Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Gabriel Mirón & Steven Morell: Steven Morell & Gabriel Mirón: NYDFS BitLicense Proposal, MEXBT, Moneero, Latin America

Episode Date: July 21, 2014

Steven Morell and Gabriel Mirón join us to discuss the recent New York Department of Financial Services BitLicense proposal. Our regulatory affairs correspondent Siân Jones also joins us briefly to give a general overview of this proposed legislation. We also take the opportunity to talk about Bitcoin’s development in Latin America, notably as a means to disrupt the remittance market, a multi-billion dollar industry. Our guests also talk about their respective companies. Steven is Chief Product Officer at Moneero, a company based in Uruguay and which is building a full suite of Bitcoin services. Gabriel is CEO of MEXBT, a Bitcoin exchange based in Mexico. Episode links: BitLicense draft proposal press release BitLicense draft proposal document MEXBT Moneero This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/029

Hello, welcome to Epistenter Bitcoin, the show which talks about the technologies, projects, and startups driving decentralization and the global cryptocurrency revolution. My name is Sebastian Quichu. My name is Brian Parmenkraine. Today we have two gentlemen from Latin America as guests. First one is Gabriel Marin. He's the CEO of the Mexican Bitcoin Exchange, Mex. ET. And you also have Stephen Morel on, who's the chief product officer of the Uruguayan Bitcoin startup, Monero. So super excited, have you guys on today. We have a few topics today. Well, the thing we want to start off with is the BitLicense thing, which has been sort of a hot topic today and in the last days. So Sean Jones has done a brief segment on that, which will play now before we get into the discussion.

Last week, the New York State Department of Financial Services published draft regulations relating to the conduct of business involving virtual currency, the first substantive detailed virtual currency regulations to be issued by any jurisdiction. The man behind the proposals is 44-year-old Superintendent of Financial Services Benjamin Lorski, who was once described by Business Insider as the Wall Street regulator who pissed off the Fed, the Treasury and the entire city of London. He regulates around 4,500 financial services businesses with total assets of around $6.2 trillion. The 40-page draft bit license regulations

focus heavily on consumer protection, anti-money laundering and cyber security. In a supporting press release, Lorski said, we've sought to strike an appropriate balance that helps protect consumers and root out illegal activity without stifling beneficial innovation. Opinions on whether the balance is right

is being hotly debated on social media and in the press. In an email to the Wall Street Journal, Cameron Winklevoss welcomed the regulations saying he was pleased Lorski had embraced Bitcoin and digital assets and looked forward to New York State becoming the hub of this exciting new technology. Nick Spanos, co-founder of the New York City Bitcoin Center, told CNN that he welcomed regulation but said younger entrepreneurs in his circles think the rules are too costly and will crush them. in an impassioned blog post founder of coinapult and Satoshi dice, Eric Fahise, described Lorski's proposals as anachronistic legislation that will toss Bitcoin into the same unethical regulatory mess that currently governs the legacy banking system. Meanwhile, leading virtual currency researcher in academic Jerry Brito wrote that the proposed regulations were a step in the right direction and not out of the ordinary.

Lorski proposes a new body of technology-specific regulation. Interviewed on CNBC, he said, the regulatory framework covers basically anyone operating in a significant commercial way in the Bitcoin space, suggesting only large players would be affected. However, as drafted, the definition of virtual currency business activity is wide and will catch exchanges,

including those exchanging from one virtual currency to another, payment processors, hosted and non-hosted wallets, custodians, market makers, traders, tipping apps, investment management services and even alt-coin developers. Only miners, merchants and consumers using Bitcoin to buy and sell goods and services, and certain New York banks are spared. Seemingly, even non-financial currencies such as Namecoin and Ether could be caught, as will escrow and notarial services. The regulations will apply not only to virtual currency businesses in New York State, but also to anyone anywhere in the world engaged in virtual currency business activity involving New York, or involving someone who resides in New York, or is located there, or has a place of business,

or is conducting business there, regardless of where he or she is at the time. And that doesn't just mean clients. It applies equally to payees, recipients and counterparties. even if a virtual currency business outside New York decides not to do business involving New York or with New Yorkers, it will nevertheless need to know the identity of all parties to a transaction in order to be aware of any New York connection.

Which takes us to one of the anti-money laundering requirements. Licensed businesses will need to know the identity of all parties to a virtual currency transaction, something that's practically impossible today, effectively removing the privacy cryptocurrencies afford. Other anti-money laundering provisions include enhanced

due diligence requirements for accounts involving foreign entities. So say a French exchanger who transacts business involving New York and even obtains a bit license is required to perform enhanced due diligence checks on his clients in France,

