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Leaders In Payments
Leaders In Payments
Maxim Galash, CEO of Coinchange | Episode 401
Max Galash takes us on a fascinating journey through the rapidly evolving cryptocurrency landscape as CEO of Coinchange, a global crypto brokerage and asset management platform with offices in Warsaw and Toronto.
Having pivoted from a direct-to-consumer approach following the collapse of major players like Celsius and BlockFi, CoinChange now focuses exclusively on B2B relationships with crypto operators, exchanges, neobanks, and payment platforms. What sets them apart in this emerging space is their multi-manager investment approach – rather than simply offering tokenized T-bills like many competitors, they employ various managers deploying different trading strategies to create customized, principle-protected structured products.
The conversation provides remarkable insight into how stablecoins are revolutionizing global payments, especially in emerging markets where access to USD-denominated products is limited. "Stablecoins are a bridge between banking, trading, exchanges, crypto and remittances," Max explains, highlighting their crucial role in enabling global settlements within seconds. His prediction that blockchain will become the backbone of settlement networks rather than remaining consumer-facing technology aligns with moves by financial giants like BlackRock and JP Morgan, who are already settling billions through private blockchains.
Ready to understand how cryptocurrency is reshaping global finance? Listen now to hear Max's complete insights and predictions for this transformative industry.
Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape. We'll be discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments. We will also hear stories from our guests about their journeys to the top.
Speaker 2:Hello and welcome to the Leaders in Payments podcast. I'm your host, greg Myers, and on today's show we have a very special guest, max Galosh. Hopefully I got that right. You can correct me if I was wrong. He is the CEO of CoinChange. So, max, welcome to the show.
Speaker 3:Thanks for having me, Greg. I appreciate it.
Speaker 2:Absolutely so, if you don't mind, tell our audience a little bit about yourself, maybe where you were born, where you grew up, where you went to school, a few things like that.
Speaker 3:Okay, yeah, I'll give you a background on myself and the business. I was born in Belarus, so it's a far outreach on Eastern Europe, the USSR bloc, so I guess we're Russian Italian as well. I lived in Italy for a bit. I went to school at UFT University of Toronto. I graduated as electrical and computer engineer. I worked in investment banking for a couple of years I worked at the SAP Consulting, so it's a global tech consulting firm in Germany.
Speaker 3:I had my own startups all along since I was probably 17. I sold one business. It was a cannabis automation platform, so kind of a seed-to-sale platform. Early in the days, in 2011, I had a small VC venture fund pre-seed venture fund with about 10 million AUM. We mostly focused on social and game five businesses back then. For the last five years I'm working on my own crypto company called CoinChange. It's a pretty much a brokerage and asset management platform, so we've raised about $10 million. We're about 50 people. We're pretty global. Office in Warsaw and office in Toronto Licenses in Europe, Canada and the US. We facilitate somewhat on and off ramp transactions. Warsaw, an office in Toronto. Licenses in Europe, Canada and the US. Watham as well. So we facilitate somewhat on and off ramp transactions, crypto to fiat and, primarily, as the core and foundation of the business, is the asset management, so providing structured investment products to B2B clients and the market Through our app. There's different ways to distribution app API, fund, SMA model. The essence of that is a multi-manager investment management platform.
Speaker 2:Okay, okay, and so who is your typical customer?
Speaker 3:B2B primarily. So it's a crypto operators, exchanges, neobanks, payment platforms, wallets so we don't really offer D2C. We started as a D2C platform as well back in the day. So there was a few other big ones like Celsius, blockfi, and they're all gone. They're all bankrupt. They're all been wiped out by the market.
Speaker 3:There was like a gray they called it a shadow banking so pretty much taken out collateralized, not uncollateralized, unsecured loans on the balance sheet and then working with them in the way that they deem appropriate, deemed appropriate to generate a new return. It was all black box and pretty much clients were left hanging back when she hit the fan and the market exploded in 2020 after a few big bankruptcies, and then FTX happened as well, so that's kind of cleaned up the system. But we started retail and we were a part of that retail wave when the market was going up and then we had to reposition the business and find a new customer. So pivoted the business towards B2B. So provided more transparency, licensing, visibility into the business for the B2B clients and they act as distributors quite often to their retail clients. So it's a B2B to C model. You can think about it as an infrastructure or a SaaS model.
Speaker 2:Okay. And how do you go to market? Do you have a direct sales team through partnership channels? How do you go to market? Do you have a direct sales team through partnership channels? How do you go to market?
