Elena Tonoyan, LocalBitcoins COO: Bitcoin Provides Financial Inclusion and Will Grow


Joining me is Elena Tonoyan, she is the Chief Operating Officer at LocalBitcoins, the peer to peer bitcoin exchange that was founded as early as in 2012. We are looking into the history of LocalBitcoins, it’s growth, and optimistic outlook for the years to come. You will also learn about the values and usecases of Bitcoin that Elena finds important, because they solve real problems and have a positive impact on peoples lives.

Our topics:

  • history and growth of LocalBitcoins
  • financial inclusion esp. for women
  • bitcoin demand in Africa, India, Latin America
  • supporting altcoins
  • fraud in trading
  • integration of the Lightning network
  • the future of Bitcoin
  • Expanding business
  • P2P exchanges vs. centralized exchanges

“Bitcoin provides financial inclusion. It is solving real world problems for many under-banked people across the globe, people who have limited access to a modern economy and empowering women is another big aspect for me. There are unfortunately still countries where women don’t have free access they are not allowed to open bank accounts without permission of, for example, a family member. And Bitcoin is obviously solving that problem. And I’m personally very happy about that.” – Elena Tonoyan

“I’m sure that during the coming years and decades, we will see several booms and busts in Bitcoin. However, what is important and what we believe is that the Bitcoin usage and adoption will continue to increase til unforeseeable future.” – Elena Tonoyan


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Recording Date: July 21, 2020
Location: Online




    Anita Posch [00:04:58] Hello, Elena. Welcome to the show.

    Elena Tonoyan [00:05:00] Hi Anita, thank you for having me.

    Anita Posch [00:05:02] It's great to have you on the Bitcoin & Co. podcast, because at first I want to disclose that LocalBitcoins is at the moment, a sponsor of my podcast show. Thank you very much for that. And I just want to say this interview, I do this interview exactly the way I would do it, if LocalBitcoins would not sponsor my podcast, just to disclose the fact at the beginning.
    So Elena, please tell us it's a little bit about yourself. You are the chief operating officer at LocalBitcoins since when are you doing this? And what are your tasks?

    Elena Tonoyan [00:05:42] Yes. So that is correct. I'm in charge of the operations in LocalBitcoins. And currently it is the biggest team we have in the company a little over 30 people in operations. And to open it up a bit and give you a better understanding, I'll explain how the structure goes and what operations team does we have three sub teams under the team.
    So first is customer support. Then we have dispute resolutions and this dispute resolution team is the team that resolves all the conflicts between traders if those happen to be and these people decide who gets the Bitcoins out of the escrow and then one of the biggest teams is investigations team.
    And under that team, we have currently all the KYC tasks and well about me: I started in LocalBitcoins in January, 2014. And at the time it was a very small company. I actually started from customer support and my tasks were slowly changing as the company grew. And well, currently I'm doing this, mainly in charge of operations.

    Anita Posch [00:06:44] Okay. Great. And how did you get into LocalBitcoins? Into this space. When did you hear about Bitcoin the first time?

    Elena Tonoyan [00:06:54] That's an interesting question because it all happened thanks to LocalBitcoins. Let's just say that my relationship with Bitcoin started exactly with my LocalBitcoins journey. And to be honest, I did not know much about it before year 2014. That is exactly what I joined the company. And, like I mentioned, and when I joined the company, it was a very small company.
    I think we had, four to five people at the time, our two founders, one developer and customer support. I think this was a very special group of people because they were extremely passionate about Bitcoin and some might even say obsessed about it. So it took me some time, I would say a few months to deep dive into that whole new world and become enthusiastic about it myself.
    But I remember that it was very exciting journey for me because all our lunch conversations or after work topics, they were all about Bitcoin. We were picking places to eat, where they were accepting Bitcoins, doing groceries with Bitcoins. If someone went to buy lunch or coffee and we had to pay back each other, we were paying back in Bitcoins.
    If, if there happened to be some new service accepting Bitcoin, everyone went to test it. So, I would say that this enthusiasm and passion about Bitcoin has always been, somewhat infectious in our company. And until this day, because anyone who joins the company is either Bitcoin enthusiast or becomes one shortly after.
    And, I must say that I'm personally very happy that I became part of LocalBitcoins because that's where my Bitcoin journey or so to say started.

