The Pomp Podcast - #1245 Patrick Lowry on Why European Regulators Love Bitcoin

Episode Date: September 20, 2023

Patrick Lowry is the CEO of Samara Asset Group. In this conversation, we talk about the differences between The European Union and The United States when it comes to crypto regulation, importance of crypto ETFs, the accredited investor laws, their bitcoin thesis, why the Samara Alpha platform is trying to take a tried and true investment strategy from traditional markets and bring it into the crypto world.  ======================= Trust and Will has simplified the process of creating and managing your will or trust online. They leverage a data-driven, design-first approach and amazing customer support to help you protect your legacy from the comfort of your home starting at just $159. Sign up today for 10% off using ⁠⁠https://trustandwill.com/pomp⁠⁠ ======================= Auradine, a leader in web infrastructure solutions including blockchain, AI, and privacy, has unveiled the world's first 4nm Bitcoin mining systems, featuring breakthrough EnergyTune™ technology, setting new standards in performance and energy efficiency. The Teraflux™ product line from Auradine offers best-in-class performance, efficiency, and total cost of ownership (TCO), positioning it as the optimal choice for Bitcoin mining needs. With EnergyTune™, a patent-pending technology, Auradine's Teraflux™ systems enable rapid demand response and optimal energy usage, fostering a symbiotic relationship with electrical grids, and contributing to sustainable energy practices. Designed and manufactured in the US, Auradine's Teraflux™ product line not only ensures cutting-edge technology but also mitigates supply chain risks and provides increased supply chain resiliency. Visit ⁠⁠⁠www.auradine.com⁠⁠⁠ for more information the Teraflux bitcoin mining systems. ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Patrick Lowry is the CEO of Samara Asset Group. In this conversation, we talk about the difference between the European Union and the United States when it comes to crypto regulation. We talk about the importance of crypto ETFs,

the accredited investor laws, how you can think about their Bitcoin thesis, and why the Samara Alpha platform is trying to take a tried and true investment strategy from traditional markets and bring it into the crypto world. I really enjoyed talking with Patrick, and I think that you guys will find this conversation interesting and also full of insights from somebody who is based in Europe and how they think about the regulatory environment in both the US and the EU. Here is my conversation with Patrick Lowry. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guest

as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by Trust and Will. I've gone through a number of different changes in my life over the last few years. I got married, I had a kid, and I had to start thinking about how could I ensure that my wife and my child would be okay if anything ever happened to me. That's where trust, wills, and estate planning come into play. Now, most people, what they do is they get introduced to a friend, an uncle, or someone in their local community. It tends to be someone who's really expensive, a lawyer, an accountant, or somebody who does

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rate based on demand response needs of the electrical grids. Auradine is an ambitious company working on hard problems. I'm really impressed with them. And if you want to check out more, you can go to Auradine.com. That's A-U-R-A-D-I-N-E.com. Go check them out at Auradine.com today. All right, guys, I got Patrick here with me. Patrick, I thought a great place for us to start this conversation would be the difference between the United States and the European Union, especially around regulatory kind of approaches to Bitcoin and cryptocurrencies. It seems like they're taking very different paths. You have experience in both markets. What are you seeing that are the similarities and what are the differences? Oh God, there's a plethora of

similarities and differences. I think the European Union more so than the United States from a political perspective, as well as from a regulatory perspective, has been more open-minded and willing to embrace what cryptocurrency and what decentralized marketplaces offer from a capital formation standpoint. And at least for me, what Bitcoin and crypto really bring about is the ultimate tool for capital formation. I mean, you know, as I only started to get into crypto back in, I think it was 2015, 2016, I was working at the Deutsche Börse,

the operator of the German stock market. And while I was there, we were looking at blockchain and DLT as an opportunity to basically recreate, redesign all of the tech stack that we had at the Deutsche Börse to manage and operate the Frankfurt Stock Exchange. And we were investing about 100 million

off of our balance sheets into a blockchain crypto companies it was one of the five pillars we were focusing on and this is where i developed a conviction back then that every single asset on earth will inevitably be tokenized um whether it be equities debt parcels of land bars of gold for me it was just such an inevitability that i decided to go full in uh into the cryptosphere now Now, I think Europe in particular, like the Boffin, the German regulator, this is historically one of the absolute most conservative regulators in history. And even through the Wirecard scandal, Boffin has been very open and embracing of crypto and what it enables from a capital market standpoint.

So Boffin, they were the first major regulator to not approve of an ICO back in 2016, 2017. there is no regulator that necessarily approved of an ICO, but rather Boffin was issuing what they called no action letters, where they would put in writing that we agree with the issuer of whatever coin there is, that this is not a security. We will not come after you like what the SEC has been doing. If anybody alleges that this is a security offering, we agree this is a utility token. So that was a huge first step. Second, after that, Boffin ended up doing a, they approved a full prospectus for a security token offering for a real estate debt issuance. That was the very first prospectus in the world to be approved for a tokenized asset.

