Fireside Chat with Uphold CEO Simon McLoughlin
When did you last pay with cash? It takes a moment doesn’t it, because the future of money is undoubtedly digital; and as we’ve just demonstrated, it’s already begun. The question is, what is it going to look like? In this fireside chat, we talk with Uphold’s CEO, Simon McLoughlin and Linqto’s very own COO Joe Endoso. We’ll try to answer this complex question and dissect why a company like Uphold is able to bridge the Old Guard with the New. Money has transformed human society. We don’t need to go into the ins and outs of this, we all understand money, as it has been. But now money is on the cusp of a transformation that will reshape banking, finance and the very structure of society. The era of physical cash is drawing to an end, especially in low- and middle-income countries, where the age of digital currencies has begun. Uphold provides a gateway to this new world. For those that don’t know, Uphold is a multi-asset trading platform that combines the features of a crypto exchange, a forex trading app and an online brokerage. It offers more than 200 digital currencies and lets users trade fiat currencies and precious metals. That’s all pretty neat. So neat, we offer it on our platform. There’s actually very few ways to easily and instantly transfer between cryptocurrencies, or any currency unless you are a skilled trader and can navigate difficult exchange platforms. Uphold, however, is like a bullet train for such matters and a bridge into this brave new world. So why not take a peek inside? Uphold’s whole story comes down to making financial access easy to people. It takes away the technical jargon and friction that scares the average user. As we all know at Linqto; we share a similar philosophy - one of democratization. This vision is broader than just crypto, as such with Uphold, you can go from Tesla stock to bitcoin or bitcoin to physical gold. This is a technology that is tapping into this money shift, a shift that’s changing the structure of society.
This year we set four strategic goals for ourselves and sort of hyper focused on those four goals the first was improving the breadth of our digital asset content the second was improving the customer experience the third was adding a non-custodial wallet solution then the fourth um dramatically improving our financial content believe it or not most people had card limits daily card limits of 500 on uphold we've increased them we've increased them for two million people across the United States to two and a half thousand dollars a day 25 000 a week we were also making it way easier to get large amounts of Bank deposits onto the platform and we've made literally hundreds of fine grain changes to the process behind when an account gets restricted we've removed a whole category of scenarios that used to produce an account restriction now they don't produce an account restriction instead you have a period during which your account is still open we've introduced an array of automations um so you know today instead of restricting your account we will do what's called a liveness check so we'll send you a request to your app that will just need requires you to take a quick photograph of yourself we compare that with the photo that we have on file we're reassured it's you and off you go our customer experience this year has improved really dramatically it's not perfect by any means but if you look at Google Play Apple Place ratings we've gone from three to four point eight to four point five in Google in trustpilot we've gone from 1.8 to almost three which means we're almost average according to trustpilot but we are twice as good as Apple by that measure an important change that's coming in a couple of weeks time at the moment on uphold if you deposit money from your U.S Bank via the ACH Network we restrict that deposit for 65 days until you can move it to an external private crypto wallet so in other words a wallet on chain on November the 7th that that restriction goes away completely we're introducing a new fraud control system which means that when you deposit a large amount from your U.S Bank you're free to move it within a few business days as soon as the funds have settled to an external crypto wallet so that will be a big Improvement beginning of the year we had a terrible problem with card decline rates all of our cards were being processed through a European processor we've now finally switched to a US processor and our car decline rates of half that's made a huge difference to us as a business but it's also improved the experience for the vast majority of our customers the key thing that used to drive people bananas was quite simply how quickly and readily we would restrict somebody's account for quite a minor infraction so it could be that a velocity control had detected an unusual amount of account activity or a an amount threshold had been breached and the account would be immediately restricted we don't do that anymore we now send you a note gives you a period to respond by and it interrupts the user experience far less than it did a year ago it's something that user experience is something that I'm personally really passionate about because I think you you have an emotional reaction to when your account is restricted or your money is in any way uh you know temporarily made not available to you it's an intensely intrusive thing to do to somebody and they have an emotional reaction to it quite understandably our CEO is a guy called Anthony Johnson his sole role this year