Olga Feldmeier on Why Switzerland Has Welcomed Crypto

Untold Stories interview with Olga (episode 14): https://cms.megaphone.fm/channel/untoldstories?selected=BWG5775450315

Xapo receives approval to operate as a financial intermediary in Switzerland: https://blog.xapo.com/xapo-regulatory-status-in-switzerland/

SmartValor white paper: https://res.smartvalor.com/public/SMART-VALOR-WhitePaper.pdf

SmartValor launches in Switzerland: https://www.coindesk.com/smart-valor-launches-regulated-crypto-exchange-in-switzerlandBusiness Insider interview on tokenizing physical objects:

Smart Valor makes South Korea its second home: https://news.smartvalor.com/korea-update/

Transcript:

Laura Shin: 

Hi, everyone. Welcome to Unchained. Your no-hype resource for all things crypto. I’m your host, Laura Shin. In case you haven’t heard I have another crypto podcast called Unconfirmed. It’s shorter, newsier and comes out Fridays. If you haven’t yet, go subscribe now wherever you get your podcasts. Also, find out what I think are the top stories in crypto by signing up for my weekly newsletter at unchainedpodcast.com. 

Kraken is the best exchange in the world for buying and selling digital assets. It has the tightest security, deep liquidity and a great fee structure with no minimum or hidden fees. Whether you’re looking for a simple fiat onramp, or futures trading, Kraken is the place for you.

CipherTrace cutting-edge cryptocurrency intelligence powers anti-money laundering, blockchain analytics, and threat intel. Leading exchanges, virtual currency businesses, banks, and regulators themselves use CipherTrace to comply with regulation and to monitor compliance.

Are you passionate about blockchain but fall short on the technical skills to build and deploy blockchain applications? Then check out Simba Chain, the Smart Contract-as-a-Service blockchain simplification layer on SimbaChain.com and their new enterprise offering on the Microsoft Azure marketplace.

Laura Shin:

My guest today is Olga Feldmeier, CEO of Smart Valor. Welcome, Olga. 

Olga Feldmeier:

Hello, Laura. Nice to be here. 

Laura Shin: 

You have a really interesting personal story that I think gives some insight into the downsides of centralization, or perhaps the power of decentralization. So, can you tell us about how you grew up in Ukraine and then came to leave and live in the West? 

Olga Feldmeier: 

Sure. You know, Laura, I had a very interesting life. I was actually born in Western Ukraine, being actually, you know, mixture of Russian, Polish, Ukrainian and Jewish blood, and as I was a teenager the Soviet Union collapsed, and was at Ukraine that is worst and still is quite dependent on Russia in terms of economic relationships while Ukraine was in very bad condition and to save the country what they started to do was basically to print money. So, we used to have a hyperinflation of 10,000 percent per year. Was down to 5,000 percent for, I think, around five years. So, in that time, you know, it’s really pretty crazy. You know all the people that work for the states they got their salaries paid like much later, like six, nine months. The same for my mother who was a piano player. So, by the time you got, you know, your salary six months later, the monthly salary was enough to buy a piece of bread, right. So, you know you were carrying these bags full of paper money to the next shop to get rid of it, right. So, and all of that it was a very tough time. You’re basically watching the collapse of the state, right. Nothing’s working, there is no electricity, people are dying on the street, nobodies bringing them away. They’re there for days, right, and you watch all of this and you think like, oh my goodness. How could this happen? That was the moment for me I started to study economics. Microeconomics to understand how could this happen, and ever since I was pretty much a big fan…well, basically it was also very fascinating to me, economy and finance and how this works. So, I received a scholarship from German government and started to study in Germany. So, the beginning of the story, but since the beginning of the story gave me also quite a solid view on why Bitcoin is needed and why I’m in this place now. 

Laura Shin: 

And one other detail of the story that I love is that you didn’t even know any German and you heard that they were giving out scholarships so then you just crammed at the last minute to try to, you know, pass these exams. I think you said it was something like nine months that you had.

Olga Feldmeier: 

Yeah. That’s a very intimate part of the story. That’s true, and I learned that if you want something really bad then there’s nothing that can stop you. I mean, there were all the other students that had German for the last 10 years and I had no clue, and I said, no, I’m going to make it. I’m going to learn German for this exam, right, and for nine months, but then I couldn’t talk even to people because I learned all this stuff by heart, right. So, microeconomics, microeconomy book and all of this stuff. So, I wasn’t able to talk. I’m like, don’t talk to me because I’m going to forget how this sounds, what central bank is doing against inflation, but you see, this worked out. Ukraine was receiving back then three scholarships for the whole country, right, and I got one of those top three scholarships. That’s amazing, right. 

Laura Shin: 

It is amazing.

Olga Feldmeier: 

Yeah. Well, but you know Laura, the rest of my professional life I started to mature money, I finished university in Munich, but then because you come from the other country and you speak with a funny accent, what you do is the first professional years you’re trying to prove to everybody and yourself that you’re as good as them, right. So, I studied really hard. I was one of the best students. I, you know, applied to all the top companies. Investment banks, BCG, McKinsey. I received offers from all of them, and somehow, I decided to go to BCG because BCG was the consulting group, was a very diverse place. There were women, you know, not like investment banking. There were more women. There were more people with diverse backgrounds, and that was just the right place to start for me. I did that for five years, all in financial services working on big strategies for big banks. Deutsche Bank, like almost all the European banks. Yeah, and at some point, I said like, wow. This is good to be an advisor, but how it is to be a banker. So, I switched to Barclays Capital, done that for several years in London, and then I decided to learn another side of banking, which was wealth management. So, I joined UBS here in Zurich, in Switzerland in their headquarters as the head of sales for Central and Eastern European regions in wealth management. So, that was also quite a phase.

