This week we have the pleasure of sharing our interview with Elizabeth White, founder & CEO of the White Company, and co-founder Edgar Radjabli. The White Company was founded in 2017 to provide the opportunity for clients holding cryptocurrency to purchase luxury goods without giving up their desire for privacy. As the business grew, it became evident to The White Company that there was a tremendous need for asset management and payment facilitation in cryptocurrencies. Last year, they announced the development of the White Standard, a fee-less, centralized stablecoin backed by fiat, as well as a payment solution in partnership with hedge fund Apis Capital.
SR: Hi Elizabeth and Edgar, what a pleasure to meet you! And what a nice weather in London to boot! I’m really excited for this interview because of the real use case experience you have, the White Company has converted over $100M in cryptocurrencies, and enabled over 28,000 transactions in luxury items, congratulations! Also, you enabled the first sale of art to be purchased with bitcoin, is that correct? EW: That was one of our first big announcements, we had a private marketplace and concierge company that turned into a public facing company with this sale. Facilitating payments in cryptocurrencies for real world goods was a milestone. This was such an awesome painting by Mark Flood, called “Select Your Victim”, and our client in Canada kind of fell in love with Mark Flood’s decentralized and anti-government message. It’s a cool contemporary art piece to announce to the world that people are spending their cryptocurrencies in this way.
SR: Definitely beats buying a CryptoKittie… EW: For real.
SR: At Stable.Report our first question is always: what got you interested in cryptocurrencies? ER: What got me started in cryptocurrencies was a $16,000 dinner in San Francisco back in 2011. I visited my friend Ryan Singer, the founder of TradeHill, one of the first cryptocurrency exchanges (now defunct). We went to a sushi restaurant, I paid the tab, and he sent me one bitcoin in exchange for his part, so…total cost was 2 bitcoins back then, which at today’s prices would be ~$16,000. It was early stages, long before cryptocurrencies gained broader adoption, but the concept of decentralized, digitized money was very interesting to me. My background being in finance, I was used to very slow international payments for goods and services, so the idea that you could send a payment in 30 minutes felt game changing to me, and little by little I became more involved and invested in it, and partnering with The White Company last year was my big foray into the space. EW: My story is a little less glamorous than a dinner. It started as a fun experiment with a bunch of my friends who worked on finance, I said I invested in bitcoin and everyone was skeptical. Little by little, bitcoin’s value kept increasing, so I would sit again with them, and ask them “how’s your portfolio doing? Mine increased by 25% this week”. And this kept going, so I continued to expand my investments, and that helped me fund my company. I actually did not need to raise outside capital because my bitcoin investments paid for it.
SR: You are also the first stablecoin launched on Stellar, why did you choose Stellar over Ethereum? EW: We realized that our clients had a need for a stablecoin to do purchases. If someone wanted to test drive a Lamborghini on sale for 12 bitcoin, but the day they decided to purchase it the market moved against them and it would be 18 bitcoin, we would lose the sale. At that time we started making a private stablecoin based on Ethereum that we moved our clients into as soon as they thought they wanted to make a purchase, so we saved the entire value for the sale, or were able to get them back into bitcoin or ethereum. We tested it first on our clients before officially announcing the White Standard, and we decided Ethereum was not scalable for what we wanted to do. XLM is amazing because you are able to do thousands of transactions per second through second settlements, its just the future and a wave that we are seeing will get adopted by merchants, if we are trying to compete with someone like Visa or MasterCard on settlements and merchant processing. ER: The other part about Stellar that’s really attractive for building assets is that it supports assets natively. So there is no necessity to write solidity code like you would for Ethereum, and it makes it much more user friendly. In order for someone to get started using White Standard, they can do so in less than four minutes. Creating a Stellar account and accepting White Standard into the account is very quick. We also have the White Wallet built on Stellar to allow people to buy and use White Standard without setting up a Stellar account. Stellar to us is the most user friendly protocol, not only does it have the speed advantages to support a payment ecosystem, but it’s also very easy to get started with.