    Anita Posch [00:08:28] The company is located in Helsinki. Is Helsinki now a place where more shops and people accept Bitcoin due to LocalBitcoins work.

    Elena Tonoyan [00:08:40] I would like to think so because we try to be active in that area and participate in different meetups. But I would say that in general, it maybe compared to Germany, for example, well Helsinki is a small city and probably there are not so many restaurants and stores that accept Bitcoin, but, we are always pleased to find the ones that do, for example, my local grocery store accepts Bitcoin, a lot of restaurants in the area where we work accept Bitcoins.
    And there are a lot ATM s, I would say. Yes, possibly, we tried to spread the word and be more active in that regard so that people would actually, get into this space and get passionate about it as well. But, I would say generally Finland has a lot of Bitcoin enthusiasts.
    So, I would say that they would, they would find places that accept Bitcoin, even without us.

    Anita Posch [00:09:35] Yeah, but maybe you sowed the seeds with your enthusiasm. So I've met Jeremias Kangas last year at the Satoshi freeathlon. We did this sports event in Switzerland and he was part of the team. And, I just wanted to ask, I think he and his brother founded the company,

    Elena Tonoyan [00:09:56] yeah...
    I was just about to comment on the fact that we were all watching the triathlon that you were participating. And that was very cool and interesting stuff actually.

    Anita Posch [00:10:06] Yeah. It was a lot of fun too. Jeremias and his brother, they are not in the company anymore. Right?

    Elena Tonoyan [00:10:13] Well, they are, the board members, so they are obviously participating in all big decision making processes.

    Anita Posch [00:10:20] Oh, okay. And for you personally, what's the most interesting feature of Bitcoin from its properties.

    Elena Tonoyan [00:10:27] Well, I believe that, the most attractive part of Bitcoin for me, was, and is the fact that, I don't have to depend on traditional economy only. And for me it has, a bit of personal reasons because when I just moved to, Finland, it took me about two months to open a bank account because I wasn't an EU citizen at a time.
    And the amount of people work and bureaucracy was huge. And this is Finland, where we have efficient systems and everything works. I believe it might have been a longer process in some other countries. And with Bitcoin, I have an alternative way to make those transactions. If, if I have a need for it, I obviously understand that in developed countries, we do not see the need for Bitcoin as strongly.
    However, the situation is a lot different in developing countries and, Bitcoin is able to provide solutions for people from exactly those countries. The reason why I am personally so driven by the idea of Bitcoin is because it provides financial inclusion. It is solving real world problems for many under-banked people across the globe, or maybe, people who have limited access to a modern economy and, empowering women who don't have access to this modern economy is another big aspect for me.

    Anita Posch [00:11:37] That's nice that you say that it also empowers women, because I think this is a fact that nobody's talking about. And I think it's very important actually, because, very often women, how should I say work very hard, but they don't really own the money then. And with Bitcoin this could change.

    Elena Tonoyan [00:11:57] That is correct. And there are unfortunately still countries where women don't have free access to let's say, they, they are not allowed to open bank accounts without permission of, for example, a family member. And, Bitcoin is obviously solving that problem. And I'm personally very happy about that.

    Anita Posch [00:12:13] Yeah, me too. Let's take a little look into the history of LocalBitcoins. When was LocalBitcoins founded?

    Elena Tonoyan [00:12:21] So I, it was founded in 2012. But it started as a hobby. Yeah, if you met Jeremias then you probably know the story, but, I think he got into, or he heard or read about bitcoins in 2010, then, he bought his first Bitcoins later in 2011. And from that moment, he was sort of involved in different Bitcoin related projects and already in 2012, there were a couple of, services, which were offering this, buy Bitcoins from your local dealer. And I think he was testing those and didn't find them conveniently enough and decided, yeah, that I'm going to just, launch my own service. So that's when he actually coded the first version of LocalBitcoins. And people started to sign up, and later in 2013, when he had to invest the increasingly amount of his own time and money into it then he actually enabled the escrow model. So this is when the company started being profitable. I think our founder wanted to experiment a lot since one thing he knew for sure that he doesn't want to go back to the traditional economy. All our growth was organic and we haven't been doing any marketing for many, many years.
    I think the only marketing that we had was affiliate programs.