Laura Shin: 

Yeah, and your next step after that was Xapo. So, how did you get into Bitcoin? Did you know about Bitcoin before Xapo? 

Olga Feldmeier: 

Yeah. Well you know, to be honest, I tried hard to understand it and initially I didn’t get it. Like, I was reading that here in The Economist wrote about it. I was like, no. Like, I’m not getting this. How is this just a code? Like, what’s the value behind it? 

Laura Shin: 

And did you hear about it from The Economist, or how did you hear about it? 

Olga Feldmeier: 

Yeah. Yeah. Exactly. So, because I was very passionate to reader of The Economist for many years. So, but you know, basically then it was just great timing because by the time I kind of realized I’m fine. You know, I made my career in banking. I’m as good as everybody else, and maybe even better, I don’t need to like, for the first time in my life I really asked myself what do I want to do, and then by that time Bitcoin kind of appeared for people like me. You know, from banking, and by that time I was lucky enough to meet Wences Casares, who was the founder of Xapo. We met here in Switzerland. I think it was one of his first visits here, beginning of 2015. 

Laura Shin: 

And that was because you had reached out to him, right?

Olga Feldmeier: 

Yes. Exactly. I knew some guys here in Switzerland, some investors and I said like, you know, I’m actually quite tired of banking. The vision is not there for me. I don’t know why I’m wasting my time, and I want to do something really exciting. I actually like Bitcoin, and they told me, oh, you know, there’s Wences. He’s in San Francisco. It’s funny. I wrote him a letter, which like, you know, a letter on their security exchange commission registration at their registered address, and everybody said like, oh forget it. You write a letter. Nobody will ever come back to you. 

Laura Shin: 

Like not an email. 

Olga Feldmeier: 

Yeah. Exactly, and you know Laura, it’s funny. Like three days later I had an email from him, and he was like, Olga, let’s meet next week. I’m in Switzerland. So, like its those things. There is a good timing in planning, but you also have to take a chance and take an action, right, and then both of them will meet and you’ll like it, right. So, it was beginning of 2015, right. So, Xapo was founded in 2017. Basically, his idea is he wanted to create this opportunity for people, for investors in Bitcoin to store their Bitcoins in a safe way, and well, also help people around the world to have more financial freedom, but his problem was, they built the tech, but the problem was that back then in 2015 there wasn’t even BitLicense in New York. Like there was literally nothing in terms of regulation. How do you deal with Bitcoin custody? Well nobody knew that, and I think they hit quite some difficulties in the US. So, the idea was they will come to Switzerland and we’ll try to get licensed here, and you know, for me it was very interesting meeting with Wences for the first time. 

You are sitting here on the lake, looking at the lake, he told me his Argentinian story. You know, how they were poor, just living from the ships, you know, the farm, and his story and my story was actually pretty much the same. Was the only difference that it was Argentina or Ukraine, but we all suffered from this collapsing state, from defaults, from hyperinflation, and all of this experience filled both of us with the visions that now we have the technology to change this, to protect us, to protect the people and basically, you know, to give more empowerment. Basically, improve this balance of power between people and state, and give people something how they can say, no. So, that was a very visionary first meeting. I think it changed my life, pretty much.

Laura Shin:

And was that actually also the reason when you were saying that you originally tried to understand Bitcoin after reading The Economist, was it your personal experience that finally made you understand the potential in it? 

Olga Feldmeier: 

Yeah. Well, I think, my first small investment I made in 2013. I was reading and trying to understand, and for me, the event was basically when Cypris banks. There was some banks went bankrupt. That was in connection to Greece crisis. So, some banks stopped to pay out money, and it was kind of like a little default situation there, and then you saw the Bitcoin event from 30, 40 to 70 and I thought like, wow, this is amazing. For the first time I see it, like you know, microeconomic indicators or what happens in one country really has correlation with this digital currency. So, imagine if things would get even worse. Imagine if European union collapsed or there is a war. So, obviously this thing has a chance to become a new kind of hedge. So, I bought my first Bitcoin back then. Of course, with Wences and Xapo. I poured pretty much everything I have in Bitcoin. It actually, you know Laura, helped me to start my own company, Smart Valor. I was one of the biggest investors in Smart Valor. How? Well, I would never earn that much money in banking, but that was my Bitcoin purchases from 2013. So, I think I made some good choices back then. 

Laura Shin: 

Oh. Interesting. We’re going to have to talk about that in a little bit, but first I wanted to ask what was it like trying to work at a Bitcoin company in Switzerland in 2015? Like now it’s known as Crypto Valley, and whatever, Crypto Nation, but back then what was it like? 