Boffin was also the first regulator on earth to approve a Bitcoin ETP. So it's effectively the European version of a Bitcoin ETF that we've been seeking in the United States. Just slight nuanced differences for regulatory purposes, but it functions 99.9% the same way. They approved that first in the world as well to be admitted to a regulated European marketplace. So Germany and Europe as a whole has been much more forward thinking and embracing of what this technology enables. And rather than trying to fit a, let's call it a square peg into a round hole, the technology into outdated regulatory frameworks, they've been actively trying to figure out what legislation needs to be drafted, what legislation needs to be passed to more broadly adopt crypto

and more broadly adopt tokenization. And this is where MICA came out, or MICA, I think a lot of people call it. It's the overarching European legislation through which they are regulating the activities of token issuers, token exchanges, etc. And while I'm not the biggest fan of regulation to begin with, I think regulation in most cases does more damage to innovation, does more damage to retail investors than it actually helps them to a certain extent. We do have to acknowledge that in a modern society, you have to have some elements of regulation. And I actually severely applaud the EU for coming up with what seems to be a reasonable framework. And don't get me wrong, there were aspects of MICA that looked horrible

for some times that ended up getting removed from that legislation. For instance, the ban on proof of work, right? That ended up getting taken out of MICA. And now we actually have a framework in Europe through which we can offer these types of token issuances. Now, if you look at that in contrast to the United States and me being an American that has spent the last decade in europe to be frank it is very painful uh to watch how american politicians american bureaucrats and american regulators have been treating the crypto economy um it's almost i mean i'm i don't like to go down the conspiracy theorist rabbit hole but it largely does look like certain elements of our regulators are being weaponized against crypto in general for i don't want to call it

and nefarious purposes, but I think we can at least certainly agree for bad faith purposes. We haven't had that in Europe whatsoever for the last couple of years. So unlike where historically the SEC has largely been the kind of de facto global benchmark for regulation around capital markets, I think you're going to start to see Europe and also the UAE, let's not leave them out of this equation as well. The UAE has made some big strides having their own framework brought to forward. I think you're going to start to see these become more global leaders when it comes to the benchmark for how we regulate security offerings, capital markets, and token offerings going forward, which is unfortunate, given that this is a huge missed opportunity for

America. How much of the difference between the EU and the US do you think is like the EU just has Bitcoin or crypto enthusiasts inside these offices, and so they're more sympathetic because they actually use the technology and and understand it versus maybe there's something that is culturally different or or maybe the rules are different already you know before you even kind of evaluate an individual asset class like like what's really driving the difference in approaches well so i think number one uh there is a geopolitical advantage to this like if you if you're the eu i mean let's be honest you're kind of stuck between a rock and a hard place and you have been for the last 50 60 years between the united states and russia slash china right europe

itself has never been able to really find its own identity outside of the idea that we're a united europe which i think obviously everybody wants to see a united europe if it's a divided europe well the last hundred years hasn't gone so well for europe if that ends up being the case but europe really has been kind of stuck between that rock and a hard place because it is a fragmented capital market standpoint where you have the the uk economy the german economy and And it's very rare that you ever see these economies kind of aggregate together where there is scalability and high grades of centralization around what the United States has been able to do, unifying all the states together under a single codified capital market structure. And then China, of course, is just unified in of itself. Right. So Europe being fragmented has always kind of left it, I don't want to say stagnant.

There are some very powerful economies in Europe, obviously the UK and Germany. But it hasn't been able to progress as far as the United States or China has been able to over the last couple of decades. So there is a geopolitical play here, I do believe, where they recognize that this could be an area where we can carve out a niche for ourselves and help usher in a new era of capital formation because we're taking the pole position here. We are China is basically banning these things and using it for their own nefarious purposes around CBDCs. the United States has weaponized its regulators against this for whatever purpose we don't have to get into. But if you're Europe and you see this as an opportunity, obviously that becomes something you want to harvest. The second thing is, I think there is a, in Europe, and this used to be how it was in the United States, there was a significant push for property rights.

And so, for instance, if you're in Germany, I think Germany has one of the highest percentage of its population as being Bitcoin or crypto holders. I actually think it's either number one or number two. It goes back and forth between Germany and Nigeria, if memory serves correct. And what you have to remember is that in Germany, there is a strong savings mentality. The German populace itself doesn't largely invest. They don't put money into bonds. I mean, they would rather, I believe, I wouldn't be stereotypical in saying they would rather have their money underneath their mattress. And unfortunately, about 100 years ago, they learned the hard way that assets can be seized.

