The Pomp Podcast - #941 Russell Starr On Bringing Crypto To The Public Markets

Starting point is 00:00:00 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. Russell Starr is the chairman and CEO of DeFi Technologies. In this conversation, we talk about DeFi, about regulation, about the European crypto market, institutional investors, and why this company is so focused at the intersection of public markets and crypto. I really enjoyed this conversation with Russell and I hope you guys enjoy it as well. Before we get into this episode though, I first want to talk about our sponsors. This episode is brought to you by OKCoin. They are my favorite place to buy, trade, and stake crypto. They're the fastest growing

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Starting point is 00:03:29 looking to enable financing for your customers or a sas dtc or any business that has recurring revenue. Sign up at pipe.com slash Pomp. Again, pipe.com slash Pomp to start trading today. All right, let's get in this episode. I hope you guys enjoyed 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. All right, we've got Russell joining us from

Starting point is 00:04:11 DeFi Technologies. Russell, how are you? I'm good, man. How are you guys? Let's start with kind of your understanding of the current economic environment. It feels like things got super, super overheated. Inflation 8.5% officially in the United States. Many other places around the world high inflation uh they're starting to raise interest rates there's been compression of tech multiples and a bunch of other kind of ramifications of that but we've also seen commodity prices explode based on russia ukraine supply chain disruptions etc like what's your general read as to where we are right now oh man uh love this topic uh honestly inflation is probably closer to 20 in the u.s um kind of the biggest joke and when you talk about

Starting point is 00:04:55 free speech and what's going on. The Fed is probably the biggest arbiter of unfree speech that I've ever seen. They've taken housing prices out of inflation. They've taken energy out of inflation. And if you were to look back at the way they measured inflation in 1985, 1995, you'd be closer to 20%. And it shouldn't really come as a surprise to anyone when you're literally printing money like it's going out of style. The one thing that just continues to perplex me, and I love your guys' opinion on this, why is it that they view Bitcoin as a tech stock or a tech play? Why is it trading with the NASDAQ and not arguably exploding when in reality, every single American, every single US citizen should be more worried about the fact that next year, every dollar they

Starting point is 00:05:49 earned is going to be worth 20% less than it was today. And you could actually apply that across Web 3.0. And it's, I don't know, it's one of the biggest hoaxes. Back to your commentary on what's going on with Twitter. I'd love to see some more people coming out and basically just calling a spade a spade and saying, look, this is black and white. You print trillions of dollars. The definition of inflation is printing money and the U S has done it, uh, uh, better. If you consider destroying the value of the U S dollar better than any other country in the world, it seems right now. Yeah, it is. Uh, it is pretty crazy. Uh, the CDC changed the definition of vaccine on their website. Uh, and so ultimately I think that everything's up for free game now, right? Like

Starting point is 00:06:36 what is inflation? Is it printing money? Is it something else? Like all of these definitions now. I think they're all aware that they can change this stuff and they are willing to change it based on the environment. One other thing on this topic that I think is interesting is what's your view on the Federal Reserve potentially increasing their inflation target? So historically, it's been 2%. Do you think there's a world where they could increase it from 2% to 3% or, you know, again, kind of, I don't want to say manipulate because it has kind of a negative connotation, but they basically just throw their hands up and say, look, we can no longer that low 2%, we now have to increase it to 3% or something like that? Yeah, no. Well, look, the reality is

Starting point is 00:07:12 they're the most powerful financial institution in the world, right? And when you can change a narrative at will and change a mathematical formula that's been in existence for decades at will, I think they actually just changed how they calculate inflation again in February to even minimize it. They've effectively boxed themselves into a corner. So you're going to see the Fed probably do exactly what you just said, increase that target and then create an entire narrative that will try to convince citizens in the US that this is actually a good thing for them. And then the other thing I think they're going to do, I mean, look, the math is there, they're the single biggest debtor and probably stand to lose the most with higher

Starting point is 00:08:03 interest rates. The question I always ask myself is, if you're going to raise interest rates, you're going to slow down the economy. The economy kind of looks like it's already in a recession in the US, despite what they try to suggest otherwise. You put yourself into a really complicated corner where you've got a regulatory environment that's trying to hinder the adoption of the coolest new ecosystem, maybe the most valuable new ecosystem the world's ever seen outside of the internet with Web 3.0, which could be a solution for the US to actually get themselves out of the box that the Fed has put themselves in. Because as they raise those interest rates, it's going to be harder to buy a house.

