Ch.Gankhuyag: Blockchain and cryptocurrency bring income redistribution

Mongolian Economy sat down with Ch.Gankhuyag, CEO of Ard Financial Group which issued Mongolia`s very first cryptocurrency, ArdCoin to talk about a shift to digital currency and why this shift is important to us.

-How would you formulate the digital currency revolution?

-Digital currency is not a concept which suddenly became a hot trend as of late. Money has always been digital since the introduction of a bank card. In modern days, when humanity is at the dawn of the Fourth Industrial Revolution, brand new concept of digital money has been borne. That is blockchain-based cryptocurrency. It started income redistribution and began to shake the very foundation of the traditional banking sector. Simultaneously, the banking and the financial sector have been very favorable to the customers. Let’s seize this opportunity to liberalize Mongolia`s banking sector. To liberalize the banking sector, we don`t need a pointless and useless criticism, however. Technology shall help us to make it happen and everybody shall have the opportunity to be the owner of the bank.

-How do you see the current status of digital currency in Mongolia?

-Blockchain, digital money, and cryptocurrency has been on the radar of the Government in the last two years. The working group has been set up and certain works have been carried out by the Communications Regulatory Commission of Mongolia and other related agencies. On top of this, there are certain initiatives implemented within the framework of the Law of Mongolia on Electronic Signatures. Residents in rural areas, for instance, shall be able to get various public service identifications in electronic form. Financing of the project is included in the state budget for this year and I hope it will be included in next year`s state budget. Understandably, people will welcome such moves that would help to lessen the burden on their life.

As for Ard Bit LLC, it has issued ArdCoin, a blockchain-based loyalty point, first of its kind in Mongolia. This is by far the fairest open reward system in the country. Traditionally, customers redeem their points when they visit a particular outlet over again. ArdCoin not only serves as a payment medium for all existing services of Ard Financial Group, but it also opens numerous opportunities for the owners, including gifting their points to others, saving their points, making investment and taking part in a lottery. In  that sense, ArdCoin is revolutionary. ArdCoin holders have already surpassed 300 thousand, which is a huge success. This demonstrates a very positive reaction of the mass to digital money. Mongolia is not lagging from many countries in terms of the digital revolution. We have a qualified human resource and the internet connection is not bad. It’s true, however, that internet coverage in rural areas is not satisfactory. The main thing is that we shouldn’t underestimate ourselves and do our best based on whatever opportunities and conditions we have.

– How do you evaluate the level of private sector participation in the digital revolution?

– MobiFinance NBFI issued Candy, digital money. It is not based on blockchain technology and its transactions are registered at the servers of MobiCom Corporation. Regulation on Electronic money was approved by the Bank of Mongolia and the National Payment System Law has also been in force.

Ard Credit NBFI is working closely with the Bank of Mongolia to obtain approval to issue digital money.

-Mongolia lacks an established concept on blockchain and cryptocurrency. This certainly is affecting a shift to the blockchain-based digital currency. How positive is your attitude towards this issue?

-The current policy of the Ministry of Finance, the Bank of Mongolia and the Financial Regulatory Commission on digital currency are correct, I would say. These institutions expressed their support of digital currency initiatives in many meetings. Everybody agrees Mongolia must be at the frontline of innovations or, at least, should not be struggling to catch up. Generally speaking, the government is supportive of blockchain-based projects. For instance, the Government of Mongolia approved its sovereign bonds to be traded on a blockchain-based platform in February 2019. Lack of public advocacy, however, is limiting its reach.

In its statement, the Bank of Mongolia stated that it wouldn’t prohibit people to get involved in cryptocurrency trade. It was noted that any risks associated with the trade shall not be borne by the government in any case. Cryptocurrency is brand new thing, therefore, many countries have not established any concrete position on it. The U.S Congress, for instance, has held an extensive debate on the Libra coin to be issued by Facebook. Likewise, we should discuss cryptocurrency issues extensively.

-What advantages and opportunities will this development trend present to a small country like Mongolia?

– For Mongolia, a country landlocked and sandwiched between two superpowers, it expands our potential to implement an independent economic policy. The economists, politicians and social leaders have a positive stand on this issue and understand that cryptocurrency could be advantageous for Mongolians. I suggested to some people that Mongolia should be the very first country to declare that it supports the Libra coin. Specifically, since Facebook has become an everyday practice to almost 2 million Mongolians, why couldn’t it be used for money transactions. Two million Mongolians have already registered at the biggest private entities in the world. This is the chance for us to implement a limitless economic policy.

At this particular time, population size or sea outlet should not be an excuse in determining the competitiveness of Mongolia. Therefore, ArdCoin is coming to the international stage. We believe the number of ArdCoin owners could reach 1 million this year. We all must work together to make MNT a valuable currency. In terms of digital currency usage, Mongolia has already outpaced the Philippines.