has been improving the customer experience and I I know the difference is now being felt because you know he's he's really done a a fantastic job touch upon the whole issue of the security of assets and the wallet that you know customers hold are there things that you're doing this year to improve security there are I mean like like every platform in the space we're constantly playing a game of three-dimensional chess with armies of fraudsters who are very sophisticated the game is constantly changing and you'll have seen you know there was a settlement this week from FTX for for six million dollars for phishing attempts you know the crooks are getting increasingly sophisticated you put new controls in and they learn the new controls and they'll find a new weakness this year we've done a variety of things and uh it's it's had a a pretty dramatic impact so one of the things we've done is put liveness checks in so now if you want to withdraw funds over a certain limit you know we actually check it's you withdrawing the money we've introduced mandatory SMS 2fa to all accounts that's set up so now somebody is much more difficult when when you know you'd need control of somebody's email account and their phone number to compromise the account that makes life much harder the the the issue with making accounts secure is a large cohort of people especially in the crypto space who want as little control and and Invasion as possible so you're constantly striking this balance between advising people to set up all of the security features um mandating that they just have to do it it's a condition of having the account and I think like a lot of Platforms in our space we're reluctantly having to go to the mandatory approach because the risks are so great that that makes sense and you're right you're not the only one that is moving in that direction of um you know higher mandated security procedures I'd like to um maybe uh just end this thread by asking if there are any product enhancements or new product features that you might give us an ink link about that haven't been launched but will be in the near future launching well I think one of the most important things we're focused on at the moment is staking allowing people to earn rewards on their digital assets we're about to launch next week a staking program that we believe is the best in the industry it's the only one that you can take part in and pay zero percent commission nobody else offers zero percent commission staking it also offers the widest range of stakeable digital assets we're offering it on 23. these are proof of stake assets unlike a lot of our Rivals we never loan out customer Assets in order to generate a yield so this is dual network function staking the assets never leave uphold and thirdly we offer what we believe are the best apis in the industry so by basically saying we're not going to take any commission we've been able to plow our share back into increasing the apis we're offering so you know our apys are up to are up to 25 percent um so staking is one area that we're we're super focused on another area is we're going to be the first platform to integrate all of the layer 2 networks which will happen later this year and looking ahead we're looking to introduce a particular kind of order which is called a contingent trailing stop which sounds very technical and boring but it's you know potentially extremely powerful nobody else offers it in the digital asset space and what it does is allow you to buy an asset and then set a threshold be it three percent four percent seven percent when the system detects a drop in the price of that asset it will trigger a sell order and it's a very powerful order that exists in the equity space and what it allows you to do is protect the majority of your upside while protecting you from a sudden downside correction which in the crypto space where there's such volatility is you know super interesting if you can lock in most of the upside from crypto volatility while dialing out the downside you've got a very very powerful product so that's something we're introducing early in the new year so on those stop losses that you can place on your account I presume you have to designate a stable coin into which proceeds in a liquidation you know go into how does that how would that work mechanically nowhere we're not using stable coins we just uh we just have automatic conversion interfere on the platform I see it would literally go into in Europe it'd be turned to e-money um but it would be held held in ring fenced ring fence bank accounts in your name basically those are all super cool I'm excited about the staking I assume that there's a wait list for that there is uh there is a wait list I think we've opened it up to the majority of the wait list at this point we announce it uh next next Tuesday when we've opened it up to a limited number of people and have seen really fantastic way of acquiring new customers basically the main reason you would move cryptocurrency to a different custodial venue is because you can earn a higher higher return on them so we see it as a really important you know customer acquisition tool for us uh let's shift to 30 000 foot level and talk about upholders of business as an Enterprise so obviously you know you you came in talked about a propitious time to come into the CEO position right because the whole market and not just a crypto Market all markets basically going to hell in a handbasket tell us about how uphold is navigating this very difficult time going