Germany, Switzerland, South Africa, indeed for all his clients who aren't American. License businesses must maintain 100% virtual currency reserves and also maintain a bond or trust account in dollars. Capital requirements will be imposed, but as yet no figures have been published on the amount of capital and bonds required. Other consumer protection measures include disclosing to consumers a list of prescribed potential risks with virtual currencies. According to Lorski, there's a big cyber security potential issue in this industry, and to countenance, and to counten, counter it, even the smallest virtual currency business will need to maintain an exhaustive cyber security

program, including employing cybersecurity personnel, risk assessment, detection and protection systems, response and recovery measures, as well as annual penetration testing and quarterly vulnerability assessments. Quarterly and annual financial reports will need to be filed and records kept for 10 years and there will also be official inspections at least every two years. licensed businesses need to employ a qualified compliance officer, qualified anti-money laundering compliance personnel, and a qualified chief information security officer. The regulations apply equally to virtual currency businesses of all sizes. Anyone engaging in virtual currency business activity who's not licensed will be breaking New York State law, as indeed will operate as a mixing services. The draft regulations will be open for public comment for 45 days from the 23rd of July and only feedback filed officially in New York will be taken into account.

The New York DFS will then review and revise the regulations before finalizing them. Existing virtual currency businesses will have 45 days from when the regulations become effective to file their applications. Under transitional arrangements, they'll be permitted to continue operating unless their applications. is denied. Applications will need to include detailed policies and procedures, plans, projections and financial reports, together with financial information and independent background reports on key personnel and shareholders. Their fingerprints and those of all employees must be submitted to both the state and FBI. On CNBC, Lorski called it a great day for the virtual

currency industry. Whether or not that is the case will become evident over the next months and years. Meanwhile, I will be reporting on developments, going into the detail of these proposals and exploring the differences between the New York and European proposals on my blog and in future episodes of Epicenter Bitcoin. This is Sean Jones reporting for Epicenter Bitcoin. So thank you, Sean, for preparing that segment. So this is this topic that, you know, kind of took the Bitcoin community, well, I mean, just caused a great amount of upsets. set in the Bitcoin community. And a lot of people are calling this

the destruction of what we're trying to build as we're trying to build these new decentralized infrastructures. It does seem quite damaging at first when you read it. Of course, now this is not enacted legislation. It is a proposal. There will be a 45-day challenge period

during which participants or people that have a say in this will be able to submit official challenges and then within I guess in 45 days and it may be reviewed and then enacted as actual legislation. But the initial proposal is, I mean, just kind of ridiculous in terms of what it tries to impose on Bitcoin companies and Bitcoin users, not only in the U.S. and in New York, but also just like worldwide. So what are your initial thoughts on this, Brian? Well, I think it's, well, I think it's obviously terrible.

If they actually enact that, it's completely impractical. I think except for some Bitcoin exchanges, nobody will actually do this. So I think we will see a type of segmentation if this goes through, you know, that people will, well, a ton of big. Bitcoin startups will be violating New York Wall. I think for the most part, you know, here, for example, we have this app. There's some friends of mine developed where you send Dogecoin. It's called Doge Rain, so you sort of slide Dogecoin and gets in the cloud and get sent to people. Well, technically, they would have to get a bit licensed, you know, which is just ridiculous.

So obviously a lot of people will be in violation of that. I think the exception being some exchanges like Coinsetter that will probably do that because for them it's not such a big change. I hope there's going to be some drastic changes from the proposed regulation. I'm not so hopeful. But perhaps let's hear from both of you guys. Gabriel, do you see any implication for Max BT

if this goes through the way it is right now? Yes, yes, of course. At the moment we're helping. We're analyzing because we're considering that it's the first draft and want to see it's going to be the final conclusion. But if this goes on, we're going to have to be much more strict and defining our processes for being compliant with how that is in place. It's interesting because I actually thought you run like the kind of Bitcoin business,

which may be in the like small minority where this is not such a big issue. Because I presume you have to do KYC anyway. so excluding New York users shouldn't be too much of an issue. Am I missing something there? Why do you still think it's going to affect you? Well, we are, we're not only focused in Mexico. We're focused in the Internet exchange for Latin America. We have to apply MIA at the moment,

and we're going to have to exclude some U.S. customers. Also, one of our goals is to be able to focus remittances and remittances. a lot of the to Mexico come from the US so there's an implication so you were actually picking up having directly American customers in your exchange yes okay yes yes at the moment we have vessels and we have US dollars so we're not only focus of Mexico we're based in Mexico but our operation is much more private to the region and also include in the US. What about you, Stephen?

Well, in our case, it's similar. We are our headquarter of this in Uruguay, but we're aiming at the global audience and we have some series outside the US, outside of Uruguay, by the way, one in the US. And we probably will have to exclude everybody from New York. But does that mean you'll also have to do K-W?

see on everybody because otherwise how do you know you don't have someone from New York? Well, if you have, if you do anything with money, you most likely have to know who you're sending money to and if you have to know who you're sending money to you are being regulated and you have to be compliant and then you have to KYC your clients. That's if it's not true in any jurisdiction at some point it will be true for a jurisdiction. The thing is that in normal AML policies, you don't have to verify every user from the start. Normally there are thresholds, and you probably know this from signing up with PayPal, you can sign up with PayPal and your account is being limited to certain thresholds

before they go ahead and ask the proof of a request, ID copy and so forth. So the same applies for every other financial institution. So the way we see the draft right now, I don't see any trash holes in this draft. So you would have to exclude every user even before we came a C, So what you're saying is that in fact, this initial draft does not include any threshold. So basically, whether you're transferring one Satoshi or $10,000 worth of Bitcoin, you essentially are subject to AML, KYC rules. This is my understanding.