Olga Feldmeier: 

Well, you know, I was the only one here in Switzerland and there were I guess like three other companies, which all had a staff between 2 to 5 people, right. So, the whole Crypto Valley was basically some 10, 20 people, and we didn’t have any place to meet or any association, nothing. You would just know them, and some guys just started to meet up. So, we sometimes met just for beer here in Zug, but there was nothing, you know. 

Laura Shin: 

Well, Ethereum was there, right? 

Olga Feldmeier: 

They arrived 2014. Yes. Exactly. Oh. Yes, you’re right. Of course, Vitalik was here, just across the street from where we sit now. He used to rent this little house, and they were putting mattresses and everything on the floor. So, they were sleeping and working there and everything, right. So, that’s true. Yes. Ethereum, Bitcoin Swiss, Monetas and Xapo we were its first full company so to say, right. 

Laura Shin: 

Wait, wait, wait. So, earlier in the conversation you said something like here in Zurich, but then just now you said right across the street, so are you in Zug right now? 

Olga Feldmeier: 

Oh, Laura, this is all so small and so close here. So now, our office of Smart Valor is in Zug. Zug is kind of like, has this name of Crypto Valley because it looks like a valley. It has a lake, right, but if you jump on the train, you’re just in 20 minutes in Zurich. So, for me Zurich and Zug is the same, right. So, no, Zurich is a little bit farther down, right, so Zurich is the biggest city in Switzerland, and this is where all the banks are. They have their headquarters there. 

Laura Shin: 

Right. Okay. Let’s talk about what you did at Xapo. 

Olga Feldmeier: 

Well my major mission was help Xapo to get licensed here in Switzerland because you see, back then we had like the biggest, you know, worst survival of the company was that we have no banking partners, right, and as you probably know every relationship with a bank starts with, well what is your status? What do you do? How are you licensed? And so on. So, us being not licensed at all, being basically holding in Hong Kong, having no regulatory status as a financial institution, that was very difficult to obtain and keep banking relationships. So, obviously we needed to get licensed and initially we thought, well it doesn’t matter. We will go any lengths, be happy to do even banking license, whatever, but then we figured out that banking license especially here in Switzerland comes at a great cost. You know, you have minimal capital requirements of 10 million, plus you need to employ around 100 people. You have super high costs to run the bank, right, and this here advance before you even get permission to operate. So, all of this actually was not appropriate for our business model, and we decided to try to get regulated as money transmitter, or like you know, payment institution, but something that is actually suitable for custodian. 

So, our goal was actually to be able to operate as a regulated financial institution without a banking license and exactly that was a problem because you see, Finmar is a Swiss financial regulator authority back then looked at our business. You can imagine we were basically one of the first Bitcoin businesses they ever heard about, right, and they looked at the custody solution and they said, well look guys, if you take it conservatively then basically you’re taking money from investors, you hold it. So, it’s kind of like public deposit taking activity. So, in a very conservative case you should still get a banking license. We were like, oh no. We don’t want a banking license. This is too much work, too much capital, and so on, and so on, and they said, well then look for another solution. 

So, it was kind of like a dead end and that after one year of work on it. You know, the money spent on lawyers, right, all of the work, you know, Wences staff they were regularly here. It was quite frustrating, you know, that’s the reason that end, and why is that? Looking back, I actually understand because you know back then this institution did not have such a broad understanding of this technology, and of course, what you know and what you hear that the currency that is used for drugs purchases and darknet. Like all of these bad things, whereas actually Switzerland has taken a big step away from this banking secrecy, and from this money laundering, from all those bad things that happened in the past, and Switzerland is now getting to position itself as an absolutely clean jurisdiction with the toughest QAC and IML, and then for them, you know, to make a step into Bitcoin. You can imagine this is quite the change, back then. 

Laura Shin: 

Off brand. 

Olga Feldmeier: 

Exactly. So, and you know actually I was very disappointed, and then Wences said like, this is it. You’re leaving Switzerland. This is all based on the time, and then I think I was just very lucky. I met some people who knew some other people, and they told me, well look in the Swiss parliament there is this group of parliamentary members that is called Digital Sustainability and they promote innovation in technology, and financial services and technology space. You should talk to them. Then I got connected to those, well parliament members invited me to Bern. I went to Bern. Bern is the formal capital of Switzerland, and then I told them like, look guys. It’s a great company. It’s a Silicon Valley company. You’ve got 40 million seed funding from top investors. You’re just basically building this technology to store securely the digital currency, right, and we want to be licensed and you guys…look, banking secrecy was abandoned in 2008. Wealth management, your most important industry in banking is not growing, right, it’s not the future of financial services. You need innovation. Everybody knows this. Everybody says we need innovation. Blockchain is innovation. This is the technology, right, and of course, you know, they’re already smart people. 

