The Pomp Podcast - #399: Fred Pye on Launching A Publicly Traded Bitcoin Fund

Episode Date: October 3, 2020

Fred Pye is the President and Chief Executive Officer of 3iQ Corp, who manage The Bitcoin Fund is a public bitcoin fund listed on the Toronto Stock Exchange. In this conversation, we discuss the challenges with getting a crypto-related fund listed on a public exchange, how The Bitcoin Fund works, what the value proposition to investors is, and what else Fred is currently working on. ============================== 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 ============================== 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. Fred Pye is the President and Chief Executive Officer of 3iq Corp, who managed the Bitcoin Fund, a public Bitcoin fund listed on the Toronto Stock Exchange. In this conversation, we discuss the challenges with getting a crypto-related fund listed on a public exchange, how the Bitcoin fund works, what the value proposition to investors is, and what else Fred is currently working on. I really enjoyed this conversation and I hope you do as well. But before we get into this episode, I want to talk about our sponsors.

First up is Diginex. They're the first company with a cryptocurrency exchange to be listed in the United States. That exchange is called Equos, E-Q-U-O-S, and it's been built to institutional standards, but it's available to everyone. You can trade Bitcoin and Ethereum spot markets as well as Bitcoin perpetuals and get a 5% discount on all fees when you go and sign up using Equos.com slash Pomp. E-Q-U-O-S.com slash Pomp. This is a really big deal, right? Diginex got listed on the NASDAQ and that includes their crypto exchange. So go check out Equos. E-Q-U-O-S. dot com slash Pomp. You can trade Bitcoin, Ethereum, Bitcoin Perpetuals, and you will get 5% off all your fees if you go to Equos.com slash Pomp. Next up is I write a daily letter. Yep,

that's right. I'm sponsoring my own podcast. How about that one? I write a daily letter to over 75,000 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, let's get in this episode with Fred. 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 have Fred here with me. They have an incredible story as to how they got the Bitcoin fund approved on the Canadian exchanges, but we're going to get to that in a minute. Thank you so much for doing this, sir. Hey, Bob, it's nice to be here. Absolutely. Let's jump right into your background. Tell us a little bit about yourself. Where'd you grow up and what did you do before you fell down the Bitcoin and crypto rabbit hole?

Well, you know, first of all, I think I'm running right up there with some of the older guys in crypto. So I've done a lot. But, you know, I definitely got the, you know, shall we say the entrepreneurial bug. And it all came from a guy by the name of Howard Kelly. My best friend was Peter Kelly. He was an artist. and my mom was an artist and they two the two of them got along really really well

and peter's father was president of company at the time called guardian trust company which was a big gold trader in the late 70s and 80s and had been around forever and i was in economics and business and gold trading and foreign forex trading so by the time i was 23 he made me a manager of the international forex and precious metal trading operations at this company called Guardian Trust. So here I am, 23 green, and whatever he wanted, I got to do. And Howard was always thinking of the next thing. And he said, well, let's set up a discount brokerage firm. Let's do this or do that. And then at one point in time, he goes, Fred, why don't we list gold, silver, and platinum certificates on the Montreal Stock Exchange? Because investment

advisors don't have any way to buy gold for their client. They're not going to stand out in line on the street with a million dollars in cash and get a gold bar and then walk out. And that's what it was like in the heydays of the 70s and 80s with inflation going through the roof. So I said, sure, let's do this. And so we applied to list gold, silver, and platinum on the Montreal Stock Exchange to the Quebec Securities Commission at the time. And their first response was, hang on a second, it's volatile, it's non-traditional custodians, and it's used for criminal purposes. Why would we ever list this on the Montreal Stock Exchange? So fast forward 40 years later, here I am going, I want to list Bitcoin on the Toronto Stock Exchange. They go,

hang on a second, it's volatile, speculative, and used for criminal purposes. Like, what's up with that? Anyways, by 1986, I think Tom sent you a picture of me on the Montreal Gazette as a 26-year-old little rookie with a newspaper saying, we finally got gold, silver, and platinum certificates listed on the Montreal Stock Exchange, which was really the beginning of investment advisors using gold as an asset diversifier. That's really where we went. Following that, my real claim to fame was I was joined a group of amazing guys, Fidelity Investments had come to Canada. After spending three years and millions, tens of millions of dollars. They were about to close the operation. It was after the 87 crash. They said, we're dead here. We're going to close it. And a great guy

by the name of John Simpson had me and a guy named Joe Canavan. And we took the company from 80 million to seven and a half billion in the next four years. So by the time I was like 31 years old, we were running this amazing organization for easily one of the best financial institutions in the world, Fidelity. It's fun to see Abigail Johnson running Fidelity right now. I remember slow dancing with her at the Christmas party in the late 80s and early 90s. She is absolutely an amazing, brilliant, wonderful woman. I have all that much respect for her. Then we went from Fidelity. And then, now this is where I'm going to blow your mind. I left Fidelity. I went to do a re-engineering of a brokerage firm to try and get people to invest in what was called the