through those challenges and how do you feel your balance sheet is what condition it's in um and is it strong enough to weather the the difficulties and get you to that better place where the market turns yeah I mean I think we're in a very strong position we've seen some of our most aggressive competitors be taken out of business or you know temporarily completely out of the game we've seen Celsius go we've seen Voyager go if you look at what happened to those companies fundamentally a large part of it was about you know nothing to do inherently with digital assets it's bad lending decisions and exposing assets to unknown risks we're very lucky in the sense that given the complexity of what we do we're a relatively small company with a relatively low cost space our burn is is Tiny we're in robust Financial Health the business this year is is now ticking up quite quite nicely I mean it's been a pretty transformational year for uphold because we've gone from covering like 72 Assets in January in the United States to 253 today we've gone from having two assets that were exclusive to us in the United States to 47 today and at the same time that dramatic expansion of the range of assets that we cover in the consumer space we've also also got an Enterprise side to our business so on the Enterprise side of the business which is run by Robin O'Connell who you know they're the use cases really really super interesting so we're closing sales in four verticals one is Banks and financial institutions who want to White Label what we do a second is gaming companies who are now using cryptocurrencies for payments to their members a number of gaming companies are going from web 2 to web 3 models which means they're replacing in-game digital assets you know magical swords and cloaks and and skins that have no value outside the game that's web 2 to web 3 where those assets are nfts and we're acting as uh you know the payment backbone um for several of the biggest gaming companies in that space that's a beautiful scalable business for us and it places us at the center of you know what a pretty vast flows of payments it's got nothing to do with crypto speculation it's got everything to do with moving moving money across across the blockchain so we've got white labeling uh we've got gaming and the third vertical um is reward systems so what's very exciting for us is we're seeing an increasing number of companies now adopting crypto as a reward mechanism so we were speaking to housing developers in Texas a month ago who are developing tens of thousands of homes and they're embedding into the architecture crypto payments that will reward homeowners for generating a certain amount of electricity through solar for example and there are other examples of similar schemes upholds unique account architecture is extremely well suited to that to support those kinds of businesses because every uphold account has an infinite number of sub-accounts so if you're the developer you can have the master account and all of the sub accounts represent individual homeowners and we can connect Fiat payments and the Fiat world with digital assets and cryptocurrency payments that's a wonderfully scalable business and once again it's about the fundamental utility case of crypto which is moving value more easily and more seamlessly and more cheaply than traditional Finance so that's the third dimension to our Enterprise business and the fourth is defy payments so we're about to launch a new product that will make it super easy for customers to load Fiat funds into D5 projects directly you don't have to set up an uphold account you can do it in a matter of of seconds it's fully compliant and we do see that being a really important part of what we're doing going forward so the Enterprise side of our businesses is is is you know also benefiting from the fact that what's been lost this year from The Narrative is that yes okay there's been a brush fire lots of weaker projects in the crypto space have been wiped out there's a very difficult macroeconomic environment that is that is sort of eradicated a lot of the speculation on digital assets that was going on last year but what's emerged in its place this year is it's super clear now that Regulators all around the world and especially in the UK Europe us Singapore and certain parts of Asia they're now making rules for crypto they're no longer standing on the sidelines hoping it will all go away and that greater regulatory Clarity and certainty is encouraging more and more companies and more and more serious people with serious projects to build using blockchain technology and everybody who does that needs to connect Fiat to the world of digital assets and so uphold you know sits in the intersection of those two worlds the old world of Fiat and the new world of crypto and digital assets so what's been incredibly helpful this year is seeing developments such as I'll just name a couple of examples but in the UK you've seen in the Queen's uh queen speech it's soon going to be the case that nfts can represent uh Financial Obligations that is simply a transformational development because it means that nfts can now play a part in things like trade finance and represent Financial Obligations that's a huge part of traditional finance that now has a clear path to migrating to the world of blockchain technology there's a new there's a new crypto Network that we work very closely within this space called xdc fabulously interesting project squarely focused on trade Finance where trillions of