Bitstamp boss says bitcoin is not a security as cryptocurrency winter drags on.
By Eric Johansson
Jean-Baptiste Graftieaux, the new CEO of Bitstamp, looks down the barrel of the webcam and says that everything is fine despite the ongoing cryptocurrency winter and other existential threats looming over the industry.
Luxembourg-headquartered Bitstamp markets itself as the world’s oldest cryptocurrency exchange. Having first seen the light in 2011, the company is a grizzled veteran in a sector bursting with nascent non-fungible token (NFT) marketplaces, Web3 startups and bankrupt bitcoin businesses.
Bitstamp has lived through the booms and busts in a sector haunted by volatility. Graftieaux is confident that the company can do so again.
“We have not been significantly impacted from a financial situation standpoint, by the [cryptocurrency] winter, [but] of course, revenues are not the same as last year, unfortunately,” Graftieaux tells Verdict.
Bitstamp is a private company and declined to share how much the cryptocurrency winter has affected its revenue. It should be mentioned that rival exchange Coinbase’s revenue has dropped by 63%. South Korean exchange Upbit has reported a 61.3% drop in sales since last year.
Boisterous as the Bitstamp boss may be, things are different this time around. The sector has been knocked off its pedestal as one of the big winners of the pandemic.
Over $2tn has been shaved off from the total value of the cryptocurrency market since its peak in November last year. Then it was worth over $3tn, but it plunged below $1tn in June this year.
Elsewhere, lawmakers want to police the industry even tougher than before. Over the years they have forced vendors to either shut down or introduce background checks on their customers. Countries like China have banned bitcoin businesses entirely.
In the US, the Securities and Exchange Commission (SEC) has kicked off legal proceedings that could end up defining some digital assets as securities.
If the courts find in the SEC’s favour, it would force several types of digital dosh to comply with stricter rules about how they can be traded, which translates to higher costs for exchanges.
Across the pond, the European Commission has agreed on the new markets in crypto-assets (MiCA) proposals that could further rein in the sector.
Puritanical crypto bros hate this. They believe any regulation would run counter to the decentralised and ungoverned vision of bitcoin founder Satoshi Nakamoto – who no one to this day knows who he really was.
Despite this tightening of the rules and the ongoing cryptocurrency winter, the new Bitstamp CEO remains bullish about the future. Part of the reason for his confidence is that, much like the company itself, Graftieaux has been involved with the industry for some time.
Swissborn Graftieaux first joined Bitstamp in 2014. By that stage in his career, he had already clocked up experience working across a number of roles at industry heavyweights like Montblanc, Accenture and KPMG.
“I am like a Swiss knife,” he jokes. “I’m a chartered accountant [and] I have done some startups in the past.”
Just before he was tapped to join Bitstamp, Graftieaux had spent almost six years as PayPal’s European chief compliance officer.
“I was super interested in crypto already,” he recalls, saying that he’d increasingly become aware of the technology during his time with PayPal.
PayPal was founded in 1998. So in 2014, it was still a fairly new business. However, Graftieaux says that bitcoin and other digital assets represented an interesting potential evolution of financial services, one that PayPal hadn’t ventured into yet.
He was intrigued by the decentralised nature of the technology and how it seemingly screamed in the face of everything that had come before it. So when the founders of Bitstamp tapped him to come to join the nascent venture, he was eager to heed the call.
“I said to myself that if I don’t do it now, then I might be regretting it,” he say.
The atmosphere of the firm was completely different from the shiny offices and sleek operations of the bigger businesses he’d worked with before.
“It was a startup in the garage at the time [with] like 10 people in Slovenia,” Graftieaux remembers.
Over the next two years, he worked with the company, providing Bitstamp with its first licences and enabling it to better comply with regulations.
In 2016, he left the company to join e-commerce giant eBay as its European managing director. He held that role until May 2021 when he rejoined Bitstamp as its European CEO.