And this is why the new German constitution has significant protection around individual assets. So from a German mentality, I do think that having an unseizable, uncensored asset like Bitcoin speaks to them on a more cultural level, given what's transpired in Germany over the last hundred years, more so than most other jurisdictions. At least that's kind of just my gut feeling. I mean, having a non-seizable asset speaks more to them than I think us in the United States really comprehend, because we've never had to live through something like that. our grandparents never really had to live through a seizure of assets like that. And when you look at the United States, is there anything that they can do to kind of get back into the poll position? Or do you think that the genie's out of the bottle and the EU is too far ahead and the US can't catch up now? I think that it could certainly catch up, but I think there would have

to be a severe mentality change with our legislators and therefore our regulators. So for instance, I don't think we're going to see, I mean, I know everybody's talking about how there's maybe going to be a Bitcoin ETF, especially with the BlackRock filing and the SEC prolonging it, yes, but seemingly more favorably engaging with BlackRock. they're at least providing comments on the prospectus rather than just flat out saying, no, we're not giving you anything, which is a major step forward. But I don't think we're going to see any meaningful legislation or any, I'm even going to say, I'm not necessarily sure the BlackRock ETF is going to be approved unless there is an administration change. It seems to be that with this current commission at the SEC, which obviously is appointed by the presidential administration, we are not going to see any meaningful progress on a Bitcoin or

cryptocurrency front. Now, this is where it's actually kind of interesting, because if you look going into the election year next year, you have like what the two front runners, Biden and Trump for each of their respective parties. We know where the Biden administration seemingly stands on Bitcoin and crypto. They're fundamentally against it. They don't really publicly say it. But when you see how legislation and certain regulators are being weaponized, I think we can infer that. And then Donald Trump has been very adamant that he hates Bitcoin. He thinks it's a scam. He wants absolutely nothing to do with it.

Then you look at the secondary players behind the two frontrunners. You have Vivek Ramaswamy, Ron DeSantis, and RFK Jr. All three of them are pro-Bitcoin. All three of them are pro-innovation technology and crypto. If we were to see an administration change and someone like that be president, any three of them, to be honest, I think we would be in a position where the United States not only can quickly catch up to Europe from a regulatory standpoint, but it could far surpass Europe over the course of the next, let's say, five to 10 years around untapping what this technology enables from a capital formation standpoint. Because you have to remember, there is one crutch that Europe will always have relative to the United States, and it's deep pockets. The United States, the individual in the United States, even though we're in an absolute macroeconomic mess right now, inflation is rampant. I don't need to go into how difficult of an economic environment it is right now.

But regardless, Americans have more disposable income per person. Americans have more disposable income in the aggregate, more savings in the aggregate than the average European. Salaries are much higher here. And on top of that, we have significant more institutional capital concentrated that can be deployed to these assets. So Europe will always suffer that bottleneck. But again, I think that's why they see this as a geopolitical opportunity, because if

they're able to create that trusted, regulated framework to onboard institutions and provide protections for their retail investors to crypto assets, then they can attract that capital. That capital can then form in Europe, and then Europe becomes the de facto global standard for crypto regulation moving forward. You mentioned earlier the crypto ETFs, and obviously in Europe, there's a number of ETFs, both futures and spot that have been approved. They're out there. We can see, you know, asset flowing into them. The United States has been much slower, but there's other places like Canada, right, that has been somewhat friendly to these ETF structures. How do you just evaluate that entire landscape? And is this something where kind of the spot ETFs for

something like Bitcoin don't count unless it's in the United States or like what's the thought process. So I don't want to say that because like, for instance, I mean, a company that I founded that I was CEO of for five years, Deutsche Digital Assets, actually formerly was branded Iconic. We created some of the first ETPs physically backed by Bitcoin, physically backed by Ethereum that are now trading on the European stock markets. I mean, exactly like you said, you have a whole bunch of derivatives out there. You have short ETPs. There are even basket ETPs, top 10 ETPs that investors can get exposure to a broader part of the crypto market if you believe in more than just Bitcoin or Ethereum, for instance. So Europe is just light years ahead

in that regard. Canada, it's actually an interesting case study in Canada. You say Canada was a little bit more open to it. That's not actually how it happened. And I think the difference is this. So in Canada, you had, I believe it was 3IQ that had the first ETF approved. Now, in Canada, because Canadian legislation is largely reminiscent of French or, let's say, continental European legislation, you have to, if you file a prospectus for a Bitcoin ETF, let's say, the regulator has to definitively prove any claims that it makes as to why it should not have to approve that Bitcoin ETF. F. So the Ontario regulator tried to say, well, the custody doesn't work or no, there's market manipulation. Well, lo and behold, we end up having custody firms such as Coinbase and Fidelity that get SOC 1, SOC 2 compliance custody standards, which is the same custody standards that Vanguard, State Street, all of the big players have from a custodial standpoint for equities

