State of the crypto market: a Q&A with CEX.IO executive director
- Bitcoin is growing but isn't ready to replace the US dollar as a reserve currency.
- Central bank digital currencies will change the way millions of people think about money.
- DeFi could be a game changer as an investment opportunity.
Konstantin Anissimov is Executive Director of the international cryptocurrency exchange, CEX.IO. As someone with a wealth of different business experiences before entering the crypto space, Anissimov brings a broad array of expertise to the worlds of crypto and blockchain. We recently sat down with Anissimov to ask him about the state of the crypto market.
Invezz: What attracted you to go into the cryptocurrency space?
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Anissimov: My involvement in the cryptocurrency space began in 2017-2018. Before moving into this field, I was involved with R&D, operations management, and corporate sales. The level of responsibility that came with my previous jobs led me to pursue an Executive MBA degree at Cambridge Judge Business School. I wanted to have solid knowledge and skills related to business management and administration.
While undergoing the Executive MBA course, I gained my first experience with blockchain technology. It involved working with a startup on a physical gold provenance platform, which was built on an Ethereum blockchain. I helped the startup launch their first MVP. In the process of doing that, I saw for myself the potential for innovation that blockchain technology possessed.
Since then, it was my goal to move into the cryptocurrency and blockchain world. Gradually, I became more involved with this field, and in 2020 an opportunity arose to join the CEX.IO team.
Invezz: CEX.IO offers a range of financial services, from loans to integrated crypto payment gateways; is cryptocurrency becoming mainstream for personal finances?
Anissimov: Cryptocurrencies are undeniably becoming much more mainstream. Even so, I do not believe that in the foreseeable future they will become a replacement for cash to be used in everyday finance. In order for that to happen, the majority of the world’s countries would have to unanimously decide to adopt blockchain technology and repurpose their payment systems to work accordingly. And, in my opinion, we still have a long way to go before that happens.
On the other hand, while cryptocurrencies may not dominate the payments industry, they will definitely have a solid presence in the financial markets. The increasing number of both retail and institutional investors in crypto shows that much. So, to my mind, crypto will likely become an alternative financial instrument, similar to high-risk equities or forex.
As for us at CEX.IO – our company stands for the development of the crypto market and can be rightfully called a pioneer in the crypto industry. We started by offering a Bitcoin cloud mining service back in 2012. Since then we’ve introduced a wide range of products and services: staking, crypto-backed lending, traditional exchange services, the ability to deposit with bank cards and SEPA, Faster Payments as well as SWIFT. We popularise and develop the market, while serving the needs of a wide range of participants – from novices who are only beginning to go into crypto to professionals with long-standing experience.
Invezz: With crypto prices surging this year, we’re seeing more and more exchanges come on the scene. What makes CEX.IO different?
Anissimov: CEX.IO was established in the UK in 2013. Rather than being a startup with an uncertain future, we are a well established and regulated exchange with a long history. CEX.IO has proven to be trustworthy and reliable throughout the years. Be it the hype of 2017 or the crypto winter, changes to regulations, or fast scale-up of the DeFi space – we have adapted successfully and timely to all of those challenges and keep becoming a stronger business every time.
Since our creation, we chose to follow a regulatory-compliant path in CEX.IO development strategy, as we knew where the industry was headed. Where others might try to evade regulations, we are pursuing better compliance. We’ve implemented and are strictly following KYC/AML policies, and keep seeking regulatory status in all strategic jurisdictions. This helps us create and maintain a safe trading environment for our customers. And at the same time, it allows us to build robust relations with banks and payment providers, offering more payment options for our users.
In 2020, we are seeing more and more traditional and institutional investors turning to crypto as an alternative investment asset. And in doing so, they are looking for trustworthy partners. That’s us. It is our strategy to provide the tools that allow investing in crypto in a secure and effective way, in line with our clients’ expectations.
We want CEX.IO to be known to the public as a top-tier supplier of cryptocurrency-related services. And what separates us from many other exchanges in this field is that we seek full regulation in order to offer our clients the best possible services, compliant and safe.
Will Bitcoin continue to rule?
Invezz: Do you think the future of cryptocurrency still has Bitcoin at its centre, or is the dominance of the first ever crypto now under threat?
Anissimov: I don’t think there is a threat to speak of here. True, there is a shift – Bitcoin may be becoming less dominant with the development of other protocols and cryptocurrencies (for example, with the recent activity in DeFi). But even so, if we look at the charts (for example, on TradingView or CoinMarketCap), we can see that in terms of total market capitalisation, Bitcoin continues to outperform other players, occupying about 60% of the market. Despite a tumultuous 2020, this overwhelming advantage hasn’t changed significantly. So in the near future, I do not see anything so serious that it could drive Bitcoin to the secondary positions.
An analogy can be drawn here with the US dollar – there are no signals indicating major changes to come. The BRICS countries wanted to unite and create a separate payment system to counterbalance the dollar. And although this has been in discussion for a long time, it seems that the idea has yet to arrive at a solution, which would have a major effect. Most of the transactions worldwide are still happening in dollars.
If you look at the dollar itself, the Marshall Plan worked great after World War II. Now, despite the fact that countries are trying to create alternative ways of paying for services and goods, the dollar’s dominance in the world remains. First-mover advantage and network effects can be extremely hard to overcome. Based on this, I don’t think the situation might be expected to change dramatically with respect to Bitcoin, either.
