Blockchain Life 2018 summit, that took place in St. Petersburg November 7-8, drew a sizeable crowd of over 4,000 with blockchain experts from across industry aisles. That’s where we caught up with Salina Bo, a vice president from AA UNION CAPITAL, a fund with over half a billion dollars under management, and talked at length about the state of blockchain, ICOs and industry as a whole.
Salina is a seasoned investor, accomplished top-level executive who has brought companies to traditional exchanges worldwide. She is always on the lookout for promising projects with a growth potential and marches in the vanguard of technological innovation.
Her company been working with Credit Suisse for 15 years in the advisory capacity linked to traditional financial markets. They’ve had a mining farm in Andorra since 2013, participated in crypto mining and partnered up with Bitmain in China, as buyers of mining equipment. AA Union Capital was set up last year, as part of the overall portfolio, focusing on crypto and blockchain related projects.
What recent developments in the blockchain industry have you noticed?
I’ve been fascinated by all the efforts that have been put into the blockchain in the past couple years. I’ve seen many companies and service providers thriving around blockchain technologies and related projects. I was at Malta Blockchain summit Nov 1-2 and attended the Oxford blockchain association, an educational institution providing classes to people who are not familiar with the technology. There are numerous organisations around blockchain with more opportunities for others to take advantage of. Many CTOs are probing their way around blockchain as well. When internet just appeared 20 years ago, email got popular three years later. Likewise, the blockchain technology got a wide-range attention only last year. But as we see it here at the Blockchain Life, one year in this space equals about five years and people join in with great enthusiasm, because they believe the technology will bring bright future and plenty of opportunities, including jobs. We’ve seen a lot of IT managers and experts coming from traditional areas who want to show their might and shine. Also, advisors, educational institutions, media, who want to be part of this revolutionary movement.
Have you been meeting any governmental officials who share your enthusiasm for the industry?
In Malta I met with a former assistant to the Prime Minister, who set up an advisory firm, currently introducing and promoting blockchain projects on the island. They provide a full package of services. Importantly, on Nov 1, the government established a set of rules [Virtual Financial Asset Act in particular] to facilitate the growth of blockchain/crypto companies. Last week, Malaysia also vowed to provide support to individual investors. These are the only two governments that have established clear regulatory guidelines at the country level.
What about Asian heavyweights like China, South Korea and Japan, any progress there?
Currently, countries like Malta, Switzerland and Singapore are moving technological frontiers, others are not sure how to proceed.
At Blockchain Life I talked with Charles Tsai, McDonald’s CTO, based in Beijing and OKEx, one of the largest crypto exchanges. We all agree that China has a long way to go. Yet China’s government is thinking to issue cryptocurrency. So they are considering joining in, as they don’t wish to be left behind. Their scepticism is reflected by the willingness to protect small investors who are not crypto savvy. They see the crypto phenomenon and get concerned about ‘unhealthy’ growth of the crypto market. Government regulation reflects the attitude, be it to support, reject or neural. Asian governments are eager to prop up new technologies but they take careful measures before embracing them.
Malta is small in size, thus able to implement new technologies faster. They have already positioned themselves as ‘crypto island’. The likes of Malta and Singapore, who do not possess natural resources, have to be in the forefront of new developments. The only way out is the financial sector. For other governments who haven’t supported blockchain technologies or cryptocurrencies, there’s one important thing – the compliance is missing. I’ve talked deeply with a chief representative of HSBC Hong Kong and CEO of Credit Suisse in Singapore. I asked what banks can do as financial institutions, without taking government regulation into view. And the answer is that tier one banks can’t do much at the moment, because they don’t know where funds come from. So far, more than 80% of ICOs have failed, whereas 95% of them have never performed KYC or AML. Nor are they compliant with GDPR, so there’s a double turn off. ICOs don’t protect personal data, which is publicly exposed. Sometimes they sell your data to social media platforms.
Is it the reason why you invested in KYC Bench?