Information Superhighway. Because the Information Superhighway had just been invented. And I would take out, I'd rent out IMAX theaters. I'd stand on stage in this IMAX theater, and we would take a dial-up phone and put it on a modem, and it would go, ee, ging, ging, ging, ging, ging, and on the IMAX theory, all of a sudden, the internet would pop up on the big screen, and it was originally the Information Superhighway, and then the World Wide Web, and I think there were maybe 10 websites in Canada. We surfed the 10 websites and showed people what surfing was about. I'd come out on stage with a Hawaiian shirt and sunglasses to Surfing USA. So we did that. And then I left there because I thought I had come up with the

best investment idea in the history of the world. And the reason was, is I had gone through a divorce and I had a beautiful daughter who had like eight sets of grandparents now that I've been remarried. And I had my new son. And the problem was, is for holidays and birthdays and everything. She would get $100 or $200 or $300. And I said, geez, imagine if there was one company in the world that whenever a child is born, that parents would send $100 to that account at that company, but anywhere in the world. And it wasn't going to be a financial institution. So I came up with the idea for this thing called the Disney Fund. I actually wrote a business plan that was called Imagine, which is a children's storybook about children being born and every

aunt, uncle, and grandparent would do this. So I sent these business plans to the entire board of directors of Disney and their strategic planning committee. I got half of them back saying, Disney doesn't entertain non-solicited business opportunities. I said, yeah, well, fine. So I decided I could try and get a meeting with Michael Eisner and everybody who says they know him can get them, you know, can't do it. So I called Michael Eisner every morning for about three months and got to speak to, got to know all his assistants and secretaries and everybody, which now is politically incorrect. But finally the VP of finance said,

Freddie, I love the idea. He says, fly to LA. We're doing a strategic planning meeting next week. We're going to get you to come in and present to us. And I'm just going, mind blown this is facebook before facebook like every family every child in the world hooking up together on the internet anyways uh my wife and myself and my three-month-old son flew to la sat in the days in next to the parking lot and nothing after three days so we went to kinko's printed up more business plans put them in every mercedes-benz or better in the parking lot But anyways, finally got the call and said, yeah, it's not going to happen.

So I rented a nice Jaguar convertible and drove with my wife and my kid up to Napa Valley. So here we are in Napa Valley enjoying a little bit of a vacation. And I'm reading old Disney annual reports. And I find out that Michael Eisner has a cottage about two mountain ranges from me in Vermont. So I had a home in Vermont and 40 acres. And Eisner was just around the corner. So that summer, I sent a couple of business plans to Michael Eisner's house. And that's when they threatened me with restraining orders.

So I'm your only guest that has almost got a restraining order from Michael Eisner for an investment idea. That is amazing. And so take us from there to at what point do you discover Bitcoin? So, I was running a multi-asset momentum portfolio invented by Jean LeClandry and Max Lemieux, who are partners of mine. And I was down at the ETF conference in Florida in 2014-15. And I met up with Chris Berniski, who I'm sure you know very well, and Cathy Wood from ARK. and they had just launched ARK and I'm running this multi-asset momentum and I'm going, geez, you know, like every other hedge fund manager,

we're looking for that perfect non-correlated asset class. And Chris goes, well, I've got to tell you about Bitcoin. So I've heard about it, I've read about it. And he says, well, yeah, he says, I said that there's no way to buy it in a public fund. He said, okay. He says, well, let's put on a quest. And I said, you know what?

I could probably get this done in Canada because I did it for gold 40 years earlier. So I did the standard thing. I maxed out my credit card every month, bought a lot of Bitcoin in 2014, 15. And if you read our original prospectus, it's very similar to Chris's book, Crypto Assets. Him and Jack Tater wrote a great book

called Crypto Assets, Bitcoin and Beyond. And a lot of that was the base of the original Bitcoin prospectus. so uh um but my real life bitcoin story is my son had got a scholarship and went off to andover outside of boston a prep school and uh his allowance was 200 us a month so the first month i sent him 200 us and i get a phone call and i go what's up he goes says dad i thought my allowance was 200 i said yeah he says well i only got 160 i look at it i said oh yeah cibc took 25 bucks and Bank of America took 15. So you only get 160. He goes, no, dad, that's not how it works.