Speaker 3:Mostly partnership channels. Yeah, events, partnership channels. We'll do some research reports. It's all pretty much for now, at least at our scale. It's all high-touch businesses, so there's no fully automated way for you to actually plug and play. I mean there is, but people usually have a lot of questions about the investment products. Right, it's what are the risks, what's the compliance, what's the regulatory about it? How do we sell it to our end client? How do we explain it to the end client? So there's always a bit of a handholding Along the first touch point of the implementation and the activation. There's usually a bit of work that needs to be done by the team.
Speaker 2:What does that timeframe look like, from first touch to activation?
Speaker 3:The clients that really want to and want to integrate directly as a smart contract, let's say, because we have a smart contract endpoints as well for them. So smart contracts eliminates your back office and mid-office primarily, so kind of operations down on chain by a code rather than by people. So it's pretty quick. I mean we'll give them the endpoints and they integrate it within two, three weeks, Even if they know whether they're looking for actively managed portfolios as an example, right, and they know what they're getting.
Speaker 3:But the clients that have no idea or have never sold investment products and just looking to introduce them, let's say payment platforms, right, they're trying to diversify over their merchants kind of an overnight interest or his savings account or investment product, depending on their risk profile. They will have a lot of diligence and exploration because they're still discovering the products and they're talking to the other vendors. So those ones can take up to six months. So depending on the need and the proficiency of the client or the partner, it can be either from a couple of weeks to six months. On average I would say it's two, three months. You can just take the middle point.
Speaker 2:Okay, and when you say sort of the B2B, are there like specific verticals or can it be basically any B2B company?
Speaker 3:No, for us it's all crypto related. They have to have a crypto on their balance sheet, so it has to be an exchange or a payment platform that uses stable coins for crypto, or a wallet that you can use a self-custody wallet to hold your crypto. So there's different crypto operators, fintech operators that we go after. We're not going to go after the logistics business, a trucking business or a plumping business, so they have to have some crypto on their balance sheet to be able to offer that product to their clients.
Speaker 2:Okay, and it sounds like it's truly global. Yeah, primarily emerging markets.
Speaker 3:So we're not licensed by SEC for the asset management business in the US. We only offer on an off-ramp in the US. So as an MSB Canada, we're also offering as an MSB on an off-ramp and some SaaS solutions want the client to distribute the end product and they're fully liable for the marketing and custody of that asset. But emerging markets Europe we're full of license for that. Emerging markets LaTown we're full of license for that. So there are regions where we go directly to B2B and can act as an asset manager and some regions we can also act as a technology provider.
Speaker 3:But we're not actively selling in the US Canada, uk, as an example, mostly emerging markets because they have a problem to access USD-denominated products of that nature and they have a primarily for payments. So those fintechs that already got a bit of a market share in the payments or stablecoin wallets, they're looking to diversify and introduce new products. So in the US the market is a little different and there's also better access to traditional products in the USD world. So I don't have to name them. But not only TBLs, but money markets, overnight products in the banks and so forth. So the need is more in the emerging markets right now, so that's where we focus.
Speaker 2:Okay, and how would you say you differentiate yourself from your competitors out there?
Speaker 3:There's not so many competitors right now. This niche is pretty new. So I mean we don't resell a T-bill. So a lot of people, a lot of businesses that started two years back, as an example, when FTX collapsed, after businesses that started two years back as an example when FTX collapsed, after that they started offering tokenized T-bill. They'll take a dollar, they'll go through a BlackRock or some other asset manager and send them the dollar. Then they have some systems to represent a value, a unit value for you and it's on chain. But it's all T-bills.
Speaker 3:It's a pretty simple product we do. We offer a multi-manager approach so we have different managers actively managing the assets on our accounts on different venues, right? So meaning that they will utilize different trading strategies, options, market neutral basis trade strategies and based on those we can comprise portfolios and those portfolios we offer to the B2B client that will be reselling and we can structure a portfolio in different ways. So principle-protected no principle-protected Drawdowns, volatility of the portfolio can be customized per client. So primarily, quite a lot of payments platforms. They will go to the principle-protected type structure product. So they want to make sure that they put $100 and take $100 back and they don't want to really be evaluating the strategies that are. Maybe they're high-performing, low-performing we just want to make sure that the principal is protected and we have a target return rate of return for that product. So let's see, we'll say 5%, 7% on stablecoins as a target return, with some down, but no principal protection. So they'll see the fluctuation of the return because there are some breakdowns of the market, neutral strategies, but the principal will be protected. So they can always take that $100 back and if they want liquidity, daily or weekly, so it also can be built in. But usually it's either weekly liquidity, because nobody's going to put a dollar for a day and then take it out tomorrow. Usually it's at least a week. So that's the differentiation factor. So usually it's at least a week. So that's the differentiation factor. So we don't really resell somebody's else t-bill or credit.
