Interview with Max Krupyshev, the CEO of CoinsPaid

Gagarin News: 

– Max, hello! We are very pleased to have the opportunity to talk with you. You are doing great things. Please tell our readers, who may know nothing about CoinsPaid, more about you and your project. What is it? What are your goals? Why you?

Max Krupyshev: 

– This is actually an ecosystem of brands, with the largest being Cryptoprocessing.com, a payment infrastructure that enables users to accept, swap, and store crypto. Users can also store the fiat money generated from the sale of crypto, transfer it easily to a bank account, or convert it back to crypto and send it anywhere they want. They can also automate all these processes through the API.

Another product is a wallet. This is a consumer product, without complex Web3 functionality. It features a user-friendly interface that helps to monitor all crypto transactions, and bridge cryptocurrencies and traditional bank payments. Now we’re working on the integration of different payment methods there.

Cryptoprocessing is a fairly large operating brand, with its own software. We also sell it as SaaS solutions. Hence, anyone who intends to start a related business can take our ready-made product, and connect it to their accounts on exchanges, liquidity providers, or hot wallets.

We also have our own media platform, CoinsPaid Media. This is an online provider of crypto news and a Crypto Academy, where we teach people basic stuff for free: what crypto is, what blockchain is, and how it works. Thus, we help both our employees and everyone who intends to boost their knowledge. It may surprise you, but even in crypto businesses, the employees very often lack a good understanding of crypto. First, they are not inspired to go in-depth, and second, there is no content they can use to get basic knowledge. And we offer this kind of basic course. It is mostly about crypto and the industry, with some information about us and our services.

If we talk about CryptoProcessing.com, its products can be sold separately: a wallet, a liquidity provider, or a liquidity aggregator. We are connected to different liquidity providers and this can all be accessed through the API. Of course, it may not be as cheap as in highly specialized businesses, but if someone needs to connect everything at once, we offer such an all-in-one solution.

– Would you say that your project is a bridge between the cryptocurrency and fiat worlds?

– Sure. But there are already many such bridges, so the next step is to add bank accounts and cards. We want our users to get a ready-made online bank to send or receive euros and dollars so that they can have both crypto and bank accounts integrated into one interface. We want them to be able to freely address their business needs with one login. As of today, we're basically a B2B company. Of course, we have a B2C wallet, but it lags behind our B2B business in terms of revenue and the number of users.

– Does that mean you don't directly compete with Bitcoin Lightning and all kinds of Layer 2 solutions?

– Yes, sure. We compete with neither Metamask nor Trust Wallet in terms of the wallet. Basically, those are wallets where you keep your own crypto, while we offer a simple product that enables you to accept crypto from your friends and pay with it instantly on the Internet: just scan the QR code and press the "Send" button.

Or, if you need to buy crypto, you may simply transfer money from your bank account, convert it, and send it wherever you want. We offer the simplest possible interface, without the mnemonic phrases and smart contract add-ons. Users can also add some notes and comments to transactions to contextualize the history of their activities.

– You divide this product into personal and business wallets. What is the difference between them?

– A business wallet is basically a crypto processing portal that brings everything in one place: a business wallet, an API, and huge limits. A business wallet allows you to do all that stuff, which is usually called OTC, with the simple click of a button. That's the kind of business product. If you select the "Business" section of the website, it will take you to Cryptoprocessing.com. So Cryptoprocessing.com is a business wallet + merchant tools, i.e. all-in-one solution.

– Do you need to verify as an entrepreneur? Or is it available to anyone?

– No, no, it's only for businesses, only for companies. You need to pass verification, and sign contracts that stipulate the terms and conditions of our work, fees, fees review procedure, and so on.

In a personal wallet, you agree to the terms and conditions and work according to them, with no opportunity to negotiate them with the company.

– How does CoinsPaid make money? If that's okay to ask.

– It’s okay. We decided not to play with hidden fees, so our main and almost only income is processing fees on transactions.

That is, if the merchant accepts payments, it pays us a percentage of those transactions. If they buy/sell crypto, they pay us a percentage of those transactions. If users just send their crypto to themselves, we don't charge any fees.

The same thing goes for the wallet. If you just deposit or withdraw crypto, we don't earn from these transactions. We always make cryptocurrency withdrawals for free. It's your crypto, you can withdraw it whenever you want and as much as you want.