SR: How does this connect with Apis Capital? ER: I’m the managing partner of Apis Capital, a hedge fund that is focused on trading volatility products in the S&P 500. It’s a completely unrelated trading strategy, and uncorrelated to the cryptocurrency markets, but our relationships with brokers, dealers and exchanges allows us to provide liquidity to the White Company when we are making large purchases on behalf of our clients. So if someone wants to buy a $4M vintage Ferrari on bitcoin, we can easily trade it at a competitive price into fiat using our wide network of exchanges. Apis Capital provides the back-end liquidity for the White Company.
SR: The White Company has already enabled over $1.5M in transactions with the White Standard, and there’s also $290,000 in White Standard deposits waiting to be spent in the White Company. How many banks are you in partnerships with, is it public knowledge? EW: If you are a wallet user you can see the bank accounts we are using. We are clients of HSBC, CapitalOne and Signature Bank. Our banking relationships are a little different than people might expect because we are a FinCEN-registered MSB and have money transmitting licenses, so we come at this from a business approach more than a cryptocurrency approach, because we are facilitating the sales and are the issuing company of the stablecoin. We have dollars on deposit that are backing our stablecoin, and at that point there is no risk because we are third party audited and do a daily pull from our bank accounts and stellar explorer to the website, it is fully transparent at all times how much money we have on deposit. We have multiple bank accounts at each bank just to cover ourselves up to $250,000 (FDIC limit), and want to make sure every dollar that we have in deposits is insured. We also have multiple bank accounts in different countries, such as EUR and GBP accounts in the UK, so we can transact and work with clients and customers in multiple countries. ER: We feel that the key part of a stablecoin, as it relates to banking, is redeemability, and that is our focus. If you are redeeming White Standard you will get an ACH the next day (if in the US) or international wire transfer. Our focus is on providing the liquidity to White Standard customers so they know they can redeem. The reality in the banking industry is that at any point, for any cryptocurrency company, a bank might suddenly not feel comfortable with cryptocurrencies. So the most important thing is not to have one banking partner, but to have a redundancy of multiple banking partners to insure that there is uninterrupted access to liquidity for your customers. EW: Also being as transparent as possible with what you are doing with the bank is very important. Having backgrounds in financial services and merchant processing businesses has helped us a lot to be able to legitimately say what we are doing at each banking level.
SR: Can you tell us a bit more about the White Wallet and White Pay merchant processing system? EW: White Wallet was developed as an easy on/off ramp for cash to get people into White Standard, and we are moving forward with other exchanges in the Stellar Distributed Exchange (SDEX) to provide liquidity and fiat on/off ramps to the Stellar community as well. The White Pay also provides traditional merchant processing, and we are partnering with a bank and credit card to have debit card allotments for using White Standard in the real world. Anywhere that a major credit card is accepted you would be able to spend White Standard, with that being said, we accept XLM, BTC, BCH and ETH as payment solutions for the merchant processing. You can convert at any time to White Standard to be able to use your dollar on deposit through White Standard at any merchant.
SR: I want to get a debit card, what’s the timeline for White Pay? EW: We are currently on beta for a select private group and it should be ready for customers in the next two months. Many think that people are spending every last cent of cryptocurrency they have on Lamborghinis and trips to the Maldives, but that’s not happening — people are spending some, but they are also holding it — just like the real world, with a spending and saving account. With Apis Capital we are also providing an investment account, trying to bring real world solutions to crypto currency holders. I myself, as a cryptocurrency holder, Edgar and a lot of my team want this to be massively adopted so we need to have real world solutions that people recognize.
SR: How has the adoption of a stablecoin impacted sales and revenue at The White Company? EW: I think it’s heavily beneficial for sales because the market is so volatile, and if we can guarantee a price that clients feel good about, it facilitates our sales.
SR: Why do you think it took this long for the industry to realize the need for a stablecoin? ER: Because they are not profitable. Crypto became popular because everybody was looking at it as “free money” to raise funds for their project through multi million dollar ICOs. Stablecoins are the next evolution of real-world usability, because no matter how much you believe in bitcoin or any other cryptocurrency, there is not a single merchant out there that is going to sell you a t-shirt or a Starbucks coffee for bitcoin at this stage. That may change over 10–20 years, but that leap is not going to happen any time soon, and as that realization became clear, it was well understood that there needs to be a cryptocurrency with all the benefits (i.e. quick to send, inexpensive, decentralized) and without volatility. Now that people are starting to realize that, they are looking at stablecoins in order to create widespread adoption of cryptocurrencies and then build economies, products and services we can actually monetize. EW: The first solution was providing people the ability to spend their cryptocurrencies, the next is to save value. We [The White Company] approached it from the perspective of a business/merchant/luxury concierge angle, it was a need for our current clients, so we didn’t start by building a stablecoin. We said we wanted to develop a market place, and then be a merchant processor. When we started looking into building a stablecoin, we noticed there were many questions behind the stability of Tether — which is now being investigated, so if our clients and merchants trust us, we had to build something trustworthy, transparent and not complicated to actually allow the merchants direct acceptance of the cryptocurrency.