Speaker 3:There's a lot of private credit that's coming on chain as well. So let's say somebody in nigeria needs a factoring for their iphone import business. They'll ask the depositors in the us that will stable coin. They'll give them some kind ofa token representation of that. They'll move usd to niger, nigeria for the business and it all encapsuled into the blockchain. So that's a private credit. There's quite a few private credit platforms as well, so they also pay you on your USD deposits very much of a factor. So that's also different. But there's other methods like that that exist to generate yield on the stablecoins, but very different to what our multi-manager approach is. So I don't see direct competitors who do exactly what we do, but there are others that provide yield on stable coins or other assets through private credit and TBLs.
Speaker 2:Okay, okay. Well, when you step back and look at the industry as a whole and obviously you can answer this through the lens of what you guys do where do you see the industry headed in the next, say, three to five years?
Speaker 3:I'll tell you where it is right now. Where do you see the industry headed in the next say, three to five years? I'll tell you where it is right now. First, I think the real use case, the only real use case right now, is payments, so in stable coins. So stable coins is pretty much tokenized dollar. So everybody talks about tokenization but nothing really tokenized except a dollar like USDT has been around for 12 years. Usdc has been around for seven years and they're actively used in remittances, cross-border payments, trading on an off-ramp.
Speaker 3:So when you want to get into the crypto economy, you'll buy a stable coin. You're not going to buy a Dogecoin to go into the crypto economy. You'll buy a stable coin. Then you go on exchange and then you buy a token that you want To get in. You'll buy a stable coin because you're going to use your credit card or ACH to get in. So it's kind of a bridge. Stablecoin is a bridge between banking and trading and exchanges and crypto and remittances.
Speaker 3:As I mentioned, because we work on the emerging markets, we see a lot of that happening. It's already embedded and there's a lot of abstractions because blockchain has gas fees, it has wallets that you have to manage on chain. So it has a lot of abstractions. People already like Circle. They already built a lot of layers of abstraction so the fintech can easily integrate through an API circle wallet for USDC payments and initiate a payment globally settling in seconds, going global right. So very good for emittance and cross-border. So right now the payments is the only use case and it's growing really fast and there's a lot of platforms globally that support that use case. Big ones like BVNK is an example, and smaller ones like the original lemon, let's say, in Argentina.
Speaker 3:But the future of that? A lot of people are looking into the issuance of financial products and chain. So tokenizing something is not really cool because it's already issued on the real world, it already has distribution in the real world through real, through merchants, through the existing channels, and then just bring it on chain enabling the settlement seven days a week, 365 a year. It doesn't really add a lot of value but a lot of hope is for that. Eventually financial products can be issued on chain as well.
Speaker 3:So meaning that if it's issued on chain, it's fully redeemable on chain. It's fully legal as well. You can enforce it through the court and that's already happening in chain. It's fully legal as well. You can enforce it through the court and it's already happening in Singapore and Dubai. They're already testing different real estate issuance on chain, not tokenization issuance, debt issuance on chain. So if you're a business, you can come tokenizing it, but going on a chain directly issuing it there without replicating the offline world, so yeah, so those things. I think that tokenization is kind of a big thing, but the use case hasn't really been yet found except stablecoins and payments.
Speaker 2:Do you see a day when I go to the dry cleaners and I pay with stable coin to get my laundry?
Speaker 3:Yeah, you just won't notice that you do it right now. Right, you don't pay cash. Right, you pay with a credit card and you don't really take it out. It's in your phone. So just this.
Speaker 3:I think that blockchain itself is not really a consumer product, is not really a consumer product. It's going to be a backbone of the settlement network, rather than a crypto NFT app or some sort of a consumer-facing. It's all going to be USD anyways, or a currency that represents it, but the tokenized assets will exist on the blockchain. That's the backbone of that. Even BlackRock right now I spoke to them recently they do about a billion dollars of settlements and tokenization a day. So they have their own on the Biddle, they have their own tokens they will call it Biddle and they already do some settlements with their partners and brokers on their own blockchain.
