In this Leadership Insights video interview Mike Vizard speaks with Gintarė Košubienė, CEO and co-founder of micapass, about how to make cryptocurrency more secure.
Mike Vizard: Hello, and welcome to the latest edition of the Digital CxO Leadership Insights series. I’m your host, Mike Vizard. Today we’re with Gintarė Košubienė, who is the CEO from micapass. And we’re talking about how to make crypto more secure and what the compliances are and where we’re going to go from here. Gintarė, welcome to the show.
Gintarė Košubienė: Hello. Thank you. Thank you for having me today, Mike. And looking forward to answering all your questions.
Mike Vizard: I think there’s been a lot of movement around compliance and regulations for crypto lately, but I’m now sure everybody’s fully tracking that. But why don’t you bring us all up to speed as to where we are? And then what do we got to do to achieve it?
Gintarė Košubienė: Okay. So when we are looking at the global market, we have seen that the first movers in the crypto regulation was FATF, Financial Action Task report, in the US. So they two years or four years ago made the first recommendations globally how to regulate those crypto virtual asset service providers, because they are making more and more impact onto our traditional finance economy. Following those recommendations, other institutions are now taking the lead. And now in the market we are seeing that MiCA in the European Union is the first regulation which has the strong blueprint mark for all other countries how to make those virtual asset service providers more compliant. Especially how to make them following anti-money laundering policy.
Mike Vizard: I feel like a lot of this right now is very consumer centered, but is this going to move to more of a corporate kind of environment as we get more confidence in the regulations and the technologies?
Gintarė Košubienė: Mm-hmm, that’s a very good question. So, yes, the regulation itself at the moment targeted the virtual asset service providers. And they are increasing the capital in these companies also that have stronger more KC-ML requirements than before.
So it looks like more institutional game at the moment, but it is just only the first step. Now more and more recommendations and regulations are looking forward, and they are seeking to make a stronger compliancy in decentralized finance where there is no jurisdictions behind it. And now the main topic in the market is how to make those algorithmic based decentralized finance to be more secure. And, of course, those regulations are very welcome. Since the crypt adoption is growing, they are making their bigger impact on the economy. And those regulations are bringing more clarity, more security, we are more trusting that all bad actors will be catch out someday, and we are not risking our money to put into these digital currencies anymore, and basically we are backed up with the regulators. So in this situation, this market situation is very crucial to adopt these regulations which will bring more clarity, and it will increase more adoption as well.
Mike Vizard: What exactly is needed to implement these algorithms? Let’s say I am a company and I am interested in pursuing this, what do I need to know? And what do I have to do?
Gintarė Košubienė: Mm-hmm. First of all, it’s needed to understand how to make those cryptocurrency exchanges and the other service providers to be compliant. It’s really tricky at the moment, because the regulation itself is a little bit from the technical implementation, but the technical implementation and the technical capabilities on the blockchain based solutions and services are really important and cannot leave aside. So what they need to do at the moment, they need to analyze their requirements, of course, for the regulation. They need to understand what services at the moment are falling under regulations, and what will be falling later, so they have a time span to prepare. The most important part is the anti-money laundering policies, how to make the better KC-ML onboarding of the customer. And the most important part is the Travel Rule; it’s like the strip in traditional finance. And now this Travel Rule will be implemented along the virtual service providers. And here comes the most technical struggles, because it’s really difficult to pass this information through the old chain without on-prem solutions.
Mike Vizard: Do I need to know how to implement blockchain platforms? Or you guys are all going to kind of take care of that at a higher level of extraction, I just kind of need to understand how it works? But I may not need a whole lot of blockchain experts?
Gintarė Košubienė: Mm-hmm. So the blockchain knowledge is not needed, you need just to rely on the experts. And you need to understand what business you are owning now. If your business is just about exchanging the cryptocurrencies, at the moment you are not going to implement. And you’re not implementing any order book in the blockchain, you don’t need to do it now, it is not needed.
