The Pomp Podcast - #1484 Chad Cascarilla | Millionaire Buys Bitcoin At 3 Cents & Refuses To Sell!

Episode Date: February 10, 2025

Chad Cascarilla is the CEO & Co-Founder at Paxos, a regulated blockchain infrastructure provider and stablecoin issuer. Visit Paxos.com to learn more. Chad is also one of the earliest investors in bitcoin. In this conversation we talk about the early days of bitcoin, the rise of ethereum and other blockchains, the importance of stablecoins, tokenization, helping onboard enterprises, where we are going, and the mission of Paxis. =======================BitcoinIRA: Buy, sell, and swap 75+ cryptocurrencies in your retirement account. Take 3 minutes to open your account & get connected to a team of IRA specialists that will guide you through every step of the process. Go tohttps://bitcoinira.com/pomp/ to earn up to $500 in rewards.=======================Xapo Bank, the world’s first fully licensed Bitcoin-enabled bank, offers military-grade security with an unmatched blend of physical and digital security, as well as pioneering regulatory oversight, so your funds are always protected. Beyond secure storage, they enable you to grow and use your Bitcoin. Earn daily interest in Bitcoin, spend with zero FX fees using a global card, and make instant payments via the Lightning Network for unrivalled access and convenience. Visithttps://www.xapobank.com/pomp to join.=======================Meanwhile is the world’s first licensed and regulated life insurance company built for the Bitcoin economy. Protect your loved ones with sound money built to manage life’s uncertainty and a broken financial system. Their BTC-denominated Whole Life Insurance policies allow HODLers to pass more BTC on to their loved ones and a tax-advantaged way to access BTC for liquidity during their lifetime. Visit their website athttps://meanwhile.bm/ to join the waitlist for a policy and to learn more.=======================Pomp writes a daily letter to over 265,000+ 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/=======================View 10k+ open startup jobs:⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

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. What's going on, guys? Today, we've got an awesome conversation with Chad Cascarilla. He is the co-founder and CEO of Paxos. Chad is one of the earliest investors in Bitcoin.

He saw it and he had conviction and he began to accumulate Bitcoin. But over time, not only did his conviction in Bitcoin deepen, but he also began to understand the importance of stablecoins. And he's built an entire company around stablecoins and tokenization. He's bringing all of these assets into the new financial system, and he's helping enterprises like PayPal, Venmo, and many others go ahead and stay at the cutting edge of innovation. This conversation is fascinating because it tells you from somebody who's been here for a very long time, where we were and where we're going. I learned a lot in this conversation and I think you will too. Here's my latest conversation with Chad Cascarilla. 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 guests 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 Bitcoin IRA. Are you a crypto investor with a retirement account, but don't have any crypto in your retirement account? Then listen up. This is for you. Bitcoin IRA is revolutionizing the way Americans save for retirement by helping smart investors diversify their savings with access to over 75 cryptocurrencies. With world-class

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Again, that's meanwhile.bm. Go check them out today. All right, Chad, I thought a great place to start this conversation is I don't think people quite understand how good of an investor you are, and how early you were to Bitcoin. A lot of your story, I think, starts with getting the housing short trade correctly, but also finding Bitcoin early. Can you just tell us, how did you come across Bitcoin? And how did you get so much conviction so early on to actually go and buy it? Yeah, well, my background has basically been as an investor. And that's where I came into Bitcoin with that lens. And when I was investing, it was

really about how technology was changing financial markets. And I still invest too. But when I was doing it professionally, I had my own asset management business. My partner runs it now. I don't spend any time on. But that was back in 2004 when we started it. And technology was creating a lot of fundamental changes in how you could have markets, how they could trade, how you could interact with them, how you could offer loans and underwrite people. And as any trend continues on, we realized that there was also ways in which you could understand fundamentally the economy. And so we modeled every single mortgage in the country down to the zip code.

And this was all the way back in 2006. And you had to have on-prem information. I think we had 100 terabytes of information on every mortgage in the country. And you could see on a monthly basis how they were performing and realize the bottom was falling out of the housing market. And there was a mechanism that you could use to exploit that called credit default swaps. And there was a whole book written by Michael Lewis called The Big Short about it. And I think it was really interesting in the way he described it because we were in the middle.

And you could also use credit default swaps to commercial real estate market, which also had the bottom fallout, not as maybe publicly, but it certainly happened. And it even also happened in Europe. And when that happened, well, one, we were very well positioned for it. But two, we really climbed into the plumbing of the financial system. And we realized the thing that exacerbated the financial crisis was the fact that you couldn't tell where any assets were. You couldn't tell where collateral was. Everyone was highly leveraged. And when you had the housing market go out, that was the cause.

And then the fact that there was a giant debt bubble then multiplied the problem. And then you didn't know where anything was because the plumbing is still cobalt mainframes, like was the total like Santa Ana wins for the financial prices. And, you know, eventually the baby got thrown out with the bathwater since we knew every mortgage down to the zip code. We actually started buying distressed mortgages. And then basically it was April of 2010. I came across Bitcoin. And it was at basically three sets. And I had no idea what was going to happen.

I thought of it like a penny stock. And well, it's probably going to go to zero. That's why penny stocks are penny stocks. I would have had, I had some notion that it could go to $100,000 or even a million dollars. But when something's at three cents, like it's a little ludicrous to say, yeah, something's going to go up, you know, a million times or whatever, ended up more than that. And so far. And, you know, it's kind of unusual, 10 million times almost.