And he goes, yes, son, that's exactly how it works. So he says, well, what are we going to do about this? And I said, well, what we'll do is open up an account at Coinbase and I'm going to send you one Bitcoin, which was 200 at the time. So I send him one Bitcoin the next month and it goes bing and he goes, wow, that was fast. That's cool. He kept the Bitcoin. So next month I sent him 0.9 Bitcoin. So he goes, Dad, you were supposed to send me one Bitcoin. I said, no, Bitcoin went up. So I only send you 0.9, which is the $200. He goes, no, Dad, that's not how it works. I go, yes, son, that's exactly how it works. So he comes back from school a year later. He's got all this Bitcoin in this wallet. And I'm going, what are you living off of? He says, all that

fiat currency in my bank accounts that are devaluing as we speak. And I go, there's my boy. so it's a it's our you know that's how we really got in in into bitcoin um so then we went on the quest to launch the first bitcoin fund in the world on a major exchange and really uh uh we looked at a bunch of different things a lot of people were doing reverse takeovers of mining companies reverse takeovers of you know different types of funds and we just said you know what let's visit with the osc and say we want to go on the front door so we had a the head of the investment funds branch at the Ontario Securities Commission was a guy by the name of John Mountain we had known for years bright visionary kind of really cool guy he goes we said do you want to

be the first regulator to approve a bitcoin fund and listed on a major exchange in the world it goes absolutely let's go so uh we we filed a preliminary prospectus Chris Berniski and Jack and everybody wrote it. We filed it. We went through two different editions, and it was about to get approved. Then the regulators create this thing called a launchpad to help digital asset companies make it through the regulatory burden faster. Well, it did the exact opposite. It made us stop the approval of the Bitcoin fund. And we said, well, how come? They said, well, we don't know if Bitcoin is a currency, a security, or a commodity. And I said, well, that's pretty irrelevant because I'm licensed to manage currencies, securities, and commodities.

I don't care what you call it. We have legally constituted this fund. They said, well, you have, but we're regulating you. And we want to put terms and conditions to make you as a portfolio manager have the expertise and right to manage a digital asset fund. So that took them about a year. And this was 2017. So Bitcoin went from $600 or $1,200 to $20,000 and then collapsed. And in January, they go, now you're digital asset managers. And we're going, whoopee. We just missed the biggest bull market on anything ever, right? For a while. So anyways, we refiled the prospectus and said, we're going to go again. and we were about to get approved kind of we believe you know in in mid-2018 and all of a

sudden john mountain who's about to sign off and approve it he gets a radical prostate cancer or sorry radical um uh cancer uh and and he dies within like three months of of us being or three weeks within us being approved, which was pancreatic cancer, sorry. And that was absolutely horrible. And I had just come off a prostate cancer scare and had a radical prostatectomy. And so remember your Movembers and get your PSA checked. So John passed away. The new group came in. They just said, yeah, we don't get this Bitcoin thing. There's no way we're going to accept it. So what happens is when a regulator rejects a prospectus, what they have to do is they actually have to articulate the reasons why they were rejecting it. And in Canada, they said,

look, it took them six months, and they said, we're rejecting it because we have questions about custody, about auditability, about pricing, about market manipulation. And finally, they always have this magic card called, it's not in the public interest to launch a Bitcoin fund. Well, in Canada, most of you know that we had a couple of disasters with Quadriga CX, an exchange where the guy died in India. And he took, what was it, 240 million of 110,000 Canadians. And it's not in the public interest to have a regulated fund. It made no sense at all. um but when so when they reject it we looked at their reasons for rejection and we said we can win this and we filed uh basically a petition to go to a public hearing in front of a judge

or commissioner to win the right to launch the first bitcoin fund in the world and uh in october so we did that in the summer of 2019 in october uh on halloween day we got the the results that said we had won on all accounts and we have the right to launch the first Bitcoin fund in the world, which was amazing. We're now like four and a half years and five and a half million dollars into this. And the judges landmark decision was not a simple decision. It was a very complex decision. It said the application that we filed engages the foundational concepts of securities legislation in Canada, meaning a regulator, it's not their job to immunize people against volatility risk taking or technology or anything along those lines. Their job is to make

sure that it is legally constituted and safe and secure in the eyes of the law. And we went on on, on all accounts. Um, the, the biggest one was custody. And this is when the early custody companies were coming out and they had just done with, they'd gone with the bit license now. And so we ended up, there were really three people, you know, where I'd hold a hundred million or a billion dollars of Bitcoin right now. It's either Coinbase, Fidelity, or BitGo, or, you know, but we selected Gemini. Um, and, uh, there's another one of the greatest books ever written, Bitcoin billionaire, billionaires. I think it's an amazing story. It was, you read that in one setting. So anybody who hasn't read one, you've got to read that. So we teamed up with Gemini and

