Getting started with cryptocurrency has always been a problem for newcomers interested in investing. Now is a critical and exciting time, when more newcomers will be entering the space than ever before, and the community is working hard to deter fraudsters and other criminals who took advantage of the previous bull run.
Reasons for investing in cryptocurrencies may vary from person to person but the same rules apply to each of us, and anyone can make mistakes, especially early on. Many exchanges are working proactively to enable straightforward custody for their customers, while reducing the effect of malicious actors through more secure, intuitive processes.
To understand the challenge of making cryptocurrency more accessible, we talked with Roman Valihrach, CEO of Confirmo Limited, whose projects include the exchange Coinmate and payment gateway Confirmo. In the following sections, he expands on central issues that will dictate the course taken by this next wave of popular interest, from education to security, and what new investors should do to protect themselves in the digital economy. As we announced just last week, you can now buy and exchange crypto directly from Trezor Suite in a secure environment, thanks to collaborative efforts of partners like Coinmate.
There are many exchanges on the market and it is difficult to know where to go and whom to trust. Here, Roman covers some of the questions and answers related to onboarding and looks at how to build good habits when handling assets.
Q: What are the biggest hurdles for newcomers to the crypto space?
“There aren’t that many hurdles standing in the way any more; pretty much anyone can open an account with an exchange, go through a quick video identification process and have everything ready to take deposits in fifteen minutes. A lot of attention goes to mistakes people have made, but really these have been studied and built upon. We’ve been here since 2014 trying to minimize these risks for users and make it straightforward.
Support for things like fast euro deposits, which are usually done in one or two hours, means you’re actually ready to trade within two hours. It’s much quicker than traditional finance, which involves a lot of paperwork, trust and time. I think crypto has advanced over the conventional financial space big time and it’s still moving ahead because that is where the innovation is.
It used to be more difficult to get started back in the early days, but if you have your exchange picked and want to start trading it’s easy. Psychologically, it is hard to invest and get caught up watching the price go up and down, but that’s a different story. Each person has to answer for themselves whether they treat it as a long-term investment or something more speculative.”
Q: What about all the new financial mechanics that many exchanges are offering now, these weren’t so widely available during the last bull run, should a newcomer be paying attention to these?
“This trend of offering things like leverage is fine but it isn’t something a beginner should be exposed to. I wouldn’t recommend anyone trading with leverage unless they have some experience, a lot of time to devote to it, and great emotional discipline. I don’t see a good reason to invest in crypto with leverage, because cryptos are very volatile anyway, so it’s not like stock trading on a few percentage changes; in crypto you can have a ten percentage change in a day so it’s volatile enough to be traded just with your own funds.
Exchanges add these features because it creates more liquidity but I’m not sure it’s good for the customer, really. That’s why we’re not moving that way because we want to keep our service as simple and as peaceful as possible because it’s stressful enough to trade crypto. Seeing sharp moves going against you as your whole account balance is wiped out on a margin call is a scary thing. I’m not against it, if someone can devote a lot of hours a day to trade, that’s fine, but I would never invest very much. I’d first start trading my own funds and then try to leverage with a small amount if I felt the need.”
Q: There are many exchanges on the market and it can be difficult to tell who to trust, what are the most important things to look out for when picking an exchange or payment service?
“Reputation is a big part of it, so I think it’s really good to look at how the exchange communicates with its customers. We use TrustPilot to track satisfaction and have one of the highest ratings for an exchange; if you go through reviews and see that there’s no one talking about significant problems, you’re probably going to be ok. We’ve built up a lot of trust and engagement since we launched quite early, back in 2014.
In crypto you don’t need leverage, futures, or options except to create liquidity and we have enough liquidity. To add to that, offering many hundreds of tokens doesn’t mean an exchange is secure and trusted, but people like to trade these small coins because the moves are even more volatile than the top 10, so some people will see that as important. Non-KYC exchanges are also something to be wary of as those exchanges will be a target of regulators at some point.”
Notoriously, crypto-anarchists hold one truth dear: regulation is bad, and it counteracts the principles of Bitcoin. Whatever the truth may be regarding the societal implications, the reality is that governments will do their best to take whatever control they are capable of seizing, and some semblance of government oversight is inevitable.
