The Pomp Podcast - George Harrap, Co-Founder & CEO of Bitspark: The Revolution of Money Transfer

Episode Date: May 13, 2019

George Harrap is the Co-Founder & CEO of Bitspark. In this conversation, George and Anthony Pompliano discuss money transfer solutions, stablecoins, and how the current money transfer ecosystem has become bloated and slow. ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. George Harrop is the co-founder and CEO of BitSpark. In this conversation, we discussed money transfer solutions, stable coins, and how the current money transfer ecosystem has become bloated and slow. I really enjoyed this conversation and I hope you do as well. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp

as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. Bang, bang. All right, guys, I am here with George. He is calling in from Hong Kong. So thank you very much, sir, for taking the time to do this. No worries. It's great to be here. Thanks for having me. For sure. So let's start with your background, George. You've been in crypto for quite a while, but what was kind of your background before you got into digital currencies? uh before digital currencies well it was probably quite a while ago now um i've been in bitcoin

since 2011 so it's been pretty much every day of my life for the last i don't know eight eight years nine years i guess maybe um and yeah i think before then i was just a student uh sort of halfway through a degree uh and in electronics engineering at the time back in australia and i sort of heard about this crypto thing and sort of got into mining and there's probably a little bit to say about that. But I think before that, I was just some guy who was interested in computers, you know, and I came across crypto in the early days when it was Bitcoin is, I don't know, $1.70 or something like that. And I thought that this was a really cool way to make use of GPU mining hardware, which I had quite a few sort of lying around at the time. And

yeah, I was interested in fixing computers and so on. So, the background was, I guess, came at it from an electronics perspective, like this is a cool thing to do. didn't know anything about economics or anything about finance, and sort of just learned on the fly from there. That's awesome. And so, when you first saw Bitcoin, did you buy any? Did you kind of see it and say, yeah, you know, we'll see how this goes? What was kind of your first reaction? Well, I think, you know, back then it was a different world, right? So, back then we had about two exchanges in the entire world. There was MTGOX with about 80% of the volume. There was Trade Hill with the other 20% of the volume. And there was a couple of other sort of disparate

things around the world. Every discussion took place on the Bitcoin forums. So, that was sort of the only key source of information. And I think I really got into it for... I did buy some sort of when I first got into it, but I really sort of started mining first. So, I sort of got started on my home computer i actually used to buy stuff off ebay uh to to mine bitcoin with and ultimately i was living in a cold city in the time uh in australia so it's kind of like hey cool i can make a heater which makes money that's probably the best kind of heater to have right so i used to sort of buy stuff off ebay you know build a computer make some money okay cool uh now i can can expand it and i i sort of got quite stuck into it and sort of decided that you know what

I should probably focus more on this rather than pursuing the degree and all of that that entails. So, I sort of went down the rabbit hole a bit early and sort of taught myself about finance through Bitcoin. But it started off in the GPU days, that's sort of early 2011. And then I was actually in the first batch of FPGAs when they first came out. And I think I was almost 1% of the network at some stage. There was a company based in America called Butterfly Labs, which used to produce some of those machines. So maybe your listeners are familiar with them, but they got into some controversy in the sort of later days, but certainly in the early days, they were literally the only option if you wanted to get into mining and that sort

of thing. So I took a risk and sort of got into it via the mining route. And then I was in the first batch of ASICs as well. And yeah, a couple of other things along the way. But yeah, I mean, I think buying and selling crypto along the way sort of taught a lot about what are the companies involved in the space. And to be honest, they didn't really change from about 2011 to 2014. There wasn't too much moving in the market. Altcoins weren't a thing, nothing to do with ICOs. There was still only a couple of exchanges in the world. And sort of that's the problem that I guess I saw and my co-founder saw before we started BitSpark was surely there's an opportunity here in the market to make things better. Surely you don't have to wire money to a random Japanese

bank account for a company called Mt. Gox, which hardly answers support to actually go and buy Bitcoin. And even sometimes I used to conduct sort of arbitrage myself back in Australia between the markets there and elsewhere and sort of got on a plane here and there to open a council over the world to see if I could do that better. That worked out for a period of time, but I don't think I made too much money on that. But essentially, it was a good introduction to sort of how money works and how money moves around the world. And I think doing that really helped me see how remittances can also work. Because essentially, if you're moving money, you're doing bank transfers all the time, trying to get money into and out of exchanges. You sort of learn

