Dear SpaceBTC team,

We live just a great time and have exceptional possibility to influence humanity future – Blockchain is the key to unlock potential. I see exchange business as a very important one despite its short/middle perspective as a business. But now it is enter point to start using crypto-based products and leave restricted fiat world.

There is understanding of “SpaceBTC” plans to enter Europe and rocketing Asia region. Being a part of Ukrainian community I would like to invite and welcome you on our local market too – it is more than a good time to go ahead with exchange service in Ukraine. Please take the invitation as a basis to proceed with our dialog just in frames of your strategic plans: all the information provided below can be extrapolated into other markets’ rollouts.

There are several projects in the area of crypto-fiat exchanges, but there is a lack of activity from their side. To answer “why?” we should provide market analysis and look through the mix of liquidity, compliance background, marketing activity (and appropriate budgets), security/team and UI/UX. BTC adoption is dramatically growing all over the world and Ukraine in particular thus there is a definite need to provide Ukrainian customers with high-quality and cost efficient exchange tool. And it is about a right mix (I’ve just mentioned above) which is absent in our local market for the moment.

Secondly, I would propose to see Ukrainian branch launch not just as spreading exchange activity but set upping a strategic partner for the business which is going to enter Ukrainian market. I had conversations with Eric Rosenthal – they are going to enter EE and CIS markets in a very aggressive way. There is a lack of infrastructure thus they tend to create its own liquidity area through third parties. And they were just happy if there would be a strong local player which could become “one window” solution over a certain area (e.g. EE&CIS) for such business as “Abra” does (and many others will catch the wave). Ukraine only has USD 5 bln remittance inbound route. It is a big piece of pie, is not it? “SpaceBTC” can become a strategic partner and get win-win cooperation with such a well-known blockchain based company (nice “chit” in case of investment search if it is a part of the strategy). “SpaceBTC” is European company – it costs a lot! The next area to use exchange platform – to provide mechanism to get payment from Ukrainian customers in favor of catalog and distance selling businesses from abroad (with near instant crossborder payments). In this case we will have a ready to use mechanics which will include as Ukrainian part, as EU (Poland, Germany, GB etc.), as Asia and it will be our competitive advantage.

To proceed with project development we need to work out the plan we will follow (or there is a one already?). After that we should develop resources map, set timelines and fix responsible persons for each task – of course, main majority of the whole pool of tasks will be put into my to-do-list as project leader. Please find a preliminary plan below (feel free to complete it according to your vision):

1. provide SWOT analyses of the project (taking into consideration international nature of the company),

2. develop/adapt business-processes map,

3. provide market analyses: competitors, fee policy, volume, payment options,

4. provide infrastructure analyses: payment options, providers/processors/aggregators, fee policy, terms to complete transaction (cash in/out), integration, support,

5. fix payment partners pool and get agreements signed,

6. develop marketing plan (extremely important!!!),

please note, that local community should be used as main marketing tool during initial rollout stage. Direct contact is extremely useful as for creating user-friendly business face (to position ourselves as a part of the same community but not as an outside business) as for getting feedback from our target audience to improve our model and day-by-day operational activity. There is a certain need in Communication Leader but the proposition is to combine its duties with CEO responsibility area not just to optimize the budget but to be inside of the dialog to get highest efficiency communicating with no intermediary. Keeping top-management positions I did my best to be “in field” because it was just great way to have swot-analyses on a permanent day-by-day basis;

7. develop PL (3 months, 6 months, 1 year),

8. choose legal firm; there are several firms which are targeting into fintech area: e.g. “Axon Partners” we have contacted several times already regarding “Nova Poshta” international remittance service development (please follow the link https://www.slideshare.net/gnosteek/novaya-pochta-letter20042016) – or “Juscutum”, “lexnet.io”, “Integrites”, “Backer Tilly”, which has great professionals within payment area (I have met with its representative on “Payoneer” conference here in Kyiv recently); legal partner is a crucial part of backoffice infrastructure!