they had, where it became SOC 2, type 2 compliant, everything, proper financial institution that works. So we dealt with custody. Then there was auditability. So Grant Thornton Worldwide In Montreal has a group called Cadillac C. For the last five years, and Francis Pouliot worked there at one point in time and Jonathan and everybody else. And they created something called Cadillac C, which was designed to audit blockchain transactions, specifically Bitcoin transaction and Bitcoin wallets. So when we went to the, we already were running a multi-crypto asset fund, and it had already been audited by Grant Thornton. And they said, yeah, they stood up in front of the OSC says, you can't get it audited. And Grant Thornton's sitting there saying, well, we've audited one and we think we can audit it.

So who's the authority here? Is it Grant Thornton or is it the OSC? So we went on auditability. Pricing was a little more complicated because you couldn't use a single index or a single benchmark or a single exchange. So one of our partners, VanEck, owns 10% of 3IQ, plus or minus, and VanEck owns a company called Envis. So Gabor Gerbax and the group at VanEck created with us, with Sean Cumby, our CIO, created

the Envis Institutional Bitcoin Index. So we ended up selecting the indexes and watching it of all the noise that shows up in a Bitcoin index. And we believe it's the cleanest Bitcoin index around. So we proved to them that, yes, you could price it properly and it wasn't subject to manipulation. Market manipulation was really kind of funny. And I'll just tell you this one story.

There was over 10,000 pages of testimony. and the guy for the OSC says, well, you know, there's market manipulation on an exchange in China. And he goes, yeah, fine. That exchange isn't in our index. So, but he says, here you're quoting Mr. Bitfinext. He says, do you know Mr. Bitfinext? The guy goes, no. He says, do you think that's his real name? He goes, no. He says, well, did you verify his data? Did you scrub down into it? Like, I mean, you're the Ontario Securities Commission. You have access to all the data in the world and he goes he says okay he says no i didn't do that he goes okay well your next one is betty b what's betty b's last name what does betty b know about market manipulation so he

our lawyer proceeded to understand the whole crowd is sitting there just going they're listening to this and going you know holy smokes so market manipulation really had nothing to do with us. We're all very familiar with the Bart Simpson chart patterns that you get out of China where it goes straight up and it goes across, comes straight down, or the reverse upside down Bart Simpson just goes down and comes back up. None of that ever ends up in the midst of a publicly traded company that's priced at 4 p.m. every single day. And then again, the final one was not in the public interest. The Ontario Securities Commission always has the right to say it's not in the public interest. So if we're trying to run a uranium, you know, enriched

uranium fund, coal storage in North North Korea, they may say it's not in the public interest to do so. So the judge literally said, even though that not in the public interest carries an awful lot of weight and an awful lot of opportunity, it's not endless. And he says it's not can't be used all the time or any time so we ended up winning on all accounts and uh the problem is so we went on october 31st in ontario canada has 12 jurisdictions so now we had to get approved in 12 other jurisdictions and then we had to syndicate we did the 12 other jurisdictions we got syndicated with none of the big canadian banks which is a disappointment they'll come on which tells me we're early, right? If we're early, if Goldman Sachs, Morgan Stanley, JP, when nobody's embracing

it, we're early. Because when they embrace it, we're already there. You get that. You understand that. So we're still early. And so we're about to syndicate the beginning of March. We go, what could possibly go wrong? Well, apparently, there's a global pandemic that we haven't checked the box out. We had a pre-market book of $100 million. It went to zero. Because every investment advisor in this country was more concerned with protection of wealth of their clients, and they were not looking for a new asset class. We were already running a Bitcoin fund of $15 million. We rolled that $15 million in, went public at $15 million, came out, did another offering

right after, just before the halving, did $50 million US, then did another $15 million US. We're doing about $1 to $2 million a day of private placements right now. and in the next few weeks the bitcoin fund in canada qbtc.u will be a virtual etf we'll be able to do what are called at the market offerings so you can subscribe to the fund every single day 4 p.m get units of the fund and you can redeem them once a month so it's virtually an etf with monthly redemptions and daily subscriptions so you know we're pretty excited about what we're doing in Canada with that. So talk to me about right now, the types of people. So you mentioned

kind of the capital that you guys have gotten into the fund. Where is that coming from? Is that coming from individuals? Is that coming from kind of wealth managers? Is that coming from family offices, institutions? Where are you seeing the demand from? Yeah, so funny enough, it's tiny, right it's a hundred million dollars or you know a hundred million dollars in three months we have maybe a handful of family offices in canada which you know who all the bitcoin interested family offices are we do have and and this is really the the real crux of it pop is we have a regulated manager running a regulated fund on a major regulated exchange so now every mutual fund in the world should be coming to Canada and buying into a part of our Bitcoin

