The Pomp Podcast - #503: Marcus Swanepoel on Crypto in Emerging Markets

Episode Date: March 2, 2021

Marcus Swanepoel is co-founder and CEO of Luno, a leading global cryptocurrency company on a mission to upgrade the world to a better financial system. In this conversation, we discuss emerging markets financial infrastructure, myths of emerging markets, technology strategies vs distribution strategies, regulatory environments, and the DCG acquisition.  ======================= Own crypto in multiple exchanges and wallets? Sync them to CoinStats so you track and manage them from one place. Track 8000+ coins and 300+ exchanges all from the Coinstats platform. Try it for free or go to coinstats.app/pomp and get 40% off your premium subscription. ======================= As one of the largest and oldest Bitcoin exchanges in the world, Kraken is consistently named one of the best places to buy and sell crypto online, thanks to our excellent service, low fees, versatile funding options and rigorous security standards -- but this is only part of the story. We’ve been on the forefront of the blockchain revolution since 2011: http://www.kraken.com ======================= Coinbase Wallets are adding support for .crypto and .zil domains through their partnership with Unstoppable Domains. Unstoppable Domains provides an all-in-one solution for blockchain domains. You can send money using these new domains instead of long Bitcoin wallet addresses, while also storing your domain in Coinbase's collectibles section. Go to unstoppabledomains.com in the dapp browser to register and manage your domains.  =======================

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. Marcus Swanpole is the co-founder and CEO of Luno, a leading global cryptocurrency company on a mission to upgrade the world to a better financial system. In this conversation, we discuss emerging markets, financial infrastructure, the myths of emerging markets, technology strategies versus distribution strategies, regulatory environments, and the dcg acquisition that luna recently went through i really enjoyed this conversation with marcus and i hope you do as well before we get into this episode though i want to quickly talk

about our sponsors first up is coin stats if you own crypto in a lot of places like me you know how difficult it can be to keep track of it all that's why coin stats is one of my favorite apps whether you keep your crypto on hardware wallets mobile phones exchanges liquidity pools or somewhere else coin stats lets you track it all in one place on your iphone android apple watch or computer you can see all of your transactions and your profit loss history and get advanced analytics on your portfolio's performance as well you can try for free or go to coinstats.app slash pomp and get 40 off your premium subscription again coinstats.app slash pomp they've got over 800 000 active monthly users people love this thing go to coinstats.app

slash pomp and you can start keeping track of your portfolio there coinstats.app slash pomp next up is kraken as one of the largest and oldest bitcoin exchanges in the world kraken is consistently named one of the best places to buy and sell crypto online thanks to their excellent service their low fees their versatile funding options and rigorous security standards but that is only part of the story they have been on the forefront of the blockchain revolution since 2011. So head on over to Kraken.com. K-R-A-K-E-N.com. One of the largest and oldest Bitcoin exchanges in the world. Kraken.com. Consistently named one of the best places to buy and sell crypto online. Kraken.com. K-R-A-K-E-N.com. Next up is Unstoppable Domains. Coinbase wallets are

adding support for .crypto and .zil domains through their partnership with Unstoppable Domains. Unstoppable Domains provides an all-in-one solution for blockchain domains. They basically make it human-readable, so you no longer have to send Bitcoin or other cryptocurrencies to that long string of letters and numbers. You can simply have a .crypto domain. I have pomp.crypto. If you go in your Coinbase wallet and type in pomp.crypto, you can send me Bitcoin. Don't do it, though. Once I bought pomp.crypto, no one else can have it, so it's like regular domains.

If you have a name, whether it's your name, your company's name, or some other word that you want, go buy it today at UnstoppableDomains.com. Whoever buys it first gets it. Whoever doesn't buy it doesn't get it. First come, first served. So go buy your .crypto domain today at UnstoppableDomains.com and make sure you have a human readable name. It's going to be the standard. UnstoppableDomains.com. Again, UnstoppableDomains.com.

All right, let's get into this episode with Marcus. 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've got Marcus here. Thank you so much for doing this.

Awesome. Great to be on your show. For sure. Let's just jump right into your background. You're obviously building a really incredible company today, but what did you do before and how did you get into technology? Spent about 15 years in finance, everything from consumer finance in consumer banking in Europe, also in Africa and Southeast Asia. I spent time in investment banking. I spent time in private equity. um and and again across multiple markets a lot of it i lived in singapore for most of the last 15 years i've lived in you know i was born in south africa so i spent you know these 20 years in africa and then also in europe so a lot of consumer banking investment banking capital markets um and then of course in across all these different geographies which which i think kind of led me eventually to you know doing something in the in the crypto space because you know it takes a bit

of, you know, when you know what the existing system looks like, I think you have, you in many ways, a lot more in awe of what this new financial system can potentially do for us. Absolutely. And maybe let's just start with kind of what was the original impetus for the idea from now? We, in about 2013, I quit my finance career and I said, look, where's, you know, since childhood, I wanted to do something in tech. And, you know, I said, where's the best place in the world to start a tech company and that was it might be in palo alto so i actually moved to palo alto uh rented a house from an early square employee and i had a guy that was actually an african fintech entrepreneur um come and stay on my couch for a couple of a couple of

