LHV Bank: Creator of the First Stablecoin
LHV Bank has been working on use cases for the emerging technology, striking partnerships with startups and providing banking services to Coinbase. LHV even went so far as to launch its Cuber Wallet app, a blockchain-based wallet that allowed users to send digital representations of real euros or now known as stablecoins.
LHV was also one of the first banks to have its own in-house crypto team. Has the situation changed since? Are blockchain projects flocking to Estonia because of this? Is LHV waiting for them with open arms? Well not quite. We asked LHV’s Head of Fintech Services Jüri Laur what the deal really is.
Jüri Laur is an expert in international payment systems. He previously led cryptocurrency product developments at LHV Bank and optimized payment solutions at Skype.
“Developing your own products, you can better understand the potential of technology,” Jüri believes.
LK: What is LHV’s standpoint on businesses operating in the crypto field? Are they deemed as a higher risk group? Why is it more difficult for companies in the crypto and blockchain field to open bank accounts?
JL: The crypto field is a very broad term - not all businesses in it carry higher risk, however separating the wheat from the chaff is very labour intensive and requires special expertise, therefore the whole area is indeed considered risky.
LHV approaches the crypto field rather pragmatically and based on risk. If a company is providing next generation financial services, we evaluate them by the same criteria as we would evaluate traditional providers.
The heightened risk comes largely from three different problems:
It is more complex to determine the background and origin of digital assets. The tools are there for the larger pseudo anonymous cryptocurrencies but not for smaller and privacy oriented coins.
Unclear legal status of certain types of digital assets. A good example is fundraising through an ICO. Many of the tokens issued have features of securities - simply calling them utility tokens is not enough.
Cryptocurrencies have simplified the introduction of new digital financial services to the market. The barriers of providing these services are significantly lower than before. This is definitely very positive; however, it creates situations where clients’ assets are handled carelessly or even maliciously. Because there is a lack of regulation we need to analyse every service provider vigilantly.
LK: LHV built the blockchain-based banking solution Cuber a few years back - what has happened to it since?
JL: You could argue that Cuber was the world’s first stablecoin - even before the term stablecoin was a thing. The project was way ahead of its time. But in a funny way, by the release of the first version of Cuber, the coloured coin technology used was already outdated in some ways. Regrettably it was too early to be used commercially and also in some ways us being a bank became a constraint.
LK: LHV is often referred to as a crypto-friendly bank, which is rather innovative compared to others, what is the situation in reality?
JL: We support innovation and entrepreneurial people in any way we can.