and funds. So custody gets solved. Okay. Well, now the Canadian regulator can't claim that as reason why to not offer an etf so they said market manipulation and this is where the sec has kind of settled over the last couple of years we can't we will not allow this because the bitcoin markets are manipulated but the canadian regulator has a higher burden of proof to prove that the markets are truly manipulated in bitcoin and they have to prove that in court so 3iq turned around and threatened to sue the uh ontario regulator saying look mark if you claim that this is the reason why you're not approving an etf you now have to prove it in court and lo and behold the ontario regulator backed down and they had to approve that bitcoin etf so this is where the uh canadian

regulator because of that higher burden of proof kind of was forced to approve that bitcoin etf which, to be fair, is the way that these prospectus offerings should be reviewed by regulators. The SEC doesn't have that burn on the proof. The SEC has a very arbitrary mandate around capital market protection that it can basically make claims that it doesn't have to substantiate in court. So it's made claims of market manipulation. It's made claims of failed custodial ship. It's made claims of failed exchanges, et cetera. It's tried everything, but it doesn't actually have to prove that it merely just has to cite that this is a potential risk therefore we don't approve it and you've started to see how particularly for instance

with coinbase and some of the coin listings uh from former icos that coinbase has had whenever the sec does have to now show up in court because they've been sued uh by a coinbase or by another player, their whole case falls apart. And you're starting to see judges basically overturning SEC decisions around how they view crypto tokenization and, for instance, a Bitcoin ETF. I mean, one of the things that we have to remember is the SEC doesn't make the law. The SEC merely interprets the law, the same as the IRS. The IRS does not make tax law. This is something I think most Americans misunderstand. It merely interprets the tax codification, believes a certain thing about how a tax rule may apply. The SEC believes a certain thing about how a security rule may

apply, which is why it's so vague with the Howey test, because then the SEC can do whatever they want, more or less. And it's inevitably the court that then has to decide, is that a security offering, is that a tax violation, etc. And that becomes precedent, therefore law. The only way that you can change that is through legislation in Congress. So until Bitcoin and crypto become more politically favorable, and you're starting to see that happen with certain candidates. And what's wonderful is you actually see it in a bipartisan manner. It's one of the only few bipartisan topics I think the left and the right can agree on to a certain extent right now. Although I should say there are certain factions of both the right and the left that are still

anti-Bitcoin and crypto. But now that that's become a little bit of a political topic, you might actually start to see legislation get drafted. I mean, Senator Loomis has been at the forefront of this for some time that will force the SEC to view how it regulates these assets in a very different manner, how it regulates that ETF in a very different manner. Now, when you think about that regulation, it changes how asset management firms can be built. And it changes the types of assets or the types of funds that you can put forward. What you all are doing with Samara is pretty interesting. Explain kind of how you're thinking about Samara Asset Group and kind of the publicly traded.

And then you've got kind of different components. Like, what is the vision here for what you guys are building? Right. So Samara Asset Group, which actually was formerly branded Cryptology Asset Group. Cryptology Asset Group being founded by German entrepreneur and billionaire Christian Angermeyer and Mike Novogratz, who I don't think I need to introduce on your channel. I'm sure everyone's heard of him. And they established this company back in Malta in 2018. And it was intended to be this crypto merchant bank for Europe, for all things crypto. At the time, you might remember Malta was pushing forward a lot of banking regulation that would be very favorable for

crypto companies. So this is why that company ended up being established in Malta. However, However, this ended up becoming the heart of what we would later call the first crypto winter. The company never really got the operations moving the way that it intended to. However, Tology Asset Group, the former brand, was able to invest in a couple of very successful companies, Northern Data being one of them, my own company, Deutsche Digital Assets, the asset manager being another. And then, of course, there's Block One, which regardless of what you think of EOS, if you're

shareholder of block one i mean they had more bitcoin than god at one point so you were pretty happy with how that balance sheet ended up performing so the company went public in october 2020 and i stepped in as the new ceo i believe it was either february or march of 2021 and since then cryptology has undergone a drastic transition from being what frankly is just a holding company uh really you could think of it as a vc fund to a certain extent uh because it had merely just invested its balance sheets into a couple of infrastructure plays in and around the bitcoin and crypto industry that ended up being wildly successful uh but now we're on the approach to really build something different for our shareholders so samara asset group being publicly

traded in germany i view this as if you own shares of samara asset group you are indirectly exposed to the performance of the asset managers as well as the funds that we are investing in and these are funds these are asset managers that typically an average retail investor for qualified or accredited investor laws qualified in europe accredited in the united states they're not legally allowed to invest in either their regulators i mean the regulators just frankly tell them you're either too stupid or you're too poor to absorb the risk of investing in a vc fund or a hedge fund that's literally what these laws nowadays are telling these people well if you're invested in samara asset group shares you get that direct exposure via the performance of the investments

