The Pomp Podcast - #386: Richard Byworth on Becoming Public Market Crypto Exchange

Episode Date: September 17, 2020

Richard Byworth is the CEO at Diginex based in Hong Kong. Previously he was Managing Director at Nomura where he ran Multistrategy Sales for Asia Pacific product globally.  In this conversation, we discuss Diginex, their Nasdaq listing, the SPAC structure, various products they have built, and Richard's time at Nomura.  ============================== Diginex is the first company with a cryptocurrency exchange to be listed in the US. That exchange, EQUOS, has been built to institutional standards, but is available to everyone. You can trade Bitcoin and Ethereum spot, as well as Bitcoin perpetuals, and get a 5% discount on all fees, by signing up using equos.com/pomp ============================== Athletic Greens is an all-in-one daily drink to support better health and peak performance. Even with a balanced diet, it’s difficult to cover all of your nutritional bases. That’s where Athletic Greens will help. Their daily drink is like nutritional insurance for your body that’s delivered straight to your door. You can get yours at https://athleticgreens.com/pomp ============================== Pomp writes a daily letter to over 50,000 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://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Richard Byworth is the CEO at Diginex, based in Hong Kong. Previously, he was Managing Director at Nomura, where he ran multi-strategy sales for Asia Pacific product globally. In this conversation, we discuss Diginex, their NASDAQ listing, the SPAC structure, various products they have built, and Richard's time at Numoro. I really enjoyed this conversation and I hope you do as well. Before we get into the episode though, I want to quickly talk about our sponsors. First up is Diginex. They're the first company with a cryptocurrency exchange to be

listed in the US. That exchange, Equos, has been built to institutional standards, but it's available to everyone. You can trade Bitcoin and Ethereum spot as well as Bitcoin Perpetuals and get a 5% discount on all fees by signing up using Equos.com slash pump. Go check them out. They're going to be the first company with a crypto exchange listed publicly in the U.S. Diginex. You can go to Equos, E-Q-U-O-S, Equos.com slash pump. Go check them out. Next up is Athletic Greens. If you're like me and you're really pushing hard at multiple areas of your life, you may not be eating the most balanced diet, then you probably want some extra nutritional support that's going to be an upgrade on your current multivitamin or current regime. Or even

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investors about business technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, that's it for the advertisements. Let's get into this episode with Richard. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy,

but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I am super excited to have Richard here. You've got lots of stuff going on, man. Thank you so much for taking the time to do this. Thanks for having me on, Pomp. It's great to be here. Absolutely. Let's just jump right in on background. You now run what I think has become kind of one of the most noteworthy crypto exchanges. But before that, you had a whole other life in like the legacy finance world. And so you cut your teeth there. Talk a little bit just about what you did, where you grew up,

and then how did you eventually get into crypto? Yeah, so I grew up in traditional finance, as you said, mainly in the derivative product set. So I was derivatives and convertible bonds. I started off as effectively a prop trader in London, so running bank risk um and then moved that into flow and then slowly moved into market making and trading around that and uh then i moved out into tokyo to run a distribution for namura um we were selling convertible bonds and then that was around the time that that lehman got acquired

by namura so we brought lehman into the fold lehman came with a lot of derivative product and so just added that to what we're doing that's then we renamed the group multi-strategy sales so by the end of my career with namura i was running um derivatives convertible bonds futures and options delta one sort of everything in the derivative space for distribution across asia product but across the world got it and so uh there are a number of deals that you worked on that are, you know, years ago, but still, I think people kind of look and say, wow, that was kind of a seminal moment. One of those was this SoftBank convertible bond. Talk a little bit about kind of just how that deal came together, you know, and kind of your experience

and actually running a lot of the distribution for it. Yeah, so that was actually a really challenging deal. Because you couldn't get credit for SoftBank at that point in time. And so So credit is a big part of the pricing of a convertible bond. And so our bankers had actually gone ahead with the pricing and just put a random credit number in there, assuming that there was a credit market. So we then had a situation at the last hour where there was no credit and we had to effectively get the credit desk to help us out and make some sort of a market. But it was a big deal. was 1.5 billion US, came with an equity tranche as well, but this was a convertible bond. So yeah, it was one of the most hectic deals I've ever run. But yeah, it was good fun. And

obviously, as you say, SoftBank, huge name, very important these days, and particularly in what they've been doing in NASDAQ. Yeah. And what's so interesting to me, I think about a deal like that is most people are saying, oh, SoftBank today, right? But it was still a big deal then. And And if this was in the early 2000s, this was kind of after they had had this like meteoric rise and then kind of the suffering of pain during the dot-com bust as well, right? Yeah. Well, actually, if you look up Masa Son's Wikipedia page, he's the person who's lost like the most money ever and then made it all back again. So, yeah, he's a legend, obviously, in Tokyo. And, you know, when I was there, he bought all of Vodafone Japan and then pivoted SoftBank into a telecom company.