But if you swap, sell, or buy crypto, we charge a fee. In addition, we charge a mining fee at the cost of production. However, we managed to eliminate it for most of the coins.

– What do you think is the best place to store cryptocurrency? Exchanges, wallets, or anything else?

– Well, the answer is simple. If you hold some crypto as an investment tool, meaning you keep it for the future, you’d better use hardware wallets like Ledger or non-custodial wallets like Trust Wallet. I mean, it's better to use wallets with a mnemonic phrase. I would recommend hardware wallets.

If you use crypto every day (for example, you accept $20 and send $20), then a hardware wallet wouldn't be the best solution. You can set up some wallets that can be backupped with your phone. But, if you lose your phone, forget something, update your phone or an app, and your backups are lost, it's gonna suck.

Of course, you can store crypto in wallets like ours, but it has to be an insignificant amount. For example, if you have $100 in pocket money for a week, then you can keep $100 in such a wallet because losing this money is comparable to having it fall out of your wallet in the street. It's not a big deal.

Of course, our wallet has a high level of security. We conduct security audits, and we store client funds in a special cold storage vault.

To conclude, don't keep your money on the exchanges. If you need to trade in some assets that are available only on the exchange, then, of course, go for it. But then, if possible, withdraw the money to a more secure place.

 

– While on this subject: What would you advise paranoid people like me, who are afraid of losing a seed phrase or a wallet? How to overcome the inner demons whispering that restoring access to your assets on a centralized exchange is theoretically possible, but finding a lost physical wallet is a slim chance.

 

– Good question. I think paranoid people should keep their seed phrases to themselves. This way, you can feel less paranoid: at least you'll be able to check your seed phrase whenever you want.

When storing money on the exchange, you will be paranoid about checking every news about that exchange. So for paranoid people (and being paranoid really sucks), keeping your seed phrases with you is akin to storing money in your locker at home and having a key. That's where I would recommend a hardware wallet. However, I wouldn't recommend memorizing the seed phrase or trying to do something with it so that it doesn't exist physically, but only in your memory. It's a pretty risky thing.

You can also make two backups. Keep one with you and share the other between trusted people who won't cheat you. They better not know each other, or at least not know that you chose them for this mission. I do not know how feasible it is, but I guess such options can be used, too.

– Please tell us this legendary story of how your mining pool has allegedly gained control of 51% of the bitcoin network. What was the threat to bitcoin at the time?

– It was 2014. I was invited to work at CEX.io and GHash. They had a great team and cool products. We worked on interfaces for Ghash.io. It was a mining pool, and it worked closely with CEX.io. GHash was actually one of the inventors of cloud mining.

That was the year of Bitcoin hype, everyone was talking about it. People view investing in mining as investing in an asset. Those miners who came to CEXs were automatically connected to GHash. Owners of physical equipment choose the mining pool on their own. For a stratum server to work more efficiently, you need a large pool. A large pool is more likely to mine blocks. Hence, when choosing a pool, it is always more profitable to join a large pool than a small one. Joining the pool with a 2% hashrate doesn't look as logical as joining the big one. Naturally, people chose the large pool. Mining was growing and everyone was joining Ghash. It had user-friendly interfaces, and there weren't a lot of alternatives at that time.

It was the summer of 2014, and we left our office for a $2 business lunch. So imagine, our Kyiv team is having a business lunch, and we see that the Internet is exploded with news that GHash has obtained 52% of the world's hashing power and that Bitcoin is at risk of being centralized. Meanwhile, we're sitting in Kyiv, in the basement, eating a $2 business lunch with compote, and we're like, "So what do we do now?" We decided to write a post like, "Dear miners, would someone please switch to another pool?" We wrote this and... that was the beginning of the end... Miners continued to leave the pool and that marked the beginning of the crash of GHash, which shut down after 2 years.

It was a fun experience. The product was really awesome. I'm not sure whether it still exists in some form, but it was made with love. Every single detail was designed for a miner: the interfaces, the numbers, the way it looked, the way it was explained. It was made by experts and for experts.

– Did you see then the difference between Bitcoin and other cryptocurrencies? Why did you mine Bitcoin? Or was it just a fluke?

