Pierre Noizat (Paymium): "I have major doubts about Binance's model".
Founder of one of the world's leading crypto platforms, Pierre Noizat is a key figure in the ecosystem. In his view, the market is set to take off again, even if the fall of FTX has not completely cleaned up the sector...
The Big Whale: After a scandal-ridden 2022, there seems to be a lull. Is that your view?
Pierre Noizat: Very clearly. The start of 2023 is much better than the end of the previous year (laughter) and that's being felt on the markets.
I'm rather optimistic for the coming months. I expect the markets to pick up in the second half of the year, especially if past performance of the bitcoin price is anything to go by. On Paymium's side, we're preparing for that in any case!
The year 2022 has been one of the toughest in the short history of the crypto industry. How is Paymium doing?
Paymium was founded in 2011, so we've already been through several crises and market collapses, this is nothing new for us. We're ready for this kind of shock. While most companies in the sector have been impacted and have reduced their workforce, we have continued to invest.
Where have you invested?
We have recruited people, and we have also worked on the Paymium platform, especially the back office, i.e. the infrastructure, as well as the user interface.
These periods of calm on the markets are the best times to improve the product. The aim is for it to benefit us when the markets pick up again.
Is Paymium profitable?
The company is on the path to profitability thanks to trading and digital asset custody fees. We have a customer acquisition strategy that should enable us to be profitable by 2024.
What are your volumes?
We do between €50 and €100 million in volumes per year. Our ambition is to quickly reach between 400 and 500 million.
If Paymium is not profitable, how have you managed to generate cash?
As soon as we launched in 2011, we invested some of the funds we raised (pre-seed) in Bitcoin. At the time, it was worth less than €10.
We never made the mistake of selling it when the market was falling. Then we raised another round of funding in 2015 (seed).
How did you experience the FTX collapse?
We saw it as a validation of our model. We've always said that a platform shouldn't be able to use its customers' money. What's more, FTX was an offshore platform (FTX was based in the Bahamas, editor's note) and therefore extremely opaque for its customers.
For us, the FTX episode marks the end of the big offshore platforms. They are a thing of the past. What will make the system resilient is the proliferation of local and regulated players, such as Paymium.
After hiring heavily in 2020-2021, most of your competitors are laying off some of their staff. How do you view this situation?
Every time the markets rise, it's the same thing: start-ups raise funds, lots of funds, because everyone is euphoric. Except that investors' expectations are also rising, so start-ups are hiring a lot to accelerate their growth. But few of them anticipate a market downturn, which always happens in the end. Especially in the crypto world. As a result, start-ups have to scale back and there's damage.
This is typically the situation we want to avoid at Paymium. Our workforce is growing slowly and gradually, but steadily. I have a "Warren Buffett" strategy if I may say so.
Some of your shareholders are investment funds. Do they let you have a hand in the strategy?
We work with funds that understand our business well. Newfund is a very successful French fund. This gives them the opportunity to support companies like us where the investment horizon is over the long term.
Many Web3 players point to the immaturity of the market. Is this your point of view?
Many still believe, wrongly, that cryptos are about making money quickly, but we're talking about something much more important. Cryptos and the whole universe behind them represent a profound transformation that will take at least 10 or 20 years, if not more. We're only halfway through, and being in crypto in 2023 still means being early adopters.
Do you still hold the majority of Paymium's capital?
I hold 26% of the capital in a personal capacity.
Have you already received any takeover offers for Paymium?
Yes, we've had several discussions in recent years, but they never came to anything, due to a lack of agreement on the valuation of the company.
According to our information, Square and its boss Jack Dorsey, who is also the creator of Twitter, have been interested in Paymium... Do you confirm this?
Is a new fundraising planned for 2023 or 2024?
We are thinking about a Series A, but we shouldn't rush into anything. The most important thing for us is that future investors are aligned with our vision.
You are historically a bitcoin exchange, but not just that. What are your other activities?
In addition to our historical activity, we also broker other cryptos and support merchants who wish to accept payments in bitcoins.
Do you have any other projects?
This year, we will be adding ether and other ERC-20 tokens to our platform, but we don't plan to add 300. We have a responsibility to our users, so we're being selective.
So you're excluding all of Ethereum's competitors?
Some protocols like Solana are interesting, but their ecosystems aren't mature enough for us to offer them to our customers. It's the same with Tezos.
Paymium has its own solution for securing assets. Why not use Ledger?
Ledger is obviously interesting, but we don't need a tool that, in my opinion, is more for the general public. And it should also be remembered that Ledger is a kind of black box that creates a dependency on a third-party player.
The collapse of FTX doesn't really argue in favour of keeping cryptos on exchange platforms...
We have cybersecurity and accounting audits. These audits are validated every year by an auditor. This aspect is often forgotten, but it's what ensures the solvency of the company. I wouldn't put a penny on a company that hadn't integrated this kind of procedure.
How many funds do you currently have under management?
We don't publish this figure for competitive reasons.
And the number of customers?
