Gautam Paul of NZ Blockchain Forums talks to Ross Carter-Brown, our Co-founder and CEO!
Hello, I'm Gautam Paul from NZ Blockchain Forums. Welcome to our second episode of Blockchain Bytes. Today I'm speaking with Ross Carter-Brown, CEO of BitPrime, a New Zealand based, full-service cryptocurrency retail trading platform that Ross launched in March 2017 with Monique Wright.
Welcome, Ross, to Blockchain Forums. Before we start, please introduce yourself tell us about your background and yourself personally.
Fantastic, thank you for the introduction. I've got a varied past; quite an unconventional route into the financial services industry. Educationally, I studied ecology and biology originally; my specialities were particularly around plants and soil chemistry. I actually left university two-thirds of the way through a Masters of Applied Science - my intention was to complete that and
then move on to a PhD and stay in academia, then I saw the opportunity in the market with cryptocurrencies.
I could sort of see that things were starting to move towards the mainstream, and I decided to jump on that opportunity. Prior to that, bitcoin or cryptocurrency trading was a hobby of mine. It wasn't something that I did hugely seriously. It was only when I realised the opportunity towards the end of 2016 as the cryptocurrency market was gaining traction [that] I thought that now was the time to enter the market and try and solve some of the problems of accessing cryptocurrency markets in New Zealand and it turned out to be perfectly timed.
I think if we launched BitPrime six months sooner or six months later, we would have had a lot more trouble, either the market not being mature enough or too much competition and difficulty with accessing things like banking services, for example, so it was very well timed, I think.
Oh, thank you for that. So that's how it all started in terms of the lead up to BitPrime and where is it now. In terms of how many staff does the company have, are you based in quite a few countries?
Yes, we currently have 28 full-time staff spread across New Zealand, Australia, Brazil and the Philippines. About half of our team are New Zealand based, and the rest spread over those other
countries. So, we use a lot of international staff to help with time zone issues and things like that because we are a 24/7/365 operation. We never close.
We are a predominantly cloud-based organisation. We only have one small physical office with three staff. Other than that, all of our staff work almost exclusively remotely, and that turned out to be a fantastic strategy when COVID-19 arrived.
Well, this is the 21st century way of working, I guess, isn't it? So, in terms of the cryptocurrency market - in terms of trading - what is the size here in New Zealand? I mean, if you look at retail and institutional investors, do you have any ideas of how big the market is?
Yes, we have a partial picture. We would estimate the local markets - this is probably going back three months now -it could be in excess of 300 million New Zealand dollars a year!
That estimate would include New Zealand domiciled operators, so the true volume is probably much larger if we were able to include figures from overseas-based exchanges where New Zealanders might be wiring money to operators overseas. So, at least as much as 300 million NZD a year; probably much larger if we had the full picture.
And in terms of growth, any idea what percentages you'd be expecting or are expected?
That's difficult to give specific metrics on because the market is so volatile, not so much in terms of just the price, but also with trading volumes. But I can tell you that we signed up more new customers in January 2021 than we did for the entire year of 2020! So there's been significant growth. We've probably tripled our customer base so far this year to give you an idea of the growth. It is variable; we do get quiet years as well. But, 2021 is definitely surging in terms of growing cryptocurrency interest and just interest in blockchain technology in general.
That is remarkable growth in terms of the demographic where are these investors coming from? Who exactly are they, and why?
We serve predominantly a New Zealand market. So, most of our customers would either be living in New Zealand or have business interests in New Zealand. For example, New Zealand would make up at least 90% by trading volume of our business.
In terms of demographics, it's quite varied. It's still quite male-dominated - we're probably seeing in the region of 75 to 80% of our customers [being] male. But that's starting to change. With age groups, it's very evenly distributed. I would say it's a normal distribution if you think of a bell curve. So, we have customers right from the age of 16. I think our oldest customer is 92 -
a former share trader; a very interesting guy to talk to. So with that, with the bell curve, we probably have the bulk would kind of be the 25 - 65. So, still a really big bracket. But, what we tend to see is we do have a lot of younger people getting involved in cryptocurrency but, because they may not have entered the workforce yet or are still studying and things like that, they may not have the disposable income to invest or trade cryptocurrencies as much as somebody who's, you know, much further down the career path. So, a key marker would actually be, as a business, the 45 - 65 age group. That's both in terms of seeing bigger trade volumes in that demographic, but also simply the way that our business is set up and the niche that we occupy. We're best suited to serve that segment, especially with some of our specialised OTC trading offerings, as well as the account managers and things that we have for more of the, I guess you could say, professional or semi-professional investors. But, generally speaking, we have a cross-section of the whole of New Zealand. [Everyone] from people that work at supermarkets to police officers, accountants, lawyers - across the entire spectrum of society.