The rise of CBDCs
Invezz: What do you think of cryptocurrencies that are linked to dominant fiat currencies, such as the Digital Dollar and China’s Digital Currency Electronic Payment network?
Anissimov: Many central banks across the world are now in a race to implement their own state-issued digital currencies. And of course, in different countries, the situation with the introduction of CBDCs is different. China is considered to be among the front-runners, currently testing its digital yuan in pilot version. The US, the EU, and the UK are all debating the potential advantages of issuing their own digital currencies.
As the idea of CBDCs is still in its early stages, for now we can only guess as to what their effects might be on the overall cryptocurrency market. Especially since many central banks are still only considering implementation without any certainty with regards to how this would happen.
However, despite all this, national digital currencies will likely have a positive impact, improving efficiency in the payments systems and allowing governments to have more granular and timely money supply control.
Additionally, as cryptocurrencies are still far from mass adoption, the appearance of CBDCs in the market would allow billions of non-crypto consumers to familiarise themselves with the concept of digital money. This would likely speed up the mainstream adoption of cryptocurrencies.
Invezz: What advice would you give to a beginner investor considering making their first cryptocurrency purchase?
Anissimov: I would advise starting with something simple. Register on a reputable platform, go through all the KYC steps, buy BTC or ETH, and conduct a simple transaction to understand that everything is actually quite easy. I would not recommend starting with trending and high-yield instruments because they are also the riskier ones. Start small and simple, try different things, make sure what you are doing works for you. Start with small sums of money, which you are able to lose in case you make a mistake somewhere along the way; though if you use a reputable exchange like CEX.IO, it is actually quite hard to find yourself in that kind of situation.
Invezz: And what advice would you give to the experienced crypto investor who thinks they have all the answers?
Anissimov: An interesting question. If a person is experienced and confident in the field of cryptocurrencies, I probably would not feel comfortable giving them any advice. On the contrary, it would be interesting to listen to such a person to learn something new from them. To converse on their vision and how it fits in with my own ideas.
The crypto industry is developing so rapidly that new people are constantly appearing who understand new concepts much better than others. And I am always open to meeting new people and learning. In our industry, it’s important not to be arrogant, and instead remain humble, unbiased and open-minded.
The next big breakthrough
Invezz: Many cryptocurrency enthusiasts see digital currencies as a way of expanding access to finance all over the world. Do you think these digital currencies have the potential to transform the world?
Anissimov: The short answer is yes. How will this happen? I cannot say that I know the answer to this question, because in truth, no one does. One of the key points of innovation is that no one knows for certain how new ideas will eventually be utilised and adopted. There are existing trends now, but who can be sure how they will transform in the future? The whole concept of innovations, especially with a step change, lies in the fact that brand new solutions get implemented which have not existed before. This is unpredictable by nature.
For example, we can see what’s happening in DeFi right now. Specifically, DeFi staking pools where you only stake stablecoins. One example is that one can have a pool of USDC, USDT, and DAI – three stablecoins pegged to the US dollar – and in theory they shouldn’t change in value at all and have qualities of a low-volatility and low-risk instrument. There are only minimal short-term fluctuations. Thanks to this, the risk of such investments is very low, but at the same time, you can earn up to 30% per annum on such pools.
For comparison, if you put US dollars in a savings account, then it is simply impossible to get 30% per annum. To get such a profit from investing in dollars in traditional finance, you would need to invest in dollar accounts in some high-risk countries (Nigeria, Turkey, Russia, Ukraine, etc.).
How does it usually work? If a person has sufficient funds, they can go to financial institutions which structure such investment products specifically to allow investors to receive such a level of income from investments in US dollars. The risk is that the banks you use to invest in these high-risk countries could go bankrupt, or that political turmoil could affect one of those selected countries, causing you to potentially lose your investments. This is partially why only professional investors are allowed to use investment instruments like this.
The second reason is that financial institutions have a cost of setting up and running such a fund. Unless the size of the investment is large enough, the whole concept does not make financial sense to attract small- to medium-sized investments.
If five years ago, in order to try out such a method of investing, you had to have $100,000-$250,000, now in DeFi this can be done starting at $1,000-$10,000. This is one example of how cryptocurrency technology is changing this small niche area of the investment world.
Invezz: What’s the next big breakthrough that we’re going to see soon in crypto trading platforms?
Anissimov: Just what I talked about earlier – the ability to effectively invest in cryptocurrencies with limited risks and fairly high returns. This, in my opinion, is the next stage in the development of cryptocurrencies. This is possible partly due to DeFi, partly due to staking. In any case, more sophisticated financial instruments are developing in the field of cryptocurrencies, which were previously intended for a simple exchange of assets, but now can generate income in their own right.
Konstantin Anissimov is Executive Director of the international cryptocurrency exchange CEX.IO. He graduated from the Executive MBA program at the University of Cambridge. His area of responsibility at CEX.IO includes customer relationships with institutional and VIP-clients, overseeing the creation of the company’s development strategy, new products, markets, and partnerships. As a member of the board of directors, Konstantin is also responsible for corporate governance. Konstantin has extensive experience working with various markets across the world, including the UK, EU countries, China, Southeast Asia, and South Africa. His strong technical background includes expertise in web development and Ethereum blockchain.