weeks he didn't have place to stay and he actually introduced me to bitcoin for the first time and i think you know like a lot of people say you know you almost have these multiple aha moments i think when he explained he was a software engineer he explained a lot of the technical stuff to me and that was a big aha moment i think it was only a while later when i you know the first time i actually sent something you know with bitcoin i remember there was someone in indonesia i opened that their skype window opened and and i just scanned the person's qr code and it shot through to um indonesia pretty much instantly and that was a massive massive aha moment for for me as well um just out of interest when we you know the so that was the impetus in terms of look this is

going to be big it's about moving value across the internet what do we do with this where things got interesting is we originally said look we don't you know it has to do with money and value and surely the banks are going to be interested and so at the time when we started me and my co-founders you know we got together and we decided to build these things for banks now bear in mind this is 2013 this is the wild west days of crypto we've got mount cox we've got you know silk road and we at the time actually built a crypto system fully integrated for africa's largest bank where you could actually log in with your customer details of this bank you could buy bitcoin we started installing it into the atm systems you could send and receive it similar to how you would

use a mainstream kind of crypto product like we have now and we announced that early 2014 in london at finnovate and you know i remember i was standing on the stage then i had the slide up and it had the bank's logo and it said bitcoin and as soon as that slide went up people started getting up and taking photos and all hell broke loose and you know in a good way because you know a lot of banks all over the world started phoning us and asking us okay hold on are we missing something here but then also that particular bank got a bit stressed out because they had so much media attention so they kind of publicly backtracked on it and said look you know it's it's just a pilot we're not rolling it out but the reality was it was live on their system we built this in

conjunction with the bank's compliance teams and the central bank in in south africa that at that point so so you know we took about the next year working with a lot of big banks on a lot of problems right how do we solve interbank settlements how do we make you know trade finance better all these things that you you know at some point saw quote-unquote blockchain companies trying to do. And to make a very long story short, you know, we came to two conclusions through that process. The one was the banks were going to take 10, maybe 15 years to actually do something in the space where customers can actually use it. And we also realized at the time, look, you know, for better or for worse, the best use case of a blockchain is a decentralized

cryptocurrency. And so a lot of this blockchain stuff at the time didn't make sense. And so what we then eventually did is you know we had a lot of banks that build this for us or experiment on this but we said look there's consumer demand we've already built something that is genuinely robust from a security and a compliance point of view let's just launch our own consumer products on top of this platform and so we went straight to consumers and we you know we built what we now have is our you know crypto wallets to just make it easy for people to buy and sell send and receive and for all intents and purposes building a consumer version of a of a global you know crypto back. And that started about 2015. So we've had a few, you know, changing direction along the way,

but it was a very valuable experience for us. And of course, it also helped us build a lot of relationships and gravitas with a lot of regulators and banks throughout that period, which has really helped the consumer business a lot over the last few years. Absolutely. I want to talk a little bit about emerging market financial infrastructure before we kind of get into the solutions, right? So some of it is good, some of it is bad. maybe walk us through your evaluation, even if you want to break down certain markets as to how people should think about that emerging market financial infrastructure. Sure. That's a good question. I think the most important thing is, it sounds like an obvious

thing, but we have to recognize that emerging markets is a very, very broad category. It's like saying the Americas or the Northern Hemisphere. There are so many countries in emerging markets, and they are all so, so, so different. So even within Africa or within Southeast Asia, you know, the difference between Malaysia and Indonesia is massive. The difference between Nigeria and South Africa is massive. Now, again, we all know this intellectually, but I find that, you know, you almost forget it if you're not careful, even for us that, you know, we have a massive presence in all these markets that if we're not careful, we start thinking that people are going to behave in a similar way. So I think,

you know, recognizing that upfront and knowing how to build a business or at least, you know, target customers in all these markets, I think is, you know, that's the, that's the, you know, key important thing. I think, you know, broadly in terms of, you know, trends, you know, for us, emerging markets really is Africa, Southeast Asia, or, you know, that would include, you know, India as well. And then there's North Asia, which is China, Japan, Korea. We don't really play in those markets. What we've seen just again, like generalizing a little bit here, but,

But, you know, Southeast Asia tends to be a little bit ahead of the market than Africa. And we've seen this with, you know, mobile adoption. We've seen it with e-commerce and so on. So what, you know, and crypto is a good example. There's a lot of stuff happening in Asia, both being built in terms of consumer adoption. That's really encouraging, but it's still, you know, three or four years ahead of where we see that same kind of cycle in Africa. The other thing I'd just say is, you know, there are, you know, a couple of other misconceptions,

I think about some of these emerging markets, which, you know, I think is useful to know about. I think the one is, you know, this is one example everyone loves talking about Mbeza, right? Whenever people talk about fintech and emerging markets, it's Mbeza, Mbeza. Now, Mbeza is a very unique story of something that happened in a particular country at a particular time. But that's not been replicated broadly across emerging markets, certainly not across, you know, Africa. In fact, it's failed many, many, in many, many other countries, right? And that was, you know, the short version of that is it was just, there was a company with a lot of market power that just introduced a new product and everyone started using it. It's a bit more nuanced than that.