So, they hear this, and they said, well Olga, we’re going to help you. So, then one of these people then submitted a motion to the parliament about the changing of the banking law that would change the definition of public deposit so that storing the private key to cryptocurrency addresses would not fall under the category of public deposit taking activity, and I thought like, wow, that’s great. So, parliament is smooching about it, and it’s really funny. You know, the parliament actually voted no to this motion. So, they let the motion fall down, but then they all decide, you know, all the conversations with Finmar moved forward and they kind of, they got it, right. They got the message, like you know, a lot of people really want this, and we should look at it, and there’s also, you know, Finmar is guided by a great guy, Mr. Branson. He’s a British citizen and he’s very pro-innovation, and he actually told us, guys I want to make it happen. Yes, it takes a while, but we will get there, and yeah. So, another half a year later, so total after one-and-a-half years, they finally allowed us to be regulated and operating out of Switzerland. Not as a bank, but just as a financial intermediary. So, member of self-regulated organization. Not even supervised by Finmar, but you know, in Switzerland kind of financial supervision is delegated to some other self-regulator authorities. So, we had become the first financial intermediary to provide Bitcoin custody. So, that was big news. 

Laura Shin: 

Yeah, and was the rationale for the switch sort of predicated on this idea that what’s different is that you’re not using the deposits. You’re just storing the Bitcoins, is that what the decision was? 

Olga Feldmeier:

Exactly. Yes. So, there’s no interest payment on it. There’s no as a use. You’re not blending it. You’re not budging it. You’re not doing anything with it, right.

Laura Shin: 

Yeah. Yeah, and I feel like, did you also help Xapo kind of like get clients to store their Bitcoins in the vault, and if so, what was that like?

Olga Feldmeier: 

Well of course, Laura, I cannot provide specific details, but of course, we were targeting large financial institutions here in Switzerland, and I was responsible for establishing connection with them, bringing them to the Xapo vault, showing them how the vault works. It was pretty amazing, you know, it was basically an ex-military bunker in the middle of the mountain, right, in the Scott Herd mountain, right. It’s massive. It was actually a major air force military station that was built during the Cold War, and with massive security could sustain 30 Hiroshima bombs, like you know, it’s just security you cannot take. This is kind of like what you see in James Bond movies, right, and I used to bring there all the bankers, and their commissions, and their internal control and all the people that tried to understand is this really safe, and normally they went away with the feeling, oh it’s super safe, right, and yes, we did it. We attracted some quite big clients here in Switzerland. Those banks that then later issued the first certificates on Bitcoin. They did not offer the client directly to their…

Laura Shin: 

The first certificates?

Olga Feldmeier: 

Certificates, yeah. You know when people basically buy a note at the bank and the bank holds the Bitcoin.

Laura Shin: 

Yeah, like the coin shares. 

Olga Feldmeier: 

Yeah. Exactly. So, I was actually very happy as of several weeks ago I hear that Xapo, well exactly this business, institutional, jointly I guess was a Swiss entity was sold to Coinbase for 50 million. To me, personally, of course I’m a shareholder of Xapo, right, but to me personally it was kind of like my first little exit in a way, right. 

Laura Shin: 

Right. Well so, speaking of kind of I guess investments, you mentioned earlier that your early Bitcoin purchases helped you found Smart Valor. That’s how you funded the founding of that company. You know, it’s a little bit different from some of the others in this space who took their holdings into investing in ICO’s, but so why don’t you tell people what it is that Smart Valor does. 

Olga Feldmeier: 

Yes. So, Smart Valor was founded after I left Xapo and basically understood oh my goodness. Wow, I can pull this off. I could, you know, make the Mission Impossible form of life. I was like, wow. Now, let’s do something really difficult. Let’s do security tokens, right, and basically, you know, we founded early 2017 here in Switzerland, in Zug, with a vision to build the first ever security token marketplace exchange for alternative investments. With the vision basically, you know, to give people all around the world an easy access to exclusive investment opportunities that you would otherwise only get access if you’re a client of UBS and super rich, right. You remember my background, I worked for UBS, right. I know that world, right. You’re rich, you’re 5 million plus, there is a red carpet for you, your assets are on board in Switzerland, it’s super safe. You get all the exclusive offers, you can invest in private equity until your return is 15 percent plus, and to me, you know Laura, I remember this life in Ukraine where if people had a bank account, well this is great, but there is no investment opportunities. There is capital control, right, you can’t do anything without it. They divide your currency. You can’t even change it into dollar. I remember this world, right, and to me, you know, there was such a huge gap between what is there for rich people and what is there for the rest of us. I said like, no, you got to change this. Our mission is to give people access to great investment opportunity in stable jurisdiction, you know. Where there are people at the organizations that are responsible for their money, and that is kind of what is behind the vision I have created in this company. 

Laura Shin: 

Well, wait. So, one question I have is for security tokens. Are there the same limitations on who can trade them and if so, does that really expand access? 

Olga Feldmeier: 

Yes. So, that’s a very good question. Of course, security tokens are securities and they’re traded very differently from currencies, and this is also, you know, a little bit what is behind our staged implementation map. So, yes. We started 2017, and we said, okay there will be two phases. Phase one we just launch an exchange, right, and this exchange is cryptocurrencies and utility tokens, and then the second stage we will add security tokens. So, this is actually what happened. Where do we stand right now? So, we launched an exchange in July via license as I did in Zug with the financial intermediary here in Switzerland. This time it didn’t take me one-and-a-half years. It took me just three months, and we did it ourselves, no lawyers. I’m very proud of this, and we also licensed in Liechtenstein as an exchange for our currencies. So, that’s the first stage. Now the exchange is running. It’s amazing. I love it. People can buy currently just three cryptocurrencies. This is like the first version, but you can pay with credit card. You can pay via bank wire. We are now adding deposit function. We are adding a lot of other cryptocurrencies next week or soon. We are adding the advanced trading view. So, it’s basically the same as Kraken or Coinbase. It’s full blown cryptocurrency exchange. This is the first stage for us, so we got tech down, right. Now, the second stage is coming with getting licensed for distribution and trading of security tokens. This one we expect early next year. Definitely prior to the summer 2019. 

