Let's just go to China: Interview with the CEO of Wyre - Michael Dunworth
Over the years, many people have wondered what happened to Snapcard, a Bitcoin startup that aimed to help customers distribute their cryptocurrencies. It stood out back then for its browser add-on that made purchasing items in bitcoin simple – even if the site didn’t take bitcoin. But in today’s cryptocurrency market, the aggressive environment has thrust Snapcard towards the road of evolution, emerging as Wyre. Recently, Wyre and Bloqboard announced a new market for the current open financial system, adding the ability to quickly repay the large MakerDAO CDPS and also be able to sell them in a trade that can take place over the counter. In this exclusive interview with Michael Dunworth, the founder of both Snapcard and Wyre, we will uncover the opportunities and difficulties he embraced in the ever-competitive crypto market.
Bianca: How did you start to get interested in bitcoin?
Michael: Back in 2012, some friends working in finance told me about bitcoin, a really exciting technology, they said. At first I basically completely dismissed it because I didn’t think it was real. The truth is, I thought of it more like a gamble. I started reading about it and actually learning about it as they kept telling me how awesome this thing called bitcoin is, the value of it kept going up, I think it was about 8 dollars or maybe 12 dollars at the time.
Bianca: Was there a tipping point when you started to think bitcoin is cool?
Michael: There wasn't really an aha moment. I kind of started to like it just on a whim almost. It is the fastest way to learn once you invest in something, same with money. So the first time I ever touched bitcoin or used it was sort of a starting point of me being invested in it.
Bianca: When and why did you start Snapcard?
Michael: It’s actually really funny how we sort of accidentally fell into bitcoin at the time. Our original idea was that you could upload your credit card into a web browser and then go shopping on multiple websites and then check out in one spot. We thought it would be a really good idea to add bitcoin as a payment method. And when we did that, people on some forums basically said, oh you can spend bitcoins on Amazon and all these places. And the next thing you know, probably 98 percent of the people using us were using bitcoin. It was just creating so much noise, that we decided to look into this a bit more. That was the starting point of Snapcard back in 2013.
Bianca: How was the environment back then? How many active startups are there for bitcoin?
Michael: I would say it was like in the first wave of venture capital that was coming in aggressively starting in 2014. In 2014 we started with the price of maybe 195 dollars per bitcoin, and then two weeks later the price went up to 250 dollars and then a week later 350 dollars and then 400 dollars. It went all the way up to 1,100 through December 2013. That forced all this venture capital money to come in and startups to get excited. You could see a huge wave of business in 2014.
Bianca: So you are one of the earliest startups in bitcoin.
Michael: I wouldn’t say we’re the first, maybe part of the first group. There were a couple of startups that have come and gone for whatever reasons. We were definitely on the earlier side, very close to the beginning.
Bianca: At the beginning, you attracted a lot of users. What kind of people are using bitcoin at the moment?
Michael: Let’s say you bought a bitcoin for 50 dollars, now that bitcoin is suddenly worth 500 dollars or 700 dollars. You want to start taking that profit, and it’s much easier to, instead of selling it on an exchange and then sending it to your bank account so you could shop with it, to use a service like ours which will verify you and then you can shop on Amazon. It is much more frictionless this way. So basically the people that were spending are people that were early adopters that have made tons of money.
Bianca: At that time what kind of e-commerce will accept bitcoin as payment?
Michael: Bitcoin is just like cash, so I can’t call the bank and ask for a chargeback. A lot of online businesses that deal with high risk, like online gambling or adult entertainment had more appetite to adopt it faster than ones that are prone to fraud and chargebacks. In the U.S. online gambing is illegal, but in the Euro markets, these activities are very prevalent.
Bianca: What kind of contribution did bitcoin make as a vehicle for payment?
Michael: It’s a mechanism to pay someone. It’s extremely fast and secure. The problem is that it’s very hard to tell someone that they should spend something when it’s doubling in value every year.
Bianca: What was the peak time of the business for Snapcard?
Michael: We focused on allowing merchants to accept bitcoin and digital currency, so it wasn't just bitcoin. We were multiple currencies. And then we added the ability for people to buy and sell digital currencies. Because when we were doing it we noticed that, even if you integrate with lots of these merchants, there is no guarantee that people will want to spend them. But the reality is that so many of these companies you know put it together so you know their PR and Marketing. It's a great way to grab an audience and the loyalty of this new community that's growing really quickly. overstock.com is a pretty big company and they started accepting it.
