Companies that have been operating within the cryptocurrency space have been calling on regulators to pay more attention to the industry for years, and with limited success. Even when Bitcoin was at its peak and the ICO sphere was booming, totally unregulated, it was months before many regulators uttered a single word on the matter.
All of that suddenly changed last week after Facebook released the whitepaper of Libra, its global stablecoin project. Some US regulators have even gone so far as to request that the company place a moratorium on the project’s development until they have a better sense of what the project is and what it will be capable of.
In short, things are changing fast–and the companies that have been in the space for several years are gunning for what may be the end to the lack of clarity that has characterized crypto regulations since Bitcoin was invented.
Recently, Finance Magnates spoke to Nimrod Lehavi, co-founder and CEO of Simplex, about how his company has been working with regulators since it was founded five years ago, as well as the future of cryptocurrency regulations.
Lehavi will also appear as a panelist at Finance Magnates’ upcoming Barcelona Trading Conference on July 10th and 11th. To learn more about the event, click the image below.
“And all of a sudden, something here can really make a difference.”
Long before Facebook announced the Libra project, Lehavi said that Bitcoin and other cryptocurrencies were already having a major effect on the status quo of the financial world.
Speaking as “someone who was always interested in financial systems and financial procedures,” Lehavi said that “you always feel like financial systems are much less efficient than they could be.”
And he sees crypto as a possible catalyst for an increase in efficiency. “If you look at history,” major internal progress didn’t happen “unless there was an external force that gave the push over the edge.”
“By definition, up until Bitcoin, there wasn’t anything that was really external to [institutional] financial systems. As a company, you have to be connected to the [institutional] financial systems–if you want to pay salaries if you want to accept payments.”
“And all of a sudden, something here can really make a difference,” he continued, adding that “I’m not on the Libertarian side, I don’t think that banks, or for that matter, governments are going to go away. But I do think that given the proper shift in balance, we can see something [revolutionary.]”
“Even if the crypto industry just pushes the banking industry to be 100x or 1000x cheaper, more efficient, and open for inside competition…and if it actually brings financial systems to people around the world, then I’ll be satisfied.”
Lehavi explained that his company’s position in all of this is to “enabling easier access to people [who] want to get into the crypto world.”
According to its website, Simplex operates with the goal “to eliminate inherent online payment risk and make online commerce safe for all.” The company runs “a secure escrow service for large fiat-to-crypto transactions,” and payment processing platform that “enables merchants worldwide to accept diverse payment methods, including credit card deposits and purchases, with zero exposure to chargeback risk.”
“Credit card fraud is [the cause of the theft of] tens of billions of dollars per year,” Lehavi explained, and “when we started Simplex five years ago…[the purchase of crypto with a credit card] is something that was considered impossible to provide.”
But now, Simplex enables users around the globe to “buy and deposit funds in crypto exchanges while benefiting from a familiar e-commerce experience.”
— nimrod lehavi (@nimrodlehavi) June 18, 2019
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Essentially, the company makes it possible to buy and sell crypto with a credit or debit card without giving the card’s bank much say in the matter. “The fact is that it’s not going through a bank,” Lehavi explained–if you withdraw fiat from an exchange using Simplex, Simplex puts the withdrawal as a positive balance on your credit card; “if it’s a debit card, it moves to your debit account.”
Because Simplex isn’t specifically a crypto-associated company, a bank wouldn’t have reason to block withdrawals or deposits through a card that it issues; some banks deny users the right to transact directly with cryptocurrency exchanges and other crypto-related platforms.
“In a few months, users will be able to store their fiat balance with us–so, not only deposit and withdrawal. So, for instance–if today you want to buy Bitcoin, and tomorrow you want to sell it, you don’t necessarily want to take the money to your bank account…you might want to store it online so you can continue to trade.”
— Simplex (@SimplexCC) April 10, 2019
Working With Cryptocurrency Regulators is Like Finding “A Way Around the Raindrops”
Because Simplex is a global company that operates partially within the crypto space, we asked Lehavi how the company is working to stay compliant with the various sets of crypto regulations that differ from jurisdiction to jurisdiction.
“Simplex is a licensed financial institution,” Lehavi said. “We don’t transact, hold, or process crypto transactions, per se.” Essentially, “we keep on finding a way between the raindrops… finding a way that we can act without breaking any regulations.”
Practically, this means that “we keep a very close eye on regulation”, and that “we handle only fully-regulated activities. We’re in constant [communication] with the European Central Bank.”
“I think that’s the way to do it,” he continued. “I think that trying to [disrupt] the system without being a part of it is dangerous and destructive to the general effort.”
Still, things are slow moving–and although Simplex and other companies that operate in the crypto space may have become adept at dodging these “raindrops”, it’s likely that some kind of global regulatory structure for the cryptocurrency industry will eventually be formed.
As he said previously, Lehavi noted that the most likely catalyst for regulatory change will be a strong piece of external motivation. And although the interview took place before the Facebook whitepaper was officially released–and, thereby, before regulators had a chance to react to it–Lehavi said that “I think the biggest [driving force] in the end will be the Facebook token.”
“Facebook is gonna do their thing, and the regulators will [need] to work with it. They won’t take too big of a risk without considering all of the possible consequences.”
“Facebook–if they want–can become the world’s [largest] organization, with their own currency–and that’s going to have a huge impact on other nations. And it’s going to happen in an existing timeframe, it’s not something that’s completely open[-ended].”
”Up until now, not giving a fuck about regulation didn’t really bite anyone in the ass hard enough.”
Lehavi said that because of all of this, he believes that Facebook’s cryptocurrency will be the first cryptocurrency that is truly regulated–at least, “to a certain extent.”
“I think that after that, everything will have to follow somehow.”
After all, the reason that regulatory action on the cryptocurrency sphere has been so slow could have been that it just did not affect enough people. “Up until now, not giving a fuck about regulation didn’t really bite anyone in the ass hard enough,” Lehavi said.
“Seriously–how many people have been in prison for market manipulation or for money laundering? Hardly anyone. Many are trying to be responsible adults, and many others are making tons of money,” he added.
But Lehavi thinks that things are headed in the right direction. “I’m fine with it–I think that the ecosystem is evolving,” he said. “But it’s basically driven by fear. If someone thinks he can get away with something, he’s doing it.”
This was an excerpt. To hear the rest of Finance Magnates’ fascinating interview with Nimrod Lehavi, click the Soundcloud or YouTube links.