Starting point is 00:08:49 Everything's going to become more expensive. So you're going to see the economy slow down. And it's already an economy that's struggling, in my opinion. And it's an educated opinion. Ironically, I went to the same university as Elon, although he was only there for two years and went on to bigger and better things, of course. But, yeah, no, they'll change that that band. They'll try to convince us that it's a good thing. And then they'll they'll increase interest rates until they probably destroy the U.S. consumer. And then I think you're probably into another decade or multi-decade period of, again, loose interest rates where they just try to inflate themselves out of this debt cycle that they've created. Yeah, it's super interesting.

Starting point is 00:09:35 Obviously, I'm a shareholder in DeFi Technologies through a little advising that I've been doing on some deal flow stuff. But I understand this because you guys have educated me on it, but I think that it'd be helpful for the audience if you could explain. You guys recently went through an uplisting to OTC, what is it, QB, right? I think it is the way to describe it. Explain how this stuff works, right? So like most people, including myself, they don't play on the public markets that much. And so they have no clue how moving between stock exchanges works, et cetera. Like how does an uplisting work and why is that important or why do people seek to do this?

Starting point is 00:10:12 Well, look, you and I have had this conversation before. And in my opinion, unless we can get more people exposure to Web 3.0 on traditional equity markets, it's going to be really, really tough to grow this industry because so many people just are terrified of opening an account on Frax, Kraken or any of the other alt exchanges. And then, of course, you look at institutions who would typically invest in this space. Unless you're private equity or a hedge fund, you're locked into only investing on traditional equity markets. So originally in the U.S., we were stuck on what's called the pink sheets, which most people in the U.S. can't invest in. And you guys would be surprised at the restrictions that banks in the U.S. force retail and institutional clients into. So literally every day, every week, I field hundreds of calls from U.S. citizens who have seen shows like yours, seen some of my podcasts, whatever, saying, look, man, we want to buy your stock, but we're not allowed to because you're on the pink sheets. And so we graduated. It took honestly, it took six, seven months because crypto is now a bad word in the US. DeFi is an even worse word in the US. And so we went through, I call it, I mean, I listen to you guys swear, so I'll call it what I call it. It was a forensic colonoscopy. It was one of the worst experiences of my life, just trying to get onto a better exchange, which is the QB, so that more people in the US would be allowed to get exposure to our stock. because we're one of the only, in fact, we're the only publicly listed company that gives you a diversified exposure to Web 3.0. You know, you can go to Hut or Hive or Marathon and get exposure

Starting point is 00:12:05 to Bitcoin or Ethereum, but there's very, very few public companies that give you exposure to Solana, Terraluna, Avalanche, Polkadot, and that's what we do. So getting on that better exchange, and just to answer your question more directly, Anthony, the pink sheets are honestly viewed as just a mugs game. Everybody's messing around with it. It's an exchange that no one really is permitted in the US to participate in. You then go to the QB, which is what we've done. And we have what's called DTC settlement, which means you can settle in US dollars rather than having to convert Canadian and US all the time. And then there's one step higher before you go of the NASDAQ called the QX, which we'll endeavor to do as quickly as possible. But if you just go