Laura Shin: 

All right. So, we’re going to talk more about the Smart Valor platform in a moment, but first, a quick word from the sponsors who make this show possible. 

Today’s episode is brought to you by Simba Chain. Do you have a blockchain idea that could benefit your Organization but you are not sure where to begin? Then go to SimbaChain.com. SIMBA Chain’s API based approach simplifies blockchain for developers and provides a simple web application that empowers business analysts, domain experts, managers and executives to design their smart contracts.  Simba Chain supports Ethereum, Quorum, Stellar and many more to come. They turn business analysts into API designers and non-blockchain developers into blockchain developers. Checkout SimbaChain.com to quickly build your Blockchain application.

Will the world follow France and advocate banning privacy-coins? Will government-backed stable-coins become the new fiat? Are distributed and peer-to-peer exchanges just a flash in the pan? The answer is maybe.  Virtual currencies can flourish and create a new, private and more versatile economy. But that grand vision can’t happen without keeping crypto clean —AND that requires support of governments and accountability for bad actors. Privacy Enhanced Compliance using cryptographic controls has the potential to preserve anonymity without compromising legitimate investigations. CipherTrace is working on this vision of the future. Sign up stay up to date on the Privacy Enhanced Compliance initiative and receive authoritative Crypto AML reports quarterly. https://www.CipherTrace.com/KeepCryptoClean Kraken

Today’s episode is brought to you by Kraken. Kraken is the best exchange in the world for buying and selling digital assets. With all the recent exchange hacks and other troubles, you want to trade on an exchange you can trust. Kraken’s focus on security is utterly amazing, their liquidity is deep and their fee structure is great – with no minimum or hidden fees. They even reward you for trading so you can make more trades for less. If you’re a beginner you will find an easy onramp from 5 fiat currencies, and if you’re an advanced trader you’ll love their 5x margin and futures trading. To learn more, please go to kraken.com.  

Laura Shin: 

Back to my conversation with Olga Feldmeier of Smart Valor. So, we were just talking about security tokens, and about how your platform will enable the trading of them. What definition are you using? Is it one that was set up by Swiss regulators? 

Olga Feldmeier: 

Well, you know, Switzerland is actually a great place to be if you’re in a crypto company, if you’re in the cryptocurrency business, but you know, Switzerland is actually not our only jurisdiction. So, we are regulated at present in two countries, Switzerland and Liechtenstein, and Liechtenstein is, you know, you get there just in one hour. It’s a neighboring country, but Liechtenstein is a part of European economic zone, which gives you access to 30 European countries. So, we have in Europe the so-called passporting system. So, if you get a license in one country you can passport it into 30 other European countries. So, we are regulated currently in Switzerland, but we are in the process of application for so-called MTF, multilateral trading facility. It’s kind of equivalent to ATS in the US. We are applying for this one in Liechtenstein, so for us all the definitions of what security and how this works are relevant for European union, right. So, in Switzerland there is a certain definition and in European union there is very much, they’re pretty much the same, right. So, securities, ever since it gives you a certain income stream and it represents ownership of certain financial product.

Laura Shin: 

And what is the demand for trading security tokens, or just any kinds of tokens representing real world assets? 

Olga Feldmeier:

So, I think the problem is not so much that there is no demand for security tokens that people don’t want to buy it. I think the problem is actually, you know, that we’re just in very early stage, right. For this space to be successful you need exchanges, a lot of them, which are easy to access. You need a lot of different assets on those exchanges, right. You need a minimal critical mass, right, and we are not yet there.

Laura Shin: 

But just so I understand, like for some of those security tokens that you’ll be offering, will anybody be able to trade them like across jurisdictions, or like how are you going to implement all the rules around who can trade them because I would imagine they would differ for each different token? 

Olga Feldmeier:

Exactly. Exactly. So, it’s different by investment product, right. If you start with asset classes, of course, it’s very simple to tokenize gold and sell gold to everybody. Gold, even tokenized, can be viewed as not a security, right, so that’s super simple. It gets more complicated with shares of companies, right. The shares of companies, there is nothing new. It’s basically IPO’s, right. So, IPO’s sell enough new shares and it’s the same for STO. If it’s a new security token offering it needs to satisfy certain criteria. The company needs to be able to prove that they have revenues, that they have audited financial statements. You know, that this this is something that can be offered to the public, and if all those criteria are there, so then yes. You can do IPO, you can offer it to public retail investors. Whereas you know something super risky like venture capital funds or private equity funds, they of course, subject to certain limitations, this is something that we called a credited investor. So, only people that can handle this risk and will not be damaged by this can have access to them. 

Laura Shin: 

So, basically Smart Valor will determine kind of what types of different tokens people can trade and then just limit them based on what their status is? 