So, yeah, it's a very special company. It's been around for a long time, been doing very aggressive things, made a load of money with the Internet and now doing it again in tech, in size. Absolutely. And talk a little bit kind of how did you go from that, which is pretty traditional and obviously a great business, but just has nothing to do with crypto or tech really, to today running what is turning into like this holding company or conglomerate of different digital asset related products and services. When did you first see Bitcoin or crypto and kind of what pulled you down the rabbit hole, if you will? but actually when i first saw it it was uh it was in 2009 um i had two kids from lehman on my desk and they were just always talking about bitcoin i was like guys just sell some derivatives for god's sake and uh they were uh you know just talking about bitcoin i was like why are you

talking about this stupid internet money like it's a scam clearly you know there's there's nothing to be done here well those two kids are retired now so um they're in a different situation But yeah, I didn't hear about Bitcoin again until all the way until 2017. I read the book Sapiens. I've been really focused on hedging or protecting wealth against what I was seeing happening in response to the global financial crisis around printing of money. I was very, very concerned about what this was doing. And you could just see it damaging everything in terms of everything in this sort of high

end space. So sort of education, you know, holidays, medical, everything that was sort of supply constrained was just going up in price to a ridiculous degree. Even if CPI was staying fairly stable because of obviously everything that we were seeing in tech and also demographic change as well. And so, yeah, it just really became an obsession of mine. A lot of people on the desk were buying a lot of gold i was buying gold um and then i read the the book sapiens at the end at the beginning of 2017 and yval is is talking a lot about bitcoin and blockchain and how it has the capacity to change the way that we think about money um and you know this is all built on his beliefs around you know money being a belief system and much of society being a belief

system and so I started looking into it and then I actually invested in this company Diginex which back then was a cryptocurrency mining company so with GPU mining they were mining Ethereum and yeah I became an investor and then when I left banking the founder asked me to come and help him build the company further and I was like I don't know what you're gonna need me for to build a mining company he's like no no you don't understand i think there is a huge opportunity around disrupting traditional finance with this tech and so then i obviously caught my attention we sat down we talked about it thrashed it out sort of built the strategy for what is diginex today which is you know a full ecosystem as you say a conglomerate around this space that

covers everything from exchange from trading to custody to asset management and actually it's investment bank. Got it. And so as you think through kind of where you sit today, let's just start at a high 10,000 foot view of, there's so many different products and services that you could go into. Maybe give us an overview of like, what are you guys doing? And then talk about kind of the why, like why are you pursuing those versus the hundreds of other things that you could be doing with your time money and resources sure absolutely i mean i think you know a lot of what we're about is you know you have a very similar philosophy it's about making the migration from institutional investors into this technology and asset class and i think when you think about that

and the way that these institutions are set up the the starting point always is going to be custody right you need to have a custody that can be trusted it can be secure um and it's viable right now you know there hasn't been a major hack for such a long time that people are just not that concerned about custody but institutions always will be and so we had a look at a lot of the custody offerings on the street and we actually acquired one um but then we we just got to the point where like look there there's nothing that we really can rely on to the degree that we need so we hired a team that's led by an ex ministry of defense security specialist and they they built out what today is digivolve and one of the most secure

and solid offerings on the street i often describe the cold custody as as below freezing because it's just you know it's actually operated out of global vaults of the vault provider malka emit so you can you can set up a vault anywhere in the world and specify that's where you you want your your keys kept so that's sort of the foundation and the the sort of where everything else is able to be built from at the center of it all is our exchange equos so equos is really focused and you know there's loads of exchanges out there so why have another one And I think the big important point here is that we've built differentiated product in the fact that we have infrastructure that is able to accommodate these institutions that are coming in. I'll give you a basic example.

Right now, you log on to any exchange, even if you go with the pro version or the institutional version, you get one login for your account, right? That's non-manageable for an institution when they come in. They need to have segregation of duty. They need to have their ops team, their trading team, their compliance team, their audit team, all to have different access and different ways that they can access that account. And so that's basic stuff. It's stuff that we've built into the framework of Equos to allow that first step of institutions to come in. Another thing is managed accounts.

So think about the asset management industry in this space at the moment. It's quite nascent. Many of the asset managers, and we have an asset manager that we speak to because we're a fund of funds, they don't understand that they need to have separate custody to be investable by institutions. They don't understand how they should be marking their books. They've got ICOs still marked at 2017 prices because they've never traded. There's a lot wrong with the way that current asset management landscape works. And so we built a fund of fund really to help develop that.

But also, when you think about that in the context of the exchange, actually provide a service to those funds of managed account functionality like we see in traditional finance. So, you know, your New York pension fund that you got to come into Bitcoin, you get them to go and allocate to a strategy within that. But say, OK, you can run it through a regulated platform where you know your assets are safe. you know if they drift off mandate that you can pull them off it and actually you can you can really have proper control over that strategy much like we do in the in the hedge fund industry today post 2008 now a lot a lot of the allocations are made by managed accounts through prime brokers so the exchange is really designed to give that institutional capacity to really grow this industry and really grow the asset management industry as well but then when we think about

retail I mean because it's not just an institutional platform it's about making sure that we can have everyone participate so obviously for retail we want to make sure that people are looked after fairly a lot of you know the experience that people have on some of these platforms is that they you know they get ripped off or their fees are too high or they get the liquidations happening of some of the levered products and you know very very much against them and so you know everything that we've designed is about making sure that we're fair we're transparent um and obviously that we've got that product innovation that really allows people to to to manage their portfolios in a way that that this this technology allows because you know you look at everything that