    Anita Posch [00:13:37] And did the growth of LocalBitcoins - was it mirrored in the global trend, like in 2017? Did LocalBitcoins grow the same time as the transactions grew and stuff. Did you grow in the same waves?

    Elena Tonoyan [00:13:55] Yeah, this 2017 was definitely an interesting year for us because, of course it was a year which brought lots of more people to Bitcoin and it raised the interest and awareness of Bitcoin globally. We also saw that in our new customer numbers and volumes, and at some point we even had to close the new registration since we weren't prepared for such a large amount of daily new users.
    I suppose the situation was pretty similar with, other exchanges at the time. Typically when there economical or political turmoil, it increases the demand for Bitcoin. And, unfortunately during the last few years there has been quite a lot of turmoil, which on the other hand have been reflecting in Bitcoin demand, however, nothing so far compares to the 2017 boom.

    Anita Posch [00:14:43] And the month since the corona crisis hit us, did you see an uptick?

    Elena Tonoyan [00:14:48] Well this is, I would say that not exactly, because typically the demand for Bitcoin increases, like I said, during economical or political uncertainties and certainly COVID-19 brought both of those globally, but, in the spring 2020 LocalBitcoins have returned back to our growth track measured by new customer numbers as well as trade volume.
    But this is largely due to the fact that while we were focusing on improving the value we bring for our customers and customer satisfaction, COVID-19 certainly has created some tailwind for Bitcoin and the demand for Bitcoin. But, I wouldn't say that we can see it reflected in our numbers too much.

    Anita Posch [00:15:33] Because I just checked the data from Usefultulips. And it says that in the last three months, the trading volume in Subsaharan countries has risen very much in Western Europe too, but on the other hand, like in Eastern Europe, for instance, it, fell interestingly.

    Elena Tonoyan [00:15:54] Yeah, I, I, we were at least connecting the changes in our volumes and numbers to due to the fact that we have done, we're focused more on our customers and we have been listening to the needs of our customers and changing accordingly much more actively, in the last few months, than before.

    Anita Posch [00:16:10] In which countries do you see the most potential for serving new customers?

    Elena Tonoyan [00:16:15] When looking at where most of our new customers are coming nowadays, we see India and African countries, leading the pack actually. Additionally there is increasing demand for Bitcoin in Latin American and in certain Asian countries, but, India, because of its over 1 billion population alone is of course, well a huge opportunity for us, if we manage to address the needs of Indian customers. However, demand growth in Africa has been amazing and it continues to accelerate currently, especially in Nigeria, Kenya, Ghana, and South Africa are showing huge future potential and I personally would not be surprised if Africa would be our biggest market already in quite near future.

    Anita Posch [00:17:00] Yeah, I think so too. You are a Bitcoin only platform. Are you going to stay that way?

    Elena Tonoyan [00:17:06] Well, we're not Bitcoin maximalists and already now you can buy and sell Bitcoins with numerous altcoins. But the company's initial focus has been on Bitcoins and it still remains one of the most widely used coins. So we have been putting all our focus on efforts to serve Bitcoin users as well as we can.
    Though, like I said, currently we support altcoins as a payment method to buy and sell Bitcoins. It is possible that we might support other coins in the future as well.

    Anita Posch [00:17:35] Hmm. Okay. And, the founding idea was to facilitate a platform where people from peer to peer can exchange money also in real life. Is this still possible? Or have you changed your policy now since your following KYC rules in many countries?

    Elena Tonoyan [00:17:53] Actually the cash trades were removed in 2019, due to regulatory reasons. However, the removal didn't have a significant impact, on our trade volumes. Cash trades were a very small fraction of the total trades on LocalBitcoins. Online trading is in general safer and more convenient for most.
    And our users, actually take advantage of the high liquidity we have around the globe to trade using their own local currencies and like local payment methods.

    Anita Posch [00:18:21] And, you mentioned before you have a department that has to do with fraud cases, is there a trend to see, is it more, is it less or, or how much fraud do you have to fight?

