Russia is striving to lead the global blockchain movement, with President Vladimir Putin even eyeing the creation of a national cryptocurrency.
But the real work to spur the world blockchain economy is being implemented far beyond the walls of the Kremlin by small groups of private software engineers, who are working tirelessly in backrooms and cramped offices to usher in a financial evolution.
Vladimir Smerkis, the founder of The Token Fund, is one of a handful of visible figures to rise on the blockchain scene alongside Ethereum founder Vitalik Buterin and Bitcoin ambassador Andreas Antonopoulos. His fund, which opened in early 2017, runs on a software that manages the cryptocurrency assets of individuals, companies, and investment funds in Eastern Europe.
Smerkis, who is a former executive of Mail.Ru, recently opened an office in Dubai, UAE, to cover the Middle East, North Africa, and Sub-Saharan Africa.
His fund’s model has been so successful, so much that investors and hedge funds from South Africa to Switzerland have asked to white-label his system on their local markets.
The feedback got Vladimir and his team thinking. As opposed to licensing out the software to investment firms worldwide, he decided to build a turnkey platform for global users, Tokenbox.io, and scheduled a funding round for the project that’s set to take place next month.
The Forbes caught up with him earlier this week. He spoke to Forbes about his vision for the future of cryptocurrencies, his company’s plans for Africa, and how blockchain can change the world.
It’s been interesting following the media hype around blockchain and cryptocurrencies. It seems like everyone wants to get in on this opportunity – investors and entrepreneurs alike. But few really understand blockchain, which means that there is significant risk involved. You’ve managed to establish yourself as a reliable player. Can you tell us a bit about your experience and what you’re doing at The Token Fund and Tokenbox.io?
We’ve been working on The Token Fund since March 2017. It’s an extremely exciting project. We manage crypto-assets for our clients. And this is a white-hot topic right now, as you said.
For sure there are a lot of people who want to jump on the cryptocurrency bandwagon. But the question is how to start. Anybody and everybody claims to be a professional crypto-trader these days, but few people have any real experience.
This is why we created a fund that takes crypto-currencies and invests in a variety of different coins and tokens. This helps the blockchain infrastructure grow and mature. And we must be on to something, because we have received numerous requests from Italy, Switzerland, and other countries to copy our model. They all say the same thing: “Guys, please give us access to your technology, or help us build a platform like yours – one of the first coin-traded funds on the market.”
It didn’t take us long to realize that we wouldn’t want to do this as part of The Token Fund. Instead, we decided to develop a standalone global infrastructure platform, which we named Tokenbox.io.
We knew we could create an end-to-end solution that would help people develop crypto-funds from scratch. It’s a stable platform that individuals and companies can rely on.
I imagine you need quite a substantial team to put something like this together. Can you tell us a bit about who’s working on the project?
We have an outstanding team at Tokenbox.io and The Token Fund, including lawyer Chris Schinner and Wulf Kaal, a top expert on blockchain applications in an array of industries.
We’ve brought together experts from finance, blockchain technology, security and international law, who are united in their desire to build an all-in-one solution for crypto-investments.
Ilya Sachkov, the head of the IT security company Group-IB, which is known globally for its Threat Intelligence, is now our in-house security expert.
This is a real coup, as he is a leading world thinker in IT security.
Security is a big issue with cryptocurrencies and crypto-assets, as you can imagine. That’s because $200 – or $2 million – can just vanish if you don’t have the right security in place.
We appreciate good old-fashioned hackers for their savvy and skills, but we know we have to keep them out because security is absolutely critical for a product like ours.
All in all, we have 15 engineers, marketing specialists, and business developers on our team.
How do you plan to split the team after the funding event? Will Tokenbox.io spin off into a separate entity, or will you continue to work side-by-side?
If we achieve our targets, we’re definitely going to expand the Tokenbox.io team. We need more developers to work on implementation. The functionality is largely finalized, but executing it is a different matter altogether. We also plan to have separate marketing and management teams.
How do you deal with the legal issues surrounding cryptocurrencies?
Now we’re diving into the finer details!
Crypto-funds keep popping up, and we need more of them, because they’re going to help drive and stabilize the market. But, yes, there is a legal issue and it’s hard to legalize them completely.
We want to solve this problem by registering an umbrella fund that will effectively sublicense to other funds and individual traders. Traders that want to join will have to pass KYC verifications.
So, it really isn’t going to be something like eToro, where anyone can start their own fund or become a trader on the system. That simple verification process solves this issue.
