A one-on-one interview with the Founder and the CEO of Regulatory Compliance Associates Richard J. Witismann, where he shares his background in business and education as well as gives an insight into why he believes that blockchain is changing the paradigm.
I have had quite a long educational journey so far during which I have obtained a master’s degree in law, both in Estonia and in the United States. My first master’s degree is from the University of Tartu, and I obtained my second from the American University Washington College of Law in international business law. In addition to my master’s degrees, I have a STEP certificate in international trust management and recently I obtained a certificate in sustainable management and corporate responsibility from the London Business School.
In total, I have around 30 years of experience in business including 6 years of working as a litigation attorney and experience in establishing and developing two start-ups.
I started my first start-up – a private security company – after I had come back from the military service and had been working as a close protection officer of the Estonian President’s bodyguard team in the early nineties. The business was established right after Estonia had regained its independence and at a time when various criminal organizations were fighting for control over the Estonian economy. During this time, the security business was booming. Crime was at its peak, the mafia controlled everything, the police did not have enough power and resources to keep everything under control, thus we were the only ones capable of providing protection to companies and individuals.
After we had established the company, Estonia conducted the property reform and started the privatization process. This led us to the opportunity to buy an existing national security company infrastructure that provided a centralized guard service for government agencies using analogue signal telephone communication. However, when we were in the purchase decision process, we concluded that the technology was outdated and would not be particularly useful to us.
Then we started to look for alternative ways to use radio communications for a centralized guard service. We stumbled across an early version of Wi-Fi. As the range of the transmitters was short, we had to cover almost the whole of Tallinn with radio devices to have sufficient coverage, which meant that we needed to seek investments.
By the end, we were able to raise a twenty-seven million Estonian crown (appr. 1 million dollars) seed-investment in 1993 from a local commercial bank without any collateral. In today’s age, securing seed stage investments like this seems unrealistic. A few years later, once the revenue of our security company was around forty million Estonian crowns, we made an exit by selling our company to our biggest competitor.
I consider my second start-up company a greentech business where we were developing a smart-house solution to make house management more efficient and convenient with the help of various intelligent sensors.
We worked on the business for around 7 years; however, after having bootstrapped and invested over one million crowns of our own money, we discovered that the market was only interested in having solutions that are convenient but not efficient. Unfortunately, only a few were really interested in solutions that could lower energy and water consumption. We even went to the extent of seeking investments from a state agency – Enterprise Estonia- but received a low investment offer because our idea was new and there were several fundamental experiments needed to be done.
When I think about my strengths, I immediately think about the 80/20 rule. In my mind, it means that you should focus on resolving tasks which you are the best at. Other tasks that you may not be so good at should be delegated to others, who may be better at it.
Digging a bit deeper on this, I believe that my two biggest strengths are the following:
The first is execution – getting things done and attaining goals in an environment that is constantly changing. Throughout my experience, I have learned that even people that you do business with may leave at any moment. Just like regulations, ways of thinking and values can change. The important thing is to not get too stuck in your own ways and to keep an open mind.
The second is the ability to synthesise information. This means taking all available information and combining it to gain insights into future trends which is necessary for any leader who wants to see things from a bigger perspective.
That is correct, RCA was established in late 2020 and is Incorporate’s sister-company that specializes in providing compliance services in Estonia. The initial idea and motivation behind establishing a completely new business was to simplify the internal processes of Incorporate.
Once we had moved our compliance services from Incorporate to RCA, the motivation became to gather a boutique of services and experienced personnel, who can really understand the impact that blockchain and cryptocurrencies have. People who understand it are very sought-after due to the sector being complex in terms of technology and legislation. Cryptocurrency accounting, which is one of the services that we provide, is a good example of this.
It all started when I became aware of Bitcoin in 2016. The only thing I knew about it was that it was a strange and profitable investment instrument. However, the whole idea of blockchain was very intriguing to me. Then I started to learn more about BTC as I wanted to learn about the fundamentals – it is something that I do with everything before making up my mind about it.
Once I became more informed about Bitcoin, I understood that it is not just something that is based on speculation but rather something that will change paradigms and it will also probably change the value pillars of humankind.
Well, when I got to understand what blockchain and cryptocurrencies were about, despite the negative media that was circulating around at that time, saying it is only used by criminals, I clearly saw how it will change paradigms.
A good example of how it can impact people’s lives is that it enables everyone to have a “bank account.” It also gives people back the control to trade between themselves, increasing the security, privacy, and transparency of the transactions.
