jean baptiste graftieaux bitstamp global ceo

b2c.org.uk caught up with Bitstamp CEO Jean-Baptiste Graftieaux while he was holidaying in the south of France, so we were especially pleased that he could take the time out to talk to us.

Bitstamp is one of the oldest, if not the oldest, and most reputable of exchanges in the crypto space, having been founded in 2011. Indeed, today is the firm’s 11th birthday.

So what better time for Bitstamp to launch a marketing drive aimed at retail investors and the Q2 update of its Crypto Pulse Survey 2022, which will be released in full at the end of the month.

We kicked off our discussion by asking JB, as his colleagues often call him, about the survey’s findings and the marketing push, before we dived into a wide-ranging discussion of other crypto matters.

Below, we discuss everything from stablecoins to regulation, the interest the company makes on its large cash reserves, and many other topics, including whether Bitstamp will soon launch an NFT marketplace and how to get a coin listed on the well-known selective spot exchange – plus much more.

What is very interesting from the survey is that the confidence level is still there from our last survey in Q1 across the UK market.

In terms of crypto being a trustworthy investment we had a figure of 52% in 2021 – that has fallen to around 42% in 2022. That’s a slight decrease but it’s not dramatic.

Significantly, we continue to see a lack of knowledge and education as one of the main barriers among retail to investing in crypto – the proportion citing a lack of crypto education has increased from 45% in 2021 to 55% this year. Which means as an ecosystem we need to be amplifying on education.

The proportion of those in the UK who see risk associated with crypto investment as too high is similar to Q1 when it was 37%and in Q2 we found it stable at 35%.

On these three points – trust, education and risk – the data is pretty consistent across regions.

GM: What about in other areas? Is there variance between regions around other factors?

It is very interesting actually because we see marked differences within a single region, as well as maybe between them.

So the data within a region like Europe, for example, is very different from country-to-country, such as between Germany, Spain and the UK it is very different.

For instance, we have Spain, which is very crypto-supportive in terms of high levels of trust and a high level of interest. But in neighbouring country France, for instance, it is the opposite – trust is very low.

Nevertheless, the major trend is that education is a big issue in all the countries. So in order to make crypto even more mainstream, we need as an industry to work on education.

When I say educate, that means how to buy crypto but also on the level of investment risk, what is crypto, what type of crypto, the different projects, blockchains and developments in the crypto space, what is staking, what is a spot exchange.

All of this stuff has to be put to the front, so we can educate all the users so they can make the right investments depending on their risk tolerance.

GM: So What about the survey findings in places like Argentina that has relatively high adoption, perhaps in response to the government putting restrictions on foreign exchange movements?

I think in Latin America we see massive adoption. Even if the regulatory framework is not necessarily in place and the level of education is not as high as we would like, we see massive adoption because of macroeconomic challenges that exist in Latin America.

Across all regions to varying degrees there are three things that are very consistent in our survey.

First, we need to increase access to education and secondly to improve the regulatory landscape, so that people feel a lot more protected.

Third is the user experience. People still find it very hard to buy crypto.

GM: Can you say something about the Summer of Discovery campaign Bitstamp has launched? Is this aimed at onboarding more retail clients and providing new offerings for existing clients too?

Yes, we are making it easier for retail clients to buy crypto on Bitstamp, so they are now able to buy crypto with Apple Pay or Google Pay for instance.

We are also launching new assets on the platform at the end of August.

And we are really excited to be introducing 0% trading fees when clients trade up $1,000 in a 30-day rolling period on all assets on the platform.

Finally, we will be launching a learning centre, to allow clients to increase their knowledge of the markets and have all the data points to make their investments safer and more responsible.

So the objective is to attract new users to the platform globally, but we are also focusing on our key markets, which is North America, Europe and APAC. And of course our existing clients will also benefit from the new features we are introducing, such as the 0% fees.

We will have some clients who have not bought for a while because of the crypto winter, so we are providing a bit of incentive for them to increase their position.

So the Summer of Discovery is aimed at bringing in new clients but also at existing clients, to encourage them to be more active.

GM: What’s your thoughts on the crypto winter? Are we near the bottom and what about the macro environment, is that impacting more than in previous downturns?

Crypto winter for a company like Bitstamp is a good period for us to build up our capabilities to prepare for the next bull run with new products and new features. We have a very active licensing journey across all the regions – 10 in progress globally.

Over the next couple of quarters we will increase our regulatory footprint, so we are in a strong position to fully participate in the next bull run.

The second point is that we see a strong trend on the institutional side. Many institutional companies are looking to make their first move into crypto – there is massive crypto interest from our institutional clients. We have seen this over the past year and a half, where they are looking for crypto solutions as they look to offer crypto access to their clients.