 

– Bitcoin was at 94% dominance in 2014. There was Bitcoin and “something else”. I can hardly give any example of altcoins of that time. I guess that's what other phones look like to iPhone owners. I don't have an iPhone, by the way.

That's certainly why people mined it. When Bitcoin completely switched to ASIC mining, people still wanted to mine some crypto with GPUs. So they mined LTC, the second cryptocurrency, altcoin. Later, ASIC miners became available for some altcoins as well, and people started to mine "something else." At that time, they didn't have much of a choice. They mined Darkcoin, which then got renamed Dash. They mined Vertcoin, which also was rebranded later. People mined any random crypto with any random thing. But the serious people, the professionals, focused only on Bitcoin. In 2013-2014, nobody took anything seriously but Bitcoin.

Coinbase and BitPay already existed at that time. The Americans have already raised tens of millions of money for these projects. But we still had the "Wild West".

– Did you ever think that Bitcoin would hit $69,000? Or would that sound like a fantasy at that time?

– I did. In 2013, I caught on the subject; in 2014, I was in the groove, and I knew that the industry was going to survive. In 2015, the market experienced a slack period, and the Bitcoin price dropped to $150. It was the first crypto winter I had ever seen. But I thought, "Whatever, it's a temporary thing.” Anyway, the technology works, the technology is fantastic, people invest money, and projects evolve, so I didn’t freak out. Such prices, trillions in capitalization... To be honest, I don't even remember the market cap of 2015. I guess it was around some tens of billions, and that already sounded quite ambitious.

Of course, there was room to grow. And, if you can assume that growth may reach trillions, then you divide trillions by the number of Bitcoins – and you can roughly understand the value of one Bitcoin. I mean, the price of tens of thousands seemed reasonable from a mathematical standpoint, but it anyway sounded fabulous.

– And how do you feel about today's bear market? How tough is it? Or is it okay?

– What is there to say? Crypto winter is a normal thing. It's even a good thing. I mean, everyone who's been wasting their time will leave the market. So I view crypto winter very much like in the tale of the dragonfly that wasted the summer and didn't have time to look back. This dragonfly had exactly that kind of "crypto winter." Everyone who did nonsense things, used some unknown money, which they took from unknown people and for unclear purposes – they all leave the business. And this is actually more of a good thing: less noise, fewer distractions, and more qualified people in the market who you can invite to the team.

In this respect, crypto winter is generally a good thing. What's worse is the broken spirit of everyone you talk to about crypto, the overall mood like, "now's not the time, let's wait and see how things go."

Of course, people are more active when the market is bullish. In a bull market, you have a queue of clients, you are always busy, your onboarding departments can't get everything done, saying "let's slow down," or "let's pick the big ones, and leave the little ones for later." Crypto winter is a more relaxed season, you have time to streamline processes, develop a team, and plan things carefully.

Speaking about our existing clients, you can, fortunately, see that those people who paid with crypto continue to do so. The businesses that settled with each other in crypto continue to do so. So, we're in a business model that's pretty steadily going through the market craze, because we're not a trading or investing platform. People have started trading and investing less. But they haven't stopped paying for goods or services with crypto. I guess the reason is that those people are more used to it and more comfortable with it despite the price changes. And some probably earn income in Bitcoin, USDT, etc. And they don't convert their crypto into fiat, but use it to pay for some games, hosting, and so on. They find it easier to use USDT, USDC, or BUSD.

– What do you think of Sam from FTX? What was it? Was it a scam, or was he just a freak who made spur-of-the-moment mistakes and got screwed?

– I can't believe that he was a real scammer. Although, if you take an unbiased look at the situation and assess the results, that's what people might think. But, he didn't look like a man who wickedly did it with the intent to steal money. I think he was riding on a roll. He had a working strategy that played out before, and he hoped that winter wouldn't ever come.

He didn't think of a plan B. What if crypto goes down in price? What if customers start withdrawing their money? With that level of business development, ignoring all those things is a crime, as is actually using the clients' money.

Is he a perpetrator? Indeed, he is. He did things prohibited by law, which, in addition, were a failure of sense-making. But I don't think he intended to make an $8-10 billion hole in people’s pockets. I guess he just got caught up with the idea that everything was looking up: they got the stadium in Miami with their name, the logo on Formula 1 cars, Sequoia Capital investment, and invitations to cool interviews. Well, everything seemed to be going well. And apparently, he had no one to bring him down to earth. 