we've got we've got you got bitcoin as an asset right you can just sit it and you're called custodian or you can start to trade derivatives around that position to maximize the value within the portfolio but you can also lend it as well as collateral and actually receive fees for it so actually it's starting to take finance into your own hands and be able to really build around that core collateral of bitcoin with other products and that's the longer term vision of what we're doing at quos putting it all together where you've got a really nice ecosystem to allow you to really manage your assets properly. So this starts to look very similar to what the traditional world did with fiat currency-based assets, right? And it almost feels like what

you're trying to do and doing pretty well is recreating all of the things that we know that work in the traditional world in terms of a product suite and kind of how those interact with each other. Now just redoing it for digital assets. Do you think that's a fair categorization? and maybe talk a little bit about there are a couple of wrinkles or changes there, but in kind of how you decide when do you follow the traditional playbook versus when do you kind of, you know, quote, unquote, go rogue and create a new crypto way to do something? Yeah, look, it's, yeah, it's very valid. And we are looking at everything that we've learned from traditional finance, and bringing it to this industry to help really grow the industry and

make it properly adopted so for example derivatives so derivatives are a huge focus of us i'm a derivative guy the original founder's derivative guy our chairman's a derivative guy i mean everybody within the senior part of the management of the organization on the product side is a derivative guy so we're very focused on effectively building that out allowing the options market to really grow and then when you have as you know a full options market of every strike and every maturity, then you can start to build things like fixed products. Suddenly, the whole thing becomes a lot more hedgeable. Then you can start to build things like variants and structured products and all these types of things. Structured products

obviously feeds the volatility into the market. And then you've got all these products that institutions want to play with and want to be able to manage their portfolio risk around. So for us, derivatives is a very core part of, as you say, bringing that institutional level of finance into this industry and going, okay, we started with that perpetual product. Everything else is quite nascent, and we really need to start to grow it out to allow this industry to hit the sort of numbers

that we see in traditional finance. Right now, the spot market of crypto is, I don't know, it's $4 billion a day that it trades, and then you've got derivatives is another 12 to 14 depending on the day so on a good day you can have a 20 billion market but derivatives is only really three four times the market but in traditional effects you know derivatives is over 100 times the spot market so the capacity for growth there is enormous and we're right at the beginning and obviously derivatives have grown quite significantly over the last couple of years but we really think that's going to continue and

that's really where we focus the opportunity set now for the business but then the other part is our investment bank itself and that's more down the line so we've taken a slightly different approach to many of the other guys that are offering digital securities in this space or security tokens as they call and rather than enforce on investors that they take a digital security because that immediately wipes out like 95 of any institutional investor because they're just not going to get it through risk or product committee is we actually deliver our assets in paper form with the option when they're ready to take it in digital so they can flip it into a digital security in the future and obviously that that's helpful to us as well because we don't have

correct licensing at this point for the exchange to allow us to list securities and we don't yet have the correct license for the custodian either although we do have all the infrastructure there already around the different standards of ethereum that we're seeing the majority of these tokens being built on but yeah it's it's about licensing so a big big drawback always is is the pace of regulation around this. So yeah, those are probably the two key areas is the derivative market, and then the digital security market. And so when you think of that digital security market, you know, I am one of many people who believe that that is going to be very, very large, right? I think that a lot of people, including myself, thought that that was going to be

kind of on the equity side first, right? So this idea of like every stock bond currency commodity will eventually be digitized. We'll start on the equity side. It feels like actually where a lot of that is starting is on the debt side. So we've seen all kinds of different debt issuances on Ethereum. We're big investors in a company called Figure that has figured out how to do this as kind of a digital kind of DTCC. But the equity side hasn't really taken off yet. And so kind of maybe talk a little bit about why that may be and then you know is that buying you guys extra time to kind of really get in position to capitalize when it happens or kind of how you're thinking about uh your positioning in the market as these digital securities kind of um you know

fulfill the promise that we've kind of talked about for two years or so yeah look i think uh you've got very large private credit markets right the the it's the private markets that are the most impacted by this, because suddenly you've got a technology that can make it much more transactable. You can embed documentation into the asset itself, which, you know, when you're dealing with a private asset, there's not so much transparency always around the documentation that you're dealing with. Now, equities is slightly different. You know, we have public equity markets, and the private equity markets are quite robust at the moment. Talk about SoftBank, obviously, huge checks flying around and a lot of liquidity in those

markets. So I think it's really on the outer edges where liquidity suffers somewhat. We're seeing the most impact. So fixed income and private credit is obviously, it's a little bit of an easier avenue. We're actually most focused on securitizations. So we actually are looking at securitization of a private equity fund, the LP of that of that fund um and we're we've been working on a number of property transactions so you know when you hear about tokenizations and buildings they're effectively a securitization right so

our investment bank is a securitization advisory firm um and so i guess where we differ to the majority of other folks out there not to figure i mean that's obviously a different product altogether. But majority of the platforms are really about delivering the technology and just allowing you to issue that token. Whereas we provide the full front to back. So from right to the advisory, how do I structure this through to the actual delivery of the security, which as I said, we deliver majority of times in paper form at this point, but we expect more and more to see that delivered in digital. It's almost like you end up just building the muscle memory of doing the securitizations today use the kind of more traditional technology but over time you'll