When Graftieaux stepped into his new role, he reported to the then-global CEO Julian Sawyer. For people familiar with the UK’s fintech ventures, Sawyer is a bit of a celebrity.
Sawyer was part of the second founding team of British neobank Starling Bank, which he’d joined after the first team had abandoned CEO Anne Boden to launch the rival challenger bank Monzo.
While Sawyer arguably provided Bitstamp with a sense of gravitas, news broke in May that he had suddenly left the company barely 18 months after joining it.
Despite reaching out to Sawyer, little is known about why he abruptly jumped ship. The cryptocurrency exchange maintains that he left to “pursue other opportunities.”
His LinkedIn profile currently lists him as an honorary senior visiting fellow at City University in London and as an advisor to the board of Volt Bank, roles he’d held even before joining Bitstamp in October 2020.
Graftieaux filled the vacancy left behind by Sawyer with immediate effect.
Graftieaux became the global CEO of Bistamp during the raging tempest of the current cryptocurrency winter. A perfect storm of unforeseen events had swept in over the nascent industry, causing the change in the weather.
Russia’s illegitimate invasion of Ukraine is one of the biggest reasons behind the downturn as it plunged the global economy into chaos. The conflict erupted as the planet was hoping to recover from the shock of the pandemic.
The technology sector has been hit particularly hard by the ensuing downturn, kicking off whispers of an imminent tech bubble pop.
The squall of rising inflation and the looming threat of a recession sent the shares of publicly traded tech companies like Tesla, PayPal and Affirm tumbling in the first months of 2022.
Privately owned companies haven’t escaped the suffering either, as buy-now-pay-later giant Klarna saw its valuation drop a drastic 85% this summer.
Google, Apple and Facebook-owner Meta – who has been promising to rocket us into the Metaverse – reportedly froze hiring in the same period.
Covid-19 darlings like digital exercise company Peloton and communications software developer Zoom have seen their market capitalisations collapse within the scope of a few months.
Cryptocurrencies haven’t fared much better. The crypto crash at the beginning of the year has so far shaved $2tn off its all-time high value in November last year.
It was at this stage that Graftieaux stepped into his new role as global CEO of Bitstamp. So far he’s putting on a brave face. He claims while rival firms like Coinbase, Bitpanda and BlockFi have responded to the downturn by axing huge swats of their workforce, Bitstamp has no plans to cut its roughly 650-strong staff.
“There is no plan for us [to] lay off [staff] like our competitors,” Graftieaux presses.
Instead, he sees the competitors sacking their employees as an opportunity to deepen Bitstamp’s own talent pool.
“We are attracting a very nice pool of talent at Bitstamp at the moment,” he says.
Bitstamp has told Verdict that it will adhere to all sanctions imposed on Russia.
That doesn’t mean that Graftieaux’s first months in the new role haven’t been marred by controversies. While he is confident that Bitstamp can outlast the cryptocurrency winter, market watchers started to doubt him this summer when the exchange introduced new inactivity fees.
In June, Bitstamp planned to start charging inactive accounts €10 per month to hold their assets. Crypto bros went ballistic. They took to Twitter, subreddits and any other platform they could find to bad-mouth the initiative.
Some even suggested that Bitstamp was so cash-strapped that it had to invent new ways to squeeze dosh out of its customer base.
Following the outcry, Bitstamp eventually backed down in July. It now maintains that there will be no inactivity fees.
While he understands the backlash, Graftieaux believes it was blown out of proportion and that the inactivity fees were not as sinister as people thought.
“The rationale of [the] inactive fees [was that] we have some clients on our platform [that we] would like to provide additional information [to us],” he explains, saying that it was a matter of refreshing their address or to update their identity document.
These are things that you would arguably expect from all financial services providers in order to avoid money laundering and other financial crimes.
“[We wanted to] try to give them some incentive to provide the relevant information,” he says. “Our intention was to charge a small fee, where either they provide information, or we have to suspend their accounts. And this is what we call inactive fee.”
