The Pomp Podcast - #786 Every Country Will Mine Bitcoin Soon w/ Kevin O'Leary

Episode Date: January 18, 2022

Kevin O'Leary is a world-class entrepreneur and investor, and is also the host of the popular ABC show "Shark Tank". In this conversation, we discuss Kevin's growing crypto portfolio, regulation necessary for the Crypto space, Institutional Capital, and where he see's the industry going in 2022. ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin. Visit compassmining.io to start mining bitcoin today! ======================= Crypto is all about democratization and freedom of choice. But many companies limit their offerings to centralized trading products. The crypto companies leading the pack in terms of innovation are those that extend access to the industry's cutting-edge products and services — bridging CeFi and DeFi. If you're searching for a platform that reflects crypto's promise of a more open and less restrictive financial future, look no further than OKEx. On OKEx now you can easily switch over to the new DeFi mode, connect OKEx's bespoke Web 3.0 wallet via browser extension and start exploring opportunities at the bleeding edge of crypto. From the DeFi Dashboard, you can monitor your portfolio of self-custodied assets across a range of blockchain networks and generate passive income from yield-farming with top DeFi protocols. In the NFT Marketplace, you can participate in exclusive drops and trade nonfungible tokens without secondary market fees. Meanwhile, the GameFi section is your portal to the latest and greatest in play-to-earn and blockchain gaming. Venture to the forefront of crypto innovation and connect with OKEx DeFi today. =======================

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 kevin o'leary is a world-class entrepreneur and investor and he's also one of the judges on abc's hit show shark tank in this conversation we talk about what kevin's doing in crypto what he's excited about in 2022, and what it is going to take to unlock more institutional capital coming into this new digital frontier. I really enjoyed this conversation with Kevin, and I hope you do as well. But before we get into this episode, I want to quickly talk about our sponsors.

First up is LMAX Digital, the number one institutional crypto exchange. They offer clients the deepest pool of crypto liquidity on the planet, underscored by 100% uptime track record through volatility spikes. They leverage LMAX Group's liquidity relationships and ultra-low latency technology. LMAX Digital is the market-leading solution for institutional crypto trading and custodial services. If you've never heard of LMAX Digital, it's probably because you're not an institution. They have no retail, only institutions. They feature a central limit order book streaming spot Bitcoin, Ether, Litecoin, and Bitcoin Cash,

all paired with U.S. dollars, euro, and yen. LMAX Digital. They're secure, they're liquid, and they're trusted. Learn more at lmaxdigital.com. slash Pomp. Again, lmaxdigital.com slash Pomp. Next up is Compass Mining. Compass Mining is the world's largest marketplace for mining hardware and hosting. With Compass, everyone can mine Bitcoin. Their team makes it easy to start mining wherever you want, at home or in one of their 23 hosting facilities around the world. Through the Compass marketplace, retail miners can access mining hardware with similar prices and purchase plans as the world's largest

mining companies. Compass miners own their machines. They choose whatever mining pool they want, and they mine directly to their own wallets. Miners who don't want to host their machines can order ASICs directly to their doorstep. Simple and low-cost hosting agreements coupled with best-in-class customer service are the reasons why Compass is the simplest and most popular way to mine Bitcoin. Start mining your own Bitcoin today by visiting compassmining.io. Again, compassmining.io. Go check them out and let me know what you think. Last but not least are my friends over at OKEx. Crypto is all about democratization and freedom of choice, but many companies limit their offerings to centralized trading products.

The crypto companies leading the pack in terms of innovation are those that extend access to the industry's cutting edge products and services, bridging CeFi and DeFi. If you're searching for a platform that reflects crypto's promise of a more open and less restrictive financial future, look no further than OKEx. On OKEx now, you can easily switch over to the new DeFi mode, connect OKEx's bespoke Web3 wallet via browser extension, and start exploring opportunities at the bleeding edge of crypto. From the DeFi dashboard, you can monitor your portfolio of self-custodied assets across a range of blockchain networks and generate passive income from yield farming with top DeFi protocols. In the NFT marketplace, you can participate in

exclusive drops, and trade non-fungible tokens without secondary market fees. Meanwhile, the GameFi section is your portal to the latest and greatest in play-to-earn and blockchain gaming. Venture to the forefront of crypto innovation and connect with OKEx DeFi today. Again, go check them out at OKEx. That's where you can find OKEx DeFi. All right, let's get into this episode. 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 guests as a specific inducement to make a

particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Mr. Wonderful Kevin O'Leary, are you there? I'm here. Great to be here. Great to see you as well. Are you in Miami? I am. I'm in Miami, right on the beach. Nice. Do you have pants on? No pants. i just gotta yeah i just gotta ask around all right let's talk about uh you you had a recent trip to uh to the middle east and you talked a bunch about uh bitcoin and cryptocurrencies regulation uh infrastructure etc tell us a little bit about the trip why'd you go and kind of what was the conversation like with the middle eastern investors well the largest pension or sovereign

