The intrigue surrounding the bitcoin is mounting. The virtual currency of our time sees itself growing highly controversial, yet immensely popular. It only gets more interesting as we hear it from those who hail it. Meet Tomas Forgac, a Slovakian technopreneur based in Singapore who is the founder of a new bitcoin merchant service, Coin of Sale.
Launched in February 2014, the 32 year old entrepreneur has a background as an IT project manager and software developer in the Slovakian financial sector, working on projects involving retail banking and finance development, integration and vendor implementation on both system integrators’ and corporate customers’ side. With stints as a project manager, contractor and incident manager, his professional portfolio includes projects at Erste Group Bank AG (one of the leading financial institutions in Europe), Cleverlance Enterprise Solutions (a consulting and software services company) and Wincor Nixdorf (a German retail, retail banking software, hardware services provider) in Slovakia and Singapore. Excerpts from the chat:
What did your job scope working for banks entail?
I worked as a software developer and project manager in system integration projects for financial sector institutions, so I gained experience in developing secure systems in employee and freelance contractor roles. It gave me a fairly wide foundation to develop the familiarity with how the finance system works.
What sparked your interest in bitcoin?
It was a combination of my IT background in finance and an education in the Austrian school of economics, primarily monetary policy and the business cycle theory. It enabled me to understand the technical foundation of its workings. I saw it as a solution to fundamental problems in modern monetary systems, which are causing inflation, boom & bust cycles, and wealth distribution mechanisms that transfer wealth from the poor and middle class to the wealthy and well-connected. I also like disruptive technologies and was even briefly involved with 3d printing and the Maker movement. However, I found my real passion lay with bitcoin.
What led you to create a bitcoin merchant service?
In the very beginning, I was trying to promote bitcoin as a payment channel for local merchants. I started promoting BTCPOS in June last year, before renaming it Coin of Sale. Coin of Sale started out of frustration, as I tried to persuade merchants to adopt Bitcoin but no good payment solution presented itself. So I made BTCPOS as a solution. Coin of Sale has been adopted for use in Europe and Singapore, so I decided to adopt it and turn it into a business.
What are the advantages of bitcoin as a merchant solution, specifically Coin of Sale?
Fundamentally, it is a global currency which cannot be manipulated or restricted in terms of movement, like conventional fiat currencies. It is not centrally regulated and is not controlled by a group of unaccountable bureaucrats in suits, meeting in some enclosed room. It offers a superior speed of transfer, and the transaction fee average about 0.6 per cent. However, Coin of Sale has a rate of 0.59 per cent.
By comparison, credit cards charge 2-3 per cent or more, and Paypal charges about the same. The only thing offering rates remotely close to Coin of Sale is NETS, which is restricted to Singapore and charges 1-2 per cent. Most other bitcoin merchants charge a rate ranging between 0.5-1 per cent.
Coin of Sale also offers simple and practical implementation, in that I only created it using open source tools without having to work with any payment processor or company. This is infrastructure that most merchant solutions need to function. This simplicity and open source approach grants merchants greater autonomy and protects customer privacy to a greater degree than conventional payment channels.
How do you address concerns about volatility?
There is a declining volatility with the increasing liquidity of the bitcoin market. Every swing in price with bitcoin is smaller and smaller, with less fluctuations in the price compared to the last time. As more traders come on board and merchants become involved, bitcoin will stabilise. It is unlikely to have a massive drop, as in April 2013, when it dropped by 75 per cent. In the long run, the fundamentals suggest that the price should go up.
What do you think of the current policy reactions by governments to bitcoin?
Globally, we’ve seen negative reactions from countries which impose capital controls on their currencies, such as Russia and China, and which have high levels of monetary expansion. Again, these are Russia, China, Indonesia and Argentina. The same applies to the US, in terms of monetary expansion.
There hasn’t been an official, large-scale attack on bitcoin in the US, but officials are attacking smaller bitcoin trading houses and exchanges, imposing regulations that make operations difficult. The environment is not very friendly to bitcoin and equivalent acts by people from established banks wouldn’t get penalised as harshly as bitcoin advocates.
Positive reactions have come from places which have economic and monetary freedom, such as Hong Kong, Germany, Switzerland and Singapore itself. Officials in Singapore from the MAS are particularly reasonable. Their officials asked for caution and the Singapore government and MAS have a sound policy, since they don’t go on increasing the money supply, as in the US. The only issue in Singapore is the double sales taxation which should be addressed properly and soon. It could create tax issues for businesses, as it will affect businesses hitting the GST threshold of S$1 million.
As a European entrepreneur based here, do you see cultural differences affect BTC adoption here?
Asian societies are generally more conservative. Singaporeans might not feel such an urge to switch to different currencies or mediums of exchange, as the fundamentals of the Singapore economy and monetary policy is stable. Fiscal policy is responsible, unlike most of the developed world, so people are not actively looking for alternatives. However, I get feedback from Singaporeans who are not particularly ‘techy’ or economically savvy reacting to the fact that this is a currency not controlled by a single entity or government. They understand the flaws in the current monetary system and how it can affect them and their financial interests.
Any comments on how people in China were using BTC as a savings vehicle, before its ban?
My guess is this was to mitigate the effects of inflation, which all export-oriented economies import from the US for real goods and services. This is valid for any country, and the Chinese may have used Bitcoin as a hedge against this inflation as well as to escape capital controls. It could also have been driven by a simple need to be a part of something novel to them.
What do you like about Singapore’s business environment?
The environment is business-friendly, with a lot of economic freedom. The regulators in general don’t intervene in how people trade or exchange goods, which is a very rare attitude. I think they can improve by not putting public money in Singapore’s startup sector, as it distorts incentives for entrepreneurs and investors.
When there is public money, there is a lack of proper due diligence and oversight in businesses, as there is a reallocation of resources from productive parts of the economy to high-risk ventures without the proper financial due diligence. In the long run, it might lead to a decrease in entrepreneurial activity due to a higher rate of failures among startups, as entrepreneurs don’t get proper guidance from investors who don’t perform due diligence or provide oversight.
Why don’t you think that government involvement in the startup sector is good?
I cannot imagine myself being a Singaporean entrepreneur joining a startup founded by a foreigner, who is simply there just to get taxpayers funding, or vice-versa for foreigners partnering with Singaporeans. I find it unethical, as it is risking public money in a venture with a high risk of failure. I was formerly involved in a venture that involved such a situation in the 3d printing scene but withdrew due to this being a consideration for myself.