Bianca: When and why did you close Snapcard and rebranded it as Wyre?
Michael: We officially announced it in 2016. And the idea was that we were buying and selling, people could buy and sell digital currencies, or they could spend digital currencies with Snapcard. That was great, but the whole company's success was so susceptible to these bubbles. Bitcoin right now is going crazy. So I can get you every dollar I have that over a coin.. Now if we want to be as impactful as we were, it is much more difficult. Most of the people that are getting into Bitcoin believe in it. This is more like an asset class. Our customers, they are using blockchain technology. They better know they are using it. Because at the end of the day, we just want to make sure that they get the benefits. It's the speed and cost efficiency they care about.
Bianca: Do you consider bitcoin a currency?
Michael: I would say it's probably more of a commodity. Because I think it's sort of the number one use case or asset used, for right now, there is a lot that's gonna change and improve. But for right now, the number one thing is going to get users, so if you don't have any bitcoins, the number one thing that is going to get you into bitcoin is going to be the appreciation of it as an asset.
Bianca: Different countries have different opinions about bitcoin. Japan, for example, accepts bitcoin as currency. But most countries don’t, including the U.S. What do you think, what are their concerns?
Michael: Well I think there's more money to be made. If I were the tax man, there is more money to be made on capital gains tax. If I know that bitcoin can be worth one, two, or three million dollars per coin, I'm probably gonna see that upside and think that's what I want to tax. It's like an asset. People do spend it. The U.S. just brought out an improvement to the regulation where they said that Bitcoin is a commodity and you don't have to pay taxes.
Bianca: How was the meeting with the central bank from Brazil given that Snapcard was very popular in Brazil?
Michael: It was really good. We went from Sao Paulo to Brasilia, and met with the central bank. And there were about 8 or 10 of them and our lawyer who speaks Portuguese. But they spoke English and Portuguese, so it was ok. We spent about four or five hours talking. And they were very excited about it because they thought it can provide so much benefit to the Brazilian people. And for us, we were just trying to show how exciting this technology is and how they can sort of embrace it. It was very very clear that they knew what they were talking about. We were learning more about our customers and trying to understand what would be most helpful as a product for them. And they said, well, I just use this cause this is easier for me to just send money overseas. I send it to my exchange partner. They sell it and put it in my bank account. I can remit money without waiting for a long time and paying all the fees. So when we looked at it that way, we thought about how can we take that use case and make it a better experience. And that was how we sort of evolved into Wyre, where instead of making them deposit money, convert it to bitcoin, transfer etc. and all these sort of hoops to jump through, we basically wrapped it all up together. So they give us the U.S. dollars and we can pay them out there in euros.
Bianca: So you use bitcoin as the converting platform.
Michael: Digital currencies. Bitcoins is typically the most liquid. So it’s mostly buying and selling. We need to make sure our customers are getting the best price. We want to go with the ones that have the best price which would probably be the most liquid. It's definitely got its challenges. One of the things with big money transfer companies predominantly like Wyre is an API. It's technology and we do service. The end consumer might be a business owner that might say they want to pay a fifty thousand dollar invoice to somewhere overseas. But you've got these e-wallets that want to do payments to say Brazil or China or wherever it is that is in their sales cycle. So to get them educated and understand how pure the technology is and how much it can benefit the company. It takes a bit of time.
Bianca: Who is using this service? Use your service to do international money transfer.
Michael: We typically break out ones that are going to be technical. So someone who integrates. Manufacture in China. They need to pay 200,000 RMB invoice. They can use us where they can basically log into the platform, upload their US dollars, and then send them directly to the Chinese manufacturer's bank account. Those are sort of the two breakouts. Non-technical and then technical. People that are the partners of ours are predominantly in North America.
Bianca: People from which country have a stronger need to use this kind of global money transfer service?
Michael: Well. I think it's more about like you know where can we solve a problem. Right now you know it takes anywhere between three and five business days if you are sending money, depending on the service you are using obviously. But, when you're sending money developing countries like China, it's very difficult. And the idea is that you can make that simpler using different technology.