fund to have that 1% in their global tech fund. So there are three really, you can probably guess who they are in Canada, tech funds that, or global go anywhere asset management funds that understand Bitcoin, they get it. And these are mutual funds that all show up as top performing. I mean, all you have to do is look at ARK and the performance of ARK Web because they bought Bitcoin, you know, four years ago, GBTC four years ago. And, you know, they're one of the best performing ETFs in the United States. So we have a lot of Canadian mutual funds that are looking at putting our Bitcoin fund into their funds. And we hope that that spreads to the U.S. and the rest of the world. Got it. And then you guys also have an Ether fund that is coming down the pipe. Talk a little bit about that.

Yeah. First of all, we have filed a preliminary prospectus for the Ether Fund. So therefore, when you're in prospectus offering, you're not allowed to promote or talk about it. So the best I can say is, you know, it is filed. It is public record that has been filed. We're in the question period of it. We hope that this closes in the next month or so. So and any details of that fund can be, you know, you can get the preliminary perspectives from your investment advisor. And that's pretty much all I'm allowed to say about that. That's fair. Talk a little bit about the Bitcoin fund and kind of where you see this going, right? Do we see an ETF coming down the pipeline? Does this eventually have a pathway to become the ETF? or do you think that the Bitcoin fund will kind of serve as that exposure for a good number of people for the persistent future? Yeah, so first of all, the answer is, you know, ETFs will come in and prevail.

And yes, we could convert this into an ETF, but we're a virtual ETF today anyways, right? You know, you can subscribe at the end of the day, you know, at NAV plus a little bit are at the market offerings. They're called ATM offerings. Not a lot of people understand what an ATM offering is at the market offering, but Tesla just did a $5 billion ATM offering in the United States. Everybody went, oh, hang on, what's this? The laws in Canada changed on August 31st. Normally, an ATM offering, you couldn't offer more than 10% of your capitalization, and you couldn't offer it more than four or five times a year, whatever the number was. Now, you can offer it daily and you can offer it to the maximum. So it's the new type of what we call an ETF.

So it's virtually an ETF. People will learn what it is. It's kind of like, and Canada was the inventor, by the way, of ETFs. My chairman, Howard Atkinson, literally wrote the book on ETFs. He was well before Horizons and BlackRock and everybody else. So, you know, Howard has literally written version one, two, and three of what is an ETF. So we're a virtual ETF right now, and people will have to figure that out and understand it. Having said that, my vision is very different. Because of the judge's ruling that we have and that we're regulated, and Canada is a very safe and understood jurisdiction, we'll be listed, we believe, in Gibraltar offshore jurisdiction in the next three days or five days if they come back to us quickly um we're looking we've been

approached by people um to list in europe and places such as austria um we've uh got a letter of intent to launch in dubai um we're obviously looking at singapore so we're looking at the friendly jurisdictions but then we passport to london hong kong and the new york stock exchange or NASDAQ. So we have every intention. There are a lot of restrictions. We can't go into the US until we are a certain size, have a certain track record and everything else. But we'll have the size, we'll have the track record, we'll have everything else. So I wouldn't be surprised to see ThriQ applying for an NYSE listing or another listing at some point in time. And just think of Some of the biggest closed-end funds on the New York Stock Exchange are Sprott Physical Gold, Sprott Physical Silver, that are $7 billion, $8 billion funds on the New York Stock Exchange.

So Canada, we have access to be able to do those kind of listings. So we're always up for a good fight, so you know that. I love it. Talk a little bit about Bitcoin just in general. So outside of the fund, how do you see the asset today? and kind of where do you think we're going over the next 18, 24 months? Yeah, so when I was a floor trader in Montreal, I remember seeing the price of something going up

and one of the old-time traders said, more buyers than sellers. So as long as Bitcoin has more buyers than sellers, and I'm an honors degree student in economics and an MBA, and if supplies like this and demands like this, the price is the only outlet, right? and you know with all respect to you know warren buffett one of my long-time heroes the bitcoin blockchain is the most powerful secure computer network in the world and i have no idea how he thinks it's we're zero if warren buffett owned email or live streaming or you know or voiceover

internet protocol warren buffett be even richer than he is today so why he doesn't own bitcoin i don't know because you can actually own part of the most secure powerful computer network in the world. I think a lot of people miss out on the simplicity of the beauty of the technology of what we have here. You buy Bitcoin for one of three reasons, because it's the most powerful secure computer network in the world, and you want to own it, which I do, or you think it's a store of wealth. Now, the store of wealth, a lot of people have a lot of funny questions about the store of wealth. When I wrote that article and got gold, silver, and platinum listed on Montreal Stock Exchange. I mentioned in that article that I thought that platinum would