We haven't discussed this. I'm not a lawyer. I'm one of the compliance officers in Petronero. and we haven't discussed this. I had some of interference. I was saying that I'm one of the compliance officer. I'm a lawyer and we haven't discussed the New Yorker bid license in-depth without our legal team yet. You know, this is also just New York.

I mean, I love New York. I live there. I work there. It's one of my favorite places. I think it's an important place in the world. but it's just one of the places. And there's a lot of competing jurisdiction worldwide. And I think if this goes ahead in New York and there will be no changes that makes it practically viable,

New Yorkers will be simply excluded from the Bitcoin. That's interesting. I mean, I hadn't really thought of this. So, I mean, what companies will essentially need to do if they want to be excluded from this legislation, you know, if it does go through and it is, it goes through as it is described in this initial draft, if they want to be able to do business and be free of that, they'll have to exclude New York customers. And some ways that they can do that is perhaps like, do IP track their IP address to know where they're coming from or do KYC on everybody so that you can actually define. fine, one person is coming from New York or not. So in a sense, if that, if Bitcoin startups and Bitcoin companies in the U.S. and also worldwide, and we'll get to that in a minute and why it also applies to other countries,

if basically they'll, they'll be excluding New Yorkers. So Bitcoiners in New York also have to lose from this. It's not only cumbersome for companies, but it's also, I mean, Bitcoin users. and if you want this to go to mass market, potentially that's a lot of people, they'll also be affected by this. Let me add one thing because you said something very important, and this is very important to understand

about AML policies and regulation and framework worldwide work, and this is true for any jurisdiction. You're not supposed to do something that actually works. And I think this is systematic for this draft that we are looking at, It's not meant to be usable or viable. What you need to do is, excuse my French, you need to cover you ass. So if I, as a wise officer, take the according provisions so that they can plausibly say, I did all that I could to exclude New Yorker users, I'm in the clear.

If there is still a way of which I don't know how New Yorkers can use, use it by, say, using some sort of proxy or VPN or whatever other technology, TOR network, and they can come up with a residential address and this outside of New York. And I have no reason to believe that they are not, I don't, you know, I'm not the FBI. I don't have to hunt people down and actually arrest them. I just have to do as much that I can plausibly say, I did what I'm not. I had to do. It's all all cover my ass. Now, well, one thing that is, I guess what I find the most appalling about this is that this

legislation doesn't only cover and is not only subject to American company. So for instance, if you're a web wallet provider in Slovenia, for instance, and you have customers in New York and you want to be compliant with this legislation, you in fact also have to abide by it and put in place all these KYC and anti-money laundering, all of this very heavy and cumbersome infrastructure if you want to be compliant. And to me, it's just the absurdity

that a U.S. government state would somehow think that they can also tell the rest of the world how they can do business. Like this just to me is just some sort of like arrogance. I totally agree. I think this is crazy arrogant. But this is nothing new, right? So I think the US has done that in many areas. That's the sort of way.

In banking as well. Yeah, I know. Exactly. Right. But I mean, I think the thing is so, you know, maybe. you know, Manero is going to go ahead and do this and you're going to require K.C. etc. But a lot of people won't, right? A lot of startups in other countries, you know, we'll just say we don't care. And so if you do go along with that, you're going to make

your services less attractive. So, because if I want to create a quick web wallet, etc., you know, I don't want to give my residential address and things like that. So I think we will see that. And then I wonder whether, for example, just IP blocking, you know, if you block a New York IP address is enough. You know, it may not be enough. Well, first of all, we are not surprised what we're seeing here from New York because it's sadly what the world has come to that the U.S. has, you know, super aircraft carriers are there forcing their law where it is in the world. We've seen this with Kim.com in New Zealand. We've seen this everywhere. It's the last remaining superpower and they're enforcing their laws as they wish.

When it comes to, and I'm not getting tired to repeat this. We are using the term of Bitcoin Revolution, but I actually think it's not going to be a revolution, it's going to be an evolution. Because there's a huge difference in the technical innovation for startups in the Bitcoin Fair that we've never seen like this before in any other innovation. Like in the days of social networks, you could hack something in the night, launch it in the morning and you would be a rockster by the next day. We've seen this with sites like Twitter or something.

This ain't going to work in the Bitcoin spirit. You want to start at Bitcoin startup, the entry levels are a magnitude or many magnitude is high. First of all, you can't program something overnight and launch on the next day because after breakfast you already got to be hacked and coins are stolen. We've seen this in the past. Secondly, you cannot just sit down and vendor service and say, hey, come on, let's launch this world white. Even if you get the technical security levels in line, you're probably violating the law in 150 different jurisdictions.