Olga Feldmeier: 

Exactly. Sure. Yeah. So, we will determine this. All of this we have here in Europe, so called MiFID. MiFID 1 and now MiFID 2. This is like a super comprehensive regulated framework, which is targeted at protecting investors in all the different jurisdictions across Europe on the same basis, and MiFID is actually regulating which type of investment is suitable for which type of investor, and we, as a platform provider, are responsible for offering the right product to the right people, right. So, yes, there will be tokens that anybody can see. So, you log in and even if you’re not a credited investor, or you don’t have experience with dealing with derivatives or risk assets, you will see them. For example, it can be real estate, it can be metals, it can be public stock of certain companies that did an IPO on our platform, but for other investments which are more risky you will not see them. For this other part you will need to be qualified as credited investor. 

Laura Shin: 

And Smart Valor is actually the first crypto exchange in Switzerland, I believe. Why do you think there hasn’t been an exchange thus far? 

Olga Feldmeier: 

The first fully integrated exchange was custody, and trading and brokerage, right. There were some other exchanges which were basically kind of decentralized, you know, some kind of tax exchanges. Yes, you can buy, but you cannot store your tokens there. The reason for that is actually that Finmar is very, very restrictive and tough in how they treat custody and how they want this custody to operate. So, they were very reluctant to enable exchanges here that provides your own  custody, and this is for us actually one of the reasons we operate from two countries, right, because our custody solution is actually provided through our subsidiary in Liechtenstein, right, which is you know, was much easier for us to register and run it out of Liechtenstein. So, we kind of like, you know, we are licensed in both countries and certain parts of our business is provided by different companies in the holding structure. So, we found a way how to basically make it work, but I would not say we are the first exchange in Switzerland because the first cryptocurrency exchange operated by a Swiss company out of Switzerland. This is our headquarter, but we regulated in both countries, in Switzerland and in Liechtenstein. 

Laura Shin: 

And Smart Valor also used a Swiss franc based stable coin. Why do you have that? Like is there a lot of demand for trading pairs in the Swiss franc? 

Olga Feldmeier: 

Yeah. Well, yes. So, Swiss franc, not a stable coin for now. It’s just a fiat currency, Swiss franc, and yes. Even with this fund there are no exchanges that offer Swiss franc trading pairs. It’s funny, but it’s the way it is. We launched it last year. We had plans to issue stable coin, and we looked at different implementation options, but basically, we put this for now a little bit on hold in view of negative interest rates. Maybe you have heard recently even UBS said they’re going to start in November charging all clients minus one percent for storing, for basically deposit, right. So, you imagine if you issue that coin you actually already need to charge people one percent because this is the money that you need to pay to central banks to deposit money. So, actually, you know, we thought the time is not right yet and the form how we will do it, we will do it a little bit later. So, for now it’s just we have four different fiat currencies on our platform, euro, British pound, Swiss franc and of course, dollar, and for the time being, this is it. We will be looking to probably list more stable coins. I’m very much interested in Korean won and Chinese yen. So, stable coins for these currencies, they will be hugely valuable.

Laura Shin: 

Yeah. Smart Valor decided to make Korea its second home. What do you mean by second home and why did you choose Korea? 

Olga Feldmeier: 

Well first of all, you know, we define ourselves as a global platform for global audience of investors, and if you look for perspective from here in Switzerland, Switzerland is the largest wealth management, offshore banking wealth management center globally. We have 4 trillion assets being booked here on the Swiss bank accounts. It’s actually quite, quite a big amount, and if you look where is all this coming from. So, the storage countries that are growing are basically in Asia, right. So, of course, it’s China. It’s different countries that are different in size, but it’s always this, you know, need for people to find a safe destination for their savings, and we were looking at Asia and thinking, well where is the wealth going to come from on our platform? Well, you know, deposit, it’s the same as for wealth management. So, it’s Hong Kong, it’s Indonesia, it’s China, but also South Korea. The special thing about South Korea is that South Korea is also one of the biggest countries in cryptocurrencies. Around 20 percent population people have some kind of cryptocurrency or token. It’s amazing, and first it was like where are we going to list our own currency, Japan is super tough you know, we cannot afford, and then we got in conversation with some people in Korea and that was a very good option. You know, they were, in terms of compliance, it’s a level where we can deal with it. So, we as a fully compliant financial intermediary in Switzerland, we cannot go to any exchange, so the final choice was put on Bithumb for the listing of the lower token.

Laura Shin: 

How much would it cost to list on Binance? 

Olga Feldmeier: 

Well you know what, I don’t even know, but I think it was crazy. Some people were speaking about 1 million and then somebody came back with a reference of 400,000. Anyway, to me personally, this is not an amount of money that I think a responsible CEO would put into listing of your token on an exchange. 

Laura Shin: 

So, actually this is the perfect segue to my next question, which was I’ve wanted to ask you, you have this extensive background in finance as you’ve outlined working for BCG, and doing consulting for all these banks, and then you worked at Barclays and UBS. So, how would you compare what’s happening in the crypto space with traditional financial markets?

