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Interviews

Interview with David Sapper on cryptocurrency trading and onboarding new customers

Friday 10 August 2018 | 08:42 AM CET

The Paypers interviews David Sapper, Blockbid’s COO to find out more about the cryptocurrency exchange, and how they manage onboarding and KYC while fighting fraud

Could you elaborate on why you founded Blockbid? What was the idea behind it and what is the background of the founders?

I have a background in technology, and in 2013 I started building mining rigs, a business which – although turned out to be not as profitable as I thought, was however developed on a concept very interesting to me. As for the others, we were involved in a trading group consisting of about 30 people, working across many different markets. We all came from many different backgrounds, from bankers and lawyers to AI specialists.

In late 2016, we started moving from standard markets to the cryptocurrency space, as we all had some understanding of what drove the market, and what the innovative products were. This meant that we had to work across 12-15 different exchanges to be able trade any particular coin. There was no single place where you felt secure and safe to not only leave your money but to trade as well. Our frustration kept building around the lack of transparency, the time it takes to withdraw your money, the inability to change your password, and the fact that sometimes sites would go down without explanation.

The leading players were not taking any steps to help the customer, which made us realise the need for a single site that felt secure for the users and that could facilitate multiple coins. So, we created Blockbid, identifying many other gaps in the market in the process: gaps in regulation, accountability, transparency, and the abundance of ‘bad actors’ on sites, facilitating crime or other fraudulent activity and creating a bad name for the industry.

The second step for us was bringing the regulation and accountability to the crypto market. So, we made our motto “bringing stock-market-like accountability and accessibility to the crypto market”. We started putting in place what we thought was going to be the stepping stone to help build our platform on a solid foundation; we obtained trading and financial services licenses.

What is the approach of the Australian regulators regarding the crypto market? Are they supportive?

Even though the Australian government was generally open to the idea of cryptocurrencies, there was a lot of uncertainty around what was needed to put in place in order to be able to let businesses grow and open up here in Australia. Before the Australian Transaction Reports and Analysis Centre (AUSTRAC) was founded, there were no centrally enforced regulations, but there was an understanding that the government was willing to support businesses, as long as they came forward and told the government what was necessary. Because of this uncertainty, we decided to move to a place where there were clear regulations: financial services. We obtained four types of licenses; a wholesale license, a retail license, an e-payment license, and a credit license. We thought that, as a company operating under the Australian Financial Services Licenses (AFSLs), even though cryptocurrencies were not technically classified as a commodity, we would operate under the same guidelines as any other financial institution. We set in place anti-money-laundering policies, a counter-terrorism financing policy, best-behaviour policies, setting all the paperwork in place from the very beginning. So, when the government gave AUSTRAC the permission to provide digital currency exchange licenses, we were already a few steps ahead of the curve. Around April this year, AUSTRAC released a digital currency exchange license and we were the third organisation to receive a digital currency exchange license in Australia.

We are planning to launch at the end of August, because we wanted to have worked together with the leaders of several industries, like LexisNexis Risk Solutions, to successfully take that step forward for cryptocurrency. LexisNexis is one of our best partners, because it allows every customer and investor to understand that we are implementing bank-grade solutions to provide that ease-of-mind and sense of security for users of the site.

There are a lot of players in the anti-fraud and KYC space to partner with, could you elaborate a bit on the vendor selection process?

We were talking with ThreatMetrix to provide digital data monitoring platforms to our site. During that time, we were aware of the acquisition by LexisNexis, but we were looking at other providers as well. However, after the acquisition, LexisNexis was the only company that could provide us with the full range of services that we needed for both our physical and digital data protection. LexisNexis is probably the best partner for us to both protect our users and not let any bad actors into the platform, at the same time. 

What is your target market for the launch in August, and how big is this market?

On the one hand, we aim to attract people who have heard about Bitcoin, as well as some of the other top five, such as Ethereum or Ripple, who are looking to understand the process of being involved in this space and what it is going to bring to our generation.

Some of them may have technical understanding, and for them the first step is their own list of requirements is around payment options and security. We want to make those users feel secure and facilitate trading the coins that they prefer. However, we are also aiming to attract institutional investors. Until now, most investors have run into the same problems as consumers; they have the need for transparency and accountability. We will be open world-wide, as long as their country allows them to trade cryptocurrencies.

What are the fees that you apply to consumers? What is your business model?

We are going to maintain a flat 0.1% transaction fee, which is on par with other global exchanges. We also developed a Bid token, which is a cryptocurrency we created ourselves, redeemable for 30 minutes of free trading on our site. There is no market entry fee, and no cost to deposit money. We aim to give all our customers a transparent image of all the costs.

To gain additional perspective on the company’s innovative endeavours, we asked Thomas C. Brown, senior vice president, US Commercial Markets and Global Market Development, LexisNexis Risk Solutions to set the context of this promising story.

The Blockbid deal has secured a significant amount of international attention. Why do you think that is?

Thomas C. Brown: Blockbid presents the first opportunity to merge two powerful technologies in a novel way that fulfils the company’s mandate – “trade with confidence.” To achieve that mandate Blockbid has to keep bad actors from accessing the ecosystem it is bringing to market, and the only way to do that in the crypto space is by having an accurate reflection of who is trading. Until this deal, that picture just wasn’t available in an elegant way. You may have heard of a “true mirror.” Well, a true mirror doesn’t reverse left and right so that means a person can see the true reflection of whatever it is they are viewing. Bringing together LexisNexis Risk Solutions and ThreatMetrix technologies is the “true mirror” for KYC (Know Your Customer). Combining physical identity data with digital identity data enables Blockbid, and other fintechs, to see the true person, not one that is manipulated, but the real one they are doing business with. This deal is a breakthrough moment for fintechs because it combines cybersecurity and compliance in an integrated way previously unavailable to the market.

About David Sapper

David Sapper is a cofounder of Blockbid. He is an entrepreneur with two successful exits under his belt and operates as the bridge between the commercial and technical sides of Blockbid. He is experienced at penetrating new markets by leveraging his analytical skills to research the industry and using his passion and technical experience to build disruptive startups from the ground up.

 About Tom Brown

Thomas C. Brown steers the global market strategy for the alternative data business of LexisNexis Risk Solutions. He frames the vision for solution innovation that leverages the company’s proprietary high-powered technology, vast data repository and advanced linking capabilities. Companies in more than 100 countries rely on LexisNexis Risk Solutions to stem financial crimes, make informed consumer and small business credit-risk assessments, and buoy collections and investigation initiatives.

 About ThreatMetrix

ThreatMetrix, A LexisNexis Risk Solutions Company, empowers the global economy to grow profitably and securely without compromise. With deep insight into 1.4 billion anonymized digital identities, ThreatMetrix ID delivers the intelligence behind 110 million daily authentication and trust decisions, to differentiate legitimate customers from fraudsters in real time.

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