-In your opinion, what could be the best possible legal environment for Mongolia in terms of digital currency? Might we be losing our chances by being inactive?

-It is better not to have bad regulations at all. Frankly, it has become impossible to prohibit a cryptocurrency by any law or regulation. Nothing could limit or stop it now.

Mongolia now needs to accomplish one important task. The Parliament, the Government, the Bank of Mongolia and other related agencies should declare that Mongolia is a cryptocurrency-friendly country to the world. We could become the first country to embrace and enjoy the magic of blockchain and cryptocurrency. Let`s declare ourselves a crypto nation. The Swiss have already established a Crypto Valley in Zurich where international companies are invited to work and conduct research. Latvia, Estonia, and Georgia are all very creative in this field. China is planning to launch a central bank digital currency. Our northern neighbor has also been active in the digital currency sector. Mongolia, too, shall be open to foreign cryptocurrency investment and implement a policy welcoming such activities. We must attract advanced technologies, companies and skilled workforces in the blockchain sector and establish a favorable environment for them to operate. Also, incentives should be offered to individuals willing to work or invest in cryptocurrency and blockchain technology. Young specialists are to be exempted from taxes and social insurance premiums, and other beneficial conditions could be offered. We need an elaborate policy to attract a skilled workforce from both Mongolia and abroad.

It is needless to say, the Government and private sector should work together to eliminate any illegal activities including money laundering, drug trafficking, financing of terrorism and tax evasion.

-Blockchain technology can be integrated into multiple areas. What do you think what could be the primary use of the technology?

-Stock exchange should be the first to adopt blockchain technology. Stocks, bonds and everything are digital in the stock exchange. Hence, all the settlements shall be processed using blockchain technology and stocks should be offered in the token. It certainly makes Mongolia attractive to foreign direct investment.

Devaluation of the turgik and retreat of foreign investors have been contributing factors to the poor operation of the Mongolian stock market. Whatever efforts are made, people kind of lost their trust in the stock market and its indexes are down. Innovations and reforms are needed for this sector. If companies began to offer their bonds in the token, anyone from around the world could purchase them. More money means the stock exchange would entice foreign companies. Thailand, for example, implemented similar policies which resulted in a huge flow of foreign money. We must be innovative, otherwise, the whole generation is in danger of spending their life talking about mundane topics, such as tourism, nomadic culture, and wool slippers.

-What advantages might a digital revolution bring to people?

-Blockchain and cryptocurrency bring income redistribution and that is why people are supportive of it. Cryptocurrency snatches the monetary policy and power of banks away from a few families and gives them to the people. It means no more high-interest rate and no more bureaucracy. It gives people more financial freedom.

In other words, a flow of money is coming from the richest to the ordinary people through bitcoin. It is the income redistribution process at the individual level. When bitcoin was cheap, for instance, many young people of Eastern Europe purchased it and when its price increased, they sold it back, creating a money flow from Western Europe to Eastern Europe. The Fourth Industrial Revolution, with the help of bitcoin, has launched income redistribution and that was why I was calling for Mongolia to be part of it. I hope people who listened to my call and supported it have purchased one or two bitcoins and resold them at a higher price. That would be a kind of a USD investment to Mongolia. It would have been more profitable if it was managed in an organized way and supported by the government policy.

-Cyberattack is in the list of top five threats of the new century. How should we manage cyberattack risks?

-You are completely right about a cyberattack. The common ostrich is a very large bird with a long neck and a small head. To avoid danger, ostriches bury their heads in the sand. This is a naïve way for such a large bird to hide from hunters. Mongolia shouldn`t be like ostriches. We can`t and shouldn`t hide from or ignore these new technologies. Instead, we must welcome them to identify possible risks associated with these technologies. To prevent cyberattacks, we must make a huge amount of investment and invite the leading companies in this sector to Mongolia to work. The best specialists must be hired to advise the Government of Mongolia. This is the biggest threat we face. At present, Mongolia is like a dipper with holes in it.

-What preparations are needed to ensure a successful shift to digital money? For example, what must we do to protect private data?

-Private data, user privacy, and cybersecurity should be at the forefront of our concern and these shall be reflected in the regulations. Generally speaking, Mongolia urgently needs a risk management policy. Mongolia is many steps behind in terms of cybersecurity. When you register at hotels or use banks in other countries, it is required to ask permission from you about using your private data. If your data is lost, that company shall be held responsible for such breach. A private data breach is dangerous, because it could ruin the victim’s life entirely. In Mongolia, there is almost no regulation that addresses these types of crimes. In my opinion, the best solution would be to copy the EU General Data Protection Regulation (GDPR).

Nowadays, most organizations in Mongolia including both state and private organizations collect name, phone number, registration number and image of individuals freely and chaotically. What happens to when the data is lost or someone exploits it for criminal purposes is not clear.