April 4, 2017 at 15:38How to open a bank in Europe: licensing and blockchain
Our first post about the Polybius Bank project attracted a lot of attention for Friday evening. Therefore, without delaying for a long time, we continue to talk about what constitutes the creation of a modern bank in Europe.
The bits.media website interviewed our speaker Edgar Bers, in which he described in detail the process of registering a bank and spoke about the types of licenses of financial institutions. Among other things, it answers the questions that were asked in the comments to the first article.
- How did the idea of a bank like Polybius come up from the very beginning?
I live in Estonia. Estonia is now known as one of the most digitized states in the world, we even have the concept of electronic residency. And here we are already accustomed to the fact that all services are available online. In Estonia, everything is digital. In theory, opening a bank account should be no more difficult than registering an email: fill out an online form, go through online authentication - and go. In real life, everything is still far from so rosy.
Banks still look like analogous dinosaurs: huge commissions, working hours, weekends, a lot of manual labor and more. Looking at this, any technically advanced person could not help but think about how to change this situation. Thus, the emergence of a modern digital bank was a matter of time - when, roughly speaking, those who have the experience, knowledge and desire to create modern digital products will meet those who have financial expertise, banking experience and an understanding that it is possible and impossible improve under existing regulations.
- How can banks improve their efficiency?
As usual, the main factor is the human factor. In modern banks there are too many literally superfluous people. People who are involved in checking and conducting transactions. Managers and clerks who serve clients in the offices of operations that could be carried out online. Analysts who manage customer assets by researching the market and trading. Even the cleaners, who are forced to clean the vast areas of these offices and bank branches every day, are all bold items of expenditure that can and should be eliminated.
Even skilled labor can already be replaced by robots: for example, the new development of JP Morganin seconds, it analyzes financial documents that previously required 360,000 hours of work for lawyers and loan managers a year - this is equivalent to the full employment of two hundred employees receiving not the smallest salaries, which then add up to the cost of the bank’s services.
Another thing is that doing it all is not so simple. In fact, we can say that we need to reinvent the bank - and we know for sure that it is easier and cheaper to do this from scratch than to change the large structure that has been around for decades. So the idea of Polybius appeared: a digital bank created from the very beginning and using all possible technologies of 2017.
- So, in Polybius everything will be digital too?
All that can be digitized - we digitize. We will strive to digitize even that which cannot be digitized. Bank payments are not rocket science, but simply data exchange. All transactions are the creation, forwarding and storage of electronic messages. The skeleton of the bank, its idea is the transfer or creation (in the case of loans) of the conditional value and storage of information about it. The first banks did not need anything except a table and an account book (the Italian word banco means "bench, bench, table" on which money changers laid out coins). This does not need a lot of staff.
Of course, banks also have their own assets, private clients and other concerns besides payments. But there is also a huge space for optimization due to modern technologies. Human participation is still needed, but in much smaller numbers: only to control the work of robots and make critical important decisions, which we are not yet ready to entrust even to the most intelligent AI.
All workflow at Polybius will be digital. We will use the blockchain for this: the technology itself provides a 100% guarantee that specific information was placed there at a particular point in time, and will be there without a chance to be deleted or changed.
- Will this evidence be perceived by the legally relevant courts of the EU and other countries?
Yes, as soon as we pass the appropriate audit. When we conduct an ICO, launch a banking platform, including data storage on the blockchain, register the Charter and other important legal papers, we will need confirmation that all this complies with European laws. To do this, we will apply for an audit to the Central Bank of one of the countries of the European Union. Most likely, it will be the Central Bank of Finland or the Central Bank of Lithuania. State banks of both of these countries position themselves as maximally oriented towards the introduction and adaptation of modern technologies. In particular, Lithuania expressly expresses its goal as a state to become the leader of the fintech segment in the global division of labor, therefore both central banks are as loyal to new technologies as possible, including blockchain.
Regardless of the country chosen, the Central Bank will conduct a thorough and thorough audit of our bank: from front-end to back-end - from the digital and legal side of the issue. Including, of course, the security of the blockchain as a repository of information. Roughly speaking, the regulator will climb into the darkest corners with a flashlight in order to study Polybius Bank's compliance with European regulatory standards.
