Mode Banking CPO: Bitcoin poised to succeed due to shift in investor mindset during COVID-19 Author: Justinas Baltrusaitis Last Updated: 29 July 2020 In a recent interview with Insidebitcoins.com, Mode Banking Chief Product Officer Janis Legler stated that Bitcoin might be successful thanks to the mindset change by investors after the coronavirus pandemic. Legler also talked about the general cryptocurrency regulation progress in the United Kingdom. During the interview, he also talked about the potential of Central Bank Digital Currencies (CBDCs) in 2020. Legler further delved into Mode Banking’s expansion plan outside the United Kingdom. In the wake of the Coronavirus lockdown, Mode reported that the volume of Bitcoin traded through the Mode app increased by almost 1,000% in the last week of March. From this scenario, what trend can we expect from Bitcoin trading in the post Coronavirus period? The week after the UK went officially into lockdown and global financial markets saw a sell-off of almost 30%, Mode saw its biggest spike in trading activity to date. One potential reason for this is that people had more time to think about their future and their finances, and were also looking for ways to diversify their portfolios. Having witnessed such widespread volatility in stock trading apps worldwide, it’s highly likely that many investors, particularly younger generations, sought out investments in digital assets instead. We believe that the rippling effects of the coronavirus pandemic are going to have a long-lasting effect on our financial landscape, and change the way we use money. The world will undoubtedly remember this crisis forever, and it could usher in the beginning of a new era where diversification of asset exposure and wealth protection are more important than ever for retail investors and institutional players alike. After interest rates fell to all-time lows in March 2020, assets that are independent of central governance, like Bitcoin, will likely gain long-term popularity amongst everyday investors – who are more tech-savvy than ever before and keen to look for new financial products to hedge against inflation. Mode donated Bitcoin to the NHS to help fight the Coronavirus. What impact do you expect Bitcoin’s contribution to such an organization to have on the overall adoption of the asset? The NHS has done an outstanding job throughout this public health crisis, one that has impacted and protected us all, including the Mode team. Our main objective with this donation was to do something meaningful for our valued NHS, something that mattered. Helping our dedicated health workers was the key focus of our recent donation, but if we are able to successfully raise awareness about Bitcoin that would be great. The Mode team believes that other companies in the cryptocurrency space should also take steps to show that not only have they truly moved beyond the ‘Wild West’ world of early crypto but that they’re here to stay and ready to make a lasting impact for the greater good. Bitcoin has been viewed as an alternative store of wealth just like gold. In 2020, the asset was projected to become digital gold. With the current economic uncertainty, how has Bitcoin performed based on this expectation? The current coronavirus pandemic has highlighted how volatile traditional markets can become in a relatively short space of time, with the largest points plunge in history for the Dow Jones Industrial Average during March 2020 – wiping out years of gains in the space of a month. Despite what many believed, Bitcoin was also severely impacted by this global shake. Its price saw a significant drop fueled by investors rushing to exchange their assets into ‘secure’ fiat currencies and a high number of leveraged positions being forced into liquidation, all of which naturally pushed the price down. However, in spite of initially falling alongside traditional markets, Bitcoin regained its pre-coronavirus value fairly quickly, which at Mode we believe is in part due to its fundamental value and scarcity. We think this is a testament to Bitcoin’s use as a store of value similar to gold and its decoupling from other assets that are severely affected by external factors. There has also recently been a Bitcoin halving, so we expect the price may continue to climb as seen after previous halvings, irrespective of other assets or traditional markets. How can you rate cryptocurrency regulation in the UK as a developing business? How has your experience been like so far? The FCA’s approach to cryptocurrencies has been measured. Despite not having produced formal legislation regulating cryptocurrencies, they have stated that cryptocurrencies shall not be considered legal tender and exchanges must meet registration requirements. HMRC has issued a brief on the tax treatment of cryptocurrencies, stating that their unique nature means they can’t be compared to conventional investments or payments, and their “taxability” depends on the activities involved. Gains or losses derived from cryptocurrency investing are, however, subject to capital gains tax. Furthermore, FCA guidance has stressed that, just like banks, building societies and credit