The Pomp Podcast - #728 Increasing Bitcoin Adoption w/ Chris McAlary

Episode Date: November 21, 2021

Chris McAlary was an early bitcoin miner and today serves as the founder and CEO of CoinCloud, the world’s largest network of two-way digital currency kiosks. In this conversation, we discuss bitcoin, mining, ATMs, increasing adoption, and how Chris has built such a large company.  =======================

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. Now let's kick this thing off. Chris McCallery was an early Bitcoin miner and today serves as the founder and CEO of CoinCloud, the world's largest network of two-way digital currency kiosks. In this conversation, we discuss Bitcoin, mining, ATMs, increasing adoption, and how Chris has built such a large company. I'm really impressed with Chris, and I enjoyed this conversation. I hope you do as well. Before we get into this episode, though, I want to quickly remind you, are you looking for a job in the crypto space? Do you want to work at a Bitcoin company or

a crypto company? Well, we've got two products specifically designed just for you. The first is the job marketplace. Anyone in the world who's looking for a job can go to pompcryptojobs.com and you can apply to hundreds of open roles at the top companies in the industry. People have already been hired at coinbase kraken gemini blockfi strike and many many others go to pompcryptojobs.com and start applying today next up is if you think that you don't have enough knowledge to actually go through the hiring process yet we've got you covered there as well you can go to pompscryptocourse.com and you'll go through our training program it's a three-week intensive program that we've worked with a number of the leading hr teams to actually develop the

curriculum. The goal is that once you go through that, we hand you off to the HR teams, and you can immediately walk into an interview confident and full of all the knowledge they need you to have in order to get hired. So pompcryptojobs.com if you want to go straight ahead and just apply to open roles, or go to pompscryptocourse.com if you want to go through that training program. All right, let's get in this episode. Chris, I hope you guys enjoy this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guest as a specific inducement to make a particular investment

or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. All right, let's get into this. First, let's start with your backstory. You were very early to Bitcoin, noticed that this might be a thing, maybe get a couple of Bitcoin in case it catches on, as Satoshi said. Tell us kind of how you originally came across Bitcoin and what caught your eye? Yeah. So, uh, I was a part of the online poker craze and boom, uh, in college. And, uh, rather than getting a real job out of college, I moved to Vegas and played online poker, uh, bought a house, did that for a few years. And then, uh, in 2011, uh, what they call black Friday happened and the department of justice

shut down Full Tilt Poker, PokerStars, and Ultimate Bet Poker. And, you know, as a kid with his whole bankroll on those sites, I was a kid in my early 20s, have it locked up overnight. You know, I just saw sort of the power of not custodying your own funds. And that was 2011. I just heard about Bitcoin for the first time at the end of 2010. And I was like, wow, you know, If I'd had my money in Bitcoin, I could have prevented a lot of this. And I went down that Bitcoin wormhole, started reading the Bitcoin talk forums, just went down the full wormhole, started my garage in 2011 because that was really the only way you could buy it unless you wanted to wire money off to Japan, which given my experience with online poker, I wasn't sending money offshore anymore. and so uh became sort of like the bitcoin guy amongst my friends family acquaintances was meeting people um telling them you know you should buy some bitcoin they're like okay yeah how do i

do that um you know yeah you got to go mine build a mining rig you got to send money to japan which one do you want to do like okay no thanks so i sort of saw the problem of how hard bitcoin was to get in the early days and was going to Bitcoin conferences. And at this conference in 2013, saw the prototype of the Bitcoin ATM. It was this giant behemoth thing called a Robocoin. And I ended up buying one of those. And they're like, well, we're only selling them to Canada and Europe right now because nobody in the US has figured out a cash to crypto compliance regime as a money service business. And so my college roommate was a lawyer, worked with him to help figure out how to do this compliantly. And we launched our first location in 2014 here in Las

Vegas. And today we've got 4,500 locations in 48 states and in Brazil. And we're still growing really fast and uh we're just trying to make bring digital currency at all all right so i want to go back first 2010 2011 you have this kind of catastrophic external event where literally you wake up one day black friday bam they took all the money uh and they're like we're freezing everything we'll figure out how to do it when you start actually looking at bitcoin you had that as the perspective or that as the backdrop so it's very clear hey the fact that i hold it rather than somebody else interesting uh when you begin mining and uh really kind of entering into the space. What was the general sentiment? Like, were you like, Oh, this thing's going to, you know,