that we make off of our own balance sheet into those managers as our shareholder so this is why we underneath samara asset group founded samara alpha management samara alpha management is a stateside based hedge fund group that began as a fund to fund group so we launched earlier this year a 10 million market neutral focused fund to fund that is diversifying samara asset groups balance sheet across market neutral strategies in the bitcoin and the crypto space and the fund thus far has been performing wildly successful ever since its launch on july 1st with that fund to fund now established what we are focusing on is building out what we call a multi-manager platform for those that are more familiar with uh millennium uh that large hedge fund group

it's a similar structure to what their bit or what basically they are where we intend to source external managers those that have innovative and unique strategies liquid managed strategies in crypto that outperform Bitcoin. And we intend to seed those strategies in a fund that gets set up on our own platform. We effectively are the general partners of that fund. And we then go out and help these managers raise capital so they can lock in capital into their fund, but not have to worry about... And they really just manage their strategies. They don't have to worry about the audit. They don't have to worry about the operations. They don't have to worry about the compliance. We had Samara take care of that entire thing. And that's what I think a lot of

managers would prefer to do anyway. I mean, if you're a new asset manager and you're setting up your own new fund, I mean, it might cost you a quarter of a million dollars to go through the regulatory process of setting up your fund. And usually everyone uses a Delaware Cayman master feeder structure. And then on top of that, all of the administration that comes with it over time, it'll make you pull your hair out. I mean, I know this because I'm a CPA and this is what my job used to be, or I was rather auditing these groups when I was at PwC. So if we can eliminate all of that for managers, we're solving a huge problem for them. On the flip side, if you're a limited partner and you're looking to invest in these types of strategies, you want to gain access

to the crypto ecosystem, or maybe even more so, you want to be invested in strategies that have been proven to work in a traditional, let's call it TradFi, capital market formation standard, but leverage that in a crypto perspective, because there is infrastructural deficiencies, because there still is opportunity for significant arbitrage in crypto. Well, you can do so through a structured manner by engaging with Samara Alpha and being able to access a menu of different strategies that we've diligenced ourselves, that we've invested in ourselves off of our own balance sheet on that platform. And on top of that, if you're a shareholder of Samara Asset Group, again, we're investing in these strategies. We're participating

in the performance, whether it be positive or negative, of those strategies. And it's our hope that we're going to be able to return a significant portion of capital to our shareholders over time. Although I guess I got to throw in the disclaimer there, it's only for Europeans. So sorry, American investors, only Europeans can invest in Samara Asset Group. So I was just going to ask, obviously, you all being based in Europe, is there a desire to come to the US? What is stopping you from coming to the US? Or what is kind of the evaluation as to whether that would be a positive development for the business? So we've been exploring ever since I stepped in as the CEO of Samara Asset Group, international listings, not only to expand our

brand just internationally, such that we might be able to source more managers, source more investment opportunities, but also so we can offer potential upside to our investors by accessing those new markets, as well as expanding liquidity pools for the buying, selling, and trading of Samara's shares. And I would be lying if I said we didn't explore the United States pretty significantly. However, the caveat to this is if we were to come to the United States, we would, so under Maltese and European law, we do not qualify as a fund today. We are merely a holding company. If we were to come to the United States and we were to list, for instance, on the NASDAQ, or even just to list OTCQX, the New York OTC market, we would have to register, I would believe,

as an investment company. And therefore, we would be subject to the same rules and the same standards as Vanguard, BlackRock, or any other publicly traded asset manager in the United States. And this falls under the 1941 Securities Act. And frankly, that is such a painful regulation to live by. I mean, this is why it's so difficult to see new scaled asset managers come into place. To become 1941 compliant from an SEC standpoint is a nightmare. You'll spend millions and millions of dollars from a reporting and a compliance standpoint just to become eligible to be in 1940. And then from there, it's just painstaking heartache with the ongoing correspondence you'll have with the SEC. Now, granted, there is a reason that regulation is there.

Asset managers, I do believe, need to be held to a higher standard, a higher threshold. They're managing other people's money, so they need that more so than a Tesla, for instance, right? But that's probably why we'll probably never seriously pursue a listing in the United States. unfortunately. Now, when you start to look at the funds, you've laid out the kind of thesis there makes a lot of sense. When we think about Bitcoin, I know that you all have a pretty strong Bitcoin thesis as well. And it's something that you've been honing over time. And in this world where there's so many different assets that you could invest in, talk about your Bitcoin thesis and kind of where that conviction is coming from and what you guys are doing on that front.