Nowadays, opening a bank account is up to the bank. They decide if they let you open an account with them or not. For one to be able to open a bank account, there are requirements that one must fulfil. But in today’s age, having a bank account should be a human right. If you do not have a bank account, how can you pay taxes to the state?
Virtual asset companies solve this problem by enabling everyone to have their own digital wallets which act like bank accounts where you can hold, send, and receive money.
Also, why can’t we use alternative ways to trade with each other? Unlike traditional bank transfers, which take ages to reach foreign bank accounts, virtual assets can be transferred within seconds across the world and all you need is the wallet address. This gives us back the power to trade freely.
Blockchain also gives us back control over our identities and assets by decentralizing the information so that no single business, entity, or person has control of the data. As you already know, in web 2.0, all the data about your online activities is controlled by a select few multinational corporations that sell it to make money. Web 3.0 solutions solve this problem.
Finally, I would say that there are about ten areas of vital importance for humanity in terms of quality of life that blockchain and virtual assets solve, and I predict that this number will only continue to grow over time.
I think the next couple of years will be highlighted by NFTs, SFTs and DeFi.
If we think about what the problem really is that NFTs solve and ask ourselves if there is anything more effective out there, then I personally think there is currently no alternative out there that could compete. Also, considering how the market has reacted to the launch of NFTs by gaining tremendous support from artists, gamers, investors, and others, it will continue to have an impact which will lead into virtual reality, metaverse and gaming for the following years to come.
DeFi will also become one of the biggest trends soon as it is the sector where the most virtual asset exchanges operate, and due to the reasons, I mentioned in the last answer, I do not see it stopping any time soon but rather continuing as countries around the world start accepting the new reality.
NFTs and other blockchain solutions are becoming increasingly more popular on the Estonian market and it is a clear trend. While the area of compliance has become broad and complicated, my objective has always been to simplify new concepts.
One way to simplify complex solutions is to package services. Just as the customer is not interested in the specific technology behind a user interface, the customer is also not interested in detailed legal regulations. It is important that the client gets a workable solution that is in accordance with the applicable law.
There are several reasons why Estonia has become a base for them.
After Estonia regained its independence, our government had to find a way to stand out as our country is small and not rich in natural resources. Therefore, Estonia has taken the role of embracing technology and saw it as the perfect opportunity to have something that can make us stand out.
This has led to our government and entrepreneurs to be pioneers in various sectors and the local government has created an infrastructure for residents, businesses and entrepreneurs that wish to use technology. In Estonia, no one has to spend their time on bureaucracy which makes doing business quicker and more efficient.
Also, the small size of the Estonian market has led local entrepreneurs to think global, by default. Anyone who establishes a business in Estonia and has big ambitions should automatically keep in mind that they should take their business global. Estonia offers an environment where all of this is possible – it is not a coincidence that Estonia currently has nine unicorns and the highest number of start-ups per capita in Europe.
After witnessing the developments from the innovation side and the regulatory side, governments wish to gain even more control over blockchain and virtual assets sectors and their wish to do so will only increase in time.
While governments are fighting to gain control and trying to understand human nature, innovators in the sector will only continue to search for ways to find decentralized solutions where government input is not needed. Now, this is also something that governments are aware of, and I believe that they will continue to regulate blockchain while simplifying the legislation that will enable innovation to happen.
The best piece of advice that I can give to a founder is that he or she should make it clear from the beginning if they are building a business that is going to be bootstrapped or will it raise funds. This is a critical decision that lays down the foundation and organization of the business for the future. I say this because investors like to see no or very few red flags when analysing a business to invest in. Confusing structures and business models are often deal breakers and can end up costing the investment opportunity.
The concluding thoughts that I would wish to leave crypto entrepreneurs with is that you should use the available technology, the available legal framework in addition to the available information to develop a solution that is valid today.
Unfortunately, dealing with virtual assets and blockchain technology has still quite a lot of “grey” areas as innovation is much faster than regulators and their reactions cannot be predicted. This also means that you must be ready for constant changes and manage your business accordingly. Each day might be different, and everything can change with just one piece of information that you did not have yesterday.
Therefore, it is important to develop solutions for the current business climate and Estonia is one of the best places on earth to do so with the help of RCA’s experts.
If you need any expert help regarding your business that works with virtual assets, needs licensing or is subject to elevated legal requirements in order operate, please feel free to reach out to us!