And there was more to go, at least one or two more zeros, if you ask me. But it was really also that this blockchain that Bitcoin was based on, there was no difference between Bitcoin and blockchain in April 2010. I mean, you got to the end of the internet in about four clicks on Bitcoin. But I looked at Bitcoin as a specific use of blockchain. And blockchain was this broader technology that could allow you to re-platform the whole financial system. in a way that could solve a lot of the problems that came out of the financial crisis.

And I looked at this financial crisis, and I couldn't believe it, that the Fed was just going to keep printing money. It just seemed so crazy to me that our solution was going to be just called, of course, quantitative easing is the technical term. But we can be quite literal about it. It was printing money. And I realized that Bitcoin was a solution to the problem that could be long as opposed to when you were trying to be shorted through the housing market or even the European crisis, et cetera, that there were ways in which you could build a whole new financial system with Bitcoin, potentially the reserve asset. That's what I think. But blockchain as the rails and that would be unbelievably transformative over time to building a

different way of interacting with everyone around the world in a financial manner when you come across bitcoin that early um you said that you know it's kind of hard to believe something that's at three cents is going to go up more um you bought some but from what i understand you kind of like became obsessive about how do i get as much bitcoin as possible talk a little bit about like what you were thinking about? Cause it wasn't just like a flipping, hey, let me buy one time. It was like a, hey,

there's only going to be so much Bitcoin. Let me get as much as possible. Yeah. I mean, you know, when you see something at 3 cents, obviously it doesn't have a big market cap and you try to think about what it can be. And so you want to have as much exposure so that it could be meaningful if you're right.

And, you know, the way we started doing it was we were buying it, but we were also mining it. And like, this was so early that, you know we were doing with cpus um right so i mean this was like um at a time where you could actually be a meaningful percentage of the bitcoin uh mining capacity i think at one point we were probably 20 or 25 percent of the mining capacity i don't know how for how long that was for but uh of the mining capacity i mean we did cpus and then we added gpus and we kind of went up that um

technology curve and at some point we kind of felt like well either you got to commit to being a minor and being in the hardware business, which we, you know, really, I don't think we're well equipped to succeed at that. I give them our backgrounds. We're really investors and investing in financial services companies to like, you know, one, a giant hardware business. But, you know, we did have a period of time where, you know, you didn't have to be completely professionalized and operating at industrial scale, and you can have a huge impact in terms of mining capacity and in terms of buying it. And I kind of looked at this as saying, I'm going to buy this and I'm going to walk it away. And it's going to be something that's going to be very valuable,

or it's going to go to zero. And if it goes to zero, that doesn't necessarily negate the fact that the underlying technology is unbelievably powerful and something that can transform society uh and we've seen it we saw examples of some places where things transform society and lots of examples where it doesn't that's like the nature of technology um but if you kind of look back now um well no matter how much bitcoin you have you always wish you owned more uh that's the beauty of it uh that you call it oh there's always fomo uh because um that there's a finite amount of it and you know they're not making more and we noticed that even back then you know 21 million bitcoin you know i think i don't know how many have been mined at that point maybe

i don't know four million or something i can't it's so early um but you could basically say well why wouldn't i want to own some percentage of this money supply um and if it really works out you have an option to own something that they're never making moral when you see uh bitcoins rise at some point, Ethereum, other blockchains start to get created. What is the general reaction to that stuff, right? You come from the investor mentality. You saw the problem in the traditional financial system, the quantitative easing, the money printing, like Bitcoin fits into that story. It feels like smart contract platforms and other things are like more tech oriented and kind of outside of the monetary story. So what was your reaction there knowing that you eventually ended

of getting into stable coins? I love the question because you can always talk about all the things you got right. I can talk about lots of things that I got wrong too. They missed Ethereum ICO. I was offered to participate and I didn't. I had a hard time wrapping my head around something where there wasn't a finance supply, which is Ethereum, and in which it was trying to essentially act as like a world computing system or an organizational structure for world computing, and that there would always be this tension between how much it could go up in value against the fact that you need to compute to be as cheap as possible for people to use it.

And Ethereum has still faced that, right? I mean, you don't want to have $40 move something around on the Ethereum blockchain. You go to Solana and it's at a penny. And there's ways Ethereum has tried to answer that. But you've seen so many new chains come along, which maybe in some ways has validated the initial bot process. But I think for a long time, I felt like the village idiot because Ethereum outperformed Bitcoin from the ICO moment. I don't know exactly where it is right now, but it's been, I think, become maybe a little more clear that there's a sore value concept with Bitcoin that is not the exact same.

But certainly, if I would have invested in a lot of these ICOs in an early stage and used some of maybe my early access or early insights into the market and thought about it a little more finally, I would have done even better. And so you always look at the things you miss and you wonder why you didn't get it. And I think you summed it up well. I was looking at this from a financial perspective, and I didn't understand how blockchain technology was going to enable new ways to intermediate users with projects that could unlock network effects and network economics in a different way. And a lot of it kind of looked a little bit like Ponzi-nomics at first. um and having seen so many ponzi schemes in my career i don't know i've shorted maybe 30 or 40 businesses to zero um and like there is just so many like pattern recognitions with well there's not that much here we're going to build something eventually and uh you know we're give us a here's

a token and you know it kind of sounds like somebody like selling you equity in a business that they're someday going to build um and uh but there was a fundamental difference uh not necessarily in all cases, but in many where you're creating a new way for early users who are putting content or putting effort into projects to benefit from them. And that makes it more likely to succeed. And I think that's a really powerful organizational mechanism. And I didn't understand it at first. I completely missed it, just to be like, totally honest. And, you know, I certainly see it now. But, you know, that's, it's more obvious now. I catching that earlier would have been, you know, I think something I wish I would have realized and seen. And, you know, you never