We have around 250,000 customers, 25,000 of whom are active, i.e. people who have carried out transactions at least once a month. But many people come to us to invest and don't touch us again for years. Around a hundred companies, including professional traders, also use Paymium.
You have long been adamant that only bitcoin had value, but we hear you saying more and more good things about Ethereum. Can we talk about a coming out?
I consider that Ethereum is now sufficiently different from Bitcoin to offer something interesting since its change of consensus algorithm (read our feature The Merge). Bitcoin and Ethereum have become complementary. On the other hand, I still have the same reservations about Ethereum's centralisation and suggest that beginners start with Bitcoin.
Have you not missed opportunities by being so conservative?
It's true that we have preferred security to growth, but we have done so in the interests of customers. We are totally comfortable with this approach.
How do you view your ICO (initial coin offering) carried out in 2018?
We made this choice defensively because we risked being much less well funded than our competitors, who were riding the wave at full speed. There was a clear risk of being invisible. The operation turned out to be neutral for us: the ICO cost us almost as much as it brought in.
The fact remains that we have investors (in the BCIO token, editor's note) and we don't want to disappoint them. Little by little, we're going to bring the use of the token back into the Paymium experience. The aim is for them to recover their initial stake, or even offer them added value.
You are currently registered as a PSAN. Will you be applying for authorisation?
We will be applying for authorisation, but not before it becomes compulsory (2026 for companies that already hold registration, editor's note).
The government recently brought forward the timetable for PSAN authorisation, which caused quite a stir in the ecosystem. Why?
It is much more restrictive, and some players will not pass the bar. The capital requirements, for example, are quite restrictive. It's a shame to impose this obligation on players who already have all their customers' assets in reserve. We have no risk on outstanding customer balances...
Paymium has had problems with the banks. Have things calmed down?
I wouldn't say they've calmed down, but we've managed to adapt. We're now able to change banks easily, but it's not satisfactory. The banks are still too fickle on the subject. We won't make France a leader in cryptos in this context.
Societe Generale does have a crypto subsidiary...
This subsidiary (Forge, ed. note) is not a bank as such. It's a laboratory.
Many people huff and puff that you're one of the biggest French fortunes in bitcoins... Is that true?
I'd be quite unable to confirm or deny it, as I don't know the fortunes of others (laughs). What I can say is that I have a modest lifestyle. I'm not in it for the money, but for what cryptos represent. Contrary to what some influencers claim, cryptos are not a get-rich-quick environment.
Have you ever sold a bit of your bitcoins?
When I do sell some, it's in dribs and drabs to meet a one-off euro requirement. But my savings are in bitcoins.
What do you think of influencers?
This isn't really my subject, but we have a problem with all those who take money from projects and leave small investors with losses once the token price has devalued. Of course, some of them do a useful job of educating people. But many promote projects that are totally hollow, or even simply scams...
Xavier Niel, via his Kima Ventures fund, has a stake in Paymium. Do you have any contact with him?
We had some when we raised funds in 2015 (the only one, ed. note). Since then, things have been more complicated. He has a lot of holdings and I don't think he has time to look after everyone!
Did he give you his opinion on bitcoin? He's very secretive on the subject...
I think he has a real personal interest in cryptos. He clearly understands the interest of this technology. After that he's also one of the big beneficiaries of the current monetary policy that the crypto world has railed against, so he's a bit caught in the crossfire. That's why he doesn't have a clear position on the subject. Maybe one day he'll regain his freedom of speech, but for the moment I think he prefers to keep a low profile.
How did you experience the lightning emergence of Binance?
Crypto platforms that grow too fast are suspect. That was the case for FTX, and it's also the case for Binance. I fear that they have taken shortcuts when it comes to the fight against money laundering. When a platform attracts so much money, it's often money that isn't in the traditional channels and needs to find a way out.
Binance's beginnings (in 2017, ed. note) created what I call a "regulatory debt". They risk being caught up in this somewhat dubious past. This could cause them problems in certain jurisdictions, particularly in the United States, where they are particularly sensitive on these issues.
Do you have any particular insights?
No, but I have major doubts about Binance's model. I know what I'm talking about, having run a platform for over 10 years.
Was the French regulator too naive in granting it PSAN registration?
Yes, it's quite incomprehensible especially as the profits don't stay in France. What's more, we don't know where they go...
And what do you think of the American Coinbase, which launched almost at the same time as you did? They are now quoted on the stock market and worth nearly $15 billion...
Unlike Paymium, Coinbase has been lucky enough to be connected to the American banking network (ACH, ed. note) since 2013-2014 and without interruption. It's a bit like being authorised to connect to the European SEPA network. As you know, that hasn't been the case...
The other big difference is that Coinbase has been able to benefit from private funding in amounts that are difficult, if not impossible, to find in Europe ($500 million in total, editor's note). From that point of view, the Americans have clearly understood that this is a question of sovereignty. In France, and in Europe as a whole, this is an issue that escapes the attention of most elected representatives. That's a shame. Paymium was no riskier than start-ups like Coinbase or Uber...