Yes. We want to build a solid bridge between investors, users and companies, that would be compliant with GDPR rules. GDPR is becoming a uniform force in the EU, but also for US and Asia in the future. KYC Bench’s goal is to raise awareness about regulation and protect individual investors from bad practices. We also perform due diligence of ICOs we invest in. Last year we invested in 11 ICOs. And this year is no exception, that’s why we visited Malta and St. Petersburg in search of good projects. But before you move in you have to consider the fundamentals and regulation of each country. Even registered on offshore islands, as long as you collect EU residents data, you have to comply with GDPR. Otherwise you’d face a 4% fine of annual turnover or $200 million.
What other requirements for startups do you consider essential?
Many ICOs have been sneaky. They register on offshore islands but they forget the laws there are not compliant with major jurisdictions. They have to keep that in mind. At the Malta Blockchain Summit about 20% of the booths were companies providing regulatory services. Deloitte is planning to set a platform in Malta to assist ICOs to do KYC/AML. Deloitte also expressed interest in collaborating with KYC Bench in providing and promoting these services.
What crypto friendly jurisdictions would you recommend to a startup?
I’d say Malta, Switzerland, Singapore, Lichtenstein and Estonia. It really depends what you’re looking for and where you want to raise funds. Also, choose the country that can protect you most on the regulation level.
Can it be risky to set up a company in Malta or Estonia, who are part of the EU? Brussels is still to introduce a clear vision regarding cryptocurrency and ICO.
I’ve heard this concern before. Because blockchain is proceeding so fast there’s always a potential risk when it comes to opening a company. But on the other hand, EU is careful in adopting radical decisions as they don’t want to hurt growth. So far, the attitude has been very supportive, as evident in Malta and Estonia cases. And I’m sure EU will seize the potential that comes along with new technologies. At the end of the day, all the policies are based on supporting economic prosperity.
What are the most interesting acquirements have you had since last year?
Our number one project is Wanchain, a company developing cross-chain technology and trying to combine different cryptocurrencies. There’s nearly a different wallet for each cryptocurrency. Тhe idea is to create a single wallet, compatible with all cryptocurrencies. They are very serious about the technology and have around 22 scientists and a team in Beijing and another team in Singapore. Before we invested in them, we had conducted full due diligence and screened all team members. The investment does not translate into immediate success but a great team is work half done.
What are the main challenges that funds face these days?
For AA Union Capital, it’s finding solid projects. There’s a lot of ‘sand’ out there and we’ve wasted a lot of energy by doing due diligence and examining ICOs. We found unreliable teams in the past, who were simply opportunists. Another major issue is government and whether the compliance can support this blockchain to go further. That’s why we’ve set up International Association of Blockchain Compliance (IABC). The association will be joined by about 80 lawyers and 200 exchanges, who will come together to support the technology. Deloitte will be part of it too. Cryptocurrency Bancor got hacked in the past and money disappeared into nowhere. KYC Bench has the ability to track black wallets. For example, if you get hacked, like Coindesk was in January for $534.8 mln, you don’t know where money goes. You’ll be able to track the black wallet. So it’s the same like anti-money laundering. Bancor got very interested in our product and plans to sign a corporate contract with us this week to sort out the aftermath of the hack. As a matter of fact, many other exchanges have suffered. Our platform will help with cybersecurity and compliance (data collection, storage, management). As we come from traditional finance, we are treating the matter in a similar fashion but with innovative attitude.
How can a startup find investors when so many blockchain events are attended by predominantly ICO projects?
It’s the same issue with traditional startups, not only from blockchain space – it’s not easy. You have to be persistent. Having said that, the leader must have a vision. Just knock on everybody’s doors.
Would you go along the line that “ICO is dead”?
In a nutshell, it is half-dead at the moment. Hopefully, it will be brought back to life again. We like to reiterate that the market always needs fresh blood. What does ‘fresh blood’ mean for an ICO? Probably, investors – individual or institutional. But for us the definition is different. It means the project should be able to generate ‘white cells’ and ‘red cells’, it means having compliance and regulation in place, as well as government support globally. This is ‘fresh blood’. Why? Because this way confidence and trust are built. Only then we can move on. Right now there’s mist all around. We’re here to help projects to navigate through it by regaining trust and confidence.