You are going to the two more likely solutions, like implementing other service providers with a blockchain analytics, and certainly this part. But there’s another side of the virtual service providers, it is decentralized service providers. So they are not under MiCA yet in this year and in the coming two years. So for them for the blockchain, it’s what they’re doing every day and they’re dealing in every day, so they will be looking for the solutions, blockchain based ones. And this is a totally different story from the centralized exchanges who are already doing this – just need to strengthen these parts. And they don’t need blockchain knowledge at all at the moment.
Mike Vizard: It feels like, to me, that the major banks are now getting involved more aggressively. It used to be something that was pretty much the smaller FinTech startups. But is this all going mainstream?
Gintarė Košubienė: So if you are talking about FATF, it is also a different story. And let’s decide for the next time.
But if you’re talking about how the blockchain adoption itself is for the more institutional players, that’s correct. Because it’s more efficient; you can make large transactions instantly, you’re saving the the cost, don’t need an intermediaries of the brokers. So any intermediaries are resolved. But still, it is not also all regulation covered, all these issues. So now the main and biggest banks are in the sandbox more. They are implementing their solutions, they are playing, there is also DLT penetration in the European Union. But it is not like a mainstream, I would say.
Mike Vizard: Can I set up a network of digital currencies without the banks involved? If I’m in industry I may decide to go to an entire… I don’t know, if I’m shipping or if I’m trading in diamonds, do I need a bank in the middle of this process? Or can we set that up company to company?
Gintarė Košubienė: I think that the future belongs without any intermediaries, and that’s why the crypto adoption and all these cryptocurrency adoptions are growing. Because people are feeling the difference, they are feeling the benefits of the taxes of the intermediaries. And you cannot remove them. But you are used to the good and you cannot forget how good it is with a blockchain technology. So I believe it in the future all the way of the digital money. And when we will have the first digital currencies backed, for example in Europe under this MiCA regulation, we will see the huge trend of electronic money institutions will be issuing such kind of the currencies in order to remove the intermediaries. But in order to do that in the correct way, they are now thinking of how to make that built in compliance, because the Travel Rule all these bad actors should be filtered out. And there comes a space for the RegTech solutions to make real time compliance for the instant payments. Because at the moment what we have, all the ML policies are so old-fashioned solutions for traditional finance. The people are sitting at the dashboards, they’re analyzing their historical data in the dashboard, they are solving. Then in the future money, when we will adopt this instant payments in our daily lives, we will need real time compliance. Basically between that I cannot even move my funds from my wallet to my other wallet if I’m the bad actor. So it should be the compliance instantly, and there will be a new era of RegTech solutions in the market.
Mike Vizard: So what is your best advice to organizations that want to get started here? Is there some sort of set of best practices they should be following? I think a lot of people are interested, but they just don’t know where to begin.
Gintarė Košubienė: So there could be few recommendations on that. They don’t need to know everything, we are seeing already there are solutions in the market, you just need to know this; that blockchain technology, cryptocurrency will be the mainstream, and there are solutions for them. At the moment they think that, “If I need ML I need to go to the solutions.” No, they are not existing. There’s battery based solutions. And when we are talking about decentralized finance then we have no intermediaries, no centralized authorities.
The people become the last point and they own the point of their cryptocurrencies. Which means that compliance itself should be pushed to the edge, the people should be responsible of being the good actor and providing the [inaudible 00:11:14] in order to use that cryptocurrency. And so my best advice is that be at the point that we need to start thinking about the cryptocurrency, not about just bitcoin or another coin. We need to think about the benefits of other technology, and find the providers. When you have the service, the provider, the solution, you’re not asking the questions, “How it works? Should I need to integrate blockchain? What network I should choose? What coin I should buy?” No, you’re just relying on the experts already in the field who are putting out the solutions every day. And start using them, and get use to them.
Mike Vizard: All right, folks, you heard it there. We don’t need to know exactly how everything works, we just have to have a reasonable amount of faith in it and trust some experts to go implement it. And if you do that, you can get to an outcome a lot faster.
Hey, Gintarė, thanks for being on the show.
Gintarė Košubienė: Thank you so much. Have a nice day.
Mike Vizard: And thank you all for watching the latest episode of the Digital CxO Leadership Insight video series. You can find this and other episodes on our website, we invite you to check them all out. Until then, we’ll see you next time.