you'll convert that to the uh the digital technology right yeah i think it's it's really hard to to say go jump in that pond it's you know it's a it's a different experience altogether to an investment manager you go to a japanese pension fund and you say why don't you guys invest in a in a digital security and they're going to be like well what's the digital security maybe like well blockchain okay well i've heard of bitcoin what's a blockchain okay so you can explain and then what standard and then how do i book this and how do i custody it and where does it trade and it just becomes too hard so you're not going to get to that point immediately and i think that's a mistake that a lot of people make is that they get sort of over enthusiastic about

what the technology can do and how it's going to change everything but it's an iterative process And you have to build to that point because you're dealing with people that are in very traditional frameworks, have to go through a risk committee, have to get it through their IC. So make it as easy as possible. Give them the option down the line when they can actually get to the point and say, oh, hang on, we bought that paper security off the Diginex guys two years ago. Maybe we can use that to experiment with this technology. And then slowly, slowly you're building a base of people that can adopt it quicker in the future. Yeah, it makes a lot of sense. You are not standing still as you guys are building this business from a capital market standpoint. You recently raised a private round, about $20 million, and then you are going through this SPAC transaction, getting into a NASDAQ listing. Talk a little bit just how you've thought about capitalizing the business and why some of these decisions over the last three to six months or so. Yeah, sure. I mean, look, we raised the private round because with everything that was going on

with COVID, nothing was sure. So we were just like, look, we'd better just make sure that we've got at least an initial base for what we need to keep getting to the point where we can deliver everything. But we always had our eye on that NASDAQ listing. For us, it was essential for the industry and for ourselves to give that additional layer of trust and credibility when you're walking into a room and talking about this technology i'm sure you've had it many times where you're just like yeah yeah i can't look at that but when you're when you're coming at it from a nasdaq listed company's perspective okay hang on a minute um i want to maybe want to pay a bit more attention the other thing is about the credibility of the exchange as well i had a lot of commentary from

people that wanted to invest in Bitcoin, but have heard these horror stories about Quadriga or exchange hacks or whatever. And it's just like, I've never felt comfortable sending money to one of these places. Finally, there's a company that's going to be a NASDAQ listed exchange that I can send my money to and have that level of comfort that they're not going to just disappear and pretend they're dead or whatever that guy did absolutely and in terms of the public markets it feels like there's just not that many kind of ways to get exposure to digital assets right so you've got maybe kind of a square which is doing a lot of bitcoin facilitating bitcoin purchases you've got now the kind of micro strategy who's actually holding

bitcoin maybe there's some others that are kind of tangentially related but there's not really kind of, hey, that is a digital asset ticker that I can buy that is pure exposure to that, right? Maybe you got some mining stocks or whatever, but nothing that's kind of a dead-on exposure. Walk me through kind of the logic between what you think the impact of you guys getting into the public market in that manner is going to be, and then two is the advantage or disadvantage, kind of pros and cons of being the first versus maybe wanting to be fast follower number two or three and let somebody else be the first yeah look for us it was it was always just about making sure that we got there um and so the we never anticipated that we'd be the first

we figured that uh many many people would be trying to do this because i mean let's be honest the industry has suffered from credibility issues for quite some time and so you know if we want to make this institutional then we have to be able to give someone that sort of element of trust where we go okay now this is a company that's you know past nasdaq listing requirements sec approved you know that's uh it's a proper organization i think to your point around having a proper play into this space in the public markets is is also really important um you've got obviously like you mentioned micro strategy but i met an etf uh guy who's he's got a blockchain etf met him uh back in march in new york and uh he said i'm having a nightmare allocating this fund you know i i'm

allocating to facebook because they might do libra or i'm allocating to ibm because they got hyper ledger he's like this is you know i need a proper pure play so you know we're obviously the picks and shovels to the industry you've got people like grayscale that that have these these tracker of funds directly into the asset, but where everything around it, where the ecosystem play. And I think that's, like you say, it's quite differentiated anyway as a business model. But being able to play it by the public markets, I think, is quite an opportunity. Got it.

And so you're obviously going to now be in this new position of publicly traded. You've got capital on the balance sheet. Where does the focus go now? Is it just more of the same and kind of go faster and further? Is there new things that are kind of on the horizon from a product and kind of services standpoint? Like, how do you think about moving forward? Yeah, we've always got big goals in terms of what we're doing. The next phase for our custodian, for example, is to implement borrowing and lending facility.

We want to make sure that people can have that within the exchange so that they can go back and forth, you know, have it in super cold. but then maybe write a swap short to effectively be able to provide some sort of derivative trade or lend it out. The exchange itself is always pushing forward with new product innovation. I've obviously talked about that roadmap for derivatives. And we've just moved ahead with our investment product business, which will be the start of having listed vehicles and notes issued out of Europe for traditional stock exchanges and other exchanges where we'll start to build the structured products flow.

Effectively, you get that derivative flow coming into the exchange. The other thing is I mentioned the asset management side of things. Really, once you start to get that traction, that takes time. But building that out, building reputation in the space for having assets, I mean, that's something that can grow very exponentially. And then obviously quietly in the background, running the securitization business, that'll continue. Yeah. And how do you think about balance sheet? One of the things I've seen with a lot of companies, both in the public and private markets, who are interested or touch this is you've got kind of fiat currencies. And then there's this, you know, digital asset.