- Are you sure that the blockchain in a real bank will not confuse them?
It doesn’t matter to the regulator where and how we store the data: even on napkins, even on the blockchain, if the process of adding, encrypting and storing records meets the standards adopted by lawmakers. And after the audit is completed, regardless of which Central Bank of which country conducts it, our software will be automatically licensed for banking activities throughout the EU.
All our activities, starting with the ICO and including the actual launch and operation of the bank, are regulated by the laws of the European Union.
The project team consists of people with great expertise in both the technology and banking sectors. All our faces can be seen on the Polybius website .
- How long can the audit take?
From two months. While the audit will be ongoing, we will be directly involved in the construction of the bank: hiring people, building partnerships and resolving many other corporate issues.
- How much does it cost to create a bank?
The cost of creating a financial institution depends on the type selected. There are only three of them.
Accordingly, the budget for the launch of Polybius is $ 6 million. To collect these funds, we launch an ICO - a digital analog IPO, but instead of stocks we issue smart contracts for sale, guaranteeing investors a share in the bank’s profit.
The audit will begin at the end of the ICO, when there will be a complete understanding of how much we manage to launch Polybius and what type of institution we need to audit. A year later, the bank should cover at least current expenses from income and begin to generate income for investors who purchased tokens.
- What is an ICO?
ICO is a modern way of financing digital projects and technological solutions. This is cryptocurrency based crowdfunding. Investors do not buy bank shares, but digital tokens, which are a smart contract that spells out the necessary obligations. An ICO will allow you to obtain licenses, undergo an audit, hire employees, develop or buy the necessary technologies, conduct an advertising campaign and work out the first year and a half before reaching operating profit.
- Why exactly ICO? Why doesn't traditional crowdfunding work?
We are a digital bank and focus on digital solutions. Unlike traditional crowdfunding, which includes the commission of the platform, ICOs are cheaper: which means that more funds remain for developers.
But the main thing is the availability of smart contracts. In the usual crowdfunding, the interaction of the baker and the recipient of money is one-time: he contributed money - he received the goods, the product. A smart contract ensures ongoing cooperation: acquired Polybius tokens represent a digital obligation in the form of a smart contract for the payment of dividends to their owners.
At the same time, the token itself has its own value. Roughly speaking, having funded a new type of pencils on Kickstarter, and having bought them for a dollar, in a year you are unlikely to sell them for the same dollar. And certainly not sell for two. And the token can be resold. It can grow in price. It has value in the form of a recorded obligation to receive a share of the bank’s profit (dividends). And it’s more convenient to manage. Each person has a paper contract with a bank at home, which you do not use in practice and are hardly even read. And the Polybius token will be stored on the Ethereum blockchain. No one will fake or destroy him. In this case, you can dispose of it completely remotely.
- How can investors make money on this? How much money do I need to make money on this?
We make a bank for people, so the minimum cost of entry is only $ 10, this is the cost of one token. At times, people sometimes spend no less on various digital subscriptions. A couple of paid services per month - and 10 bucks are already running in. Even a beer to go and drink in Tallinn in the evening after work will cost no less. Moreover, the value of the token is much higher: it will not expire in a year, and will have value as long as the Polybius Bank project exists and is functioning. And as the bank grows, both token profitability and the cost at which it can be resold will grow. Thus, this is a pure investment: you invest in it once, and then it works for you. We will allocate 20% of the bank’s profit for dividends on tokens, which will be distributed depending on the deposit between all investors who participated in the ICO.
Each of our investors can create their own bank account and get their own digital ID.
ICO kicks off this spring. The exact date will be announced soon. In order not to miss this event, and manage to purchase tokens in the first weeks, while there are bonuses, subscribe to the newsletter with a notification on the site polybius.io
The bits.media website interviewed our speaker Edgar Bers, in which he described in detail the process of registering a bank and spoke about the types of licenses of financial institutions. Among other things, it answers the questions that were asked in the comments to the first article.