    Elena Tonoyan [00:18:37] That's a, that's a good question because, fraud always existed in this space and probably will continue in this way or another. However we always had compared to the amount of successful trades on our platform fraud rates were very, very low and with the recent KYC and AML procedures that we had to implement it actually dropped even more. So, eh, now it's insignificant. We would say that way.

    Anita Posch [00:19:06] Can you please explain for a newbie how, buying Bitcoin on LocalBitcoins works? I mean, you said something about escrow before. If I'm a newbie, I don't know what that is. Can you maybe explain that?

    Elena Tonoyan [00:19:19] Yeah, absolutely. So, you come to LocalBitcoins to buy or so Bitcoins, if, normally if you're a buyer, you don't publish an ad. You just go and browse through the ads filtering that payment method that you would like to use the currency that you would like to use, and, possibly the country and the amount you want to buy.
    Once you fill in that small form you, you press search and then you see all the offers that there are with the criteria that you searched for. Then you just look through the ad terms, if it's suitable for you, you press buy. And that's how the trade starts.
    The moment you press buy the Bitcoins from the sellers wallet, go to the escrow. So this is the safe place where LocalBitcoins keeps, the Bitcoins until the trade is over. Then you make the payment, according to the, payment information provided by the seller and the payment method. Most of them are pretty fast. Some of them are instant. So once the payment has been made buyer marks the payment is completed and then it's up to the seller. So the seller needs to make sure that the payment has been received. If the payment has been received, all the seller has to do is to press release the Bitcoins from the escrow and Bitcoins go from the escrow directly to the buyers wallet, and to, explain a bit more, of course there can be situations when the payment is delayed or the payment let's say has not been made. Or there are some issues between the traders that they cannot figure out by themselves. That is when our team can provide all the help because, parties can start a dispute.
    And once they start a dispute then a LocalBitcoins team comes to check the trade, analyze the evidence and kind of provide directions on what has to be done, in order to resolve the dispute and for the buyer or seller to receive the Bitcoins back. So that's in short words.

    Anita Posch [00:21:18] Yeah. Okay. So as a buyer, I'm safe in a way because the seller either he or she has to release the money, or I can ask LocalBitcoins to solve the problem.

    Elena Tonoyan [00:21:30] Yeah, exactly. Well, I think that both as a buyer and as a seller you are safe. The only situation where one might be not safe, if let's say a buyer did not make the payment or send some fraudulent payment and for some reason, LocalBitcoins members, weren't able to receive. However, this is, well close to an impossible scenario because if, let's say we have a notice that there is some fraud at the buyer side, and we, we find it out afterwards because, both parties can contact us after the dispute has been resolved.
    Then of course we will move through the dispute once again and take all the decisions or revert back the decisions if, if there is a need. However, those are once again, very niche cases because we currently have about 40,000 successful trades per day. And, less than 700 disputes. So it's a very small amount and most of the disputes actually get resolved by themselves without even an Admin looking at it because usually people start the dispute by being impatient. Let's say I didn't receive the payment within 10 minutes I will start a dispute and by the moment our Admins start looking at it, it is released, so the real number is even less.

    Anita Posch [00:22:47] And the Bitcoin you release, I guess you have them by yourself in a pool, or how does this work? Because otherwise I would have to wait at least 10 minutes until the next block.

    Elena Tonoyan [00:22:59] Yeah, so, we keep them on the LocalBitcoins side. So, they don't go through the blockchain. It's like an internal transaction that LocalBitcoins sends the Bitcoins directly to the buyer from the escrow. So from the sellers wallet we take it to LocalBitcoins, so to say wallet, and then from there, we release it to the buyer and this is immediate. So no one has to wait for the blocks. The only time when someone needs to wait for the transaction is let's say if you'r depositing from outside to LocalBitcoins or sending it out from LocalBitcoins to outside.

    Anita Posch [00:23:32] Understand. And speaking of immediate transactions or settlement, do you plan to integrate Lightning in a way?

    Elena Tonoyan [00:23:40] Well, I think there were a lot of, discussions about it and anything that could make, let's say between transactions faster and cheaper, we, we loved that idea. But, at this point I don't really have much more information. This is more up to our technical team and a bit more discussion that is out of my scope, but, I know that this has been discussed and will probably be discussed further and maybe at some point we will, but, I, I, at this point I wouldn't be able to give any exact answer to that.