overtake gold as the store of wealth over gold because it was more scarce, it was more geographically diversified, you could mine it in more places, and it had greater industrial uses. So I said platinum should be a better store of wealth than gold. What I forgot was there was already five trillion dollars of gold embedded in central banks and there's no way you could ever amass five trillion dollars worth of platinum by the time we've got five trillion dollars of bitcoin in central banks of the world and somebody says well i believe in blockchain but i don't like bitcoin i'm going you have no idea what you're talking about and when you talk about store of I have $4,000 t-shirts and $2,000 tubes.

I bought dinner for people in Venice for 10 Bitcoin. Well, no, I wouldn't do that anymore. I won't spend any Bitcoin. So when people tell me, you know, if you can't, Bitcoin will never get a bid till you can buy something with it. And I said, that's why I wrote a white paper with custom Frank. And it's on a medium about for Bitcoin to really hit hyper growth. $4 trillion a day of Forex fiat is traded every day until you get those traders taking their phone and going, I'm trading U.S. dollars for Canadian dollars, instantaneous settlement, bing, bang, zoom for Japanese yen, for, you know, euros, for British pounds until they start doing that and going, holy crap, I don't want to own any of these fiat currencies.

And now you're selling your US dollars and buying Bitcoin, or you're selling your Canadian dollars and buying Bitcoin, or your yen and buying Bitcoin, until we can, as a whole group, get Forex traders to understand that stablecoins will be used as a means of currency. but stable coins are either going to be on the Bitcoin blockchain through liquid, or they're going to be on, you know, or regular, uh, you know, or they're going to be on, you know, ether or any one of the others, other blockchains. So until the world starts trading digital currencies, we own a company called half, half a company with a Maven net systems out of Canada called Canada stable

court. And, uh, yeah, I'm going to pitch that to your private equity company at some point in time, because I love the new fund that you just created. But coming to StableCorp, we sat down with a famous bank and a famous asset manager, and we did a $4 million bond trade that settled in T plus three, T plus three seconds at a cost of two tenths of a cent. So if anybody who denies that all securities trading, all bond trading, and everything is going blockchain-based, and Bitcoin is not the US dollar standard of the blockchain, well,

they're just not getting it yet, right? And I'm preaching to the converted. Well, they just haven't paid attention, right? They haven't done the work. They haven't spent the time to actually understand how much more superior this is, I think, right? Yeah. And again, getting involved in stablecoins, it's going to take, you know what, we're year 12 in Bitcoin. Email was invented in 1982. Most people didn't get their first email in Canada until BlackBerry went from being a little pager system into an email system in 1994, really. It took 12 years for people to adopt email. For them to adopt digital currencies and everything else is going to maybe take another while. We are so early in this growth

pattern. Same with voiceover internet protocol. When that was invented, we didn't start using Zoom and Skype and everything for another 14, 15 years. Now, we're 20 years. People's time horizons are way too short. That's why I say when Bitcoin goes from 1,000 to 20,000 in 2017, it was easily the biggest short I've ever seen in my entire life. For people to be buying into the futures. I could see all those futures traders going, this is going to be the biggest short or easiest short apart from mortgages during the mortgage crisis in 2008. It was easily the big short for me as far as I was concerned, not because I didn't like it, but Bitcoin's price has followed its growth pattern, its adoption rate. There's no brain surgery here. Stock to flow,

So anything Saifedean talks about, all of this, the more power it gets, the more people want it, the more people want it, the more powerful it gets, the more secure it gets, and it goes round and round. These are all brilliant people, and these hedge fund guys, you know, are amazing. I was really, I watched your podcast, the guy from MicroStrategy, and how he ended up with his investment in it. you know yeah there's a bit of a rolling of the dice there but the reality is you know it's not going away right it's probably more right than wrong right michael saylor from micro strategy who put 85 of his balance sheet to 500 million dollars put 425 million bucks of it into into bitcoin so yeah but my early shareholders and a guy named greg foss who loves to talk about fiat and currencies, you know, the guy is brilliant.

