Mike’s Speech at True Global Ventures: Disruption in Financial Services (November 13th, 2017)
As far back as before Mt.Gox happened, we knew that when we looked across the globe, we didn’t find any cryptocurrency exchange that was built by a banker. At that time, cryptocurrency was still a niche. When I go and talk to anybody about it they would look at me with a strange face. If I go to a financial institution, they would be like “Oh my god, you’re a money launderer”. Especially when Mt. Gox happened, all of our bank accounts were shut down and we could not open any bank accounts in Japan and in Singapore. To this date, we still have issues with the banks.
Putting that aside, Mario and I, as a startup we wanted our products to be 10x better, 10x faster, at one-tenth the cost. We knew that in order to compete, we needed to be better, faster, and cheaper. It took us about 8 months and after that, we bootstrapped it. At the time I was still working at Softbank as an angel investor so I was more like an advisor when we first started because there was nothing I could do. Fast forward to late 2014, we launched our product. To this date, we’ve spent zero dollar on marketing (in contrast to other exchanges that spent a lot of money on marketing). We just let our product do the talking, and during that time Mt. Gox went down and there was a ban in China, etc. These events worked for us since it brought more volume to us. Another thing is that last year alone, we processed about 12 billion USD in transactions on our exchange!
We finished our ICO last Wednesday. We initially planned to run our ICO for a month, because that is the normal ICO length. However, we’ve decided to cut it short to just three days, in view of the Bitcoin Segwit split. We raised 350,000 Ether-worth of QASH tokens. It’s a utility token, so it is not a security. It can be used to for all of our services, to pay for transactions fee, market fees, collateral, etc. But it is also a cryptocurrency, it is going to have its own blockchain and one thing to note is all of these things we’ve discussed are in compliance with the Japan FSA. So this is actually THE FIRST REGULATED ICO IN THE WORLD. Japan has strict guidelines, and we comply with each of them. This is the first time the Japan FSA has acknowledged a cryptocurrency before it was circulated in the public, whereas in the past we have seen Bitcoin, Litecoin, Ethereum, and Ripple circulating in the public well after they were introduced.
We started off as an exchange because we knew that there was an absolute demand for people to buy and use and spend [cryptocurrency]. But I have never thought about the whole token economy with the ICO. There’s more than a thousand crypto tokens out there, and even as of right now there’s 200 ICOs ongoing. So when you look at the pipeline, there is just so many of them. In every industry, it is all about liquidity. You can have the best run business, or the most credible asset. But if you don’t have short term liquidity, you’re in trouble. So when you look at the Global Financial Crisis, Bear Stearns or Lehmann Brothers, they had a liquidity crunch. When you look at cryptocurrency, liquidity is in Bitcoin, and maybe Ethereum? We knew that liquidity is a problem, and it is going to get worse. We knew that there was a need for a liquid platform, which combines all of these liquidity “silos”. So we are connected in the back end, to the top three forex exchanges in the US, the largest in Europe, the largest in Hong Kong, the largest in Korea, and smaller ones as well. Each of these exchanges might have their own cryptocurrency base, like in Europe it could be in Euro and in Ethereum. However, someone in Singapore will not have access to that liquidity. So we combine at the back end, all these exchanges, into one single trading order book; we call it the World Book. Furthermore, we have this real-time conversion engine for the currencies. So if it’s in Euro or Ethereum, we can convert that to SGD.
When you look at mainstream finance, they’re all going to come in. I had a wonderful call with one of the largest investment banks in the world. They have a prime brokerage division and they were telling us “Hey Mike, institutional investors are excited to come in, but there’s no platform that has robustness, security, etc”. When mainstream finance comes in, there has to be a pro-regulation token, and there’s probably one or two that are pro-regulation. Obviously, Ripple is one of the pro-regulation token where they want to work with large banks, but there needs to be an opportunity for small financial and fintech companies, and we believe we are one of them.