    Anita Posch [00:24:07] A lot of my listeners come from the U S and from Germany, and I think LocalBitcoins is not serving customers there, is that true?

    Elena Tonoyan [00:24:17] Actually that is not true. Germany's restrictions were lifted months ago. The US I think users from US can come to LocalBitcoins and trade freely the only thing is that we disallowed in our terms of service using our service from Washington state and New York, but that is currently the only restriction and we are a finnish company and fulfil finnish regulation primarily. As a service provider, we're also working to follow the regulations from other countries where we have significant markets. So but currently with Germany and US there are no such restrictions.

    Anita Posch [00:24:56] Oh, okay. Then I misread that or misinterpreted it to maybe.

    Elena Tonoyan [00:25:00] Well, your correct that Germany was restricted I think for quite some time.

    Anita Posch [00:25:05] Hm. Yeah. I think the situation, the regulatory side was not very clear in the last years, that's also a reason why in Germany, there are not very many or only five Bitcoin ATMs, maybe.

    Elena Tonoyan [00:25:16] Hmm.

    Anita Posch [00:25:16] So I think you're one of the biggest peer to peer exchanges in the world. Then we have some new competitors when I can say this in that way, without having KYC and regulatory forms to fulfill like hodlhodl, for instance, do you think, are those a competitor for you or not?

    Elena Tonoyan [00:25:41] Well, well, once again, since LocalBitcoins is a Finnish company operating under finnish legislation and Finland was one of the pioneers to implement 5 AMLD we, we wanted to, run a legitimate business. So, we made a choice to be compliant. We also see that the regulation is slowly coming to all the countries.
    So we really saw no reason to postpone the processes. This is going to concern, all the exchanges at some point sooner or later, and one of the actual, well, very good sides out of this was the fact that, we got rid of a lot of illicit activities on our platform, which actually, strengthen our brand and reputation and people have a lot more trust in our platform, which we're certainly very happy about.
    So, yeah, there are of course, many different kinds of competitors be it peer to peer exchanges or centralized exchanges. But, we in LocalBitcoins believe that instead of focusing on our competitors, we should have full focus on improving the value we provide for our customers and help them to solve the problems they might have.
    And when we succeed with our customers, everything else will follow.

    Anita Posch [00:26:49] Yeah. Sure. So, and in 2019, I think you had quite a good year.

    Elena Tonoyan [00:26:55] Yes, I think, just recently the results from 2019 were posted. And, I think we made an annual revenue of 26.2 million, which was an increase of 10% from 2018.

    Anita Posch [00:27:09] In Euros. So also your team has grown, I think, in the last year.

    Elena Tonoyan [00:27:16] That is correct. We actually doubled the amount of people in the team and undergone major restructuring after September, 2019, because actually investigations team had to become a lot bigger because all the KYC tasks went under the investigations team. So this is the team that we had to form the KYC sub team and hire a lot of people to be able to do to deal with the work load. But that is absolutely correct that we have doubled in size and we continue growing.

    Anita Posch [00:27:46] And, what are you expecting for Bitcoin and also the trading volumes on LocalBitcoins in the coming years. Do you think another boom is close?

    Elena Tonoyan [00:27:58] Well, we're obviously big believers of Bitcoin and booms and busts are of course integral part of almost any market in the world. Be it stocks, commodities, or cryptocurrencies. And I'm sure that during the coming years and decades, we will see several booms and busts in Bitcoin. However, what is important and what we believe is that the Bitcoin usage and adoption will continue to increase til unforeseeable future. And, there are many reasons for that adoption feeds even faster adoption, especially the younger people are unfortunately losing trust for the traditional financial systems and looking for alternative systems.

    Anita Posch [00:28:37] Hm. Yeah, I think so, too. And, even more the numbers in Africa, show that, people, I mean, I think the, the average age in Africa is 25 years or something. So people are very, very young. They don't have work there, so they want to work with computers and over the internet. And, also I think a peer to peer platform like yours is perfectly fitted in, in African nations because I think they are used to do this peer to peer transactions.

