Bill Barhydt, CEO of Abra, on the Potential of Facebook Coin towards Mass Blockchain AdoptionBy Mar 27, 2019 6 Min Read
As held in Hong Kong Mar 13-14, Token 2049 gathered crypto leaders and financial professionals to discuss the role of blockchain towards global financial inclusion. During the session “The Push Towards A Billion Crypto Users”, Bill Barhydt, CEO of Abra, highlighted the needs and importance of the underserved population, which is essential to drive mass adoption of blockchain.
We are delighted to speak with Bill, which he further stresses the role of Abra towards global financial inclusion, as well as his insights in Facebook coin and ICO regulations to our readers.
From Boom Financial Inc. to Abra, we know that you are a serial entrepreneur in mobile banking and the target customers are mostly underserved population. Can you explain how Abra strategy will promote mass adoption in the future?
Our vision for Abra is global financial inclusion and we want to basically build one single app like WhatsApp for messaging so everybody in the world can use Abra to access different financial services. I want a single app that could work in every country in the world. And the only way to have an app that's legal everywhere, is to turn each phone into its own bank. Our priority is to make people investing into different asset classes very easily with Abra. Then we'll have other services like credit or money transfer over time.
We see that Abra is using Bitcoin smart contract because of its liquidity, security and huge market cap. Do you think there will be a better replacement of Bitcoin smart contracts as blockchain technology evolves?
Maybe, I think the advantage of Bitcoin has is that it's more secure, knowing the fact that the scripting language of Bitcoin is not very complicated. It makes it more secure, right? Whereas Ethereum does everything, but it's very complex. Programmers make mistakes in developing their applications without conducting proper testing. On the contrary, that would had been almost impossible in Bitcoin. I don't even think you could develop the dApp with them. But over time, there may be other things that we want to do like lending and other services where Ethereum based smart contracts might be better suited. It may be a combination of both Bitcoin and Ethereum over time, we'll see!
We see that Abra recently launched a new equity investment feature that allow users to invest in traditional stocks and ETFs using Bitcoin. Do you think that using Bitcoin to invest into traditional financial instruments is riskier for your customers?
I think it does the opposite. It opens up new investment opportunities that the retail consumer doesn't have, which decreases the risk versus illiquid high risks investments that they're normally relegated to. For example, Chinese and Southeast Asian customers who previously do not have access to the western market, can now use Abra to invest in the S&P 500, Gold, emerging market ETFs and European market ETFs. This facilitates portfolio diversification and dramatically lowers their risk profile. On the other hand, we want to add the Chinese and Hong Kong markets to the app as well, while using the same crypto collateralized contracts, so Americans can invest in Asian stocks easily like Tencent. By democratizing the access to different asset classes, I think it dramatically lowers the risk profile of investors because of portfolio diversification.
How does Abra handle AML and KYC issues with its offering of crypto-collateralized assets?
Remember that in the Abra app, when users collateralized the contract, the collateral will be held by users. The definition of money laundering is somebody else hiding the money that you acquired illegally. This is not the case for Abra as the money is held by users.
Regarding the KYC issues, we are working with exchanges in order to convert the fiat to crypto and then the crypto gets pushed back into the Abra app. Those crypto exchanges need to know the identity of customers. We are already doing KYC on consumers if they want to deposit fiat to their bank accounts. If you deposit using crypto today, you're holding the crypto just like the normal open source bitcoin wallet. But if you trade crypto using your bank accounts, crypto exchanges need to know your identity before your transactions get approved.
What are your views on the current state of decentralized exchanges?
Nobody has really come up with a technology model for a truly decentralized exchange. I'm not aware of any, banks like to claim that they are decentralized, but it's really not right when their system was hacked, they were able to shut it down and then bring it back online. Well, by definition that's highly centralized, so I think the idea of a decentralized exchange is very compelling but it really doesn't exist yet. I’m not sure if it ever will, we’ll see!
What are your views on the new JP Morgan coin and Facebook coin? Are they even real assets or how do you define them?
I think the JPM thing is just not interesting to me. I think it's an enterprise project, I have no idea why they're doing it, or what the details are. It's really not interesting to me. Facebook coin, on the other hand, could be very interesting. Because Facebook has WhatsApp if they could actually create a currency integrated with WhatsApp that worked in every country, that would be extremely interesting. I hope what they do is creating a model of fiat-based cryptocurrency launched in the public blockchain, which works in every country and compatible with other applications because then we could use it in iPhones. If you want to basically buy your Apple shares, you could just take the money from WhatsApp push it into Abra and buy Apple’s share, and that would be awesome. I know the people on Facebook are working towards this direction in payments. I have a feeling that Facebook is going to start off with a small number of countries for money transfer, which isn't that interesting at first, but if they can really increase the number of countries for global adoption, then it's interesting.
Do you think the transactions between cryptocurrency and traditional financial instruments can enhance the transparency of the stock market?
I think the potential is there, just depends how you use it. Just another tool, right. Like everything else, you could use the tool for good and bad. I think the potential for having tokenized real-world assets doesn't really solve a lot of problems. Transparency could be one of the problems just depends on how it’s used. There are cases where I can create a public cryptocurrency based on traditional stocks, yet the cryptocurrency can be completely anonymous and have zero transparency. It just depends on which direction the markets go and what people want and what regulators do. The problem with tokenizing real-world assets is that the same rules apply. There are no new rules meaning that the old rules don't go away. If you create a new security, that's a token I mean, and this is the lesson that everybody learned when they thought that there were no rules for ICO, but in fact the existing rules on securities still apply. Now the question becomes, what value does the digital version have versus the paper version? I believe legality is what investors are concerned about. No matter the financial instrument is operated by smart contracts or traditional stocks, investors will invest to it as long as it is legal and regulated. I think this delusion that somehow tokenizing the physical world is going to enable all these new forms of commerce, but we are not there yet. I think the huge benefit of cryptocurrency is in eliminating trust, and I think a lot of people and governments don't get that by definition because they want to be that trusted party.
In 2019 we noticed more nations started to regulate ICOs and crypto exchanges. What are your views on the current regulatory landscape of ICOs?
My feeling is that if you already regulate securities issuance in your country, then you are already regulating the ICO market. It doesn't matter whether the token is digital or paper based. I think there is a growing acceptance that there is no regulatory arbitrage to be had in the ICO world, and the public should be aware of this. At the same time, regulators should improve their understanding in the differences between ICOs and traditional stock, despite both are regulated by securities law.