So, I mean, at this point in time, I believe Bitcoin has definitively established itself, not only as the gold standard in the crypto market, but I view it as being, I don't want to say on a higher tier than the other asset classes, but I view it in a completely different asset class than the rest of crypto. I mean, one of the biggest fallacies that I think the mainstream retail audience doesn't understand is that just because Bitcoin and Ethereum and not really Solana, I was going to say that as an example, but Solana is not even a blockchain. But just because these groups use similar cryptographic technology and just because they're quote unquote cryptocurrencies doesn't make them the same thing. I mean, just because I have a piece of paper that is a cute

little share of Disney that has a cute little Winnie the Pooh on it doesn't mean it's the same as commercial paper, right? Even though it's the same paper technology, just because it's built on the same technology does not mean it's the same asset. So this is where while I view the rest of crypto from a utility and a monetary perspective, fine as it is, I view Bitcoin as its own asset class. It really has established itself as a commodity. And I believe that Bitcoin is the most perfect form of money that humanity has ever yet been able to conceive. Is it perfect? No, it can't be perfect. Because I mean, if Bitcoin was able to solve the cryptographic trilemma on its own, I mean, security, decentralization, and scalability, I mean, that would be the perfect

cryptocurrency. But as you know, with a trilemma, pick two, and that's the best you're going to be able to get. But Bitcoin has certainly perfected decentralization and security from a monetary standpoint. And what we've started to see, particularly within the Layer 2 community, most notably the Lightning community, we're starting to see solutions that are enabling scalability of Bitcoin. And this is where if we can enable that scalability, Bitcoin can and will, I believe, be inevitably used for microtransactions. So you're going to be able to go to, I mean, I'm from Philadelphia, so I can go to Wawa and I can purchase my hoagie with Bitcoin. You're from New York, you'll be able to go to your local sub and be able to buy a sub with Bitcoin

and pay very minimal transaction fees. Now, this is where I believe we're going to start to see a real renaissance in Bitcoin, but not in the West. I don't think we're going to see it from a payment perspective adopted in the United States or Europe too quickly. I hope that I'm wrong in that, but I think it's going to take a couple of years. I think you're going to start to see this really happening in emerging economies, particularly in Latin America, in Southeast Asia, and in Africa. And I think this is highlighted very well by Alex Gladstein and his book, Check Your Financial Privilege, where from the Western perspective, we truly have not been able to conceptualize what money is outside of the dollar and the euro,

just because we've never really had a currency crisis, or at least any time that we think that we have a currency crisis. People would actually call in the West the last two or three years of inflation in the United States as a currency crisis. Okay, I know there's a lot of people that are really struggling to make ends meet out there because of near double-digit levels of inflation, but that is far from a currency crisis. I mean, if Argentinians saw Americans complaining about 10% inflation, they'd laugh their asses off at us, right? So when you get out of that mentality and you start to accept the fact that money can effectively become worthless, Well, that's where you start to look at alternatives, and that's where these emerging economies are really starting to engage with lightning, are really starting to engage with Bitcoin.

Even Tether has a very pronounced foothold in Latin America as being a means of transacting. And this is on top of Ethereum or Tron or Solana. So I think you're going to start to see Bitcoin from a scaling adoption happen more or from a microtransaction perspective happen more in these areas because of Lightning's ability to scale Bitcoin. And this is where I think the next stage of layer twos on top of Bitcoin is going to come full circle. Because one thing that Bitcoin isn't able to do that the other cryptocurrencies are able to do is have Turing's complete smart contracts, right? You cannot create the utility, the functionality on top of Bitcoin the way that you've been able to with Ethereum and other layer one solutions. However, you're starting to see certain groups like Rootstock and Stacks, as well as RGB, backed by the Bitfinex guys, that are trying to bring functionality on top of Bitcoin. We at Samara Asset Group are also even invested in a platform called Topple.

And Topple years ago was working on building its own layer one solution. But recently, they've decided that they're going to be building their Turing complete smart contract framework, its own blockchain, and implementing it on top of Bitcoin. So basically, what they're going to be doing is bringing that same functionality that you see in DeFi, NFTs, etc. And it's going to be secured by the Bitcoin network, but it's also leveraging lightning scalability. Well, if we're able to bring those three pieces together, and there's multiple groups that are working on doing this, we can now have Bitcoin become not just an alternative as a potential global reserve currency, and maybe this is a very long way to answer your question. I view Bitcoin, if we're able to achieve this, as the standard of a global ledger system. So Bitcoin, if we can bring that scalability and functionality to it, is no longer just a decentralized peer-to-peer e-cash. It now has become a ledger system upon which all capital markets, equities, debts, derivatives can be tokenized upon.