– As the saying goes, "through fire and water," huh?

– Well, he failed at the stage of fire. He hadn't even reached the water stage. Somehow he caught the wave of success, which took him to the top, and he didn't have time to take in the situation.

Well, they had enough problems, apparently. They didn't have the right people and the proper supervision. Regulators never asked them the right questions. Because if the regulator had checked them out, they would have said, "What are you guys doing? That will never do."

– What do you think is by far the top feature of crypto in terms of benefit to people and the world?

– This feature doesn't seem to change from year to year. You can send as much value as you want to anyone at any time.

– Look, one of the main ideas of crypto, though, is decentralization. How correlated is the very idea of creating a successful centralized business within decentralized finance? And how do you feel about centralized cryptocurrencies on the whole?

– There is indeed such a disjuncture of philosophies. In fact, the only decentralized cryptocurrency is Bitcoin. All other coins are up for debate. But, in order to run a business, to use the advantages of technology, to meet the needs of some people and companies – you have to do it in a centralized manner. Because everyone is used to having services provided in a centralized way. You don't go to some abstract facility for a haircut. You go to a specific person who cuts hair. It's not like you're saying, "I want to have my hair cut."

Or, for example, people store their money. They come to a particular place and say, "Hey, here is our money, and we want to do thus-and-so with this money." Decentralization today sounds better than it is. Businesses and most users have a hard time with it so far.

And so, with this paradigm, one comes to DeFi. But we understand that it takes several steps: you have to figure out what blockchain is; you have to create a wallet with a mnemonic phrase; you have to connect to some platform that you can distinguish from a scam copy. And you have to do other things like clicking buttons, signing transactions, and interacting with smart contracts. Let's face it: very few people can handle that. If someone, who is not much knowledgeable about the subject, were listening to us right now, they would say that it's probably impossible.

Businesses are a long way off still. They have corporate rules, they must check the supplier: the counterparty, its CEO, the company's location, its authorized capital, license, etc. They come to suppliers as suppliers, not as some kind of virtual blockchain. A virtual blockchain can't sign a contract with them. For businesses to benefit from decentralization, you have to make a centralized service that takes advantage of decentralization and mitigates its disadvantages. This is essentially the concept our business is built on.

– CZ has recently written that he admits the possibility of the complete disappearance of centralized exchanges. What do you think? If so, what would supersede them?

– It’s a long shot but not beyond the realm of possibility. It would take many iterations of how businesses in the world actually work. In other words, it requires the worldwide adoption of decentralization. People feel more comfortable going to centralized platforms, using their fingerprints to log in, and their e-mail and password to authenticate.

And if we are talking about decentralization, things are a little different and more complicated there. This assumption cannot be based on the hypothesis that all "people will suddenly see the light." How many people in the world do understand how money works? Very few. If people had to understand how money works to use it, most of them might not even use money. 

– Agree. 

– Looks like there is no one to simplify it. Electronic money had people handing out Mastercard and Visa cards. They were motivated. DeFi and decentralized technologies seem to have a fundamental problem with sales motivation.

– Let's imagine that the whole world became one big El Salvador and everyone suddenly started using Bitcoin. Is such a model of the world economy feasible? 

– First, Bitcoin won't work. It does not have enough bandwidth. I don't really believe in Lightning. But I might be wrong.

The economy is challenging to function on the basis of an asset with an unpredictable price, and that kind of volatility. We have come to think of currencies as depreciating assets. They do not move in the other direction. I mean, we understand that today's money is more than it will be tomorrow. We live in this paradigm; the economy, finance, businesses, business plans, and projects live in this paradigm. Everyone lives with the idea that a million today is better than a million a year from now. And we can roughly estimate how much better it is. We can somehow predict things. But if you mess it up, you won't know what to do, or how to deal with this.

Switching to CBDC or stablecoins is by no means beyond the imagination to envision. However, switching to a deflationary crypto asset, like Bitcoin, seems impossible to me. Everything would have to change completely for that to happen. It's kind of "too much." I wouldn't bet on it happening in our lifetime.

– So shall we let things drift, neither fast nor slow? And time will put everything in its place, right?