There’s also the question of liquidity. As they stand, crypto-exchanges have tight input and output limits, even after full KYC checks. It can be as low as $25,000 and, when we’re talking about big players in traditional markets that want to get on board, this is just a laughably small number. This is a real problem, and we have the solution. On the technical side, terminals like MetaTrader, which are fantastic for classic trading, aren’t suitable for trading cryptocurrencies.
So, we have technical and legal issues, as well as liquidity problems and tokenization to solve.
You worked at Mail.Ru as the Vice President of global development. Why did you decide to enter the world of cryptocurrencies?
Mail.Ru is a large company, yet it still manages to innovate. That’s great, but even with all the things that were happening at the company when I was there, I just didn’t feel that I was reaching my full potential. When we launched MyCom, an international subsidiary of Mail.Ru that offers games and Internet-related services and products, I felt like the best part of the project, like the analytics and global market research, was pretty much done.
It was the right time to leave. I left to become an entrepreneur, and I couldn’t help but notice how blockchain and Bitcoin were starting to impact the digital scene. So I started to study the market. Over time, I began investing privately. Since we started the Token Fund I keep the lion’s share of my crypto-assets there. I also keep Bitcoin and Ethereum just for daily expenditures. I stayed on the outside of the market for a while as an observer, but the next logical step was to jump in.
You’ve stated in the press many times before that initial coin offerings (ICOs) and cryptocurrencies need to be legalized fully. How exactly do you see this happening?
Well, this is a complex issue and the first thing you need to do is define cryptocurrencies at the legal level. It’s a new, largely unexplored instrument, so what’s the best way to start?
I think the best solution is to define it as an asset class. Then we have to create an exchange where we can trade it.
We think that every citizen in every country deserves a right to buy and sell cryptocurrencies, but it simply must be KYC-verified and they have to pay taxes on the profits. This way, governments can profit and at the same time allow citizens participation in the free economy. It’s a win-win.
You have moved into the Middle East and Africa. What has the reception been like?
Dubai has become an absolute lynchpin of the traditional trading market, and they obviously are a leading player in oil and gas. One of the things we love is the pro-business approach we have encountered in Dubai, and the country shares our vision for a blockchain-powered economy.
This is why we chose Dubai as the hub of our operations for North and Sub-Saharan Africa and the Middle East.
We think Dubai is going to be a cryptocurrency pioneer, and we see it is a key territory for our fund’s development. So that’s why we’re happy to have a partnership with Nomadic Capital that gives us a regional office and a presence in one of the fastest-moving economies in the world.
Dubai might have been built on oil money, but its leaders want to take Dubai to the forefront of technology. That’s all-encompassing – from 3D-printed construction through to a blockchain-powered economy. We want to be a part of that.
In terms of North and Sub-Saharan Africa, do you see cryptocurrencies taking off there?
North Africa and Sub-Saharan Africa have many fast-moving economies with solid broadband Internet and impressive mobile penetration. This is an amenable situation for cryptocurrencies. Meanwhile, other countries in the region suffer from rapid inflation, or currency devaluation. We believe that in such situations a cryptocurrency alternative could provide people peace of mind.
As far as Sub-Saharan Africa is concerned, micro-lending has been expanding rapidly over the past decade. We can further empower the people with blockchain. ICOs could be used to help local entrepreneurs finance their projects. My team and I would be proud to take the lead here.
Do you really think that blockchain-based ICOs can help entrepreneurs secure project financing in emerging markets like Sub-Saharan Africa? Won’t investors still be wary of risk factors like corruption and bureaucracy – the region’s traditional growth hurdles?
A lot of projects in Sub-Saharan Africa receive financing, but are never able to get off the ground as a result of bureaucracy and corruption. More still fail to receive financing at all, as investors simply don’t want to deal with the headache of dealing with these issues. Cryptocurrencies can solve this problem by allowing entrepreneurs to sidestep these kinds of aggravating issues.
I want to stress that cryptocurrencies should not be seen as an under-the-table form of financing. They are not the e-equivalent of an envelope stuffed with cash. They must be properly regulated, but they do open opportunities for new economies and aspiring entrepreneurs seeking financing.
When cryptocurrencies are truly established, they could form the basis of online credit unions and other forms of financing that we just can’t predict today. That’s the beauty of this global economic evolution that’s taking the world by storm. It will go wherever the world wants it to go. And I think that Sub-Saharan Africa could really benefit here.
In the meantime, our aim is to speak out as much as we can in Russia, regionally and globally about the benefits of blockchain and cryptocurrencies. We want to secure more support for this movement in governments, academia and the private sector, so that we can really get things going.