a little bit about how banks work and how the system actually functions and how decrepit at times it is so yeah i mean that's a little bit of backstory about how i got into it got it and so why start a company in the space right there was so little infrastructure at the time um did you just kind of say hey i want to solve that problem uh or was it something where you know customers were kind of pulling you into it or what was kind of the original genesis of wanting to start the company i think the the premise was that everything sucked and surely we can build a better thing and and that was literally it because you know there still wasn't that many options uh if you wanted to you know trade crypto or do anything useful with it or there wasn't really that many

wallets you had to to run the the old you know bitcoin core node and sync it and so on it kind of was pretty bad so i think the initial thesis was uh why don't we just give it a go um and yeah i initially it was kind of like okay if we're going to give it a go then where are we going to do that from? What's the optimal jurisdiction? And it wasn't going to be Australia. So, essentially, I got on a plane to Hong Kong. It was going to be either Hong Kong or Singapore because the idea was it's going to be Asia. That's going to be the focal point of a lot of the crypto trading activities. So, it was going to have to be there. Didn't know anyone, got on a plane and essentially started the company with the idea that why don't we start

an exchange and from that, you know, everything else will kind of flow. And I mean, back then exchanges, now they're a dime a dozen, right? There's like a million of them, but back then it was, you could probably count them on your hand. So it was quite an undertaking to do, but I just sort of think that that was a gap in the market that from my own experience, just using it so often, everything was pretty bad. I mean, I was in Bitfinex's beta and that was kind of a bit clunky with how everything worked and people thought that the code came from bitcoin occur at the time maybe it did maybe it didn't but um you know there was just sort of projects like that which are like wow cool this this can really go somewhere um can we can we

build something like this and uh yeah yeah i think we we achieved a lot of what we what we initially set out to do but we learned a lot afterwards as well and some of the realities of actually operating one of these companies like this is pretty hard you don't just like turn up and make an exchange for sure and so when you originally started uh it was purely an exchange or you you saw the opportunity with remittances as well yeah well okay so the initial thesis was you need an exchange first in order to do uh remittances and merchant payments because you know bitpay was around at the time bitpay liquidated their bitcoin at some of the larger exchanges but then there was like a time lag between you being able to actually liquidate your Bitcoin on something like BitPay

and then internally they would have to go and do a wire transfer somewhere else that might take like three days or something like that. So, I guess, you know, more liquidity pools, you know, were better. And I think sort of we decided that the exchange has to happen first because you need to have a liquidity pool if you want to do remittances or merchant payments. And to be fair, we actually did. We built the exchange, launched in 2014. It had 20 different currencies. This was before ICOs and stuff had come out. So, not many people really cared. I think we were one of the first with multi-sig as well. So, the exchange worked quite well for what it was doing. But I think we actually saw the opportunity in remittances more and more in our part of the world because

we saw a lot of people talking about remittances, but nobody was actually doing it. So sort of one day we decided, why don't we just give it a go? And Hong Kong is a place where every Sunday, there's 10,000 people that go to the center of the city to send money back home to the Philippines and Indonesia. And they will go to these physical cash agents. And throughout the world, these physical cash agents is kind of how money moves. And it's sort of quite an old antiquated system. could you apply the concepts of crypto to those companies and to solve that particular problem? Because we saw it, you know, quite prevalently.

So I guess when there was just a lot of discussion about it at the time, we thought this is something that we should definitely pursue. And I think we initially, if you look online, you'll see that we had a physical little stall that we set up back in the day. and that literally took cash from people converted it to bitcoin locally you know btc hkd and then sent it to the philippines with one of our partners there who converted the bitcoin to the philippines

peso so essentially we just sort of got set up with a very manual process to really test the thesis uh if it really worked that was sort of direct to the customer so it was a lot of convincing people like are you going to take my money are you going to be here tomorrow what is this system that you're doing you know and there was quite a bit of learning to come out of that and essentially yeah you know going direct to the customer is hard and you know I guess for a small company at the time we sort of learned that it is quite difficult but there's also a bigger problem to solve with all of the existing infrastructure which is already there so all of these physical money transfer shops are already there you know what are they using