Speaker 3:Same happens for the. Jp Morgan has their own blockchain as well, so they already do it internally. Just in the grand scheme of things, it's still a very small right Kind of risk-free for them flow, small risk-free for them flow that they're settling. But eventually it's going to be more the problem right now with them that they're discussing, let's say, jp Morgan and BlackRock and the others. How do we bridge together our closed ecosystems? Because they have closed blockchains?
Speaker 3:It's not an open blockchain because you have to have compliance and there's a lot of layers of compliance and regulation, primarily around the financial services. So they're thinking, okay, how do we really marry them together and talk to each other so they can talk to each other? Not like databases talk to each other, but actual blockchain?
Speaker 2:Well, let's switch gears a little bit and talk about you, maybe walk us through your career journey, how you got to where you are today.
Speaker 3:Yeah, I mean, I've been in tech for all my life. I started a couple of businesses, as I mentioned. One of them has been acquired since 2017. And I started to buy Bitcoin in 2018. So it was pretty simple. I took a sabbatical and there's Dublin and crypto and it went from 2000 to 20 in 2017. I remember that was my kind of wave when I started buying. Then it crashed to 3000 in 2018.
Speaker 3:And, yeah, I kind of sticked around, but I didn't like the experience. I could buy it from those existing brokers that existed. There was a lot of hidden fees and a lot of complexity and at the same time, I was using TransferWise. It's called wisecom. You probably know Wise, kind of a neo-bank, but primarily for the cross-border payments. So it was really clean. They showed you the rates, everything very transparent. So we wanted to build something like that first. That was kind of the coin change journey when we started in 2019. We thought about it, did all the market analysis. We knew from the product perspective, the steps we needed to take. So 2020, we started building that. 2021, we only took it to market and it already had the asset management component, but only on DeFi rails, very different to what we did. So that was the journey, how I got into the coin change. So trying to change the brokerage business pretty much in Canada. But then we realized it was saturated. It was raised to the bottom compression of fees, a lot of regulation, hard to go global. So we always pivoted towards the DeFi yield platform, right again within the application, and then we pivoted to the asset management of B2B businesses. We are right now multi-managing B2B business. So we also have a hedge fund, a fully licensed hedge fund in Gibraltar, where we service institutional clients, primarily family offices.
Speaker 3:I've always been the entrepreneur Since I was a small kid. I was on the parking lots, I was acting as a parking superintendent looking for the neighbor cars, getting paid a little bit. I was also collecting free bottles and hourglass bottles and taking them to the beer store to get some cash for the ice cream. So yeah, it was kind of there since I was a little kid. And then eventually you do more and more and more and out of snowball something doesn't work out quite often, right? You just have to have an ability to learn from those missteps and try to self-correct for the next step. I think the venture is. I mean, there's very brutal statistics that it's only like three or four percent of the startups actually succeed right or get big right. So most of them fail or stay as a family-owned business right. That barely pays for the family bills. Not an easy journey. You definitely, if you're able to self-reflect and learn, and that's probably interesting to have such a career.
Speaker 2:Okay, well, what are some things you're passionate about? Maybe one work-related passion and one personal passion.
Speaker 3:Reading would be probably a personal passion. My family have their kids. It's my passion too my kids, my wife obviously, and the work passion in work. I mean also reading. Yeah, I like reading about what's happening in the industry and what's happening in my niche right Small world, probably. If happening in the industry and what's happening in my niche right, small world, probably. If you talk about the day-to-day, I would say hiring people, that's also pretty important and I liked doing that finding the right people that probably have the right skill set for the problem. So that's also that I try to spend more time on and analyzing people you have and the efficiency of that mechanism that exists. I would say those things.
Speaker 2:Okay. So if someone comes to you, max, and they're maybe looking at building a career in financial services or fintech, or even payments, with your experience and since you said you liked hiring people curious, what advice would you give them to be successful in this industry, successful in their careers in fintech, if they choose to go into that?
Speaker 3:How do they approach employment opportunity right or starting their own business?
Speaker 2:No more on the employment side in crypto or in fintech in general. Just fintech in general. Crypto is a little different.