funds in the world are in the middle east and and i was i really wanted you know this there's policies that comes out of the region, but then there's also the opportunity to sit down and talk to the leadership there about what their intentions are in specifically Bitcoin mining. I was interested to see if there was a way to invest together because what they're contemplating in some of these countries are sovereign mining operations. And so what is that going to look like? And so what I learned, and this is because you were talking about institutional adoption. So let me tell you what I think is going to happen in the next 24, 36 months on this very topic. Once a sovereign fund decides it's going to invest in Bitcoin, it's going to want to mine it sustainably and ethically because we've got a lot of controversy started last year.

I remember at Bitcoin 2021 and the whole Elon Musk thing, we've talked about it a lot, the conversation around ESG and is mining Bitcoin going to be compliant with ESG mandates, specifically the Larry Fink letter, the largest asset manager on Earth, BlackRock. And so this is what I'm getting out of this conversation and the way I think I'm going to invest, because I've always wanted to open up my own mining operations and I'm going to probably do it in this calendar year. So number one, is it approved by the community it's set up in, both politically and by the people that live there? What's the plan to give back to that community? So let's take a Nordic country, Sweden or Norway or something like that, where a lot of these adoptions are occurring. It's happening in West Texas, too. But the whole idea is that you go to that town in West Texas and you have an agreement with the mayor and the city council. Like you're compliant with them to start off with.

You're going to give back to the grid, whatever it's going to be. You're going to mine from the stack, heat, maybe you do hydroponics, whatever it is, you get them on board. Number two, can you keep the award? When you get awarded a coin, can you keep it on the balance sheet so I as an institution can buy your equity? I don't have to buy the coin. I don't have to go to my committee and say I'm buying Bitcoin anymore. I just buy your stock. And now I own the coin as long as you make the promise to me that you're never going to sell it because now I know what's being mined ethically. I know what's being mined with the community in mind. I know the political environment there is on board. I'm not breaching any

regulations. And now I own the coin and I get exposure to the price through the equity. I tell you guys, that's what's going to happen this year. You're going to see a ton of capital go into these new projects. Some of them will use old Chinese stacks because they're all exiting the country, all that equipment. And they're going to be set up in jurisdictions just like the way I described it, with the equity being the way the institution owns exposure to Bitcoin pricing. And those are the deals I'm going to invest in. So when you think about that, are there places in the Middle East that you think this will happen? Or is it too hot there? Is the political climate not ready for it? Like, how do you think of the Middle East fitting into

that? Because you mentioned the Nordic countries, you mentioned places like West Texas, is the Middle East potentially a place they got a lot of oil, you got a lot of power production going on there? Like, how do they think about it? Well, they also have nuclear power there, too. They have excessive electricity available. It's about the cooling. You're right about that. There may be a way, and this is being explored by a couple of ventures right now, to build the facilities way underground, underneath the sand, like way down. So the cooling becomes far more efficient. These are really, really large stacks. We're talking about big, close to billion dollar facilities. I think in this, the way to start thinking about this,

And I've come to the conclusion is different jurisdictions. Let's let's take if you're an investor like me, you've got to find jurisdictions where they're compliant with the local regulator. Now, the most advanced in my mind right now is Canada. Canada was the first to allow you to do an ETF with Bitcoin as the underlying asset. Then they opened it up for Ethereum. Now they have multiple ETFs in that jurisdiction that people from all around the world are investing in. compliant with the regulator. They just licensed the very first market crypto exchange, the very first in Canada. I know that because a company I'm involved in called WonderFi bought it last week for about $160 million. It's the first of its kind. This allows institutions or individuals,

right now it's focused on Ethereum and on Bitcoin, but it's going to expand. The mandate will expand. And so it allows for people to set up accounts and actually do price discovery on an exchange. So we're very excited about that. So it's got me thinking, where else is this going to happen? What other jurisdictions are going to open this up and licenses are going to be granted? Eastern Europe, Nordic countries, Middle East regions. So I'm on an airplane all the time now. I'm going to meet with regulators saying, look, this is what we did in Canada. Can we do this here? And when they say yes, I'll invest there, too. I want to be in the exchange business.

Why? Because I'm agnostic to price. The more volatility there is, the better it is for me. So if I make eight or 10 or 12 basis points every time you're trading, I'm in a great place. It's the picks and shovels of the future of Bitcoin and digital currencies and payment systems. I want to be part of the exchange.

All right. Before we talk about the exchange, I have one last question about the mining. If I tweeted and said, Kevin O'Leary is considering investing in an underground desert Bitcoin mining facility, would that be like an accurate statement? Not yet. Not yet. Not yet. Because the technology has not been proven. Got it. It's being conceptualized. But the reason you don't see a lot of stacks in Middle Eastern or desert countries is what you pointed out at the beginning, Paul. The heating costs are brutal.