You know, how do they actually send money? And it's this crypto system that you can build and make use of. Could it benefit them? So I think, you know, a later learning was instead of going direct to the customer, it's probably better to do a sort of business to business, you know, kind of approach. And that's sort of where we went down. Got it. And so, let's talk a little bit as to why people in specific countries in Asia, why is the remittance problem so bad, right? What are those obstacles that they go through on a daily basis to send money back home? Yeah. So, we'll take a step back. What is a remittance? A remittance is often it is a name for sending money overseas often to your country of origin. So, often if you're a foreign worker in another country, you're making money in that country, maybe you have a bank account, maybe you don't. In many countries around the world, often the remittance ecosystem is held up by people who don't have bank accounts. So, they receive physical cash and they need to get that physical cash back home to their family because that's the whole point of them moving

to another country, right? It's, I'm going to go to another country and make some more money over there so I can send it back to my family in another country. And, you know, that's sort of how that sort of system works. So, you know, the demographic is often, you know, sort of from 20s to, I guess, 45 immigrant worker in various different, I guess you could say, richer countries around the world, more developed jurisdictions. So, your Hong Kong and Singapore's sort of the sender countries. So, they're countries where people are sending money from. And then you've got the recipient countries, let's say Philippines and Indonesia, and they're a net recipient. So, there's always more money going there than is coming out. And it's certainly the case in,

say, the US as well, where you've got a lot of remittances going to Mexico. It's one of the third largest corridors there. And often that is migrant workers in the country sending money back to their family. And it's a huge market. So, it's about $700 billion, growing at about 6% a year. That's the official numbers from the World Bank because there's literally no data on it. Nobody has data on this. The World Bank is actually the only data source for this entire industry. And the underground grey market is expected to be about the same, about another $700 billion. And grey market just means like, oh, you want to send money back to your family? Okay, go and call some dude, give him cash on the corner, and he will send some money to another

guy who will send some money to another guy. And eventually, the money will get back to your family. That's sort of the unofficial channel, but it's just as large as the official channel. So, often, when we're talking about remittances, it's physical cash, money transfer shops, sending money through official channels, using agent networks like, say, a West Union Moneygram and all of these different sort of regional versions. Like every country has their own, right um and they all operate on the very similar premise it's just that sort of western it's so much bigger than everybody else uh they're often the target when people are talking about remittances but there's good reasons why they are as big as they are and uh and why they

may or may not be interested in crypto uh but but ultimately the problem is solved to solve is can you move money uh cheaper faster quicker to countries and currencies which are hard to access you know that's another key thing is yeah if you're sending money to indonesia how are you going to get money to the the physical island in the middle of nowhere that only has a post office you know so you have to be integrated with the post office network okay cool how do you do that okay you have to physically go to indonesia make a company sign up uh that takes months years or you just have to connect to some other bigger network and often that's what people do unfortunately. And that's why a lot of these sort of larger agent sort of monopolies have

such a monopoly is that it's just very hard to access these currencies and geographies as well. And that's sort of one of the key things in how money's sent is it's all very well to have a cool system and to have a cool technology. But if you don't have the physical geographical coverage to disperse money at the other end, it's not really going to solve any problems. absolutely and so let's talk about how crypto can solve that yeah so i mean if you if you look at how a transaction works currently um you have money in one end let's say you know a country like the united states you got people earning their money there uh and they need to send it to a country like mexico a net recipient country um they have

to get the cash deposited at some location. Now, that location needs to already have a balance in USD on the sender side, as well as a balance in Mexico on the recipient side, because people expect instant transfers, right? So, you can't physically send pieces of paper around the world very quickly unless you, well, you can't. So, you've got to have a lot of money already sitting there that's sort of already on their books in a number of different currencies. So, the traditional world works whereby you have, say, a remittance company which collects a bunch of cash on one end, disperses a bunch of cash on the other end, and at the end of the day, they have a bunch of cash on one side, no cash on the other side, and they need to get that cash to the other side again to

refill their balances on the recipient side. So, the question is, how do you get the money there? Like if you have physical cash in the United States, how do you get that to Mexico? Well, often you have to take that cash to a bank. And with that bank A, you need to have a bank in the first place. Banks don't really want to bank remittance companies. There's a whole phenomenon of de-risking where they're sort of exiting the industry and a lot of remittance companies can't get bank accounts. So, if you do have a bank, great. Cool.