SR: With over 70 projects today, how do you see the stablecoin space evolving? ER: I think its going in two directions: those supported by nothing and using financial wizardry to try to keep its price up, and those redeemable for fiat, like White Standard and TrueUSD. Being redeemable for fiat is key to making a stablecoin successful, because if it’s not redeemable, it’s not useful and people won’t trust it. Redeemable stablecoins will probably evolve into a few ones that are used extensively for different purposes, for example we see White Standard being used for micro payments, and TrueUSD perhaps for trades on exchanges, focused on being a cash option for traders. At some point there may be some projects that will combine the liquidity of those redeemable stablecoins and that will be interesting as well. On the other side, the non-redeemable stable coins, I think there’s a lot of projects trying to create something out of nothing and I don’t think will be successful in the long term. I think most of those projects will go away if their price starts to unpeg, if you look at economic theory, we all know you can’t create something out of nothing — and if you are trying to, ultimately, I think you will fail. I think stablecoins that are redeemable for fiat are going to become very very important for the cryptocurrency economy, and there will probably be a universe of five or ten that are extensively used.
SR: How has your definition of money changed overtime by facilitating payments in cryptocurrencies and developing a stablecoin? ER: Money effectively is anything that can be exchanged for goods and services. The definition of money has changed over the years, from seashells to gold and fiat. My definition of money changed long before bitcoin. When I was a kid and had Magic The Gathering cards, those were effectively money, because enough people had them and you could exchange them. In fact, the very first bitcoin exchange was Mt. Gox, which actually was an exchange for Magic The Gathering cards, so you could really make the argument that that was the first evolution of money for the bitcoin generation. But the definition is changing in the sense that there is more control over your money, I think that is really the key thing that cryptocurrencies are changing. It used to be that money was in the hands of the few, and it was regulated and controlled by those few. Obviously, regulation is a good thing and we still want that, but the decentralization of money is important because with something like a stablecoin you can now trade with people all across the world. You don’t have to be stuck by capital controls, or issues like we see in countries with high inflation like Venezuela. A lot of these problems can be solved by these new kinds of money based on cryptocurrency.
SR: Are there any developments or partnerships in the pipeline we didn’t cover that you would like to share? EW: We are working with a lot of partners that the Stellar Development Foundation introduced us to. Merchants who would like to accept XLM or other cryptocurrencies also need merchant processing, ease of transfer between USD to EUR and, Stellar being so fast and inexpensive to use, they are looking to them to provide the solution. Since we are a trusted anchor with dollars on deposit and a lot of experience, we are able to work with them. We are talking with a couple of exchanges, so that will be fun in the future, once more adoption starts happening — we only launched publicly in June and to actually have helped a lot of our clients go through out stablecoin at $1.5M is great, and you can see this on the Stellar explorer or other available trackers. We will keep testing products privately before announcing them publicly to keep them safe and protected. But we are launching a debit card backed by USD on deposit through the White Standard, so that’s going to be exciting. If you see the market moving against you and want to put it into White Standard, you can now get a debit card and go use it wherever the debit card is accepted. It’s really exciting because your BTC, ETH or XLM can now e used in the real world. ER: That really is a game changer for the cryptocurrency stablecoin ecosystem because White Standard would then be the first and only crypto that you can actually spend on the real world. That shows you the power of stablecoins because, when they are equal to one USD, then you are able to use them very efficiently. EW: Also, because we have relationships and business partnerships that are being paid in GDP and EUR, we are looking forward to provide liquidity and be anchors in those currencies for Stellar, and be able to easily convert between our own coins, which will be a lot less expensive than moving through banking. Possibly in the future we will move to other currencies to help the world get a little closer.