Alexander Tkachenko, CEO and Founder at VNX, a digital asset investment platform joins us in this casual chat where he shares a few thoughts on the evolving fintech landscape in Luxembourg while diving into a few future plans for the VNX platform.
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Can you tell us a little about yourself Alexander and the story behind VNX? What are some of the short to long term goals in mind for VNX?
I was always fascinated by the entrepreneurial spirit and passionate about innovation, and this has defined my professional career. In 1997 I arrived in Luxembourg while working in marketing for a Japanese electronics company and since that time I have stayed here to live and work. In 2014 I set up an early-stage VC fund – 2be.lu, which now has a portfolio of 17 companies and EUR 14 million under management.
2be.lu venture fund was literally the launch pad for VNX. Since the day of establishment of the fund I’ve been looking for the tools to provide liquidity to VC, which is recognized to be a notoriously illiquid asset class, and make this asset class more accessible for investors. The issue of long investment period and illiquid nature of VC makes it difficult for smaller funds to attract smaller investors. The emergence of promising blockchain technology led me to the idea that tokenization of traditional assets is exactly that instrument that can tackle inherent problems. I launched VNX in 2018 and within a year the platform went live. Today VNX is one of the few operating digital asset investment platforms in Europe. And our ambition and goal is to become the number one in this space.
How are tokenization platforms evolving today? What are some of the ways in which you are seeing trends change in this space worldwide?
At the very beginning we saw a lot of discussions about tokenization rather than the real cases. A lot of projects sprung up in this space. Time sorts things out so today we see a handful of working platforms. In general, the market has made a transition from vision and evangelism to practical implementation and operation. The industry is still shaping – the evolution is happening in regulation, at least as we can see it in Europe. For example, the EU Commission has recently released the draft proposal on a framework for crypto assets – Europe’s Markets in Crypto-Assets (MiCA) and an initiative introducing a pilot regime for Distributed Ledger Technology (DLT) market infrastructures. Proposed legislation treats crypto such as cryptocurrencies, security tokens and stablecoins the same as any other regulated financial instrument under MiFID.
In what ways have you seen Blockchain impact global finance trade and global fintech developments?
I think that Blockchain as a technology is still in a very early phase of development to make any significant impact on global finance. The real impact can be seen and assessed within the next 10 years.
As for the blockchain’s impact on the global fintech – it’s significant. It is starting to reshape and change how players view financial products distributed. It could become the backbone of the financial industry, offering countless opportunities. Not surprisingly, a lot of large institutional players have already turned their attention to this technology. Some have already launched pilots or created teams focused on blockchain adoption. Again, as we discussed earlier, the blockchain technology is attracting the attention of regulators and lawmakers, meaning that it’s gaining weight.
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We’d love to hear your thoughts on the fintech startup marketplace in Luxembourg, can you talk about some of the game-changing innovations / fintech startups you’ve come across?
I must say that Luxembourg’s Government is doing a formidable job in supporting innovation and developing a strong ecosystem for fintech. Over the past 20 years Luxembourg has been actively attracting talent, fostering innovation and opening its ecosystem to thousands of experienced professionals from across the globe who are eager to launch their own fintech startups. The centerpiece of this ecosystem is LHoFT (Luxembourg House of Financial Technology), a dedicated hub for financial technology. It brings together financial institutions, fintech innovators and public officials, to help drive forward the development of products that meet specific industry needs.
Ecosystem players actively facilitate a dialogue between traditional financial institutions and fintech startups to exchange ideas and stimulate collaboration. For example, Luxembourg financial industry associations ALFI (the Association of the Luxembourg Fund Industry), ABBL (the Luxembourg Bankers’ Association) have established fintech clusters and working groups for various fintech companies.
Among the most promising game-changing fintechs in Luxembourg, I would mention Bitstamp. It was a pioneer in the regulated crypto exchange business in Europe. It is a good example of operating crypto businesses in Luxembourg which has moved the whole industry forward.
Can you share a few thoughts on the evolution of blockchain based apps in fintech, how do you see these platforms transforming now when compared to a few years ago?
Speaking of the evolution of blockchain platforms I’d highlight two major trends. One is the relative decline of Security Token Offering (STO) projects that were expected to be “the next big thing” a few years ago but stalled mainly due to regulatory concerns. Another trend is the raise of DeFi projects that we can observe right now.
As global fintech trends change and the market shifts due to business environments (and also Covid-19), what are your comments on the state of fintech in 2021 and beyond?
Covid-19 became a catalyst for digital transformation in almost all spheres. I think that 2020-2021 will be a very challenging time for those who operate in fintech. But the crisis also creates opportunities. Social distancing and remote work are becoming a new normal; most businesses, including large financial institutions, won’t be able to effectively operate without the adoption of new technologies and innovations. The future is in fintech and, for sure, the fintech industry will continue to grow.
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Before we wrap up, what are the biggest learnings / tips you’d share with fintech innovators and founders?
We are living through a very difficult period, so first – the cash is the King, so preserve it. Second – the fundraising process will take three times longer than in the normal days. It will be a fight for a smaller bandwidth of attention, smaller pot of money so it will be harder to get funding. And the third – boldness in decision making. The time of crisis requires it.
VNX is a digital asset investment platform founded in Luxembourg in 2018. VNX platform allows tokenization of traditional assets and access of investors to a new asset class. Tokenization adds new features to traditional assets (fractional ownership, cross border reach) with a significant reduction of the intermediary costs. VNX provides services to the issuers in structuring and tokenization of the assets and services to the investors allowing access, purchase and secure storage of the digital assets.
Alexander Tkachenko is a serial entrepreneur and business angel. He is a Managing Partner of 2be.lu VC fund; CEO and founder of VNX – a digital asset investment platform; co-chair of VC club at LPEA (Luxembourg’s PE and VC association) and Executive Council member at Digital Banking and Fintech Cluster in Luxembourg’s Banks Association (ABBL).
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