    Elena Tonoyan [00:29:08] Yeah, you, you, probably, know a lot about those regencies I know that you travel there a lot, and this is the regions that we want to explore more because we see a lot of potential and, we see that the, actually those countries, will need the service that we are providing the most. So they, it will help them in their day to day lives that this will provide them a better quality of life.
    And this is exactly the reason why we want to be in those countries. And we want to, expand more in those regions. And hopefully we will be able to, I mean, a few years,

    Anita Posch [00:29:42] Hmm. I mean, it's very difficult. I was in Zimbabwe in February this year. And you also sponsored that, thanks. Yeah, and what I saw there was that really people in Zimbabwe, there is no official Bitcoin exchange. So people know about LocalBitcoins and then, most of them organize themselves in local WhatsApp groups or Facebook groups.
    And, so they facilitate the, the exchange, not only over LocalBitcoins or with the help of LocalBitcoins, but they also, like trust each other in this groups, which I think fascinating because it's actually, I think the original idea behind Bitcoin.

    Elena Tonoyan [00:30:23] So they pretty much set up their own small exchanges built on complete trust.

    Anita Posch [00:30:28] Yeah, exactly. So when they have found partners, they then meet up in person and exchange money.

    Elena Tonoyan [00:30:35] I think that happens actually quite often, we noticed this kind of trend, a lot of, traders who have done multiple trades with each other they might want to actually continue trading in some place else. But the most important part of course, is the trust because with our service, we are, we can guarantee that, if there is any problem, we will help figure it out and, resolve whatever situation comes out. But, obviously, if it happens outside of our service or any other service, then, well, it's the responsibilities on the individuals only.

    Anita Posch [00:31:08] Yeah, quite interesting. Thank you. Anything you want to add?

    Elena Tonoyan [00:31:11] Well, I suppose that, I will, once again mention that, we do believe that the future is increasingly peer to peer. And, as the environment is changing, we will be listening to the needs of our community. We will be adopting accordingly and we once again, want to be in those countries and serve those customers who need us most.
    And this is what we will be focusing on in most years.

    Anita Posch [00:31:36] Can you maybe, I mean, I know the answer, I think, but maybe my listeners don't why is peer to peer exchanging Bitcoin in a way better and more secure than using an exchange?

    Elena Tonoyan [00:31:49] Yeah. Well, I it's, it's hard to answer the question. What is better and safer? I would just say that, peer to peer is not necessarily the competitor of centralized because there are different use cases and, we serve different areas. We are mostly serving the users who are not served by centralized exchanges.
    So you, you, in a way, I wouldn't like to think of a centralized exchanges as competitors. I would like to think about, the overall picture that more companies in this industry are just bringing more people into the Bitcoin ecosystem, and be just happy about that.

    Anita Posch [00:32:27] My goal was to, to say something like, yeah, because that's my interpretation - you know, when you do peer to peer exchange, then you need your own wallet with your own keys, and then you have the private keys to your wallet. On an exchange you leave your money there and you never know.
    So it's basically a bank, but you are a medium of exchange, like a payment railway an exchange railway. That's the difference for me?

    Elena Tonoyan [00:32:54] Well, yes, obviously with the centralized exchanges it works a little bit, yeah, different. The risks are different, but I guess the, the most important thing is to, at least from our side, to make sure that we educate our users, and to make sure that they understand in which cases, which exchanges are better to use. So they find something that is suitable for them. For example, in the case of LocalBitcoins, we always advise users, to keep the amount of bitcoins in the wallet that they're going to be able to, or they're willing to trade or use and not use LocalBitcoins as a wallet service where they just hodl. So I think it all comes down to educating our users and explaining, what are the use cases for each scenario. So they will be able to choose whatever works best for them.

    Anita Posch [00:33:43] Yeah. Great. Okay, Elena, thank you very much for that, where can people follow you or LocalBitcoins?

    Elena Tonoyan [00:33:51] Well, I think we're mostly active on @LocalBitcoins on Twitter. So just LocalBitcoins, also LocalBitcoins on LinkedIn and our website LocalBitcoins.com. This is where you can follow our work.

    Anita Posch [00:34:03] Great, Elena. Thank you very much for your time and have a good day.

    Elena Tonoyan [00:34:07] Thank you, Anita for having me, it was a pleasure

    1 Comment

    1. Alice Jenifferze20. October 2020

      nice post! The adaptability of bitcoin keeps on increasing!


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