He knows everything about trading, about money, about governments, about bond trading. And he knows all the weaknesses that you should follow him at Greg Foss. He's absolutely amazing and point on. But again, he's a maximalist and you have to adopt his enthusiasm. I'm enthusiastic,

but I'm looking at the entire infrastructure together. um but when people say it's blockchain i like and not bitcoin that's when i shake my head and i'm going you haven't even you haven't even started to understand it yet and that's that's that's the signal that they're starting yeah right it is there's this like continuum you have to go on and then eventually you get back to uh hey this bitcoin thing is probably going to be pretty valuable in the future exactly yeah what what um what else are you excited about in terms of just the build out of infrastructure, right? So you guys have done a ton, obviously,

in getting the 3IQ, the Bitcoin fund approved and kind of onto the exchange. What else do you see as important milestones here to help a lot of these investments or investors and asset allocators come into Bitcoin? Yeah, I mean, we're going to be really early. So if you think of a couple of things, let's just talk about like,

what would 3IQ have on a product line in the basis? Everything that's going on with DeFi, It's amazing, right? Like BlockFi, you know, I think, you know, Morgan Creek might be in there, but, you know, Zach Prince and what they built there is beautiful. It's a whole new lending management infrastructure. You know, there's no reason I can't start creating literally money market funds paying 8% in Canadian dollars using my, you know, stable coins and or my big coins and hedging the positions out. So how well accepted would a, you know, as far as we're concerned, a, you know, a DeFi digital asset money market fund look? I think it'd be amazing. And, you know, you're going to get income, 70% of income. Well, versus what, 0.6 on a 10-year?

Like, forget it. So I think there's an awful lot of opportunities in there. And you know that we're obviously looking at those. um i do think the uh you know when you start to see uh the traditional banking methods um and let's talk about central banks for a second the government central bank of canada could not create a stable coin yes they could they already have it you know they you know they can program one but if all canadians are going to hold their money at the Central Bank of Canada, what do we do with the most amazing banking sector

in the world? We've got seven to 10 banks, mostly five, that are very powerful. It's not broken, well-capitalized. Canadians don't have any banking issues or banking problems. So why would the Central Bank of Canada want to F that up? Well, they wouldn't. So basically what will happen is a central currency is going to be held by deposits because it'll be backed one-to-one. so all the canadian banks will start competing for the deposit it's a nice stable coin and they won't let that happen very long they'll just take it out and say okay qcat is now owned by all the canadian banks and you know in my version vision but then every credit card loyalty program and in canada we've got canadian to hire hudson bay company tim hortons these are brand names like

you know it'd be like your starbucks or your you know kogers or any of these kind of people So any of those companies start adapting stablecoins, I think that's when you see the entire infrastructure going, and that's when Bitcoin really skyrockets. I tend to think that what Zach has built is just the start for BlockFi, but also we're going to see many, many more entrepreneurs follow in terms of building out this, what really ends up being just a mirror image of the legacy financial world in terms of providing all the financial infrastructure that allows Bitcoin to thrive, right? And if you kind of think about over the last 11 years, Bitcoin has grown from essentially on nobody's radar, basically worth zero or three-tenths of a penny to today being worth kind of $10,000, $11,000 and now kind of the talk of finance. That's all without a lot of infrastructure along the way, right? Yes, you had the Coinbases and exchanges and things like that, but all the things that you're used to in the financial services industry really haven't been around and they're coming online now. But fast forward 10 more years, right? I always joke with people.

You think more people are going to hold Bitcoin or less, right? In 10 years from now, you think it's going to be easier to use or less useful, right? And so it tends to be, you know, pretty much a no brainer, in my opinion, as to kind of the world that we're headed towards, but not everyone sees it that way. Well, we'll take a piece from the Disney fund and create the Bitcoin Children's Education Fund. How's that sound? So everybody can start saving for their kids' education in Bitcoin.

see how see where they're in 20 years you know i have no idea how you finance your kids to go to university in the united states right it was crazy at the university of toronto it's crazy it is literally insane right and the the secret is that most of them aren't doing it their kids are just taking on you know two hundred thousand dollars a hundred thousand dollars worth of debt to uh to go to college it's pretty uh pretty bad um you know a foot to start on if you will right given the problems. We hope to help solve a lot of those problems. And again, Pop, a lot comes from, for us, it's not Bitcoin or gold. An investment advisor should own both. It's not radical. It's not this. When we filed our Ethereum fund, I can't say, but we have certain opinions that

they're not novel investments anymore. They're 12 years old. And yes, it did take, while we were doing all of this gemini was working with us step by step to get their sock one sock two type one type two audit things they were getting their regulatory licenses none of this happened fast and none of it was there two years ago or a year and a half ago right and that's why you know grayscales on a non-regulated exchange we think a regulated exchange has advantages so now pension funds they can't overweight their otc holdings or now you know family offices that say we need certain, you know, regulatory prospectuses around investments that we'll invest in. We think we've now broken that. And the way I look at it is, yes, the OSC rejected us. And the new group that came