9. provide legislative analyses of an operational activity – develop compliance basis: fixing legislative field with appropriate law base (instructions of National Bank, instructions and comments from Tax Administration, lawbook), scheme of interaction with state bodies, customers, partners including appropriate documents (e.g. service agreement with customers, which the team has already but it should be localized);

10. provide legislative and financial/accounting analyses both together regarding type of legal entity to launch: here we should fix the scheme of investment and profits payouts (dividends) taking into consideration local taxation system and its rules, offshore legislation issues (if your team is going to use it) in context of Ukraine; also we should fix profit center in a certain company/jurisdiction (e.g. UA-company has direct agreement with offshore/UK company regarding trading platform rent; according to it UA-company will redirect all/80%/50% of the profits as service fee according to the contract – optimization of the taxable basis),

11. choose an accounting firm to keep it as a partner both for consulting and keeping accountancy on outsource basis,

12. provide accounting analyses regarding exchange activity, develop financial resources flow scheme,

13. register the company,

14. choose the bank taking into consideration cost/fees and speed of transactions factors as key ones in line with mother-company origin/jurisdiction as soon as we should pay attention to correspondent bank e.g. within Poland (as 100% Eastern Europe leader) or any other country to make payments both cost and speed efficient,

15. open an account,

16. develop UA-zone:

prepare texts translation,

complete all integrations (internal, external),

provide subdomain trading test launch (QA),

provide subdomain launch.

To make a right assumption regarding the term of launch we should put all our project data together. For instance “develop/adapt business-processes map” – assumption is that there is a ready to use doc, which reflects business-processes flow within proposed service; if you have the one we do not need put additional weeks to complete the task. “develop marketing plan” – there can be several attitudes (thus different terms) which depend on the strategy we will chose: e.g. to get into the market and be presented with no aggressive targets (during first year) means we need no third party (set up correct SEO and launch GA-campaign by our own) and additional term to work out marketing plan with additional tools, channels, TA; in case of aggressive marketing we need additional tasks to be fulfilled: complete research on digital marketing services market, to provide tender etc. – it is about additional term. Are we going to use investments or to follow reinvesting strategy, which will affect our milestones too? Are we going to launch only exchange line or will attract remittance market clients too? Partners’ side: there will be plenty of partners (in payment, law company, accounting firm, bank), which have their own speed of interaction and the way of communication. From my experience it varies very much. As well as integration processes take totally different terms from one IT-team to another (and we will have plenty of integrations). I had clients with just rock-stars IT-specialists who were able to complete their part of work less than in a week, but some clients were less efficient (while being perspective thus we were forced to craft our Zen and wait up to a month). That is why we should provide analyses of the payment partners market to understand supply part in terms of integration term too before we make prediction regarding the term of this concrete task.

Please note that there is no aim to avoid setting terms of the project – it must be done with no doubt. The thing is we need go deep into the project to make our term predictions as correct as it is possible to avoid cash-flow breaks and resources bottlenecks in the nearest future.

We definitely have a big advantage developing international platform which connects EU, Asia and such countries like Ukraine and others from CIS and Eastern Europe – each of these regions has its own specifics which should be investigated once and put into a single product. Ukraine is out of EU and we should be creative in terms of mechanics, legislation and taxation to connect both EU and UA part in the most appropriate way. The biggest competitive advantage for any exchange is its liquidity, isn’t it? And some companies have liquidity even as a product – “Blockstream”’s “Liquid”. Thus UA-EU connection will provide local market with just great spread, which will bring us loyal customers with no additional marketing budgets (and will keep efficient ROI).

Setting up the branch office and bank accounts in Ukraine – is a technic question just after fixing the scheme of all business processes, which take into consideration legislation and taxation issues of international nature of the project. To launch local LLC – it is a question of several days. btw I have two family companies which can be used by us just after reregistering. But we need local expertise regarding a type of the company we should use. Will it be just simple Ukrainian LLC or should we use more sophisticated JSC or include foreign citizens into the list of owners (to get additional indirect defense from local state bodies). Thus we need to complete legislation and taxation analyses – it is my part of job to find consultants and complete memorandum on the issues mentioned above.

There could be a need to find alternative way of launching UAH-BTC pair with no legal entity within Ukraine. Ukraine is not Somali (for the moment) and the solution should be found to minimize risks and create scalable business; moreover we should have direct contact and be a part of e.g. EU-Ukrainian business organizations, Ukrainian Chamber of Commerce and Industry, other professional associations, charity and educational initiatives – to be ready “to shout too loud” and make state bodies to think more than twice before doing something out of the law. Such steps must be put into our strategy and action plan as soon as it is about building basis for a long-term innovative project but not a try (I hope so).

At the same time we should take into consideration the fact that activity with no legal entity is a double-edged sword: cutting risks we also will cut our opportunities in a meaning of potential clients audience because of higher operational expenses=higher fees (with competitors’ background “1%+UAH 5 for deposit transaction and 0-fee for withdrawal in case of 3D-secure cards” e.g. “kuna.io” provides through its partner “UAPAY”), possibly longer transaction period due to international type of transaction. At the same time we should pay attention to FX-rate factor as soon as we will have double-exchange operation to go through deposit-withdraw cycle.