But so I think, you know, it's easy to latch onto one or two success stories and then just assume everything else that we do is going to be like that, whether you're normal fintech or whether you're, you know, the crypto side of things. And I think that's, that's important. And then the last, I guess, important thing is, you know, in a lot of these markets, it really, the problems are around distribution. it's not a product issue you know if i if i had you know one satoshi for you know every company in in the uk or the us that phones me you know once a month you know twice a month and says you we have this amazing new technology it's going to really help you know solve all of africa or southeast asia's problems um please can we you know can we put it on luna and then i go oh but why you know why why should we be involved you know you've built this amazing thing because

they don't have distribution and so a lot of the cool stuff that even in our industry that people are building whether it's around use cases for remittances or investments or you know online e-commerce and so on they are great ideas with a huge potential but you have to get to all these people and it's very hard to get to all these people very very we are dealing with low trust environments it takes a long time to build this trust not just with the consumers themselves but also with the regulators and the banks and all the other place you know stakeholders and so you know we have to be smart about how we take these technologies and take it to the market. And, you know, not, you know, I don't want to say don't be overenthusiastic.

I think the enthusiasm of the crypto community is probably one of its strengths. But there is a bit of a reality check on how we need to go about doing some of these things. But again, it will be very different by country and by market, how you build that trust and how you kind of distribute those products. Absolutely. And so talk a little bit more about this idea of the balance between technology and distribution. Right. And I think that it's a very interesting and valuable framework for people to understand, because just like in the early days of the Internet, we saw a lot of people who built some amazing technology, but it might not have been as user friendly as it needed to be. They might not have actually had the distribution that they needed. So how do you think through that kind of balance between the technology innovation and the distribution actually at people's hands? Again, very good question.

I think, you know, if you look at, certainly on the consumer side, if you look at most consumer companies in, you know, certainly in the tech world, they are mostly successful because of their distribution, at least from the data I've seen. There are some exceptions. Now, of course, you know, I think it's important to know there is a minimum level of quality that you need for a product, right? Like, you know, if the product needs to keep people's money safe, it needs to keep people's money safe. Or if it needs to be able to send something from A to B, it needs to be able to do that. but at some point and and i think it's also you know what when when markets start maturing and when competitions start speaking up the distribution part of the equation becomes a lot more important so i think in the beginning like crypto is a good example in the beginning it was all about product

because they were genuinely issues you know there were risks that you know you can't just say oh we you know we're some crypto company and it's really exciting and you know buy your crypto with us but then it gets stolen the next day right that's a problem so you solve that with building really good products and i think you know the crypto industry and for a lot of kind of the larger players we all have to be you know we have to acknowledge that a lot of the growth and the traction we've seen in our industry wasn't because we had the most amazing products it was because the media wrote about crypto the whole time and if the media are and i'm talking more like 2017 18 cycle now if the media are writing about it the whole time and there's no competition i mean at

that stage there was very few places you could buy bitcoin even in the u.s and most other markets people are gonna you know go to your platform and it's going to create this illusion that you've built a product that is just so amazing that you never even have to think about distribution i think we are way beyond that point now i think the next cycle so there i would say you know the right thing was 80 product 20 distribution but that is going to swing over the next few years and i think it's going to be the exact inverse of that where as long as you have the minimal minimum level of product quality it is going to be you know distribution where the game's going to be won certainly from a competitive point of view the the the last thing i just mentioned

there as well and and you know again very pertinent for a lot of people in our industry right so you know remittances fantastic use case for crypto i'm i have no doubt in my mind in the next 10 or 20 years crypto is going to form the basis of you know most global remittances and it's going to be completely transformative for people and for countries and yeah but if you were building a remittance crypto remittance product today or over the last few years you need to understand that the product you know just the fact that it's being moved with crypto i don't care if you're using the lightning network or whatever i mean we've built many products like this you know previously your competitors are the western unions the transfer wise the remittance of the world

because they are distribution companies. And so they've built those distribution channels, they've built those brands because consumers are not going to care how the money gets moved as long as it's just, you know, it moves. And unless you have a massive price advantage, which you don't have at the moment

because there's not enough liquidity in these markets to do it. So it means that when you are building a company, you have to understand what company you are building. If you are targeting remittances, you are building a remittance company, which means you're going to have to raise capital to compete with remittance companies

that have raised hundreds of millions of dollars that have licenses in all of these markets. It doesn't mean you can't win. It doesn't mean there's not a business to build there, but you have to understand the game that you're playing. And then you are 90% playing a distribution game. Whereas when you're in the DeFi side of things at the moment, that's more product game

because we're not at that level of competition on the consumer side or on the distribution side again. Yeah. And I think what's really, really interesting is this is one of many myths in the emerging market space, right? It's kind of this idea that if you just build it, they will come. Obviously, that is not true and distribution is king. Talk a little bit about some of the other myths that maybe people in the Western world have about these emerging markets, right? There's all these narratives that kind of

