‘All economics students should learn to program’

Yakov Barinskiy, who holds a bachelor’s degree from the International College of Economics and Finance (ICEF) at HSE, puts his degree in finance to good use in the field of crypto investment. His success running the HASH CIB crypto bank shows students that fundamental education in economics remains relevant even as fintech develops. In this interview with Success Builder, Mr Barinskiy explains why you should work in a good company before launching your own business and what the Russian authorities are doing to legalise digital assets.

Why did you choose HSE University for international education?

The choice was largely dictated by the environment of the school where I studied, as well as my family. Although my parents were mostly interested in big-name schools such as Moscow State University and MGIMO, I already understood that compelling teachers are largely what make a university. I heard from other applicants and college students how opaque and, in many ways, confusing the admission system was at Russia’s largest universities.

At that time, HSE was very different from most Russian universities. It was attractive because it met the needs of demanding applicants. And HSE had special requirements for the applicants themselves: you knew that you had to meet requirements of a certain level because there was an extremely strict selection process that could not be influenced in any way. This meant you’d be studying with the very best. This promised attractive prospects and a special environment where it would be interesting to learn and grow in general.

At that time, it seemed that Russia was on the path towards international integration, so the advantage of ICEF over other faculties was that it had a diploma from the London School of Economics. My strong suit was a good knowledge of English with which I had won several Academic Olympics. To summarise, I can say that opportunities for integration into the global market and work on projects abroad in the future played a role in my choice of HSE and ICEF.

My subsequent career and the success of my classmates confirm that ICEF provided exactly the type of platform that we all wanted to acquire. It primarily taught us to solve a wide range of very complex problems.

This type of training made it possible to carry out any task I might have in the future. Even the workload in IB, in which I worked after graduation, could not compare with the difficulty of the tasks I had to complete at ICEF. Education gave me extremely important skills — the ability to mobilise in any situation and not be afraid to show results.

Has your communication with HSE alumni given you any insights regarding your career or a better understanding of the future?

Many of my schoolmates went to HSE and I spoke with ICEF students while still a school student myself. In my final schoolyears, they gave me input that greatly prepared me for the educational process to come. But once I became a university student, I soon formed my own idea of the future, found a job and built a career, starting from my second year of studies. Professionally, the ICEF alumni community is very helpful for many students, making it possible to find a job thanks to someone who already works in a bank or some other company — especially an international one where the reputation of the diploma and the level of knowledge is important. For example, it was thanks to an alumnus that I wound up at Renaissance Capital, which at the time was the largest investment bank in Russia. Therefore, I can say that ICEF networking works, as does the HSE brand in general.

How did your career come to include fintech?

As a school student, I was an advanced user of various technologies, especially torrents, that are similar to how crypt works, and I had no idea that this would overlap with my future career. I am still the main tech guy in our family. I had no exposure to programming until only recently, so I suppose it was by chance that I got into technology. While working in IB, first at Renaissance Capital and later at Credit Suisse, I was constantly in search of something and knew that these jobs were only temporary for me. Working as a consultant was not very interesting because it didn’t allow me to delve deeply into a project: no sooner did you get a handle on a particular segment, get acquainted with a company and establish an emotional connection with the people than you were switched to another task.

I began looking for an opportunity to develop and thought about starting a business of my own, but this required knowledge and experience in formulating clear tasks — primarily for myself. For example, I didn’t understand the difference between developing someone else’s business and my own. Only after working at QIWI for five years did I see the difference and feel ready to leave the company to start my own business. It was at QIWI that I first encountered the tech business.

What did you find attractive at QIWI as compared to IB?

The top management team at QIWI was great. From the time we met, I felt like one of them, and this feeling of being among like-minded people stayed with me. Alexander Karavayev was the company’s financial director at the time. He was a prominent specialist on the Russian market, played a key role in my transition and I wanted to be a team member under someone like him. As a Credit Suisse employee, I worked on the IPO for QIWI, and he invited me to come work for the company. That was 2013, when the company was valued at just under $1 billion and the corporate structure was built according to the Western model perfectly.

For the Russian market, QIWI was something new and daring, unlike the usual domestic business. It stood out for being fresh and innovative. My colleagues were IT specialists, programmers who made a unique product with their own hands. I learned from them, picking up things that fascinated me more and more — for example, how to conduct a transaction from one bank card to another at a time when not a single bank in Russia was doing this. QIWI was the first company to come up with the technology that became the market standard. In addition, the company implemented a global partnership with VISA in 2012 that was the first of its kind. I joined the company at the very moment when it was developing at incredible speed.

Everything the company did was in demand in the global market. I turned out to be the only person there with experience in IB and I finally saw excellent prospects for my development, both personal and corporate. At that time, fintech promised many innovations that could only be put to use in practice and a growing business.

What led you to make the final switch to the technology division and your interest in blockchain specifically?

My role within QIWI has always been with investment. I first worked in investor relations. This is when you are a communicator between the market and business and accompany the progress of shares. In effect, I managed market expectations — this was my main task. Then I took over the M&A function, and one of my key deals was the purchase of Flocktory, which generated revenue for various businesses by analysing user data.

Why was this important and illustrative? The fact is that the transactional business is gradually dying out because clients are less and less willing to pay for acquiring. Consider the example of mobile operators that five years ago stopped paying intermediaries to help users replenish their accounts. It became clear that major clients could sometimes bottom out due to operating costs for maintaining financial flows. QIWI suffered greatly from this, and the Flocktory project offered a solution. QIWI was supposed to become not just a payment service, but also a full-fledged business that led sellers to buyers. That was the idea behind the deal.

