Armenian venture capital community and banks have a good understanding of what the cryptocurrency industry is all about, says Binance CIS regional director
YEREVAN, September 7. /ARKA/. Vladimir Smerkis, Binance Regional Director for the CIS, spoke in an exclusive interview with ARKA news agency about the current situation in the crypto market, how to regain the trust of clients after a series of high-profile crashes, as well as about the prospects of Binance in Armenia.
ARKA - First of all, we would like to talk about the overall situation in the market, which is going now through a "bearish" cycle, with cryptoskepticism prevailing over crypto-enthusiasm.
Vladimir Smerkis - Markets always move in cycles, and a ‘bearish’ cycle is often followed by a ‘bullish’ cycle. The question is when it will come. We are already seeing positive trends for this. At the end of July, our Binance Research division released an extensive report on the market. In particular, on how BTC dominance is growing, how ETH is regaining its position, how new products and a large number of institutional players are emerging.
The crypto industry is not as huge now as it was at its peak when it was worth $3 trillion, but the prospects are very big. Binance appeared in 2017, and we have seen many different cycles during this time: BTC in 2017 went up to $20,000, then went down to $3,000, then there was a new ‘bullish’ cycle with a record of $68,000, and so on. So there's no need to worry. Our company focuses on users, security, new product development, and we will continue to do so. We have no doubt that blockchain as a technology and cryptocurrency as an industry will only develop.
ARKA- Users are aware of FTX, Celsius and Three Arrows Capital, which collapsed in one day. How can you trust other companies after that? And what is Binance doing to keep customers' trust?
Vladimir Smerkis - All people, as well as countries, banking and financial institutions, need to understand how the crypto industry works. For crypto-enthusiasts, it is obvious that the crypto industry is much more transparent than the financial industry in many countries.
For educational initiatives, we have a large Binance Academy division where we train both beginner, intermediate and advanced users. We cooperate with universities, in particular, we cooperated with the Massachusetts Institute of Technology. In Kazakhstan, we are implementing a major initiative to graduate several thousand specialists within a couple of years. Therefore, one of the directions for increasing trust is user education.
The second is training for regulators. Tigran Gambaryan (Vice President of Global Intelligence and Investigations at Binance) is dealing with this, in particular. For mass use of cryptocurrencies, it is necessary for people to have a clear and convenient fiat banking channel for depositing and withdrawing funds. And for banking institutions to function, we need to work with regulators. Binance has 18 licenses and registrations worldwide, and this number will only grow. In all the countries where we operate, we are communicating with and training regulators.
Third, Binance has a SAFU fund generated from the profits we collect from commissions. At the moment, it amounts to more than $1 billion. This fund was created so that in any emergency situation, users can be compensated for potential losses.
In terms of user security, we do a tremendous job, both product-wise, for example in the form of two-factor authentication, and prevention-wise: no fraudster can get on the platform because we have a strict KYC procedure for individuals, during which we check users against various lists. For corporate clients, it's a KYB procedure where companies submit their documents. And of course, there is a team of several hundred people who are solely focused on security. User experience and a secure environment are our primary objectives.
ARKA - In this context, we would like to recall a phrase that is circulating in the community: "If you entrust your money to centralized exchanges, it ceases to be your money". This is a reference to the story with FTX exchange, when user funds were used for personal purposes. How reliable is Binance in this regard?
Vladimir Smerkis - Binance has a completely different approach. We have never had external investors and all funds are secured 1 to 1. We have published our audits and access to our wallets, where you can compare the number of declared and real funds. For example, the number of user funds on the site. We are as open as possible, we have no external investors, and the financial security of the company is stable.
It is clear that with ‘bearish’ and ‘bullish’ markets, the revenue may change, but we have enough funds for development. Changpeng Zhao, founder and CEO of Binance, formulated six principles during the market turbulence in 2022:
1. Do not risk users' funds.
2. Do not use native tokens as collateral.
3. Provide real-time confirmation of assets.
4. Provide reliable reserves.
5. Avoid excessive amounts of credit facilities.
6. Strengthen security protocols and enforce them.
We use these principles internally and have asked those who share the philosophy of a safe trust environment to join us. We have been supported by many projects and exchanges.
ARKA - Many countries, particularly the United States, are preparing bills that will regulate the cryptosphere. This implies the transfer of some customer data to law enforcement and government agencies. Doesn't this contradict the very idea of the crypto industry?
Vladimir Smerkis -First of all, I would like to quote Changpeng Zhao: "Good regulation is good, and bad regulation is very bad". When regulation tries to strangle the cryptocurrency industry, it is bad. So there should be clear, proper, transparent regulation anywhere in the world that will allow states to collect taxes. This will help create a lot of jobs and develop technology projects - from CBDCs to NFT marketplaces.
Secondly, the entire crypto industry realizes that the more users a product has, the better. The role of financial institutions is integral here, because we want our brothers, sisters, parents to use the blockchain, to make it convenient and understandable for them. So there are a lot of products in our ecosystem. For example, as part of today's event (the interview was conducted on August 28, before the Binance Community Meetup in Yerevan ), a representative of Trust Wallet is coming to attend it. This is part of the ecosystem, a non-custodial wallet for those who want to keep seed phrases to themselves, own their own crypto and not be tied to a centralized platform.