float around. And so which ones are accurate and maybe which ones are maybe not so accurate? so look again i'll generalize for emerging markets because we're going to see various you know varying degrees of this across you know particular countries i think the one certainly in our industry is this thing about people don't trust their governments in emerging markets right oh they trust they don't trust the government give them bitcoin and then they're so happy the problem in emerging markets is because so many people trust their governments that's actually that's the big problem because that's why the presidents keep on you know all the governments that are corrupt in you know keep on getting voted in because people actually think

that they're helping them now it doesn't mean that no one you know everyone trusts the government there's going to be some segments of the market you know people that are maybe you know highly educated or have a lot more disposable income or maybe who lived abroad of course there's going to be you know you know double digit percentages of people in every country that don't trust the government but the mass market the critical mass to keep governments in power they are 100% trust the government and they love the government because the government gives them social security you know some form of welfare they you know that that's what they grew up with so that's a big misconception and i think you know that is to rely on that to say oh people will shift to crypto

economy just because they don't trust the government i think that's a bit naive it doesn't mean that crypto can't play a really strong role in starting that shift now so you know even even something like you know just educating around how money works that's a really powerful thing that bitcoin has you know i said i remember many years ago i said to someone you know if if the whole industry just collapsed tomorrow and the only thing it did was educate people about money it's a success story massive success story and so you know just you know laughing about people playing around with dogecoin and things like that i mean there's if if the purpose is to educate then there's value in it and so in that sense i think yes definitely we can we can in emerging

markets change that but it's going to take a generation it's not going to happen in you know two two or three years the other one you know i think that that's maybe worth just also talking about is this hyperinflation every country with you know if there's hyperinflation everyone's going to run to bitcoin um if you know if the currencies are depreciated now again on a macro and a purely intellectual level that is true right if if they are if there's going to be you know a lot of these markets the currencies aren't strong and people are looking for alternatives I can tell you now that that alternative typically is US dollar. And after that, it might be gold a little bit.

And in a, you know, way after that is something like Bitcoin. Now, we've seen in some countries, not necessarily where there's hyperinflation, but where there's, you know, real big depreciations in currencies, we have seen increase in activity of people buying crypto. And then, of course, we speak to our customers and we, you know, want to know what they're doing. And some of them are genuinely doing, you know, they're buying it because they want to hedge against the currency or they want to put it somewhere else. It does happen, but it happens in a very, very small amount of cases. And certainly if it's people with a lot of money, they don't put all of their money into that, right? Again, they're going to go mostly to U.S. dollar, maybe some gold and so on. But the other interesting thing about a lot of these markets are because they're trying to control their currencies is that, you know, they don't allow you to just buy U.S. dollar.

Some countries outright ban it. Other countries make it very difficult. And so I think, you know, that's also where there's this interesting opportunity for stable coins, you know, to come into play, which, you know, it might be that in some markets, that's the intermediate step people have before they actually start choosing the other things. But yeah, it doesn't mean that in these economies, people don't buy crypto to deal with these issues. But it's not nearly as prevalent as what people, you know, at least publicly say it or want it to be. Of course, I also want it to be like that, but that's not the reality that we're dealing with. Not yet. Over time, we will get there. But again, we're like 10 years away from that. How important is it that the emerging markets, maybe 10 years ago, 15 years ago, there wasn't

as much internet penetration, there wasn't as much kind of cell phone, smartphone adoption. Today, that's changed drastically. Is that playing a big role in kind of the adoption we're seeing in some of the emerging markets? Yes, that is definitely true, right? I mean, it is internet penetration is growing like crazy people have multiple mobile phones i mean just to give you an example in south africa where we you know have you know run the biggest crypto company in south africa about 80 percent of our users only use their mobile which is a big big number um other markets would be a lot less or in the uk you know maybe be half or even less and so that is definitely not a misconception and it's happening and it does actually sow a fertile ground for

people to be using these type of products and services that are kind of mobile first um to use them a lot a lot easier and that you know that kind of cliche about african africa leapfrogging other technologies i there's something true in that as well right it doesn't mean that we go from someone that have that's never had a bank account to putting all their money in crypto i think that's a bit of extreme jump but does it mean that they are you know going to be sitting around, you know, a table with their friends and everyone's going to be, you know, doing things on their mobile phones and be keen to try new things a little bit and share things. Very social driven, you know, markets where people share a lot of what they're doing and

products that they're using. Definitely. So it is going to, I think, I think it's going to definitely accelerate the adoption. But, you know, with a lot of these technologies, they always say that, you know, it's always happening, you know, faster than, you know, what some people want it to be and slower than other people. So I think we just need to find that middle way. But that's a big factor that's going to be, you know, driving a lot of adoption a lot faster for sure.