dollars move every year and you know they now have a real traction and it's backed by the fact that they've got much greater regulatory Clarity in many parts of the world the first ever bill of lading in the trade Finance space was minted on the xdc blockchain in Singapore earlier this year so I think that while the headlines have been about the collapse in crypto values that's about that's about speculation the fundamental utility purpose of blockchain technology and crypto has never been stronger and it's been strengthened this year by all kinds of regulatory developments that make it clear that the technology is going to be embraced and regulated rather than extinguished that's actually a really important and profound uh point and you know for those of us that are retail customers of uphold and use it as such it's probably an aspect of your business that isn't as readily apparent by and by it I mean the growth and evolution of your Enterprise business and basically the application of what you've built to serve retail customers like us into a payments infrastructure offering that can then be offered to institutions and and that allows you to grow your customer base indirectly your payment and processing flows indirectly and contribute you know I think a lot to your revenues overall maybe today it's not a Big Slice of your overall uphold Revenue pie because these things necessarily take longer to mature and to nurture than the retail business but if if you were to wager a guest Simon three years out what percentage of upholds revenues would be generated by that Enterprise business that's a great question my hope and belief is that within three to five years between 60 and 70 percent of our Revenue could come from Enterprise and today it's less than 20 percent I genuinely believe the next three to five years will see Mass migration of a lot of Finance towards blockchain technology we're already seeing it I saw um amazing new ad exchange called Alchemy built out of London gets rid of a lot of the inefficiencies and questionable practices of the traditional advertising Market if you're marks and Spencer or Walmart to participate in this market you need to buy an ads token it sits on Constellation one of the most fascinating new projects around I hesitate to even call it a blockchain because it's actually a hypergraph um but it's a very very powerful new entrance into this space um and you know that we're seeing now really serious companies getting involved with that with that ad exchange that's just one tiny example at a time when there's still a lot of regulatory uncertainty I think what's fascinating in Europe at the moment is there's now clearly a competition between the European Union and the UK to see which can become the most crypto-friendly environment so we went through the hellish FCA process last year to become one of only four large trading venues that got crypto asset firm status and uh this year the FCA you know the dynamic has changed it's very clear that the mindset has gone from crypto is a dangerous space that we need to be very very wary of to this year the whole tenor of regulatory oversight in the UK is far more friendly and forgiving and it's because fundamentally my thesis at least I don't know this to be a fact but my thesis is that the European Union are fundamentally competing with each other to become the home of this exciting new high growth industry so listen I'm going to turn this over in a minute to a q a with our member Simon so they can ask you questions directly but I'd like to end by just asking you this question let's do a little bit of a mind experiment and imagine that we're in a market where the IPO window has reopened you as the CEO now have the opportunity to take uphold public and you're sitting in front of me I'm the portfolio manager at Fidelity and you're pitching your IPL tell me the top three reasons why I ought to invest in uphold oh that's putting me on the spot well I think I would say we are a web 3 Bank built on blockchain in rails we have a very fast growing Enterprise business that's infinitely scalable virtually at very low cost because our Enterprise clients bring us literally millions of customers free of charge and I would say that our architecture is completely unique so we don't just have one order book we have access to 26 order books because we're plugged into all of the major crypto exchanges and that means that we have a very material advantage in the sense that first of all we can smart route orders and get better price Discovery for our retail clients secondly we've got Superior liquidity because we we have access to 26 different order books where we can sell assets we were one of the few trading venues where you could continue trading Luna for example during the recent crisis pretty much uninterrupted and thirdly that architecture allows us to cover more assets more quickly so we can be much more agile in the market but the fine final point I would make is the real the real reason you should invest in upholders that we are going to become the center of people's Financial lives we believe that people won't want one app for crypto another app for Equity another app for Commodities uphold brings all of the asset classes together in one environment it allows you to trade from any asset into any other asset even across asset classes in one single move and what's coming in the new year is the ability to use any asset any balance you hold from physical gold to bitcoin to US dollars to do things in your everyday Financial