For this podcast, we are delighted to interview Gregory Klumov, CEO & Founder of Stasis, a fiat-backed stablecoin based in Malta. This June, they introduced a euro-pegged stable coin, EURS, and outlined their aim of bridging the gap between decentralized finance and off chain markets. The Maltese Prime Minister, Joseph Muscat, was at the launch event and spoke about how Malta was taking the lead in establishing itself as the ‘blockchain island’ with the passing of new legislation on cryptocurrencies and blockchain.
This interview is <25 minutes long, feel free to click play and listen to it now, subscribe to our podcast here to listen later, watch it on YouTube, or simply go ahead and read the edit below. Please enjoy and let us know what you think!
SR: Gregory, its a pleasure to meet you, and I love the name Stasis, which signifies equilibrium in physics. What got you into crypto, and what inspired you to create a stablecoin? GK: I was an analyst and portfolio manager at a hedge fund, analyzing global macroeconomic trends and picking stocks and trades, and witnessed the housing crash of 2008. Back then, everybody was allocating to commodities with predictable supply curves and diversifying from assets that increase in supply, such as the USD, into assets which they thought had a more understandable supply curve. I began paying close attention to Bitcoin in 2011, and the idea was very similar: it’s the only linear supply curve on earth that is very forecast-able and not amendable. My partners then launched the world’s first Bitcoin fund here in Malta in 2012, and we had to educate government officials, fund administrators and auditors about the essence of digital assets. It was a fun journey and I realized I should pay attention and allocate capital to trade in this exciting asset class going forward. If there is a new crisis or situation with central banks printing fiat, it will inevitably reprice this asset versus other currencies — at the peak of the crisis in 2012–2013, global central banks were printing over USD$200bn/month.
SR: If or when currencies issued by central banks collapse, are you concerned about how that may affect stablecoins collateralized by fiat? GK: Credit is a demand that will happen in the future and future demand balances the price out, so if there is too much credit the currency cannot collapse. When there is very short credit as in Turkey, with no demand for their bonds or Lira, then it collapses. But the USD and EUR have perpetual bonds issued and there is always demand to buy and sell these instruments, so long as the global economy uses these currencies to trade, it’s impossible they will completely collapse. However, inflation expectations and investors sentiment towards a particular currency drive the trends of currency re-evaluations, and assets like Bitcoin, Gold and Real Estate could be repriced relative to these currencies.
SR: We know Stasis is compliant because of your daily statements signed by your director, as well as weekly and quarterly verifications by one of the big four. Could you explain this process and how it affects your bottom line? GK: This is the process that brings transparency and it’s a huge differentiator because other stablecoins have limited or no transparency. We understand how important the cost of risk is to institutional and accredited investors and this transparency in our balance sheet provides credibility and comfort to measure their credit risk against us.
SR: Where do most of your clients come from, are they mainly buying from fiat or converting cryptocurrencies? GK: So far mostly fiat, maybe 4% bought through cryptocurrencies. They are mostly institutional investors who want to either allocate to an ICO without the volatility or exploit arbitrage opportunities between exchanges. We are also witnessing a new trend with clients of OTC brokerage, because they charge a higher commission to enter the market and transacting through us provides a price advantage.
SR: How do current KYC/AML procedures delay your on-boarding and affect your bottom line? GK: In the current world it’s inevitable to have KYC/AML procedures, we inherited all the requirements that currently exist for European Financial Institutions. We require all documents to be less than three months old, notarized and apostilled, so it can delay client on-boarding by a couple weeks.
SR: Does this affect your plan to reach developing nations? GK: Not at all. We understood from the beginning that these rigorous on-boarding processes require some time on the client side. It’s business as usual. We also pioneered what I call a Crypto-ISDA, which is an agreement in British Law that allows you to get EURS by depositing any traditional financial security, whether it’s stocks, bonds or crypto. So we can accept any security out there and provide EURS against it, it’s the typical process of how institutions exchange capital trading derivatives and other financial products.
SR: If I’m a teenager in Venezuela with crypto assets and want to use a stablecoin I cannot comply with some KYC/AML requirements. So how do you envision the future of stablecoins in general? GK: There will always be a secondary market where you can trade BTC or ETH for stablecoins, in small quanitities, without having to comply with regulations. But I think the main question has to do with “mental models”…some jurisdictions prefer the USD, others the EUR or Yuan, yet none recognize one particular stablecoin. The USD was de-pegged from gold since 1971 and the whole world mentally adapted to that fact, I think stablecoins may follow a similar, but much faster, process of adaption to convenient, on-chain transactions of digital assets. Our EURS allows users to transfer to any wallet for a fixed fee of 50 cents, but the educational process away from the conventional banking system takes time.
SR: How does Stasis generate revenue? GK: Stasis will be generating revenue from commissions and from managing the reserves — think of it as a huge money market fund on the blockchain.
SR: Are you planning to run on alternative blockchains other than Ethereum, and can we expect Stasis to have a pair for the USD, GBP, etc? GK: We are really involved in the development of our own blockchain, and also have a pilot product on the Stellar blockchain, but since our focus is on institutional clients, Ethereum is the most secure blockchain to transfer our tokens on and until that changes we will not be moving significant amount of Stasis to different blockchains.
SR: How has your perception of “money” changed over time? GK: Money is something that your neighbor is willing to accept as a means of payment. Two thousand years ago it was stones, then rare stones and shells, and then governments came up with gold and silver standards. Money is something you want to have to pay for goods and services, it just needs to be convenient and accepted as a means of payment. I think that Bitcoin and other digital assets are currently too volatile to be accepted as a means of payment, but stablecoins are a perfect intermediary to get mass adoption and give people the feel of blockchain use and its benefits, while keeping the conventional logic of traditional currencies.
SR: Is there something we did not cover that you would like to tell our readers and listeners? GK: I suggest everybody to read Digital Gold by Nathaniel Popper. There is a huge learning curve to climb in digital assets, I find it fascinating that even finance professionals don’t understand the concept, they don’t understand the technology behind it. Similarly, tech people without financial education have a difficulty understanding the value of what digital assets can be worth. I suggest everyone to climb their own learning curve, it’s definitely a new market place, definitely an exciting asset class and it’s just getting noticed by institutional investors. Before blockchain, you could only have invested in a particular asset or company after it had gone public, now digital assets are available to the public audience and institutions are just starting to value, gauge and allocate to it. I find it quite fascinating because it’s definitely an investment opportunity as institutions are the ones who hold liquidity and can bring billions into this market place, thus increase the value and liquidity for the benefit of all investors. Our product is a perfect fit for institutions to start their journey with this exiting market place.