Yeah. And where do you think the biggest opportunities? So like the in terms of these emerging markets and understanding, you know, each market is different. But what do you think the biggest opportunities are for technologists and entrepreneurs? They really do want to make an impact. They do want to kind of affect change. Is there specific things that you're saying, look, this is an unsolved issue or this is the area that I think more people should be paying attention to, but they're not yet? Yeah. Yes, I think, look, I think there's two parts that are kind of the big kind of areas where the work needs to go into and where the opportunities lie. The one is unfortunately a little bit tricky and that's around regulation.

You know, we've, again, it depends on the country. We've seen some countries like Malaysia, you know, look, they're very forward thinking in terms of how they think about technology and financial services. And, you know, we spent a couple of years working with their government and regulators to come up with essentially the first properly, you know, licensing regime in emerging markets, which they issued and, you know, 30 companies applied and, you know, we have that license now and operate legally in Malaysia. So, you have examples of that, but they're few and far between. In a lot of countries, in particular in Africa, you know, the regulatory regimes are not adequate yet for, not just for crypto, but for mass market kind of consumer finance products. it's not because i you know i'm not sure if it's because people really don't want it to be like that it's just the markets have not evolved like that and you know there's just not been economics of you know activity to support bringing a you know another bank or another challenger bank or a crypto company into the into the market so a lot of the work that we are doing

and and other companies in the space as well not just and other fintech companies is on the lobbying and regulatory side how do we create an environment where people companies can actually flourish. In the US and the UK, you can apply for a challenger bank license. It's very easy to become a payments company or remittance company. In a lot of these countries, those classifications don't even exist. So that's a problem for fintech generally. The good news for crypto is that because they don't exist, as long as the regulators are pragmatic and open, they are it presents opportunity to create new legislation that's specific to crypto because one of the worst things i think that can happen in the industry in crypto you know globally is

that people are forced into other licensing regimes that don't apply to crypto given how unique you know the industry is so i think that's where a lot of the work goes in and then the you know the second part we briefly covered on is around you know we call the distribution but you know we can rephrase that as building trust in these markets and you know if you know if you are a highly commoditized product or something that's purely you know product that's purely focused on price like uber is a good example right like it's just you know how cheap can you i mean it's how hard is it to get into a car and drive somewhere it's just how cheap can you make it relative to something else right there's not i mean there's a little bit of trust required to

get into the car but it's not you know that's not i wouldn't say that's the main problem that they're trying to solve with with people's money you know people are very strange about their money and they you know the trust equation is is very complex and again depending on the country or the type of product you are going to have to do something that people are going to actually trust you that they you're not going to steal the money that you're not you know the thing's not going to disappear and so on and that's where most of the work i think is going into certainly from our side and and you know where i think most of the work should be going into is that how do you build trust in these markets where the you know again starting all the way

from education to how the product functions to where it's available to how it's co-branded with you know things that people already know that you know and that's the opportunity because if you can build trust in these markets you can you know that that trust you can leverage so broadly and you know again if you look in china or indonesia like some of these super apps right where people use one app and they trust that thing so much and now you can put anything into that product you can And, you know, people start with car sharing and then the next thing they have financial services and, you know, texting and whatever. So that trust is so valuable in these markets. Again, given they are generally low trust environments, but once you cross that threshold, then you have a lot to work with.

And that's, I think, the biggest opportunity for any company, whether you're crypto or just kind of a general consumer company in tech. Absolutely. I want to talk a little bit about, you mentioned kind of regulation, but an aspect of regulation I've been thinking a lot about is centralization versus decentralization. Is there any sort of bifurcation between the developed world and the emerging markets in terms of how people are receptive to decentralized products versus centralized products? And do you see maybe some of the more adversarial regulatory regimes almost making it default that we need to have decentralized products

in order to allow people to be onboarded without the governments being able to kind of be egregious in their lawmaking? So I can tell you that from an emerging markets perspective, if you ask me about like Singapore and the UK and so on, I can tell you a certain answer. But for most of emerging markets,

we're like two years away from that conversation. We are literally still trying to explain to people what bitcoin is that's it i know you know and and you know decentralized finance versus centralized finance all of these things it's you know these are things that from a consumer perspective is interesting especially if you're an early adopter in the crypto space and maybe in some kind of more advanced regulatory regimes or somewhere in new york where you know the bit license was issued many years ago and now you know you're starting to have conversations about these other things um but it's not even on the agenda not even close right so so i think we you know we

still at that early stage what i can say is what we're regulation where the big pain point is you know originally with with a lot of regulators was around aml and you know anti-money laundering and so on right and that obviously is just kind of a generic risk factor but in emerging markets what a lot of people don't realize is these countries have capital controls now if you grow up in the US or the UK, you might not even know what that means, but it means that you can't just send your money in and out of the country freely. In some countries, you're completely prohibited. In some countries, there's a limit on how much you can send in and out. But in almost all cases, you need to actually report how much money you send or receive. Now, I think we all know, given where

the financial technology is going, it's going to be really difficult for governments in the next generation to have effective capital controls at some point those things are going to break and you know whether it's because of bitcoin or whether it's just because of globalization or you know countries you know competitive advantage it's going to be very hard to hold onto those things forever but the unfortunate reality is where we are now and certainly for the next few years those are the rules of the game in a lot of these countries the and the risk for them is using crypto or these kind of products to move money in and out of the country. Now, again, the reality is people are not, you know,