And we can now have a trustless ecosystem to engage in capital formation that is completely intermediary-less. We will not need auditors anymore. We will not need fund administrators. We'll be able to see a lot of these things in real time. Or rather, I should rephrase that. We're still always going to have auditors and administrators, but rather they're going to become more automated tech services within that ledger system, more so than the services that they're currently providing today. And that's where going into 24, coupling the happening with what we're seeing built on Bitcoin, I think we're ripe for the real emergence of Bitcoin. It's going to be transitioned from being that speculative asset that it largely has been for the last decade. And we're actually going to start to see real tangible results from the work that has been put into building on Bitcoin and building around Bitcoin. And this is why at Samara Asset Group, we are Bitcoiners. I mean, I'm not a maximalist by any means, not to say that I don't believe Ethereum has its own value and some of the other layer ones do as well too. But I believe in Bitcoin and what is being built in and around

Bitcoin more than I do the other ecosystems. Talk a little bit as to the payments for cryptocurrencies. We've obviously seen stable coins become incredibly popular. The payment volume for stable coins now is rivaling Visa. And these are just usually dollars on blockchain. There's a couple other fiat currencies, but mostly just dollars. Bitcoin, though, also is being used. And you're talking about micropayments. How do you see Bitcoin and stable coins kind of evolving over time? Is it coexistence? Is one got to win, the other's got to lose, all boats rise together? How do you think of those two? I mean, I think all boats got to rise together, right? I mean, stable coins are a novel innovation.

The idea that we can now have tokenized assets physically backed by dollar, physically backed by euro to have higher throughput and ease of transacting, that is a revelation. Now, are stable coins of much merit and use, for instance, in the United States? I mean, arguably not really, unless you're using them as trading pairs, whether it be in DeFi or on traditional exchanges to buy, sell and trade cryptocurrencies. But if you're an Argentinian, if you're a Colombian, if you're a Venezuelan, and you have an opportunity to hold your local bolivar or dinar relative to USDT, and you have trust that the USDT is going to hold and maintain its value better than your local currency is, well, that's revolutionary. And that's why you're starting to see Tether, most notably, and Circle to a certain extent, really be adopted as a standard of currency in these local jurisdictions. Like, for instance, earlier this year, my wife and I, we went on a trip to Cartagena. My wife wanted to visit all of the continents before she turns 30. South Africa, not South Africa, South America was the last one that was on our list.

So we just spur of the weekend flew into Colombia. And we were walking around in Cartagena and we found local markets where people were transacting in Bitcoin. People were transacting in Tether. It was astounding to see because I had personally never really experienced it at that point. But given that there is not as bad of inflation in Colombia as compared to some of the other jurisdictions, it's relatively maintained. But even then, these people were engaging in crypto transactions on a day-to-day basis to purchase little bottles of water, more so than they were in their own local currency. Now, this is where I think, I mean, we have this whole conversation about CBDCs. I'm not a fan of them because I do think that if they are implemented incorrectly, they can lead to ultimate financial tyranny.

with that said i do not believe central banks are going anywhere i don't necessarily think it's responsible to say we should end the fed and get rid of central banking it would have to be a phased out process over decades uh if we were able to do that right but i do believe that if cbdc's are open source and protect privacy and it's questionable if that's possible or even is going to be reasonably achieved or if it's even in the cards for some of the CBDCs. But if that is implemented, I do see merit in the CBDC stablecoin from an ease of transacting standpoint. But we can't have the programmable money, for instance, like what the guy from the Bank of England has been saying, where you have a limit on how quickly you actually

have to spend it you can't save it etc etc um so this is where i see bitcoin and stable coins as well as cbdc's kind of evolving together these are merely alternatives for how you can transact now if you are an individual and you want to protect your wealth better i mean i would probably advise you although this not being financial advice but i would advise you to protect your money in uh bitcoin if you live in the west if you are in latin america if you are in an emerging economy well maybe you can't necessarily stomach the volatility of bitcoin the same way that an individual from the west can because he has more disposable income maybe a tether a stable coin is the right solution for you because relative to your

own local currency that does hold its value and this is where at the end of the day i think again boats all got to rise together it's all about individual choice it's not up it should not be up to politicians and it should not be up to us as people that work and build in the crypto space to determine which singular asset is the end-all be-all definitive asset that we all have to transact with i personally prefer bitcoin because bitcoin speaks to me as i i have a more libertarian mindset bitcoin speaks to me in that regard and bitcoin speaks to me and what it is aiming to achieve and what it's been building but i'm not going to shun another person if they believe that tether or circle works better for them given their personal circumstances and i'm not going to shun

somebody if they would prefer the simplicity and the trustness the trustworthiness of a central bank in using a cbdc but having viable alternatives should be the end goal for everybody my last question for you is as you guys look forward let's say that the regulatory environments improve uh more capital flows in we get some sort of transition from what's been a bear market into a bull market how do you look at the next five years for bitcoin cryptocurrencies and asset management firms like samara so i mean i think the bitcoin uh i i mean i am uh i try to stay reluctant from giving bitcoin price predictions um i think it's wildly irresponsible to do so every model that has ever been put out there has to a certain extent been effectively debunked i