get everything right. And partly it's the background that you have that informs you, just as you pointed out. So let's talk about Bitcoin and the US dollar, right? Because the dollar is obviously kind of the foundation of the stable coins and a lot of the work that you've done from there. But when I first discovered Bitcoin, started learning about it, you immediately think, hey, the dollar is a threat to Bitcoin. Bitcoin is a threat to the dollar. Like these two things are very kind of, you know, zero sum game to a degree. Now, it looks like with the introduction of stable coins, actually, maybe it's the dollar and Bitcoin are going to rise in popularity. And like the foreign currencies, the fiat currencies may actually be the ones at

risk. How do you look at kind of the traditional currencies and something like Bitcoin? Are they actually competing with each other? Or there's some complementary natures to it? well i definitely think they're competing and they're complementary um so and the reason i think that's the case is because really um you have to step back and say what is a currency um you know and i you know we don't want to maybe go down too far down this rabbit hole you know like existentialism here uh who am i what am i doing here um but it is very important to ask what is the point of a currency and the point of a currency is even really the point of an economy which is you're trying to take energy and convert it into useful work and that's how like someone is

like growing some growing some uh vegetables and someone's building a car and they have a way of being able to um transfer uh the goods in a common way that's what a currency is doing but really that's just a way of transferring energy i did work you did work how are we valuing that work and therefore we can figure out a way to exchange these goods and services. And so money is a representation of energy. And historically used gold, which is basically energy,

it's diesel fuel, you dig it out of the ground. Right? And by the way, what's Bitcoin? It's energy. You know what I mean? It's basically mainly energy because everyone's trying to figure out

how can I get down to the cheapest kilowatt hour? That's, you know, what they're trying to figure out. And by the way, fiat money is energy too. It's just a tax on future energy. We're going to get receipts in the future from our citizens that we're going to tax because they're creating a useful way of investing energy. And the problem with fiat money is that a little bit of it's good.

A little bit of being based on the future is good, but you can never just do a little bit because it's just too tempting. And then you start having more and more and more debt that is back in your fiat currency and you can't pay it back. And in fact, it consumes your future instead of actually allowing you to invest in the future. And we're probably at that tipping point. So that's money. But if I talk about the product of money, so that's different from what money represents. The product of money is far and away being won by the dollar. Everyone, everywhere in the world wants a U.S. dollar.

and they're not focused on dollars that represent you know energy and what's going to happen they're just going i got a currency and it's much worse than the dollar it depreciates in value against it i don't want to have the i don't know argentine peso i'd rather have a dollar i don't want to have south african ram i'd rather have a dollar and you know what the dollar is better than those currencies so everyone in the world wants a dollar the main problem is money is has a product to it, which is how do you use it? And right now, it's basically like the post office. A dollar takes two, three, five days to move. It can be even longer. It has all these costs and frictions and limitations, but yet everyone wants it. And actually, central banks all over the world

are selling dollars. They're buying gold, but retail people, they want dollars. And that's where blockchain is so valuable because it's a different distribution mechanism, a different rail for dollars. That's what a stable point is. And we can maybe talk about that in a second. But if you didn't figure out how to get dollars in people's hands, they won. And that's really powerful for the US as the issuer of dollars. It's our number one export, for sure. And certainly the one we made the most money off exporting is dollars. And dollars are competing in some sense as a payment mechanism against every other fiat currency. But it's also in some sense, even competing against gold and bitcoin if we can't figure out a way to make the dollar stay

relevant from a distribution standpoint you know people are going to start using other um other mechanisms and that could be bitcoin that could be tokenized gold or it could be some other fiat currency um you know really god forbid and um because it gives so much power to a country when they have the currency that everyone wants to use um and you know if the u.s seeks printing money um you know we're not printing more money than anyone else in the world but you keep printing money and you have a problem people will eventually go you know what i don't really want to hold it anymore i want to i want i don't want a dollar that isn't backed by fiat it's backed by maybe gold or backed by bitcoin or if you can't figure out a way to enable the dollar to move in real

time at the speed of the internet people are gonna be like well i'm gonna go use something that can And so that's where there's competition potentially with, say, Bitcoin. But there also may be fundamentally representing something a little bit different. One is trying to be a hard asset, whereas one is acting as a means of payment. I know we covered a lot of ground there, but I think it's important. There are different ways to create a mechanism for me and you to have a common way of buying that it services. The dollar is in the pole position, but that can be squandered. It can be squandered because the product doesn't keep up, or it can be squandered because you keep

printing so much of it that people don't trust it. What's interesting to me is there's a lot of countries around the world that their currency, their local currency fails for a variety of different reasons, and they adopt dollars. They become a dollarized nation. But moving forward, there's also a lot of countries that are very scared of holding U.S. treasuries, holding dollars. We see, obviously, sanctions like in Russia or many other places where I think there's some people say, hey, hold on a second. There's some complexity with this. I want dollars, but also there's maybe some national security or kind of sovereignty questions about where is it being held and things like that. Is there a world where central banks kind of take the

diversification approach and they say, you know what? We're going to hold some Bitcoin. We're going to hold some dollars. We're going to hold some gold. We're going to hold some of our local currency. And that is the solution is to just diversify. Or do you feel like most of these countries, they are going to try to have a single strategy with clarity and really drive home a single currency for their people? I don't know if people really have a clear strategy yet. Partly is, this will be driven by the United States. Can we keep our house in order around what the value of a dollar looks like. Secondly, the US goes out and buys Bitcoin, which looks increasingly likely, still TBD exactly what that means. But the US built a strategic Bitcoin