So you have to, you can't just start a page in the global. You have to do your diligence and you have to go through licensing process. You have to solve. Well, I disagree with that. So right now, as far as I know, if you just do some like Bitcoin startups where we don't touch Fiat, I think the only law you're going to clearly violate if it goes through is the bit licensed thing. And then, you know, the powerful thing with Bitcoin is that you can start your startup anywhere. And as long as you don't have that intersection with the banking system, et cetera, you know, you can have users anywhere.

and so people can totally do that and I think that the sort of starting a Bitcoin startup overnight you know I think that's totally or like you know overnight or sort of like in the typical startup style of like hacking something together and doing that I think that's absolutely going to be a huge

part of this and of course you're right right if you hold customer funds if you have like a web wallet yeah then you know you need to be more careful but this is what I'm saying whatever your business model is you have to evaluate and if you have to do this with social network

if you start whatever type of Bitcoin startup you have to take your business model and you have to sit down with a legal team and say can I do this? And it's not only New York. Keep in mind that as often portrayed Germany being the Bitcoin Paradise country

which is not Bitcoin is in Germany in financial instrument and is regulated So if you're just a journey doesn't send aircraft carriers around and the rest people abroad. But you very easily you can violate German federal law. And this is true for many more jurisdictions. It's the question of enforcement. The US simply enforces it outside his own country on a massive scale and other countries don't.

But you're still violating a lot of regulation laws. Or you might. And you don't bite, but not even now. One thing that's also important to point out is that this bit licensing will also be required for people or entities controlling and illustrating or issuing actual virtual currency. So in effect, if you just create a new virtual currency, which you can pretty much do right now, And we're not talking about all this other stuff like colored coins and the cold crowdfunding thing. You'll also be subject to bid license. So in effect, I mean, if this would have been enacted four or five years ago, just starting Bitcoin itself would have been illegal unless Satoshi would have had to get a bid license.

Yeah, right. But nobody's going to do this. Like, I mean, it's not like people are going to stop creating new currencies. It's not got any of these people, you know, maybe some exceptions, but let's say 99% of people will not get a bit licensed. So, I mean, I think I see the future slightly differently from Stephen. I think what we will see is just that there will be a lot of things going on that are technically illegal. You know, people will just start their companies anyway. And people will start them in other places.

People will obviously be violating this bit license thing if it goes through. I totally, excuse me, I'll jump in, I totally agree that the way out of this, of this lockdown situation we have between this crazy, crazy and totally useless worldwide regulation that is built on this totally useless affair of war on terror and war on drugs, which is all a pretext to do massive surveillance of capital. movements will be eventually, and I'm totally with you, will be eventually overcome by people massively violating it. And it will be a problem of enforcement.

And you're right, maybe your startup is in some bit quite frankly jurisdiction and maybe you don't care about the laws of New York and maybe you're not, never pop up on the radar of any district attorney in New York, and nothing will happen. but you're still violating New York law. And, well, we know what happens or what potentially can happen to people abroad who are violating the U.S. law. Sorry, no, I was just what I thought it was interesting about what you're saying is enforcement, right? And this is where things get interesting is how will the U.S. government, and particularly the New York, the state of New York. And we can also anticipate that other states will enact a similar legislation and not just in the U.S.

How will they be able to enforce some of this stuff, which is just like completely impossible? Like if you create a new virtual currency, for instance, and you issue it, and it's completely open source, and there's not like one person you can go after in one country because developers of new virtual currencies can be pretty much anywhere. How will you enforce this? And there's a lot of things in this when you read this. It's like, how do they expect to enforce this stuff? Well, they can, of course, put out arrest warrants. Sue people can arrest people when they, you know, get on a U.S. soil.

Maybe in some cases they can try to get international arrest warrants. No, but, I mean, I'm just talking about identifying parties. I mean, of course, they will only do it, like, if it gets to, like, a certain size or if they care about it. I mean, there's going to be way too many violations to, like, go after everybody. but of course it creates this huge uncertainty because so many people will be in violation of this it kind of gives them

a legal basis or it could give them a legal basis to just arrest like whoever they don't like yeah that's the risk I would say I would say they can do this already they can and this is you know the master balance

that the NSA is doing worldwide is aimed at you know the possibility of arresting anybody anywhere at any time. There is a big difference between two main forces here. One is civil disobedience, and I hope that we will see more civil disobedience in the future, because I believe it's one of the pillars for freedom and for checking balances, there be governments and populations

that are in cases speaking here. But the other thing is if you run a startup, there's different responsibilities because you're running a business. You probably have investors that's money that you're responsible for

and you cannot create a startup based on I'll probably break loss, but maybe it ain't going to be enforced. That's just not how you can build business. So if you're a serious startup, you have to make sure that your startup is in line with the loss. You cannot, users get angry at the startups. Why are the K-YC, why they want the passport copy, why do they want my proof of address? I don't know about that though. I mean, if we have a lot of, for example, think of Airbnb, Uber,

in London we did a longer interview with the former CEO of Skype. All those companies were in violation or are still in violation of various local laws. I think, you know, that's often, that's just something you'll have to do if you want to do something. I mean, I don't think getting a bit licensed is going to be the answer for a lot of people. I think it's going to be, well, it's just going to be a risk you have to take is you're going to be in violation of these laws. Well, it depends what type of laws you're violating. If you're violating laws because some, you know, cat-driver unions are protesting, that's one thing.