Bianca: So you see less of a use case between two developed countries, like from Canada to the U.S?
Michael: I'll give you an example. A lot of people think, why don’t you send money from Euros to British pounds. When you send money between the U.K. and Europe, lots and lots of money gets in between them. But it's already sold. You can use the services that do same day delivery, that do really good pricing. If you want to have an impact it's very difficult. And the sort of impact that you have is that all these magnitudes improve. People are used to 48 hours to five days for their money to show up. And we get it there in two hours or less, or six hours if that is what we agree to. If we get it there then, that's exciting for them. So that's why we focus on businesses and to harder-to-reach areas. Because it's much more of a real value proposition for us.
Bianca: How much do banks charge?
Michael: We test this very frequently and it can be anywhere between four and seven percent. So banks are charging much higher. Let's do an example. If you send 100,000 dollars with your Wells Fargo, your Bank of America, you're gonna pay a wiring fee which is pretty common amongst everything. But the exchange rate you get is probably gonna be between ridiculous amounts, 4-7%. If you are sending a hundred thousand dollars, that's gonna be about four to seven thousand dollars you're gonna pay just to them. Now with us it's probably it's closer to 750 dollars. So that's a big saving, especially if you're a business. Let's say your business is importing goods. That's a huge amount of savings for you. If you do that once a month, you're looking at close to a hundred thousand dollars annually that you're gonna be saving.
Bianca: In your opinion, besides money transfers, where else can blockchain contribute some value?
Michael: So this is the thing that everyone's really caught up on, money transfer, currencies and assets. Basically the best thing that the blockchain is, when the internet came out and the Internet became a way that you and I can transfer information really quickly. But the blockchains come out, we can now transfer value really quickly. let's say photocopy. I take a photo of my 100 dollar note. If I send that to you, like text you on Wechat. You get that. You've got a picture of 100-dollar-note. I've got a picture of 100 dollar note. So it doesn't get transferred. It gets duplicated. But now with bitcoin, this is one of the big exciting things is that you've taken something that I have and you've pulled it from my account and put it in their account. So if I had one bitcoin and I send it to you, you have one bitcoin. You don't have a copy of a bitcoin. You've got the one bitcoin. Put it on the blockchain, and then if I actually transfer that digital asset, which could be a document or whatever it is, from my wallet to you. You are now in ownership of that. So now look, the government might not recognize that or whatever right now. And it would take time before that happens. But if you think about the ability to transfer value, it's all this stuff, paperwork, from legal documents, property title transfers. All this is gonna be so much more liquid because you'll be able to just transfer everything so much faster. So it's all about whatever is valuable for tracking something. It's all 100 percent transparent on the blockchain basically.
Bianca: And how far are we away from blockchain become popular or as popular as the Internet is today?
Michael: It's very early. But I think it's gonna move faster than what the Internet did.
Bianca: Besides the financial industry, can other industries benefit from blockchain as well?
Michael: Yep. Everywhere. It is going to create new industries that we didn't even know existed.
Bianca: By the way, what do you think about that ICO craze this year?
Michael: I think ICOs as a mechanism or a vehicle is great. You can get lots of money really quickly and investors can liquidate them. It's very liquid, right? Now I think obviously it's problematic because the barriers to entry are so low. You can pretend to be really awesome and really cool or whatever and convince people. You do Facebook ads and all these kind of things, and lots of people buy into it and you just run away with the money. That’s very possible. We just have a massive massive craze. The amount of money put into ICOs was double the size the venture level has put into it in the past.
Bianca: You think not every project is good or is valid?
Michael: Nope. If you look at Kickstarter, an online platform where they crowd fund. And that's basically what ICO is. It's like a Kickstarter except it's using digital currencies to crowdfund it. And you know the scale, all these magnitudes bigger when you know if I'm raising 50,000 dollars on Kickstarter for a cool board game I want to make, versus raising 250 million dollars on an ICO from people all around the world. The stakes are much higher. And for founders and entrepreneurs that are doing these ICOs, I would say it would be really horrifying because you are in the public spotlight and you have hundreds of thousands of people that are counting on you to deliver. And everything is in the public spotlight. So you know if you have founders and then you know someone on the team leaves, the price might dip down. It's just like a publicly traded company.
