On The Brink with Castle Island - Zac Townsend (Meanwhile) on Bitcoin Life Insurance (EP.644)

Episode Date: July 10, 2025

Zac Townsend, the founder and CEO of Meanwhile, joins the show. In this episode we discuss: Zac's background and the path that led him to start Meanwhile. The mechanics of Bitcoin denominated life insurance. How Meanwhile generates Bitcoin yield. Zac's views on the evolution of Bitcoin treasury companies. To learn more about Meanwhile visit meanwhile.bm  

Today on the podcast, I sat down with Zach Townsend, the founder of Meanwhile. Meanwhile is building a Bitcoin-denominated life insurance company. In this conversation, we discussed the mechanics of the product and how Zach sees the broader Bitcoin capital market sector evolving in the next few years. I think you'll enjoy this one. So without further ado, here's my conversation with Zach Townsend. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them where the guests on this podcast are solely their opinions

and do not reflect the opinions of Castle Island Ventures. Guests and hosts may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep.

The federal government is stepping it to stabilize Fannie Mae and Freddie Mac. The two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. And it printed a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. Zach, thanks for coming on the podcast today.

Excited to talk about Bitcoin life insurance. We have never talked about that on this podcast before. We're the only ones. Thanks for having me, Matt. We'd love to just start with your background and what led you to this idea, which is quite a novel one. Like anything in life, it's somewhat complicated. On the one hand, I have a background in FinTech, so I moved out to San Francisco,

worked at Strait for a bit, went through Y Combinator with a company called Caren Trevery, backed by Index Ventures, Andrewson Horowitz, Data Collective, and the others. And we built banking infrastructure, banking APIs. I am very interested in the business of banking. We thought about starting a bank, so it was thinking. a lot about what do you do on the loan side of a bank, as that all sort of fit together. At the same time, this is like 2013, 14, 15, I got interest in Bitcoin, and that business ultimately gets bought by Silicon Valley Bank. So on the one hand, I had this traditional

syntax background, thinking a lot about banking, and I began thinking about life insurance as the best bank to run because the problem on the bank is you make promises that people can have their money back whenever you want and then you go make mortgages. It's like, it's a wonderful life. And it certainly doesn't work. There's a fundamental mismatch. But in insurance companies, you don't have been mismatch because you say, like, hey, Matt, I'm going to make a promise to you that when you die sometime, clean 40 years from now, I'll give you your money back. So you give me money now and I'll give you money for your future. And that makes sense for both of us. but then I can go invest in the mortgage

because there's matching between the durations of those liabilities, the insurance products, and the assets. So thinking about all this stuff for years, I go and lead a big truck of a product that another Fintech uniform, and I lead a part of the Fintech back to St. McKinsey. This other strain, I'm just sort of like buying and accumulating Bitcoin.

I don't pay a lot of attention to the ICO boom. and at the beginning of my co-founder and I was sitting down to start from this company, we just have this core belief, which is Bitcoin land, crypto land, is an economy. You should think about like a country and there's like an economic system being built. It's a little weird in that it's global and it's decentralized and it's like a layer above the global economic system, maybe. But it makes sense sort of as a country and an economy. So we sat down and we made a list. What are the regulated financial institutions

because we're really good at regulatory bullshit? What are the regulated of financial institutions that exist in every economy? Oh, there's exchangeers, there's payments company, then there's banks, there's asset managers. But actually, we didn't have life insurance in the list. A week later, I literally woke up in the middle of the night, two in the morning, I was like,

oh, this should be a Bitcoin life insurance company. I can merge all these things I care about together. And then I went to my office at 2 a.m. and I wrote the memo, and that is the memo we raised our street ground on. And then we were off to the races. That's an incredible story. I think a lot of people probably interact with life insurance, maybe from like a term life policies. They just make a payment, and it's probably on auto debit from their account, and they don't think too much about it. There's a whole other type of life insurance, the whole life policies, which I'm not actually sure if those are more popular or less popular than term,