$60,000 and like, Hey, we're all going to get rich. Or was it very much just like, Oh, this is like intellectually interesting to us. I want to kind of play around and learn here. And then it became this thing that was much, much bigger than everyone thought at the time. Yeah. When I first heard about it, it was on a podcast. Econ talk was one of my favorite podcasts at the time was 70 cents. And, uh, you know, like a few months after that happened, across $1 parity. And I was like, wow, this is like, it's at $1. It's more valuable than the US dollar at this point. And I thought it was the coolest thing ever. And so at that point, like I'd sort of gotten this itch of like price appreciation. And, you know, it was like part,

I wanted to get some Bitcoin and it was really hard to get. So I just did it for that purpose. But I also wanted to learn about, you know, how it actually worked, what this mining process was. i'm very much like a learning by doing sort of person and uh you know yeah i went down this wormhole and looking back like i can't believe i actually was like did what i did in terms i had like this octopus computer that had like eight graphics cards connected to it i was like writing scripts in my garage like on on you know how to mine it was you know i'm not really that technical of a person but somehow i got it done yeah that's awesome all right and so talk to us about coin I start from the top in terms of just how many employees, how many locations,

and then if you can disclose, how big is the business from a financial standpoint? Yeah, so we're 240 employees. We're headquartered here in Las Vegas, Nevada. We've got 4,500 locations installed today and a variety of amazing retailers, HEB, 7-Eleven, many others. We're bringing this mainstream, digital currency mainstream. So when you're at your checkout counter, look around. You'll probably see one of our kiosks. In terms of how big is this financially, yeah, we're in the hundreds of millions,

if not billions, in terms of our total sales today. I'm not sure what we'll be at by the end of this year. um it's we're looking forward to it to a good november and december so i think we'll probably get into the billions this year so got it and when you look at uh how this works so you go to let's take a 7-eleven right or some other kind of retailer you go to them and you get the atm actually placed inside of that what is the relationship between uh your business and the retailer like i don't think people understand how these businesses work from like a mechanism standpoint? For us, it's really simple. We're subleasing basically a 1.6 square foot space in

their store. And the value proposition of them is really simple. They get rent. So based on the rent we pay, we're already the number one revenue per square foot in their entire store. And if you got a small C-store or a grocery store, they're really looking at that metric. In addition to that rent and revenue that we pay. We're bringing in lots of new foot traffic. So around 300 people a month are coming to the destination to buy and sell digital currency. We're one of the few digital currency machines that our entire network is two-way in that you can buy and sell. And so that adds a lot of repeat traffic. People who've bought elsewhere want to cash out. one of the only places they can get cash for crypto is our kiosk. And so that drives a lot

of traffic into their store and retains a loyal customer. And because crypto is so sort of new and scary to a lot of people, we have a live 24-7 customer support line that they can call anytime. How do I download a wallet? How do I do my first transaction? How do I sell my Bitcoin for cash? Where do I find a location? What are the hours? Call us anytime. You don't even have to be a customer. We'll help you understand what digital currencies are, how to use them and use our product. And so building that trust with our customers is a really important piece of what we do and brings a lot of customer loyalty to both our business and the host business. Got it. And then walk me through in terms of who is this for, right? I think a lot of folks,

when they think of buying Bitcoin or cryptocurrencies, they're thinking about going on to kind of a traditional exchange. I'll put traditional in air quotes of it's something that I do on the internet. I go, I sign up for an account and I go and I purchase it that way. These are in-person physical retail devices. So what is the kind of intended or target demographic age, you know, location? Like, how do you think about why somebody would go to the physical system rather than go online? Great question. That's just a lot of things. or one key point most people understand about our business, but it's cash to crypto. There's no banking intermediary with our product. It's direct in and out to crypto with cash. And cash

is a very immediate payment means and still serves 30 plus percent of all transactional activity in the United States. COVID might have put a dent into that a little bit, but cash isn't going anywhere. And there's a certain piece of cash that is financially independent from sort of the legacy banking system that you don't need a bank account in order to do these transactions. And as somebody who's been in crypto since 2010, I probably had 50 bank accounts closed because banks saw a Coinbase wire coming in out of my account or Gemini wire coming in out of my account. And for a long period of time, there was this sort of, you know, embargo against people who did crypto transactions. And so, you know, I think the importance of cash to