There is also a decentralized wallet inside a centralized platform, which allows you to get the technological advantages of decentralized wallets and preserve capital. This method has its own advantages: many of my friends lost their seed phrases and were subjected to hacker attacks. Another example - a few years ago, an acquaintance of ours passed away and we were approached by his relatives. They were able to access the funds because the cryptocurrency was stored on a centralized platform. If it had been stored on a decentralized wallet and the person had not taken care of transferring access in advance, the relatives would not have received the funds. The interview was conducted on August 28 during the Binance Community Meetup held in Yerevan.
Technology must be used in multiple formats and cater to a large number of users. The future lies in the symbiosis of decentralized technologies as they have emerged and centralized platforms that improve the user experience and allow to get hold of that very billion people that will be on Web3.
ARKA - In the U.S. and Europe, institutional investors have submitted many requests for spot and futures ETFs on BTC and ETH. Many expect a decision on these requests to be made in March 2024. What will the arrival of so many institutional investors in the market lead to?
Vladimir Smerkis - We look at the arrival of institutional investors as positive news: more money on the market, more clients - both corporate and private.
ARKA- What about competition? When we are talking about such volumes, of course, institutional investors expect to attract a lot of clients.
Vladimir Smerkis – The market is quite competitive now. Competitors are only expanding it: each offers its own approach, attracts a new audience, and the client makes a choice in favor of one or another platform. Moreover, Binance Lab invests in decentralized and centralized exchanges, so it is important to us that the industry develop.
ARKA - What is the situation in the CIS market in terms of creating a legislative framework, working with regulators, and the arrival of iinstitutional investors
Vladimir Smerkis - Regulated markets are emerging in the CIS. For example, Kazakhstan, where we received a license last September, and a few months ago we opened a local platform. In Kyrgyzstan, regulation and the ability to obtain a crypto exchange license, including for exchanges, is emerging. Georgia and Uzbekistan are also starting licensing.
In terms of acceptance of cryptocurrencies by states, in Kazakhstan we are negotiating the creation of bridges for CBDC, in which BNB Chain will participate. Today, during the meetings in Armenia, we said that we would be interested in cooperating with universities and the Ministry of Education so that as many people as possible learn how to use cryptoassets safely and how blockchain technology works.
The level of acceptance is quite high. I flew to Yerevan for the second time and met a group of venture capitalists who are interested in the industry. They wrote for me a dozen projects on the topic of investment by Binance Lab. The level of cryptocurrency use in the CIS is on average higher than in many parts of the world. People's interest will also promote the state's attention to the development of technology, authorizing the use of technology in Armenia and other CIS countries.
ARKA - Last year, Tigran Gambaryan, Vice President of Global Intelligence and Investigations at Binance, was here. We know that in addition to educational meetings with law enforcement agencies, there were also meetings with regulators, particularly the Central Bank. Can you tell us what the outcome of the meetings was, and whether Armenia is ready to accept Binance?
Vladimir Smerkis - The meeting was open, because many regulators, as well as people, do not know how the industry works: how it responds to law enforcement requests, fights fraud, treats KYC and KYB procedures. Tigran talked about this during the meetings, and we expressed our willingness to interact.
The banking community is happy to discuss integration and development with us. However, I know that the Central Bank is examining the industry at the moment. This is right, because the task of the Central Bank is to preserve the rules and security of citizens. But we very much expect that in the near future the Central Bank will make a step towards the crypto industry, and we are ready to facilitate it.
At the moment, approaches to the crypto-industry and blockchain technologies are under study. We have always been open to regulators and we are always ready to continue this dialogue.
ARKA - Can we say then that today's event is a signal that there is a community in Armenia that is ready to accept technology?
Vladimir Smerkis - Yes. A lot of people have written to us. The other day we opened our community in one of the messengers, so that people could discuss the work of the platform and the crypto industry in Armenia. In general, our approach is not like a big sluggish bureaucratic organization, but like a dynamically developing startup. When we enter any new country and explore the possibility of working, we start first of all with the community.
We have several employees in Armenia who work with the region - both with nstitutional, corporate organizations and marketing. There are several Binance Angels in the country - volunteers who are learning more deeply about the cryptocurrency industry, but are not yet ready to work with it. We in Armenia are holding a lot of business meetings, figuring out what the needs and wishes are regarding Binance and the whole industry.
So this event is, of course, is the first step, which says that we are very interested in the market. We are grateful to Armenia for the way we are welcomed, the way we are treated, and the interest the local community shows in the crypto industry.
ARKA - You mentioned that you have been approached by local startups and projects that would like to cooperate. Is Armenia promising in this regard, taking into account the fact that the government's strategic goal is to turn the country into an IT center of the region?
Vladimir Smerkis - We don't close ourselves off - we provide infrastructure for different startups and businesses. This includes Binance Pay for stores and banking institutions that want to issue their own cards, and our liquidity, which can be of interest to local banks, region-wide or global exchanges. Not to mention NFT -marketplaces that can be used by local gaming companies, artists and entertainers. The venture capital community is also well aware of what the cryptocurrency industry is all about.
That is why we see interest in different projects and can offer different things - from investments to liquidity. There are many points of contact on which we can work, we are absolutely open. Definitely, after this event we will have a lot of new contacts, there will be interest in joint promotion of the crypto industry, our services in Armenia - so that the task set by the government continues to be realized.
We hope that the position of the Central Bank will develop towards a more comfortable and convenient regulation of the cryptocurrency industry. There is room for cooperation here, and we are only in favor of market development.
The interview was conducted on August 28 during the Binance Community Meetup held in Yerevan. -0-