Speaker 3:It's a pretty nascent industry. So a lot of things that we looked at is you don't have to have a past experience direct past experience, right and crypto Like at least five years when we started. Anyone right now you can cross-pollinate your experience of Tread5 to crypto pretty easily, especially on the investment management side and in payments. So I think, approaching the employer and going to the interview what we look at at least what we like when people don't really. First of all, I mean you have to have a deep understanding of your domain. So, depending on what exactly you're hired for is it risk, is it compliance, Is it market research, is it financial product engineering you have to have a certain deep expertise or real direct knowledge, experience of that. Second of all, I think you have to be able to challenge. It's also not easy to challenge people or you have to be ready to be challenged. So it's important because a lot of people don't want to be challenged or don't want to challenge the others right. So we always kind of foster that, so not to follow but to challenge, right. So that's when you actually get some granularity and everybody can ask any question for anyone the question manual primarily for the most part. So that's important. So we're going to test that right. Then we think it's important and I think the work ethics is important.
Speaker 3:You won't know until you start, but you try to find okay, do you do any extracurricular? If people do sports usually a professional, like semi-professional sports or varsity sports you know that they don're going to have to hire me, they're going to be more professionally rounded ethically to do the job rather than, let's say, they've never done nothing, no charity sports, and you've got to question a little bit. So you want to have that professional ethics checked on. That's about it. And then you try, and then usually you want to identify quickly if it works out or doesn't, not to invest too much in the candidate that's not going to work out. So usually we do about three months. We try to evaluate within the first three months.
Speaker 2:Okay, great Well, thanks for sharing that. Obviously, we've covered your background the company kind of the industry. Is there anything else you'd like to do before we wrap up?
Speaker 3:I think regulatory is an important part in crypto right now, especially with Trump right at the White House. I mean crypto industry had a really big hope right for the change. I think it happened, either for the worse, right, it's hard to say yet. I mean generally the markets. I mean really unpredictable right now with everything that happened. So there's definitely a lot of still unpredictability. But at least we can really see on the regulatory side of the bills that they're passing the regulation that's right now been reviewed.
Speaker 3:There was an operation choke point too before in the last two administrations and it was really challenging to get a banking relationship with a crypto company, even for the corporate bank I'm not saying the list, I mean the client side of that. So right now we can see it's definitely flexing up, so there's more opportunities for businesses to open up bank accounts and to service their clients. We see that stablecoin bill is coming as well. That's great news. The biggest stablecoin in the world is USD. None of the other stablecoin. Mexican-based stablecoin was issued. Euro stablecoin was issued. Nothing is close to that and it's good for the US because it does penetrate emerging markets substantially and most of that collateral under the stable coin goes to the T-bill. So I think Tether is the seventh largest purchaser of American T-bills globally. So some crazy numbers, right. So it's not a country, just a business. But they issued $150 billion stable coins coins and I think $120 billion is in T-bills some very big numbers.
Speaker 3:So I think the regulation is important. So crypto was like that and right now it seems like we're on the right track. So I think this is very important for the operators to understand as well. There's going to be probably still a black market and a regulated market. Always there's a black market in anything, right? So crypto is not an exclusion. There's always a black market to service certain people in certain flows. But it's going to be more deviated than before, because before it was all kind of gray. Right now it's going to be a clear distinction between the white regulated players and the black unregulated players.
Speaker 2:So I think that's an important item to consider for the clients and for the operators. So do you see the changes in the regulatory environment around crypto in the US.
Speaker 3:Does that affect the global market? Not really. I think Europe is already on their way to Mika. Mika is like a unified crypto regulation across Europe. It has been delayed, delayed, delayed in different jurisdictions. Dubai is doing their own thing with Vara. Singapore is doing their own thing with VARA. Singapore is doing their own thing with their VASP registration. So I think it's still segregated. But I think it's good for the US businesses to come back, because a lot of US businesses went offshore. A lot of US businesses went to Dubai and to the other jurisdictions where they could easily operate. So I think more clarity comes to market, more banking relationships open up, more businesses are going to be relocated back to the US Because it's still the largest of the best capital markets in the world, right?
Speaker 2:Okay, well, max, anything else before we go?
Speaker 3:No, we can't wait at all.
Speaker 2:Okay, great, great. Well, thank you so much for being on the show today.
Speaker 3:I know your time is very valuable, so I really appreciate you being here. Thanks a lot I appreciate it.
Speaker 2:Thanks a lot, I appreciate it. Thanks for having me Absolutely, and to all you listeners out there.
Speaker 1:I thank you for your time as well, and until the next story, thank you for joining us this week on the Leaders in Payments podcast. Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes. If you enjoyed listening, please share on your social channels as well.