The Big Whale: 2022 has been particularly complicated for the industry. How did it go for you?
Nicolas Louvet: I would say it was rather mixed because we had several big highlights during the year, in particular with our fundraising (information revealed by The Big Whale) .
This strategic operation brought a lot of positive energy internally within the teams and enabled us to develop new products, to project ourselves to other countries in Europe. But like everyone else, we were also faced with a particularly complicated environment. We started the year in market conditions that were not what we had imagined.
A year ago, we were still convinced that the bull cycle would continue and that the market downturn seen at the beginning of 2022 was just a moment of stabilisation, which in the end was not the case.
How can we explain this?
A number of events disrupted the markets. First there was the war in Ukraine with much greater tension on risk markets, and then of course the cascading falls of Terra-Luna , Celsius and others, before FTX's .
What was the impact on your business?
These events obviously had an impact on our figures from the spring onwards with a much less buoyant market. We managed to cushion the blow because, in addition to buying and selling cryptos, we also provide support for customers, which helps them put investment strategies in place.
What level have volumes returned to?
We're well above the pre-Covid period, but volumes are more like those seen in early 2020 than in 2021 when we hit historic levels.
So everything hasn't collapsed?
No, of course, but the market could be much more buoyant! You know, when you're an investor and you sit on the board of a company, you don't want to see results that go up and down from one year to the next. You obviously prefer to see steady growth.
Are you going to cut costs in 2023 to adapt?
Yes, we are obliged to do so, like all Tech companies. We're not going to stop recruiting, people are still joining us, but at the same time, there are also going to be departures. Some teams are going to have to adapt.
Where exactly?
This concerns more the teams in contact with customers and in charge of consumer communications, quite simply because there are fewer customers at the moment.
We also had an international development policy, in Europe, and we're going to refocus our resources and target countries.
How many people are there today?
Including service providers, there are 90 of us. At the peak, there were 110 of us.
FTX was a cataclysm. The sector's image suffered greatly. How can we avoid the whole industry being singled out?
There is a lot of confusion on the subject, on the part of the general public, politicians, and I'm sorry to say, on the part of some of the media too.
What are we talking about in concrete terms? An actor who has committed an unprecedented fraud. Yes, there is a problem with the platforms, well more precisely with certain platforms, but does that mean we should condemn everyone? I don't think so, and we simply need to rely on the serious players.
This period is a stress test for everyone. The most fragile players are in trouble and there's going to be more breakage.
The Exchanges have tried to reassure by offering "proof of reserves". What do you think?
The way this has been done is a joke. The platforms have made a mockery of customers. You don't make a proof of reservations by showing what you want. If you do a proof of reserves, you have to take everything into account, i.e. assets and liabilities.
And what about you?
We're not an exchange, we're a broker. We don't have the same requirements as exchanges in the sense that we don't put a buyer and a seller in touch. We have a direct relationship with customers.
Are you secure enough?
We have all the necessary guarantees: we are registered with the Autorité des marchés financiers (AMF), we are working on accreditation, we have statutory auditors, insurance...
Do you sense any concern among retail customers?
With some customers, especially those who came to crypto later. They bought at high levels and so there is disappointment. But where we feel the most mistrust is obviously on the side of those who are outside crypto and have never invested.
Isn't this the main problem for the sector?
Yes, and it's a problem that we're going to have to solve quickly because we can't neglect the general public. The crypto sector is here to stay. What's a shame is that with scandals like FTX we've lost time. A lot of time.
How is Coinhouse used today?
We have two types of customer: those who only use us and rely on our service offerings (advisers, managed management...) and those who have an account with us and another with competitors.
Speaking of products, you were caught up in the fall of FTX with your "Crypto" passbooks. How do you explain this?
In hindsight we obviously say that we would have liked to avoid working with them, but we tend to forget that many players worked with Genesis and Gemini.
You have undertaken to compensate your customers. What is the status of the operation?
98% of our customers have been compensated and have recovered all or part of their funds in their accounts. Only 2% refused to sign the agreement and their funds are in their account, but in the "unavailable" section. They see their funds, but they are not available as long as they are frozen on Genesis and the other counterparties.
Why were some customers only partially compensated?
We set a limit of 6,000 stablecoin USDT (the equivalent of 6,000 euros) for full reimbursement, in other words 0.36 bitcoin or 5 ethers.
This limit corresponds to the highest of the average investment in Crypto Passbooks. All customers who had less than USD6,000 in their Passbooks have been fully reimbursed, and above this limit it's on a case-by-case basis.
Customers have recovered the equivalent of several bitcoins because we managed to recover the funds on the counterparty side. Depending on how the situation develops, some customers will receive additional payments.
How many customers have recovered everything?
92%.
How many customers were affected?
There were 2,560 passbooks to be precise, but some customers had several passbooks, so this concerns just under 2,000 customers.
How much did this commercial gesture cost you?
We don't disclose this figure.
Why did you have a non-disclosure clause signed?
It's important to understand what happened: we weren't obliged to compensate our customers. We could very well have applied the Livret contract, but we chose to compensate our customers for reasons of trust.
Everything we're talking about here has nothing to do with the Livret Crypto. It's a new commercial proposition that puts an end to contracts, so it needs to be framed and given a beginning and an end, if only because there can't be people waking up in several years.
The commercial gesture you've made is very similar to that of Just Mining, now Meria, which compensated its customers after the fall of UST . Hasn't it become compulsory to compensate customers?
