SafetyDetectives sat down with Georgy Sokolov, Co-Founder and VP of Partnerships for Wirex, to discuss how Wirex is changing the way we use cryptocurrency, some of the privacy and anti-fraud methods used to prevent scams, and how he sees crypto evolving in the next few years.
Thank you for taking some time to speak with us, can you please tell us a little about how you started Wirex?
It was a classic situation with a few friends studying in a business school. I was studying together with Dmitry Lazarichev, who is one of the CO CEOs, and he was good friends with Pavel Matveev who’s another founder and CO CEO.
Around a year after we finished business school, I was talking to Dmitry, and he mentioned Bitcoin to me. I can’t even remember; maybe I had heard about Bitcoin in the news, maybe not, but I had zero clue of what it was and why it matters.
And he mentioned that it’s the new currency of the internet, but it’s not really spendable in the real world. Even now, there are very few places where you can go and actually spend your Bitcoin. Back then, it was nearly impossible.
However, that’s one of the fundamental qualities of what currency is, right? It needs to be a means of exchange; you need to be able to spend it.
So, we started thinking of how to make it happen. And essentially, there are two ways.
You either go around and try to convince every single merchant to start accepting cryptocurrency or Bitcoin at the time (even Ethereum didn’t exist yet, this was in mid-2014) and good luck with that option.
The second possibility was to try and build this new nascent digital financial system into the existing one and connect it to the convenient and familiar rails. Most people have a debit or credit card in their pocket. Why not try to make the Bitcoin spendable with a card – and that’s essentially what we did.
Does it work with a regular Visa or MasterCard, or do you need a special Wirex card?
It is a regular Visa or MasterCard, depending on the region. In Europe, where we are principal members of MasterCard, we issue the cards ourselves. In Asia Pacific and the United States, a Visa card is issued in partnership with sponsors.
From the seller’s perspective, if someone comes to you with a Wirex card, you will never know that there’s crypto in the back end. They receive the money in the currency they are charging, whether it’s dollars, euros, etc.
In terms of what account is debited from the buyer’s wallet, it really depends on their preference. If they prefer to spend the Dai stablecoin, for example, they can just set a priorities list. So, Dai would be converted exactly as a US dollar would be, using interbank rates. So, there is zero difference from the rates you see on google or XE.com, and merchants receive the currency they want. Meanwhile, the Dai, Bitcoin, Ethereum, GBP, Euro, or digital currency gets taken from my wallet.
There is no difference to the buyer or seller, and there is no indication that anything is different than using your high street bank, credit or debit card, except the fees are lower.
One of the big benefits of Wirex is that the user also earns rewards back in crypto for every purchase made with the card, which we call Cryptoback™ So, there are really big benefits that come with the card.
SD: What is Cryptoback™?
Cryptoback™ is a rewards that we pay on every transaction, except ATM withdrawals, to the user. Depending on your account tier and subscription level, it can be anywhere from 0.5% to 8%. Currently, it is based on our native token, WXT, but we’re planning to change that to stablecoins so that it’s more predictable since most people prefer to get cashback in something more stable.
We see this as a marketing expense, but it’s a pretty good tool for onboarding newbies into the crypto world since Wirex users earn crypto automatically. Nevertheless, you can use Wirex without knowing anything about crypto. For example, I use my card all the time. It just makes sense. I can top it up from my Lloyds accounts, and it costs me nothing. Then I spend money and automatically earn some crypto rewards.
Next time I open my wallet, I see I’ve earned some new tokens in my wallet, and I can actually go and buy a cup of coffee with it. Then I think oh, that’s crypto; maybe I should look into what Bitcoin is etc.
So, it’s an easy way for people to get started. You don’t have to buy cryptocurrency but once you spend a certain amount and earn those rewards back in cryptocurrency, and you say, okay, I can get myself a coffee, what else can I do with crypto? So, it gives people an incentive to start entering the crypto world without any risk.
What kind of security measures does Wirex have for user privacy?
Well, security is super important, especially in a nascent industry like cryptocurrency. I mean, in the finance space, it’s important, and in cryptocurrency, it’s even more important.
Almost every week, there are stories about this hack, that hack, and something happening here or there. So, we spend a lot of time, effort, and resources using various kinds of resilient anti-fraud technology and practical measures like Strong Customer Authentication (SCA), device authorization, etc. We integrate with the world’s best partners who use advanced technology, including facial recognition, biometrics, and real-time checking. We use different providers, like Onfido, for example, to make sure you are who you are when you’re getting onboarded. We use state-of-the-art fraud analytic tools for transaction monitoring on both the fiat and crypto side of things.