Starting point is 00:12:54 back and look at our filings, you'll see that we actually got approved to be listed on the NASDAQ and we got DTC. And then last minute, out of the blue, the SEC intervened and stopped us from uplisting onto the NASDAQ. And it's purely because the name of our company is DeFi, because everything else we do is cleared by a prospectus. Everybody's KYC. Everything that the US is trying to get this industry to move towards, we kind of do already. But when you're stuck on these lower exchanges, you're prohibiting more people from being able to participate and buy that equity. I hope that answers the question. That makes a ton of sense. And so when we then start to think about you guys uplisting you obviously get access capital markets all that

Starting point is 00:13:44 you started to take uh some stakes in some interesting businesses one of them is this uh uh swiss digital asset bank known as seba seba seba yeah what is going on there why are you guys doing this so look the i mean you guys are all believers we're we're talking to the converted here, but a lot of people I'm not sure have gone completely towards what you and I and everyone who participates in this space thinks it's going to be. It's the future and the evolution of kind of tech and capital markets combined. But I think it's going to revolutionize the way that banking is done for all of us globally. There's a bank in Switzerland, Siba Bank, unknown, underappreciated. Think Silvergate, which might be a name more familiar to you guys,

Starting point is 00:14:36 or Anchorage Bank, which you would have seen KKR just do a lead investment in maybe four or five months ago. We led a consortium of investors into a large round into Siba Bank. And it's one of two licensed FINMA permitted, which is basically the SEC of Europe, banks that's pursuing an entirely digital strategy. So we own 6% of it. A guy that you guys are probably all familiar with, Anthony, I know you are, Ollie, Olivier Russo-Newton is going to take a seat on their board, or already has. So we actually have this large investment in them. It's already come close to doubling in value. It's crazy what the capital markets are doing right now. You're actually seeing private companies trade at higher valuations than public companies, which is

Starting point is 00:15:31 kind of backwards. Usually a public company trades at a higher valuation than a private. But we had an opportunity to invest along the likes of Alameda, Ordway, basically the who's who of sort of Europe, Asia, and Middle East into this underappreciated, underloved private crypto Swiss bank. And if you think of banking globally, most people would look at the US as the leader in banking or traditional banking. Swiss and the Swiss private banks are probably a close second, but this particular bank is pursuing an entirely crypto strategy. So Web 3.0, custody, staking, you name it, and their assets are ballooning. And it just made a ton of for a company like us. We have our VC portfolio and we do make these alt investments. When we

Starting point is 00:16:24 had a chance to actually take a stake in it, 6% of what's probably going to be a multi, multi, multi-billion dollar enterprise is never a bad thing. So that's what we did. That's why we did it. And it gives us an edge that no one else has. Look at any company on any exchange. I don't think there's anyone that's doing what we're doing and and and has a stake like that in a in a private swiss crypto bank makes sense and then uh a huge part of your business is etps uh describe the difference between an etp and an etf uh for everyone and then why are you guys so focused on this etp business so in europe um etfs are prohibited from having any more than five percent of any one product. So that's the difference, right? So you can't really have an ETF for any

Starting point is 00:17:15 one single asset product. So when we launched our Bitcoin Zero, our Ethereum Zero, and just to everybody understand what that means, we have a listed traditional equity. I guess you guys could think like Grayscale or some of these other companies, but our product tracks Bitcoin perfectly. There's no variability and we charge no management fee. And what we do is we list other ETPs basically. And I know for the purist in the crypto space, decentralization is everything. But if you want to get your mom, your dad, your kids, or people who are just terrified of getting on these alt exchanges into this industry, the way you're going to do it is by creating these ETPs. And so we've got a Solana one, Polkadot, Cardano, Terra, Avalanche, and we're planning on listing another 20.