That's a decision for everyone. We put a lot of time and money into building Coinhouse. We have a long-term vision and that's why we decided to make a commercial gesture. Coinhouse will act as an interface between customers and counterparties, and we will manage the recovery of funds ourselves.
Will the Livrets Crypto start up again?
The Livrets Crypto will start up again, but in a new form. For several weeks now, a lot of people have been explaining that these passbooks should be based on DeFi (decentralised finance) , and why not!"
But you have to understand what this implies, because for most DeFi protocols you are paid in the currencies of these protocols and when this currency loses half its value your return disappears, and I'm not even talking about hacks or bogus projects.
If we make a list, there are maybe two or three serious protocols, in other words we are in exactly the same situation as with CeFi (centralised finance) where there are only 2 or 3 players like Genesis and Gemini... The aim is obviously not to repeat the same mistakes.
You will no longer be working with BeCeFi players?
Not in the short term, that's a certainty, especially as the project is huge. Many players are not up to scratch. I'm shocked that some platforms, particularly the biggest, are not at all transparent.
That is?
All the companies we work with have to fill in a questionnaire that is around twenty pages long. This questionnaire enables us to get to know the company, its system and its jurisdiction. For us, it's mandatory.
We receive the same kind of requests from banks as crypto players. The biggest exchange on the planet has refused to respond to us. All the others have generally played along.
What are you going to use for your Passbooks?
We're going to base ourselves on protocol returns, in other words things close to staking (Kiln is one of the companies specialising in the sector) . We've had a node on Ethereum for a long time. Even on that it's not easy because this type of product doesn't exist on Bitcoin , nor on USDT, so we're going to have to find other protocols that combine security and profitability.
Do you think other big projects will fall off?
We're not sure of anything. The year 2022 has just shown that no one is safe. Celsius and FTX were supposed to be solid and they have fallen like houses of cards.
Coinhouse has been much criticised because of Livrets. What lessons have you learned from this?
That we probably need to talk more about the risks and improve communication. We thought things were clear, but that clearly wasn't the case.
I also don't think we should be self-flagellating because many of those making noise and grumbling, particularly on Twitter, aren't Coinhouse customers or even people in crypto. They're just taking advantage of the footage to vent their anger about cryptos because they saw an advert in the metro.
Don't you just regret that advert in the metro where you compared the Livret crypto to the Livret A, where the capital is guaranteed?
Honestly no, because it was validated by RATP's legal department and the Autorité des marchés financiers (AMF) was aware of it.
I would also point out that it was indicated that, with every investment, there is a risk. What we were highlighting was the return on the Livrets Crypto. It's all very well to criticise the fact that there's an industry around stablecoin yields, but that's another subject.
There was still an explicit reference to the Livret A...
Yes, of course. The fact is that returns on traditional investments were very low until a few months ago (0.5% for the Livret A, editor's note), but we never compared the two directly. We have always said that capital is not guaranteed.
What we have compared are the rates. The aim was to liven up the market, to tickle the banks, and some like Cogedim (real estate) took the opposite tack by making fun of investing in cryptos in their advertising. It's fair game!
Speaking of banks, Franco-German institution ODDO BHF has invested in Coinhouse. What are you using this strategic partnership for?
In particular, two things: to reach a new clientele, more from the traditional financial sector, and to expand in Europe. This project is still topical, but it's going to be done in a much more fragmented way because of the economic context.
Is traditional finance still interested in cryptos?
We're still seeing strong demand from investment funds. We have signed partnerships with several funds in Luxembourg.
What are you doing with ODDO BHF?
The aim is to facilitate the distribution of crypto products and access to wealth management advisor (WMA) platforms.
We are already working with Nortia (a platform that brings together more than 1,000 WMAs) on this subject. The aim is to enable banks to offer crypto products to their customers.
You have been defining yourself as a "crypto-bank" for several months. How far have you got with this project?
It's coming along. We will soon be launching a euro account that will enable us to offer a wide range of services halfway between the world of fiat currencies (euro) and cryptos.
Today, you can't live solely in the crypto universe, it's still very limited. Our aim is obviously to move towards 100% crypto, but we have to be clear, it's going to take time.
Who is this euro account going to be aimed at?
Mainly businesses, at least initially. It will enable them to manage payments in cryptos (customer payments) and also the management of digital wallets.
Many companies want to accept cryptos, but don't know how. We have started to support several companies, particularly in the luxury goods sector, in managing and storing cryptocurrencies and NFTs.
Is the payment card coming soon?
It's part of this strategy. Here too, it will be aimed primarily at businesses.
What do you think of the text arriving at the National Assembly and accelerating the timetable for PSAN approval?
I don't think that's a good response.
The text has caused a huge reaction, with some people talking about a potential impact on the sector that doesn't correspond to reality? Why is that?"
It's true that there may have been a bit of a furore, but that shouldn't make us forget the overall context. Of course we need to control the players better. As we have seen recently, PSAN registration is not enough: several PSANs have been deregistered because of their internal management.
The real issue is the AMF's resources. At present, they are unable to process applications in a timely manner and, on top of that, to manage the supervision of registered and future authorised players.
Isn't there a risk for small players?
This authorisation will have an impact on the industry and the business model of companies in the sector, but, if anything, everyone knew from the outset that this authorisation would be needed. It's a bit like when you're in the sixth form, you know that one day there will be the Bac. Everyone will have to take it.
The problem at the moment is that some people will have to go straight from sixth form to final year, and that's a lot more complicated.
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