Salvador, BlackRock, Worldcoin: Interview with Cryptio, one of the leaders in crypto auditing

The Big Whale: At a recent conference in London, you explained that Cryptio was a kind of "crypto back office" for any business. Could you clarify what you mean by that?

Cryptio is a data platform for all things accounting, compliance and auditing related to cryptos. We help our corporate clients manage all their crypto operations, and their needs are growing all the time as regulation takes hold.

What type of companies do you work with?

We work with 3 types of companies.

The first type is crypto companies. These are historically our first customers. We started working with these players back in 2018, and today we work with companies like Uniswap, ConsenSys, Worldcoin, and most of the major blockchain foundations.

The second type of customer is states and public authorities. We currently have two major contracts with governments. One of our two contracts is with the government of El Salvador. We manage the accounting and auditing for Chivo, which is the digital wallet backed by the Salvadoran government.

The 3rd type of customer corresponds to what we call regulated crypto companies and products, i.e. banks, exchange platforms and stablecoin issuers.

Who are Cryptio's biggest customers?

The biggest contracts, which are also the most complex, are clearly those with crypto players because there are so many transactions to track. The volumes are colossal.

To give you an idea, when we work with Metamask, which is ConsenSys' digital wallet, we have to track absolutely every transaction and that represents several hundred million operations a year.

Our role is to give ConsenSys the most accurate view of the activity of its digital wallet. This is a mammoth task that is increasingly demanded by regulators. This is what the US stock market regulator (SEC) recently asked ConsenSys to do.

What exactly did the SEC ask for?

All the transaction history on the blockchain. It's very interesting to work with companies like ConsenSys because they are paving a path that thousands of other crypto native or traditional companies will follow.

How do you work with data?

We work in two different ways.

Or we start from almost zero and we have to retrieve all the data that could have an impact on the company's accounts. We're essentially talking about onchain data. In fact, there's a kind of paradox about onchain data because many people think that because this data is public, it's easy to use, when in fact it's quite the opposite.

If we take the case of Metamask, collecting and compiling the data is complicated because there is a lot of it and on several blockchains. For Metamask, we're not far from 10 blockchains, and on top of that we have to manage the different transactions between those that are manual and those carried out via smart contracts.

So we have to compile this data and make it understandable for the regulator and the traditional auditors (PWC, KPMG, EY, Deloitte, Mazars, etc), who will certify the accounts. To do all this, we run our own nodes on the blockchains to access the data. We are also able to link this data to that of the Exchanges and other market players.

There is also the hypothesis that we have a single source of reliable information and in these cases we will use modules that we will connect to this source of information. This is obviously faster and is what we do with certain companies on accounting or regulation such as MiCA in Europe.

What do you do to compile all this data on the blockchain?

We have developed a tool for this: our "indexers" retrieve data on blockchains and reconcile them to have a clean database at the end.

Today, most tools like Etherscan give a good overview of things on blockchain. They give us 95% of the flows, but there's always 5% missing, and it's these 5% that we're able to provide in addition. This has a lot of value for auditors and companies.

You can trace 100% of transactions?

Our indexers are themselves audited to ensure that our data is the right one. In fact, what's very interesting about blockchain is that it's not easy to have all the data, but on the other hand it goes very quickly to check whether it's the right data.

You can easily trace the data back and using 2 or 3 nodes you can make sure that everything is correct. We do this at scale at Cryptio. You know very quickly whether or not you have the right data.

What's the most complicated thing for Cryptio?

It's getting all the data back. The most important thing for a company's regulators and auditors is to be certain that they have all the information on all the transactions.

Would this systemhave prevented FTX and other scandals?

Yes, I'm totally convinced. After that, we shouldn't consider it a miracle solution. It's a very interesting technology, but we still lack the tools to use it to best effect. There's a real technological gap to be filled before blockchain is truly a layer that everyone can use with confidence.

How is Cryptio doing? You've raised $10 million in 2022. Is profitability within reach?

We're not profitable yet, and that's not our short-term strategy. Right now, our objective is to continue to grow - we have 65 people - in a very promising market, and to do that we need money and we need to invest. Profitability is a very good goal, but it can also sometimes distract you from something that is at least as important: growth.