- How did the idea of a bank like Polybius come up from the very beginning?
I live in Estonia. Estonia is now known as one of the most digitized states in the world, we even have the concept of electronic residency. And here we are already accustomed to the fact that all services are available online. In Estonia, everything is digital. In theory, opening a bank account should be no more difficult than registering an email: fill out an online form, go through online authentication - and go. In real life, everything is still far from so rosy.
Banks still look like analogous dinosaurs: huge commissions, working hours, weekends, a lot of manual labor and more. Looking at this, any technically advanced person could not help but think about how to change this situation. Thus, the emergence of a modern digital bank was a matter of time - when, roughly speaking, those who have the experience, knowledge and desire to create modern digital products will meet those who have financial expertise, banking experience and an understanding that it is possible and impossible improve under existing regulations.
- How can banks improve their efficiency?
As usual, the main factor is the human factor. In modern banks there are too many literally superfluous people. People who are involved in checking and conducting transactions. Managers and clerks who serve clients in the offices of operations that could be carried out online. Analysts who manage customer assets by researching the market and trading. Even the cleaners, who are forced to clean the vast areas of these offices and bank branches every day, are all bold items of expenditure that can and should be eliminated.
Even skilled labor can already be replaced by robots: for example, the new development of JP Morganin seconds, it analyzes financial documents that previously required 360,000 hours of work for lawyers and loan managers a year - this is equivalent to the full employment of two hundred employees receiving not the smallest salaries, which then add up to the cost of the bank’s services.
Another thing is that doing it all is not so simple. In fact, we can say that we need to reinvent the bank - and we know for sure that it is easier and cheaper to do this from scratch than to change the large structure that has been around for decades. So the idea of Polybius appeared: a digital bank created from the very beginning and using all possible technologies of 2017.
- So, in Polybius everything will be digital too?
All that can be digitized - we digitize. We will strive to digitize even that which cannot be digitized. Bank payments are not rocket science, but simply data exchange. All transactions are the creation, forwarding and storage of electronic messages. The skeleton of the bank, its idea is the transfer or creation (in the case of loans) of the conditional value and storage of information about it. The first banks did not need anything except a table and an account book (the Italian word banco means "bench, bench, table" on which money changers laid out coins). This does not need a lot of staff.
Of course, banks also have their own assets, private clients and other concerns besides payments. But there is also a huge space for optimization due to modern technologies. Human participation is still needed, but in much smaller numbers: only to control the work of robots and make critical important decisions, which we are not yet ready to entrust even to the most intelligent AI.
All workflow at Polybius will be digital. We will use the blockchain for this: the technology itself provides a 100% guarantee that specific information was placed there at a particular point in time, and will be there without a chance to be deleted or changed.
- Will this evidence be perceived by the legally relevant courts of the EU and other countries?
Yes, as soon as we pass the appropriate audit. When we conduct an ICO, launch a banking platform, including data storage on the blockchain, register the Charter and other important legal papers, we will need confirmation that all this complies with European laws. To do this, we will apply for an audit to the Central Bank of one of the countries of the European Union. Most likely, it will be the Central Bank of Finland or the Central Bank of Lithuania. State banks of both of these countries position themselves as maximally oriented towards the introduction and adaptation of modern technologies. In particular, Lithuania expressly expresses its goal as a state to become the leader of the fintech segment in the global division of labor, therefore both central banks are as loyal to new technologies as possible, including blockchain.
Regardless of the country chosen, the Central Bank will conduct a thorough and thorough audit of our bank: from front-end to back-end - from the digital and legal side of the issue. Including, of course, the security of the blockchain as a repository of information. Roughly speaking, the regulator will climb into the darkest corners with a flashlight in order to study Polybius Bank's compliance with European regulatory standards.
- Are you sure that the blockchain in a real bank will not confuse them?
It doesn’t matter to the regulator where and how we store the data: even on napkins, even on the blockchain, if the process of adding, encrypting and storing records meets the standards adopted by lawmakers. And after the audit is completed, regardless of which Central Bank of which country conducts it, our software will be automatically licensed for banking activities throughout the EU.