If you're accused of money laundering or terrorist financing, you must see yourself thinking what worse case or, you know, somewhere else this is a whole different magnitude that they're going after. Well, perhaps let's segue into Latin America, And maybe we can just start off with regulation as well, although we have been spending way too much time to discussing regulation, although it's such an important topic. What's the situation in your country, Gabriel, in Mexico, Mexico?

Well, what's the situation of the relationship? We're a temple for our business. We have to apply several rules about identifying our customers because we're talking, we're working with cash, we're a direct gateway of a fiat to crypto. So we have to identify our customers. We have to submit reports of the people that is that is caching in. And that's an arbitration of the business regarding Bitcoin.

Well, we had a meeting a couple of months ago with the Bank of Mexico. And to be honest, it went pretty good. they are fully aware of it. They understand how it works technically and but they see it as too little at the moment to have to regulate it

and they were pretty clear in this part that they understand that there's a lot of benefits that the technology can bring and they're analyzing it but they're not not going to regulate it in this moment because number one it's too little

and if it's evolves, they're going to take cards in the matter, but they just see and how it evolves. So that's a little bit of the situation at the moment. So, Gabriel, if you guys are doing AML, are you doing it because you expect

that in the future regulations or legislation will be passed that requires you to do it? Or have you already been told you need to do this right now? Yeah, no, we need to do it. We need to do it. We're doing an activity vulnerable activity and every business that is in this sector has to identify all

your customers and identify their transactions when they're talking piet. Okay, cool. And what about your guy? Well, the same situation. And not only over why, as I said, we are in multiple jurisdictions. and the way it works is essentially it's the same framework and the same set of rules just a little bit different versions in every jurisdiction I've seen so far so down here worldwide we are awaiting a new law

about money issues very similar to the legal framework that we've seen developing over the last decade in Europe I think the government will write PayPal stand out as an e-money issue in the UK. So we have waiting for a new law here, group by that would make us an e-money issue. We've seen the same thing in part why. And as Scott Bina said, we are under the same regulation. We need to K or see our clients, we need to report suspicious transactions. And to the whole shebang that any other financial institution has to do.

Even lying to our users and decepting them, I can give you an example. If I detect a lot of small transactions that look like somebody circumvent in certain thresholds, I have to contact the client. and this is actually in the regulation. I have to tell the client that I want to help him save costs and if he would explain me the nature of his business, I would be probably able to do this more cost-effectively for him, which is a blatherly.

If the client cooperates, it's fine, and I get to sniff around his business, which is none of my business. And if he does not comply, he says, no, no, thanks, that's fine. I have to report this. That is crazy. It surely is. If you want to be compliant, if you want to run a legal business, you need to be compliant.

If you want to be compliant, you're becoming essentially a fuck of this crazy worldwide surveillance network. of this controlling financial movements. Which is, I mean, I feel like with this news, we're just going back into the same type of system that we're already in. This is what we're trying to fight and trying to counteract, I guess. And this is the ideological vision of Bitcoin is to detach ourselves from this corrupt system of corrupt governments and banks and corporations. And it just seems like we're just going right into a wall here.

If this stuff does pan out as it seems to be going. Well, we will eventually prevent. The thing is, in the first step or in first phase, we need to bring Bitcoin to the people. Once Bitcoin has mass adoption, enforcement of this will become simply important. possible. Think of regulations like you cannot transport more than $10,000 usually across the border without declarating it. But you can travel with $20 million in your rainbow wherever you want it.

So this is a very good example that this system they have built or that has grown on. I don't want to say somebody built it has just grown. will become simply not infrothable on the last scale. Yeah, I mean, I totally agree. That's kind of always been my thinking as well. You know, when people were worried about companies like Circle or Coinbase, you know, because it's like don't pure. You don't hold your own key.

I never saw that as a problem. I saw that as a good thing because it gets more people in. And then, you know, once you're in, of course, you know, that's a very different situation. If you can transfer it to wallets you control, that open source wallet you run locally, you know, there's just no way you can control that from a government's perspective. But of course, that changes, you know, when you have sort of in, when people don't hold their private keys and when it's, for example, prevented that you sort of take money out of that.