Graftieaux also rejects the notion that Bitstamp’s finances were in such dire straits that it had to resort to new creative ways to diversify its revenues. Although, again, he doesn’t provide any details about the company’s finances during the interview.
Graftieaux also says that the inactivity fee project started in November last year, at the height of the crypto bull run.
While Bitstamp maintains that it has so far come out comparatively unscathed from the cryptocurrency winter, other crypt companies have not been so lucky.
Over the summer, the cryptocurrency Terra Luna and its sister token, the stablecoin, TerraUSD collapsed after a large amount of the digital asset was dumped, which led to it becoming unpegged.
Following the crash, South Korean police raided offices associated with the company after investors had levied fraud accusations against the firm.
Similarly, crypto lender Celsius filed for bankruptcy in July. The company is now undergoing a restructuring and has been accused by regulators of looking like a Ponzi scheme.
“Bitstamp zero exposure, zero exposure at all [to these businesses],” Graftieaux says. “So no impact on [our] business.”
He claims Bitstamp has avoided exposure to the collapse of these ventures as it is much more risk averse than other businesses.
“[Our] risk management framework is very sophisticated and our risk appetite has been quite low,” he says. “And I think we stand on a very traditional digital assets, if I can say like that. And as you know, on our platform, we are a spot exchange, we are offerong staking, but today we [don’t offer] derivatives options, margins to any of our retail clients. So the impact on Bitstamp is zero.”
Regulators are coming for cryptocurrencies. The EU has just approved MiCA. Graftieaux welcomes the push for more centralised European regulation, arguing that it would streamline the continent’s fragmented legal landscape.
“It’s different from Spain, to Italy to Germany – it is extremely expensive to monitor this regulatory landscape and legal framework,” he says.
“MiCA would change all of that,” he adds. “In two years, two years and a half, [it will provide] a level playing field where we could get a MiCA [approval in one] country [and] passport [it to other] European countries.”
There are similar bills being drafted across the pond, which Graftieaux welcomes with open arms.
“We are super supportive of more regulation to build and enable the level playing field,” he says. “That’s the first reason. The second one is that more regulation will give more trust, and more trust will give probably more consumers on the market with more protection in order to buy crypto for investment or for payments.”
The SEC is behind of the most publicised pushes to rein in the Wild West of the crypto market this summer. The market watchdog sued Coinbase in July, accusing it of having enabled the trade of digital assets that should’ve been classified like securities.
If the regulator wins the case, it would mean some cryptocurrencies could be listed like securities, meaning the trading of these assets would be subjected to increased scrutiny. If that happens, those assets would be removed from Bitstamp.
“If we would be in a situation where an asset would be defined as security by a regulator in the region, or in the world, we won’t take any regulatory legal risks to have the asset on our platform,” Graftieaux says.
He also rejects the notion that the world’s biggest digital asset, bitcoin, should be viewed as a security.
“[Is] bitcoin a security? Probably not, at least not for the time being,” he says.
Despite the cryptocurrency winter, the Bitstamp CEO is confident that this is not the end of the crypto industry.
“We see lots and lots of interest from very significant institutional players today,” Graftieaux says.
Bitstamp’s own survey of some 10,000 retail investors suggests that 52% are now invested in some form of digital asset. Of some 2,000 institutional decision-makers, 31% said that they planned to increase their crypto investment.
That comes as more traditional financial service providers like PayPal, JP Morgan and Mastercard have also started to provide crypto services.
The sustained interest in the industry is the reason why the Bitstamp CEO is hopeful that there might be an end to the cryptocurrency winter.
“Hopefully, [by] next year, we should see some kind of [bull] run come back,” Graftieaux says.
GlobalData is the parent company of Verdict and its sister publications.
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Bitstamp boss says bitcoin is not a security as cryptocurrency winter drags on.