now you have your money in USD in a US bank and you need to often do a wire transfer to your partner in Mexico who is distributing the cash. And that can take a couple of days sometimes. And especially if it's for a weekend, you might have to send a little bit more. So you have to come up with some capital on the US side to send a bit more money to Mexico to cover what they're paying out over the weekend. And this all takes time and a lot of effort and a lot of potential risks as well. What happens if the exchange rate moves? Exchange rates can move a lot in a couple of days. And if you do a remittance on day one and the rate is 6.5, by the time the actual money gets to Mexico, maybe it's 6.6 or 6.2 or some other rate, right? So, actually managing all of

that takes a lot. So, where does crypto come in? Well, crypto, especially using something like Bitcoin, is that unlike, say, a bank settlement, a bank settlement is you're not actually moving value. You're sending a message. You're saying, hey, bank A, can you credit bank B over there? And they send a message to each other. That's what a swift wire transaction is. And eventually, the other bank at the other end will distribute the physical cash. with crypto you're actually sending the value itself so it's as if i had a you know something that had some value let's say a piece of gold and i if i give you a piece of gold i'm standing right in front of you the settlement is done right i don't owe you any money we don't need to send a

message to each other you take the gold finish done uh but the problem is that sending gold around the world is really hard and you can't do that very quickly so you know having crypto is this sort of unit of value of which you can move around the world very quickly means that you don't have to do this net settlement. You don't have to do this pre-funding of accounts all over the world because I can literally buy two bucks of Bitcoin here and I can send you two bucks of Bitcoin over there. And now you have $2 of Bitcoin. So you can give somebody $2 if you want to. And that happens very quickly. So I think the big difference of what crypto can do is not so much sort of tracking stuff and keeping track of who owns who what it's like actually having a unit of value which you can

move around is is tremendously important for for settling payments between between people at both ends got it and so as you look at this let's talk about um deeper on about the difference between using bitcoin versus maybe stable coins right kind of i think of the narrative publicly is that most of the remittances are happening with Bitcoin. Obviously, you've got the volatility issue and a number of other things. But it sounds like a lot of the countries that you are operating in, or supporting, it's different than the developed Western world, right? And so maybe just give us an understanding as to how the people who are engaging with these crypto assets for remittances, what's the big difference between that Western world and kind of the Eastern

even Southeast Asian world? Yeah. I think the first thing is that you've got to be able to solve for cash. If you don't solve for cash, you don't have a product. So if you're in Vietnam and 20% of the population has a bank account, 80% of people who don't have a bank account, let's say you've got some cool new system, crazy technology, mobile app, whatever, it doesn't matter because 80% of the people in that country can't use it. It's the same for pretty much every country around the world except about 20. There is this massive gap in banking. So, I think that the first problem to solve is if you're creating a crypto product in some of these different geographies around the world, can you be able to solve for the realities on

the ground? And when you're sitting in the United States or where I'm from in Australia, you kind of take banking for granted. I can do an instant payment between anybody very quickly. I was doing that on Facebook like eight years ago with my bank. And that's pretty easy to send people money. But if you don't have access to that, then what are you going to do? And often in countries that don't have the physical geography, you know, to have bank branches everywhere, everyone just sort of has cash. But, you know, what they do have is that they have these physical cash agents. And this is what you've seen a lot in Africa as well, is that Africa is kind of like M-PACE.