To keep international infrastructure projects is a challenging activity but it makes the company more stable in terms of diversification while developing niche market solutions (despite its scale). As I have mentioned previously, I see our dialog not as “let’s launch UA exchange” (short-term burst, which is a component) but “let’s develop the team and its competence” (long-term cooperation, which is a system). The competence brings us possibility to be on the edge and create new products/services while local expertise makes us efficient because we know the market we have won previously. Please note that it is very important to be ready to scale the product with a minimum resources to use. And it is about the current situation we have.

There is a ready to use exchange platform and business – resources have been invested already and are looking forward to being claimed and getting additional ROI. To do this there should be universal rollout mechanics which is the same from one launch to another – we just follow it step by step using our previous experience and workouts. It brings us cost efficiency! It provides additional advantages e.g. through liquidity (for customers) and goodwill (for partners/investors) growth. It brings us strict understanding of resources needs (time, people and finance) and ways to optimize it. E.g. the only difference in backend is payment options pool. Thus we need no local CTO till integration process will start (and I have enough time to select the one by my own). That’s it. Moreover to pass integration process is a question of low-mid skills and obviously takes low time resource (especially for the team or just a single representative who has passed the process several times already and can be paid via transfer prices). Moreover #2 – I can manage the process as soon as I’ve passed multiple integrations and success tests (QA) with self-developed WMS while being CEO of fulfillment service provider.

Incorporation and other prelaunch tasks should be fulfilled simultaneously as soon as there is going to be several third parties companies we will communicate with and e.g. I am more than able to search for a consulting partner while selecting accounting firm, to negotiate with payment partners and proceed with registration procedures. And it is not about to be unfocused but to be efficient and multitask which is a critical skill for a successful top-manager. That is why I find it possible to develop several directions within our cooperation – to make your investments cost-efficient and profitable. And it is not only about profits of nowadays but growing capitalization and investment/cooperation attraction, which becomes crucial on such a dynamic market we both are eager to develop and win. As soon as we get results out of business comfort zone we will approve the consistency and strength of the team making it attractive and putting it on the position of “we choose” but not “we are chosen”.

Exchange business is extremely important for the whole community – it is the connection between fiat and crypto. Exchange business is extremely profitable because of being that connection despite the margin of 0.1-0.5%. And turnover is growing worldwide and in Ukraine in particular – https://coin.dance/volume/localbitcoins/UAH. The growth is stable. There are several drivers and remittance is one of the biggest one. I would suggest it as one of key factors to use in exchange business strategy development. Of course, macroeconomics indexes are important also as well as country political, investment and legislation climate. E.g. I fully support your initiatives within Asia and China in particular despite its regulations issues which I see as totally artificial created to control outbound investments route but not to kill crypto. India is a very perspective market also and I am looking forward to hearing the verdict of India Government conclusion regarding crypto-assets on the 20th of April – there gonna be no miracle but it will bring more understanding and clarity for sure thus will activate the market as within the next country proven example. Japan has just put the rules on a local market since April the 1st – no surprise: JPY is #1 currency in trading volume for the last 30 days. Also there are underestimated countries like Iran (with more than !!! 50 mln Internet users comparing to 20 mln in Ukraine), underestimated currencies like XMR, ZEC (even with hype features) or even situational derivative nature assets like new-born BCC and BCU – it provides us with customers and income/profits from sources which are out of other businesses comfort zone for the moment. Of course, the team must be brave and creative.

Last but not least: we are a part of a very dynamic business area and I strongly believe that as “Abra”’s business, as exchange business will follow conservative bricks’n’mortar representatives for 5-10 years and will be gone. People will learn BTC as a tool and ecosystem will provide customers with appropriate tools, business will start using BTC as usual payment method. It means that we should collect the competency (tech, marketing, compliance etc) and goodwill to convert it into new products – the result of the global vision, which is able to create demand. We but not customers understand the power of the tech due to our competence thus we are in charge to craft alternative financial reality. I will be more than happy to share my developments in this direction too e.g. decentralized remittance project based on true p2p tech like OpenBazar uses (and with free market FX-factor model).

Dear colleagues, I will take your proposition to enter the team as a real great opportunity to convert all my background, experience and passion into real life projects within the industry I love so mush and believe in so much. I make the focus on such things because of a deep conviction that there is success if there are love and passion in things we do. It is so fucking rare coincidence and thanks God I have the one to share and invest!

Let’s rock!

Sincerely,

Andrew Zaichenko.

linkedin: https://www.linkedin.com/in/gnosteek mob: +380 67 218 81 89 skype: pi.crew

Kyiv,

10th of April, 2017