How did you get an idea to set up a CryptoLombard in Russia?
When my friend and a business partner had mentioned about “setting up a lombard” I did not take his words seriously but in a couple of days ideas started to come about its establishment and possible profits for clients and for me as a businessman. It took us only three months to transform an idea into the reality. We started to work recently and a technical launch took place at the end of December 2017.
When bitcoin’s price grew up to $3000 in an instant, I became familiar with cryptocurrency topics and cryptocurrency started to interest me not just as a financial asset but as a technology of the future.
What cryptocurrencies are accepted as collateral at your lombard? What assets are put in pledge in most cases and what amount?
We accept the most popular cryptocurrencies such as Bitcoin, Bitcoin Cash, Dash, Dogecoin, Ethereum, Litecoin, Monero, Ripple, Zcash. In the greatest demand are loans secured by the pledge of Bitcoin и Ethereum. Security loan amounts differ as this service is interesting for various groups of market participants. If we take miners, they normally put in pledge 2-3 coins even for the minimum sum of 10,000 rubles and wait until coins grow in value in order to sell them effectively later. It is quite the contrary for investors – they borrow the maximum approved amount up to 500,000 rubles. Some of them buy even more cryptocurrency with the loan money.
You offer the interest rate of 0,32% per day (which is 9,6% per month), what is the reason for that? How many clients have already got the service and can you describe an average client of the cryptolombard?
We are on the market recently and for me the main priority is quality rather than quantity. Now for us the most important factors are to provide an ideal functioning of the system and the software, to ensure professional skills of our specialists and to have business processes running like a well-oiled machine. We plan to start up traffic only in the second half of this quarter but even today I feel that there is a great interest to this service.
As for our clients – they are people of different professions, but I would specify some distinctive features: the majority of our clients are men aged from 25 to 50 and university-educated.
What is the actual process of a transfer of assets and funds?
If the loan amount is over 400,000 rubles, we can send a manager to a client and transfer funds directly to a client’s current account for convenience but, in reality, clients prefer to come to our office to know more about our company. It is clear that no one wants to transfer their assets to someone they do not know, people need to be sure that the service is safe, legitimate and eventually they will get their assets back.
Until the Cryptocurrencies Act is adopted, we, as legal entity, are not entitled to place cryptocurrencies in the company’s books of accounts, keep records, store, buy, sell or distribute them.
How do you evaluate risks in connection with instability of cryptocurrencies rates and how do you insure yourself against these risks?
We have reserves in case of strong drawdown for the period of half a year. If the rate falls and an insignificant non-recovery occurs, we will wait a few months. Cryptocurrency is a very interesting asset, for example, in 2011 bitcoin fell by 94%, in 2013 by 79%, in 2014 by 87%, in September 2017 by 40% and every time it did not just move back towards its initial price, but set new records.
The trick is that, in comparison with USD, bitcoin emission of limited to 21 million bitcoins which means that USD will fall in price and BTC will increase in price.
When, for instance, the USA carry out another currency issue for another war, it means that all people on the planet become poorer and pay from their own pockets, because a dollar’s price, on which in some way depends everything that has value, gets a little lower. In large part this attributes to the popularity of cryptocurrencies. People do not have trust in fiat money, banks, governments and social institutions. Today we witness the collapse of values in the West such as “humanity”, “democracy”, “liberalism” and “globalization”. It became obvious to everybody that there are no any values, there are just financial interests.
Blockchain is based on overall consensus of all participants in the system and there is not a single transaction which can be carried out until its authenticity is confirmed by 50% of participants. This inspires trust. In blockchain all the information is coded, participants are anonymous – that’s why the system does not distinguish nationalities, skin colour, level of well-being or sexual orientation. People do not wish to be watched on cameras, through domestic appliances, phones and social networks. Blockchain gives an opportunity to maintain anonymity of transactions. People prefer to be masters of their own destiny and to manage their funds independently.
Therefore, blockchain is more than cryptocurrencies and technologies, it also means values of freedom, equality and inviolability of private property. If we go back to the issue of price, in the long term a price is secured by value.
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