Everyone talks about M-PACE here in Kenya, right? There's a number of different other countries around the world which do it, but they sort of pioneered it whereby everyone has a mobile phone. So can you use a mobile phone to send money? And the problem to solve is how do you get your money into the mobile phone in the first place? It's very cool to have a mobile phone app or whatever, but if you don't solve for the physical realities in Kenya,

nobody has a bank, therefore, good for you having a mobile phone app, but how do you get the money in? So, what they did is they had the physical money transfer agents and they were the portals into and out of the network. So, you get money into your mobile phone via a physical cash shop and these physical cash shops, it's like a dude by the side of the road with a little van or something and he's selling little phone top-up credits. But that's the reality and that's how oh, a lot of money moves. You know, ultimately there's sort of downstream effects from that as well. You know, well, what does that guy do with the cash, right? He's now received cash from somebody. Where does he take it? And there's sort of a whole logistics, you know, infrastructure

for moving cash around. But ultimately the problem to solve is how do you move this cash? And if you're interacting with crypto, do you have to get people to learn about crypto before they use your product and service? If the answer to that is yes, it's probably, it's never really going to be relevant for many of these markets, right? Like there was actually some use cases where people thought, you know, here in Hong Kong, oh, why don't we put an ATM in, you know, one of these buildings where everyone goes to send their money and there's Western Union agents and all these other ones. Why don't we put an ATM there? And why don't we connect that ATM to like a backend crypto money transfer service? And people could go to the ATM and, oh, cool,

they can press a few buttons and send the money. The reality was that that never took off and a lot of people tried it and a bunch of people lost money on it, but it was because a lot of people actually like visiting the physical agents, especially when they're in a foreign country, the agent speaks their language, you know, really understands them. They meet all their friends there. It's kind of like a social activity as well. So, you know, those sort of concepts around can we, can we digitize everything and eliminate humans? It didn't really work because there is actually a lot of value in this physical agent network and people people do you know want want to do that with their money so that was another sort of interesting insight about uh you know

what what might work and whatnot but i think the realities are is you know cash is is still king it's actually growing uh in terms of use case a lot of people talk about digitization of money um that's not really the case so bis cash is growing like three percent a year um so uh so yeah you know cash is growing it's how do you actually move it and i think if if you can uh be able to move it effectively, you could buy Bitcoin with that cash. That is certainly one way. But okay, cool. You're in some country which doesn't have a crypto exchange, doesn't have a liquidity provider. If you want to sell Bitcoin in Sri Lanka, who's going to be on the other side of that trade? Who's going to give you the rupee? Nobody's going to give you the rupee. There is no

exchange. So, I think one of the... You mentioned stablecoins. One of the really cool things about stablecoins that we've sort of seen over the last year or so is that this can really solve this problem. Because often we have companies come to us and say, hey, George, I think your system is cool. I live in country X. I'm a money transfer company. Can I connect to your network? And if I'm using Bitcoin, the answer is, sorry, I can't. Because I literally, if I send you Bitcoin, what are you going to do with it? How are you going to get that to your local currency? There's literally no mechanism. So sorry, you can't use our product and service,

which kind of sucks because you want to sign up as many people as possible. So the problem for us is like we need to be able to hold that currency and you can't like call up a bank and go, hey, can I have Sri Lankan rupee, please? Because it's not a currency that anybody has unless you're actually physically in that country. So a stable coin, where do they come in?

Well, if there is a stable coin for a rupee, I can actually buy that rupee now digitally for free without having to talk to a bank or anybody. And that guy at the other end who's dishing out the physical rupee, he doesn't get Bitcoin. He doesn't get USD. He doesn't want any of these other currencies. In our system, he actually gets a thing called a rupee. So, he doesn't take any FX risk and he can manage his margins. So, when we're talking about why are stablecoins important to the future remittances is for exactly this problem because it makes you be able to actually have a scalable product to sell in any jurisdiction of the world got it and so what are the challenges moving forward right as

crypto continues to kind of permeate um you know across the globe i think we're going to see uh this proliferation of stable coins i think we're going to see uh the continued mass adoption of Bitcoin, but how does that affect the remittance market and both on the crypto side and also on what I'll call the non-crypto or fiat side? How do you see this playing out over, let's say, the next kind of three to five years? Well, I think one of the cool things about emerging markets is that, certainly in the Bitcoin world, there's often more demand there than in, say, some of the larger liquidity pool, USD, JPY, HKD, Euro, and so on. The reason I say that is that, let's say you're in Indonesia, the top exchange in Indonesia has