we have a lot of data that we can see, you know, what people are doing with the crypto because it's obviously all on the blockchain and we have a lot of visibility and it's not actually a major problem, but there's a perception that it is a problem or that it could become a problem in the future. And that's where almost all of the energy is going on at the moment. And if you see some of the kind of regulatory reactions around the world of

regulators and emerging markets, if they're not positive, then it's usually because of this factor. So, yeah. So I don't think there's much else to add there, but on the decentralized point, I think, you know, they, the ones that know a little bit, I mean, decentralization is obviously kind of a broad topic, but this, you know, if I could throw peer to peer crypto trading, maybe just, I know it's not really decentralized, you know, decentralized, but it's in that direction, right? at a very basic level if you look what the regulators in malaysia did they said look you are not allowed to buy or sell crypto in malaysia unless it's with a company that's a regulated business and they specifically do not allow p2p transactions now can they control it probably not or they can you know try and make an attempt but they are very overtly saying that that is something that they don't want to happen and so they are looking to have some kind of

central oversight into something. Now, again, the market's still really small. Let's see where it ends up in a couple of years. Maybe that conversation has to be revisited. But I suspect that once we get over the basic capital control issues and what is Bitcoin issues, when it comes to that, it's not going to go down well with most regulators, certainly not in emerging markets. Absolutely. And I guess part of this, too, is the constant cat and mouse game between the technology and innovation getting ahead of regulation. I forget who told me at one time, but they were like, well, we don't want, I think it might've been Tony Thomas, who was a former four-star general who said, you basically don't

want regulation to get ahead of innovation because then you're innovating to the regulation, right? You're basically only doing what the government and politicians, and as we know, they might not be the most groundbreaking thinkers. And so I think that that's a pretty interesting way to look at it. I want to bring this back to Luna, which is, what are you seeing from growth in uh specific markets and and uh also within the product suite itself what are people doing right what do they want to use which products are most interesting to them uh and which markets should people be aware of that seem to be growing the fastest so so yeah your what you just mentioned reminds me you know about six or seven years ago we were sitting doing some training for a big

central bank and a bunch of regulators and there was a guy sitting behind me from one of the regulators and he was in his late 60s and he'd been working there for like 30 years and we were explaining bitcoin and dark markets and blockchain traceability and i i just remember the guy he was talking to his colleague and he just said i i just i didn't sign up for this you know like what it's just i don't have i want to retire in a couple years like you know i don't have time to try and understand this thing because it's just i just want to you know relax and do my job and not have to deal with this and so you kind of have to feel a little bit for people that are you know now having to basically relearn an entire new you know industry um but yeah so so certainly i so i i agree

with you on that i think you know um now it you know there is a lot of education work that we do obviously as a company and an industry where we try and lobby and we try and educate um and and what i can just say about that before we go into the you know kind of the the markets and opportunities is generally speaking the regulators have been surprisingly pragmatic we've had a few exceptions obviously you know every year there's something happens and there's you know some miscommunication or so on but generally it's been it's been pretty good and what I've also you know every now and again strangely that I hear in these regulatory conversations is that people say oh but you know look at you know look at what Airbnb did look what Uber did now those are completely

different not incomparable companies compared to the risk of you know what we're doing in terms of financial regulation but i think that's kind of just stuck in people's heads that like technology is here you know the world's going to change and and you know at some point we're going to have to just deal with this right so so what is happening and and you you obviously know this but the de facto regulators in our world is actually being the banks because the banks are the ones that are saying look if your product it depends again on the type of product that you have if you have a kind of a fully decentralized product it's it's not it's not relevant but if you have something where, for example, in our case, you have to deposit money into our account. We need a bank

account. And they will set the rules. They will say you have to do the AML, KYC, and so on. Obviously, we self-regulate, but the regulator isn't really guiding everyone. And the problem is that a lot of financial institutions are just de-risking, generally speaking. A lot of people like to say, oh, look, the banks don't want to work with crypto companies because they're scared of what crypto is going to do. That's not the reason. They're scared of getting fines for remittance clients, non-profit organizations, you know, crypto is somewhere in that kind of high-risk category. And so, that's kind of been the issue. And one would hope by now it would have been sorted out, given how, you know, prevalent crypto is, and at least the, you know,

the macro narrative has obviously changed to be a lot more positive. But it still continues to be a problem. Across the world, developed markets and emerging markets, you still see banks cutting off accounts um you know and and that's that's a big big challenge um but just yeah just on the on the on the opportunity side and and the markets to watch i think the you know certainly the big ones in africa on nigeria and south africa they are by far the biggest markets by any measure in terms of population gdp per capita all of those things and and the crypto kind of trading volumes and that kind of reflects that as well. And then in Southeast Asia,

the markets to watch are Malaysia and Indonesia. Philippines to maybe some extent, but it's not as, you know, maybe as big as one would think. And then of course, Singapore is, you know, just launching their kind of new licensing regime. A lot of crypto companies are moving there to work under that license. So I, you know, we're expecting some big things from Singapore as well, but, you know, in terms of what people use it for, you know,