reserve. I can tell you every other country in the world is going to build a strategic Bitcoin reserve. They're not going to just be like, well, we're going to let the US go off on its own. They're all going to do it as well. So you could have an and where you buy Bitcoin, you continue to hold dollars. Of course, it could end up being an or because you just keep printing dollars and people don't trust it. And so then they buy Bitcoin. There is a huge amount of interest in gold. I mean, it hit an all-time high today. It's almost at $2,800 an ounce. And that's driven by central banks buying gold. It's not retail buying gold. If you look at ETFs, for instance, the amount of gold they're holding per ounce is down massively. It's just the price

has gone up so much that it looks like you're at an all-time high in terms of the size of ETFs. but not anywhere close to an all-time high when you look at the ETFs per ounce, not per price. And so you don't have retail buying really. You have retail actually selling it. It's the central banks that are buying. So they are, in some sense, trying to break away from the dollar, or they're trying to make sure that they hold something that's going to hold a store of value. And Bitcoin definitely represents that. But until very recently, with ETFs, etc., It hasn't been an investable asset, either because of its size or because of the way it was being treated within the global financial system. And so I think it is to be a very interesting moment to head here if the U.S. buys Bitcoin for generally it to become a reserve asset.

And I think that is ultimately a good thing, even for the U.S. You want the U.S. to have a reserve currency. you know i certainly think we want that but you know you want that to be tied to economic reality and tying it the reality is tying it to the energy that's been spent to create um that's why gold has historically been so good it's a little out of the straitjacket though because there's only so much gold as you've dug out of the ground and spent energy on you know when you can base it on that which is the future it's a lot easier um and you know bitcoin also has that straightjacket maybe even a little bit more so because it has a finite amount

to it um and so it's gonna be a very interesting um global financial uh test to see how can the u.s maintain the credibility of the dollar from a product standpoint and from a store of value stand for? So when I go and I look in the United States, ATMs work, wires, ACH, cash, right? There's a lot of different kind of form factors and transaction mechanisms for dollars. And so it's a little bit harder, I think, for people in the United States to see why stable coins in particular would be something that they need. Outside the United States, the story is completely different. One is just access. As you described earlier, people want access to dollars. They can't Otherwise, this is a great way for them to do it.

But also things like remittances and kind of some of those transfer mechanisms, et cetera. Can you talk a little bit as to what are you seeing people do outside of the United States when it comes to stable coins? Are they just buying and holding it? Are they actually using it for transactions or business using it? What are you seeing there? It's a fun question. So I think there's two ways to frame this. Even in the U.S., 20% or 25% of people fall into the category of unbanked or underbanked.

and this is by the Fed. They do their own surveys and publish this. Usually, I think it's every two years or so. So even in the US, a lot of people don't have access to what you would think of as the traditional banking system. Now, once you get outside of the US, how many people have access to dollars? It's even less.

It's very, very hard to get a dollar bank account. and that has created this need to develop mechanisms that make it possible for anyone in the world to be able to hold dollars and so if you went around and looked how many people have smartphones in about 14 years you've gotten from zero to 85 penetration rate of smartphones around the world around the world what percentage have access to bank accounts It's actually only about 60% or 65%. Maybe you could say 70% at best. So the underbanked and unbanked globally are more than people who don't have smartphones.

It's like 30% or 35% unbanked, 15% don't have smartphones. If you said how many of those people who are banked and have access to dollars, I don't know what the statistic is. But if I had to guess, I bet you it's only about 10% of people, maybe 15%, something like that. The US population is only 5%. Not very many people have access to dollars. So this is kind of crazy in a way. Everyone wants dollars. Everyone wants a bank account. They can't get it, but they have access to a stall.

And the beauty of a stable coin is you don't need to have a bank account. You just need a smartphone now. That's all you need to have is a smartphone and a wallet. And now anybody can send a dollar to anyone else in the US and around the world. And it moves 24-7 instantaneously, basically for free, and it's programmable. So you have a software month. And of course, the whole world is being eaten by software. Why wouldn't money get eaten by software? And I think that is the thing that StablePoints is representing is an entirely different rail that allows the market to expand by somewhere between, I don't know, 10 to 20x. It's an enormous expansion of opportunity for the dollar.

And it's all made possible by having a different distribution mechanism, which is the blockchain. That's what it represents. I think we can even get away from the blockchain at some point. I almost think of a thought experiment is, what would the world be like if no one even talked about tokenization? And I think that world is coming because it's just your phone that you're interacting with and sending it to somebody else. You don't even need to know that it's a stable point.

It should be completely in the background. You know, nobody talks about like IP addresses or HTTPS or whatever it might be, or like what browser are you even using? None of that stuff matters anymore. In the same way, we're going to get pretty close to a world where no one even knows that it's a stable coin. It just moves. And that's what I think is so important about stable coins. So one of the ideas that I've heard people talk about is this idea that if you don't have access to dollars and you don't have access to a bank account, people think, oh, you don't have access to this stable store value or this kind of short-term stable store value in dollars. But that probably means you also don't have access to interest.

