Is the crypto revolution as big as the internet?
Iqbal Gandham, eToro’s UK managing director, thinks it’s bigger. He speaks to Geoffrey Lyons about the early days of the internet, crypto critics, and how the UK can become a global leader in the industry
The world of cryptocurrencies can seem strange. New cryptos emerge daily, some with bizarre names like “Dogecoin” and “Coinye.” Enthusiasts occupy an awkward middle ground between suave financier and cyber-geek, part of a new entrepreneurial class that is as obsessed with Lamborghinis (or “Lambos”) as it is passionate about solving complex hash functions. But what may look strange from the outside is seen from within as nothing less than a technological revolution.
“This is exactly the same as the start of the internet, it’s just a whole lot bigger,” says Iqbal Gandham, managing director of UK business for eToro, a social trading platform. “But a lot of people just aren’t seeing it.”
Gandham perfectly embodies the curious incongruities of someone at the cutting edge. While his manner of speaking is as direct as his dress sense is refined, he also admits to running Tough Mudders and listening to trance – unlikely hobbies for a man sporting a waistcoat. But whatever his idiosyncrasies, he’s dead serious about cryptocurrencies being the next big revolution.
“I was there when the internet first started in the UK, and I helped build some of the first Internet Service Providers,” he says. “Most people have one chance to be part of technical revolution, but for me it’s a second bite at the cherry.”
It’s a revolution that is forcing policy-makers to sit up and take notice. Earlier this year Bank of England governor Mark Carney called for greater regulation of crypto-currencies, warning the sector had “all the hallmarks of a bubble,” while the Chancellor has announced the creation of a new Task Force – with representatives from the Treasury, the Bank, and the Financial Conduct Authority – in order to “manage the risks” and “harness the potential benefits” of the technology.
The Treasury Select Committee, too, has been taking a closer look. A major report from the group last month warned that crypto-assets exist in an unregulated “Wild West industry” that leaves investors “facing numerous risks”. Their chair, Nicky Morgan, cited “high price volatility, the hacking vulnerability of exchanges and the potential role in money laundering” as particular concerns. The Committee’s report called for the introduction of greater protections for consumers, and anti-money laundering regulation, and argued that, if policy-makers can get it right, the UK is well placed to become global centre for crypto-assets.
Gandham does not deny that there is work to do, and has called for the FCA – the UK’s financial watchdog – to be given responsibility for regulating the industry. But he argues that such teething problems should not be used to write off the technology altogether. “When it came to the internet, the people who solved the problems were the ones who saw the problems. Today, the people who see the problems aren’t the ones who solve them,” he says.
He’s most frustrated by those who think cryptos are just a bubble waiting to burst. “There are two things wrong with that argument,” he says.
“Firstly, when the tech bubble burst, U.S. tech stocks were thirty percent of global GDP. When Bitcoin peaked in December, it was less than one percent of global GDP. So we’re not even close to the scenario that happened in 2000.
“Secondly, people talk about what would happen if the bubble burst. Well, since December, the bubble has burst in crypto. It’s fallen 70-80%. Has anyone outside the industry even batted an eyelid?”
To Gandham, the bubble argument is just one manifestation of critics’ failure to give cryptocurrencies a chance. And while he believes perceptions within Westminster have evolved significantly in recent months, there’s still some hostility to overcome. In an interview with The House magazine earlier this year, for example, Shadow Home Secretary Diane Abbott compared Bitcoin to “a gigantic Ponzi scheme”.
“The media works on negative headlines,” Gandham explains. “Right now there are tens of thousands of developers who are building this, a lot of them working for free, and all they read in the media is about money laundering and bubbles. I think it’s unfair.”
Beyond this, Gandham argues, the aversion to crypto boils down to a failure of perception. “Not everybody can take a leap from A to D,” he says. “Some people need to have the completed product before they understand it.” He raises his tea. “Whereas some people can have a look at sugar, milk, and water and say ‘we can create a cup of tea from this,’ other people just need a cup of tea.”
Unfortunately, Gandham couldn’t use tea as a prop when he provided oral evidence to the Treasury Committee’s hearing in June. “It was nerve racking,” he says with a laugh. “It wasn’t a typical committee hearing where we were there to be criticized for doing something wrong. We were all there to learn, and I quite enjoyed it.”
Gandham sat before the committee, in both his capacity as managing director of UK business for eToro and as chairman of CryptoUK, a trade association representing the industry, to make the case for regulation. He argued that cryptocurrencies (Bitcoin, Litecoin, etc.) and “crypto assets” (digital coins that can be converted to cryptocurrencies) should come under the remit of the FCA and be treated like any other asset class.
From an outsider’s perspective, it’s not immediately evident why Gandham would be advocating for this. Shouldn’t he be pushing for less regulation? Gandham replies with another internet analogy. “When the internet started, there were people saying that it should all be decentralized, because the whole idea was to open it up to communications,” he says. “Anybody could communicate with anybody else without having entities in the middle. I could send you an email and not need Gmail in the middle.”
But as businesses evolved, Gandham argues, a demand grew for these entities. “So while Bitcoin is designed in a way that I can send you money without having a bank in the middle, that doesn’t mean every consumer will not want an entity or a bank there,” he says.
By extending the FCA’s powers to bring cryptocurrencies within its financial services regulation, Gandham believes consumer needs will be protected, and the UK will be better positioned to be a leader in the cryptocurrency sector.
“Because of the UK’s geographical position and the relationship we’ve had with finance and money, we cannot afford to play second fiddle here,” he says. “If we want to maintain leadership in capital markets, then we have to foster innovation in blockchain and crypto.”
Join The House and eToro on for a panel Q&A and drinks reception, Understanding Cryptocurrency: A Bubble or the Future of Finance? The reception will take place Wednesday 31 October,16:00 - 18:00 in Strangers' Dining Room, House of Commons. To RSVP, please contact firstname.lastname@example.org