make it more intuitive for beginners to start trading and offer advanced tools to experienced traders. On this front, we’ve launched a new mobile app this year and are just rolling out an upgraded version of our Tradeview desktop trading interface, which is currently in open beta.”
Additionally, “[Bitstamp] launched a new mobile app this year, which took our mobile experience to a whole new level. The app is already getting positive reviews from our customers, but this is actually just the first version,” Kodrič explained. “We plan on regularly updating the app with new features and optimizing its performance, so the Bitstamp mobile experience will evolve significantly over time.”
MOBILE: The Bitstamp app just got an update ? Highlights include a brand-new Prices screen, private mode, depth chart and improved subaccount switching. New version available for iOS and Android!? pic.twitter.com/Pr8OcpxRfi
— Bitstamp (@Bitstamp) March 12, 2019
Steady User Growth (If You Don’t Count the Spikes)
The efforts have paid off in terms of user growth. “Right now we are approaching 4 million users,” Kodrič said. “We did see exponential growth in late 2017 and early 2018. That has levelled off as the market has calmed down and we’re now once again seeing steady growth.”
He also noted that growth has been uneven, moving in tandem with media hype.”The public perception of crypto shifts very quickly, so new users sometimes come in a rush. However, if we disregard these spikes, we see a pattern of steady user acquisition.”
Kodrič said that this user acquisition has happened on retail and institutional levels. “Both institutional and retail clients will find a reliable partner in Bitstamp,” he explained, although “being reliable means different things to different customers.”
“Institutional investors benefit from our high Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term and availability, top-notch APIs, including FIX API, industry-leading security practices and dedicated premium support managers, who are available 24/7 to assist them with anything they need,” Kodrič explained.
Additionally, “the new matching engine we’re rolling out this year will also put us a step above the competition in terms of order matching speed and throughput, which is especially important for professional high-frequency traders.”
“As for retail investors, they can trade at Bitstamp with peace of mind, knowing that their money is safely stored on a stable platform. We’ve already proven that with our track record and an outstanding customer care department, which is available via email, social media or phone whenever our customers need some support.”
“The UI upgrades we are implementing this year will help make Bitstamp even more user-friendly,” He continued. “Our fee structure is very friendly towards retail investors, especially on mobile, where we charge the same fees as on our desktop site.”
When it comes to being an ‘old’ company in the cryptocurrency industry, relativity is key. After all, Bitcoin was only invented ten years ago--therefore, no cryptocurrency company can be older than a decade.
Most of the companies that were born out of the cryptocurrency industry appeared sometime within the last three years, born in the time leading up to or directly after the hype that took the cryptocurrency industry by storm in 2017. Even among those companies, many have already disappeared.
Therefore, it’s rare that a company has truly had the chance to become “wisened” within the cryptocurrency industry. However, if there’s any company that’s truly had the chance to earn its stripes, it’s BitStamp. Founded all the way back in 2011--just two years after Bitcoin was created--Bitstamp is one of the oldest cryptocurrency exchanges in existence.
Recently, Finance Magnates spoke with Bitstamp co-founder and CEO Nejc Kodrič about the exchange’s past, future, and the ways that the cryptocurrency has changed over the past ten years.
Two Guys and €1000: “We Had No Assurances that We Would Be Successful”
Bitstamp’s origin story is analogous to many within the cryptocurrency industry, including Coinbase--almost no start-up capital, a small team, and a lot of ambition.
“Before I founded Bitstamp with Damian Merlak, I ran a computer shop,” Kodrič explained. “One day, Damian came in and asked for a computer with the worst CPU, almost no RAM, but the best possible GPU. I was curious why he needed a machine like that and he soon introduced me to the concept of crypto mining. Back then, it was much harder to buy bitcoin in Europe.”
“We soon realized that we had found a business opportunity and started Bitstamp out of a garage, with €1000, a server and two laptops. We had no assurances that we would be successful, but that didn’t matter. We were just happy to pursue our love of technology and felt that cryptocurrency would grow and have a place in the future.”
Now, Bitstamp is regarded as one of the oldest and most reputable cryptocurrency exchanges in the business. The exchange has been hacked--in 2015, $5 million were stolen. But the exchange’s reaction to the hack contributed to a positive culture of what should be done when a hack strikes an exchange.
“Bitstamp has been around for a while,” Kodrič said. “It’s been a long journey from our humble beginnings in 2011 to becoming a globally renowned crypto exchange.”
”A Cyclical Adaptation Towards Traditional Finance”
Because Bitstamp has been operational for longer than most cryptocurrency companies, Kodrič has a particularly acute awareness as to how regulations in the EU are changing when it comes to crypto.
When we asked which direction that Kodrič sees crypto regulations are headed in, he answered that “rather than a direction, I see it as being a reaction to the challenges presented by the market.”
“Just a couple years ago in 2013/2014, the industry faced its first wave of mainstream attention due to staggering user growth,” he explained. “That’s when compliance in terms of KYC and AML became growing concerns for regulators.”
Kodrič said that the companies who have taken the EU’s regulatory directives seriously are the ones who have managed to survive. “Some companies addressed these concerns and built automated systems to operate at scale, implemented policies and defined procedures,” he said. “Others didn’t. Most of those who didn’t are gone now.”