You probably don't have access to a whole host of other financial services. And with stable coins, we're starting to see people trying to innovate where either you can earn interest on the stable coin or there's interest bearing stable coins and you can have these various little tools. And I'd never thought about this before, but a friend was talking to me and he was like, dude imagine if you could give an interest-bearing account to every person in name some country you know outside the united states where no one has access to dollars and i just was it just was like oh my god you're basically introducing like compound interest to an entire uh population and sure maybe you know some portion has been able to figure this out on their own through

some esoteric thing but not in the way that you know maybe people in the united states have And so that feels really powerful. I can agree more. One thought experiment to try to frame this would be, imagine for one second that you had a market where the wholesale rate was some number, 5%, and the retail rate was somewhere between 0% and 2%. That's a huge spread. Basically, it's like an 80% or 60% to 100% discount on your return if you're retail versus your wholesale. You couldn't even imagine how could that exist, especially in a world with the internet.

The whole point is that you've compressed the retail wholesale spread. It should be almost nothing now. But that's exactly what exists in the financial services world. If you're a retail person and you go to a bank, what are you getting? Zero to 2%? And I know it's now more like 4%. But whatever. You know, the whole point is, you know, the wholesale rate is 5%.

People can't get it. And that doesn't make any sense. You know, you put your money in a bank, you're a creditor of the bank. You're lending money to a bank. A bank has risk tier than the governor, but the governor will pay you 5% if you lend money to it. But you're not getting that from a bank. And so I think what's good is the stable coins are democratizing access to the dollars on

a global basis. We talked about how all these people all over the world with just a smartphone can now get access to a dollar in a wallet. But imagine if you can democratize access to the risk-free rate. And there's no reason you shouldn't be able to, because a stablecoin is just backed by T-bills, US government debt. And a stablecoin moves in real time, and then it could pay interest like a T-bill. It's very simple. In fact, we had a product that does that. it's called the lift dollar and it pays interest daily at the risk-free rate to anybody that holds it and of course not for u.s citizens because it would be called a security ironically but for

anyone outside u.s you can literally hold this and you get interest compounding daily on your phone you don't have to do anything you don't take any risks you simply sit here and have the token in your wallet, that's going to not just be something that the Lyft dollar provides, which we're very proud of, but it should be the way the whole financial system is built off of. That should be the building block. The risk-free rate is the building block of the entire financial system and the entire economy. The irony is that most people can't get access to it. And that has created these enormous levels of inefficiency for people in the US, but also the whole world. Because like you just said, if someone has a stable coin and they're in South Africa, eventually you go up the

Maslow hierarchy of needs from, I have a stable coin. Yes, I am now safe from devaluation of the RAND. And then the next thing they're going to say, well, I'd like to get a return. Well, the first type of return you probably want to get is the risk-free rate. And then essentially you might say, well, you know what? I want to start getting even more than that because I'm going to lend to this person or that person or whatever it's going to be, or I go into a DeFi pool. And you're going to create this way to create global pools of capital that everyone has equal access to, but it's going to start with democratizing the risk-free rate. And it's going to completely shift the entire way the financial system works. It's going to be unbelievably powerful for

innovation and creating a way of bringing people globally into a financial system that they never even had an ability to access at all. So we've talked a lot about accessing dollars as a major shift in this financial system, what else do you think is going to change, right? Are there certain other things that you're paying attention to that kind of stable coins give access and therefore there's kind of second order effects? For sure. Because stable coins are the cash light. And we spent all this time talking about cash and dollars, et cetera. And the reason that's so important is almost every transaction has a cash leg on some side of it. I buy a cup of coffee at Starbucks, I give you cash, you give me calm. But it's also the cash leg exists for everything

else. I buy a house, I give you cash, you give me a house. Or I buy a share of IBM or Apple, and I give you cash, you give me the share. And you go on and on and on. Everything has cash on one side. You really don't buy a share of Apple for gold or for Bitcoin. Maybe you will in the future, but you don't do it now. And the reason that matters is if you don't have the cash leg, on the blockchain, it's hard to put the other leg on the blockchain too. And crypto has been tremendous at pulling dollars in because you needed dollars to move in real time because Bitcoin moves in real time or any other crypto asset moves in real time. So you needed to make dollars available to everybody. You need to make a move in real time. That's pulled in a critical

mass of, I think it's about $180 billion of dollars have basically been pulled into stable coins, kind of tokeners, so to speak. After dollars, there's almost nothing that's been tokenized. We have a gold token that has about $600 million in it. And that's basically more or less the next largest asset that has been tokenized. And by the way, that's like a top, I don't know, six or seven gold ETF, but it's not a big number in the scope of gold, which is 20 trillion, or in the scope of the world where there's $800 trillion in assets. And that was the whole reason we created Paxos at the beginning is we wanted not just to change how cash moves around, but how do you change the whole financial system? And that's what tokenization, the idea,

hopefully we all even forget what that means, because everything is moving in real time. All asset markets are able to operate 24-7. All asset markets are available to anybody in the world, as long as you have a trustworthy other counterparty. And that's what I think is coming. And having the payment leg really start to accelerate. And remember, $200 billion seems big, but it's kind of small. There's $20 trillion of dollars, $22 trillion. There's about $100 trillion of money. And then there's $800 trillion of assets. So you're still a very early stage at getting the payment leg to move. But I think it can go very fast over the next two or three years. And it's going to then pull in all these other asset

markets. And that's going to be the next wave. And by the way, we're already talking about it. It's called real world asset tokenization. That's the buzzwords that people throw around. And what they really mean is, I want gold on the blockchain, I want Apple on the blockchain, I want real estate in the blockchain, I want my private equity fund on the blockchain, whatever it might be. And you don't need to know what's on the blockchain. But when it is, suddenly, things become more liquid, they become cheaper, they become more accessible, and everyone can participate. What's interesting to me is we have already seen this. The framework that I've used for years now is like we were in the analog age or physical assets. You had physical deed to your home, a physical cash, you had physical gold, whatever. And we transitioned to what I call the electronic age, which is the same asset. We just now change the kind of mechanism in which you hold it.

