Israel’s cryptocurrency players were surprised when Capital Market, Insurance & Savings Commissioner Dr. Moshe Bareket granted the first license to a local crypto company, Hybrid Bridge Holdings (HBH). HBH is an unknown quantity, not part of the local crypto market’s inner circle.
Unlicensed crypto companies, it should be noted, cannot operate in Israel. Other crypto companies that have applied for a license in Israel receive a permit to continue operations. Licensing makes it easier to work with the traditional financial system, as compared with the permit to continue operations.
"I'm not your classic crypto type. I'm not a radical young thing, I'm completely mainstream, and my team is relatively mature for a startup, in their 40s and 50s," says HBH co-founder Giyora Ran, who also serves as CEO.
"I don't believe in fighting the banks. I don't believe in fighting at all - you can always find synergies and work together. Also, I come not from the financial side of crypto, but from the technological blockchain side. My team and I mainly specialize in software programming and that's what we do," says Ran in a first and exclusive interview with "Globes".
"The financial institution is the only one facing the customer"
Although cryptocurrencies and blockchain technology undermine traditional banking, and threaten the banking system, HBH - Israeli’s first permanent licensee - has developed a system that aims to help banks and traditional financial institutions operate in the crypto world.
HBH's system is designed to be installed at these institutions, and a variety of crypto activities can be executed through it in a "walled garden" model, meaning that money leaves one regulated entity and enters another regulated entity, eliminating the worry over money laundering or terrorist financing.
How does it work? The system is connected on one side to entities licensed by US regulators, such as Kraken or Coinbase, and on the other side, to local financial entities. When customers of a local financial entity want to make a crypto trade, the funds go out from their account, which has undergone Know Your Customer (KYC) and Anti-Money Laundering (AML) verification, identification and authentication procedures as required by law. It then transfers to a financial institution that also meets all these requirements, as do its customers, so that the received cryptocurrency also meets the regulatory requirements. A walled garden system makes crypto trading very easy.
HBH's system facilitates both trading and custody of assets, and provides a technological infrastructure for more advanced activity, such as leveraging crypto. "We’re an infrastructure company, we create the system, and the financial institution that implements it will decide what it allows customers to do with it. We built it so that there is no difference between fiat money [government-issued currency -- E.A.] and crypto. Anything you can do with fiat you can also do with crypto," Ran points out.
Who sets the rates for the customer for making a transaction?
"In terms of the crypto purchase price, the system will make the best offer from among the institutions we work with. On the customer-facing side, fees will be determined by the financial institution itself, subject to its considerations and the competition between the various entities. The financial institution itself is the only one facing the customer".
What is your business model? Where will profits come from?
"We share in some of the bank fees, and if we provide custodial services, we charge the accepted market rate for custody."
So, you’ll have a number of financial clients and all their money will be in your custody?
"Any financial institution can choose to us as their custodial service, or they may be the custodian. If they are the custodian, then we provide only trading and other services. If a financial institution chooses to have custody with us, its customer funds will be separate from those of other financial institutions’ customer funds. There’s no combining of customer assets from several financial institutions".
Ran started his career at Amdocs, and later held senior positions at various large software companies. "At about the age of 50, I decided it was time to do something for myself as well.
"I came to entrepreneurship at a relatively late age, and I went into a different field altogether - I wanted to develop a product in the area of genetically adapted drugs. We started visiting hospitals, studying, and collecting data, but then the coronavirus pandemic happened, all the medical teams were very busy, and our venture simply evaporated. At that point, I started thinking about crypto. The field intrigued me," says Ran.
"It was clear to me, as someone who comes from technology, that this technology would be the next big thing. So, we started surveying the sector, and its problems, and it was clear that the main problem was money laundering, which complicates the entire process. Have you ever tried to buy crypto? Friends of mine gave up after three days. So, we decided to develop a product that would make using and trading crypto as easy as using and trading fiat."
"Our customer is the regulator - the system was designed for them"
Ran is a friend of Sagi Shroyt, currently Chief Operating Officer (COO) of the company. Together they recruited a team with expertise in blockchain: Oren Sokolovsky and Benny Shani. Today the company has 15 employees and its offices are located in Caesarea. According to the registrar of companies, Gitam/BBDO, Moshe (Moshik) Theumim, and Ido Har Tuv also hold stakes in the company.
How do you explain the fact that, out of all the companies that have been in the licensing process for years, you were the ones who were licensed first?
"Our customer was the regulator - the system was designed for them. It is true that officially the system is intended for banks and financial companies, but no bank will buy a system if the regulator isn’t satisfied with it, and no bank will take the risk of operating with something the regulator didn’t approve. So, we knew that if we wanted to sell to banks, our client had to be the regulator. At a very early stage, we did in-depth consulting about all regulatory requirements, and from the outset, designed something that would meet them."
How did the connection with Moshik Theumim, your company chairperson, come about?
"I met Moshik when I worked with him on another venture, and when we founded HBH I was already experienced enough to recognize my own limitations, and I knew that I would also need someone to take care of marketing, advertising and sales, so I turned to Moshik and he joined. Along the way, and during the funding rounds, other great people joined us, like Yossi Ackerman and Ofir Dubovi."
How do you see the crypto sector developing in the future?
"I strongly believe both in the technology, and in currencies designed to solve problems such as an inefficient financial system, and very high fees, which unfortunately also exist in crypto today."
Yes, this technology was supposed to be an alternative to banks. After all, if you can transfer money from wallet to wallet, you don't need them. So why do we even need an enterprise like yours?
"The banks and the financial system will not disappear, and crypto will not disappear either - both systems will learn to live with each other. Crypto will be subject to regulatory supervision, and there will be things that will not continue, like anonymity. No one wants to finance terrorism and launder money, and anonymous activity has led crypto to a very deep and dark place.
"When the mainstream adopts crypto, there will be no place for these things. People need to trust the system where they put their money, and the regulators will go deeper and deeper into the matter.
"On the other hand, the banking system will also have to change, become more efficient, reduce fees. There are reports on developments, according to which any bank that does not adopt the blockchain in the next five years will be at a great disadvantage, and will pay for it by losing customers."
Do you still believe in crypto even after the recent declines?
"It's part of the sector’s cyclical nature; every few years there’s a 'crypto winter'. Is crypto down? Buy it and wait. I believe in it."
Israeli banks like to go with large international entities, not with small local players. How will you break through?
"The banks have their own challenges, it's not easy for them either vis-a-vis the regulator, and a large international institution gives peace of mind in this sense. But I believe that a local entity that has received the stamp of approval from the regulator can break through."
Will you offer more complex assets, such as funds?
"Our infrastructure allows trading in different types of assets, for example NFTs. We are a technology company that provides infrastructure. We will not create our own financial products."
Where will you be in a year’s time?
"I would be happy for us to grow in Israel, the Israeli market is my natural home. In addition, by the end of 2023 we‘re targeting to add at least one more significant customer in Europe and one in the US."
Ran Giyora
- Personal: 55 years old, married and father of three. Lives in Yokne’am.
- Professional: Before founding Hybrid Bridge Holdings, he served as VP of Operations at FTS, as VP Delivery at MIND CTI, and as Development Project Manager at Amdocs.
- One thing more: Loves cycling, running, and sculpting
Published by Globes, Israel business news - en.globes.co.il - on September 15, 2022.
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