Could banks become crypto’s unlikely savior? Croatia’s crypto pioneers weigh in

Nikola Škorić, the mastermind behind Electrocoin, Croatia’s first ever Bitcoin exchange, has built a name for himself in the cryptocurrency and blockchain community over the past decade.

What began as a mere hobby has now developed into the country’s largest cryptocurrency brokerage service. In 2021, the company registered a growth of 80 percent of turnover, and has now set its sights on expanding across the EU.

Škorić’s own journey has been diverse – from being a computer engineer with a variety of interests, including a stint as a nuclear reactor operator, Škorić remains dedicated to growing a company in the highly volatile crypto industry.

In an interview with The Recursive, the Croatian entrepreneur delves into his experience and reflects on what the future holds for Electrocoin and the crypto industry – from regulation to whether it is possible to change the banking system, or simply become part of it.

The Recursive: What was the idea when I founded Electrocoin back in 2014 and how did it evolve over the years?

Nikola Skoric: We founded Electrocoin for practical reasons since back then crypto trading here in Zagreb was expensive, slow and cumbersome. And we found that we could do it faster, cheaper and easier. So we started offering that service as a hobby and very soon we realized that it can become a company, it just happened naturally.

Out of that, within a few months, my business partner Marin Marzic joined because he was going through the exact same thought process. We both graduated in computer science and security, with the same mentor and only seven years apart.

We were both interested in cryptography and we both discovered cryptocurrencies and realized that we were able to offer better service. Since then, our volumes have grown year by year. At first we only traded bitcoin. It was like an Amazon for bitcoins, and then there was enough volume and enough revenue for us to build our platform.

And we started hiring people, we grew and at some point we realized that even though there are some decent payment processing services out there, for some reason people prefer local services like they did with our local brokerage instead of going to Coinbase for example, or as they do by going to local banks instead of HSBC for example.

So we opened our data processor, which now serves Konzum, the biggest retailer here, and Bazzar, the biggest online store, then gas stations, all kinds of places, and so on. So basically we exploded on the Croatian market.

In 2019, we recognized that there is also a need for cash services and business as people want to buy crypto via a bank account or card, or they also want to be able to exchange cash for crypto. But we’re not good with cash, so we didn’t want to do that – but there were physical currency exchanges that didn’t know crypto, so it was quite natural to integrate with them. We integrated with local exchanges and now have around 100 locations.

I would say that basically everything grew out of necessity, through all these features and new services. Now more than 50% of our brokerage business is EU-based. The payment processing and physical exchanges are almost all in Croatia, but we are pushing more towards the EU and the wider EU market.

How would you say crypto adoption evolved from when you first entered the industry?

It is quite correlated with the bull/bear cycle, especially in terms of the growth of adoption that it accumulates. For example, throughout the bull market of 2017, adoption grew. But in 2019, which is the worst year, our volumes fell by 3 percent. Last year, our volumes fell by 1 percent again.

However, our overall volumes grew, which I think indicates that the adoption is correct. Of course, these rise faster through the bull cycle and I think infrastructure adoption continues.

However, we also see that in mindset right now is probably the worst period ever for groups. During the last 10 years, there have been times when the price drop was more radical. But we have never had so much negative exposure.

On the other hand, last month we had a fintech conference where we had a guy from MasterCard give a talk on MasterCard’s crypto strategy, and we had several panels with bankers referring to crypto.

I think this shows that there is a shift in mindset, so now it is quite normal to have sold out large mainstream fintech conferences, where crypto is not just an integral part in the sense of having crypto panels, speakers and so on. , but it is integrated into core topics and directors of major banks are talking about it. So I think we will see more exposure in the coming years regardless of the bull/bear cycle.

What would the role of regulation be and how could it change the crypto industry?

I think we will just see more of the same in the sense that all industries go through the same path more or less.

First it’s the Wild Wild West, then regulation kicks in for obvious reasons. At the same time, this helps and hinders progress. I’d say regulation hurts us less than the guys who want to get into the market right now.

So it is much easier for me to talk about regulation than the new players on the block. On the one hand it helps establish the industry as legitimate, but on the other hand it gives us so much useless overhead.

Can regulation solve the various crypto scams going on?

Regulation is not a silver bullet. The largest Ponzi scheme in history was perpetrated by the chairman of NASDAQ in a hyper-regulated industry – Bernie Madoff. So obviously, if regulation didn’t solve the problem of Bernie Madoff, it wouldn’t solve the problem of crypto fraud.

However, something needs to be done. We see this best in our cooperation with banks. For example, Electrocoin has a compliance department. And we are relatively small and an innovative institution, so we pay close attention to what regulators say. We try to approach compliance from a practical point of view, and we see what we are trying to combat.

In my previous life I was a nuclear reactor operator, which is one of the most regulated industries. And I fully understand how large institutions work in terms of regulation – the first thing that the HR manager in the department said to me when I got there was that this is not the place to innovate.

And that is more or less the mindset of large institutions. Such large banks are not the place to innovate for obvious reasons, because they control such a large amount of money. But if there is no regulation, they would not want to innovate and they would not know how to approach us and how to work with us. That’s why it needs regulation, but as I mentioned at the beginning, it’s really a double-edged sword.

Is crypto going through its worst period now?

I don’t think we are in danger, mostly because of the change in mindset. Prices may fall, they may be negative, and trading volumes may fall – but the adoption and overall mindset has never stopped evolving. So I will frame the question in the direction of how we get back on track.

I think we are definitely on track, we just have to keep going. There’s this great fake quote from Winston Churchill, he didn’t exactly say anything like that, but I really like it, “when you’re going through hell, just keep going”. So I think we’re right at that place. Right now we are going through hell and we are slowly moving forward.

And the current industry will not die, because now MasterCard is carrying the torch. It is Visa that carries the torch. Two of the biggest payment networks in the western world are now offering services that will enable banks to offer crypto, so I think this shows where we are right now.

Where do you see crypto in five or ten years in terms of its relationship with the banking system?

We had the privilege of listening to a board member of the second largest Croatian bank last month, and he made an excellent point – that the banks and the banking system survived the last 200 years.

It is far too optimistic to think that crypto can kill something that has survived the last 200 years. I never thought crypto could kill the banking system, nor do I see the point. However, I see banking changing over time, and banks are not stupid – very, very smart people run banks, and they hire very smart people.

I think that we will see more banks innovating, and changing and banks approaching crypto, banks integrating crypto. I also see the other sides – we see the biggest crypto institutions requiring banking licenses.

Also, I wouldn’t say that independent crypto will fizzle out and disappear, because it’s a place for such radical innovation. Crypto is all about innovative startups – you have crypto popping up here and there every day.

Only in decentralized finance are there new startups every few days, and you have completely new and unseen opportunities, since innovation is radical and fast. I don’t see it stopping in the next five or ten years – for example, you can have banks buy up all the crypto startups today, and in two weeks you’ll have a whole new industry popping up out of nowhere.

So I think we will see a convergence in the long term – banks are integrating a lot of what we do now, but I don’t see the industry disappearing completely, as it is such a radical field of innovation.