crypto is really, you know, missed in the mainstream media today. And, you know, we sort of provide that sort of base level of being able to supercharge your dollars, right? You can take your US dollar and you can turn it into a digital currency and get, you know, a million more use cases and value out of it. That's a really powerful thing to, especially to people who are underbanked that, or don't want to be banked or unbanked. You know, there's this whole class of US citizens that the banking system just doesn't serve and they still need to interact with the global economy and uh you know cash to crypto is an amazing way for them to supercharge their dollars and then is this all individuals or are there other uh types of organizations

whether they're corporations or other types of folks uh that would be using this as well and then maybe you can also talk about the u.s versus international right is there a difference there that you see uh between uh what many would describe as like a western developed nation versus anywhere else that you guys may have locations? Yeah. So at the retail level, we're two individuals, you know, corporations don't really use that part of our business. We do have an over-the-counter trading desk, private client desk for people who want to do over $25,000 a day. We see more corporations use that. We also have sort of an on-chain DeFi fund that's gaining some corporate interest that came out of just managing our company treasury,

which is a whole new business we're getting into. But in terms of the international front, Brazil, you know, we see much smaller transaction volumes, but a higher quantity. And Brazil is a country where over 50% of the people are paid in cash. And, you know, over 50% as well are not connected to the legacy banking system there. And so the value proposition to users in that country is massive. and we see a lot of just small dollar volumes there.

And, you know, it's all about education there, I think. You know, they're a little bit further behind in terms of their adoption curve. And so we're making, you know, big efforts in both places, both in the United States and Brazil on education. Got it. Joe, John, what questions you guys got?

Hey, Chris, how you doing, man? Good to see you. Hey, what's up, Jeff? Not much, man. So my question would be just like, how big can this business be, right? You've obviously got really good traction here in the United States. It sounds like you're doing some cool and interesting things abroad,

but like how big can this business be? So I think we all believe this is the future of finance, that crypto technology is going to be behind all personal corporate finance in the 21st century. And so anywhere you see a legacy ATM, there'll be a crypto ATM in its place or next to it over the next, whatever, 50 years. So that's hundreds of thousands, if not millions of locations. I think today there's 4 million ATMs out there. And so the use case for crypto and cash to crypto to your local economy is massive. And so we're going to continue to put machines out and we've just continued to grow and grow and grow and meet the needs of the of the market demand and so i don't see it slowing down anytime soon john what you got

yeah how you doing chris um love what you guys are building that coin cloud can you talk about like the kyc stuff that happens like what happens when a consumer actually walks up to the machine and what is the process for them like yeah so we've got a the initial kyc level is uh up to a thousand dollars a lifetime you can just come up and use a phone number and we wanted to make crypto easy to try and buy on a first experience like that. And so beyond that, if you want to do over a thousand dollars a lifetime, you're going to take a selfie and scan your driver's license or government ID in some form. We'll do a match on that. Make sure that you're not on any sort of terrorist watch list or anything like that. And that'll give you a $8,500 per day limit.

and if you want to go above and beyond that you do you know share your social security number and you can do up to twenty five thousand dollars per day uh you're going to answer a couple questions around you know what what your source of income is and how you're planning to use the digital currency and uh so so those are our limits that's our kyc very similar to to uh most of the other online exchanges in the space sure chris when you think about uh talent in the space, one of the things I'm really interested in is it seems like there are companies growing at an immense rate. You mentioned that you've got hundreds of employees. Where are you finding the talent? And also, how many of those people are coming in already being familiar with Bitcoin

and cryptocurrencies and having a kind of foundational knowledge base versus you're having to actually train them? And you're saying, hey, look, you're really good as a technician or as marketing or customer service, but we've got to teach you this other component of it. great question so the company's been around since 2014 you know throughout the years we've been the ones training people as they've come on because you know barely any people had any sort of knowledge or expertise in this space um recently you know we we have our customer support staff we just had a training session um starting last week where we brought in a group of 30 or 40 people for for our latest class over half of them already already had crypto or crypto enthusiasts

