One thing that I absolutely love about this industry is meeting new people, meeting Charlie Hayter, CEO and Co-founder of CryptoCompare, was doubly great because we got to chat about crypto over tapas in sunny Barcelona.

Colin Platt (CP): Hi Charlie, good to finally meet you after months of trading emails.

Charlie Hayter (CH): Hi Colin, glad we could connect.

CP: Charlie, I’m a huge fan of data around cryptocurrencies and blockchains, so naturally am interested in your product. Can you tell me a bit about how you got into cryptocurrencies and what got you to launch CryptoCompare?

CH: I think that I originally saw it in 2012 but was dubious about the idea of a currency that wasn’t backed by anything. Truth be told, I didn’t really know much about money at the time, so did not really see the value in something like Bitcoin. It was about a year later when the price crossed $1000 that a friend got me to look back into it, and quickly thereafter I started dreaming up the idea behind CryptoCompare. A year later, along with my co-founder Vlad, we launched CryptoCompare. I come from a financial services background, so financial data was something that I saw value in having. The idea behind CryptoCompare was to set up a unified data platform, somewhat like a live research report, much like Bloomberg for crypto to give a more holistic view. I also have a background in digital marketing and knew how to get ad revenue to grow the business, and saw the long term value of the data that we would be collecting.

CP: So you launched in 2014, what’s the journey been like?

CH: This is a fast moving industry, and we as a company have been evolving as well. When we first set up in 2014 we were a very thin team, classic startup, I wasn’t taking a salary and we focussed on getting the right elements in place. Later in the year we raised our first funding round from angels and officially launched. The next year we were able to get a version two off the ground which greatly improved our offer. From the beginning I knew that we liked the name CryptoCompare but didn’t have the URL, we negotiated and finally were able to buy it in 2015. In 2016 we had grown a lot and were able to get our second round of funding, the following year we managed to be cash flow positive which was a great achievement. In 2017 we were able to grow the team to set up the business, and 2018 was about making everything work. This year we have really been concentrating on growing up as a company and becoming more efficient. We never did a token sale, so our journey may look different from some others.

CP: It seems very disciplined and more sustainable. Tell me a bit about your product offerings today.

CH: We have three main activities. First is our data business, where our APIs sit. Our APIs receive 20 million calls per hour on average, having peaked at 180 million calls from 14 million unique IP addresses, Our second line of business is our data products, this includes our cryptocurrency indices business, which provides to companies like VanEck, Reuters, Yahoo! Finance, and underpins the Nasdaq Cryptocurrency Futures. Our third line of business is media, we run the CryptoCompare Digital Asset Summit, which took place last June in London. We also do affiliate marketing, the CryptoGlobe news site and research. Within research we do our taxonomy work, as well as exchange rankings.

CP: I saw those exchange rankings, those are extremely useful. I do want to talk about indices, in crypto we don’t have closing rates or official “fixings”, how do you construct indices?

CH: Absolutely right, a lot of the design in indices is making sure that we have robust methods which reduce the risk of manipulation. This is particularly important for tracker funds and futures. We spend a lot of time on methodology and benchmarking. Our indices are based on VWAP (Volume-weighted average price) and include fade-outs, if exchanges haven’t had trades in a certain amount of time we reduce their contribution to the price. We also do a lot of work to evaluate how robust exchanges are, and if the prices are reliable. The statistics from the VanEck report to the SEC are well known for their work on this, we’ve found that when you look at other pairs things become more complex. Looking at exchanges for good management practices and generally trying to do the right thing is highly important, and helps us ascertain our weightings. Less liquid currencies can add more complication as we often need to go to the extra step of passing their prices by BTC or ETH then back into fiat.

CP: That’s great insight, surely regulators and investors must be interested in your findings.

CH: Yes, we are founding members in GDF (Global Digital Finance) and share a lot of our findings via their working groups to help inform global regulators about best practices. We’re also members of the CryptoUK self-regulatory organisation and do advocacy work in the industry on these aspects as well.

CP: You brought up a point earlier about originally not having seen the value of Bitcoin. Popular topic nowadays is Libra. Where do you see that fitting in?

CH: I look at money as coming in three forms, the first is issued by nation-states, like the Dollar or Sterling. The second is natural money and algorithms that we collectively agree to treat as money, things like gold on the one hand and bitcoin on the other. The third type is issued by companies, this is where Libra fits in. It’s money more or less because a company, or group of companies, have put it out there and will accept it. These types of money have existed for a while, and are popular in video games. Libra is a new form of that. There are pros and cons, but this is how I see it fitting in.

CP: My favourite question, but the one that interviewees always hate. If you could go back five years and give yourself advice, knowing what you know now, what advice would you give yourself?

CH: That is a tough one. I think that I would tell five year younger me to not create such a scramble in the early days, and hire and raise more earlier on. I would also have wanted to focus more on the leverage and derivatives aspects of the industry sooner, as that is clearly a large trend which we would have liked to be involved in earlier. I probably would have also started our conference in November 2017. I still don’t think that I would have done a token.

CP: Charlie, thank you very much, it has been a pleasure speaking with you.

CH: Thank you, great to meet you.

Coinscrum, the UK’s largest & longest running Bitcoin & Blockchain networking group is proud to have partnered with Blockchain.com to launch the first of the regular Coinscrum_markets seminars where they’ll be introducing the key influencers & innovators who are driving the future of the digital asset market ecosystem.

Whether a crypto veteran or traditional market pro looking to expand your knowledge of this fast-evolving sector, Coinscrum_markets will provide an opportunity for you to learn from, and converse with, the people at the coal-face of the industry.