Yeah. I mean, the cooling costs are insanely brutal. So it's not time yet because it hasn't been proven. But each year, the technology advances. If there is a cooling system that makes sense, they're going to discover it. Because most sovereigns want to mine Bitcoin on their own land, where they have control of it, where they can do it ethically and according to the regulator's rules. Most people would want to do that.

Now, West Texas and the governor in Texas, as you well know, has embraced crypto, specifically Bitcoin. And there is a ton of capital going to West Texas right now, right down to the town level. And so there's multiple projects there. And I think you're going to see a lot of capital. And there's a big initiative on right now to find an American manufacturer for Stacks so we don't have to buy anything from China for obvious reasons. China's got itself a little hot water here and there, as you know. But we don't have that yet. So there's a lot to have happen. I think this will be discussed all through 2022. This is where the puck is going. So I've never told you this story before, but I went to Kuwait, I think it was in 2018, maybe. And while I was there, I was at an event, very well put together. And there was both foreigners that were visiting for the event and also Kuwaitis. And one of them said to me, hey, do you want to see a Kuwait Bitcoin mine? And I was like, you got a Bitcoin mine? And he's like, yeah. And so we went to dinner. And then afterwards, we went to this Bitcoin mine. And it literally was in a warehouse basement.

so like we went to this warehouse it was kind of you know you're like all right where are we and then they brought me down to the basement and they showed it to me and it wasn't a huge operation but it was it was big enough and uh i remember asking him why are you in the basement he said well you know one we might not want everyone to know that we're doing this here but also two is there's much more uh kind of cooling uh capabilities down here so not quite underground in the desert you know type thing and not quite the skill you're talking about uh but you know years ago there was people who kind of as an individual or a small business we're trying to figure this out. So it's cool to kind of see that it's evolved to the point where

now you're talking about large billion dollar facilities still trying to conceptualize this and put it into effect. Now tell me about the WonderFi deal. So just so everyone understands this, my understanding is that the Canadian regulators went ahead and they said, okay, we are going to actually approve a regulated exchange to trade in Canada, in the Canadian markets and WonderFi and you decided that you were going to be very opportunistic here. And you went ahead and bought that license so that now you own the only regulate uh regulatorily approved publicly traded canadian crypto exchange is that fair it's not the only one there's two licenses in canada but this the bit by one the history of the bit by deal is wonderfi itself had already

made a bet on bit by became an investor in a private round and so they they already were exposed to it but it was before the license was granted there was a lot of speculation that they would be granted that license. It wasn't done yet, but you're taking a chance and you're betting on it. Great management team, fantastic guys running it, really knew what they were doing. And it amassed 375,000 accounts because they were just a dealer broker at that time, like any other. But the exchange, the market exchange license was unique and new and the first of its kind. And so we already knew the management. I was really attracted to the model, the whole idea of having an exchange, Because if you look around the world, NASDAQ, New York Stock Exchange, the London Stock Exchange, the Zurich Board, all of these places are where you discover price.

And as a result, you are the infrastructure of the liquidity. And so I was really attracted to that idea that they would somehow, you know, get together. And they did. And so as an investor, I'm just thrilled. I'm very happy about it. And now, as you remember, the WonderFi mandate was to work in the decentralized space. But what's going on here with Bitbuy is a centralized exchange with the accounts. So they've combined both. And there's a narrative coming in to the institutional investor. Think this through, Paul.

When I talk to institutional investors about investing in crypto infrastructure anywhere, when you acquire a customer, I don't care if you're Coinbase, if you're WonderFi, if you're a Bitbuy, you've spent money to acquire that customer. And if you don't have a full suite of services, both centralized and decentralized, there's a high probability that if they want to go put their NFT on a decentralized wallet, they'll drift out of your sphere and go do that on their own because you didn't provide it. So these new investments, these new companies that are emerging are trying to figure out, OK, if I acquire a customer, how broad a service base can I create? Can I be centralized, decentralized? Can I have brokerage accounts? Can I service them in NFTs? Can I do stable coins? Can I stake those stable coins for them? I'm of the opinion now as an investor, I want managers that are going to bring a really broad sweep of service and products to keep that customer in their ecosphere. This is no different than what Apple thought through

decades ago. And I think there's going to be some companies, and I wonder if I could be one of them, that emerge with a really large platter of services, and not just in one geography. I've talked to the management there and told them, get on a plane, do what I do. Go meet other regulators. Go find out where you can take this model to other jurisdictions. And I think that's going to happen because Canada is so advanced. A lot of the rules that they've set up there have worked. And I think they're a great model for other countries.

