First let us stop and commend Alex Mashinsky for his impact on the world as we know it. An early pioneer in VoIP, with patents going back to 1994, he is now in the process of replicating that disruptive game changing charge with MoIP or Money over IP. As we sit in the middle of a pandemic, zoom calls at the ready, his impact is already written for the history books; now his challenge is to do for money what he did for telephony.
Modestly he acknowledges this in our call, emphasising that the internet infrastructure is what makes it possible for billions of people to be talking online today, but the sheer impact of his early work needs to take a bow.
At the time, he was met by telecoms engineers who tried to explain to him that the internet ran on phone lines, to which he replied: actually the phone network is just an application on the internet.
As a serial entrepreneur, Alex never lets a big success get in his way and is fully ensconced in his next, and arguably more impactful, challenge – posing an alternative to the banks. He likes to pick his challenges and he likes them big.
Tackling the banks is different from upgrading technology. Here, Alex recognises banks were set up to serve the community, giving credit and loans and providing interest on deposits; so it’s not the system that he is tacking per se, but the institutions as they have evolved away from their initial purpose. In his view, it’s not banking we don’t need, it’s the banks themselves.
He has been known to term our relationship with banks as an abusive marriage. “Get out,” he says with all the knowledge that history and inertia are powerful counter forces.
“Today’s banks are nothing like their community originals. They do not care about the individual, there is no connection between you and the bank and basically it is their job now to extract maximum profit for their customers – to hand over to the shareholders.”
The whole ‘too big to fail’ ethos is mind blowing to Alex, so too is the transition of a service industry to a profit squeezing one at every corner from lack of fair interest paid on deposits to charges of every hue on every interaction with the bank.
As it happens not all roads to Damascus happen in a timely fashion. When Alex first heard of Bitcoin he was unimpressed and indeed very critical of the energy expended on the network.
“I’d spent my career building bigger, better and faster and here was a network delivering the slowest database possible. I was not going to fall for that one.”
In fact, it took several years for Alex to come around to the possibilities of this very slow database. Fixing the double spend issue was the critical issue that swayed his thinking and once he cottoned onto that attribute, he began to look at the trillions of dollars of value tied up in the very slow database.
In the same way the move to digital video coincided with the pandemic and lockdown, the abuse by the banks at an individual level right up to Central bank with their quantitative easing, made Alex realise the time was now, and he was going to launch a bank that went back to first principles.
He also quickly realised that while there was an appetite for change, it needed to be easier.
“I wanted ordinary folk with small amounts of money to engage. Let the whales, traders and OGs look after themselves, I wanted to fix this ‘ordinary joe’ problem.
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“VoIP took off because people wanted to talk to their loved ones far away, simple, but money has a higher level of trust required. I want to solve it so that the vast majority of people on this planet are using cryptocurrencies without even knowing it.”
To that end, Alex is doing Celsius within the system.
“There is no way we could help the majority of people in this world and still be an anarchist.”
Alex sees cryptocurrency adoption as coming in waves. The first were the anarchists until they ran out. Then the libertarians showed up, until they ran out. The third wave was of speculators pumping and dumping coins, but the fourth or last wave is everyone else.
“The people who are going to get us to $300,000 a bitcoin, or even a million, will be the hundreds of millions of retail users who want to use cryptocurrency for their everyday needs – for loans and to earn interest.
“That is why we follow all the regulations. We are complaint in every market, we work with the tax authorities, and the fincen authorities, and with the regulators.”
It’s much harder to work with the regulator than not, according to Alex. “It’s not possible to pretend the rules do not apply to you. People don’t have to make a choice between compliance or cryptocurrencies, they can use both.”
Celsius at the time of writing has in excess of $13 billion in assets and that is growing.
“We focus on the hodlers. Our customers are not looking to trade but to use their money. Inside the app, people can store their cyrpto safely or they can access loans and interest.
“It is as safe as houses.”
Customers can deposit their crypto and use that as collateral to borrow money or pay off loans. As all loans are collateralised, there is no need to check customer credit. This also results in low interest charges.
Right now, Celsius has not moved into the mortgage space, possibly the last frontier for customer solutions, but works smart within the system. For example, if a Celsius customer borrows money using their crypto to pay off an expensive loan, they are deferring taxes as they have not sold their bitcoin; being within the system allows for clever collaboration.
It also works both ways. During the summer of DeFi, Celsius basically offered its customers secure DeFi and while not headlining like other protocols in the crypto press, it was one of the largest participants in the DeFi movement.
Staying true to core values means Celsius is not in the market for a luxury, prestigious headquarters. In fact, Alex points to a report by McKinsey that said statistically anytime a company builds a giant tower and put its name in it, the company was likely to decline thereafter.
“Right now, every Monday we pay interest to half a million people. Our average customer is a single mom, or a retired person, or a college student, and they are entrusting us with their live savings. So, yes we have a big pool of money, and yes we behave like a big shot but really our job is to extract as much as possible from the institutions and deliver it back to our community. And we do that better than anyone.”