Starting point is 00:18:09 Plus, we have our Bitcoin and our Ethereum as well. And it's basically just a way of giving people access to any of these protocols that you can think or want to own without having to go through, you know, a Coinbase or a Kraken or a Frax or anything like that. So it's basically traditional equity market exposure to Web 3.0, which no one else is doing, but then also married with, you know, some other really cool stuff. Like we've co-invested with you in Sovereign, we co-invested with you in Wilderworld, which have been, you know, hugely successful and stuff like that. So it's, it's, Europe is so much more friendly towards Web 3.0 versus what's going on in the US that, you know, everybody always asks us, when are you going to come to the US? And my answer is really, really simple. So write your congressperson, write your governor, write the president, write whomever. This is an industry that's not going to go away.

Starting point is 00:19:06 And for whatever reason, I think it has mostly to do with the fact that the U.S. dollar is kind of under siege from various different ways. China, Russia and crypto, Bitcoin in particular. And I think that's part of the reason why you haven't seen a Bitcoin ETF as well. And instead of embracing the technological future and Web 3.0 and what it can do and bring to everyday citizen, it's become kind of a hurdle to get involved in it if you're doing anything in the US. So Europe, ETPs, and the one exception to that, Anthony, is in Switzerland, you can actually do ETFs. So we're working on some pretty cool stuff with Siba in Switzerland. Makes sense. Joe, John, what questions you guys got? Yeah, my question would just be around the current state of Bitcoin and crypto markets in general, right? I think people are looking at Bitcoin specifically and seeing the stalemate where it's been trading in this range for a longer period of time. And there's some uncertainty around the global economy and what's happening overseas and stuff like that. So just talk me through kind of how you think about this on a more broader level.

Starting point is 00:20:06 Yeah, look, it's, again, back to what you guys were discussing with Elon and owning Twitter. I think I read a stat not too long ago that there's six or nine families that basically control every single media outlet globally in the world. Like it's actually that controlled now. And similarly, that's what's, I think, happening with Bitcoin, because you're seeing Bitcoin trade almost, you know, perfectly, I wouldn't say perfectly correlated, but pretty much correlated to the NASDAQ and tech stocks. But it's not a tech stock. It's a store of value. It's an alternative to destruction of fiat currencies. And the one thing that sort of is the aha moment, and I don't know what you guys think about it, but think through why on earth they would allow a Bitcoin futures ETF and not a Bitcoin spot ETF. And the answer is actually pretty self-evident to me. You get a Bitcoin spot ETF and Bitcoin is going to $100,000, $200,000, $500,000. You'll see institutions, retail, you'll see everyone jump into that. um and so this is this is a situation that's you know i think far more politically motivated than it is actually um you know fear greed or or any of those other things this has to do with um you know the petro one and and how you can now settle oil in gold or renminbi it has to do with what russia is trying to do and the one time you actually saw the coin the couple of it was

Starting point is 00:21:41 was on the invasion of ukraine which you know i'll call it it's you know disgusting i can't even believe that that the world the global global world is allowing this to happen it's it's i don't know i i thought we were evolved enough that we'd never ever see wars again but it seems like russia is taking a different perspective on that but that being said it's it's the narrative and i think people need to start uh looking past um you know analysts they need to start looking past social media and they'd have to start looking at the destruction of what's going on in the US dollar. And we remarked on this earlier in the show. If every dollar you make in the US next year is worth 20% less, and I'm not making this up, just there's an amazing website. You guys

Starting point is 00:22:25 should have it all the time. It's called Shadowstats. And it's a guy who literally just said, I'm going to just keep measuring all this economic data the way they used to do it instead of measuring it the way they're doing it now. And you'll see that inflation is up at 16, 17, 18, 19, 20%. That's the erosion and the destruction of your dollar that you earn every day. So you're actually making 20% less every year than you would have normally. And you're probably not getting a pay raise. How do you actually protect yourself from that? You buy commodities because that's one of the single best ways to protect yourself from inflation. And you've seen oil go through the roof. And again, part and parcel, you know, supply chains, part and parcel Ukraine. But