And some people are religious about, let me convert Bitcoin, Ether, whatever it is, into cash as soon as possible. It's easier for accounting, all of those things. Other people are converting from cash to crypto, as we see with MicroStrategy. Where do you guys sit in terms of kind of managing your balance sheet? How do you think about, you know, maybe not exact numbers, but just like theoretically the balance between that cash and digital assets? Yeah, for us, you know, I mean, it's obviously we're moving very, very fast, as you said. So in terms of the focus on managing that balance sheet, that it's not at a degree where it's significant enough, where someone like a MicroStrategy or even an Apple sitting on a cash pile of that degree, they have to think very carefully about their inflation hedge. And more and more, we're having people in the organization that want to be paid in cryptocurrencies.

So, yeah, we have to manage that, obviously, from a treasury perspective. But yeah, I can tell you that it's been the subject of many conversations, particularly expedited by our friends at MicroStrategy. Got it. And then in terms of zooming out from just Diginex into the crypto community industry, what areas are you kind of paying attention to? Are there things that maybe are not getting as much, you know, airtime that you think should be? Or are there things that maybe are overhyped that you say, hey, you know what, we're actually not as excited as maybe other people are? Like, how do you just think through other things that are going on? Yeah, I think obviously DeFi is the big sort of phase at the moment that everyone's getting very excited about. And, you know, I do believe that DeFi is the future potentially down the road of the way things start to evolve.

But it is, it's very early. It's like trying to fly to the moon in a cardboard box. I mean, you're going to get yourself into trouble along the way and, you know, things are going to break and burn up as we've already started to see. So, yeah, I definitely have concerns about what that does for us on a reputational basis. for the industry as a whole and i definitely look back to 2017 and like uh this defy thing is probably not what we need right now you know we've got micro strategy coming in we've got paul judas jones coming in we've got some really serious hitters starting to pay attention to this industry and i just i just hope that defy doesn't become another another ico craze that uh the

People go, you know what, everyone's crazy in crypto. Stay away from it for another few years. I'm assuming that you are also thinking that we are kind of in the early days of another bull market. Correct me if I'm wrong on that. But also, how does that play into you guys being listed, some of these other kind of non-Bitcoin type areas that people are focused on? Is this kind of all boats rise together? Do you think that there is that, you know, everyone waiting for the decoupling? Is there a flippening?

I feel like there's all these, you know, kind of theories as to what plays out. You know, where in your mind do some of these things end up? Well, you know, I'm a big Bitcoin bull. I mean, the reason I got into this industry in the first place was because I was looking at an inflation hedge. And so I'm a big, big believer in Bitcoin. I think we're going to see a massive rally and it's coming very soon I often say to people right now it's a coiled spring and it's just coiling tighter and tighter and tighter and it is just going to explode to the upside very very soon that said to your question about

you know the high tide rising all boats I think definitely the the debate I was at a debate with There's a lot of people in the industry in Hong Kong a few months ago. And there was one person there saying, look, there's no way that we're going to see people make the same mistakes that we saw in the ICO craze. And it's just going to be Bitcoin and everything else is just going to stay down. That's just not factual. I mean, there's so many new people coming into this industry, so many people that don't understand what Bitcoin is, that look at it and go, OK, what's the next one?

and we see it we saw it in 2017 and and i'm getting that question all the time like bitcoin's too expensive i don't want to buy it i want to buy the one that's going to do a thousand x and it's just the nature of the whole game theory the way satoshi planned it is that greed is what effectively will help with the adoption because when you get that cut in supply to the degree we do every four years then that's just going to squeeze the price very very hard and so then you get that sort of game theory element and greed sort of number go up theory uh around propagating the the success of bitcoin but but what happens around the edge is everyone's like well there's got to be another one that's going to be better than bitcoin because bitcoin is the old one

i'm sure you've heard this a hundred times right and i get it i'm like no no you you you've got buying some bitcoin sure have have a little portfolio to muck around with but you know your main investment is bitcoin i uh i joke all the time and i tell people uh sometimes the simplest trade uh or the the best trade is the simplest trade uh but on top of that uh humans want to gamble right like that that is ultimately what it is and you know for everyone who is you know intellectually honest they say the stock market is just a legal casino and that's okay right? I mean, knock yourselves out. But there is this element of if you want to kind of go play in the crypto casino, to your point, have the major exposure to Bitcoin, and then sure,

take 5% or 10% of what you want to put in a crypto and go bet it on black. You'll win half the time and half the time you won't. And frankly, I think people are just paying for entertainment to some degree rather than uh than actually trying to generate a financial return uh and that's okay right there's no problem with that but uh but it's pretty funny when you start to think of it that way yeah but you know when we next see bitcoin go up a thousand percent people are gonna go okay what i've missed it where's the next one and you will have this effect and because these are all smaller market caps they will probably outperform to the upside but but the tears afterwards are going to be significantly more to the downside and so when you go through that cycle as as we've

