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Can banks become crypto’s unlikely savior? Croatian crypto pioneer weighs in

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Nikola Škorić, the mastermind behind Electrocoin, Croatia’s first-ever Bitcoin exchange, has built a name for himself in the cryptocurrency and blockchain community over the past decade.

What started as a simple hobby has now become the largest cryptocurrency brokerage service in the country. In 2021, the company checked in 80 percent growth in turnover and now has its sights set on expanding across the EU.

Škorić’s background has been diverse: from a computer engineer with varied interests, including a stint as a nuclear reactor operator, Škorić now remains dedicated to growing a business in the highly volatile crypto sector.

In an interview with The Recursive, the Croatian entrepreneur reflects on his experience and reflects on what the future holds for Electrocoin and the crypto industry – from regulation to the possibility of changing the banking system, or simply become a part of it.

The Recursive: What was the idea when creating Electrocoin in 2014 and how has it evolved over the years?

Nikola Skorić: We founded Electrocoin for practical reasons, because at the time crypto trading here in Zagreb was expensive, slow and tedious. And we realized we could do it faster, cheaper and easier. So we started offering this service as a hobby, and very quickly we realized that it could become a business, it progressed naturally.

From there, in a few months, my partner Marin Marzic joined us because he followed exactly the same thinking. We are both IT and Security graduates, with the same mentor and only seven years apart.

We were both passionate about crypto and we both discovered cryptocurrencies and realized we were able to offer a better service. Since then, our volumes have increased year after year. First of all, we just traded Bitcoin. It was like an Amazon for bitcoins, and then there was enough volume and enough revenue that we could build our platform.

And we started hiring people, we grew and at some point we realized that even though there are decent payment processing services, for some reason people prefer local services, as they ‘ve done with our local brokerage instead of going to Coinbase for example, or like they do by going to local banks instead of HSBC for example.

So we opened up our data processor, which now serves Konzum, the biggest retailer here, and Bazzar, the biggest online store, and then gas stations, all kinds of places, etc. So we exploded on the Croatian market.

In 2019, we recognized that there is also a need for cash-based services and business, as people want to buy cryptocurrencies through a bank account or card, or they also want to be able to trade cryptocurrencies. money for cryptocurrencies. But we’re not good with cash, so we didn’t want to do that – but there were physical exchange offices that didn’t know crypto, so it was only natural to integrate them. We have integrated into local exchanges and we now have around a hundred sites.

I would say that ultimately, everything was born out of necessity, through all these features and these new services. Today, more than 50% of our brokerage activities are based in the EU. Payment processing and physical exchanges are almost all done in Croatia, but we are moving more towards the EU and the wider European market.

How would you say crypto adoption has grown since you entered the industry?

This is quite correlated with the bull/bear cycle, especially in terms of the adoption growth it accumulates. For example, thanks to the bull market of 2017, adoption increased. But in 2019, which was the worst year, our volumes fell by 3%. Just last year, our volumes fell by 1 percent.

However, our overall volumes have increased, which I think indicates adoption is okay. Of course, these grow faster during the up cycle, and I think infrastructure adoption continues.

However, we also see that in mentalities, this is probably the worst period that the groups have ever known. Over the past ten years, there have been times when price drops have been more drastic. But we’ve never had this much negative exposure.

On the other hand, last month we had a fintech conference where a guy from MasterCard gave a talk about MasterCard’s crypto strategy, and we had several panels with bankers referencing to cryptography.

I think it shows that there is a change in mentality, so it is now completely normal to have large, sold-out consumer fintech conferences, where crypto is not just an integral part in the sense where you have crypto panels, speakers, etc. , but it is embedded in fundamental topics and members of the boards of directors of big banks talk about it. So I think we will see more exposure in the coming years, regardless of the bull/bear cycle.

What would be the role of regulation and how can it change the crypto industry?

I think we’ll just see the same thing in the sense that all industries will more or less follow the same path.

At first it’s the Wild West, then regulations come into play for obvious reasons. At the same time, it promotes or hinders progress. I would say that regulation hurts us less than it hurts those who want to enter the market right now.

It is therefore much easier for me to talk about regulation than about new players on the market. On the one hand, this helps establish the legitimacy of the industry, but on the other hand, it costs us a lot of unnecessary costs.

Can regulation solve the various crypto scams that are occurring?

Regulation is not a silver bullet. The largest Ponzi scheme in history was perpetrated by the Chairman of NASDAQ in a hyperregulated industry – Bernie Madoff. So obviously, if regulation didn’t solve the Bernie Madoff problem, it wouldn’t solve the crypto scam problem.

However, it is something that must be done. We see this best in our cooperation with banks. For example, Electrocoin has a compliance department. And we’re a relatively small and innovative institution, so we pay close attention to what regulators say. We try to approach compliance from a practical point of view and see what we are trying to fight against.

In my previous life, I was a nuclear reactor operator, which is one of the most regulated industries. And I completely understand how big institutions work when it comes to regulation – the first thing the department’s HR manager told me when I got there was that this is not the place to innovate.

And this is more or less the state of mind of large institutions. So big banks are not the ideal place to innovate, for obvious reasons, because they control huge amounts of money. But if there is no regulatory framework, they will not want to innovate and they will not know how to approach us or how to work with us. This is why we need regulation, but as I mentioned at the beginning, it is indeed a double-edged sword.

Is crypto currently going through its worst period?

I don’t think we are in danger, mainly because of the change in mentality. Prices may go down, they may go negative, and transaction volumes may go down – but adoption and overall sentiment has never stopped growing. So I’m going to frame the question in terms of how we can get back on track.

I think we are definitely on the right track, we just have to keep going. There’s this super fake quote from Winston Churchill, he didn’t actually say anything like that but I really like it, “when you’re going through hell, keep moving forward”. So I think we are exactly in this situation. Right now we are going through hell and we are progressing slowly.

And the current industry will not die, because MasterCard is now taking over. Visa carries the torch. Two of the largest payment networks in the Western world now offer services that will allow banks to offer cryptocurrencies. So I think that shows where we are right now.

Where do you see crypto in five or ten years in terms of its relationship with the banking system?

We had the privilege of listening to a board member of Croatia’s second largest bank last month and he made an excellent point: banks and the banking system have survived over the past 200 years.

It is too optimistic to think that cryptography can kill something that has survived for the last 200 years. I never thought crypto could kill the banking system, nor do I see the point. However, I see that banking evolves over time, and banks are not stupid: very, very smart people run the banks and they employ very smart people.

I think we’ll see more banks innovate and change and banks moving closer to crypto, banks integrating crypto. I also see the other sides: we see the largest crypto institutions acquiring banking licenses.

Also, I wouldn’t say that indie crypto is going to die out and disappear, because it’s a place of such radical innovation. Crypto is all about innovative startups – cryptos are popping up here and there every day.

In the field of decentralized finance alone, new startups appear every few days, and you have completely new and unseen opportunities because innovation is radical and rapid. I don’t think this will stop in the next five or ten years – for example, you can have banks buy out all the crypto startups today, and in two weeks you will have a whole new industry springing up out of thin air go.

So I think we will see convergence in the long term – banks will integrate a lot of what we do now, but I don’t see the sector disappearing completely because it is such a radical area of ​​innovation .

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