Olga Feldmeier: 

Well I think, you know, if you look back like let’s say, 20 years, you know, there was this time, or even 15 years, where it was all around online banking and oh my goodness, you don’t need to go to the bank. Now, you can do it all online and wow, what a freedom is that? So, I think what people are experiencing now is that you don’t even need banks. You can do it all out of your wallet, and we’re just starting to realize what this means. I think we are kind of like in that age, right, but the difference, Laura, is that we’ll have much more profound consequences for people’s lives and for societies. I think what I’m particularly excited about is that the same way as Bitcoin established itself as digital gold, and you can wire money and there are so many payment options now with cryptocurrencies, and you know, the state cannot anymore say to people, well we want your money, so give it home. You’re not allowed to buy a boat, right. So, it doesn’t hold true anymore. People can send money wherever they want, and I think what happened with Bitcoin is an exciting thing. The same will happen with investments, securities, opportunities to invest in other countries. So, this whole notion of centralized exchanges and security tokens or any kind of tokens that you’ll present some kind of failure or participation. This is amazing, right. It’s kind of like it doesn’t matter if governments want it or don’t. There is regulation or there is no regulation. It all just happened, right. There is no way to stop this. 

Laura Shin: 

That’s kind of what I was asking you before. I mean, if the security token still carries the same restrictions with it then how does it kind of democratize access? I don’t understand that part. 

Olga Feldmeier:

Yeah. So, look, I think, it’s just a huge, huge space, and the space of security tokens, it will have different niches. So, we at Smart Valor, we are targeting this regulated, compliance of being an exchange in accordance with all the laws here in Europe. So, this is kind of our niche, but there will be other players that are completely out of nowhere. Nobody knows who runs them. Nobody knows where those people are. It’s decentralized exchanges, right. I send you Apple share. You send it back to me, and there’s no way any government can stop it, right, and for people who has a appetite for that, look, it’s like some people go to Binance. Some people go to only Coinbase. Some people go to some super shady exchanges, right, and to some investors it doesn’t matter, to some investors it does matter. So, also within security tokens there will be zero segments, and there will certainly be some countries where we will not be able to offer our services officially, and there will be other platforms that will serve those countries. I am speaking about Iran, sanctioned countries like, you know, countries with very tough security regulations, and there are those cases and that business will go to other platforms. 

Look what Abra is doing. They’re basically replicating stocks. So, equity in public companies, and anybody can access it from so many countries. I love it. It’s a great vision. Is it our business? No. Our business is this regulated space, right, but even within that space, even if it’s security, Laura, there are big opportunities for innovation in this space. To give you an example what I’m talking about, so if you think about a multilateral trading facility, so what is this? It’s basically, you know, self-regulatory trading venue for securities. It was created around 10 years ago. It’s relatively new license and why, because before that all the exchanges were local. So, there’s a France exchange. There’s a London exchange. There’s German Deutsche Börse, and they all pull like their national securities. So, they’re all very small markets on the French, and the idea was to create this European market. So, for this, MTF was created, so that any shares of any companies issued in any European city, European countries can be traded on those exchanges, and you know what happened? Yes. Those new platform trading venues came to life and they’ve become bigger than national exchanges. So, this is great, right. We got to just take this regulation and apply this for shares of the companies, securitized on the blockchain. Will it be better? I believe it will be much, much better. Better liquidity, cheaper infrastructure, simpler handling of clearing a settlement. So, all of those exchanges, this is one part, technical, but the other part is that there is also amazing new space of new investment opportunities. I’m super excited about the whole fashion investment space, films, music, art, you know, all the stuff that was never securitized. Now, we have a chance to securitize it and sell it into fractional ownership to a lot of people and make it even tradeable. It doesn’t have to be tradeable every day. There can be auctions. There can be weekly trade. There is so many options to do that.

Laura Shin: 

But for something like that like with a physical item like an artwork…oh, do you mean like a digital artwork because otherwise…?

Olga Feldmeier: 

Anything. Yeah.

Laura Shin: 

Well then, but who would take possession? So, let’s say we have fractional ownership of the Mona Lisa. I’m just making this up. Then who keeps possession of it? 

Olga Feldmeier: 

Museum. It’s in the same place, but you can own it, like one-millionths of it and you can give it to your daughter as a present, and of course there will be certain value increase over time with Mona Lisa if you wanted, but to mention, Laura, for the first time you will be able to hold a super diversified portion of super different assets even if you have just 10,000. It’s not possible today. If you come to me like five years ago with UBS, I would tell you, well bring 5 million. Otherwise we are not talking about diversification. It is not possible because stakes are so high. You want private equity? Well for good one please bring at least half a million. So, all of this like for average people the access and diversification is very limited, and this is what tokenization is changing. You can have anything in a very small fractional ownership and it’s not so expensive. You can tokenize much cheaper than securitization. It’s possible today, and another area I am super excited about is what is fair? What do you sell? Like is it fair to just ordinary shares that we know, and then on the other side there’s a utility token and payment token, or is it a mixture, or will we see the new definition of share? Like you probably heard about this exchange. I guess it was you guys in US. They’re issuing the tokens as kind of security. It has the features of Binance tokens, so it’s kind of like you can pay their fees with a token, but it also pays dividends. Like, what is this? It’s absolutely new instrument, and yeah, we need trading venues for those new instruments. Do you agree?

Laura Shin: 

Yeah. No. I do agree that there’s kind of new financial instruments, as you said, that are being created that don’t have pre-existing correlates. One other thing I want to ask you about is, so why do you think, I mean, obviously you explained your pitch to Switzerland about how this was kind of the wave of the future and this was the new technology, but do you have any other theories about why Switzerland has been so open to the crypto industry?