already seen many times then uh then those those pointless projects will be uh will be exposed fully absolutely talk a little bit about uh some of the challenges or things that you're thinking about uh in terms of us getting the business we've talked a lot about kind of the products and the services and kind of the the bull case if you will for you guys and for crypto what are the things that kind of keep you up at night and you spend a lot of time just figuring out you know how do we solve these problems yeah look i mean we're a very kyc uh an aml focused exchange we want to be compliant we want institutions to know that they're not going to come onto this platform and buy bitcoin off a money launderer or or someone that's been financing terrorism so we do have

strict controls we do have kyc and ml and as a result retail often you know run into uh run into problems so we have to be very active in driving that forward that's one thing that that i i work on actively with both the sales team and the marketing team is making sure that we've got that plan really mapped out and making sure that we're always sort of helping retail on an educational basis understand what they're dealing with but also really making the process a lot easier as much as possible but adhering to compliance guidelines as well so that's that's probably the the one thing that does keep me awake at night around the platform itself in terms of you know other stuff where we we've got i would say probably one of the coolest institutional

on-ramps to an ecosystem that i've seen anywhere in the industry is our trading platform so we have trading platform called diginex access and access effectively allows you to trade on any platform you've got to have your own login but effectively allows you to trade algos and ops and spreads across different different platforms but the important thing about this is this plugs into two of the world's largest trading technology providers FIS I'm sure you've heard of fidelity investment solutions, and ITIVITY. Those two providers alone cover the large majority

of the institutional finance space that look at outsourcing their trading technology. We plug into both their portfolio management systems. So anybody from any of those institutions that wants to start to trade crypto gets given access as part of that portfolio management system as their crypto module. So this is huge for us in terms of helping, again, drive adoption. But obviously, it's a way for us to get paid for all the flow that's going on in the industry, as well as obviously help direct flow into ECWAS from these institutions.

Got it. Makes a lot of sense. And then talk a little bit about from a talent standpoint. Obviously, you're in Hong Kong now. How have you found the market for talent and building up the team? Is this something where you've been able to kind of convince people from the traditional world to cross over? Are most of the people that you're finding just coming right out of the crypto world already? Just kind of elaborate on that. yeah no sure so as you probably know hong kong has quite a rich crypto uh crypto environment and uh yeah actually there i don't know if you saw it actually there was bitcoin ads that have been put up everywhere around hong kong now so is that you guys was that you guys actually the big it was the bitcoin association okay kudos to them it was a very high quality move i loved it um but yeah look there's a big community here and a big focus on the industry so obviously we've got that access but also there's a huge financial services industry and a lot of people that we know from that world that we've been able to pull over um give you an example so the guy the guy we hired

to run the investment products business i told you we're just launching that now so that's the sort of the way into structured product as a guy that we knew from uh from ubs um ran global structured products for them ubs is the biggest structured product house in the world you know with their private bank and their asset management so you know taking their global head of structured products and moving them into this industry is quite a coup for us um but yeah look we're we're a global business so we hire a lot out of london um switzerland um as well as hong kong and now we're building in singapore as well so actually with the with the listing we're moving the company to be a hong kong headquartered company um so that's uh that's obviously another huge talent

pool around the fintech space um not so much in crypto as hong kong um but yeah it's uh it's obviously also in the traditional finance one thing i've really found with this industry is is obviously you know my own passion when i'm interviewing people and getting getting excited about it um as i'm sure you have you you do when you speak to people about the asset class but even with a much smaller checkbook that i ever had to hire people in investment banking um we're hiring levels of talent you know way way above what we were ever able to achieve in banking so i think this is really just turning the heads of some of the most you know brilliant minds in traditional finance, as well as obviously, you know, young people that are coming up and

looking at traditional finance again, I'm going to go crypto. I tend to think that you're right there, my friend. Help me understand what would change your mind about all this, right? So, you know, I've started to think more about I'm, you know, as bullish as anyone. And somebody asked me recently, what would change my mind? And I had a couple of ideas, but what would change your mind when it comes to Bitcoin and kind of the whole case for crypto in general? Yeah, look, I think Bitcoin, there are two major arguments that are pulled out that do kind of occasionally may make me sit and wonder. And that's obviously a government-sponsored 51% attack.

And that could only really be achieved by someone with big balance sheet. So let's say the Fed decided, you know, Bitcoin is the only threat to us continuing with this game of fiat money. And, you know, they could go and, you know, amass enough hash power to do a 51% attack and then cause people to lose confidence in Bitcoin. but I just think it's so unlikely. I don't think they're ever going to be able to be considering doing that until it's at such a point where it's too late. And, you know, the value of all that fiat printing is probably not going to be sustainable.