And so I think Eastern European countries and Nordic countries are potentially great places to set up shop, buy exchange licenses, bring the technology over that Wundify has. That's my investment thesis. and I've in fact increased my position there since we last talked. I've invested more. All right. And so when you think about how this is all playing out, the last time we talked, you had said that you were spending more time, I think in partnership with Circle, if I remember correctly, with the stable coin yields. And you were also looking at some of the decentralized yields that you could generate. Walk us through kind of the yield generation,

how you're looking at your portfolio today. Are you still doing both centralized and decentralized? What does that look like? Right now, I'm primarily centralized on my staking and lending. And so I'm using two platforms and soon will be a third with Bitbuy. FTX is my largest platform. Obviously, I'm an investor at FTX and a paid spokesperson. I have to disclose that. I do a lot of staking on there. Pretty well any asset, I'm constantly putting it out and generating yield there. Specifically to USDC, though, I have worked with Circle. Circle just updated their platform with a new treasury feature. The biggest problem we've got, I got to tell you, this is still a nightmare for institutions and it's a nightmare for me.

Let's just take staking for a second. All right. So I'm regulated. I'm a regulated entity. I have so many investments in other standardized financial services companies and indexing and everything else. So I'm regulated. I have an auditor, an external auditor. They mark to market my internal compliance marks to market my position every day and every stock and bond I have. It's checked by compliance. And then it goes out to the statement that the auditor signs. And then we file our compliance reports to whichever jurisdiction we're in. So think about staking. What a nightmare. How do you mark to market that at 4.05? There's no such thing as a, the market doesn't stop at four in the afternoon in crypto world. It's just 24 seven.

So getting this thing approved just for the staking, because I'm writing contracts all the time, 30, 60, 90 days, whatever it is, just getting the compliance guys head around what we're doing took six months. I've told you this before. And what we needed was an audit trail. And Circle just added that with the Treasury tab. You can go back and see every single transaction on a centralized platform, when it happened, when it closed, what interest you made.

So now the compliance guys are saying, oh, this looks like something I'm used to. I get it. I'm more comfortable now because they were treating USDC as an equity, as a stock, because we haven't had the regulator approve. I mean, this is another problem, right? What is USDC? It's not an equity to me. It's a form.

It's a payment system. It's software. But we don't have that ruling yet. And that's what I hope the regulator does this year is rule on stablecoin. What do you think the ideal kind of framework or sandbox for the stable coins are? Do they basically just say this is a currency and treat it like a currency? Do you think it's some sort of regulated asset? How do you think of like the ideal scenario? I would like them to rule it. This is what I personally would like. This would solve my problem. And I think a lot of other institutions would agree with this. Let's take Circle. Turn it into a bank, FDIC. Turn it into a bank and let my compliance people say, oh, that's a currency.

It's a currency. And it's regulated currency. And it's backed up by X amount of assets, just like every other bank has to comply with the amount of leverage they put on their balance sheet. And then all of a sudden, I wouldn't be bound by the fact that I have to treat it like an equity. So I can't have more than 5% of it in a mandate. The typical mandate is 20% in any one sector, 5% in any one name. Very few institutions, you mentioned Fidelity earlier, any of those funds that they're managing, you're not going to find a whole lot of the funds that are holding a position up to 20% in one name, they're kind of maxed out in the 5%, 6% range. But when you're dealing with cash, or a currency, a Swiss franc, or a euro, or a British pound, there's no limits. You're

basically, you can have 30% in cash, 40% in cash, 50% in cash. If we could get stable coins regulated that way, we could now keep our liquidity, in my case, I'd like it to be USDC, so that I could be constantly rolling it. Because think of the problem I've got. I've got cash. Inflation, 7%. I'm getting 20 basis points on US dollars. I'm getting taxed at 6.8% right now. There's nothing I can do about it. I'm losing 6.8% of value. The way to stop that is stake out my USDC at 6% and 7%. At least I'm keeping intact with inflation. But we need the ruling. We've got to have that done. And for my compliance people, let me do that. Because I can't have more than 5% USDC right now, they're treating it like a stock. Yeah, it's incredible to think about how is the

macro economy playing into all of this in terms of you mentioned inflation. Obviously, there's a lot of talk right now about the Fed interest rates and kind of tapering. What's your general thought process on what happens there with with the Fed kind of decisions in 2022? I think Bitcoin and gold are the two assets that institutions are eyeing for a hedge against inflation. And so many of the institutions cannot hold Bitcoin. So they're exploring owning the equity of the miners and they run into the ESG problem. So and, you know, one of the discussions going on these days about the ESG, if you're buying carbon credits to offset, which some are doing, some of the big public miners, who's auditing that book? In other words, is there somebody that can show to the ESG