it's it's i would say a couple of years ago it would be very similar to someone in a city in the u.s for example it's someone that is educated has a bit of extra money and so on and so that has been traditionally the the demographic they they certainly are people that use it for transactions right so so we we also integrate into e-commerce systems and so we you know ran for over 10 000 merchants i think that and we could see people buying things online it was very small but it was happening but people do use it to move money they use it to move money in and out of the country and you know from from what we can see when they do do it it's not because they want to circumvent capital controls it's just the convenience is a lot easier than having to go

through all of the process of declaring the money and filling in all the forms and so on so um yeah so but then you know even to this day i would say it's less than 10 percent of total volumes are transactions the rest is broadly into this category of investment so that could be you know seeing it as a store value or seeing it as you know some kind of asymmetrical return or even speculative trading right the one thing that is changing those over the last you know 18 months is that that kind of investment group where it's people with a lot of disposable income and so on that's starting to move into the mass market and into that longer tail and you're starting to see the people that will eventually probably benefit the most from crypto are starting to come into the

crypto ecosystem but it's a it's a very uh recent thing it's it's not it certainly wasn't like that for the last six or seven years but that's the exciting point right so we're starting to to tap into that market now yeah and so when you think about um kind of the future prospects of what you're building uh you guys obviously recently did a transaction with dcg maybe talk through a little bit as to uh what the logic behind that was kind of why you guys were excited about it and then whatever you can talk about in terms of how the business will change or the structure of luna going forward thanks y'all good question i think look we you know we love what we do we love building you know what we perceive as really really good value for our customers and the you

know the opportunity to impact you know not millions or tens of millions but billions of people with our product is, you know, I don't think there's any doubt within, you know, our team and that, you know, that's what we can do. So the idea of like selling the company has actually never been top of mind. I know a lot of people used to say, oh, but you know, what is your exit strategy? It's like, I've literally not thought about it. So, and we've had some acquisition offers over the years, many years ago as well. And, you know, we, people talk to us and we say, And I look, you know, Luno, we do things in a way that we think is best for our customers in our market. And we don't want someone else to kind of spoil that.

But, you know, DCG, what maybe a lot of people don't know is DCG was our very first investor, Barry, you know, Barry Silbert. And when we were, you know, four or five people sitting in a room building that initial product for that big bank in Africa, I was on the phone with Barry regularly just talking about crypto, talking about our business and so on. So it's been seven years that I've worked very, very closely with DCG. And the one thing that we realized as the market started maturing and as it started growing is that, you know, you have to ask yourself, what is the best business model? Like what is going to be, you know, from other than just building products that your customers love, what is from a company point of view going to make the most sense? Because we are going to see massive increase in scale. We are going to see consolidation in the market.

We're going to see all of these things. How do you position yourself for that? and and the thing that i loved about dcg always other than just being very culturally similar and and knowing them really well is that they if you look at what they do you know again a lot of people think that they just do crypto investments but they that's not really their main business they own and operate some of the biggest players in the space genesis you know crypto trading and lending um grayscale which is now the biggest you know asset manager in the space um coindesk so So they have these groups of people that really focus on particular segments of the market and particular problems.

And the one part that was kind of missing there was mass market consumer or retail, if you want to call it that. And obviously, DCG is a little bit more US-centric and we're very international. So it kind of made sense if you think from a business point of view, like, okay, but, you know, what is the best way to succeed in this industry? And I honestly think it's by allowing teams to focus on doing the thing that they do really well. too many crypto companies are trying to be everything to everyone that is okay in a very mature industry if you 100 years of banking and you want to consolidate to get some cost synergies that strategy will work it doesn't work when you're at the beginning of an industry and everyone's still trying to figure out what actually to build and what is the best value proposition for whatever

segment of the customers that you know it happened to be and so for that reason just dcg have a unique business model if we could be part of that i think it's just purely objectively speaking the you know the best business model i would love to be part of that they have a massive balance sheet behind them and they have a 20 30 year time horizon on thinking through this there's no you know they're not a public company they're not under pressure to do things in the short run and let's be honest you know as excited as we all are about what's happening in the crypto space right now this is a 20 or 30 year project and so so for all of those reasons it made sense for us to to to to be part of that group and you know the easiest way i sometimes just explain it to people

is you know instead of having seven shareholders and four board members and i have one shareholder and one board member but it just happened to be my favorite one so that works for everyone so we run completely independently nothing's changed in luno other than the scale of our ambition and our access to capital um but yeah that's you know we you know it's it's business as usual um in that sense that we all operate completely independently yeah makes a makes a ton of sense what is the one thing that you're looking forward to moving forward? It might not sound like the most exciting thing, but, you know, this thing about buying your first Bitcoin, that's a problem that's still not actually been solved in most markets. You know, in our industry and if you're in tech

and finance, okay, sure, you kind of know what you want to do. But, you know, I can walk out of this house now and I can walk into a restaurant with 10 random people at a, you know, at a table and I can ask them, go and buy your first Bitcoin. And I can assure you that none of them have heard the word Luno, Coinbase, blockchain. I mean, they wouldn't even know, like, do I go to my bank? Do I go to 7-Eleven? Is it online?