mean even the stock to flow ratio i mean one of the things that we've seen recently is that okay while i do personally believe in the stock to flow ratio of bitcoin as well as uh the rainbow chart that eric wall puts out there i also now acknowledge that bitcoin is still subject to macro factors if you look at bitcoin in just a pure microcosm okay those models might work if you look at it in a vacuum those models might work but when you consider the macro impact that bitcoin inevitably undergoes because it is a traded asset well you can see where those models don't necessarily work the way that we would have expected them to maybe two or three years ago however with that said as an asset manager um i mean i think it was even peter

teal that said like the most blatantly stupid thing you can do is just put your money on bitcoin right now and i don't think that he's wrong um if you're looking at bitcoin from a pure return perspective which a lot of our shareholders i know are since we're holding bitcoin um i know a lot of investors in our samara alpha platform i know they're looking at it that way because they're expecting uh price appreciation of bitcoin i personally hold bitcoin because i'm expecting price appreciation of it but with that said for me bitcoin is much more than that uh as i said bitcoin i do believe has a legitimate opportunity to become that de facto ledger system that trustless ledger system that the entire global economy or a good chunk of the global economy can

operate on in a transparent censorship resistant manner so that's what really excites me over the the course of the next five to 10 years, I do expect that there will be tokenized capital markets, not just DeFi like what we've seen in Ethereum, but traditional capital markets, a theoretical New York Stock Exchange or a NASDAQ tokenized exchange built on and secured by Bitcoin. And this is something that I think a lot of people don't necessarily articulate, A, because Bitcoin doesn't yet have that functionality, although I do believe it is coming. But B, they severely underestimate the branding power of Bitcoin. Whereas most institutions remain a little skeptical of Ethereum and certainly skeptical of everything else. I mean, 99% of the rest of it is just garbage anyway. Bitcoin, because of its brand, because of how it has evolved, I think, again, standalone in its own class.

And that's where I think institutions will be more open and more embracing of building on Bitcoin than they will Ethereum or some of the other platforms that are out there. So for me as an asset manager, I'm excited for this, number one, because I do believe in the long term price appreciation of Bitcoin relative to the dollar. Two, because I do believe that with this ecosystem being built out, all of the functionality being built out in and around Bitcoin, we will see massive capital market formation built on top of Bitcoin. And then number three, because I'm personally excited, I would love nothing more than at one point in the future have Samara Asset Group's shares tokenized on top of Bitcoin. I would love to have our funds shares for our LPs tokenized on top of Bitcoin. And I see that as an inevitable future. I see that as revolutionary from what it'll be able to do to pull in capital and create transparency, more transparency for investors. And it also enables disenfranchised investors, those that come from emerging economies, to participate in that ecosystem as well.

And for me, that inclusiveness, I mean, that globally inclusive economy can be best built on top of Bitcoin. I think that's a beautiful way to look at what is possible if this all works. It might be a little bit too idealistic, but that's just the future that I really hope to see. And we're on the cusp of it. I would be surprised that if that by the end of this decade, we do not see substantial progress there. It's going to be a lot of regulatory questions that need to be answered because you're going to have to have jurisdictional cross-border harmony between how those trades can be settled, placed. You're going to have to have a few counterparties, custodians, for instance,

anyway um but i think having that vision and i think that's the vision most bitcoiners do have maybe they're only thinking about it as that currency because that's to date what bitcoin has been but i'm looking beyond that and i think bitcoin can actually be so much more limiting bitcoin to being hard money i think limits what its potential upside is and what the impact it can have on humanity is the beauty of this is that um you know we can agree on some parts disagree on some parts um and you know there are people who are outside of the community who disagree with people inside the community people within the community disagree with each other but at the end of the day the market is the referee and so far uh it appears to uh to be

working um patrick where can we send people to find you on the internet or find out more about samara asset group sure um i mean so it's just samara dash at ag.com um anybody can come and see our portfolio of companies including northern data deutsche digital assets um topple the layer two on bitcoin as i mentioned earlier uh you can take a look at some of the other investments that we've historically made uh you can take a look at how the share price has been performing on our website over the last couple of months and then also earlier this year me and a couple of friends launched our own podcast we call it proof of words again i didn't come up with that our marketing girl did um i thought it was a clever name so we decided to roll with it so you can

also prof uh find us at proofofwords.io uh we conduct interviews ourselves um would love to get you on sometime uh because i'm not sure if i'm doing the podcast thing right maybe you can advise me as to how i can actually get a podcast running on my own right we'll just go completely meta um but yeah you can find us on proofofwords.io we're interviewing people in the bitcoin as well as the more traditional financial space and kind of just having fun with it i love it i appreciate you very much taking the time to do this i'm happy to do your podcast as well and uh we'll go from there my friend but uh thank you so much and uh excited to see what you guys continue to to build. Thanks for having me on brother. Always a pleasure to catch up.