So you hold a QSIP for a stock or you hold a digital kind of version of whatever the thing is. So maybe with gold, it's we put it in this wrapper and now you hold a QSIP for a stock. that gives you exposure to gold, but there's still physical gold that exists. And now there's this kind of electronic version where you're really talking about is like, you're not going to take physical gold and it like, you know, I don't know, Aladdin comes by and like poofs it into the air, right? It's still physical gold that sits somewhere, but all you're doing is you're changing the form factor of the way that people can hold that asset. Same with dollars, right? Is the dollar stable coin is backed by dollars somewhere, but now you actually have

the ability to move this much more effortlessly. And so I think people get caught up on kind of tokenization in a weird way. But it's just what is your interface to the asset is changing. And it's giving you kind of more ability to hold, move, store, etc, that maybe you otherwise wouldn't have. Do you think that's a fair description? I try to think of what the right analogy is to reify it for people, because this can often feel like very intangible or opaque. But it's kind of like I remember way back in the day, unfortunately, I remember this, where you had Web1. And Web1 was like you went on and it was literally like somebody scanned a piece of paper and they put it on a web page and you would just look at it and it was just the web page that you scroll through

it had all the font and like you literally you're looking at a piece of paper and in some sense that is what the financial system did it went into like the web one world but it never was able to go beyond the web one world because everything in the financial system is on an intranet it's on a closed private system and there wasn't a way to figure out how could you make the system be open but yet secure and safe and once you can do that you can basically put on the internet you can start coming up with these different form factors just like mobile came along and so you never you weren't you know you had better ui on the your web browser but then you had your phone and now you even have like this concept of web 3 and the web 3 is really

just a way of saying the financial system and the internet are meeting together in a way that keeps everything open. And that is a recent point of software eating the world. You had to come up with a way to be able to turn the financial system into software that was open. Because even though you might have interacted with your brokerage on a webpage or something, you're still just had the same backend. You weren't really shifting anything. It was just this one interface became something different than it was before. Once you're now moving something in token form, you're completely shifting that form factor that allows there to be a completely different level of interaction with it. And you can start doing micropayments. You can start using an AI agent

even to move payments around for you because it's not tied to the old backend. It's tied to something that's publicly available. And it will unleash, I think, innovation within the broader economy in such a huge, profound way. We can't even fully appreciate it. And you're trying to think like, what would be the right analogy for this? And you sometimes struggle to make that possible because it's going to be a complete different leap forward it's like a phase shift you're trying to explain oh we're going to go from water to you know which is a lit you know liquid to gas you think probably that that's not um a linear understanding it's a complete different um shift in in the phase of it and that's what will happen in the financial system

because it's been so held back by being an intranet and and i think the petri dish of crypto is what's so fascinating. It's showing lots of ways in which you can now organize in different ways. You can create network economics. You can bring people in all over the world and completely alter everybody's lives for the better. One last way of even thinking about it is right now, the financial system is somewhere between 8% to 10% of GDP. I don't think that's a good thing that's a bad thing it's historically even four or five percent you want the financial system to be as efficient as possible not as large a percentage of gdp you want to be as small a percentage of gdp um and so imagine if you could take four or five percent of gdp and

return it to everybody i mean that's kind of what you're potentially talking about it's huge let's talk a little bit about these i'm going to call experimental use cases for stablecoins. You mentioned two of them that I think are pretty interesting. I call it like streaming payments, right? Or micropayments, the ability to kind of get paid as you're doing something. And we've definitely seen this happen over time, right? It used to be you get paid every two weeks. Now there's things like Uber and Lyft that actually pay people out at the end of each day. And they're really kind of just financing some of those payments. But what you're talking about is not a financing mechanism as much as I can literally sit here and say, okay, pay Chad,

you know, $1 every minute that he works today over the eight hours that he works or whatever. And then it just streams to you. And at any point, if you stop working, then you stop getting paid. So it becomes much more real time in that. But it's really technology now allows that to happen. That's kind of one use case of streaming. The second is money for machines. And a lot of what we talked today about is, you know, what can humans do with this now?

What access do they get they previously didn't have? But you talked about the AI agents and some of these use cases where whether it's software or hardware with robotics or humanoids or whatever, they need money too, right? They're going to have to be able to do some of this stuff. And so what are you guys doing or how do you think it plays out with both streaming and kind of money for machines or money for these AI agents? yeah i by the way i can that is it'll be such a fascinating uh way in which uh the financial markets are going to evolve uh because you're going to have you know internet internet-based financial systems so then you can have agents that are able to access the internet be able to do things for you oh go pay this bill for me uh pay this person you can now get paid in real time

uh someone can receive dollars and hold it in their wallet they can earn interest on their wallet turn into some other uh asset whenever they need it so you're not like kind of tied down by all this friction um and which is maybe not something everybody feels but really does exist and is holding us back um what we're trying to do with paxos is make sure that we're creating these building blocks in a way that are highly trustworthy so we've gone out and gotten regulated in new york where we have a trust and uh company um and in abu dhabi and singapore and a trust is basically a bank except safer. If someone sends money to Paxos, we can't hold it and spend it or lend it out. We put in the client name and just sit there. And that's fully segregated and