But maybe just talk a little bit about how insurance works today and then how you guys are approaching it with Bitcoin being the core asset as opposed to dollars. Let's just start with what is term and what is hold? What is life insurance? The history of life insurance is we're all going to die, but we don't know when. It really sucks if you die before you're supposed to. So what do you do? The idea is like, okay, well, if thousands of us get together, we don't know who's going to die, but we can start to see statistical regularities. oh, maybe like three of us are going to die. So if a thousand of us all put a dollar in a pot and we say whoever dies gets $300 and there's $100 and profit and if we ever runs this thing, that sort of makes sense. There's like risk sharing. So that's the history of the insurance business. And then what happens is insurance seems good. Orphins and widows don't starve.

People buy life insurance. What happens is that governments really all over the world, if they have taxes, they tend to have tax benefits and tax privileges for life insurance parts. The reason that story is important is there's a few things happening in life insurance. One is there's the literal action for you or your family. There's savings aspect of it that I'll talk about. But then there's also what gets layered on is we should all save her retirement, but we save more because it's 401Ks. In some ways, we should all have some life insurance, but maybe we'll have more of it or we'll do different things because these tax benefits and bliss. So term life exists for a term, 10 years, 20 years, 30 years, and you're very unlikely if you're young to die

in that term. So you pay a very little amount of money for a huge amount of coverage, and it really is catastrophic loss. That example I gave, you're putting $1 a pot, and you get $300 out. But the ratio is even better. I think I pay $1,000 a year for like $3 million in coverage. So that's a $3,000 to one ratio. I'm just not going to die in that term. I could, but no, it's not. So term life, I bought term life when my wife and I got a mortgage. They were like, okay, we should both have 30-year term life or a 30-year mortgage if one of us gets to buy a bus, the other can pay off the mortgage. So that really makes sense. Now, there's the whole other side of products called the whole life, and the point of whole life or permanent life insurance is the last year of all life.

Since we're all going to die, there will eventually be a payout. For our Bitcoin product, we started with Whole Life, partially because if you're going to bottle Bitcoin, it just makes sense. You're saving it for your kids anyway, so why not put it in this tax amendment structure, which I can tell you about. The other reason we started with Whole Life, not just because we primarily don't know a product, but also the thing about term life is most of the people who buy it don't get anything. I mean, they did get something, which is they got the protection, but they might not feel like they got something. Most people, you come to the end of the term, you don't get a pay out. And there's just not a great industry in crypto and Bitcoin on

products where people put money in and they don't get money money out. So we just didn't think that that product made sense. Even though it is a great product and you should buy it for the protection, that didn't feel like a great product for us to sell until everyone already knows our name and they really trust us. We started with this product called The Whole Life, Bitcoin whole life. And basically, it's pretty straightforward. You pay us Bitcoin every year for 10 years, we make a fixed guaranteed payout. This might look like Matt pays us one Bitcoin a year for 10 years, so you paid us 10 Bitcoin. And we promise whatever ever Matt dies your wife or kids or nieces or nephews or whatever, we'll get 15 Bitcoin. So we're like turning the 10 to 15.

We can talk about. We do that. And then you just get these benefits. It goes to your beneficiaries, income tax free. That compounding from 10 to 15 is tax free. You get the protection, but I mentioned, like you hit by a bus tomorrow, you get the 15. And the big, cool one I think that people just love the interaction with Bitcoin is you can borrow against the policy tax rate. If you think that Bitcoin's going to go from $100,000 to a million dollars, then you could borrow Bitcoin out in year 15. You're not paying any of the capital against tax. And then again, you eventually dying. It goes to your kids tax free. You don't really pay the loans back. It's like netted out against what we pay your kids. So you borrow one Bitcoin out. So instead of your kids getting