unions, cryptocurrency businesses must also comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs). Amendments to those regulations, which came into force in January 2020, incorporate both the latest guidelines set forth via Financial Action Task Force (FATF) and the EU’s Fifth Anti-Money Laundering Directive (5AMLD). Mode wants to be at the forefront of compliance and regulation in the crypto space while providing a seamless, AI-powered KYC user experience for our customers. We have also partnered with an FCA-regulated EMI institution, who hold and safeguard our customers’ fiat funds on our behalf following FCA requirements, and we are now registering with the FCA for Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) purposes under 5AMLD. In your opinion, what does 2020 hold for Central Bank Digital Currencies (CBDCs)? The rise of cryptocurrencies like Bitcoin and Ether sparked the attention of central banks early on with some institutions investigating the issuance of their own digital currencies already in 2014. The announcement of Libra has expedited this process with now over 80% of central banks globally conducting research on CBDCs (according to the Bank for International Settlements (BIS) Depending on the actual implementation, CBDCs could offer improvements to significant macroeconomic problems like payment efficiency, transaction security and financial inclusion. It’s important to note that most countries are not utilising DLT or blockchain in their proposed digital currencies and not a single country will be issuing their currency on public and permissionless ledger. We don’t particularly see CBDCs as challenging Bitcoin’s dominance in either the short or long term within the digital asset markets. There are also multiple permissionless fiat-backed stablecoins that function similarly to a CBDC and work alongside or even compliment the Bitcoin market. Instead, we think it’s far more likely that Bitcoin will maintain its place as ‘digital gold’ and mature alongside CBDCs to become a de facto store of wealth for the new digital economy. With the Mode’s Bitcoin jar, users can earn interest on their Bitcoin. How does this product stand out compared to competitors? The Bitcoin Jar has been our most successful product since we launched. We have had many users migrating from other well-known platforms to Mode, predominantly because they love the Bitcoin Jar. There’s a good reason for this – our Bitcoin Jar offers one of the highest yields in the market at 5% APY, which allows holders of Bitcoin to turn their idle assets into interest generating ones. Unlike many Bitcoin interest-generating account products in the Bitcoin market today, through the Bitcoin Jar users accrue interest daily, get paid every Friday and have no lock up periods. Withdrawals from the Bitcoin Jar are unlimited (processed within 24h), and our users can get started with a first deposit of as little as 0.01BTC. Oh, and the one thing our users really love about Mode is that they can see how much they are earning every second, with our live interest counter! What security measures does Mode have in place to secure user Bitcoins? At Mode, we believe that our users should be able to store their assets securely, while also maintaining ease of use, which is why we’ve chosen to work with BitGo as custodian of our customers’ Bitcoin. BitGo is the leading custodian in the digital asset space. With a compliance-first approach, BitGo uses bank-grade vaults for cold storage, multi-signature wallet technology, and throughout its 7-year history, there have never been any funds compromised. Through our partnership with BitGo, we are able to offer Mode users access to their own highly-secure Bitcoin accounts, with round-the-clock deposits and withdrawals. BitGo uses multi-signature wallets, which require authorisation from several parties before a transaction can be made – making it extremely secure to transfer funds between wallets – and maintains purpose-built bank vaults for Bitcoin private keys, which allows them to offer insurance of up to $100 million on the funds they hold in cold storage. The security of our customers’ assets is our key priority, that’s why we have chosen to partner with the best. Can you talk about the Mode banking Money Transfers feature? How is the progress and what currencies will it support? It’s coming very soon – the tech team is working relentlessly to make it happen as soon as possible! Our money transfer feature will allow users to send other Mode users funds for free, instantly, no matter where they are in the world. This feature will be available for both GBP and EUR transfers, and also Bitcoin! We are very excited to roll out this functionality and show all of our customers just how easy it will be to transfer value in the future. How is the Mode banking expansion plan? Are there plans to move out of the UK? That’s a very good question because we have already added functionality for Euro deposits within our app, and we are now planning our European roll out as we speak. The countries we will be available in are yet to be announced but we will sure let you know as soon as possible! Thank you, Janis, for the conversation!