in, they challenged us to take it to the highest possible level to get the proper approval. So we can easily say there's 10,000 pages of testimony approved by a regulator approved by a regulator who did four years of due diligence and rang us run us through the biggest ringer to make sure due diligence was properly done so we easily believe qbtc.u is the cleanest most powerful product in you know in the market today i love it before we get into the rapid fire questions uh what is the place where people can find you on the internet or find out more about the bitcoin fund yeah www.3iq.ca not.com.ca and that's for canada the great white north and um on there you'll have everything how many bitcoin per unit you know what's our our challenge is is we're

trading at a 19% premium and our competitors are trading at a 9% premium today. And I'm going, I need to get my premium down. I need people to sell my Bitcoin fund, not buy it. They're all buying it. I need them to sell it to get it down. So we hope to manage the premium a little better when we have at the market, our ETF comes out in the next couple of weeks. But yeah, visit us there. And as I said, for Canadians, again, you get to put it in retirement accounts and then tax-free savings account, something that we have here. And it can change your life. If you're 23 years old, you can emplace the $10,000 investment. But if it goes up 10x or 100x, you've missed out on an amazing opportunity. I love that. I asked the same two questions to everybody to wrap up,

and then you're going to get to ask me one. First is, what's the most important book you've ever read um the most not the most important book i i i've ever read but recently the one that i read that was the most fun was literally bitcoin billionaires and the way he writes and his tv show and everything he does is amazing i was absolutely you know fascinated by it and and i like a good a feel-good story you know other than that uh i read for escapism but i'm also a big sailor so most of the important things i read are about weather patterns weight patterns and you know what do you do when your hurricane's coming and you're sitting in the middle of the ocean your sailboat these are so i'll read educational uh stuff mostly um and then anything industry

oriented so but um and i'd be remiss to say if i didn't mention jack tater and chris bernisky but we're getting a little dated we need we need version two jack if you're listening those are great suggestions uh second question is more fun aliens believer or non-believer oh i'm gonna have to quote and sing you know the late david bowie there's a star man waiting in the sky he'd like to come and see you but he thinks he'll blow your mind there so there's a star man waiting but he'll blow our mind absolutely that one of the best writers and one of the greatest songs ever written that is a fantastic way to answer that question no one has ever said that you could ask me one question to finish up what you got for me

fred well how big are you gonna make your why did you get into venture capital and how big are you gonna make your venture capital and how exciting is it i want to really know how you've gone And because that's obviously, you know, you're half my age, but, you know, at some point in time, that's what I'd like to do. Tell me about why you did that, because I'm really fascinated. Yeah, I think, you know, I've been doing it now for four years or so, and there was no grand plan. But if you kind of look with hindsight bias, there's definitely this belief that companies have been staying private longer. Most of the gains have been occurring in the private market. There are still great opportunities in the public market.

It's just that, you know, kind of the public market companies, all of the private market value was already sucked out of them, right, by the private market investors. And so that game ends up having a attractiveness to a specific type of investor. If you like to be less kind of what are the, you know, financials and what's the cash burn and the OPEX and kind of actually looking at financial statements, you're probably more of a public market type investor. But in the earliest stages of building these companies, there really isn't any of that, right? And so what you're doing is you're basically optimistically believing in a person and in a vision they have for something that they want to create. But that's why there's such great returns available to investors is these entrepreneurs are literally dedicating years of their life to not only recruit other smart, intelligent, hardworking, ambitious people to work on hard problems, but also of their own personal sacrifices with themselves, their families, et cetera, to go build these businesses.

And literally they are creating this stuff out of thin air and kind of building value. And the hope is that those companies will capture that value. And so I just really enjoy that, right? I mean, there's now, I've been doing it long enough to have multiple founders who pitched me an idea and a problem that they were gonna go solve to the point where they've grown big enough

to see they're doing hundreds of millions of dollars in revenue, right? And it's just really cool to see somebody who's set out to do something and kind of through all the obstacles, all the challenges, get there. And so for me, it's, you know, yeah, sure, we can make some money doing this. But at the same time, it's much more just about watching these founders kind of build this stuff. And I personally just get enjoyment out of this whole idea of, you know, betting on somebody early on their journey to go do something and if they're successful

it's a pretty cool ride to be along for yeah moving from a user of capital to a provider of capital it's got to be the day that you put a big smile on your face and congratulations on everything you've accomplished I'm a big fan as you know absolutely well listen I'm a big fan of what you guys are doing as well and I think that you guys are just getting started so we will we will have to do this again my friend uh at some point when you guys have more news but uh just keep going because i know that what uh what you guys have done so far is not easy and and kind of where the ambitions lie uh are even harder so uh just uh just keep going for all of us great thanks great seeing you