Is it offline? I mean, it is completely, completely, you know, early stages in our industry. And so a lot of what we are doing over the next 12 to 15 months is continuing to address that problem of, like, where do people just go the first time? All the way from the, you know, the brand top of kind of mind brand building and education, all the way through that funnel of being able to trust you with their money and being able to get KYC properly and so on. So, again, it doesn't sound as sexy as DeFi or a few other projects, but it's an important problem that's not being solved.

And it's a crucial problem for us to solve to enable the rest of the industry, right? If there's not a critical mass of people that are using Bitcoin or buying and selling it, all of that infrastructure that we're building and all of that liquidity that we are creating in all of these markets enables other companies to then come and build on top of that and say, okay, well, now I want to do remittances. If, you know, there's a lot of liquidity in Nigeria and, you know, country-wide, now the product will actually maybe work, right? So I think that's where a lot of our attention is going on and something I'm still very, very excited about seven or eight years into the journey. but on top of that we're going to be launching a couple of new markets we've got a lot of demand in a few other markets but yeah we haven't announced too much around that but i'm sure you will you will hear more about that and i'll also i mean i'm i haven't been spending that much time on fin twit the last few years but i'm i'm making a comeback and um yeah we're going to be

posting a lot more on twitter around updates on all of these markets what's happening on the ground in nigeria what's happening on the ground in indonesia um and and hopefully that'll be useful for people to, to, to, to, to kind of get a better idea of what's going on. I love it. Before I wrap up, I always ask everyone the same three questions. The first is what is the most important book that you've ever read? I actually didn't know that these questions were coming. So the most important book I've ever read, I can, I just, I'm just stalling a little bit for time here, but just so you know,

I have a bit of an obsession with reading books and I buy about five books for every two that I read. So, so I, I just need to also think that have I actually read the book? I think, yeah, that's like asking what is my favorite child, right? It's just impossible, but okay. I'll just be, I mean, a fictional, a hundred years of solitude, Gabriel Garcia Marquez, really amazing book. Um, I know there's a hundred business books, but you know, I'm going to, I'm going to pick

that one out for, for now. So, yeah, that's a great one. Second one is a little bit more personal, your sleep schedule. So I used to be somebody who slept only for, you know, five or six hours. Uh, and then I recently started to, uh, to work with, um, and invested in the company eight sleep. Uh, and in that business, uh, they've got a thermoregulated bed. Essentially you can make it really hot or you can make it really cold.

I sleep literally on an ice cube and sleep like a little baby now. What's your sleep schedule and how has that changed over the years? Same as you, you know, I did investment banking, right? You don't sleep other than maybe under a desk every now and again. And, and I changed my schedule to go to bed early. I now try and get like seven or eight hours of sleep where I used to do, you know, four or five. I try and wake up at the latest six. I've tried the 5am thing a little bit. It's a bit tougher than it sounds,

but yeah seven or eight hours um go to bed very early complete game changer and can i just this this um this sleeping company you mentioned i am absolutely dying to get their product in the uk i can't find it so if there's a way someone i can talk to someone can ship me something i am really keen to you know i i'm all in on the sleep thing now that's something that i've i've seen you know and read about extensively so really really keen on that if there's a way to get it we will uh we will work on it for sure uh last question is a little bit more fun and you could ask me one to finish up uh last question is about aliens are you a believer or a non-believer i am actually a believer i you know just basically but just on you know statistical odds you know from a beer

you know that that's why i you know i don't believe because i you know i think i'm going to see one in my lifetime but just statistically speaking i'm pretty sure there's life somewhere else in the world. I tend to agree with you. I don't know if they've come to earth, but I definitely think that they're out there somewhere. No, they're there. Well, maybe they sent us Bitcoin from the future. You never know. Absolutely. You could ask me one question to finish up. What do you got for me? I'm going to ask back what your favorite book is. I know maybe it's a little bit boring, but that is a really good question. And it says a lot about a person when you ask that question so yeah so i mean look i i uh always say the same three books

which is rich dad poor dad richest man in babylon and thinking girl rich because just because they were kind of life-changing for me uh a book that i recently read that i thought was really good was morgan housel's the psychology of money um or or also um uh the i think was the uh almanac of naval ravikant uh which is just basically a bunch of naval's thoughts all put together I think both of those are great books as well. So I'm similar to you. I could go on and on and on and just, you know, a hundred books and feel like I didn't do it a good service. So I just enjoy reading.

Very good ones. Right. Awesome. Well, listen, Marcus, I really appreciate you taking the time to do this. Where can we send people to find you on the internet or find more about Luno? Luno is luno.com. The Twitter handle is Luno Global and my Twitter handle is Mark Swain. you'll find it through the through the luna handle as well got it uh well listen thank you so much

for taking the time to do this what's to do to get in the future awesome thanks so much for your time