protected. And that's allowed us to create stable coins that are really safe. Example one is for PayPal, but we've also launched others for a combination of Anchorage and Kraken and Robinhood and Galaxy and Foolish, et cetera. And so many people want to make sure that they have a really trustworthy instrument that they can now use and be able to move around. And so our goal is that we're in the infrastructure. If someone wants to build something, or we can be a tokenization agent so that we can create a token form of assets that can now move in this blockchain world. And we need to have our APIs completely ready for firms to build off of and use it in that kind of high-touch way because we're not there yet with AI agents, but it's probably not that

far away where they're going to need to be able to say, oh, I'm going to move money into a account, create the stable coin, pull it out in real time and pay somebody and do it in a low cost way. And that's why there's so much pressure even on blockchains to be able to operate at pennies or less than a penny, you know, because you need to be able to make micropayments work. but the rails of the chains are continuing to be built the rail the infrastructure regulated infrastructure like us are continuing to be built and it's going to converge around a real-time financial system that is completely programmable that then allows you to overlay programs which ai is to make economic activity um happen in a way that it didn't before that's where it's going now

Now, you know, it's always hard, you know, when you're on the S-curve, anytime you kind of project on the S-curve, you're always lost. Because you're projecting linearly, and S-curve, where you're at is nonlinear. And so we don't know exactly, like, am I talking about something that's like 10 years away? I don't think so. I don't even think it's probably five years away. But it's not tomorrow either. It's somewhere, I think, in the next couple of years, we're going to be able to see this definitively. And you kind of dial it back and go, well, we're only at $200 billion of stable coins.

And my point is, yes, we would be at $200 billion now, but we have a different administration. And they understand the importance of what this can mean for the dollar and for the payment system and for the economy. And we're going to have a nonlinear ride here. When you think about the United States, we talked a lot about, you know, kind of the international use cases, etc. There's been talk about central bank digital currency. Now, President Trump has stepped in and he's basically tried to ban central bank digital currency and feels very strongly that that's not a good thing. There's a lot of risk with it. How do you see this playing out, though, whether it's in the U.S. or elsewhere with the central bank digital currencies?

Do we let the Paxos and others that have these stable coins kind of empower them and use them to really kind of drive a lot of the activity? Or is there something that the government could have a role in? Well, you know, the way I think, by the way, I think there is the key thing here is the private sector. Probably no surprise that I would say that, but I'll maybe illustrate why. You know, today, the Treasury issues debt and it does it through something called primary dealers. So it already uses the private sector, right? I mean, it's not selling out to everybody. It's doing it by using intermediaries.

And that makes sense. I mean, could you imagine the government really doing a great job trying to interact with every single person in the world? That's tough. The other thing is a CBC could be viewed as a surveillance coin by people outside the United States, maybe even by people inside the United States. We've seen a lot of examples of debanking and other things. You've been subject to it. So many others have been subject to it. And I think there'd be a lot of hesitation around giving the government maybe the means to do that in a politicized way.

But that's ultimately going to be something that's settled in a political process. I think that the reason you need the private sector is because we're so early. The product needs to be iterated on. What's the right chain? How much privacy you need versus anonymity? They're not the same thing. I'll give an example of what that means. A private transaction is you and I interact.

People know it's you and me, but they have no idea what we just interact with doing. anonymous is people could see what the transaction is but they don't know you or me you know should it be private and anonymous should it just be anonymous like it kind of is now uh should it just be private how can you create second layers that help to make these things possible because jp morgan and big america moving money all over the place uh you don't want that information leaking out of the whole economy everyone was using a stable coin on a public blockchain you could have huge amounts of competitive information leaking out for all kinds of companies. Those things haven't been thought about. You'd have the government come in and

start doing something. They move pretty slow. We're trying to iterate fast. Who's going to be able to do that? And who can respond? So historically, the government's relied on the private sector. Secondly, the market's in early stage. You need private sector innovation to help find what is the true private product market. And then there's the questions around how well you could trust something from the government on a global basis. And there have been attempts at CBDCs. It could work. I don't think that there's necessarily a problem with that. There are pluses and minuses to it. But my general viewpoint is that, especially in the US and the way we have operated historically, it's going to be the private sector that is going to make this

um really um something that's globally available and it doesn't just have to be companies like us it could be traditional institutions too banks etc when um i think of where crypto is in general um bitcoin has obviously been accepted in the traditional financial system uh it seems like stable coins are that next you know big theme uh we obviously saw david sacks and many politicians uh recently talk at this press conference about stable coin regulation and things like that But do you see a world where, let's say that the banks themselves or the ETF issuers, they start to use stable coins to interact with their customers? A lot of this has been kind of individuals using it with individuals, maybe paying some businesses. But what about like the core plumbing and the ability for these banks to use this stuff themselves?

Well, I think everyone is looking at it now. um in a sense there were these regulatory restrictions that were put into place um for all kinds of different reasons um and those are being broken down and being rethought which i can't support enough i think it's just unbelievably important technology is a tool and uh when new technology comes up you can't just say we're gonna just keep using the same old tools there's new tools out there and there are problems with those old tools. They solved the problem before, but they're not working anymore for the problems that exist. And in the payments world, we talked a lot about what some of those problems are, why stable coins are unique. And, you know, for certain

traditional institutions are going to use these. We already see firms using them in everyday payments all over the world. That's why we're the fastest growth is happening. I saw a statistic that 30% of remittances touch a dollar stable coin. And I mean, that's an enormous market. And another example of providing real value to people all over the world so that they can move money cheaply to loved ones and being able to do vendor payments all over the world

where it's so hard to get dollar bank accounts, but you need dollars. And the more that traditional institutions embrace this, the better it's going to be for everybody because it will change the cost order. It's going to change your access to interest. It's going to change who is able to have it in their wallet. So I think that has mainly been held back,

not because there is any real hesitation around the possibility of stablecoins, but because the regulatory restrictions made it impossible to experiment in a real way. And we're already seeing this change. I mean, to give you some sense, It's only been two weeks. Sometimes it feels like it's been two years, but it's only been two weeks.