life such as pay bills in the New Year you'll soon be able to get your salary paid into uphold and you'll be able to say okay I'd like five percent in Bitcoin 70 in USD uh 15 in inequities anything you hold on uphold can be spent instantly over a debit card or it can be used to pay a bill and our obsession is on ease of use we want you to be able to do that in fewer steps with fewer points of friction than on any other app you may have just seen this week we introduced Apple pay and Google pay so binance doesn't have it coinbase doesn't have it on uphold you can now fund your account with Apple pay and Google pay it's literally two clicks you no longer have to link a card at all and the thing I forgot to mention earlier was when you asked me what we're about to launch next week we launched the new uphold card which pays four percent back on every purchase in xrp that will be rolled out across the United States and the UK next Wednesday what a great way to end our interview Simon so let me turn you over um so there are a bunch of Q and A's and there is a bunch of questions on chat and comments but we do like participation so whoever actually wants to ask and interact with Simon directly please let us know and come onto the screen as everyone is waking up and putting their hands up and deciding who needs to come over I really can use start with some q a that we can answer that Sami can answer okay so we have a question from James Long uphold unbox stats daily the xrp is top seller 87 or better buying also see where Ripple is buying a gross amount of xrp on the OTC market May you comment on then why xrp trade is basically sideways I I feel that question is outside my realm of expertise and I hesitate to comment on it I'm sorry to duck it but I'd rather duck it than say something dark James long again is our current uphold card transferring into the new four percent card or do we need to apply to the new one you will automatically be rolled across into the new card um so you don't need to apply in fact the card will be embedded in your uphold account in the uphold app so um the old card um as James will recall required a separate app you no longer have to have a separate app you simply swipe right on your transaction screen and then you access your virtual card and can start spending right away any any re-hypertification of customer assets any similarities and or learnings or improvements in the management of funds as a result of the downfall of several of your competitors you know it's funny a year ago uphold was open to the criticism of being a bit of a tour choice in this space we had a lot of our Rivals taking growing extremely quickly and taking very high levels of risk and and fundamentally a lot of them are not still around and are rather conservative model we feel has been Vindicated what do I mean by our conservative model number one we're the only platform in this space that publishes our assets and liabilities in real time on a public blockchain what does that what does that mean sorry not on a blockchain on a public website it's hugely significant because you know as a user that your money is always there and you can always take it out we never lend out customer assets to third parties for any reason and if you look at the you know the major casualties of this period in the industry most of them are related to Paul lending decisions then they were exposing their customers to risks that their customers didn't understand so we have a super conservative policy of we don't lend out any assets and we're completely transparent with our assets and liabilities not only overall on an aggregated basis we don't just use a dollar denominated equivalence we actually make sure that each asset is a hundred percent backed by the underlying asset that it represents so we hold ourselves to a very strict standard in making sure that our assets match our liabilities you mentioned nft skins in Gaming revenue scaling how does the Apple tax affect upholds business model on this Revenue pillar it's a great question a very timely question the answer is I don't know and we're looking at it but kudos to you for bringing it up what I can say is we do see nfts as one of the most important parts of our three to five year future I I confidently predict that that is going to be an extremely important part of our business on both the retail and the Enterprise side in the coming years there's just no doubt about that it's extraordinary to me that you know it UK is now recognizing nfts in UK law and people forget that you know English law is still informative it informs a lot of different legal systems around the world that means you'll get this viral I believe this viral recognition that nfts can represent Financial Obligations that is transformational any plans to upgrade the software to automatically add how much has been invested into a particular asset cost of that asset and profit of the investment at that time of review is there a way to see this other than manually figuring it out yes and I hear where you're coming from it is a bafflingly complex Challenge and we've spent a lot of time this year tackling it so two things are going to happen first in the coming weeks you'll see gains and losses appear as part of the app window the second thing is we've done an integration with tax bid that will allow us to generate tax information for people at the end of the year so they don't have to worry about it um and that that again is is due for completion next month so from next year you'll get automatic