Q: KYC is now a requirement for almost every exchange, what are the benefits and drawbacks
“The benefits are that having these checks in place does help stop things like scams, black markets, fraud, tax evasion, all of which is definitely a good thing. The detriments are that the government delegates these requirements onto the private sector. Coinmate, for example, spent almost 20% of its costs on development for KYC and AML adherence. There’s no support in enforcing these regulations, and you pay a lot of money for services to fulfill requirements.
Everyone’s doing the same thing and creating their own tools to handle it, as there’s no central service to check on requirements, and it’s very ineffective. Pushing the cost onto the private sector is a huge burden. If it was done centrally, costs would be so much lower. This I perceive as a barrier of entry for innovation and newcomers. Our list of things to do is huge, so we’re forced to leave things out.”
Q: What should governments seek to avoid when implementing regulation in this space and do you feel they are informed enough about cryptocurrencies to pass regulation that is effective and potentially even a benefit to the industry?
“Dark markets are not a good thing for crypto, and the freedom of trade has been misused in the past. So AML and other regulations have a place, but governments shouldn’t simply impose more regulation. They need to provide tools to the private sector to help make it more effective in applying legislation. There are services we use that monitor blockchain for illicit transactions, but regulating what crypto should be allowed to do and how it should be traded? I’m against that.
It is a very complex subject, and I don’t know if regulators have someone educated enough to provide them with the necessary information to create effective regulation, but maybe I’m wrong. In my opinion, the world is too regulated already and regulation kills innovation and I’m glad we established ourselves in this business a long time ago, today it would be much harder to do so. Switzerland is a good example, they seem to be in discussions and want to support crypto, which is a big difference from many places. This approach is much more positive because, if you can fulfill requirements, they support you.”
No valid exchange can exist without making security a priority. The industry is slowing down in face of regulation, with far fewer exchanges being established now than in 2017–2018. With more responsive and responsible efforts by exchanges, there is a greater pushback against fraudsters and thieves, but what can a user do to ensure their funds are safe?
Q: What steps should people take to look after their coins once they’ve purchased them from an exchange?
“How secure you need to be will often depend on the amount you’re investing. For a thousand euros, you might be happy to trust the exchange; many people trust it with more. We’ve never had a problem in six years but of course it’s a threat that does face the business, one that never goes away. If you start investing regularly or find out that the price has grown a bit more than expected, just move it to a Trezor for peace of mind. Most exchanges will provide some form of guarantee nowadays, but it’s cheap and easy to take ownership of your crypto so it’s almost always the better option.
Security is a major concern for exchanges, and there are constant attacks and fraud attempts which we must be prepared for. Users should take the same approach and equip themselves with the tools and knowledge they need to eliminate the risk of having their funds stolen. We see attacks a few times a month but we’re very well-secured, a regular user might not find out their seed has been compromised until long after the event takes place. ”
Q: What is missing from crypto exchanges?
“ Of course, by running an exchange I have a vested interest, but I think most of the people coming to crypto now will be looking for simplicity and peace of mind. Custody is not necessarily on peoples’ mind, but there is definitely a gap where things like paypal are starting to cater to the masses with non-custody products, or “Bitcoin IOU’s”, as many people call them. Coinmate has a pretty good history of sticking to Bitcoin’s principles, so we tend to be a bit isolated from the latest drama.
It can be stressful to trade, and watching the price constantly move is tough. There are people who are successful at day trading, but it’s hard to tell how many users actually turn a profit when they take that route. We added price alerts, which can be set to trigger if a pair reaches a two week high or low, for example, or if their portfolio grows by a certain percentage. Users can just receive an email instead of spending everyday watching charts. We’re trying to help people disconnect. Most people should just sit calm, invest and be a hodler, trading really is not for everyone and something like 90% of short-term speculators lose funds. Our mission is to bring crypto to everyone, to make it easy and accessible, providing peace of mind.
Crypto should be used more for payments, which still isn’t happening. Most traffic is rooted in speculation. Adding features for invoicing in crypto, like we’re doing, should help make it more commonplace. For Litecoin, for example, we have fast processing when users withdraw funds, to ensure crypto invoices are paid within the limited timeframe usually set, or paid without taking into account the fee. We have features that fix this.
Safe crypto storage was a big issue, as when you hold coins on an exchange you trust them to the governing entity. There should be an option to hold some part of the portfolio that’s not being traded, which is why we started integrating Trezor in the past and we want to integrate it more, by being able to show both the funds stored on a Trezor and those in trades, and make transfers even quicker, or instant.”