I don't think that's going to work. I think that's just going to be impossible to do. But I guess that's at least what they're. perhaps we'll try. But let's briefly just also go into both of your businesses because we haven't really talked about that. And I just said like one sentence about it. But Gabriel, do you want to tell us a bit about MaxBT,

what it is and what your plans are? Yeah, for sure. Okay, so MexiccD is a trade and platform for our cryptocurrencies. We are based in Mexico. our focus is for the region. And at the moment, we really beta launch semi-privately, because

we're letting all the users come from it and test them. And it has been going pretty good. We have had no major issue. The technology is working smoothly. The users are pretty happy with the system. So, but now we are hoping this week are going to

update and are going to launch the new, the new US version with a lot of updates. And after that, probably going to be one, two, three weeks more in data before open. At a moment, we have Bitcoin, we have Bitcoin, we have Mexican pesos, and we have

US dollars. But we're going to be integrated with different payment processors in the following weeks. So we can take money from different countries in Latin America, such as Colombia, such as Brazil, such as Argentina and the gateways to receive money. Our main goal is to give access

and easy access to people from the region to buy crypto. And you focus is kind of on remittances, is that right? Yes, at the moment, what we want to do is we want to bring liquidity to the region. Like when we started in September, For example, in Mexico, we were doing OTC, and you were buying at 8%, 10% premium on the market. This has been decreasing.

This is really positive. It was really good at the moment. Like, you're still high pay in like one or two percent premium for crypto, but it's going lower. And right now, with us, it's 0.5% for trade and hope to have a proper market in the following month. But I'm going to an 8% premium to 2% in six months. I think it's good. And let's see how it evolves. How is the Mexican, what's the percentage of banked people there

and also the amount of people that hold credit cards? Is it fairly high? No, no, no, it's horrible. It's horrible. We are cash sites. So it's basically a cash-based economy. Do you plan on providing other ways? Like I know, for instance, like in China, BTC China has like vouchers that you can buy at kiosks,

which allows you to then purchase Bitcoin on their website. Is that something sort of things that you guys are thinking of also, like other ways of getting money into the exchange? Yeah, yeah, yeah, yeah, of course. That's one of the main way that we have, like what you said, the bank of Malaysia and Mexico is 70%. It's huge. And so it's a major issue. But we have this cash payment network that has 130,000 places in Mexico where we can say cash.

So, for example, somebody can go to a convenience store and can cash in 50 pesos or can cash in $5,000. And they have 130,000 places around Mexico, going from 7-11 to Oaksol to Walmart, a lot of places where they can put a, put cash and it would be credited in our system. So that's that right now, for example, if the data has been, I don't know, like, let's say, 70% of the way that people is caching in cash in it. I was looking for some information on maxbt before and I found I think there was a prospectus maybe for seed coin. And I saw some numbers on the remittance figures.

So I think I saw that 10% of the Mexican GDP comes from remittances, which is basically all from the US, and that this was about $38 billion per year. And I'm curious, first of all, what kind of fees are usually charged when you do the sort of dollar to peso remittance transfer? Yeah, well, it's $23 billion, the amount of money annually that it's coming in. 23. Yeah, and it's crazy because like 51% comes from Texas and California. So it's really easy to target. And after then, you have Michigan. But, yeah, so the fees that are charging,

a difference from, for example, Africa, where I think it's around 8%, here we would say that they have several solutions. Like banks and remit institutions have developed different. different ways to send money. In some cases, they can be charged like 5%. Or, for example, if you send $100, they charge you $5. They have developed these cards. They have targeted through many different places, like the remittance issue before Bitcoin.

So I don't know. I'm not exceptic about remittances in Bitcoin. Bitcoin, but I think there are a few things that must be to be done for it to be able in place because it's not only about the fee. It's much more complex. We have to understand also that the people that receive in money here are what we're at cash society, but we believe in cash. We believe in this paper, you know, and especially the mothers of the people that's working

uprope and that send them money, money back, believe in this money. and don't believe in even banks because they have their money stored on their pillow. And making them move from that to receive in their mittens. For Bitcoin, it's going to take much more that only the fees. So, so, so that's all that. I mean, I guess the thing that could happen is that somebody, you know, kind of plugs into Mix BT and maybe plugs into

a coin base or maybe a more cheaper and more liquid US exchange once it's there and then sort of abstracts the whole Bitcoin behind the scenes and does that service and perhaps you can do it much more cheaply

than the current remittance services. Do you think that's a possibility or do you think the fees are low enough that this is difficult to do? Yeah, yeah, of course. You have to make it transparent, and that's a whole idea. You plug in not there and you plug in here

and you make it invisible so people never knew that they took, that they transacted with. Bitcoin, yes, it's a possibility. Let's see how it falls. Like, I don't know, for example, digital money you know like there have been several several solutions here like you have transfer transfer it's similar to impesa but it's from america mobile america mobile is one of the largest

telecoms worldwide it's carlos lim and they had 70% of the market and they came with transfer for example and they have almost one year and a half working on it and it hasn't hasn't big attraction or you have Wanda from Telefonica which opened the same solution as in FESA in different countries in Latin America and right now it was a joint venture with MasterCard and with Telefonica and they closed they closed their operation in Mexico they closed her operation in Argentina the only one that's still operating it's Peru and I don't know that I'm not sure it's still operating so people at least in Mexico and I think in Latin America hasn't be adopted like they have adopted in MEPSA.