With the acceleration of regulation, we are clearly seeing the crypto accounting and compliance market grow. More and more companies need these services. We will therefore be raising again in the short term and we have no doubt that we will succeed in doing so and consolidate our leading position ahead of certain American and Israeli players.

Where does the competition come in? Is it a question of price or products?

There are several levels of analysis. When it's for a crypto start-up, price is clearly a key element because many of them are still small and don't have the budgets or even the regulatory constraints of some of the big companies.

For these crypto companies, there is real competition on price, but we've decided not to get involved in this competition that keeps pulling prices down. We believe that the most important thing is to offer the best product.

In contrast, there is the market for traditional companies where price is not the issue. For these companies, which are highly exposed from a regulatory point of view, either because they are listed or because their business is highly regulated, the price of failing to meet their regulatory obligations is much higher than the price of our services. For these companies, the question doesn't arise and it's mainly with them that we work.

How many clients do you have?

Just over 500 clients in 25 countries. Our biggest market is the United States. Our historic office is in Paris and our biggest office is in London. We also have an office in New York. Asia is one of the markets we're looking at, as is South America where we have more and more clients like Brazil, Colombia and El Salvador.

El Salvador is known for being the first country to make bitcoin a legal currency. That was three years ago, in September 2021. You work with the Salvadoran government. What exactly do you do with them?

In El Salvador, the government launched its own bitcoin wallet, the Chivo wallet, three years ago. It's not a compulsory wallet, but the government is pushing for Salvadorans and businesses to use it. Our role is to track wallet activity and report on it. This represents tens of millions of transactions per month.

There is a lot of debate about the use of bitcoin in El Salvador. You know Chivo's business very well. Could you say that it has been a success?

I can't go into all the details, but overall, things are developing well in El Salvador. Whether it's the number of addresses or transaction volumes, everything is on the up. The government is very proactive in this area.

You monitor Chivo's activities. Are you doing the same on the activities of the government, which is developing a whole programme of bitcoin-backed sovereign bonds?

I can't comment on that.

So you work with crypto start-ups, governments and also more traditional companies. We've recently seen players like BlackRock accelerate on the subject. What interests them most about crypto?

We've been waiting a long time for the traditional players to arrive, so it's great that they're finally here! We're working with some of these new traditional players, like Bancolombia in Colombia. They're in the process of developing their own stablecoin peso and other products for their customers.

We're also working with US ETF providers and there's a real sense of change in the US. This move towards more regulation validates our thesis that the crypto sector will benefit from regulation.

The other activity where we see a lot of traction is on the payments side. We're obviously talking about banks, but also payment giants that are creating new payment channels via blockchain.

These players have realised that blockchains are very effective new payment rails and they're starting to use them. The phenomenon is all the more important because there are now very efficient stablecoins.

It's also interesting to see financial giants moving from in-house projects to live products. It's like a marathon: you pass milestone after milestone. We're in the process of crossing a new one.

But I don't want to be overly optimistic either, because we've been around for six years with Cryptio, and every year we say that this is the right year for institutionalisation, and that's not yet the case! So let's remain cautious.

When you're BlackRock, Goldman Sachs or BNP Paribas, what interests you in crypto?

Many things, but fundamentally what they're looking for is profitability, which is normal, these are companies that want to make money. In fact, the launch of the Spot ETFs is the best example of this, even if the strong competition prevents them from making much in the way of margins.

The interesting thing about BlackRock and the other financial giants is that they have understood that they need to start with Bitcoin ETFs, which are simple-to-understand products for the general public, and gradually move towards more complex, niche crypto products that are also more profitable, such as with tokenisation.

One of these very interesting products is their Buidl fund, which is a tokenised money fund created on Ethereum. It's a real niche product dedicated to companies that have a lot of stablecoins and would like to access highly regulated and secure money funds.

You have a presence just about everywhere on the planet. What is the most dynamic region for you today?

For our business, I would clearly say South America, without hesitation. That's really where things are moving fast, there are lots of opportunities because blockchain doesn't replace anything, it creates things.