“Those of us who did are now anticipating new challenges in terms of protecting our customers and preventing market abuse,” Kodrič continued. “This is the process through which our industry is maturing. It is a cyclical adaptation towards traditional finance.”
”Timing, Interest, Vision, Offer”
As such, Bitstamp seems to be taking every effort to become as “traditional” as possible, in a regulatory sense. “Bitstamp Europe SA holds a payment institution license, which we obtained in Luxembourg and passported to all the EU member states,” said Kodrič.
“All other entities in the Bitstamp Group follow the same practices, standards and policies. We also work with the regulator to establish best practices and standards for the industry. We’re working on getting licensed in the US as well.”
“We’ve embraced self-regulation since our beginnings and are part of the Virtual Commodity Association, an industry-sponsored, self-regulatory organization.”
However, Bitstamp may have surrendered some of its control over its own destiny when it was acquired by Belgium-based investment firm NXMH in October, although Bitstamp assured its users that “it is business as usual here.” But why did Bitstamp choose to be acquired rather than holding an IPO or tokenizing?
According to Kodrič, the “short answer” consists of four words: “timing, interest, vision, offer.”
ANNOUNCING: Bitstamp was acquired by Belgium-based investment company NXMH. Our team, leadership and vision all remain the same. We believe this is the logical next step on our mission to be the most trusted digital currency exchange on the market: https://t.co/UxjNpDeKNR pic.twitter.com/3MUoQtdXFn
— Bitstamp (@Bitstamp) October 29, 2018
“It was the right offer that came at the right time, with an honest intention to help us grow and fulfil our vision,” he explained. Tokenizing was never even considered. As for the IPO, it takes too much focus and time. If it’s carried out, it also adds a lot of rigidness, which is not ideal in our industry right now.”
In Bistamp’s statement announcing the acquisition, the move was said to have been made to “Bridge Bridge The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service its clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Metat The bridge or liquidity bridge is an essential component for brokers that are enabling their clients to trade at interbank rates directly via a Prime Broker or a Prime-of-Prime (PoP). While market makers do not require a bridge in order to service its clients, brokers which are sending through orders to a liquidity provider or an electronic execution venue need a bridge to connect their trading platform to the interbank market.Bridges are used extensively in forex trading, specifically for Metat Read this Term the gap between traditional finance and crypto.” Kodrič explained that this was “a reassurance of our mission.”
It means that, even with the change of shareholders, we are staying true to our mission of ‘bridging the gap between traditional finance and crypto.’”
Bitstamp is also working to bridge the gap between crypto and the traditional financial world by making users more aware of what crypto is all about. “We realized early on that there’s a need for better crypto education, even more so now that crypto is becoming more mainstream,” Kodrič said.
“We’ve been offering educational content to our users for a while, with regular educational posts on our social media channels. We started with more entertainment-based content aimed at those willing to learn the basics and are now working on more in-depth educational resources.”
FOLLOW THE LINE: Investment terms 101 ? #cryptobasics #cryptotrading pic.twitter.com/liNQEB2k28
— Bitstamp (@Bitstamp) March 1, 2019
“We are also working on improving our user interface, which will make it more intuitive for beginners to start trading and offer advanced tools to experienced traders. On this front, we’ve launched a new mobile app this year and are just rolling out an upgraded version of our Tradeview desktop trading interface, which is currently in open beta.”
Additionally, “[Bitstamp] launched a new mobile app this year, which took our mobile experience to a whole new level. The app is already getting positive reviews from our customers, but this is actually just the first version,” Kodrič explained. “We plan on regularly updating the app with new features and optimizing its performance, so the Bitstamp mobile experience will evolve significantly over time.”
MOBILE: The Bitstamp app just got an update ? Highlights include a brand-new Prices screen, private mode, depth chart and improved subaccount switching. New version available for iOS and Android!? pic.twitter.com/Pr8OcpxRfi
— Bitstamp (@Bitstamp) March 12, 2019
Steady User Growth (If You Don’t Count the Spikes)
The efforts have paid off in terms of user growth. “Right now we are approaching 4 million users,” Kodrič said. “We did see exponential growth in late 2017 and early 2018. That has levelled off as the market has calmed down and we’re now once again seeing steady growth.”
He also noted that growth has been uneven, moving in tandem with media hype.”The public perception of crypto shifts very quickly, so new users sometimes come in a rush. However, if we disregard these spikes, we see a pattern of steady user acquisition.”
Kodrič said that this user acquisition has happened on retail and institutional levels. “Both institutional and retail clients will find a reliable partner in Bitstamp,” he explained, although “being reliable means different things to different customers.”
“Institutional investors benefit from our high Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term and availability, top-notch APIs, including FIX API, industry-leading security practices and dedicated premium support managers, who are available 24/7 to assist them with anything they need,” Kodrič explained.
Additionally, “the new matching engine we’re rolling out this year will also put us a step above the competition in terms of order matching speed and throughput, which is especially important for professional high-frequency traders.”
“As for retail investors, they can trade at Bitstamp with peace of mind, knowing that their money is safely stored on a stable platform. We’ve already proven that with our track record and an outstanding customer care department, which is available via email, social media or phone whenever our customers need some support.”
“The UI upgrades we are implementing this year will help make Bitstamp even more user-friendly,” He continued. “Our fee structure is very friendly towards retail investors, especially on mobile, where we charge the same fees as on our desktop site.”