But there's an interesting case in Nicaragua. There is a similar solution that's called M-Peso, and they're using it for their mobile or their public transport, and it has like 30% of the usage. So people are starting to use that solution. They have done it pretty correct. So it has a lot to do with adoption and how, our societies are going to adopt this e-money and this this cryptocurrency to make this work.

So what about your plans of expansion? You talked about Colombia, Chile, I think Peru, as I mentioned somewhere. I don't know, perhaps this is outdated, perhaps not, I don't know. So are you planning on setting up local subsidiaries in the different countries that would allow people to buy Bitcoin's there? At the moment, we are focused in Mexico, and

what we're doing is enabling cash-in. We want to be able to take money from all these different places. So we are working with different payment processors to integrate to our system and be enabled to receive money from them through payment

processors. Yeah, that makes a lot of sense. Are you going to have some issues like with local regulations that are going to be complicated? or can you do that pretty easily? Well, that's difficult to say. That's difficult to say. At the moment, the rules that we have to apply and to regulate our Mexican roles,

which are really strict, really, really strict, like, we have a situation about moving money. And our AMO and KYC rules are pretty, pretty, pretty, script and we have all of the reports monthly to the authorities. So in that part we think we're pretty covered and

we're probably on the rules here I think we're going to follow the rules of other other countries that are less great than this matter. Stephen, could you perhaps tell us about Monero? Yeah, let me first say that I totally agree

this is also my experience what Garber was saying the way I haven't been in every single Latin American country yet but from what I've seen so far most of the Latin American

countries and most of the countries in the emerging markets are see this huge number of under banked people and are And our cash base, each country has something that, like a Western Union style service,

one or more, or what we have two, like Bago and Abita, where you can essentially send cash around for some fees, usually between 2% and 5%. In some countries, it's a little bit higher. But there is a general trend in Latin America, at least, to move. the population away from the cash handling towards some sort of electronic money. Ecuador is a very good example. It's one of the countries that do not have their own national currency because of collapse. And they just recently started a project, by the way, contracting an Uruguay company,

to develop a sort of e-money that will be able to develop a sort of e-money that will be a project. will be cell phone-based, stupid phones and smartphones. And we see the same thing has happened in Paraguay, about 80% of money transfer in Paraguay is going over cell phones. I think the initiative in Paraguay was taken by one of the mobile phone providers. And we see this in a lot of countries in Latin America. Monera itself is based in worldwide. What is our worldwide?

We also have a subsidiary in Hong Kong and we have a subsidiary in the US. We are planning for a further subsidiary in Dayton in Yucin. But Monera itself is not as much a Latin American targeting company. We are targeting the global market. So just as coin-based circle, blockchain. Or info, we are not focusing solely on the Latin American market. To describe more narrow in a nutshell, I would say it's a Bitcoin bag. I should be careful with a word bank from legal reason.

but the idea is to you know people do not really care about Bitcoin itself nobody cares about underlying technology right now we are in a time where in some places

you can open a store and write on it Bitcoin Embassy or Bitcoin here or whatever and Bitcoins will flock to that place but it's only Bitcoins and they're coming there for political reasons, most of them. If you want to reach the normal population,

you have to solve their problems, just as Gabriel said, the moms believe in cash because that's what they know. In other parts of the world, they believe in their bank account because that's what they know. Or they believe in checks because that's what they know. So we have to provide them things that look and feel. feel and taste the same way that things felt that they trusted and that they knew all the life.

So Monero is offering accounts, very similar to bank accounts, or save the PayPal accounts, and a lot of channels on which you can access this account. And from there we have this, I sometimes describe this as a box of label pieces. We have this box term that allows us to build business logic, to build products that actually solved the problems on the ground. Like we have a rising level of criminality here in worldwide. and the merchants are concerned about carrying the cash of the daily sales to the bank after they close their shop. So addressing this problem, reducing the amount of cash that you have in the store,

is solving an actual problem. And this is what we are aiming at. And can you tell us about some of the solutions that the Monero is, I know there's different solutions. So you have Monero Social, Monera SMS, the BTM and a trading platform. Yeah. Yeah, let me give you a quick rundown so that it's easier to understand. The core of Monero is a currency-agnostic banking system that we call rocks.

And rocks does on the one side, it handles account, as I said, current-to-ignostic banking system. It can handle accounts in Bitcoin, light coin, whichever coin, ripple, any fiat currency, a dollar, euro worldwide, pace or whatever, up to, you know, smart property, common coins, this type of things. As our CTO said once, it could be bags of rice as long as it tell us how many rice coins are in the bag of rice. So this is on the one side and the other It does all the things that banking systems should do. It does user management, account management, KIC procedures, audits, and so forth. And on top of ROBS, there is an API and it allows us to build what we call thin applications.