2 million people signed up. And often, the price premium for Bitcoin in that country is often about 1%, sometimes 2%. So, it means that if you send money to Indonesia, let's say you send $100, you actually get $102 worth if you buy in one location and sell in another location. So, you literally make money. So, when you're looking at a remittance product. It's like, I could go to Western Union. I have a hundred bucks. They're going to charge me five bucks and $95 is going to arrive at the other end. Or I could use crypto and I give you $100 and $102 arrives at the other end. Negative fees, right? Nobody has that. So that's an incredible advantage I think that the crypto has, certainly in the remittance world and really sort of getting

that message across. And the reason for that is that you're actually exchanging something which has value rather than just sort of settling between each other. So, I think that as crypto grows, that's only going to become more pronounced. And people often say, well, aren't the markets going to be more efficient? And is that margin going to come down? And it's like, well, I don't think so. Because, I mean, look at a commodity like natural gas, right? Natural gas is a different price all over the world. It's very cheap in the US and it's about two times more expensive in Asia. Why is that? Well, it's because Asia has more demand for it. Why is that? Well, there's a lot of people that need natural gas to get electricity. The same thing is with Bitcoin whereby, why do you

need Bitcoin in this country? And it's like, well, Indonesia's currency depreciated 30% last year. So, if you're somebody- It's crazy. Yeah, right. Exactly. It's crazy. And another thing is that, I mean, a lot of these emerging market currencies, all they have done ever is depreciate rapidly against the USD. So, they're only going in one direction. They're only going down. And that means that everyone in those countries and currencies is getting poorer every year. So, I think where the crypto opportunity is that, wow, here is this mechanism whereby I can exchange my currency, which is always going to go to zero

for something else, which, yeah, cool. Okay. It might be volatile. Or I could buy some Bitcoin and then convert it into my stable coin of choice if I wanted to. So I think that as the proliferation of crypto spreads, you're going to see more of these interesting market signals and these different weird currencies around the world. Often the 180 currencies of the world and only like 30 of them are easy to get. What about the other 150? It's these ones which I really see the growth and interest of crypto

because that's where people really have a problem and crypto can really help out. Absolutely. That makes sense. And then how does regulation play into all this, right? Especially in kind of the non-Western world. Are regulators fearful of how crypto could impact the remittances? Is it something where they're working together, right? Given that you're sending money from one jurisdiction to another.

What are you seeing there? Yeah, I mean, I think it's a mixed bag. There's some in the basket of apprehension. There's some in the basket of we don't care. and there's some in the basket of, oh, we've got to do something. We've got to shut the door. I think a good example of how it's been handled

is the case of the Philippines, right? So Philippines, big remittance country, about $28 billion a year goes in there. I think it's rising about 5% a year. I think it's the number three remittance country, but a lot of money flows in, right? Now in the crypto sort of remittance world, there's been about three solid crypto remittance companies

that have been there for like the last five years and they're all doing very well. In fact, one of them has 5 million users that have downloaded their app. And that's 5% of the population. So, 5% of the population of the entire country is using a crypto app. That's super cool. But often, you know, what was happening over the years in the case of the Philippines is that the crypto remittance, you know, ecosystem just kept growing. and initially it was, you know, who are these sort of cowboy companies

that are receiving this magical internet money from wherever it is in the world and then somehow they're able to distribute our local currency to people over here and it turns out to be cheaper. And they sort of watched that, the regulators in the Philippines, they watched that for a number of years, but it got to a point where they couldn't ignore it and there was, you know, tens of millions of dollars, you know, often every day in some cases flowing via Bitcoin into the country. And another interesting thing is, well, how does money flow

as well? Like Bitcoin is going into the country. You know, pesos is not coming out. USD is not going in. There's like magical internet money, which is coming into the country. So, on the one hand, they didn't quite know what to do with that. But what they did do is they created a crypto remittance license. And in fact, they're pretty much the only country in the world which has done that. And that was because they saw that there was such demand, such interest, that they kind to have to do something um so i think you know on the one hand you've got the philippines reaction which is watch it for a while then we'll make some regulation to do it then there's other countries like let's say hong kong um hong kong it's an interesting place and it's kind of the reason

why we're here and that's why a lot of companies here right it's kind of one of the epicenters of crypto stuff in asia because there's not really many regulations on anything and it means that you don't need to collect licenses and pieces of paper to get started with your business you can like get started with your business and just go uh you know that's why a lot of the exchanges are here you've got uh you know bitmex you know here as well you've got okay coin warby everybody has offices here um and uh it's the regulators here is kind of under the impression that like our job is to regulate the hong kong financial banking system we have a currency called hong kong dollar and that is our purview and that's what we do if you use a thing called

