Belarusian crypto exchange: how does it work and what are the risks?
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The first crypto exchange has been opened in Belarus. Currency.com was registered in the High-Tech Park (investors - VP Capital Viktar Prakapenya and Larnabel Ventures Said Gutseriyev). With the help of the platform, it will be possible to exchange regular money for cryptocurrency and vice versa, and to buy and sell tokenized securities.
Belarusian economists and lawyers have already expressed doubts about crypto exchange and complaints about Terms and Conditions of the Currency.com. With the help of Cryptoplatform director Viktar Perhament and Alpari Eurasia representative Yauhen Novik Euroradio has examined the nuances of the Currency.com operations.
Tokens instead of shares
The project produces over ten thousand token-based exchange securities. More than 150 types of tokens will be available later (this is a unit of account, a substitute for securities in the virtual world). At the Belarusian crypto exchange you can buy both regular cryptocurrencies (for example, Bitcoin) and security tokens.
Viktar Perhament explained what security tokens are:
"Security tokens are very similar to stocks or bonds, because this type of tokens allows to demand certain actions from the person who issued it. But the concept of a token is broader than that of a stock or bond. It can include some other interesting features, like the right to receive discounts, the right to free coffee in cafes, some additional bonuses and the like. Tokens open up a large number of opportunities for company marketers, make it possible to match the interests of clients and businesses."
The cryptocurrency exchange director clarifies that security tokens need to be distinguished from payment tokens, such as Bitcoin or ethereum. In the case of Bitcoin and Ethereum, there is no person who would somehow promise to accept this token. Payment tokens are very difficult to estimate, thus their prices vary greatly. Security tokens, according to him, are much more obvious tools with low volatility as compared to payment tokens.
It is impossible to buy real stock at the crypto exchange
Clients will not be able to purchase regular company shares. At the platform, they will be able to buy tokenized assets, whose value is determined by the market value of the relevant securities -- this is the economic equivalent of the relevant share, but not the share itself.
Mr Perhament: "Our partner capital.com will buy shares, futures or derivatives (depending on the device) for currency.com, so that currency.com could transfer the received financial result to the client. Thus, the price of tokens will be confirmed by the real price of shares and other financial assets owned by capital.com".
Is crypto exchange just like forex, but with the use of blockchain technology?
Both from a legal and practical point of view, the crypto exchange and forex are completely different concepts, said the head of Currency.com. He outlined the following differences:
1.1 Forex is for trading currencies, while crypto exchange is the platform for selling security tokens and cryptocurrencies.
2.2 A forex transaction is a position opening. The purchase of a tokenized stock asset is token purchase. Forex transaction can only be closed, while you can sell a tokenized stock asset, withdraw it from a stock exchange, or you can transfer it to a third party. It has many more applications.
3.3 Forex is trading with a broker, while tokenized assets are traded in a crypto exchange.
"It is important to understand the difference between a broker and an exchange, and why trading on a stock exchange is more profitable and more transparent for a client. If a client trades with a broker, they see the purchase and sale price of only this broker. Customers may have doubts about the fairness of the price they are paying. The price on the stock exchange is determined by the bids of a large number of people. On the stock exchange, any client can leave a bid to buy or sell and influence the price. [...] As a result, the price on the stock exchange is determined by all customers of the exchange together, and in case of a broker, it is determined by the company where you open an account," said Viktar Perhament.
Forex companies cannot afford such freedom of definitions
Several conflicting points have been found in the crypto exchange rules. For example, clause 17.1 lists the rights of the company, including the freezing and confiscation of customer's funds.
Yauhen Novik, an official representative of Alpari Eurasia, a Forex company, says that such measures are usually used to counter money laundering or terrorist financing:
“If, for example, one of the clients performs any suspicious operations or operations that are related to the financing of terrorism, or they are on the wanted terrorists list, then any financial institution in Belarus can, or in some cases is obliged, to block operations and freeze their funds until a separate order of the state body. Most likely, they (Currency.com - Euroradio) had this in mind, but for some reason did not write why they did it."
Indeed, after the Euroradio's query, a clause was added to the crypto exchange rules, where the company explained the reasons for such measures: "We may suspect the legalization of proceeds from crime, financing of terrorist activities, fraud or any other financial crime, in particular, but not limited to, if you repeatedly commit transactions that we consider suspicious."
"I’m more concerned about the clause (3.3 (e)). - Euroradio), which states that they do not bear any responsibility for any losses that you may incur, regardless of the reasons. That is, whatever happens -- your funds get stolen or there is some technical error -- no matter the reason you lose the funds, you have to agree that you have no complaints," said Yauhen Novik.
Forex companies cannot afford such freedom of definitions, said Yauhen Novik. They are in the registry and are regulated by the National Bank, so a large list of requirements and restrictions is established for them:
"There are, for example, restrictions on the cumulative open position risk. That is, a company cannot take on risks that are bigger than its own capital -- its own money. There are various financial standards, more than seven: liquidity ratios, standards on the borrowed capital concentration and so on. All this is controlled daily by forex companies. "
After the this story was published, representatives of the crypto exchange contacted the Euroradio and said that clause 3.3 (e) would also be changed soon: (e) You acknowledge that the availability of tokens on deposits and their trade creates certain security risks, including, but not limited to, various security breaches or targeted hacker attacks. You acknowledge that we are not responsible for any losses, thefts, failures, violations, errors, deviations or delays that you may encounter when trading through the Application, except in cases where such losses, thefts, failures, violations, errors, deviation or delay occurred due to our fault.
Was the crypto exchage launched to transfer private capital from Russia to Belarus in payment for the implementation of the Moscow oil maneuver?
In the first days of the crypto exchange operation, the platform received over twenty thousand applications for registration. Clients from both Belarus and from countries other than the United States (due to national prohibitions) and countries included in the FATF black list (international group for the development of financial measures to combat money laundering) will be able to conduct transactions.
Rumor has it that a crypto exchange in Belarus was launched specifically to pull private capital out of Russia to Belarus as payment for Russia's oil maneuver. Is it true?
“This is absolute nonsense. Neither we nor the Republic of Belarus have set such a goal. We, as a business, are outside politics. But it should be noted that there is a heightened interest from Russian users to our website,” said Viktar Perhament.
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The possibility of creating crypto exchanges in Belarus appeared in 2017 after the adoption of the Presidential decree No. 8 “On the Development of the Digital Economy”. The investments of Viktar Prakapenya and Said Gutseriyev into the first Belarusian crypto exchange totaled about $ 10 million. What share of investment belongs to each company, as well as the terms of the transaction, is not disclosed. According to representatives of the exchange, in 2019 they expect to receive proceeds in the amount of $ 70 million. They plan to make money on exchange commissions, which will be from 0.2 to 1.5%, depending on the operation.
Accounting of tokens is carried out according to the national standard "Digital characters (tokens)", adopted by the Ministry of Finance of Belarus last year.
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