Exclusive Interview with Xapo CFO Félix Moreno

What is Xapo doing?

Xapo was founded by serial entrepreneur Wences Casares in 2014 with the intention to safely store Bitcoins. Furthermore, Xapo offers the use of a debit card for an underlying Bitcoin account that can be used everywhere Visa is accepted.   

Who is Félix Moreno?

Félix Moreno is the current CFO of Xapo. He previously worked in banking and consulting and is a well-know personality in the European Bitcoin scene. 

What do you think is the future potential of cryptocurrencies?

My idea is that cryptocurrencies are going to change payments in the same way e-mail changed communications. No less than that. That is because they are permissionless, like e-mail, as the blockchain protocol can be used by anyone. This for sure will take time. Tools have to be built to make it easy, to make it so simple that in fact your granny can use it.

In times of increased insecurity in the financial markets, why do you think anyone would use a payment network based on a nonphysical and volatile currency?

In fact most people already use nonphysical payment networks. 97% of the money that goes through the European Union is digital. The average customer will not use Bitcoin or any other cryptocurrency until they stop being volatile. The good thing about Bitcoin though, is that you can easily use smart contracts to guarantee the price and stop volatility. Some people are doing that already. The adoption curve will surely go with the volatility. Volatility has already gone down tremendously since the early days and it continues to go down at a steady rate. At 10bn market capitalization it is a lot more stable than it was at 1bn. Furthermore, volatility is a function of volume and stock. The bigger the stock, the more stable something is. That is why the Euro or the Dollar are so stable compared to currencies of smaller economic zones. These currencies are a big stock and there is a relatively small volume exchanging between both. The same thing will be happening with Bitcoin. Bitcoin has the possibility to reach a higher stability in the future than any other currency, as it can be globally used and is not bounded by frontiers.

How do these smart contracts, that you have mentioned, work?

Basically the Bitcoin code allows for certain operations, so called OpCodes. So far there is only a short list of these possible operations, which allow you to set certain conditions to payments. For example, the most useful one right now is called MultiSig. This code allows you to make a payment if two or more people sign. Which means that you can make payments conditional. It is programmable money.

Do you believe that cryptocurrencies will be able to fully replace fiat money?

I think that cryptocurrencies will dominate the Internet before they dominate anything else. But then, as the Internet is becoming a bigger part of our life, they will have a large role to play. This will probably not happen over night and it will need a long time for mass adoption, but exponential movements do happen very slowly at first and very quickly thereafter. We have seen this with social networks. Each doubling took an even shorter amount of time.

Do you think with the evolvement of cryptocurrencies there will be increased intentions from nations to regulate these?

One of the reasons regulators are not doing anything about cryptocurrencies right now is that there aren't yet many users; there is not such a large volume. For them it's not worth it to devote time to that. As the user numbers keep growing, there will surely be intentions to regulate cryptocurrencies. Nevertheless, cryptocurrencies do not care that much about what regulations someone makes up. Just the same as e-mail doesn't care very much. As long as regulators do not regulate the physical aspect, meaning that they stop you from getting an Internet connection, they won't be able to stop it. Additionally, cryptocurrencies can be transferred over many more streams than just the Internet.

Is it complicated for retailers to implement the Bitcoin payment system?

Not at all. It all depends if you want to receive Bitcoins or if you want to receive your local currency. If you want to receive your local currency you need a service provider that will do that for you, such as BitPay. Otherwise it is very easy and can be done through various programs, such as the app Blockchain.

What do you think will be the impact of cryptocurrencies on peoples' everyday life?

Actually there will be only little impact in Europe or the United States, as most people are already familiar with transferring money digitally. Nevertheless, there will be huge impacts in countries such as China, as it comes to regulation, and in Africa, where payment systems are very split between different countries and it's very hard to make international payments. We will see big impacts in remittances; in fact there are several Bitcoin companies that are already focussing on the remittance market. The only problem that remains is that you still have to convert your local currency into Bitcoins, which is a bit expensive right now in many places.

What do you see as the main challenges for a company providing complimentary services for cryptocurrencies, such as Xapo?

A main problem is regulation. We are a regulated company, which slows things down a lot. For example, we have to proceed users' documents or block suspicious accounts. Also regulations sometimes is unclear and it varies in different places. This all costs time and money.

How does Xapo guarantee full security for the Bitcoins stored at your servers?

We provide a product called the Vault, where we safely store our clients' Bitcoins. A vast majority of the Bitcoins are stored offline in cold-storage vaults all around the world. That  prevents them from being hacked.