On the crypto side, we work with Fireblocks, who have pioneered the MPC or multi-party computation technology. It is a new iteration of multi-SIG, so several parties have to sign a transaction to ensure it happens. For the end user, the result is that it’s only them who can get into their crypto wallet. And then, to protect documents and sensitive data, we use TLS and 256-bit encryption.
On top of that, we get insurance with Fireblocks for the crypto funds, and we will soon add optional additional insurance for cases where, for example, a user loses their password and gets their account compromised for whatever reason.
Apart from that, we just ask users to use every possible tool we make available to them. Some are compulsory, others are optional, but strong customer authentication is compulsory. If someone loses their card, they can block it, but it’s not a requirement because a PIN is required and if it’s used online, they will be asked for a code that comes to your authentication app or via SMS on your phone. So, there are several levels of protection.
Do you have any recommendations or tips for individuals on how to protect themselves from online scams in the crypto world?
That’s an interesting one because on the one hand, we all hear about scams here and there. On the other hand, when it comes to an ordinary day-to-day user, and we’re not talking about some super complex defined protocol or cross-platform bridge that gets exploited with ordinary users, it’s rarely very sophisticated, right? It may sound like a cliche, but as long as you use just common sense, you remove 90% or even 99% of the chance of being hacked or having someone steal your funds.
Just keep an eye on very basic things, like how were you contacted? If someone called you and said, “Hey, I’m with Wirex,” just go to the Wirex site and check it out. Suppose you receive an email or a notification on some social network; double check if it’s the official channel because maybe it’s an imposter.
If it sounds too good to be true, like if someone is promising you a 90% discount, free crypto, or anything like that, odds are it’s a scam. Again, a cliche, but it’s true.
If someone is asking you to send funds to unlock a prize or solve a problem in order to receive something back, that’s suspicious. Similarly, if you are ever asked for any sensitive information, wallet, addresses, and passwords, no one in your bank would ever ask you for that and Wirex would never ask you.
So just very basic things. If you feel you may have been compromised, change your password immediately. Contact your account providers and let them know, and they’ll help you out. Here at Wirex, we also have 24/7 customer support that can help.
What are the benefits of using a decentralized money system?
It’s probably not as obvious when you and I are talking, living in well-developed countries with easy access to banking, stable currencies, and solid economies.
It becomes a lot easier to explain this to someone in Argentina or Turkey with two-digit or three-digit inflation rates when you can’t rely on the money you made this month because next month, it will buy you less.
It’s also important in a country with corrupt governments. Do you know what the countries with the highest adoption of crypto are now? Ukraine. People need this as a tool to continue living a decent life when their governments are unstable.
It’s still early days and It’s still very small, but hopefully, it will help improve the global financial system and bring more fairness and privacy to it. It’s not going to be an easy journey, especially in terms of changing people’s opinions.
We often hear about money laundering using crypto. But that same activity is happening via the traditional banking system but on a much larger scale. According to analysis, crypto scams are decreasing by 65% year-on-year, and the total volume of all money laundering that’s used for crypto is still negligible.
Although crypto may appear anonymous, it is actually pseudonymous. It’s possible to trace a lot of transactions to the final beneficiary or whoever initiated the transaction.
Blockchain is very transparent. You can’t tell the name of the person, but you can use sophisticated tools to trace the sender. We’ve seen quite a number of interesting examples in the cybersecurity space, because the hacker or ill-minded actors used crypto, investigators and officials were able to get down to the bottom of things and resolve those issues.
Had it been done with cash or fiat currency, it could have been much harder.
Do you see cryptocurrency evolving and becoming more mainstream?
It certainly is becoming more mainstream. You can see by the percentage of users in countries like Ukraine, Russia, Argentina, and Turkey, adoption is quite high. In many developed economies, the adoption rate is rising too.
It’s not only on the currency side but there are also other use cases, like NFTs, for example, where the technology has some potentially interesting use cases going forward in terms of ownership.
For now, crypto’s value lies mostly in speculation. But as the dust settles, as the system gets more mature, there will be other applications. For now, it’s developing on the payment side of things, but it’s not where it should be yet. Not all the potential is being used, mostly because of a lack of education and difficulty with that last mile. For example, while you can send crypto to anyone in the world, what can they do with it? If they’re in Europe, they can get a Wirex card and spend it anywhere. However, if they’re in a Latin American country, there are only a few tools available there.
Hopefully, this will change sooner rather than later, and there will be more accessibility and more education.