Founded in Austria in 2014, the Bitpanda cryptocurrency exchange has since been widely deployed in Europe and has become, for example, the leading crypto broker in France. Eric Demuth, CEO and co-founder of the project, explains how he was able to help build trust in these digital assets.
Can you tell me more about your background and how you became CEO of Bitpanda?
Eric Demuth: At first, right after school, I wanted to be a naval pilot and actually spent two years studying ship mechanics. But I soon felt out of place. Then I got involved in business and finance studies and that was the first step that lead me towards entrepreneurship. Then I met Paul Clanchick and Christian Trummer, two people from the cryptocurrency ecosystem, and we both realized that buying Bitcoin or Ethereum is difficult, especially among the general public. So we imagined an intuitive platform that would allow for such massive reliance.
The main challenge was convincing the banking industry to connect their systems to the blockchain, it was very late in this matter. Today, however, it has become a necessity as adoption accelerates. In Austria, for example, there are more people with a bitcoin wallet than holders of an exchange.
What is your development strategy in Europe?
ED: We are particularly focused on Europe and the aim is to obtain as many licenses as possible. The second version of MfiD allowed players like us to be able to offer both stocks and cryptocurrencies and our idea is to offer everything in the same platform. We have 9 offices and 750 employees in Europe: that’s enough for now and we’ll see when we need to target a new market.
Bitpanda has been consistently profitable since 2016 and we intend to continue this momentum. Our last funding round was in 2021 and we don’t intend to raise any more money given our current revenue stream.
Why are some major banks still wary of digital assets?
ED: It depends a lot on the actors or the banks we are trading with. We have also discussed at length with the French ecosystem to create stable systems and we must remember that preventing fraud or money laundering is nothing new. This has always been part of banking standards. So I’m not particularly concerned the violations still exist due to people choosing not to respect the rules.
Regulation is crucial, whether it is related to banks or financial technology companies. However, creating common rules for tech companies is more complicated because their creation is new. It took a long time for the European framework for digital finance to emerge, and the MiCA regulation is only supposed to come into force in December 2024. This is a literal translation of MfiD already imposing guidelines and codes of conduct on traditional financial players. We should have taken the lead on this issue, but we had the right to a lot of negotiations and political struggles before the first bills appeared.
It took 10 years for banks’ confidence in cryptocurrency to stabilize. In Europe, new rules on open banking systems have emerged – such as DSP2 – and some more should arrive very soon. Therefore, traditional banks are adapting to this normative context but also to the demand, which is increasingly interested in cryptocurrencies.
The cryptocurrency industry is now established and compliant with the applicable regulations and we no longer see anyone suggesting that this ecosystem is only driven by “scammers operating in the shadows”.
Can you elaborate on the launch of Bitpanda Cash Plus that you justify launching “in response to the growing dissatisfaction with the low interest rates prevailing in Europe”?
ED: We do not know how long central banks will continue to adjust interest rates upward. On the other hand, in 5 years we see a rise in the money market. The problem: You need at least 1 million in funding to get started. We launched Bitpanda Cash Plus specifically to allow more people to participate from 1€ and at very advantageous interest rates.
In the end, it is hoped that the public will realize how similar or even more efficient these financial products are than those offered by traditional banks to increase their savings. The current context is uncertain and the flexibility we offer is absolutely necessary to adapt.
We also have more B2B offers that are of interest to more and more companies and banking institutions. For example, Deutsche Bank granted us a valuable license to issue and manage cryptocurrencies on the German market.
Why do you think it is important for savers to diversify their assets? Is investing in cryptocurrency a way to achieve this, despite its vulnerability?
ED: This is generally a good idea but it all depends on the profile. I’m not comfortable with this idea that everyone should necessarily own cryptocurrency. The most important thing in the inflationary context we are going through is to make smart and logical choices and not rush into a particular stock without thinking.
In recent years, before and during the health crisis, we have noticed a growing public interest in finance. This is a phenomenon that seems very healthy to us and encourages more people to adopt good financial practices. We must not put everything in the same basket and above all start slowly. Diversification remains the key and we always advise investing very little in cryptocurrencies as they are very volatile.
The other piece of advice I would give is not to rush into the “new crypto hype” and take it one step at a time. Don’t focus too much on winnings, keep savings aside and aim for the long term!
How do you survive this new craze for generative AI even though you’ve been practicing it for many years?
ED: Artificial intelligence and machine learning are nothing new. But ChatGPT-like language models have just reached a new stage of maturity that allows for widespread adoption among the general public. So today it is possible to introduce a new experience thanks to chatbots that no longer need to be trained on large internal databases but from external data around the world.
Financial markets generate data that no one can understand at once and AI can help us a lot in this case. We combine this financial data with the power of existing language models to help our customers. These AI systems can learn how decision makers in the world of finance operate and thus help them in their work in the long run.
I recently announced a $10 million investment plan in artificial intelligence, mainly to develop a financial advisor in wealth management…
ED: We are seeing the emergence of a real discussion about artificial intelligence and these generative models continue to evolve at an unprecedented speed. We are convinced that technology will very quickly enable the public to adopt better management of their money.
We’ve widely embedded AI into our internal operations over the past two years, and this new $10 million plan takes another step toward bringing AI-powered financial management to the public.