– Yes. I believe that more people will use cryptocurrency. I believe that it will be used both as an investment tool and as a payment method to avoid questions like, "Where are you sending your money? Why? To whom?" I mean, you can really own your assets the way you want to own them, not the way someone else decides for you and changes the decision every year. Our conversation got some flavor of anarchism.

– We can't help but ask you about the market bottom. Everyone is waiting for it. What are the major crypto bottom signals? Miner capitulation, rising interest rates, or anything else? How do you personally spot the market bottom?

– I'm bad at this. For me, a sign that the market has bottomed would be when people stop opening short positions. When they stop opening even long positions. When they stop trading at all. I mean, when they keep all their crypto to themselves. When they don't care that it may add up to zero, as it's already too cheap to sell.

I'd love to say that Bitcoin wouldn't go below $10,000 under any circumstance. But that would be crystal gazing. Anything can work to the disadvantage. For example, some new regulations. Big exchanges or players may say: "Guys, sorry, but we can't survive these regulations, so we're leaving." There is no point in waiting for some positive news, which will suddenly take us to the bull market. I think it won't come in the near future.

– A few questions about your company. Did you raise investments? If so, how did you arrange the investor relationships? How do they affect the company’s roadmap and mission? Do they meddle in the company’s affairs?

– We never raised. We were incubated by a group of companies, SOFTSWISS. It's a big IT holding company. I joined them later, so I'm not a founder, but a co-founder. We already had some software written, and we made a business based on it. Then we finalized the product, and things picked up the pace.

Our main stakeholders are entrepreneurs. And like any entrepreneurs, they have a lot of ideas, their own vision of how things should be done and how they shouldn't be done. We have people who have gone through the complexities of scaling and can direct us. They can help us with resources and contacts to solve some tasks, needs, problems, and things like that. They definitely influence the business. It's common in the brand group that anybody who owns a business plays a part in it. 

– What is more important for you: money or ideas?

– Well, if I said I work purely for the idea, I'd be like Sam from FTX. "Why do we need money? We donate all of it to charity." Certainly not.

Look, I didn't get into crypto because of money, but we all live in a material world. People always strive to improve their standard of living. That is why building a business that brings in money is always more enjoyable than generating ideas that are never rewarded. There is a well-established culture, and it is quite reasonable: businesses that do generate profit are not businesses.

– You were engaged in quite a few projects. Did you change businesses because they were some kind of logical continuation of previous projects, or were they some kind of disillusionment? What was your path?

– In 2014, we launched Fruit Wallet with Andrii Parubets. It was a kind of hobby project developed by Andrii. I was more of a smart-ass who went around and debated on how to implement it. We tested it, published it on the Bitcoin Talk forum, and some users even created accounts there. I went to the Сhernovetskyi Fund and said that we needed some money to create a cool ecosystem. But they told me that they can't touch crypto. We realized that our plan died on the vine as we were in the wrong place at the wrong time. I wasn't ready for some incredible challenges at the time. I had no budget, no understanding of the prospects, and no experience with big projects.

Then I had that great year with CEX and Ghash. But that was followed by crypto winter and all the important projects for me shut down. The company initiated massive layoffs. I wasn't dismissed, but the things I was assigned to do no longer interested me.

Then I got onto a great idea for making crypto payments. Andrii, with whom we piloted Fruit Wallet, had already moved to Berlin to work at a crypto payment startup. They invited me as a product manager.

A couple of years later, the CEO stepped down. They hired another guy, who lost his game, and we found ourselves in a situation similar to FTX. So all of a sudden we ended up with much less client money than we were supposed to have. And the company eventually filed for bankruptcy.

I worked as a business development manager and the face of the brand. I spoke at conferences and interacted with clients. Suddenly the company closed down with debts. I was in an ugly situation, as you can see. Of course, I didn't handle the money and had no legal claims against me. But my reputation got fractured.

– Did you have problems afterwards?

– Yes, I did. I testified to the British police. I received threats. That wasn't a pleasant story. And at that time I already knew the founder of SOFTSWISS – Ivan Montik. We met back in 2014 at the first CIS conference in Moscow. He presented their crypto-based gambling projects. He already had an MVP at that time – a casino where you can both play and replenish your account with Bitcoin.

In 2019, we met, talked, and he invited me into the business. Since then, we've been working together on CoinsPaid, CryptoProcessing.com, and other brands.

