Cointelegraph continues publishing interviews with prominent guests of BlockShow Asia 2017, that took place in Singapore in November 2017.
This time we talked with Nick Cowan, managing director and founder of GSX, Gibraltar’s first regulated stock exchange. With his 30-years’ experience in the investment business and knowledge about the culture of business across the Eurasian continents, he is fascinating company for a conversation.
Nick commented on dynamics of crypto communities, narrated his own love story with the fintech market and applied the theory of the paradox of choice to Bitcoin.
Cointelegraph: How do you find the venue here today in Singapore?
Nick Cowan: It’s great! We have obviously been to a number of conferences so far, but this is fantastically well organized. It’s great and really good people, there’s a lot of familiar faces as well. There was a lot of interest when we were trying to get involved -- a lot of people we know were saying -- you gonna be at Blockshow? We are really pleased to be here, fantastic event!
CT: I imagine that you travel a lot, how would you describe the differences between crypto communities on different continents?
NC: It’s really interesting because you go from continent to continent and there is a mixture of regulated and unregulated, but also there is a real interest in terms of acceptance in terms of what’s happening.
So, there are two dynamics that I see. The distributed ledger technology usage, so operators looking at the Blockchain, and how they can use that to transform their business, and then the cryptocurrencies themselves and what’s going on in that space with regards to traders, etc.
I went to an Asian country this week and spoke to about 500 people, the average age I would say was 60; they were cryptocurrency traders.
That business is absolutely on fire!
NC: Then you go to another jurisdiction, and it’s much more focused on crypto fund managers and more institutional. So, I have been surprised. A lot of it is driven by regulation, in terms of the acceptance of the technology and cryptocurrencies in general, but also the knowledge base from country to country has been incredible. But wherever we go, there is a consistent theme, and that is more people are getting more and more interested, more and more people are starting to look at this as possibly going mainstream. You are seeing more and more companies, fintechs that are looking to start their business or grow their business tapping into token sale space as a way of raising money. We have seen this is a consistent theme, and I had a graph in my presentation basically like that. You can see that business is absolutely on fire!
We are off to San Francisco Saturday, then New York, then Ljubljana, Berlin and Zurich. So traveling more than ever!
CT: What inspired you in the first place to enter the crypto world? Maybe it was your background, or some event or some people?
NC: Well I run a stock exchange and we are a small jurisdiction in Gibraltar. We have the ability to be pretty innovative and flexible. We first got involved about two years ago, when we tied up with a partner who was interested in launching ‘the first Bitcoin asset-backed security approved by, regulated in the EU.’ It was the first product that basically got up and down with Bitcoin price. At that time Bitcoin price was about $300 when we first started that conversation, that’s how far it has moved!
So in order to structure that, we have to dive in and really find out how does this work? How do you open a wallet? How do you buy Bitcoin? What is a hot wallet? What is cold storage? And how do we then structure something that basically is secure and will protect investors? And that’s really when we got involved!
Throw all you know about exchanges into a new space
NC: At the same time, our government in Gibraltar in January of 2016 asked the community, globally as well as in Gibraltar: Should we look at regulating operators on the Blockchain in financial services? They asked the question! That then brought Gibraltar and us as the exchange really together with a similar objective. Those regulations start in January. So our interest, especially as we saw the ICO token sale space explode in 2017, that’s when our interest really started to get deeper and deeper. Because we thought we can take all the stuff we know about exchanges (what needs to happen in terms of governance, investor protection, disclosure and transparency), if we can take some of those rules and apply that to the token sale space and then apply for a license in January from our regulator. So we have had to throw an incredibly steep learning curve from about two years ago about how this whole space works.
CT: Do you consider tokens assets?
NC: No, I don’t technically think they are assets. I think one of the things we have to do is in our rules we have to make it really clear that as a token you have to have a legal opinion that they are a utility because it can’t be viewed as capital. In fact what you are doing is you are actually taking in money against future services, that’s effectively what a utility token is. Unlike a security token, which we will hopefully be putting next year on our main exchange, where obviously you are participating in the performance of the company itself, be it P&L, equity, dividends, etc.
