Centralized and Off-Chain: It’s Cryptocurrency, But Not As You Know It

Nicolas Vereecke is Head of Crypto at Cashfree, a mobile payments provider company. The Belgium-based start-up aims to build the bridge between the old financial world and the new, and does this through a centralised solution.

Vereecke was kind enough to lend us some of his time to talk about the factors he feels are most important when it comes to evolving peer-to-peer payments.

Peer-to-peer transactions are the lifeblood of blockchain technology. By comparison, the founding principles behind the creation of the first, progenitor cryptocurrency Bitcoin included: ‘changing the finance paradigm’ and ‘decentralizing international banking systems”.

More information on this can be found in the original whitepaper that was published by ‘Satoshi Nakamoto’ (the pseudonym attributed to the Bitcoin creators).

Profile: Cashfree and Nicolas

Cashfree is the company behind a ‘bank-independent’ mobile-payments application aimed at the B2C market, essentially attempting to allowing local retailers to easily accept cryptocurrency as a means of payment.

With the aim of spurring wide-spread blockchain adoption, the Cashfree solution offers users the same ease of use and simplicity as fiat payments, in addition to making the crypto payments “as easy and seamless as possible”.

As Nicolas puts it:

“Until blockchain technologies become so easy-to-use that even your grandma can start paying with them, we plan on keeping our systems centralized”.

That’s right. Cashfree does not incorporate blockchain technology into its platform at all and also, it is completely centralized at the time being. The plan is for future versions to provide more advanced users with compatibility and support for “any transactional blockchain, regardless of its consensus mechanism.”

In this light, it could be considered as attempting to achieve something of an ‘internet of blockchains’ for payment transactions.

Payments Solutions: Beyond Blockchain

PayPal and other dominant forces in the payments sector are identifying the potential, and highly relevant, threat of blockchain based competitors.

Revolut and Wirex, for example, are relatively successful on an international scale – both of which coming out of the United Kingdom. At the moment, the UK is mostly preoccupied with their infamous Brexit deals, and the country has proven itself (and even admitted) to putting cryptocurrency on the back burner – both institutionally and legally speaking.

Cashfree is conversely based in Belgium.

Belgium not only houses the EU headquarters, but more importantly in this sense, the country was featured repeatedly in the crypto-media, over the course of 2018, as a result of its staunch stance on regulations. Most frequently as a result of the infamous Financial Services and Markets Authority (FSMA) ‘blacklist’.

Nonetheless, Nicolas stated that both he and Cashfree “believe that regulation is both desirable and necessary” citing the frequent currency losses as a result of scams and failed projects.

“If we want crypto to live up to its full potential, we need an initial regulatory framework to allow for mass adoption. This is why we embrace the effort needed to get our STO on its feet.”

“Additionally, the more ‘traditional’ securities become tokenized, the easier it becomes to attach a value to cryptocurrency assets. It is, after all, easier to value something that represents a generation of cash flow (like a tokenized share of an existing company) than it is to value coins like BTC or ETH.

This will likely result in a greater acceleration of cryptocurrency adoption as well”

Technology, Partnerships and Legislation

As previously mentioned, the core of the payment solution offered by Cashfree is centralized, and does not use blockchain technology, however, it is planned to support any transactional blockchain “regardless of consensus mechanism” in the future, “as long as it is adequately secure.”

One of the main reasons for this is that Nicolas Vereecke wants to surpass access issues in the procurement of cryptocurrencies for non-technical users, using a system which is compatible with the multitude of current options available on the market.

Behind Cashfree sits a network of intertwined technical hardware and software functions, alongside high-level corporate partnerships, such as Ibanity and Microblink, and use of public or standardized protocols. Highlighting their commitment to a secure and reliable payment system is their close collaboration with the National Bank of Belgium.

This brings us to another fundamental difference between Cashfree and its peers, which is Vereecke’s outspoken commitment to achieving their operational goals within compliance with ever-changing EU financial legislation, particularly ‘PSD2’. This is the title of a European Union regulation that was first implemented in January 2018 and introduced many game-changing legislative changes, which resulted in increasingly more steps that organisations had to undertake in order to accomplish full compliance.

Nicolas Vereecke sees increased regulations in a positive light when it comes to licensed payment institutes of all shapes and sizes. When it comes to allowing third party access to bank accounts, users need to know that these third parties have been vetted thoroughly, and are under permanent regulatory governance.

“Scammers and people just looking to make a quick buck will never get regulated (just like they would never get listed on any major stock exchange), and this will bring confidence to investors.”

“The fact that Cashfree, a licensed payment institute, has had to go through so much due diligence to get regulated suggests that the average quality of companies doing an STO will dramatically increase.”

Featured image courtesy of Shutterstock.