I also headed the company’s venture capital efforts, with the idea of integrating startups from a number of countries into the Russian market. The idea was to invest in projects at the MVP stage to receive distribution rights to their products or open a representative office in Russia. At that time, QIWI really had a problem — the company was very bad and slow at generating new products because the IT function was secondary and the main efforts were devoted to maintaining the outdated legacy system that was the core driver of the business.

I was offered the position of CFO at QIWI but I turned it down in favour of heading the venture capital business. At that time, initiatives were already emerging within the company to develop a crypto ruble and put it into circulation, but they were blocked by the Central Bank. It was necessary to create some sort of new technology, but the company management wouldn’t approve it. No breakthrough occurred so, in 2017, I left.

After that, I did some independent collaboration with Sergey Solonin, who proposed that we work with crypto technologies. A new project took shape — HASH CIB, which is something like a family office with a focus on crypto assets mainly engaged in R&D. I initially acted as CEO and began assembling a team consisting primarily of my co-workers from QIWI and ICEF alumni who were working in investments.

What makes HASH CIB an investment project? How is it more than simply moving money ‘back and forth’?

The crypto business is our area of activity, but in general, the project manages digital investments. We started by doing a lot of research on how the cryptocurrency market works. In 2017, both Russia and the world saw an insane wave of ICOs (initial coin offerings – Ed.). We were approached by a variety of projects, including many very ambitious ones such as Pavel Durov’s Telegram. For half a year, we tested various hypotheses and had to hire a marketing specialist for the team because clients demanded detailed market analyses from us.

As the name (CIB) implies, we positioned ourselves as a crypto investment bank because we can analyse projects and decide whether to invest in them. Initially, because digital assets were unregulated, we had to act as a hybrid between market expertise, consulting and a venture fund. Our primary task was to help the project build an investment presentation correctly and attract crypto investors — with whom we began to interact. Now, having built up the necessary expertise and investment base, we are focusing on trade strategies and venture activities.

Is there an official crypto market in Russia?

Russia does not have a crypto market, but most of my team is located there. I live in London to develop the overseas business. Of the strictly Russian projects, we worked only on a deal with Telegram. The current Russian market is practically unregulated concerning digital assets. For example, there is an understanding that you cannot pay with bitcoin, but no arguments are given as to why. Neither is any provision made for brokerage or management companies to work with digital assets, although bitcoin, the most popular cryptocurrency in the world, is actively used in Europe and the U.S.

So far, Russian regulators have taken only one step towards defining the crypto market, introducing the concept of digital financial assets (DFA). In effect, DFA are traditional banking products such as assets, bonds and stocks, except that they are ‘wrapped’ in the infrastructure of blockchain technology.

Sberbank and the Moscow Exchange are now working to tokenise ownership of all assets. When digital banking structures are put in place officially, trading in tokenised shares will be possible and DFA will become a viable instrument.

Full recognition of bitcoin is possible after the launch of the digital ruble, which the Central Bank is currently working on.

Bitcoin is a global phenomenon, a cross-border market divided only by the physical presence of mining offices in this or that geographic location. Another well-known cryptocurrency, ethereum, works in the same way and is the ecosystem on which almost all the portfolio projects of our venture fund are built. Entrepreneurs from China, the U.S. and Europe are currently HASH CIB’s main clients.

Does the cryptosystem stand in opposition to traditional banking in any way?

The world today is divided into two groups. The first is developed countries that encourage the digital asset market and adapt it to financial regulation standards. The second group includes such major economies as China, India, Turkey, Russia and Brazil and takes the opposite position. I think they reject it for only one reason — the percentage of transactions that are in cash. Whereas banks in America, Europe and Singapore will not allow you to withdraw $10,000 from your account without serious grounds, you can do so very easily in China, India and Russia.

Due to the ‘power of cash’, an ‘alternative’ banking system is emerging in which you can withdraw $10,000, use it to buy bitcoin that you send, for example, to China where you sell it for cash yuan with which you again buy bitcoin that you then send to Russia. This system is already passing beyond the bounds of local regulation and the phenomenon of states rejecting cryptocurrencies will only end when the issue of cash is resolved.

In this regard, China is a pioneer and an example for other countries on how to establish control over the general population’s finances. Now, as the digital yuan is being launched and adopted by the regulator and banks, the cryptocurrency system will work at the state level. Legalisation will be the next iteration for countries that are opposed to crypto-assets because all transactions can be easily tracked. It is important to accept the fact that there is no difference between the crypto-yuan and the yuan. It is the same instrument of the country’s financial system — that controls its turnover — transferred to a new technology platform based on blockchain.

How should traditional financial education be updated in this regard? Is this even necessary or possible?

All economics students should learn to program. I think this will be a key skill in finance because it will be needed to understand how cash flows are structured in the new digital systems. As for the rest, if to speak about the job search and the relevance of the education that current students receive, there is no need to worry. University-level economics programmes provide versatile skills, and such areas as investment will only grow as the number of companies and funds increases.

In addition to general knowledge of finance, you need to have some other specialisation as well to be in demand in the labour market. As someone engaged in investment in the technology market — moreover, on the technology market directly related to finance — I consider it necessary to understand technology and programmable money. Judging by the dynamics that I observe in digital assets globally and by the size of investments in the crypto-asset market, I can say that the field offers a lot of work for future finance specialists. This summer, a16z (Andreessen Horowitz), one of the world’s leading venture capital funds, announced the launch of a $2.2 billion fund, its third, that will invest exclusively in crypto-assets and that was given to a 30-year-old woman to manage.