Bitcoin or cans of Pepsi or whatever, and you're trading these things, then that is seen as a commodity and it's not something which we regulate. So we're never going to regulate it. And often the response in Hong Kong is, look, it's not something we regulate. We're not interested. We never will. You go and do your own thing. And that's often the purview of many countries, I think, in this region as well. And then there's a couple of other countries which are more apprehensive don't really understand it and the sort of knee-jerk reaction is to just say no but then that doesn't really do anything like you know how china's banned bitcoin like 100 times or whatever hasn't really stopped anything right so i think that um a lot of countries are probably

just going to wait and see still uh and okay let's say worst case they're just going to say this is a form of money transfer we're going to add it to our current remittance license and they'll just be done at that and that's pretty easy to do it's like everyone pretty much has a remittance license already in all these different countries. So, you can just add a thing called Bitcoin to it and then they don't have to think too hard about making any specific crypto reg or anything like that. It's kind of just easy to slot it in. So, I think that's probably what's going to happen in the next couple of years is you'll see more jurisdictions that perhaps won't come out with crypto-specific regulation. They'll just go, oh, it's just part of this existing

license and we'll just add a few words to the legislation and here you go. Because it's a lot easier to do that than it is to make a whole new uh you know crypto you know regulations for sure that makes a ton of sense what uh what's in the uh in the future for you guys what are you thinking about right now or focused on over the next kind of 12 24 months yeah i think for us um it's all about getting access to these 180 currencies which nobody has access to so you know our our goal for the rest of this year is we want to create 180 different stablecoins for 180 different currencies. And that's all very well and good to say, but how do you actually do it? Well, I think the best way to do that is with trustless

stablecoins. And that's probably the only scalable way to do it. So, you have two different types of stablecoins, right? So, you got the trusted, like your tethers, which is I'm a company called Tether, deposit money into my bank account and I'll give you, you deposit $1, I'll give you one Tether. So, it's a lot of trust. You've got a counterparty there. You've got a bank account involved. You know, maybe they have the money, maybe they don't. And that's just sort of how a trusted stablecoin works. And you've got a couple of them, which I guess sort of came to the fall last year, predominantly in USD. But for that to work, you often need to have a company set up in that jurisdiction, in that specific currency, with a trust account in that specific

currency. You need to have the regulations in place to, you know, have oversight of that. And And often that doesn't exist in many currencies around the world. So, it's not a scalable thing to go, I'm going to go and do that for Tajik Simonyi or some currency like that or Nepal Rupee or something like that, right? So, you're not going to be able to do that everywhere. So, what you are going to be able to do everywhere is create an algorithmic stablecoin. And I think that's certainly where we're going, whereby some of the oldest stablecoins have been around for about five years now.

So, you had BitShares originally, they created a number of different ones, BitCMY, BitUSD. You had sort of MakerDAO, which kind of forked from that and is now the largest liquidity provider with DAI. But the same concept can work for any currency in the world. So, our purview is we're going to create these currencies and the next question is, where does the liquidity come from? And it's like, well, we are a remittance company. We are buying these currencies every day.

So, we have transactions going to these currencies. so we're going to be buying them so it's much easier for you to lock up some crypto collateral uh to to uh allow us to be able to buy them we're actually going to buy them from you for a premium so um and that's super cool as well because take the example of sri lanka before which i gave what i said with bitcoin was that if you send bitcoin to sri lanka there's no fiat exchange there's no fiat broker like there's nothing right so you literally can't do remittances there via Bitcoin. Because if you did, you would have to have an exchange which exists there with local banking access and people depositing fiat and so on. You'd have to build that up from scratch.