15, they're going to get 13.8 order. One plus interest. That's fascinating. So it seems like it's a good option for someone that would you say thinks Bitcoin will go up in the future and probably has enough Bitcoin to meet those yearly payments. Yes. People buy it and think Bitcoin will be worth more in the future. So you think Bitcoin's going at zero, not the right part of you. Has anyone tried this on any other asset besides dollars over the years? Is there a history of people trying this with things like gold or any other esoteric asset? Well, the problem with gold is it's hard to turn gold and more gold. There are all these rules in the internal revenue code for the United States about what is and isn't life insurance and there's like a minimum

rate of return. Basically in the 60 and 70s, these people get really crazy stuff with life insurance. They put their yachts in life insurance. It was like this hatch-all generic way. to avoid taxes and a state tax. Back in the days when Congress could pass sensible laws and debate things as part of the like Reagan tax reforms, they pass rules about what is and is in life insurance. Now, what's interesting about those rules is they don't use the word dollars or the word cash.

They do use the word value. So when we went to like our big expensive law firm was like, hey, is this going to be life insurance in the internal revenue code? They were sort of like, oh, we've never thought about this, but the answer is yes. you could denominate a life insurance contract in bushels of wheat. And there is some insurance company in like Zimbabwe that does insurance policies in cows. Which I find really fascinating.

The other thing you mentioned, though, is do I recommend people do this about the Bitcoin? We do not recommend you go short Bitcoin. If you're going to buy a 10 Bitcoin policy, I'd suggest you do that if you have like 20 Bitcoin or something. If you're going to buy one Bitcoin policy, maybe you should have two Bitcoin. We have people who buy 35 Bitcoin policies. We have a max. Some people do do this and they're like, this is a way to dollar cost average into Bitcoin. And I'm like, I don't recommend people go short Bitcoin. When you put a Bitcoin in our policy, it's a long-term thing. Even the borrowing is valuable in the out years. So think 10, 15, 20 years. I usually say to folks, we have some amount of Bitcoin. Our minimum policy fee size is one.

if you're fortunate to have a couple of Bitcoin or a lot of Bitcoin, you should think about a portfolio of Ethereum around that. Maybe you are self-custing some in a lager, buried in your backyard or any single box or whatever. Maybe you have some of a multi-sig, like a Kasa and Unchained. We're part of that solution. We're in that world, and then you get these tax benefits I mentioned. You're like growing your Bitcoin, you have to borrow against this.

We're not trying to pitch people on, like, give us your entire stack. We're trying to say, are you playing? are you playing a hoddle for your kids? This is part of the solution to know. That makes total science. So in the example you gave a 10 Bitcoin policy turning into 15, is that 15 locked? Is that a contractual thing where you say it will be 15 at the end?

When you sign the contract, we like give you that fixed guarantee payout. It's anywhere from 12 to 18. And it depends on your age and whether you spoke or not or whether you're a man or a woman. whether you are on that store and going to die of cancer tomorrow. We are a life insurance company. But if you're young and healthy, come talk to us. 10 to 15. Yeah, you want the healthy bitcoins, for sure.

There's a lot of overlap between Bitcoiners and an obsession with longevity. I sort of joke that we sell life insurance, the 30 to 50-year-old rich men who are obsessed with longevity. It's a pretty good population to sell life insurance, too. A lot of people that avoid seed oils and try to eat. eat carnivorous diets, stuff like that? Now, oddly, we ask these questions about drug use. We'd probably get a more diverse set of answers to that question than the average life

insurance company. So it had to really engage with what's the mortality implications of Molly insurance in a way that I'm not sure in New York life. Makes sense based on some of the use cases that took off first. Yeah, I do enjoy people who pretend that they're geniuses. And I'm like, did you just really want to buy a pot in 2012? Is that why you have 2000 Bitcoin? When you get the pitch that someone got into Bitcoin in 2011 or something like that,

what exactly were you doing back in 2011? Let's talk a little bit about how you transform that 10 Bitcoin into 15. So maybe you could talk about how you guys function in the capital markets for crypto, where the yield comes from to get from 10 to 15. There's obviously not a good history of getting yield in Bitcoin. and there was Block 5 in Genesis. We are aiming and successfully get pretty low yields. So we promise people implicitly something like 2% returns,