And then the other thing is quantum computing. A lot of people talk about that. But again, I think, you know, there's so much around quantum computing that is yet to be understood. um i think that you know even if someone was sitting in their garage developing a quantum computing to the computer to the degree that it could actually launch and work tomorrow that nobody knew about then the first thing they can do is not attack bitcoin they got plenty of other things in their plan and the amount of money they probably spent

financing that is is is going to give them a focus on other things so yeah look i those are the two two big things um how would you think about those two particular items i'm sure they're both things that uh that have come across your mind yeah look i think both of those are valid points and the only third one that i usually add is uh if literally everyone just walked away right right to the point of like, there's almost this feeling of, yeah, Bitcoin's price went to zero, like literally zero, then it's over. Right. But even if it dropped, you know, in some weird way to hundreds of dollars from here, I actually think that there's a lot of people who would just be buying it up. Right. And it's kind of this joke of, well, I know that, you know, a government

can't buy up all the Bitcoin because they're not buying mine. Right. Right. And so, you know, I just think that one of the greatest assets of the industry and of kind of Bitcoin specifically is just this community of really strong hands that this is not just a, I hope that the price of an asset goes up. This is a belief in something that is much, much greater than any financial asset. And I think that that's very rare to have those belief systems kind of tied to something. And that tends to lead to kind of outperformance, right? You see it with other kind of stocks where you get almost like cult-like following. I think the same thing is playing out here as well. Yeah, I mean, did you ever read that book, Sapiens, by Yuval Harari?

I've read like half of it. So I got this weird thing where I read – I just don't sit down and read like one book at a time. I kind of read a little bit, I moved to another one, whatever. And I probably read about half of it. And just got busy with other things. But I enjoyed what I read, but I haven't finished it. Yeah, I mean, he goes on about money being a belief system. And obviously, that's what it is, as we've seen it evolve through throughout time. And like you say, I mean, Bitcoin has a cult following already you've already got 18.8 million bitcoin out there in probably fairly steady hands you don't have much left as more and more people start to join the game it's not going down to 100

certainly not to zero i don't yeah i don't think that is is even viable like you say you and i would buy the whole lot before it got to zero so it's it's not happening absolutely Absolutely. Richard, listen, what you're doing is, I think right now, everyone's kind of like, what's going on? There's going to be a crypto company that's going to get out into the public markets. Talk a little bit just about, you know, 20 years from now, how do you want people to remember this time and kind of what you guys are doing right now? Well, I think 20 years from now, I mean, we'll be looking back on this, everything will be different um certainly the financial services industry you know we've the public filing of

the presentation that we made actually talks about how the internet affected many other industries obviously retail being one with you know amazon just sort of absolutely carving it up that's a 25 trillion dollar industry whereas you know with capital markets you got 200 trillion dollar industry and this is going to be gargantuan when we start to see companies like ours come in and really change the face of what's being done in investment banking and capital markets and you know we're doing everything to make sure that we're positioned right in front of center of that because derivatives is going to be a core part of it but also being able to manage your portfolio in a single place is so much more attractive and then you can actually as you know move those assets

out and you know sit there and at a poker game say oh well rather than pay you in bitcoin i'm going to pay you as part of my property that i just invested in in sao paulo which got 12 yields and if if uh i've got quite a lot of it so i can uh i can let you have some of that directly out my portfolio and then you know what impact is that going to have on the asset management industry what impact is that going to have on the 401k business you know as people say look i just want to manage everything in one single place i'm not american but i understand that if you want to switch your 401k the amount of paperwork you have to do is going to take like 10 days to two weeks if you're efficient so the idea of just being able to move an asset to from one to the other

at the click of a button it's going to change everything um it's going to change the way we deal with private equity as well um you know look at all the documentation now you've got companies like carter that manage all of that for you you can now embed cap tables into you know tokens and You know, it can be all updated live time with documentation, everything. This is, it's just remarkable how it's going to transform things. And I'm, yeah, I'm really excited that DigiNex is here now. And 20 years from now, hopefully you're still doing a podcast and we can have a good chat about how the world has changed.

I'll be old, man. I might've lost my voice by that point. before we get into uh the rapid fire questions to uh to end this where can people go find out more about diginex the exchange and kind of what you guys are doing sure so um diginex.com is our overall website uh to get onto the exchange it's equos.io but equos.com will get you there as well um we're on twitter so diginex global at diginex global on twitter all one word and then at Equus underscore IO for the exchange. And then I'm on Twitter as well,

at Richard Byworth, all one word. Awesome, man. What is the most important book that you've ever read? I would say Sapiens. It absolutely changed the way that I thought about the world and certainly changed my career almost immediately. I read the book.

I said, right, that's it. I'm leaving banking. And yeah, it took me about eight months to get out of banking. It's a little bit of a difficult process when you're tied up in equity and these sorts of things. But, yeah, got out to it, man. You could ask me one question to wrap this up.

What one question do you have for me? So, yeah, if we are to meet one day in New York, what is the restaurant you're going to take me to? Oh, man. I don't know how I've gotten in this position now, but somehow people ask me for recommendations Cause they know that I'm like, cause I always eat, uh, dominoes and McDonald's and all this crazy stuff.