And why BitPrime? I mean, how do you position yourself to capture this increasingly aspirational and affordable sort of client base?
We're a boutique cryptocurrency retailer. We have two segments, BitPrime retail which provides trading for the general population. Then we have a very specialised OTC trading desk which caters for institutions and professional investors.
Generally, the split is under NZD 50,000 in terms of trade or deposit size. Our retail segment [would make up] 75% of our customer base, and then NZD 50,000 upwards would be BitPrime OTC.
What we provide is a higher level of customer service and customer support. Particularly technical support.
What we've found in the cryptocurrency market, generally speaking, they are predominantly automated exchanges, and in terms of customer support, it's normally delivered via a ticket system.
So, if somebody has a request or an issue, they'll send an email which turns into a ticket, and they might receive a response in 24 hours. And then you have to send another response. It's quite tedious. Whereas we offer 24/7/365 live chat. Our response time is usually under one minute. We also offer fantastic key account managers as well for some of our bigger traders. So, we really do offer a higher level of service, more personalised and more specialised. And obviously, being based in New Zealand and being banked in New Zealand, we offer high levels of security and trust, generally speaking because you're dealing with the New Zealand banking system.
That's great, and that leads me on perfectly into the next question. What are the tax implications when it comes to this sort of trading and dealing with cryptos?
That's an excellent question! It's a question I get a lot, especially around certain times of the year. I'm not an accountant; I'm not qualified to give specific tax advice, but, generally speaking, cryptocurrencies are taxable in New Zealand. There has been a misconception in the past, because there wasn't a full suite of regulations in place initially, that perhaps you didn't have to pay tax, but you certainly do have to declare cryptocurrency holdings in New Zealand, and you're taxed based on realised gains, and you can also claim losses. You can claim tax back on realised losses. Obviously, most people generally don't like to sell at a loss but, one example would be is if you had a bunch of dough in the cryptocurrency market, but then you decided to buy a house, and you needed some money for the deposit. It might make sense, in that case, to sell your portfolio at a loss because you needed the money right now. But, you could actually claim that loss back as part of your annual income tax return. Once again, that's generally speaking; it's a little bit more nuanced than, but that's generally how it works. Realised gains and realised losses.
It's an incredibly volatile market or certainly has been the last couple of years; what are your concerns with regards [to this], [do] you think it's going to level out and become a bit more steady?
We generally have seen a decrease in volatility this year. I mean, on a day-to-day basis, we're still seeing high volatility, but for a long period of time, we were trading sort of between 50 to 60,000 USD mark. Trading sideways for quite some time. I think as you've probably seen in a lot of recent media commentary, and obviously, with a new all-time high reached of 69,000 US dollars bringing it close to 100,000 New Zealand dollars, there has been a lot more money pouring into the cryptocurrency market. A lot of that appears to be on the back of increasing inflation, particularly globally, but obviously, we have some quite high inflation locally as well. But, the price is determined by the international market, not by the New Zealand market. Internationally inflation is on the rise as well, so that seems to be quite a significant driver at the moment. There are other drivers as well, which is there's always a regulatory risk with any investment and with the cryptocurrency market where there is an incomplete regulatory framework if we speak internationally. There's always a high risk that the government or a particular government might change the rules on you. And that risk definitely factors in inter-trading volumes and in the prices, in general, but we're starting to see a lot more certainty on the regulatory side.
There's obviously the inquiry in New Zealand at the moment from the Finance and Expenditure Committee. We're also seeing similar legislation being looked at or a similar inquiry in the United States, and that's replicated across a number of Western countries. So the general tone of those inquiries is to regulate and tax as a general approach which gives those governments greater control of those markets but also provides greater certainty and protections for investors as well.
And you mentioned about bitcoin touching 100,000 New Zealand dollars recently; where do you think it's going to end up?
Oh, that's a hard one! In 2017 I made a prediction about bitcoin price, and I thought by the end of 2017, bitcoin might hit 5,000 USD, and of course [it hit] 20,000 USD. So since then, I generally steer away from giving specific price predictions, but if we looked at the macroeconomics at the moment, there's a huge amount of cheap credit - cheap money - flooding the system still. Even though stimulus is being reduced. And there are very few places to put that money to earn a return. We're already seeing, you know you could argue, excessive valuations in the equity markets and residential and commercial property across the globe. So there's very few value propositions for investors and very few places to get reasonable returns. So I don't see the current uptrend ending in the near term. I think we will see this continue until the Christmas/New Year period where a lot of traders take a break. If I was a betting man, I would say that you know, 100,000 USD wouldn't be out of the question. Particularly given the new institutional investment and managed funds that are entering the market. That is a punt because I don't have a crystal ball but based on the factors today, that's probably a realistic figure, I think, for the end of the year. But, we'll see.
