Kai H. Kuljurgis, Managing Director and Founder of Coindex in a recent interview with LearnBonds.com explained the company’s smart wallet business.
The founder of Coindex also explained how the company established relationships with the German regulator, BaFin. At the same time, Kuljurgis discussed cryptocurrency futures amid current price swings.
1. What is coindex and what motivated you to create a crypto related product?
My co-founder and I both had experience with crypto assets. In 2017, a lot of friends approached us if we could help them get into this asset class. We were both shutting down our previous companies and thinking about ways to create a digital product that would allow our friends to enter crypto investments. After evaluating several models to follow the global market, we decided to create an index investment platform. With Coindex, users can buy, manage and store a diverse crypto wallet by offering wallets based on our index algorithm. Automated rebalancing and monthly savings plans come full circle to make investing as easy as possible.
2. What does a smart wallet mean? How does your product stand out from the competition?
Smart wallets are detached from emotion. All the portfolios offered with coindex are based on the cdx family of indices – the cdx is the first German crypto index to receive an ISIN number and therefore to be listed on exchanges such as Börse Stuttgart. It tracks the global crypto market covering around 98% of the total market capitalization with just 30 assets. The family of indices around the cdx currently consists of 18 fully data-driven indices, which follow the market including from 2 to 50 constituents – these serve as the basis for smart portfolios. By using the coindex, you will be able, for example, to choose cdx5 (including five data-driven constituents) as the basis for your index portfolio. For the manual wallet, you will be able to choose from these five data-driven assets. With this approach, Coindex removes much of the complexity of crypto investing for many retail investors.
In addition, we offer a fully regulated product with a unique proposition for retail investors with no knowledge of the field: as described, you can enter the crypto market without having to worry about which assets to buy. We combine this with automated rebalancing, data-driven portfolios, monthly savings plans, super intuitive user experience, and regulatory compliance in Germany, making our product unique in the competitive landscape. You get all the theoretical advantages of a crypto exchange traded fund with the added benefit of having real crypto exposure.
3. Why are you focusing on the German market?
We are working with German partners who allow us to offer co-indexing in compliance with all regulatory requirements specifically in Germany, which in our opinion has great potential, which has not yet been fully identified. So, we want to conquer this market first and then start to internationalize to other markets in a step by step approach. Our business model and set up with the partners involved is fully applicable to the European Economic Area (EEA) as it is, so it is likely that we will expand to the EEA in the next step.
4. What was the idea behind the partnership with a German bank?
When setting up our business model, we were not just looking for a bank but a real partner to set up coindex in Germany. Partnering with a German bank, in general, allows us to meet regulatory requirements while our partner allows us to create exactly the product we want to create. In addition, the partnership offers great potential to add more functionality in terms of investing, asset management, banking, payment and more due to its extensive licenses. In addition, we believe that fintech and the future of banking as we know it best occurs through strong strategic partnerships, where both parties learn and grow together. This is the type of partnership that we have found with our banking partner.
5. What is BaFin [Germany’s financial regulator] tell about your project?
Our partner has set up scalable processes and is in close communication with BaFin concerning the realization of this assembly. Additionally, we have watertight legal advice regarding the validity of our business setup in applying these processes. All lights are currently green for the launch of coindex and our goal is to become a positive example for regulated crypto products.
You are finally launching the smart wallet in the first quarter of 2020 after working on it since mid-2018. What part of the product required the most resources to configure?
We wanted to take our time to optimize the user experience and create the product that our major customers really want to use. Apart from that, we have built a very advanced technology stack in-house that covers all use cases including secure custody of crypto assets. The combination of meeting legal requirements with this reusable technology stack was very resource intensive.
6. Since the all-time highs for cryptocurrencies in 2017, prices have fluctuated, with some experts questioning the outlook for digital assets. So what prompted you to use this product in the midst of the market uncertainty of the past two years?
First of all, we strongly believe in the value of crypto assets and we believe crypto is here to stay. Short-term fluctuations do not change this opinion. Second, the development of the market shows a professionalization of the entire asset class, which is also supported by many institutional players entering the market. Of course, it cost us energy and resources to survive this time, but we came out stronger than before and the uncertainties helped take most of the black sheep out of the market. Accelerated by new regulations regarding the custody of crypto assets, the market has taken on new momentum, which we see as proof that the coindex – with its imminent launch – is now in a very comfortable and promising position.
7. The cryptocurrency industry faces several hurdles like legislation and slow adoption. What do you think is the biggest challenge facing the industry and how does it affect your product? Maybe you can give some insight into how you plan to overcome this challenge.
I think the biggest challenge we face – and this is also what we experience on a daily basis – is the confidence of the general population. Periods of hype and ICO scams have not helped create a trustworthy asset class. One of the goals of our product is to open up the asset class to all private investors and thereby make them understand the value of crypto assets. We are currently developing a broad content and education strategy to build public confidence. We attend events and plan to work with many traditional media and partners to raise awareness of the crypto.
8. Bitcoin’s halving comes in June, and opinions are divided as to the true impact on the price of Bitcoin. From your position, how will the price be affected by the halving?
We cannot predict the price evolution of Bitcoin in all cases. There is some interesting data on Bitcoin’s stock-to-flow ratio and possible price outcomes, but I don’t mean to suggest that I’m smarter than the market. We’ll have to wait and see to understand the impacts of this year’s halving. All I can say is that in my opinion a data driven investing strategy is the best way to prepare for events like this because an index spreads weight without emotion and s ” adjusts to global market developments.
9. What measures do you have in place to attract more customers once your smart crypto wallets are launched?
We are currently refining our go-to-market strategy. As already mentioned, we will place great emphasis on content and education as well as strategic partnerships to build trust and be the go-to source for crypto investments in Germany. In addition, we are working with various media partners to spread the message. For growth, after our launch, we focus a lot on making early Coindex users as happy as possible and creating incentives for them to become product ambassadors. Even in 2020, word of mouth remains one of the most powerful marketing tools.
10. Ease of use, transparency and reliability are among your core values. How do you plan to maintain these values in your operations?
We are committed to creating the best possible product and only hiring people who share our values and support our mission. The people who work at coindex are the biggest influence in conveying our values to the masses. Sustainable growth is the main driver of this and therefore of maintaining our values within the operation.
Thanks, Kai, for the conversation!