committee of an institution that there really is a true offset? The way to avoid that is what we talked about earlier, simply get a miner that is not that is zero emissions from the beginning and that is mining and keeping the coin on their sheet. You just own the stock. I think that's where we're going. But, you know, inflation is scary because it's we did something in this country over the last 26 months that's never been done before. We basically printed three trillion dollars. I don't care what you want to call the program, you know, the relief program or the PPP or whatever it was, we got out the machine and we printed $3 trillion. Never been done in any country ever before. Never been done here ever before. And then we thought to ourselves,

we don't have to worry about inflation. Are you kidding? Like, look what happened. It spiked up to 7% in a matter of weeks. Of course, it's going to do that. And now we have to live with that. And the idea of another $3 trillion is suicide. I mean, that's ludicrous. We can't do that. we can't the build back better is dead i mean that you can't put that out in the market now it would it would destroy the people that's trying to help you be you'd have right now we have on on protein and meat 24 inflation i mean it's it's crazy and so that's gasoline five bucks a gallon in san diego like that's people are getting pissed that's what's happening and they're going to take it out on the polls yeah one of the things that uh i don't have an answer yet

to, but seems to be happening, is there is a political appetite, obviously, for some tapering. Let's get this inflation down. Let's do some things to to maybe have people forget, you know, how bad the economic situation is going into election season. But at the same time, inflation is still seven percent. You know, gasoline is up 50 percent. Food's up, you know, all these different things, even food at home or out of the home is up

six percent each. This is a really dire situation, according to the official numbers. We're not even talking about the unofficial numbers. When you think of that, is there a world where, regardless of what the political will is, that the central banks could be talking about tapering, could be talking about raising rates, and actually back off of that, and their actions aren't as severe as the language? Or do you expect them to follow through with what they're actually saying in terms of kind of taking a tough stance against some of this stuff?

It's a great question. That's why we have volatility back in the equity markets, because there are some pundits out there talking about six hikes in a row and some saying two so somewhere between those numbers you know is reality but you've also got this this this new pandemic whatever you want to call this this is kind of a different one than we had 12 months ago but wow there's a ton of cases i mean it's it's really uh sweeping through here in florida we have extraordinary numbers uh they've shut down the province of ontario and quebec virtually shut shut it down because they've got such a raging pandemic going through there. Switzerland in the same boat. I'm just talking

with my dad over there. I wanted to go and visit him. They've got over 30,000 cases a day. That's close to what it was at the height of the original pandemic. So there's issues that I think the Fed is looking at saying, I've got to balance this against what's really going on and trying to figure out how fast does this latest round of pandemic burn itself out? I would like to think by July of this year, we're through this thing. And the economy is going to come roaring back. What I find so interesting, and this is probably a great way to look at it. In Q4, when analysts started printing, and Q4 was almost 6% GDP growth, extraordinary, extraordinary GDP growth. But they pulled back assumptions for Q1 down to just over three. They basically cut it in half.

I think this quarter that we're in right now, every index I've got, including private companies I've invested in, so I see their tariff sheets on sales, the economy is on fire. It's just booming. I bet you we're going to print north of 5% in this quarter. It's going to be much better than people thought. This is my own take on it. And it's going to really buoy the equity markets back up. Because when you talk to 7% inflation, you do not want to be in fixed income.

You want to be in something that at least keeps pace with inflation. That's equity. So I think it's going to be a pretty good quarter, but it also may mean that the Fed is hiking. But why are they hiking? They're hiking because we've got such a strong economy. And that generally does not offset the pace forward on constructive ownership of equities. The first few rate hikes generally do not destroy a bull market. And we are in a bull market. Yeah, I agree. My brothers have questions here in a second. But the other question I want to ask you is, I've seen you go on CNBC a few times and get in some verbal tussles. Back in the day, you and I used to have some verbal tussles which I just want to remind people of but uh recently

you've been asked about the vaccine mandates and kind of choice versus mandates etc like what's your general take now that we're in kind of as you said like a new version of this whole thing and like how do you think business owners specifically should be thinking about this obviously with Shark Tank there's a lot of small business owners that watch and they like the show etc when you talk to those business owners like how are they balancing the health stuff versus running their businesses, supply chain, like just a very complex environment right now. So how do you think about that?

