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Can Banks Become Crypto’s Unlikely Savior? Croatia’s Crypto Pioneer Weighs in

Nikola Škorić, the mastermind behind Electrocoin, Croatia's first-ever Bitcoin exchange, has built a name for himself in the cryptocurrency and blockchain community during the past decade.
Image credit: Pixabay/Ja TRGOVAC
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Nikola Škorić, the mastermind behind Electrocoin, Croatia’s first-ever Bitcoin exchange, has built a name for himself in the cryptocurrency and blockchain community during the past decade.

What began as a mere hobby has now evolved into the country’s largest cryptocurrency brokerage service. In 2021 the company recorded an 80 percent growth of its revenue, and has now firmly set its sights on expanding across the EU.

Škorić’s own journey has been diverse – from being a computer engineer with a diverse set of interests, including a stint as a nuclear reactor operator, Škorić now remains dedicated to growing a company in the highly volatile crypto industry.

In an interview with The Recursive, the Croatian entrepreneur delves into his experience and reflects on what the future holds for Electrocoin and the crypto industry – from regulation to whether it is possible to change the banking system, or simply become a part of it.

The Recursive: What was the idea when founding Electrocoin back in 2014 and how did it evolve throughout the years?

Nikola Skoric: We founded Electrocoin for practical reasons since back then, crypto trading here in Zagreb was expensive, slow, and cumbersome. And we figured out that we could do it faster, cheaper, and easier. So we started offering that service as a hobby, and very soon we realized that it can become a company,  it just progressed naturally.

Out of that, in a few months, my business partner Marin Marzic joined because he went through exactly the same thought process. Both of us graduated in computer science and security, with the same mentor and just seven years apart.

We were both into cryptography and we both discovered cryptocurrencies and realized that we were able to offer better service. Since then, our volumes are growing year by year. First, we just traded bitcoin. It was like an Amazon for bitcoins, and then there was enough volume and enough revenue that we built our platform.

And we started hiring people, we grew and at some point, we realized that although there are some decent payment processing services out there, for some reason people prefer local services, as they did with our local brokerage instead of going to Coinbase for example, or as they do with going to local banks instead of HSBC for example.

So we opened our data processor, which now serves Konzum, the biggest retailer here, and Bazzar, the biggest web shop, then petrol stations, all kinds of places, and so on. So basically we exploded on the Croatian market.

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In 2019 we recognized that there’s also a need for cash services and business since people want to buy crypto through a bank account or card, or they also want to be able to exchange cash for crypto. But we’re not  good with cash so we didn’t want to do that – but there were physical currency exchanges that didn’t know crypto, so it was quite natural to integrate with them. We integrated with local exchanges and now we have around 100 locations.

I’d say that basically, all grew out of necessity, through all of these features and new services. Now more than 50% of our brokerage business is EU-based. The payment processing and physical exchanges are almost all in Croatia, but we are pushing more towards the EU and the wider EU market.

How would you say crypto adoption developed from when you first entered the industry?

It’s quite correlated to the bull/bear cycle, especially regarding the growth of the adoption that it accumulates.  For instance, through the bull market of 2017, the adoption grew. But in 2019, which is the worst year, our volumes fell by 3 percent. Last year again our volumes fell by 1 percent.

However, our overall volumes grew, which I think indicates that the adoption is right. Of course, these are rising faster through the bull cycle, and I think that the infrastructure adoption is continuing.

However, we also see that in the mindsets right now is probably the worst ever period for groups. During the last 10 years, there were times when price drops were more radical. But we’ve never had so much negative exposure.

On the other hand, last month we had a fintech conference where we had a guy from MasterCard give a lecture on MasterCard crypto strategy, and we had several panels with bankers referencing crypto.

I think this shows that there is a shift in mindset, so now it is completely normal to have sold-out large mainstream fintech conferences, where crypto is not only an integral part in the sense that you have crypto panels, speakers, and so on, but it’s integrated into core topics and board members of large banks are talking about it. So I think that we will see more exposure in the upcoming years, regardless of the bull/bear cycle.