and we are seeking 3% returns, that 1% is our, how we make money is an insurance company. Block 5 is out there saying, oh, we'll get you like 7, 9, 12% returns of Bitcoin. There are no 7, 9, 12% returns of Bitcoin that I'm comfortable with. You can be comfortable with it, but you should know that there's a really high race. we have a half independent board, we're regulated, we are a life insurance company,

we have achieved risk office, or achieve compliance officer, our credit committee, investment, a huge enterprise, risk manual framework. We have to post our own capital. That's part of it is we've put 200 Bitcoin into our insurance company, first lost capital on any loans before policyholders would ever lose any capital. Fundamentally, what we do is to go back to what I was talking about in the beginning, people are entrusting us with their Bitcoin for a long time. And allows us to go into the debt capital markets and say, hey, we will lend you, mostly institutional counterparty Bitcoin at term, which means we'll do it for like a year. But what we want is credit production.

There's a relatively robust overnight Bitcoin lending market, but is unsecured, uncollateralized yields like 4% right now. And actually not much in this market, but that's my understanding. Well, we say, hey, big institution that the listeners in the room of, We'll lend you 50 Bitcoin or 100 Bitcoin. We'll do it for two years. We want 3% yields. But no, we're not going to lend against your bullshit came in subsidiary with no equity.

We want a parental guarantee. We want 100-gained legal agreement. We want covenants. We want a seniority. We're running a credit operation. And that has succeeded in that we have gotten 3% yields and we have never had any credit losses. We are incredibly conservative. That's how we get yield.

It's not like playing the casino or doing cover calls or stuff like that. Big institutions that have a lot of equity borrow Bitcoin from us or term. I would imagine that the growth in the ETF market and just the types of financial institutions that are trying to market make and BAPs for these products has probably expanded the list of firms that have the need to borrow Bitcoin. Is that a correct assumption that the capital markets around the ETFs, and some of these Bitcoin treasury vehicles even might have brought more participants into the underlying spot market for Bitcoin?

I think that's right. I don't want to say that these are like super developed market. We can't negotiate with each of these deals one-on-one, counter-party, counter-party. We're running a private credit desk from Bitcoin. It is not like there's a ton of one-year Bitcoin-nominated bonds out there. There are a fact none. We're working on trying to have more to develop that. But you're absolutely right that.

There's more in various ARBs. There's this company RDC that's doing deposit receipts in Bitcoin. There's margin lending, there's prime lending. There's market making. We have a few loans that are really like treasury operations. You're in exchange and you just need to like get through the day or filling orders. And you have a bunch of Bitcoin in cold storage. How do you do that?

Do you just buy Bitcoin? Now maybe in the treasury play world, old, actually you should just buy that to coin. Coinbase, I think has gotten a lot of flack for not having more Bitcoin, given how old they are. But another way you think about it is more like a treasury operation, oh, well, if I can borrow Bitcoin from these guys and not put a bunch of my cash to work and just pay them 3%. That makes more sense for me. So there's also like payments firms and stuff like that. We've done one loan to a minor, but haven't found sort of like another one, theory, that's another category of folks who you could lend them Bitcoin, they could like go buy

rigs and electricity, and they like have cash flows in Bitcoin. It'll be interesting to see how this unfolds. I mean, I've been reading a lot of the SEC crypto working group meeting minutes where they're meeting with these ETF issuers and banks around the in-kind create process for the Bitcoin ETFs. And at that point, you're going to have to have a lot more of these financial institutions that are creating the ETFs actually touching Bitcoin. And I would think that there would be a bigger demand to just borrow in order to facilitate some of these things. So I'll be interested to see when the banks actually have the ability.

I guess they do now have the ability to touch spot with Sab 121 going away, but the in-kind create hasn't been approved yet. I wonder if more banks will be in this market in the next year or two. Every insurance company has two things. On the one hand, we provide what we believe is a critical financial service to our users and helping them save for the long term, protect their family, use the types of tax and estate planning that we were talking about. And on the other hand, every insurance company is also an asset manager.