How do you talk to those companies? So I have been talking to those companies because I've wanted to get some tonality of their policy and start applying it to ours in the case where we're a control shareholder. I want to respect people's rights to do what they wish with their own personal health. At the same time,

I want to respect the employees that work together. And so the way I think it should shake out on private business, you know, this just got tested in the Supreme Court and got rejected. The government shouldn't be able to do a mandate to a private company and tell them what to do. The private company should be able to decide their own policy. And indeed, that's what's happening. There are many companies that have made the decision at the board level that if you're going to work together in an office, in an airplane,

in a factory, in a manufacturing facility, whatever, you have to be vaccinated. Now, you don't have to be vaccinated, but you're not going to have a job. So you're going to have to make that decision individually. And some people are going to make the decision. They're not going to get vaccinated. They're going to go find and try and find a job where they can work remotely in perpetuity or they, you know, a company that doesn't have a policy like that. But if you go down the S&P 500 slowly, but surely, since we last talk, you've seen many large entities put in place, including Citibank recently, that either giving people time to get their vaccines, paying for the vaccines, giving them time off to go get their vaccines, supporting them any way

they can. But if they don't choose to get vaccinated, they lose their job. And I'm OK with that. I'm OK with it. It still gives you the personal right to do what you wish. But it shows respect to your fellow worker that you don't want to infect them, because really, we're all in this thing together. It's been said countless times and we are. But, you know, if you want if you want to get sick right now, you just go in a room with 20 people. Somebody's going to have COVID and you're going to get sick. And if you're vaccinated, you're going to survive. If you're not, the outcome's unknown. Joe, John, what questions you guys got? I'm going to pull us a little bit closer back to the middle of, uh, of discussing digital assets.

Kevin, they don't like that. I like talking about, you know, important topics. They like to talk about money. I'm just saying he's here for a reason. We're going to let him, uh, we're going to bring him right back in. Go ahead. Um, let's talk about some of the investments you're making. I know that you've been public about kind of the specific assets that you're investing in, and it's a pretty diversified portfolio. You've got Bitcoin, Ethereum, Solana, Polygon, and others. I want to talk about just quickly, if you can run through your general framework of how you determine where you're going to allocate capital. So I have come to the conclusion on all things digital, the best way to look at it, and I've said this several times, Bitcoin is not a coin,

it's software. Ethereum is not a blockchain, it's software. It's all software. HBAR, software. And so what I do is I say to myself, I've seen this movie before. I was an investor in software engineers 22 years ago at the learning company when we made educational software. So the way I used to do it then is the way I'm doing it now. I'm a very lucky guy. I can make a phone call and it always gets returned. That's the whole Shark Tank thing.

And I get all that. But if I want to invest in Polygon, I want to meet the engineering team, which I did in Dubai. I called them up, met them at the team. heard their vision of what they're doing, looked at the economic reality of the outcome, the potential of it. So first is team. I want to meet the team. If I check the box on team, smart guys, good engineers, good strategy, good group, I'm interested. Here's the test, the second test. What economic value are they creating? In the case of Polygon,

let's stay on that Polygon for a second. Aggregating transactions to reduce gas fees on ETH is a smart idea. There's a reason you would do that because you have an economic reason to pursue that. You save money. Transaction fees are less. So I think the potential of that is large. HBAR, okay, great team, good engineers. What's the economic premise that would keep that growing? Well, Boeing wants a quasi-centralized, decentralized platform. They want the best of both worlds. HBAR can deliver that. Check the box there. Buy into that one too. Look what's going on with, you know, Solana. I mean, they're trying to solve problems a different way too. Speed everything up. Check the box. Who's working on that? Sam Bankman-Freed and his team. Why wouldn't

you bet that horse? So it's all about getting positions in all of these, you know, software platforms. That's what they are. They're software platforms. So I say to institutions, you criticize me for investing in Bitcoin. You own a big position in Microsoft. You own a 5% weighting in Yahoo. What is that? That's software. Why don't you do the same thing in Bitcoin? Why don't you do the same thing in Ethereum? Why aren't you in HBAR? Why aren't you in Polygon? Why aren't you in Serum? Why aren't you in Helium? It's all software. And so with that attitude on, it's hard to say, I'll only invest in publicly traded software companies. One day, these, to me, and I really believe this. One day, crypto and all these software platforms are going to be the 12th

sector of the S&P. And I'm just taking the bet now that we're on our way there. And I'm taking and staking my bets now. Broad portfolio. Ethereum is my biggest position right now. Bitcoin's had a bit of a correction. I get it. But there's been volatility. But now, to offset that volatility, I own an exchange. So I want to own more exchanges. I look at it it's all software john kevin yeah thanks for coming on you talk about um this industry being the 12th sector of the smp and recently drone palace said that their report on crypto and cbdc's are coming is coming out soon what are your thoughts on the impact that that report can have and what do you think that report will contain i'm encouraged by that report because

it shows that they're inching forward and they're trying to do it right i my opinion about the regulator is they understand the tremendous potential of this technology, the potential of streamlined payment systems, the potential of productivity that blockchain has in smart contracts and all the case uses for it. They get it. But at the same time, they're well aware that when they rule, it will be the global standard. The Chinese aren't going to do this. No one's going to follow them. They're going to follow the SEC. They're going to follow the US regulator. So they want to get it right. The first place I would like them to get it right would be on the baseline stablecoin as a payment system. I would very, very much like to be able to transact globally, pick a coin. My preference is USDC, but pick one, regulate it and let me as an investor, along with hundreds of millions of other investors, use it as a form of payment.