And, you know, we specialize in working with enterprise, you know, whether it's PayCal or Venmo or et cetera. Many big firms use us, Stripe. And we've gotten inbound from an enormous number of financial institutions. um it's it's unbelievable like the ban has broken or maybe a better analogy maybe the fever has broken uh of like kind of uh trying to prevent this technology from becoming more widely utilized and i think we're going to see some really big companies use it in some really fun and um important ways in a much shorter time frames than maybe people are thinking it's not going to be many years away it could be this year uh it just takes a little while though to

shift the regulatory apparatus. When we think of Paxos, the business, what can you share in terms of how big you are, maybe some stats that you guys have that you've published publicly that would really give people a sense for the business itself? So our business as infrastructure has been largely around enterprise. Though, we can help customers of all sizes, for sure. Perhaps some of the most notable examples would be, say, PayPal launched their stablecoin, and that's a white label. Stablecoin meaning you run the entire thing in the background. It just has the PayPal name on it. And of course, they do the distribution and manage their customers. But we're running the operation

of the compliance, the treasury management, the regulatory overlays. And that will be one example where we work with someone. And if you were a buyer selling crypto on your Paypal app, that's also Paxos and the same with Venmo or other places. And so we're either providing you the infrastructure to be able to launch products or we're providing the tokenization that might have your name on it or that you can use. And we can do that on an individual basis or we can do it as a common good. That's where we've created something that looks a lot more like a community

coin for a number of firms in the crypto space. um and uh so whether it's a paypal or interactive brokers or stripe or robin hood or kraken and anchorage we're trying to be that um infrastructure provider because we're not acquiring the end customer i mean we're not going out and getting a retail end user then the interesting thing about the crypto space is a retail end user can use our products but we're not trying to uh go and acquire 100 million end users, we want to power the firms that are touching those users. The financial system is unbelievably fragmented. Even J.P. Morgan, which is the biggest financial services company in the world, has this tiny

market share on a global basis. So everyone has financial relationships. We're trying to say, how can we help shift from this analog financial system into a digital one? And so we minted over $150 billion of stablecoins, as an example, huge amounts of tremendous blows. We have powered all of these different brands. And, you know, I look out and think, it's just a matter of time before the whole financial system is operating this way. That's what our goal is. That's our mission. How do you guys make money? If you're serving the enterprises, I'm assuming there's some relationship there with them. But also stablecoin issuers have been in the news quite often, because they hold a ton of treasuries and they're earning yield off of those treasuries. And so talk a little bit about being kind of an enterprise solution, but also this great business model that stablecoin issuers have as well. and so as infrastructure you you really have two ways uh that you earn money one is in certain cases the transaction fees you know if someone's using our infrastructure and we're enabling them

to create a buy sell hold send receive uh product uh we're either taking a transaction fees or helping them buy or sell something or for them to be able to send and receive something including payments uh or crypto or holding it and so we're taking a transaction fee and if we're um the issuer of an asset, whether it's our gold token, it could be our yield-bearing stablecoin that pays the risk-free rate, or our traditional stablecoins, we're earning an asset management fee. And so you have kind of an asset management business in which we're tokenizing. And then you have the infrastructure business where you're getting paid per transaction, almost like an API I call. And so that's the two different streams. And our goal here is how do we try to take $800

trillion of assets and tokenize them? One way you do that is you make as many assets available to be tokenized as possible. The other is you provide the infrastructure to businesses of all shapes and sizes so that they can go ahead and launch products using a regulated custodian. And And they want to use our tokens, right? They want to use someone else's. We can't facilitate as well. And so these are the two legs of our business. And they're really mutually reinforcing.

PayPal comes in. They want to be able to offer products to their end user. And they want to create their own token and we help them with it. And then where can we send people to find you on the internet or find out more about the company? Come to Paxos.com. If someone's starting a business, they want to be able to have access to our products. They can come. If someone is a larger enterprise, come to Paxos.com and we want to help that. I mean, we've constructed our products specifically in a way where they're completely egalitarian.

You know, you can come use our stable point products and you'll get paid interest no matter who you are. And that could be true of our yield bearing dollar. It could be true of our global dollar product. Anyone comes and uses it and they hold balances, you can accrue interest. And so the whole idea is that we're not just trying to make this limited. Different types of users have different types of needs. We want to democratize the financial system. We want to democratize access to dollars. We want to democratize access to the risk-free rate.

We want to democratize access to gold. Any place you walk, our driving force is how are we democratizing access? How can we make any asset available to anyone anywhere in the world? I think you guys are doing a pretty damn good job of it so far. So I'm excited to see what you guys continue to build. And you've been at this for a very long time now, going back all the way to 2010, which is pretty cool to see how you've navigated each one of these key themes. And so I think the people who are interested should definitely pay attention to what you

guys are doing. And any companies, go check out Paxos.com. Thanks for having me on. It's great talking to you. Thank you.