I think utility tokens need to be categorized very carefully as utility tokens, legally signed off as utility tokens in order that no securities or legislations are being breached globally. That’s also, by the way, a pretty grey area at the moment. Different jurisdictions are taking a very different approach to this space in terms of: is it a security, is it an asset, is it a liability, is it an equity? I think that’s going to be a pretty fluid situation for the next couple of years.
CT: How do you follow the market, which resources do you use?
NC: We have got a number of resources. The main thing what we found is since we launched our own token, and we figured if we go into the token sale space we should do our own find out to find everything about it, is the importance of social media. That’s been unbelievably important. We had to really get ahead of the curve in terms of Telegram, Twitter, and social media generally. Obviously, we look at you guys too; we use actually a lot of your stuff in terms of our presentations. Really making sure that we are tapped in because with traditional financial markets there is an existing space out there with traditional news channels, as you know, where you can get basically get R&S feeds. In our space, there is basically none of that! You have to go into a completely new method of media, understand what’s going on and stay current. In many ways that’s why we are launching our own token sale platform, we want to create a marketplace where ICO issuers and investors or token contributors can come to in as a center of reference.
CT: Could you name a book that inspired you the most recently?
NC: Actually it’s a great book, it might sound pretty boring but it’s a book called The Paradox of Choice, it is by a guy called Barry Schwartz. It’s a book that’s generally read by traders, but it’s not about trading, it’s about psychology. It’s really appropriate for the cryptocurrency space as this space will grow.
Analysis paralysis
NC: So, for example, if you are like me: I tend to go into a shop and buy a pair of jeans and walk out as quickly as possible. My daughter will go into 10 shops and try 10 different pairs on because she can’t decide and she will end up probably going back to the first shop to get the pair she tried on first because she had to eliminate all those other choices. I think the paradox of choice is the more choices you have in life, actually in some ways, the less satisfied you are. Which might sound really counter indicative but if you walk into Gap, (I’m using the jeans analogy) and there are 100 different jeans on the wall in front of you I just have to walk out because I just want a pair of jeans. So in terms of cryptocurrencies and that space, what I learned after 35 years as a trader, is you are better at trading a couple of things incredibly well and just shut everything out because you have analysis paralysis otherwise unless you are a certain type of personality. That is an amazing book that I would advise anybody to read. It has to do with that choice is not always a good thing unless you are a certain type of person that can handle choice.
CT: That is interesting -- I read about a psychological experiment where there were two groups of people - where everybody could choose a picture from an album to take home. In the first group they couldn’t change their decision afterwards, while the second group had a day to think about it and if wanted choose another picture. So it was the second group that was completely not satisfied with their choice.
NC: It has to do with satisfaction. If you are a perfectionist, it’s sometimes very hard to actually be satisfied. Look, I have one of my friends, he is a great trader like me, so he scans 1,000 different securities every day and he never does any trades. I just look at two, two or three, that’s what you need to do because otherwise you end up…
CT: So how do you limit yourself?
NC: Because you don’t need to worry about…There’s a story I sometimes tell about a guy I met at a bank where I used to work. In the 40’s he went to war and he said to his broker ‘buy this new company called International Business Machines, I think it could be interesting. Just keep on buying it while I am away and if I lose all my money it’s fine because I will probably die anyway.’ Then he came back and IBM stopped. He had made 10,000 times his money. Then in 1959 he saw an airplane land in Frankfurt airport, a Boeing jet (first jet) and he thought that was the future, he has only ever traded IBM and Boeing. He said -- look there are amazing companies out there, but he said I don’t need to do anything else because I understand these two things and it’s better for me to do those two things better than anybody else than it is to do 5,000 things averagely. That’s what the book is all about. In terms of inspirational book, it’s a very good read because it actually addresses some of those psychological satisfaction and challenges and conflicts that so many individuals have. A lot of what’s happening here is about psychology right? It’s about choice. That’s my inspirational book and I am not getting any royalties for that.