and stability. It would be fantastic if it was backed by the US dollar. They know that. They know that. It would just be so much more efficient and so less expensive if I could just transact, maintain a centralized wallet, and just be able to imagine if I could buy a Swiss stock with a stable coin instead of having to go US dollar into Swiss franc, buy the security, then back into Swiss franc, back in the US dollar. You know how screwed I get doing that, how much friction there is and how much I lose? It's insane. Same with Euro stocks, same with British pounds, same with Canadian dollars. I mean, I invest in all these jurisdictions and I have to deal with that. And so it's sort of, that's where I think we want to go first.

Once they rule on that, everybody will say, okay, we're moving in that direction. It'll be very constructive for the asset allocation you talked about at the beginning of the hour on institutional follow through into crypto. There's no question you're right. There's a lot of demand. They just need the regulator on board. Kevin, what's interesting about that idea is basically the US dollar, if it does get kind of the blessing, right? I think a lot about like the regulators are essentially the Pope at this point, right? They're just going to give the blessing to the stable coins, especially things like USDC, et cetera. When that happens, there's not a lot of reason for people to go back

into the antiquated technologies of the same currency. So we used to have physical dollars. Now we have, let's call it an electronic dollar, which is an essentialized database with kind of long settlement times to eventually you just move to the digital version. And so monetary policy doesn't change, just a new technology upgrade.

If that was to happen, do you think that the other currencies around the world would suffer? And what I mean by that is if you have US dollars, rather than be forced to go into Swiss francs before you go and buy a stock, now you're just going to go straight from usdc into the stock do some of these weaker currencies and maybe not in developed nations especially in like developing countries they start to suffer

at the hands of the more dominant fiat currencies or how do you think about that yeah the way i look at it is there's going to be um four or five currencies that will be digitized so there will be a digital version of the swiss franc there will be a digital version of the euro there will be a digital version of the british pound there'll be a digital version of the canadian dollar there'll be a digital version of the US dollar. It may be a stable coin in that case. But the reason I think that happens is you allow the economies to compete with each other on productivity and interest rates so that if I'm going to go buy something in Switzerland, there'll be a spot exchange price from my USDC or whatever the stable coin is into the stable version of the Swiss

franc. And I may elect to keep a portfolio, as I do today, of multiple currencies because basically I want to own Swiss francs. That country is very, very efficient. It's a very good currency. They don't have a lot of debt. So how do I own the digital version of that? Because right now, if you want to own native Swiss francs, you practically can't do it because if you want to open an account in Switzerland as an American citizen, you can't. You can't do it. They won't open it for you. I think all of this political border stuff goes away with digitization of the currency. So I'm very optimistic for that. Now, the reason you'd only have four or five of them, Chinese yuan, yeah, that's going to be digital at some point. Would I own a Chinese yuan? Probably

not if the government's watching my wallet address, and it'll be an unfavored currency for that reason. But I've happily owned Swiss francs, happily owned the digital American dollar. it's going to play itself out. But you're saying, if it happens, 100% it's going to happen. It's just when. If we just digitize our dollar, or we've got a stable dollar, like a bank, if Circle became a bank, I don't need anything else. I'll just own that, and I'll piece it off digitally whenever I need to buy some other kind of asset. And I'll be staking it at whatever the current rate is i'll be rolling my contracts and just like in the old days when you could make five six percent interest which we don't get anymore and so i think there's a really big use case and

why there's so much pressure on the regulator to rule on this thing and you guys are dead right the efficiency brought forward is just insane it's so powerful an economic reason to pursue this agreed last question then we'll let you get back to uh miami beach you know get a little tan going because it's 70 something degrees here for anyone who's stuck in New York at 12 degree weather is when you think about your portfolio, I think previously you were kind of two, three, four percent. You had aspirations, but not quite at I think it was like eight percent, nine percent, somewhere in that range is what you were kind of targeting. And eventually you said that you could see going up to like 20 percent in in a single sector. But that would take some time to get

there where are you today and how have your thoughts around uh kind of portfolio allocation percentages how has that changed since last time we talked yeah so um at year end last year we thought we'd be at seven where we were at 10.7 percent in the operating company portfolio and today i just this morning i got off with our our compliance guys um because of our recent investments additional investments in some of the equities that we bought. I increased my position in Hold, Immutable Holdings, the Jordan Freed company that owns NFT.com. I bought more of that.