To cut this long story short and answer your original question, I've been in crypto payments since 2015, but it wasn't a transition from one company to another, it was a hard stop every time.

– Has CoinsPaid already experienced a critical situation? Or do you have a good thing going?

– What's truly critical is scaling. You're constantly moving to new levels. The level when you have a team of 20 people and you need to learn how to make money. And then goes another stressful situation – you need to make money because you have a pretty clear burn rate and runway, which you need to break through.

The next level is to find ways to make more money. Today we have a team of 210 people, we need to convert the company into a corporation. We are no longer a startup. That's also a certain kind of crisis. We're lucky to have a business model that doesn't depend on price swings. If we had to think about where to get money for people's salaries, things would be a lot worse.

– Our traditional question. What would you choose to give up forever: sex or crypto?

– Cryptocurrency is easier to give up. Of course, that would be crypto.

– What do you think about CBDC? Is it a good or bad idea?

– Overall I like it. I think it's a great idea. It's something between the centralized services (like Visa and Mastercard), and stablecoins.

When you pay by credit card, for example, with Visa and MasterCard, you still pay a fee to Visa or MasterCard. Let's take Ukraine as an example: Imagine, you go to buy coffee in Lviv, and you pay by card. You're a Ukrainian in Ukraine buying a Ukrainian product, and you're paying Americans for this. It's kind of weird. So CBDC will let you use your phone to pay a merchant in hryvnia, without having to pay fees to Visa, MasterCard, or anyone else. CBDC rocks in this respect.

Still another question related to the СBDC is whether the government will tolerate private businesses in this game. Companies like ours, for example. If not, I don't quite understand the purpose of it.

– What's the forecast? How will the government deliver this story? Will they stick to liberal views or play hardball?

– I dare say that they will stick to liberal views. They see it as a tool for financial freedom, and economic development. They want this to work. People won't use it in their day-to-day life if it is strictly regulated.

To make it function, you need to ensure that small businesses can easily work with it, and larger businesses can develop new projects around it, and so on. A healthy government should approach this way.

– And now let’s play rapid fire. Twitter or Telegram?

– Telegram.

– Mercedes or Tesla? I mean ICE vehicles or electric cars?

– Electric cars.

– Cash or stablecoins?

– Stablecoins. USDT, USDC, BUSD. Proportionally. Some of them will probably scam, while others won't.

– Why don't you use an iPhone?

– I don't find them comfortable to use. I tried iPhone 4, iPhone 5, but they didn't win me over. Now it's too late to try, there are so many cool gadgets.

– What do you think of the "State in a Smartphone" project by the Ministry of Digital Transformation of Ukraine? Is it feasible?

– The progress is fantastic. They've already done a great deal. Way to go!

– Has the war in Ukraine affected your company?

– As a business, fortunately, we felt less impact than others. Again, we hold better fortunes: we do not have many business ties and employees in Ukraine. It affected us psychologically and morally. Of course, the war impacted the business either, but I have nothing to complain about. I know how it has disrupted other companies.

– Any predictions for our country for the next 5 years?

– We have to beat putin's barbarians back. I guess it may take a year or so, and then we have to rebuild the country, properly manage investments, and develop into a European economy. We have to become a civilized, regulated, and innovative society. I see us as a democratic European country, focusing on technologies. Ukraine may well become the next crypto and IT hub.

– One last question: Where would you advise starting with crypto for those who are only thinking of their journey in this field? And which direction to choose for those who have already made their portfolio of the first 0.1 Bitcoin?

– I would say they have to learn what it is and how it works. Take the time to learn, there are a lot of courses to help you out. Look at it, gain insight into it, and try to explain it to someone else. If you can explain it simply, you understand it well enough.

If you already have crypto, and you bought it to make a profit as the value of the investment goes up, sit back and wait. Do you want to trade? Go for it. But there's over a 50% chance that you'll lose it all. It's pretty hard to make money in trading. If you just like to move money quickly and easily and pay for something instantly – try using crypto as a payment method. Try using it in different ways. The key word here is "try".

– Max, that was great! Thank you so much. It was a pleasure meeting and talking to you. I think this is not the last time we meet at Gagarin News.

– Sure, looking forward to it! And good luck to you!