All our activities, starting with the ICO and including the actual launch and operation of the bank, are regulated by the laws of the European Union.
The project team consists of people with great expertise in both the technology and banking sectors. All our faces can be seen on the Polybius website .
- How long can the audit take?
From two months. While the audit will be ongoing, we will be directly involved in the construction of the bank: hiring people, building partnerships and resolving many other corporate issues.
- How much does it cost to create a bank?
The cost of creating a financial institution depends on the type selected. There are only three of them.
- The first type: an authorized payment institution. In fact, a simple payment system. Its creation, including the entire development, costs approximately $ 1.5 million.
- The second type: electronic money institution, an electronic money institution. Creating your own Paypal costs $ 3 million.
- Third type: commercial bank. The cost of opening a bank ranges from $ 6 million, including operating expenses for the first year of operation, until the bank reaches self-sufficiency.
Accordingly, the budget for the launch of Polybius is $ 6 million. To collect these funds, we launch an ICO - a digital analog IPO, but instead of stocks we issue smart contracts for sale, guaranteeing investors a share in the bank’s profit.
The audit will begin at the end of the ICO, when there will be a complete understanding of how much we manage to launch Polybius and what type of institution we need to audit. A year later, the bank should cover at least current expenses from income and begin to generate income for investors who purchased tokens.
- What is an ICO?
ICO is a modern way of financing digital projects and technological solutions. This is cryptocurrency based crowdfunding. Investors do not buy bank shares, but digital tokens, which are a smart contract that spells out the necessary obligations. An ICO will allow you to obtain licenses, undergo an audit, hire employees, develop or buy the necessary technologies, conduct an advertising campaign and work out the first year and a half before reaching operating profit.
- Why exactly ICO? Why doesn't traditional crowdfunding work?
We are a digital bank and focus on digital solutions. Unlike traditional crowdfunding, which includes the commission of the platform, ICOs are cheaper: which means that more funds remain for developers.
But the main thing is the availability of smart contracts. In the usual crowdfunding, the interaction of the baker and the recipient of money is one-time: he contributed money - he received the goods, the product. A smart contract ensures ongoing cooperation: acquired Polybius tokens represent a digital obligation in the form of a smart contract for the payment of dividends to their owners.
At the same time, the token itself has its own value. Roughly speaking, having funded a new type of pencils on Kickstarter, and having bought them for a dollar, in a year you are unlikely to sell them for the same dollar. And certainly not sell for two. And the token can be resold. It can grow in price. It has value in the form of a recorded obligation to receive a share of the bank’s profit (dividends). And it’s more convenient to manage. Each person has a paper contract with a bank at home, which you do not use in practice and are hardly even read. And the Polybius token will be stored on the Ethereum blockchain. No one will fake or destroy him. In this case, you can dispose of it completely remotely.
- How can investors make money on this? How much money do I need to make money on this?
We make a bank for people, so the minimum cost of entry is only $ 10, this is the cost of one token. At times, people sometimes spend no less on various digital subscriptions. A couple of paid services per month - and 10 bucks are already running in. Even a beer to go and drink in Tallinn in the evening after work will cost no less. Moreover, the value of the token is much higher: it will not expire in a year, and will have value as long as the Polybius Bank project exists and is functioning. And as the bank grows, both token profitability and the cost at which it can be resold will grow. Thus, this is a pure investment: you invest in it once, and then it works for you. We will allocate 20% of the bank’s profit for dividends on tokens, which will be distributed depending on the deposit between all investors who participated in the ICO.
- On the first day of the ICO, tokens will be sold with a bonus of 25% from above, over the next four weeks, bonuses will gradually decrease.
- If you are afraid to skip the first day of the ICO and want to reserve tokens with the maximum bonus, please contact us by mail info@polybius.io
Each of our investors can create their own bank account and get their own digital ID.
ICO kicks off this spring. The exact date will be announced soon. In order not to miss this event, and manage to purchase tokens in the first weeks, while there are bonuses, subscribe to the newsletter with a notification on the site polybius.io