For the sake of our audience as well, I mean, in terms of the use of hard versus soft wallets, can you just go into a bit more detail in the sense of how they work?
Absolutely, so wallets are essentially used to store your private keys for your cryptocurrency and the private keys [are] what gives you control of your cryptocurrency. Essentially, blockchains are basically a big digital ledger that's distributed over millions of computers, so you're not really keeping your assets in your software on your phone or in your hardware wallet. They're actually being stored on a ledger which is distributed, as I mentioned. Where the difference between those two types of wallets are is that with the hardware wallets, you have a second form of verification before you send a transaction. So, for example, if you are sending me some ethereum from your mobile phone on a software wallet, you might just have to paste in my wallet address and hit send; and perhaps enter your pin number. If you were using a hardware wallet, you would do the same thing, except you would have to use the device to physically confirm the transaction on the device. So, it's an extra layer of security. Software wallets are very secure - they use high levels of encryption. I think the key security advantage between the two would be that hardware wallets overcome the issue of screen overlays, for example, on a computer and yeah, so that will be the main security advantage. I think there's not a huge difference in terms of the interface in terms of how your portfolio is displayed. Very similar across software and hardware wallets, and increasingly these days, hardware wallets actually integrate with a software wallet application so you can actually integrate the two. So, a hardware wallet is just an extra layer of security.
Okay, and besides pure digital assets like bitcoin, how do you think other tokens like ethereum and Solana, etcetera, do they really have a practical role and value in blockchain applications?
Absolutely! The cryptocurrency market has exploded. Obviously, the first was bitcoin, but there's literally thousands now. I would only seriously look at the top sort of one or two hundred by market cap. There's a whole host of different technologies that have been developed under the blockchain or distributed ledger technology.
There's a couple of different ways you could view the range of cryptocurrencies available. In New Zealand, the primary motivation, at least at the moment, for using cryptocurrencies is still for investment purposes, but certainly, in some developing countries overseas where they have hyperinflation and things like that, cryptocurrency is actually used as a day-to-day currency. So in the New Zealand context, from the investment perspective, I think the most opportunities would be with, for example, smart contract platforms like ethereum. You mentioned Solana, soon to be Cardano, a few platforms like that, and the reason I say that is, when there's a gold rush, it's the people that sell the spades that make the money, you know, in the long term.
And what these platforms provide is you can always regard them as cloud computing, in some respects, and it allows people to build other tokens on those blockchains. The poster child would obviously be ethereum; there are literally thousands of cryptocurrencies with tokens and smart contracts that have been built on the ethereum platform. The ethereum platform has almost single-handedly facilitated the explosion of decentralised finance. Of course, there are many other players in the space now.
So, though those platforms are hugely significant, from both an investment perspective but also from a technology perspective, and facilitating a whole host of different use cases, so if you're interested in the cryptocurrency market, I think smart contract platforms or blockchains are a good place to start.
So Ross, what are the other crypto trading platforms here in New Zealand that we should be looking out for, or we should be tracking?
We're very fortunate in New Zealand; there's quite a number of established cryptocurrency exchanges of various different types. One of the other majors would be Easy Crypto which is another kiwi born and bred sort of business owned and managed locally. They have a similar business model to us, but they have a slightly different focus.
There are also a number of custodial exchanges, including Dasset and Kiwicoin, and there's a new Australian operator, I believe it's called Swyftx, that is recently now offering services in New Zealand as well. So New Zealand consumers are really spoiled for choice locally. And obviously, you have the added security of staying within the New Zealand jurisdiction and banking system.
And lastly, but by no means least, how about sharing some of your insight as to sort of what else is happening here in New Zealand. Are there any new tech companies that we should be watching out for or new applications and opportunities yet to emerge, and where do you think we're going to be sort of by 2050?
That's an excellent question; it's difficult to pinpoint specific New Zealand operations because so many of these projects are multinational projects or they have teams that involve people from all over the world. I would say the most significant project in New Zealand, though, the most significant company, would probably be Centrality. [They] managed to raise a huge amount of investment back in 2017. And they've been developing a whole range of projects under the Centrality umbrella, such as digital identity verification, for example, but there are also a range of other technologies being developed locally. One example, I guess, would be with supply chain management. There's another huge one; there's one company that's using recycled textiles to produce clothing and things like that. And they, I believe, are using a blockchain to help manage those increasingly stressed supply chains. We're also seeing more of that and with shipping and things as well.
Thank you, Ross. It's been an absolute delight and pleasure speaking with you, and with that, I think we are done and all the best.
Thank you very much.
Last Updated: 13/11/2021