you know gains and loss calculations will you be offering the use of ubikey for 2fa that is an interesting question I don't know the answer to it I do know that we are planning to introduce an apple Pass key as a way of making it you know accounts more secure and creating a much more seamless experience with people we think Apple passkey will render a lot of traditional biometric sign-on method redundant will you be able to move flr immediately when the airdrop takes airdrop takes place to how is uphold preparing for defy we are aiming to allow people to move it very shortly to after it it goes live we're working on that at the moment actually it's one of the things that we most we're most Keen to support um I can't give you a definitive answer on it because our Engineers are looking at that particular issue right now Anonymous attendee how do we apply for the uphold card the answer is you don't need to apply for the Oppo card you just need to open an uphold account and it will magically appear in your app you just need to swipe right from next Wednesday and you'll see it and all you have to do is toggle a switch to say enable and you're Off to the Races that's excellent and from Nathan as a customer the best I appreciate the uphold send me the proper end of year tax forms I didn't receive such paperwork from Kraken question Ray saying can we get xrp to magically appear the answer is you can if you spend on the uphold card there you go spend and swipe right he plans to integrate for coinly as well like tax bet not as yet but it is again something that's under discussion what is the limit on this uphold card is it tied to the balance that you have with uphold it is tied to the balance you have with uphold that's that that's correct um the limit on it I can't remember the spend limited I think it's two and a half thousand a day but don't hold me to that because I'm not sure James love wanted to come uh and ask some questions in person no I saw somebody else about withdrawal limit the answer to that question is yes we are going to raise withdrawal limits historically we had very very conservative limits because frankly our fraud controls lacked sophistication we've this year we've very materially improved those controls um and we have introduced liveness checks so liveness checks means that when you withdraw we ask you to do take a photograph of yourself basically and that means that we have much greater security of knowing that it's really you when you withdraw your money that opens up the ability for us to be to be to be more confident in our withdrawal limits thanks for having me on I believe he answered all my questions there was the one about I brought up starlink Elon Musk roll out of the internet banking the unbanked and I just wondered if you kind of like keep track of the areas that are signing up with starlink that you see an uptick of new customers on the on uphold that's a that's a really interesting point the funny thing about uphold is we operated in 150 countries but where we make our money and where there's the most engagement it's a relatively small number of territories by far the most important to us is is the US U.S folks seem to love what we do they love the Simplicity of the service and I think they love the breadth of assets that we cover the other home the other area very high uptake for us is South America South America obviously a lot of people want to get out of unstable local currencies and into other forms of assets so that historically has been important to us but I will monitor it really interesting point right well thank you for doing all that you do and I'm sure uh uphold is is cash flow positive correct and you can't comment on any future valuations and tell you is that given the market we're doing extraordinarily well just one more question that I'd actually like to ask from Michael Woods there is a fear in the market about hacking and people are taking their tokens to Cold Storage how are you going to combat that I think you know we've always taken security incredibly importantly at uphold we spoke earlier about user experience one of the reasons the user experience was so poor we were just super strict about things like security and compliance then it was probably you know too black and white it was too stringent but you know it's something that we obsess over we've got a large infosec team this year we've made even you know even even more enhancements we're very aware of you know the flight to private wallets in in light of the problems a lot of other exchanges have got into acutely recognize that it's something that we ourselves this year haven't really experienced interestingly and I go back to you know a unique part of our model we simply don't loan out people's assets we don't expose them to risks that some of our other competitors do and we give them a window on our transparency page that they can see in real time on a public website that all of our liabilities are covered uh by corresponding assets and I think that does really set us out from our competitors it's just a safer home for you to for you to keep digital assets thank you so much uh Simon and Joe for putting this together it's been very insightful I really thank you for your assistance Simon congratulations on being named one of the fastest number one as a fastest growing company uh by fast track in San Francisco congratulations on that oh thank you we hope that you continue that into 2023 and we will be biting at your heels here so watch out for link to try to catch up with you