I had the pleasure of interviewing Vijay Valecha, Chief Market Analyst at Century Financial Brokers. Vijay has over 10 years’ experience trading the financial markets, with a deep knowledge of both fundamental and technical analysis, specializing in asset management and derivative trading. In his current role, Vijay tracks economic and market trends for global markets, bonds, shares, commodities and currencies, formulates trading strategies and plays a key role in educating clients. He also frequently produces research reports which give an in-depth look at topical financial and economic events that have the potential to impact regional and international markets. He works closely with clients to help them understand their risk and return expectations and provides support to novice and experienced traders, HNI investors and corporates.
Thank you so much for doing this with us! Can you share 5 ways that Regulation and Regtech can help stabilize the Crypto Economy?
· Safe guarding of investors
Almost every alternate day there is news of crypto currency exchanges & accounts being hacked which has restricted investor participation atleast a few that are aware of the risks. Many investors have lost a lot of money and life savings because of these hacker attacks.
Another risk is the fraud offerings made by many startups. Many analysis state that 80% of all new crypto offerings are fraudulent, they offer currencies with promise of getting listed on exchange soon and huge appreciation in value plus bonus free coins, which are ultimately useless.
· Increased credibility & hence usage
Many crypto currencies are trade on exchanges which are not regulated and do not have proper safeguarding standards. One can only imagine the difference between investing in some exchange in South Korea as compared to a crypto offering on CME/ CBOE, which would give investors much more safe and credible alternative for investment.
If a coin is regulated the investment and usability of the currency would be boosted way more than by not being regulated.
· Prevent Misuse
Crypto currencies are untraceable due to use of block chain technology and hence have become a popular tool for money laundering and other criminal activities.
As per Rob Wainwright, head of Europol, money worth $5.5 billion USD are being laundered through cryptocurrencies annually.
While Blockchain provides a public ledger of all crypto transactions, criminals are using cryptocurrency tumblers or cryptocurrency mixing services to obscure the trail back to the fund’s original source. Newer cryptocurrencies such as Cloakcoin, Dash, PIVX, and Zcoin have built in mixing services as a part of their Blockchain network. Monero, drug dealer’s favorite crypto, provides anonymity without tumbling services due to its privacy-centric Blockchain design.
If cryptocurrencies are regulated this misuse could reduce considerably in areas of anti-money laundering, tax evasion and other criminal activities and hence make it a cleaner technology to use for the benefit of the overall crypto economy.
· Fear of being banned
Many startup companies and initial Coin offerings (ICO’s) work with the fear of violating regulations or uncertainty of upcoming regulations and hence are not able launch new ideas and innovations. Current regulations are decades old created even before the internet took off. There are overlapping oversight by various agencies in case of certain areas and hence structural improvements are required.
Such regulatory improvements would improve the new offerings and encourage innovation in the field of crypto currencies.
· Smart Contracts :
A smart contract is a computer protocol intended to digitally facilitate, verify or enforce the negotiation of a contract. It help in exchange money, property, shares or anything of value in a transparent, conflict-free way while avoiding the services of a middleman. With the security of the blockchain behind it, the contract is executed automatically without any human interference or risk of tampering. Almost every new Crypto issued today works on the ERC20 format, which is designed specifically for the Ehtereum which was built to support the smart contracts.
What are the top concerns that crypto firms should be considering in order to have a competitive edge?
· Protection against High Volatility:
The crypto market is highly volatile as the market for crypto is still small and the wealth distribution in cryptocurrencies is very disproportionate. Its lack of intrinsic value and lack of regulatory oversight makes the prices really volatile to sentiments portrayed by media as it really does not have a real fundamental base.
How can we get the volatility under control?
– By regulating Cryptos
– A coin backed by currencies or commodities
· Protection against hacking by educating customers:
– Blockchain technology in its current form is very difficult to use. The user must know how public/private keys work.
– Lack of knowledge and awareness of the blockchain technology, users need to be educated thoroughly so that they do not get into any ponzi schemes with all the hype in Cryptos
Can you share examples of measures you take to prevent internal data breach?
· Track data: Tracking the data within the organizational network helps avert any unintentional use of sensitive data.
· Ban unencrypted device: Organization should have a ban on the device that are unencrypted. Laptops and other portable devices that are unencrypted are vulnerable to attack.
· Monitoring data leakage: Periodically checking security controls will allow the security team to have a control on the network. Regular check on internet contents to locate if any private data is available for public viewing is also a good measure to keep a check on the data leak.
· Breach response: Having a breach response plan will help in triggering quick response to data breaches and help in the trimming of misuse.
What are some things that you do on daily basis regardless of how busy you are?
A few things I would do on a daily basis would be to follow all economic news and check up on any event that could trigger a movement in anything in the financial markets. It is important to realize that all asset classes irrespective of correlations have huge contagion effects and keeping a track of the macroeconomic view is very important.
What are the top 3 upcoming conferences you are attending and are excited about?
· Blockchain Connect: The 2018 US China Blockchain and Digital Currency Conference at LAX Marriott Hotel on August 22, 2018 is organized by Blockchain China Connect, Artisan Business Group, Inc., and partnered with FundingPost.com. The conference is the only Sino-US investment and funding focused event for blockchain and cryptocurrency industry. Hundreds of blockchain entrepreneurs, investors, bitcoin mine operators, traders, and legal taxation experts are expected to attend, and it will provide a great platform for peer-to-peer networking and exploring investment, finance, business and collaboration opportunities between the U.S., China and other countries.
· The RegTech Convention : The RegTech Convention will take place on November 14–15, 2018 at the Kap Europa, Frankfurt. Gathering more than 600 delegates, representing banks, insurance companies and regulators from across the globe the motto is “Collaboration for Innovation”. Close collaborations among all stakeholders along the Regulatory Value Chain could form a catalyst for innovation and efficiency that can make a significant contribution to strengthening financial stability.
· RegTech Rising : This is Europe’s leading RegTech event providing a platform to connect with financial services firms, start-ups, technology providers, regulators and policy makers, all searching for RegTech innovations that will accelerate the industry’s digital transformation. The event will be held in December 2018, in London.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
The quote that inspires me most is “Don’t try to buy at the bottom and sell at the top, it can’t be done except by liars”. Everyone who joins the financial industry tends to believe that it is possible to maximize returns without risk, which probably only means that the person has been lucky once or twice. In the end the best returns are generated by the most disciplined and rational investors.