There's also a permanent capital vehicle. And that's why you may am right on notice. Apollo owns a theme, which is big insurer, and KKRO's Global Atlantic, and Blue Owl just bought Kvar. So what I think is unique is we believe that Bitcoin, is running and the best global sort of value there is. If Bitcoin is going to be money, it's going to mean there are capital markets nominating Bitcoin. And it's going to mean they're a debt capital markets nominating Bitcoin. We say we want there to be a yield curve in

Bitcoin. And that somewhat sounds nonsensical to people, oh, why would there be a five-year borrow lend rate on Bitcoin? I'm like, well, if it's money, there will be a lending market. We see ourselves both as our super long-term existence depends on there being debt capital markets or some way to get yields in Bitcoin, but also we see ourselves as part of creating that market. Maybe just a bigger picture of stepping back question. What's your view just generally on the state of Bitcoin today? And very curious your view on these micro strategy like companies that are popping up and running these treasury strategies in the public markets. I'm obviously a big believer in Bitcoin. and I'm a big believer in the idea that this is a better form of money. And I think you're going to see a lot of companies own some Bitcoin.

And it's going to be a reasonable and long-term part of everyone's treasury strategy. I don't think that means that the particular MNAVRB that exists now can persist forever and that there should be a hundred of these. So we said that, you look around the world and much of the physical infrastructure of the world, many of the mortgages, a lot of the long-term corporate debt, a lot of venture funds, they're owned by permanent capital vehicles. They're owned by insurance companies in particular. They're owned by endowments.

They're owned by sovereign wealth funds. I think people are focused on the ARB, they're focused. focused on the converts. They're focused on getting access. How I see these institutions is their endowments. They're Bitcoin endowments. And in 10 years, that's what they're going to be. They're going to be these big public pots of Bitcoin. And what are you going to do with that? Well, I think you're going to manage it like an endowment. You're going to be thinking about how do I put this Bitcoin to work? How do I get yield? How do I like create productive economic activity in the world, so you add value to my stakeholders. I'm always trying to understand what's the long-term

story. Because we're running an institution that's supposed to last decades. We're making promises to our policyholders that are going to last for 60, 70, 80 more years. So that's how I say these treasured companies. Nakamoto will be the Yale endowment. The problem with strategy is, in my opinion, they may be too big. Too big to actually run that endowment model, you think? Yeah, but also, If 10% of the world's supply of money was owned by one institution, then that institution, it's not just that they're powerful. Is that a planet with too much gravity for any moons? That's my worry.

If Bitcoin is going to be money, it needs to move. It needs to go from one place to another. It needs to be the cornerstone of economic activity. It's not just gold in the ground, it's currency. And that is what the white paper is about, is about cash transfers. I worry that if micro strategy ends up controlling 2 million Bitcoin or something, then I don't know. Is Bitcoin used for payments at that point?

Not that it really is now. That is sort of like a stablecoin use case in a lot of ways. We've tried lightning. I actually would say payment of what type. I'm not sure it's about peer to peer payments. but I think it could be about country to country payments. I see this future with such an intrinsic connection between energy and national resources in Bitcoin.

You could imagine oil futures contracts being settled in Bitcoin. In that scenario, Bitcoin is more like wires that is like credit cards. It's more like the Fedwire system probably in a lot of ways. the ultimate custodians probably don't even have to do that much movement. Three years ago, I was in like Midtown Manhattan with one of my investors, she's like a Tradfai guy and the insurance guy. It doesn't really think a lot about Bitcoin. He's like, you know how I think about Bitcoin?