Um, but no, I, I think that, uh, what, there's a couple of restaurants that I really enjoy. Um, there's a, uh, there's a Spanish place and I've got a soft spot in my heart for this guy. Uh, he's down the street from me. He runs a, uh, a Spanish place called Alcopa, I think is how it's pronounced. Um, and, uh, throughout this entire pandemic, I walk by him every day. And he basically gives me updates on the politician's lack of competence. And he basically will say something to the effect of, literally for months,

you can go get a massage, but you can't eat in my restaurant. This is bullshit, right? Or he'll hit me with, I used to do 80 tables per lunch. Now I do six. This is bullshit. And he just cracks me up. He's getting you stuck every day. yeah he's just always got some perspective on you know this sucks and and he says it with a

smile on his face and he's so jovial uh and all that so he um uh he's got great food right but uh but i think he i just got like that sweet spot in my heart for him uh after you know literally seeing a month after month after month saying the same stuff um and then uh there's all the classics like i think most people really like the you know like 11 madison parks and and um you know union square cafes and like those types of places for me i'm those are less interesting to me just i think that they're yeah that's where everyone wants to go i like going and finding kind of the hole in the wall places um yeah that's the best yeah and then i'll tell you this that there's one place that i take a lot of people plin and i um it's our favorite place to take people is the uh

the jp morgan library uh in new york which is uh not a restaurant um but basically it is uh an old um you know kind of house slash office slash library uh of jp morgan and it's literally the size of a block uh and you go inside and they've done a pretty good job preserving it but you just see uh kind of a you get thrust into this world of the early 1900s um and it's pretty cool just to realize like this was the high society of that time right and kind of all the things they have um as part of the actual uh decor or the the structure of the building um and you walk in this library uh and it's basically everything except for the door you walk in is all bookshelves around you it's you know two or three uh stories tall uh filled up um there's secret doors so you

can go up the stairs to other bookcase and all kinds of crazy stuff and you just realize like it was all about knowledge like that's literally all it was right is they that's why they had the big library it was because they literally would they didn't have the internet and they would go and pull a book and like learn and look things up and so it's just kind of a cool experience so when you come we'll we'll go there and then maybe find uh find a shitty uh fast food place right done done that sounds great i do have one more question for you all right so so you did uh you did something quite monumental for the industry you got you know those two pension funds to come in and invest effectively directly in the asset class how long did that take you and how many of

those calls did you effectively make to find those those two investors because that was impressive So I don't know if I've ever said this before. What I will start off by saying is the two CIOs who made this decision are incredibly forward thinking, courageous. They had to do a lot of work kind of behind the scenes to make this happen. So it wasn't as easy as just, let me do an asset allocation. And like, you know, everyone's like, oh, of course we're going to buy stocks. Uh, this was a lot of work on their part. Um, and so they really believed in this. Right. And so I'll forever be grateful to them. Uh, my partners will as well. Um, but, but, uh, I think that, uh, it'll prove to be pretty effective decision. Um, but, but I think that's kind of the key pieces, like without those two people wanting to do this, uh, this never gets done. But they were familiar with Morgan Creek already. I don't think that they

had actually ever invested, but they were familiar. And the crazy part of the story is myself and one of the sales guys went to go see them in person in Virginia. And in the very first meeting, one of the CIOs said, yeah, I'd like to do this. And that never happens, right? And so here's the crazier part. It was the first institution I ever met with. Wow. The very first institution I ever met with the very first meeting, one of the two CIO, there's three CIOs in the room, kind of from all different pension plans. Uh, and one of them says, I'd like to do this. And so, you know, there's still a lot of work to do, whatever, but, but basically kind of verbally indicated, let's go do that work and let's get this approved. And then

the second, uh, one said, uh, you know, I got to think a little bit more and kind of look through everything, but like, this is interesting to me. So I walked out of there. I was like, we're going to raise a gazillion dollars like these people have huge checkbooks and they're like that's it uh this is easier than raising money for your own company it's like all kinds of stuff and uh the uh the sales guy basically we didn't even close the door to the room and he was already like that will never happen again i've been doing this 30 years you know like he was trying to like really set expectations low and uh i said well that's because you haven't had me like of course Like, you know, like we're, we're going to go do this. And so, uh, I ended up calling, um, uh,

Mark Yusko, uh, one of my partners, uh, afterwards. And, you know, basically it was like, you guys were telling me how hard this is. Like, this is the easiest thing in the world. Like, where's the next one. Right. And, uh, he didn't believe me. He literally did not believe me that that's what happened. Cause he was like, I I've never even heard of that happening. Uh, and so he put the sales guy on the phone. The guy's like, dude, I've been doing this 30 years. I've never seen that before uh and then in true form you know i went oh for 30 in the next 30 pitches right because it was just like okay like you got the the beginner's luck out of the way uh got you excited so i think there will be many more uh but but you know ultimately that those two it just

comes down to the cios um you know kind of having the foresight and uh um kind of the courage to uh to do it which is pretty special and obviously that's actually a great story i uh i wasn't aware of that uh look trust me i i've already convinced myself i'm gonna tell that story 20 years from now to somebody and they're gonna think i'm lying right so it's like i'm putting it on the record and uh and uh pretty cool experience but but look i think what you guys are doing right in terms of being one of the first uh to get out into the public markets i think like what michael saylor's doing uh with micro strategy obviously what um andy and katherine at the fair Facts Pensions have done. Again, it's just data point after data point after data point. There is

a lot of pioneers that are moving things forward. And ultimately, that's what we need. That's how this ends up being successful. And so it's pretty cool to watch and see. Yeah, well, I think we've got a great, great group of people pushing it forward. So yeah, thanks for your hard work in that endeavor as well. It's really great to see the progress the industry's made over just the last four years that I've been involved. Absolutely. All right, ladies and gentlemen, Richard, go check out DigiNext and we will have to do this again, sir. Thanks, Pom. See you soon.