We see many banks, payment service providers, brokers and insurance companies looking into how they can offer crypto, regardless of the crypto winter. We act as service providers and have an API that institutions can use to help them integrate with our systems to offer crypto to their clients.

We are building for our future, but we also see a lot of our institutional clients doing the same.

This brings me to my third point. From a global standpoint, the war in Ukraine hangs over everything and there is no visibility on the future there, but when the situation does begin to improve, probably this will contribute to helping the ecosystem to recover and rebuild.

Generally on how long the crypto winter will last, it is a bit too early to say when and how, but what I feel personally is that we are in a more positive trend now compared to the last couple of months, even though the climate is still very uncertain.

In the coming quarters we will probably see more positive indicators – maybe not of a bull run but of some positive evolution on the markets.

GM: Monetary tightening and tech stock correlation – those are new variables not seen before. How are they affecting things?

This is interesting. If you take PayPal or Amazon for instance, if you compare these sort of traditional stocks with crypto, I think we see an interesting correlation compared to the previous rounds, but I think the situation in Ukraine will be more important in shifting sentiment.

GM: On monetary tightening, do you see higher interest rates damaging future earnings of growth companies such as crypto exchanges?

I think for Bitstamp we have a level of cash which is quite significant on our balance sheet. The increase in interest rates is therefore having a positive impact on our business. This was not the case before when interests were zero or negative. Since the end of July we are observing a nice return on our cash position.

Precisely because we are a spot exchange, we can benefit on our balance sheet from high interest rates.

GM: MiCA is coming in next year or next. Given its European pedigree and being one of the oldest exchanges, is Bitstamp in a good position to navigate the new regulations, would you say?

Our crypto survey from Q1 and Q2, and what we mentioned earlier, showed that the lack of education and a weak regulatory framework are barriers to some extent to attracting new clients and prospects into the crypto ecosystem. Individuals and companies want to know that there is a high level of protection.

Since the early days of Bitstamp we have looked at being regulated wherever we operate. In 2016 we were regulated as a payments institution in the European Union and then later in the US with the Bit License, and Money Transmitter licence in most of the US states – we have only one state missing in terms of licensing.

Being regulated is helping us to drive more adoption and more clients, especially institutional clients as they are looking to partner with regulated crypto companies, such as Bitstamp for instance.

Being regulated gives institutions a lot of trust and we have 11 years of experience and crypto knowledge we can share with them – we speak the same language in that sense.

This all means that it is very important that the industry gets more regulated, but it has to be smart regulation.

What we are experiencing today is not very smart in Europe.

For example, if you want to operate a crypto business, you need to register with each country separately as a virtual asset service provider. Each country has its own requirements.

If you want to operate in the top eight to 10 countries in Europe, you might need to have eight or 10 registrations with eight or 10 sets of requirements. It is very complex, fragmented and expensive.

“MiCA will be a game-changer”

So with MiCA coming in 18 to 24 months, that will be a game-changer because there will be a level playing field. There will be one country where you can establish your activities as MiCA-compliant and then passport the activities across the different European countries.

We are therefore very supportive of the MiCA framework. It is not there yet, but it is coming and it will ease crypto commercial developments everywhere in Europe.

Maybe the entry barrier will be higher, but for us having been in the crypto space for 11 years, we have deep knowledge of regulation, compliance and risk management, which means that MiCA is a good thing to do and that for BitStamp it just probably means a little bit of an upgrade on our current licences in order to become MiCA-compliant.

GM: As a regulated entity, will MiCA put you in a stronger position in the market compared to smaller exchanges and those that are less regulated? Many exchanges may not have the resources to navigate the regulations that are coming.

Yes, we are supportive of MiCA and the entry barrier will increase, so smaller players will have challenges and difficulties in becoming MiCA compliant. We expect to see some consolidation once MiCA is in place, as we will find small players that will not be in a position to carry on with their activities.

GM: Will MiCA be a template for regulators around the world?

This could be true in as far as leveraging some of the competencies of MiCA and that would be great.

If regulators outside Europe adopt similar approaches to those seen in MiCA, I think that would bring some level of consistency across the globe. At the moment we have a regulatory puzzle in Europe as I mentioned, but also across the globe. Every country has a different view on crypto so if MiCA could act as a sort of template, that would be great.

GM: What will the fallout from Terra be for stablecoins and the wider crypto ecosystem?

I have been in the crypto space since 2014, and when stablecoins arrived it was as a very useful form of protection for crypto-to crypto exchanges, so you could quickly convert to stablecoins to be protected from volatility.

At the time this was an important innovation. But since then we can say that stablecoins have developed in a direction that has made them less safe.

I can see two trends. The first is that we will see increasing regulation for stablecoins. We see this with MiCA. In the future if you want to issue a stablecoin it would be seen as electronic money and you would need to be MiCA-compliant, and potentially also need a licence to issue electronic money.

