Friday, May 29, 2009

Interview with Liberty Reserve

Interview with Arthur Budovsky of Liberty Reserve
Conducted by Ragnar Danneskjold, editor
Monday, May 20, 2002

planetgold: Today, Planetgold is pleased to interview Arthur Budovsky, of Liberty Reserve.

planetgold: Welcome, Arthur. Thank you for agreeing to be interviewed.

Arthur: It’s my pleasure.

planetgold: Please tell us about Liberty Reserve.

Arthur: Liberty Reserve was originally an escrow service for our private clients engaged mostly in the international import and export business. We have been operating for about three years, and only recently decided to expand Liberty Reserve into a digital currency.

planetgold: Why the expansion?

Arthur: In effect, it was our clients who asked us to provide digital currency type services (similar to e-gold). For example, we would see more and more clients simply accumulating money in their escrow accounts and then calling us with instructions to send money to one place or another or to simply debit and credit their accounts between various third party accounts. We were transformed into a stored value type system without even realizing it. The next step was obvious.

We started work on an online digital currency but with a slightly different edge. We are currently backed by the U.S. dollar, and in the near future, we will add an option for gold backing. We may also add backing for other popular currencies, depending on demand.

planetgold: Do you still provide escrow services?

Our clients can use escrow at no additional cost

Arthur: Of course. We have integrated the Liberty Reserve digital currency business into our escrow and fulfillment services. From our experience with our clients, trade on the internet is still viewed as risky, and clients demand a service where risk can be limited. More can be done to assure the security of business transactions. Nobody wants to pay $1,000 for a product at an auction and then never receive the goods. Our clients can now use our escrow service online, at no additional cost, to make sure the seller delivers before he is paid. It’s built into the system. We are, in fact, the first digital currency to have an escrow service built in. We’ve been doing escrow for three years, although without a web presence. And we also need entities such as the eCTA or GDCA that you mentioned to help consumers distinguish between reputable businesses from dishonest ones.

planetgold: Tell us a little about your family background.

Arthur: I am a single child of a German mother and Ukrainian father. My parents immigrated to the United States about 15 years ago from Ukraine. I have a wonderful wife, and two beautiful daughters.

planetgold: What about your professional and educational background?

Arthur: I have a university degree in international business and economics from the International Management Institute of Kiev. In the states, I started a business exporting computers and electronics. During the ten years of running my business, I got acquainted with my current partner, Michael Klein. Together, we developed the business to include escrow services for a myriad of import and export companies.

We started transferring millions of dollars of client funds

The rest, as they say, is history. There was a greater demand for escrow services, and we were only too happy to accommodate our clients. Eventually, clients started to bypass banks and simply let their money accumulate with us. We started transferring millions of dollars of client funds from one client account to another. We were like a central clearing house for a bunch of import and export companies. The evolution to a digital currency was a logical development.

planetgold: Do those clients still use your service?

Arthur: Sure they do. Except now, instead of calling ourselves, “International Import/Export Exchange,” we transformed into, “Liberty Reserve,” and “Liberty Escrow.”

Our interface is top notch. Lots of stuff that we did before manually is automated. Exchanges are instantaneous. I don’t need to be awakened in the middle of the night by a client from Eastern Europe who needs to transfer funds to a third party. He can do it all by himself now.

planetgold: How does Liberty Reserve distinguish itself from other digital currencies?

We intend to link anonymous debit cards to client accounts in the near future

Arthur: Well, the escrow service is one way; plus, we’ve been around longer than most (except maybe e-gold) as a hybrid stored value/escrow service type company; we have an excellent staff; we are negotiating with several market makers in various countries to make a market in Liberty Reserve currency for the benefit of our clients; we intend to link anonymous debit cards to client accounts in the near future so that clients can have easy and discreet access to their funds, at any time; and most importantly, we are first and foremost dedicated to exceptional customer service. We are not a bank, and don’t treat our clients with a suspicious or haughty attitude.

I’d like to add that I was pleasantly surprised at the revolutionary idea behind e-gold. I must admit that it was looking at e-gold that gave us the final push to realize that we were doing something similar. We just never realized, until we saw e-gold, that someone would have the audacity to compete with the Federal Reserve, to claim that their money is better money. e-gold changes the way people think about money, for the better! We hope to one day be able to integrate our service with e-gold to provide our clients with seamless currency transactions across most avenues of worldwide commerce. We see how other digital currencies are popping up and offering their own currencies and it is up to so-called, exchange providers, to make a market in all of these currencies so that the public can have some integration. But it is far from seamless. We looked at, and that service is a very good start to aid in seamless integration between fiat and digital. But the digital currency world needs even more integration. We are currently looking into the idea of backing our currency with e-gold.

planetgold: Do you have any legal concerns about this type of business, such as government regulation or invasion of privacy?

We don’t collect much in the way of personal information

Arthur: Since we’re based in the Caribbean (Nevis to be exact), we have not to date, nor do we anticipate any sort of problems of that type. We do respect our clients’ privacy and only a subpoena served in Nevis would prompt us to consider providing anyone’s personal information to a third party. However, since we’re not a bank, we don’t collect much in the way of personal information anyway.

Because we’re based in Nevis, you have to be a murderer, kidnapper, or drug kingpin for us to be forced to divulge any sensitive information. Of course, if you ARE such a person, we do not want you as a client, and we would be only too happy to cooperate with authorities in situations like that. As far as client privacy, all our files and communications with clients are encrypted and stored on offshore servers. All online transactions are conducted through a secured socket layer protocol (SSL). We have taken other steps, but they are proprietary in nature.

planetgold: Have you had any problems with fraud?

Arthur: We’ve had no fraud attempts in the past because most of our clients were well established. I know that fraud is a prevalent problem in this industry because better money attracts thieves. But we are ready to face the challenges, and we are working on proprietary systems to help alleviate fraud problems.

planetgold: What are your fees?

Arthur: There is no fee to obtain or to store Liberty Reserve digital currency.

planetgold: How’s that?!

Arthur: It’s true. You can obtain Liberty Reserve currency dollar for dollar, plus bank fees. There are no storage or set-up fees. Spends are only 1% with a maximum fee of 25 cents. For example, you can obtain LR digital currency of $100,000 (minus bank charges), and spend it to a third party for a fee of 25 cents. We want to encourage the growth of digital currencies outside the snooping banking environment. We’d like people to recognize that Liberty Reserve (especially once we have gold-backing) is better money and hoard it. Therefore, there is a 2% fee for out-exchanges (we have to make at least a little money for providing the valuable service).

planetgold: Why don’t you offer gold-backing immediately? Why wait until later?

Arthur: We considered waiting. But there is really no reason to wait. Once Liberty Reserve obtains gold-backing, current customers will have an option to convert their currency to gold at extreme discounts. I guess it was a business decision to enter the online digital currency market as soon as possible.

planetgold: What information or procedures do you require for people to open an account at Liberty Reserve?

Arthur: Anyone can enjoy the benefits of Liberty Reserve. Signing up is a cinch. All you need to do is fill out an online form, and you will instantly receive an account number that you can use right away.

planetgold: What are your plans for the future?

Arthur: We plan to integrate Liberty Reserve with online bill paying services so that our clients can pay most or all of their bills with digital currencies. We are constantly on the lookout for ideas and services that would help our clients make the most of Liberty Reserve and to switch their financial transactions from the established bank monopoly to a better form of currency and value storage system.

planetgold: So when is the official launch date for Liberty Reserve online?

Arthur: We’ve set a launch date for the online business for Tuesday, May 28, 2002.

planetgold: This concludes our interview with Arthur Budovsky of Liberty Reserve.

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