Starting point is 00:23:06 a lot of this was really, really obvious to people like me with economic background, economics backgrounds, because you just can't print money and do that. And what I keep on saying to people anytime, anywhere I go, I was actually just in Phoenix at sort of a little political event. And I said, look, everybody needs to start looking at what's going on And realizing that one of the best ways to protect yourself from what the US government is doing, and in particular, the Fed, is to buy crypto, buy Web 3.0. I mean, this is maybe being a little bit flippant, but if someone said to me, 1994, here's 50 grand, what would you put your money in? 10 times out of 10, I would put my money into Amazon in 1994. And here we have a sector that's growing two times faster than the internet that's structurally hard to invest in because of a political event and basically a narrative that I think you guys are doing a phenomenal job helping

Starting point is 00:24:12 people understand. I was long winded, but I hope that helped. That was perfect. That was perfect. I want to talk on one thing that you mentioned there was you said when a spot ETF is approved, you see Bitcoin 100K. I know our audience loves to hear that. What do you think the regulatory framework is about getting to that spot ETF in America? Oh, man. Look, having gone through what we've gone through to just get an upgraded listing to the OTCQB and now also working through the hurdles to get listed on the NASDAQ, I think what we need is everyone to write their their congressperson their attorney general whomever it is or even just phone and just say look man I want exposure to this this is something

Starting point is 00:24:56 that's going to be good for all of us um and and truthfully I believe it is um innovation is always good for for everyone it's just we're sitting in an environment right now where I think the bigger issues at play are political rather than what you and I are talking about um and that would be start number one. I also think, and look, I'll just call it as it is, that there are ways and opportunities to get a spot ETF created outside of the US. And that's something that we're looking at really, really aggressively because if for whatever reason, from a regulatory perspective, it's going to continue to be a hindrance. And I'll tell you something for you guys to think about the minute the spot futures ETF was created, I said Bitcoin is no longer going higher. A futures

Starting point is 00:25:46 ETF is the easiest way for leverage to be created to actually suppress price increases. And they did it to the gold market. They did it in the silver market. People will call me a conspiracy theorist, but it's more fact than fiction. And the Bitcoin ETF will actually flip that around. And the beauty of the new world and web 3.0 is it doesn't matter where it is if it's in australia if it's in switzerland if it's in um you know pick pick a jurisdiction as long as people have a an online trading account they can get access to it and so um it may be competition it may be that it's created somewhere else i think you guys all saw that grayscale is actually trying to get approval to to turn themselves into an etf i don't think that's going to happen because you've seen you

Starting point is 00:26:34 Kathy Wood gets shot down. We've seen Fidelity get shot down. These are household names that are trying to do the right thing. So maybe, just maybe, it's going to be it being created outside of the U.S. to force the U.S. to recognize the value-add of just allowing this incredible new ecosystem to grow and thrive in the U.S. and allowing everyone to get exposure to it. Yeah, it's super fascinating. We've got to go, but I'll give you kind of the last word. If you look out through the rest of this year, what's the one thing that you're most looking forward to or most excited about, whether it's for your business or for the market? Can I say being on your show one more time? That's a very good answer. That is the answer of an expert right there, my friend. Yeah. No, look, I think we're going to be in for some pain here for the next three to five months because the Fed is really jawboning the long end of the fixed income curve higher. But the reality is, if you guys do the math and just think through nominal and real rates, the real rates are extremely negative. Fixed income is a waste of time. And so what I'm really, really looking

Starting point is 00:27:49 forward to is is sort of that institutional and retail evolution um of of moving into this space and and i i've got to tweak this conversation and you know pitch defy we are literally the only company right now publicly that's actually doing this giving people exposure on listed exchanges to web 3.0 so leave it with that i love it man thank you so much for joining us we'll definitely do it again in the future you got it thanks so much guys have a great day Thanks so much for listening to today's episode I really hope you guys enjoyed this one Make sure you're subscribed on Apple, Spotify

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The Pomp Podcast - #941 Russell Starr On Bringing Crypto To The Public Markets

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