And I also bought a lot more on the deal that Wunderfi did, buying blockchain or buying BipBuy. We're now today at 16.5%. And so we're on our way to 20 and it happened really, really fast. And I'm comfortable with it. It's it's more volatile than our traditional book, because when you look at what else we own, it's commercial real estate, it's large cap S&P companies, dividend payers, a lot of them. This stuff is volatile, but the underlying potential and the growth of it. And I know that a lot of institutions are going through the the

angst i'm having i can't find better opportunities than these companies like they are really this is like investing in the earliest days of the internet the earliest days because we're in the first inning of this stuff and so you you got you have to find your opportunities where they are and and you know probably by the end of this quarter i'm going to be at 20 that's what's happening here so i think i've said this to you before uh on the show but if not in 2018 you forbid me it was garbage the whole nine yards i knew before the day was over you're gonna bring that up again hold on hold on this is a compliment though but from there to essentially let's call it three years later or less so within three years from that perspective which actually i will uh admit

It was a fair perspective for most people to have at the time because they had just watched Bitcoin go from $20,000 fall to $3,000, et cetera. To now have 16% of your portfolio in the industry and not only have what I'll call like true skin in the game and in a growing percentage, but to be able to talk about it with such detail, nuance, the understanding of the regulatory side, the technology, et cetera. I got to say kudos, man. I'm very impressed. I think that you not only understand what's happening here, but, uh, you're kind of not sitting back, letting it, you know, like pass by you, you're, you're jumping into it. And I think there's a lot of people who you would consider your peers that they may say,

okay, yeah, he's probably not wrong, but like, let's figure out what to do. Let's go read some white papers, whatever. And they're going to take another two years before they jump in and they're just going to miss a huge piece of this. So it's not only the, the willingness to change your mind and all that, but it's also the, the courage and conviction to kind of act in a way that 16%, like that's nothing to sneeze your nose at, especially cause you have these like weird rules,

like no more than 20% in a single sector, no more than 5% in a single stock. It's, you know, it's like almost like I know all your talking points on that stuff. Yeah, no, you're right. But that is the way the mandates work out there globally and sovereign and everything else, you know, it's sort of, one of the challenges I've got is I have to include my, my, my holdings and my contracts on usdc as basically an equity as i said earlier which to me is

frustrating um because i would i would you know i can't get past 20 but it should be treated like what it is it's a it's a currency where there are no rules like that but we're not there yet and it's it's a push i i will say one thing in closing watch what happens this year in the amount of capital that comes into that new mining model. We're going to solve this ESG problem in 2022. You're going to see a lot of institutional capital come into this idea of mining within a community, supporting a community, doing an ESG compliant, ethically compliant, all that stuff. And they'll own the equity just like they own any other equity, but they'll be exposed to the vol of Bitcoin. That's how they're going to do it. Yeah. I think that people

are underestimating how violently institutional capital moves when it moves. We saw this with Bitcoin in 2020 into 2021. There was really a lot of the price was driven by the arbitrage for the Grayscale Bitcoin Trust. I mean, there was just massive capital inflows there. And because that capital couldn't be redeemed, there ended up being this huge price increase. At one point, I think Grayscale was buying like 150% of all Bitcoin being mined every day, right? So it was just they were just sucking liquidity out of the market and that was just institutional capital and it frankly wasn't the big boys it was hedge funds and family offices etc i do think that once the really really large firms whether it's the sovereign wealths the you know large trillion

dollar asset managers etc when they start to allocate you know i mean if you really think about it right now if a trillion dollar asset manager said we're gonna go put 100 allocation of bitcoin they could buy from a price concept all the bitcoin that is liquid traded on the market Now, of course, they can't actually get it because someone's going to sell it to them, but they have enough money to buy the entire market cap. And so I think people just don't understand how much money these people have and how quickly they move. I agree with your analysis of what happened there. That was not healthy for the market. I prefer more transparency, more liquidity.

And I think we're going to get it through massive amounts of capital going into the equity of miners. That's the way it's going to first manifest itself. And that'll have much more liquidity, much more transparency, much more disclosure, and it'll be compliant. I think it's a trade of 2022. I think you're going to see a bunch of deals announced, a lot of them in West Texas. I'm aware of a lot of these deals, and I'm certainly looking at them, and I'm planning on investing in some of them so I can make claim to owning direct ESG compliant coin.

And that's what every other institution wants to do. Anyways, listen, I've really enjoyed it. Another great session. Let's do it again soon. All right. I appreciate you very much. Where do you want us to send people? You know, follow me on social.

It's Kevin O'Leary TV on any platform. I talk a lot about our projects on Instagram, Twitter, LinkedIn, you know, Facebook. It's a communication with, you know, my followers. And I love to hear their opinions about this stuff. People are getting very interested in this asset class at every age group. I mean, it's the future. It's the future of our economy. That's how you started this whole show.

You're right. That's what it is. It's true. the official channel of kevin o'leary dropping cold hard truths i like that that's amazing all right thank you so much i appreciate we'll do it again soon take care bye-bye thanks