What would be the role of regulation, and how can it change the crypto industry?

I think we’ll just see more of the same in the sense that all the industries go through the same path more or less.

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At first, it is Wild Wild West, then regulation for obvious reasons kicks in. At the same time, this helps and hinders progress. I’d say that regulation hurts us less than the guys that want to enter the market right now.

So it’s much easier for me to talk about regulation than the new players on the block. On one hand, it is helping establish the industry as legit, but on the other hand, it brings us so much useless overhead.

Can regulation solve the various crypto scams that are happening?

Regulation is not a silver bullet. The biggest Ponzi scheme in history was perpetrated by the chairman of NASDAQ in a hyperregulated industry – Bernie Madoff. So obviously, if regulation didn’t solve the problem of Bernie Madoff, it would not solve the problem of crypto scams.

However, it is something that has to be done. We see this the best in our cooperation with banks. For instance, Electrocoin does have a compliance department. And we are relatively small and an innovative institution, so we pay close attention to what regulators say. We try to approach compliance from a practical standpoint and we see what we are trying to fight.

In my previous life, I was a nuclear reactor operator, which is one of the most regulated industries. And I completely understand how big institutions function regarding regulation – the first thing that the HR manager in the department told me when I came there was that this is not the place to innovate.

And that’s more or less the mindset that big institutions have. So big banks are not the place to innovate for obvious reasons, because they control such a large amount of money. But if there is no regulatory framework, then they will not want to innovate, and they wouldn’t know how to approach us and how to work with us. That’s why it needs regulation, but as I mentioned at the beginning, it is indeed a double-edged sword.

Is crypto going through its worst period now?

I don’t think we are at risk, mostly because of the mindset shift. The prices might be falling, they might be negative, and the trading volumes might be falling – but the adoption and overall mindset have never stopped progressing. So I will frame the question in the direction of how we get back on track.

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I think we are definitely on track, we just have to keep on. There’s this great fake quote from  Winston Churchill, he didn’t exactly say anything like that but I like it very much, “when you’re going through hell just keep on going”. So I think we are exactly in that place. Right now we are going through hell and we are slowly progressing.

And the current industry won’t die, because now it’s MasterCard carrying the torch. It’s Visa carrying the torch. Two of the biggest payment networks in the Western world are now offering services that will enable banks to offer crypto, so I think that this shows where we are right now.

Where do you see crypto in five or ten years in terms of its relationship with the banking system?

We had the privilege to listen to a member of the board of the second biggest Croatian bank last month and he had an excellent point –  that banks and the banking system survived for the last 200 years.

It’s overly optimistic to think that crypto can kill something that survived in the last 200 years. I never thought that crypto could kill the banking system, nor do I see the point in that. However, I see that banking changes over time, and banks are not stupid – very, very smart people lead banks, and they employ very smart people.

I think that we will see more banks innovating, and changing and banks approaching crypto, banks integrating crypto. I see the other sides as well – we see the biggest crypto institutions acquiring banking licenses.

Also, I wouldn’t say that independent crypto will extinguish and disappear, because it is a place of such radical innovation. Crypto is all about innovative startups – you have crypto popping out here and there every day.

Just in the field of decentralized finance, there are new startups every few days, and you have completely new and unseen opportunities, since innovation is radical and fast. I don’t see that stopping in the next five or ten years – for example, you can have banks buy up all crypto startups today, and in two weeks you would have a completely new industry popping up out of nowhere.

So I think we will see a convergence in the long run – banks integrating a lot of what we are doing now, but I don’t see the industry disappearing completely, since it’s such a radical field of innovation.

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Bojan is The Recursive’s Western Balkans Editor, covering tech, innovation, and business for more than a decade. He’s currently exploring blockchain, Industry 4.0, AI, and is always open to covering diverse and exciting topics in the Western Balkans countries. His work has been featured in global media outlets such as Foreign Policy, WSJ, ZDNet, and Balkan Insight.