Olga Feldmeier: 

Well I think those are historic reasons. So, basically, if you look back 100 years, so you’re in the first second World War because Switzerland was always a politically neutral country, you know, not being involved in armed conflict and worse, so all the wealth came here for safety, and even after the second World War this country saw an incredible increase in assets pulling into this country as a safe haven, and then basically what happened in 2008 was that US cracked down on UBS and basically asking UBS to reveal all US customers data and that was actually gained the banking secrecy, which was out of banking law for 200 years. 

So, you know, it was very dramatic development here in this country. They had to abandon banking secrecy, and with that, you know, the core business, wealth management, I mean, there is no growth. The growth is in Asia. Here we have like two, three percent, and the question is like, well that was a competitive advantage. This banking secrecy is safety and if this goes away what is going to substitute this competitive advantage, and I think it’s very obvious answers that, yes, it’s technology. We want to establish ourselves as a place where innovative businesses and financial services, capital market infrastructures can build. Of course, that’s the only source of growth in this industry, right. Does it make sense? 

Laura Shin: 

Yeah, and one thing that interests me is so far a lot of people say that Zug has been the center of all these different crypto companies and foundations, and I mean, we see just where the foundations are based and stuff, but obviously now we have the Libra Association, which will be based in Geneva. It’s a little bit far from Zug and seems to be culturally different because Zug is German speaking and Geneva is French speaking. You know, I’m not Swiss. I have no idea how much that stuff matters, but I just wondered like do you think that means that Libra will have kind of like a different experience or will that have any kind of effect on the development of crypto going forward or in the development of Libra since they’re going to be kind of separated away from where Crypto Valley has historically been? 

Olga Feldmeier: 

I think that doesn’t matter. You know, the country is so small. You get on the train and in three hours you’re in Geneva. Everything is very small here, and you know, Geneva has an advantage. It’s been always a place for non-governmental organization, for UNESCO, Wall Street Organization, all those guys are there. So, if you want to position this project as this global, super national entities then Geneva is absolutely the right place to be. In terms of regulation it’s still Finmar. It doesn’t matter. So, they are working with Finmar. Facebook reached out to them in terms of applications. It was actually just yesterday that Finmar released the guidelines about stable coins, and they dedicated a whole page to Libra, the stable coin on Facebook, so that’s great. 

Laura Shin: 

Did you have any thoughts…?

Olga Feldmeier: 

I think it’s amazing. It’s absolutely the right place to do it. Not just being a little bit farther away from US, but also because Switzerland still has very solid privacy data protection rules, which data is shared with whom and so on, and I think a lot of people will feel much better about Libra knowing that it’s not US supervised or at least feeling that way. I don’t know. I cannot say how much it will be possible to move away from US supervision and from big brother watching all your transactions. I cannot speculate about this one, but I think it’s very good to at least try to get away. 

Laura Shin: 

But one thing that was interesting was obviously Finmar did release this guidance on the stable coins and address Libra, but then the very next day France said it was going to block Libra, so do you have a take on why that is and why they’re not kind of sort of waiting to see how things play out? 

Olga Feldmeier:

Well I think it’s, you know, this is the biggest difficulty with Facebook projects. There are a lot of politics, so this can be almost like political move. France wants to be closer to regulation and with regulators saying US. They can distance themselves from the whole Swiss crypto. You know, there are so many things under the water that we don’t even perceive, but I don’t think this matters. It’s almost the same as with Bitcoin. How does it matter that Chinese bans it, or one country bans it? I think the vision is so big, and then those 2.5 billion or like this crazy number what they have in users, and actually people need it. People need it. People want to transact in an easier, efficient way outside of the banking system, and I think Libra is going to be super successful. It will take time. It will take time also to get here with Swiss regulation, but the vision is big, the users are there, the funding is there. Like, you know, if you made it with Xapo with 40 million being funded with that and also being super new and everybody said, no, this is not going to happen. Facebook is going to make it anyway. I’m actually quite positive for this one.

Laura Shin: 

Okay. Well we’ll leave it on a positive note. Thanks, so much for coming on the show. Where can people learn more about you and Smart Valor?

Olga Feldmeier: 

Well on our website. It’s smartvalor.com. So, smart as in smart and valor is actually in Switzerland is a name for securities, all right. So, smartvalor.com. Join our crypto exchange today and you will be the first one to get access to exciting opportunities in the space of security tokens.

Laura Shin: 

Great. Okay. Well thanks, so much for coming on Unchained.

Olga Feldmeier: 

You’re welcome, Laura. It was nice to talk to you. Thank you so much.

Laura Shin: 

Thanks, so much for joining us today. To learn more about Olga and Smart Valor check out the show notes inside your podcast player. If you’re not yet subscribed to my other podcast Unconfirmed which is shorter and a bit newsier be sure to check that out. Also find out what I think are the top crypto stories each week by signing up for my email newsletter at unchainedpodcast.com. Unchained is produced by me, Laura Shin, with help from Fractal Recording, Anthony Yoon, Daniel Nuss, Rich Stroffolino and Josh Durham. Thanks for listening.