had nfts like they're coming in with with nfts as their profile pictures on our company slack so that you know they're so ahead of the curve um this generation that's crypto generation that's popped up in the last year or two um so that's really exciting to see and you know the labor market's tough generally right now i think all all companies are having a tough time finding finding people who are good quality that want to work um we're you know we're no different from that we've got we're growing fast we've got a lot of job requisitions out and so um you know getting those people to get off the couch i guess and and and work um is tough in this environment today for whatever reason but um you know the one thing we do have going for us we've got a lot

going for us. We're an amazing place to work. But the fact that we're in crypto, I think is of interest to a lot of people. People see it as the future. People want to get involved with this industry. And as one of the few crypto companies in Las Vegas, that's something really, really attractive to a lot of young people in this area. Absolutely. When you start thinking about the biggest risks or challenges for your business moving forward, what are those things that stick out in terms of things you're working to mitigate right now? Biggest risk. So I think we're all confident crypto is going to continue to grow the market for taking your fiat dollars and moving that into digital currencies. That's a great business. I think it's going to be a good

business for, for years to come risk. You know, I would say sort of like crazy regulation that might come out. Um, you know, you just see like stuff that doesn't make any sense that is in Washington. And, you know, for us, we also have to do licensing at a state by state level. And, you know, we've encountered some weird things at the state level that are, you know, scary and they come sort of out of misunderstanding, usually, of how this space works and how it operates and what the risks are. and so something going wrong there at the regulatory level is I think the biggest risk I think it's a short-term risk I think in the long run people get it right in the long run in the United States I think we really want to have the economy grow and be you know be a centerpiece of you know the future of this technology and the future of the economy so they'll get their

heads on straight at some point. It's just got to be about education and interacting with the regulators so they make smart, informed choices. Awesome. Before I let you go, I got two last questions. The first one is what is like the pitch for why people should use the CoinCloud device or kind of go find a local location for them? Easiest way to buy and sell digital currency, you know, walk up, put in your phone number, put in some cash, get it sent to your phone within a couple of minutes or less. That's the easiest way to try digital currency. You can buy as little as $1 at a kiosk, which is pretty amazing. If you try and do that at a Coinbase or a Gemini, you're going to be wiring in $1. That doesn't make any sense. You're going to pay a $30 wire fee.

It's going to take you a couple of weeks to go through onboarding and compliance. With us, you're buying a beer at your local liquor store, walk in, try it out. Like I said earlier, I find learning by doing is the best way to figure stuff out. And I think that the magic of experiencing a crypto transaction and having your own digital currency, there's nothing like it. And so if you come across a CoinCloud kiosk anywhere, I'd encourage you to just take out a dollar, five dollars and give it a try. All right. And then last thing is, where should we send people to find you on the Internet, Twitter or somewhere else? um me personally yeah yeah twitter i'm probably most active on twitter all my other accounts are locked down um i think i'm at chris underscore mccallery you are i'm gonna drop the uh the

twitter account uh in the chat right now we can uh maybe get you like two or three more followers see what we can do there anyone want to uh go follow chris on twitter you can go to that link right there you know now listen okay this is this is great i appreciate all of your perspective but I got to now check with your employee to make sure. Let's see what they think. How did you think of his performance? Great. I don't know, man.

Tough crowd, tough crowd. What did you say, Sean? Sean said great. I said great. I hear the roaring. Yeah. Listen, I appreciate you very much coming on. Obviously, you guys have built a massive business here.

You've been in Bitcoin for a very long time. So appreciate all the work that you've done there and trying to get more people onboarded into the asset, more, uh, of the education that you guys are doing. And, uh, we'll have to bring you back as you guys continue to build a bigger and bigger business. I know that, uh, that we're super excited and cheering for you. And every single person that walks in this studio sees, uh, sees the ATM here and, uh, uh, asks us, Hey, what is that? So it's a strategically placed in, uh, a place where everyone sees it. Love it. Hey, I love what you guys are doing for the space.

You know, I've been following you guys for, for many years. You know, what do you guys do in terms of all the topics you discuss and the education, um, Bitcoin and beyond, um, personal finance. You know, I think you're doing amazing things for, for the whole world. So thank you for what you guys do. And you have, and you have this coming towards you. I'm going to send you one of these. We're going to, uh, get you, uh, now here's the problem is a bunch of people who are watching this from coin cutter are going to start hitting us. I'll be like, Hey, how do I get one? I need one to wear to the party too. So hopefully you guys have a great Christmas party and we'll talk soon, my friend. All right. Thanks, Palm Boys.