QUOINE company: one of the future main actors in the new digital economy?
By: Raphael Hannaert
Tags: Trading, Bitcoin, Cryptocurrency, Blockchain, Finance

Credits: Kelly Belter

QUOINE is one of the leading fintech companies in Japan working in the cryptocurrency industry. It was founded in 2014 by Mike Kayamori, MBA from Harvard Business School and previously Senior Vice President at SoftBank Group, and Mario Gomez-Lozada, previously CIO at Credit Suisse Asia and CTO of Merrill Lynch in Japan.

QUOINE is established under the laws of Singapore and offers various products:

1. QUOINEX is a crypto-fiat exchange with a monthlyvolume of over $5B that emphasizes security and a rich trading experience through low fees and sophisticated trading tools (e.g. customizable panels, fast execution matching engine, and API). In addition to the transparency they offer about their team (unlike some of the major exchanges) and operations, it is the first fully regulated (by the Financial Services Agency) global crypto exchange in Japan.

2. QRYPTOS is a secure crypto-only exchange and ICO listing platform that aims at providing a complete solution for token issuers to list and trade their tokens. In fact, some ICO platforms do not offer the necessary security measures, for example, not doing due diligence of teams listing new tokens. As a result, many cases have led to multimillion dollars’ worth of theft.

3. QUOINE LIQUID, initiated with an ICO in November 2017 (350,000,000 QASH sold which corresponds to 350,000 ETH or more than $100M) and which at press time has a market cap of $600M. This platform aims at facing the current liquidity problem existing in the crypto economy.

The liquidity problem according to QUOINE

- While some pairs offer high liquidity (e.g. BTC against USD, EUR, CNY, etc.), others present low or none, raising a barrier for holders of minor currencies to enter the cryptocurrency market.

- Liquidity is offered in “silos”, as exchanges may have liquidity for some pairs, but that liquidity is only accessible for users of this exchange. There is no partnership across multiple platforms.

The Liquid platform is being designed to tackle these problems by bringing two main innovations: A world book (an order book across multiple markets) and a prime brokerage (set of services to reduce counterparty risks and increase ROI). More details about the implementation can be found in their whitepaper.

We had the opportunity to visit their office and have an interview with Katsuya Konno, CFO of this fast-growing startup that has now about 100 employees

Interview with Katsuya Konno, Chief Financial Officer of QUOINE

When did you join QUOINE?

After working for 7 years at Softbank where I was in charge of M&A and venture deals, I joined QUOINE in November 2016.

Could you tell us more about QUOINE? Where are you based?

QUOINE is a leading fintech company, offering various products, including the first global exchange licensed by the Financial Services Agency (FSA) in Japan. Our Headquarters are in Japan and we have a subsidiary in Singapore. We also have our development center in Vietnam, including core developers and customer centers. De facto, Vietnam is becoming a great hub for Blockchain and AI development. However, we do not offer any crypto-related service there, as the Vietnamese regulations are stricter.

QUOINE has QRYPTOS and QUOINEX. What is the difference between these exchanges?

QUOINEX is global, it is offered to both Japanese and non-Japanese people. Crypto-only exchanges cannot have a license here in Japan. The Japanese government cannot study all cryptocurrencies and regulations are therefore stricter. For the coins that we list on QUOINEX Japan, we need to consult with the FSA. Not for QUOINEX global and QRYPTOS. Therefore, we decided to split in two parts.

QRYPTOS is offering more than twenty cryptocurrencies, Besides, for practical reasons we are currently listing mostly post ICO tokens based on Ethereum (ERC-20) as we plan to transform QRYPTOS as ICO Self Service platform.

You offer negative fees on Qryptos. Why?

On QUOINEX, we are doing the market making. On Qryptos we cannot do it, there are so many coins and we prefer avoiding taking position in order to reduce risks for now. Therefore, we decided to go for a fee design that would incentivize market makers by offering half of the fees. In addition, the exchange area in Japan is very competitive and most propose fees close to zero, which is good for users, so even half of the fees is comfortable for us

How difficult was the process of getting the FSA license?

We spent almost 18 months to get the license, having weekly meetings with the Japanese FSA, and calls every morning. We have spent significant resources for this license, working with law firms and accounting companies. As a matter of fact, it was an important milestone for us.

In the end, cryptocurrencies will be regulated in most (all) countries. I think that exchanges should embrace regulations. However, many are startups that do not have the connections with governments. It is important to create these bridges so they can participate in these decisions. We have established that direct connection with the top of the FSA and it is benefiting all parties involved.

What are you trying to achieve with the Liquid platform backed by the QASH token?

We started our QASH ICO in September. This is the first regulated ICO by a licensed exchange. We successfully raised over $100M. Through our ICO, we would like to build a new platform called Liquid , aggregating order books with partner exchanges, creating a big large liquidity pool. We believe that crypto will become mainstream in the financial industry but in the current situation there is an important problem within the crypto-economy: there is a lack of liquidity. The Liquid platform will resolve this problem and enhance the diffusion of the technology. We plan to build the beta version of this platform in early 2018 and offer the service in early 2019. After that, we would like to expand to crypto-based financial services such as global remittance, lending and insurance services to every user. Our objective is getting a banking license at the end of 2019.

Credits: Kelly Belter

Basically, we are trying to be the Tokyo stock exchange of cryptocurrencies. We would like to create this ecosystem in the crypto-space. To complete this mission, collaboration with other exchanges is needed. As a consequence, we see more partnerships with exchanges, market makers, investment banks, and other relevant actors in the long term.

In terms of Roadmap, what are you focusing on at the moment?

ICO self-service platform on QRYPTOS. We are also building a team dedicated to developing the QASH blockchain. However, we realize that there is a lack of good blockchain developers in Japan, forcing us to look for potential abroad in order to sustain the fast rate of innovation in this industry.

Currently, QASH is an ethereum-based token but we will replace with our own blockchain. It will therefore become a coin and not a token anymore. On top of the QASH blockchain, new fintech companies will be able to easily implement their financial services, using our basic financial features such as credit scoring, automation KYC, and trading algorithm.

We are also considering expanding our market. We are now entering the Filipino market as we believe it has a huge potential for remittance, due to the numerous citizens living abroad. We want to use cryptocurrencies for remittance as it would offer lower fees than existing players in this field.

Recently, the Korean exchange Youbit got hacked and it is not an isolated case, as some of the main exchanges including Bithumb and Bitfinex also ran into troubles in the past.

How do you feel about these threats? Does that bring you to reconsider your security settings?

It is clear that there will always subsist a non-zero risk. But we have very strong security measures. This is something we are allocating a lot of resources into. Although we have never experienced any hack, Distributed Denial-of Service attacks (DDoS) often happen. However, we are using a private server instead of the public cloud, and a cold wallet only with multi-signature. I would even say that with putting such a great emphasis on security, the user experience is sometimes harmed.

What do you think about decentralized exchanges? Do you think they will bring a new paradigm and replace centralized ones?

No, I do not see how they could scale and deal with latency. This is a very different model from the traditional financial world. I believe that the centralization is needed to a certain extent. Nevertheless, there could be collaboration between centralized and decentralized exchanges, and that would be interesting.

What is your opinion about Chicago futures? Do you have any plans to introduce futures?

We are currently talking about this possibility. On the one hand, due to speculation on the short-term it may increase volatility. On the other hand, I believe it should stabilize bitcoin price in the future.

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