To kick things off, they will welcome three seasoned professionals who carry a wealth of experience drawn from Investment Banking, Venture Capital, Technology and the crypto-assets markets.

:: Charles McGarraugh : Head of Institutional Markets at Blockchain.com
:: Iqbal Gandham : MD at eToro
:: Simon Cowell : Head of Corporate Development at Bitstamp

They’ll each be sharing their experiences in terms of how they’ve seen the crypto markets evolve in comparison with others; their view on where they’re at now and; their thoughts on where they need to go during their next stage of maturity.

Register now at coinscrum.com/register and follow the link in the confirmation email to register for this event.

Follow  @coinscrum

This week I had the good fortune of catching up with John Salmon technology lawyer at Hogan Lovells, we had an interesting and wide ranging talk on what’s going on in crypto-land, new forms of raising money, and the laws and regulations that affect them.

Colin Platt (CP): Hi John, it’s been a little while since we last spoke, great to finally be able to catch up again. Thank you for taking the time.

John Salmon (JS): Hello Colin, yes it has been, and great to be involved.

CP: John, before we get too in-depth, would you mind sharing a bit about your background?

JS: Sure, I’m a London-based partner at the law-firm Hogan Lovells, and have worked as a technology lawyer, advising on digital and online legal issues for more than 20 years. For the last 15 years, I’ve focused on financial institutions and technology companies working in innovative areas, which we now call FinTech. As you can imagine, I have spent quite a bit of time looking at cryptocurrencies and blockchain technologies.

CP: Great place to start actually. I’m really curious about your take on this raft of acronyms that have been flying around, ICOs, STOs, IEOs. Projects are using tokens and cryptocurrencies to raise money, what are some of the challenges that you see?

JS: You’re right, they have been popular and we have had a number of discussions with clients on what is, and isn’t allowed, and the implications of what they are looking to do. There are still several areas which need further clarity from policy makers and regulatory bodies. This is an important distinction to make, while people like to group policy makers and regulators together, they have very different roles, and levels of understanding. By and large, policy makers have historically seen cryptocurrencies and using these assets to raise funds as a way for people to get around the rules. Regulators focus more on AML, terrorism funding prevention, investor protections, and increasingly cyber privacy issues like hacks. In addition to working with clients, my role has also been to educate policy makers, and regulatory bodies about these markets.

CP: I often hear people in this space say that the rules are unclear, or the existing rules unfit for crypto. What is your take?

JS: This is a complex area. To some extent there are teams that simply don’t like what the rules say, or don’t want to hear the truth, others are confused about how they apply. The fact is that while many of the existing rules do work, 10-20% don’t really work at all or were designed for an analogue, centralised world. We see wording in the rules where it was assumed that a single regulated entity could sit in the middle and act as gatekeepers. Ultimately rules, like those around money laundering, put the job of policing at the banks. In cryptocurrencies, this may not always work. We can very much look to the roots of bitcoin, which grew up in the wake of the 2008-2009 financial crisis, and found supporters who were disillusioned with the existing system and often used bitcoin as a way to get around failures.

CP: So this is an interesting point. Today we’re talking about tokens and rules, but as you point out, the early roots of cryptocurrencies, in many instances, could be seen as rejecting the rules. How does this square up?

JS: Really good point, ICOs are generally looking for clear rules rather than breaking the rules. Clients that come to us generally want to follow the law, they often just don’t know how. We talk a lot about the Howey test in the United States, but in Europe things are different, and what’s quite interesting is that European regulators have opened up the possibility of utility tokens. They have gone one step further and stated that utility tokens may completely fall outside of regulated parameters, these things are very unclear and it is currently very easy to get pulled back into a regulated area in one way or another. This can be because of the way that it was issued, or the lack of actual utility, or the way that it is marketed or promoted. It’s also important to note within EU regulations, that while EU countries are adopting more complex sets of rules for cryptocurrencies, they still also need to respect EU regulations like MIFID II, which can be complex for those working in this area.

CP: I am always fascinated by the notion of utility tokens, and personally feel like a lot of the project purporting to be utility tokens are just trying to hide what is actually a security. What are some of the things that you might look at to determine if it is actually a utility token?

JS: As I said, doing it right is really hard, and there aren’t clear tests yet, but areas like marketing, issuance and utility are important. The Swiss regulator, Finma, have expressly talked about utility at the point of issuance. Take for example a “blog token”, you sell a token that gives you access to read this blog, that’s useful today. Maybe you use that money to pay yourself and expand the blog, so in time that token could become more useful, even more valuable than the money you paid today. It’s pretty clear in this example that anyone that bought the token did so for the purpose of the underlying utility and not on the basis of trading a security.

CP: I like it, I should start charging everyone to read this blog. You did mention something important, the potential value going up over time. What about secondary markets, are those important factors?

JS: There are varying views on this. Having a secondary market for a utility token isn’t a non-starter, but some regulators may look at this as an indicator of whether the token is an investment or not. Intentions are very important, and the things that issuers do and say will have an impact. For instance, paying listing fees to cryptocurrency exchange venues could, in some circumstances be seen as a negative. Simply having a secondary market however, isn’t necessarily definitely negative, Wimbledon sold debentures to fund the development of its stadium and these are tradeable on a secondary market. Stamps are another excellent case, all postage stamps have a defined utility, but some have collector value and trade on platforms, this doesn’t detract for their utility. It is similar if we look at investors buying houses off plan and then reselling them.

CP: John, thank you very much this has been fascinating. I think that we’re going to need you to come back again soon to discuss more of these areas and look into how things evolve.

JS: It would be my pleasure to come back. Thank you.