In a nutshell, regulatory requirements are likely to increase for issuers and for the distribution of stablecoins.

Recent developments mean that if we want to regain the trust from retail clients and the next wave of investors, transparency is very important and this is my second point.

Audited stablecoins with a high level of transparency around their mechanisms and the protections they are offering, risk management and controls etc, will be the key for the success of stablecoins to enable them to last within the ecosystem.

GM: DeFi has come quite a long way despite all the daily hacks of protocols. It has proven that you can successfully innovate with new ways of lending and borrowing. What’s the future for DeFi? Will it be adopted by TraditionalFi?

In 2010-11 when crypto was getting started, exchanges were hacked almost every day. But as an ecosystem we have learnt very rapidly how to secure exchange platforms – what kind of principles, what kind of audits, what kind of risk management, what kind of measures and control to implement to protect the assets of our clients.

What we are learning in DeFI is similar. It is a new sector within crypto. We see players who are new to the game who might not have a high level of controls and that might be because they are focused on the business in terms of the commercial development.

This might make them more exposed to hacks. Nevertheless, it is very important for companies to succeed in DeFI. If we bring in security and smart regulation and transparency, I believe these will combine to make DeFi very successful.

Actually, maybe not so much more regulation, but more guidelines and principles need to be applied in DeFi

GM: NFTs and metaverse – is this a big opportunity for crypto and BitStamp in particular?

NFTs has been very interesting these past two years. There are lots of companies that we have seen entering into the space. We saw Gucci just the other day, for example; American Express, sports brands like Adidas for instance.

The way we look at it at Bitstamp is our core business is to offer a crypto spot exchange at the moment. We will continue to concentrate on Bitstamp as a service, increasing our regulatory footprint, offering crypto solutions for institutions and not necessarily developing our own NFT platform. Nevertheless, we are following NFT developments very closely.

The key question is, is it going to last? I think it will, definitely. We will see NFTs in the metaverse. I am a big fan of NFT communities,where you buy an NFT to become part of a community and you get some utilities from the NFT ownership, for instance in the sport area.

I totally see the value of NFTs for gaming as well. There are tens of millions who have interacted with NFTs in gaming now.

Maybe in a few years we might change our strategy, but an NFT marketplace is not something that we are contemplating at the moment.

GM: NFTs have certainly had a disruptive impact on fine art markets. What other areas can you envisage blockchain and decentralised networks disrupting?

In the field of government applications – record management, identity management, voting in elections or even taxes, blockchain technology has a place in all of those areas.

Also in big data, data storage and of course financial services. The next wave, though, I think, will be outside financial services, in areas such as real estate.

GM: How does Bitstamp decide which coins to list?

We are extremely selective in the assets we list.

We apply a set of controls. I can give you a non-exhaustive list. So here are some examples. We look to see if there is a team in place; if they have a track record; what’s the business plan, what’s the level of security; is the project subject to litigation; is there any risk of reputational damage; risks around money laundering or piracy issues; we are also looking at securities legislation such as MiFiD in Europe for instance.

We also listen to our customers and what assets they would like to see on our platform.

However, the most important thing is liquidity. What we want to ensure is that when we list an asset on our platform, that we have sufficient liquidity to ensure that our clients can trade the assets with no problems.

So there is a mix between control, audit and security with some legal assessment – for example, that it is not a security that we are listing, and that there is sufficient liquidity for a good trading experience for our clients.

On BitStamp we only list 73 assets globally and 32 in the US – we will be adding new assets at the end of August.

GM: Young people are more open to crypto – this is good for the future of crypto, right?

Yes, and this is a global trend that we see at Bitstamp. Very interestingly, from the last survey (in Q1 2022), 88% of institutional clients and 75% of retail clients believed crypto will be mainstream within a decade. This was a bit of a surprise to us to see such a high level.

It is also worth adding that we see a strong relationship between gaming and crypto. The population interested in gaming is younger people and crossover is very strong.

GM: What are the possible downside risks Bitstamp sees facing the industry? Is prohibition a possibility?

An unregulated industry is probably the biggest risk. I think we are seeing a good trend from the regulatory standpoint and we are engaging with regulators on an ongoing basis. Most regions and countries are looking into regulating crypto. The key risk here is around ensuring regulations are smart and they foster a level playing field.

The other point is around education. We need to make sure people understand crypto, how to buy crypto, the different coins and so on.

Thirdly, we have to encourage more transparency, so that people really understand the protocols and the assets, so that they can make their choices and investments based on complete and transparent information. MiCA will help with this.

So lack of regulation, lack of education, lack of transparency and security are the main risks.

On regulation we are on a good track. On education it is a collective effort from the ecosystem and transparency is dependent on regulation but also the industry has to encourage best practices to bring forward that transparency.

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