If Mark Zuckerberg and Sheryl Sandberg say, hey we're quitting Facebook tomorrow, I have a feeling that the Facebook stock price would go down. It's the same thing. But now you've got start-ups. And if you look at Kickstarter, Kickstarter's got a 34, 35 percent failure rate. The challenge is much higher. Investors will get slapped from it probably. But the ones that do fail, they've got people that have invested in them and those investors aren't gonna invest in products that don't exist or teams that they've never met. It's gonna make it run smarter. And the market will become more intelligent from it.
Bianca: What's the next stage for Wyre?
Michael: I think for us it's staying focused and making sure we just execute on what we've been spending a lot of time building and keeping our customers happy. If we've got happy customers, everything falls into place. But identifying those customers who are most valuable to us and who our product serves best is something we need to do, we always have to put a lot of thought into it.
Bianca: Great. Do you have an office in China? Do you have any Chinese partners?
Micheal: Yes. We've got Chinese investors and we’ve got a team and office in China. We acquired a competitor of ours. It was called Remitsy. They were China-based, doing a very similar product to us. We really like the product, and it was a really good fit. And we were just about to start opening our in-China office. They are absolutely fantastic at what they do. They are very experienced and we were so happy to be able to join forces, and set that up in China with them.
Bianca: Sounds like China is a very important market for you. Why do you think China is so important?
Michael: Well, I think the pain point is big. If you look at, I mean the pain point in that is a few things. One, it takes a long time to transfer money to China. It can take anywhere between 2 - 5 business days. The total addressable market. So few people who do business would want to send money to China. Yet, lots of businesses do. It's a pretty good place for businesses to work with. Most start-ups don't go to China. That's the last thing they do. Like a U.S. based company is not gonna be, ok, start in the US. Let's just go to China. Because the difference between the U.S. and China is completely polarizing. Literally like Earth and Mars almost. If you look at say, U.S. and Europe, a lot of business will start in the USA, and then they'll go to Europe because the language, the culture, the social norms are very similar. Now if you look at the U.S. and China, language barriers, cultural barriers, social barriers. No one uses Facebook. No one uses Google. No one uses Twitter. No one uses LinkedIn. It's just, it is different. It is much more difficult.
So, for that reason we felt like there was much more opportunity that way as well. And we had really fantastic investors both here in Silicon Valley and in New York, and then also in China. And that network kind of brought us the opportunity to be able to execute in China. So it's not easy to do it. But I feel like that team has done such a good job. Being able to get traction and get these very large partners, the large companies in China provide a really good technology solution for them.
Bianca: One last question. What do you think about the regulatory risk in China?
Michael: Definitely. It's a huge thing. So obviously the exchange is closed. ICO is banned. You can't trade it digitally on the exchanges. Thousands of businesses are becoming P2P lending platform. So peer to peer. I deposit money and you want to borrow money. And the platform in the middle arranges everything. Now, you have, four or five thousand of these websites, lots of people started to get scammed and the money was going missing. So the bank came in and just said, nope, hold on, we're finished. And then they came back and said whoever wants to do this, everyone is still allowed to do it. But here's the certain criteria you need to meet. So you need to have audits. You need to have this and that. They put a policy in place that you know people might think they're trying to squash it but it's not at all. Now there's 250 or you know 400 of these companies that operate. The net outcome is being way more beneficial than letting it run amok. So with ICOs, I would say I would be very surprised. If you think about that example of peer to peer lending. I could be way wrong, but I feel like ICO will take that same page. Because it's very easy for people to scam people, and give them, sell them really quickly with ads and stuff like that. Technology is always going to move faster than regulatory guidance. And with that being said, they're gonna just sort of go, alright, just stop everything, and stop it, we'll figure it out and then we'll come back 6 to 12 months or however long it takes. And say, here is what you need to do if you want to do it. And they might say, if you want to do an ICO, here's exactly how you must do it. You must report everything to this entity. You must report everything to this government body. You must verify .. all this kind of stuff. Essentially ICO, there's a reason why it sounds like the word IPO. Because that's what it is. It's like, the public getting an offering, except it's a coin offering. So I think it's, look, it makes sense to me. I kinda get that. If that's the way they want to go, I think that makes sense.