And we call them thin application because we don't want to call them stupid applications, but they are stupid applications because they don't store their own data, they don't have their own business logic. What they do is they take user input and shuffle into rocks and then they get an answer from rocks and shuffle the answers if they use it. Right now we are launching a number of examples like a Facebook application, a Twitter application, an SMS application, an ATM, an ATM, a ATM application, a point of sales, term, and so forth. We can essentially connect anything to rocks. And we are thinking also in terms like, you know, upcoming internet of things, devices, sensors could be connected to

two rocks. And it allows us to connect this account that you have, that feels and looks like a bank account, to any type of social network or social service and it allows us to target also markets like, say for example, China, social network landscape is totally different from what we know, or from our social networks.

So when you look on the outside, we see where social and the web and beach, and all yourself. But the truth is, these are all thin applications that talk to the kernel. And the kernel is a banking system

that gives you accounts and can allow for any type of financial product because we can accommodate any type of business logic. So it's interesting how sort of ambitious you guys are in doing all these

wide range of products, you know, even if you compare to something like Coinbase, this is like a whole other level in a sense. So I'm curious, are you guys

planning to raise like some really big amount around of funding? It seems like you will need a really big team or I would say different teams working on all these different aspects to accomplish this. Well,

Well, we have been funded over the last year and a half through supporters and their own shareholders now from the Bitcoin sphere and through some private equity. And I think we've done a pretty good job in developing this core system over the last year. Now that the core system has been stable for quite a while and we started developing all those applications on top of the API. We are hiring, actually, if anybody's listening out there, good quarters, please send us an email to jobs at Moniero.com. If I'm allowed to do this, we are hiring coders and we are also planning to open this API to third party. Actually, a very interesting conversation going on with partners in China who are planning to develop their own. to develop their own set of Finax formula. So eventually this will be the API open to third parties

to develop their own solution based on rocks and the Monaco API. So what's the timeline? When will this be available and in which jurisdictions? You see, we have to be, we have to be. When we look at this bid license that we spoke about earlier, we are happy about the mid-license, but we feel that we did the right thing because we saw this coming very early on. We very early on we sort of understood that there will be a nightmarish jungle of regulation around the world and looks so different. And Rox has been designed to accommodate different, any number of jurisdictions with different regulations.

So theoretically, I can just switch off all non-compliant products from the New Yorker users. Right now, we are in closed beta. In the next couple of days, the closed beta will go into a public beta. And it will at this level provide a so-called play wallet with Bitcoin test coins. It's a tool for developers. I think there is no decent test-coin wallet service out there. And it allows us to test the number of other things that we want to test before we go into what we call real money. version that we expect to launch towards the end of August.

And from there, we want to show the capabilities of scaling the system and a number of other things. We just want to have proof of work. Cool. Well, thanks very much for joining us today, guys. And I hope both of you guys will be successful sort of in building your products. and hopefully people in Mexico or Latin America will be able to use Max BT soon to get their bitcoins. And I also request an invite for Minero. So hopefully I'll get that at some point in a new future and be able to test the system out. So, yeah, thanks so much for joining us today, guys.

Yeah, thank you very much for joining us. Just the question, I want to know if I can add something. Of course. Sure. Sure. Okay. So for example, about Latin America and what's going on? Because, for example, you have people in Argentina, you have people in Chile, you have

in Costa Rica. There's a lot of things going on. For example, in Argentina, you have the foundation. They just did the third center for Bitcoin in Argentina. With Alberto from BIPA and Diego, they're doing really, really cool things that have a lot of startups that are working and interesting things in crypto currencies. And also, for example, in Chile, you have Adam Straddling. Adam Straddling is also, he was X-Trade Hill.

He sold almost 10% of the Bitcoin that are circulation. And he was one of the biggest coin providers and liquidity providers for Latin America. Or in Uruguay, for example, also our Al-Pastrope that now is the Ripple Gateway. It's a Latin American Ripple Gateway. For example, Nicaragua, they're working on different things. But now in Nicaragua, they close a deal to do. a new canal next to Panama. There's a $40 billion investment done by China.

And they are pretty, the bit, the bit, the bitcoins over there are pretty, pretty active and trying to push Bitcoin inside the country. And it's going to be a lot of money coming in to there. So that's interesting. And over there, they have in Besso. And for example, in Colombia, in Colombia, you have Mundo Bitcoin that are traders from, from Potex and are doing Bitcoin trading. And they're also doing a digital conference, which is going to,

be pretty, really interesting on the end of the year of Bainabite. And for example, when you have Costa Rica and Guatemala, that they are also pretty, pretty active, small communities, of course, but, you know, there is pretty active in the people that is involved there. It's really interesting, interesting. They are well positioned, and there's a lot of things going on in all the region. So I just wanted to have that. That's great to hear. So hopefully we'll see cool projects coming out of all kinds of different countries in Latin America.

Yeah, so thanks so much for joining us today, guys. And thanks for listening. If you want to support the show, you know, you can leave us a review on iTunes, which is greatly appreciated and helps people find the show. You can also support us by donating. You need that episode of Bitcoin slash tips. and you can call us on Twitter at the Epicenter BTC and finally if you want to kind of stay up to date with what's going on with Bitcoin, we send out a newsletter every Friday so you can sign up for that at epistenterbidcoin.com slash newsletter.

So thanks so much and we'll see you next week.