ISITC Europe Chats to Igor Erker about frontier investment in Cryptocurrencies Part 1
Following on from his insights at the recent ISITC Europe General Meeting in London, Igor Erkel from Columbus Financial Advisory, shares more insight into his world of investing in Cryptocurrencies
Nigel Solkhon : What were the key challenges for you to set up your funds in what you described as frontier investing and how did you overcome them? (trading, risk, legal, regulatory, Custody).
Igor Erker : There were quite a few challenges both major and minor. Custody and fund fiat bank accounts were the heaviest and we had to secure custody away from traditional providers and utilise a cold storage wallet provider who was plugged into a Fund administrator and fund management company (Cold storage is a nominee account). There are not many banks prepared to offer fiat-crypto (token based) and crypto-fiat (token based) fund transaction supports. As a Hedge Fund issuing a regulated fund we would most probably have to look for a solution in Lichtenstein or Switzerland.
Nigel Solkhon: Can you describe the value chain in your processing from research through to settlement?
Igor Erker: We deploy a structured approach to investing:
– Research: A combination of a Venture Capital fundamental approach and listed crypto technical analysis.
– Execution: In listed assets either through Brokers or directly on the market as an exchange member. Private transactions directly with the target company through SAFT (Simple Agreement for Future Tokens).
– Settlement: Listed assets are first executed in hot wallets on the exchanges and settled via cold storage.
Nigel Solkhon: How do you view the difference between ICO and IPO and how will they compare in 5 years?
Igor Erker: An IPO has a regulatory set of rules (prospectus, characteristics of securities etc), ICOs differ from IPO mainly in the definition of the underlying asset class. In case of ICO each asset is slightly different. Predominantly with different rights. Where I expect similarities is ICO process becoming institutionalised with the same requirements as IPOs . Global retail ICO will become extinct. In best case scenario a geographically limited retail ICO could still be there. ICO process will resemble IPO process, hopefully with very flexible definition of the asset class.
Nigel Solkhon: How do you see an industry group like ISITC Europe, contributing to the future flows in digital currencies?
Igor Erker: Bridging the gap between the Cypto-currency processing and best practice as well as institutional requirements. For example, I would be happy to discuss with custodian’s solutions available on the market today, but not yet institutionalised under AIFMD or bank regulations.
Nigel Solkhon: How do you see the commercialisation of Central Bank digital currencies evolving?
Igor Erker: Digital currencies could become a practical substitute of existing electronic money. Where I see a proper evolution in central banks utilising digital money is when monetary policy would be defined in cryptocurrency smart contracts. But for now, this is more utopian than not.