I think of it like fine art and they waved out the window. Or like these buildings. I'm like, what? What are you talking about? And he's like, it's just a way for rich people to trade big chunks of value. It's an interesting lens. It's definitely one use case. I guess there's the other use case around living outside of the United States

and wanting to preserve your wealth in something other than your native fiat currency. When I pitched Sam Olman and led my seat around how that happened, I'm like, I want to serve a billion people. It's like, how are you going to do that? I'm like, if you are a middle class person in Argentina, you do not buy life insurance because you are going to live longer than the Argentinian peso. So I fundamentally believe if you are in Cambodia or Turkey or Nigeria or Argentina, you should be buying life insurance of Bitcoin.

But it's also the case if you bought life insurance as I did in like 2018, which is when my son was born, so seven years ago, then you have seen the purchasing power of that policy go down only at 30%.

What legacy are you really actually passing on? See what those ones? Totally. When you're going out there and you're selling this product, there's a lot of questions. You have to convince people to believe in it from a number of different angles. Convincing people Bitcoin is going to be

thing's probably less of an issue for you. You're dealing with people that have Bitcoin to begin with. We don't attempt to convince people on Bitcoin. We don't see ourselves in the business of convincing people of convincing people who've already decided to buy Bitcoin that they should buy a product. And I'd say the fundamental tension there is in every Bitcoiner's heart. There is a love of self-custody, but there's also a hatred of taxes. And then we're just like trying to find where you are in that spectrum. I guess that's one persona of our customers. And then we have another set of customers who work family offices are people who are maybe not so ideologically aligned. And there's like, I bought 10 Bitcoin because I don't want to be the idiot that doesn't learn 10

Bitcoin or I believe in the aspect, whatever. But it's like a part of their wealth. And then they're always looking for the clever tax structure for their wealth. And we are one of the few ways to hold a significant amount of Bitcoin in a known process. I'm sure you get asked a lot about competition, but it strikes me that life insurance companies don't move really fast. Do you think there's a long time before we're going to start to see large U.S. insurers move into this market and write policies similar to the ones you're writing? Let me answer the nearly constructive question you have, which is, am I worried about competitors?

I'm absolutely not worried about competitors. I think that, yes, all the Tadfai insurance people are, not going to really spend the time to understand how to do this and it scares them. And then I'm not really that worried about other crypto founders. Weird, weird folks. We're just really into reading regulations and writing 1,000 page business plans as well as Love Bitcoin and Go to Happenab. It's a pretty unique skill set. They said, we can help other carriers bring us product to market. If you're a big carrier X in the U.S. or in Argentina or in in Singapore, there's structural challenges to you doing this product or any insurance product

that has Bitcoin. These people aren't dumb. They're economic. They're out there seeing that BlackRock and Fidelity and Franklin Templepin are saying you should put 1% of your retirement savings in Bitcoin. Well, you should put 1% of your annuities or 1% of your life insurance in Bitcoin, too, but they can't structurally do it. We announced our Series A in March.

we raised $40 million, so we've raised $61 million to date. And I have been surprised at how much it turns out we may really be in the institutional reinsurance business of helping others bring Bitcoin products to market in addition to selling it directly to the folks who listen to this podcast. Just the debt capital market side of this alone would be a monstrous undertaking for a large insurance carrier to just start from scratch, I'd imagine. Absolutely. This is fascinating. Where can we send people to learn more about Meanwhile, about these policies and get in touch?

That's Meanwhile.b, although Meanwhile.com redirects to us. If you begin the application flow, you insert your email address and your password and you start answering questions. Someone from my team, whether it's me or someone else, is going to send you an email, is going to offer to set up a one-on-one call because people have so many questions. They want to really know they can trust us. They want to know about our enterprise risk management framework. They want to know how we do the lending. They want to know what's that section of the Internal Revenue Code that I can figure out? And you talk to my accountant. So we have a very personalized handholding process to push people through. And that process really begins with signing up on the website to a certain extent.

And then you get a personalized reach out from one of us and we set up a call. That's awesome. Meanwhile.com. We'll put it in the show notes as well. Thanks for taking time to come on the podcast and talk about it. A truly novel idea here. So congrats on all the progress. Amazing.

Thanks so much for having me, Matt. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website. Thanks for listening.