But if you can create a crypto collateralized rupee, and you can do that sitting in New York, you can do that sitting in Hong Kong, you can do that sitting anywhere in the world. You can just create this bit rupee by locking up some crypto collateral. That solves the local fiat problem you actually are not dependent on the local market in that currency and jurisdiction existing you know people understanding crypto you know people wanting to to use the exchange um you don't need all of that because you actually open it up to the world of sort of investors wherever they might be in the world and i think that's super cool as well is that you don't have to physically exist in that jurisdiction to be able to access a currency in that jurisdiction

um so yeah i think you know what we're interested is being able to grow this cash in cash out network in all these different currencies around the world and being able to help companies and people move money quicker, faster, cheaper. That's awesome. I think it makes a ton of sense. All right. Before I wrap up, I always do rapid fire questions. What's the most important company in crypto other than your own? I think the rise of Binance has been great for the industry. I think that's super cool. Yeah. I think that BitMEX is probably one of my favorites because they certainly have a lot of liquidity and have built out a really cool matching engine. So I would say that they're very important to the ecosystem, having that liquidity

and having a means to actually transact on that scale. Got it. What's the one regulation you would change or improve if you could? To not regulate anything. I think that if there was one thing I would be able to say to regulators, it would be, look at japan right what did japan do originally when they were thinking about regulating crypto they actually set up a a self-regulating group that was run by companies and the government could point to them and go hey look we're the government right we don't actually we're not innovative people we're reactionary in terms of regulation we're not the forefront of things but what we can say is that we don't want people to get ripped off and scams and so on you know what

these people over here in this organization they can come up with some best practice rules and we as a government can point people to them because they're going to give a tick of approval and if you're an end customer and you have a choice between two products one has the tick of approval one doesn't which one are you going to go for you're probably going to go for the one with the tick of approval so so i would say that regulators should look at creating these uh you know self-regulatory groups run by the industry of which they can point to which can create best practice and as far as the government you don't need to come up with any new stuff you can just say look uh best practice over here um we recognize that you know a lot of companies

could should look to this and consumers should look to this and i think that's a path which has worked pretty well in the past so that'd be the one thing i would suggest it makes sense to me what uh what's the most controversial thought you have in crypto what's the one thing you believe everyone else would disagree with you on? I think that Bitcoin can't be used to scalably grow a remittance business. And that's after using Bitcoin as a remittance business for the last four years. That is not what I expected you to say. All right. What's the most important book you've ever read? I'm not really a book reader, but I think Charles Darwin's Voyage of the HMS spiegel was super interesting that's one of the few books i have read and i thought that was

that was pretty cool so that'd be my choice all right what uh what do you think about aliens think they're real not real believer non-believer uh they're real but they're probably already ascended to to robot status so they probably don't care about us i would say they're probably already integrated machines you think they don't care about us well it's like do you care about a rat like walking around the street i don't uh aliens probably see us as the same they're like look i'm a cyborg i've computed a billion trillion transactions a second uh who are you you're just like a ball of meat so i would say that uh yeah they're probably out there and they probably have got to machines like maybe that's the way we're going who knows i love it i love it um all

right you could ask me one question uh before we end uh in the session what uh what do you want to ask um well who's gonna win game of thrones maybe that's uh that's a good place to start man this is gonna be unpopular but uh i actually don't watch i've never watched a single episode of game of thrones wow but it's probably for the best though to to be honest um maybe maybe my thought is uh i don't uh i don't really watch any fiction stuff so you know that's like the ultimate uh fiction um every once in a while i'll get into some like sci-fi stuff with like a black mirror episode um or i did watch uh ready player one um so things like that uh but but in terms of a uh an ongoing kind of weekly television series uh i'm just not into it so i haven't watched it

yet that's fair enough that's fair enough well i mean what would be if you weren't doing this what would you do what would you be doing in crypto land uh i wouldn't uh let's say that if I wasn't in crypto, um, I'd probably just be, uh, continuing to invest in, uh, early stage companies, right? Just, they wouldn't be crypto focused, but, uh, but I think that I really enjoy kind of spending time with founders as they build their companies from scratch. And so, uh, we find some, you know, some way to do that, uh, just in different industries. Awesome. Sounds good. Yeah. Listen, I appreciate you doing this. This is a lot of fun. I think you've got some, uh, some unique insights in the world,

especially kind of how long you've been in the space. And hopefully we can do this again in the future so that we can get an update on what's going on in the remittance world. Absolutely. It's been great to be here, Pomp. And I wish you all the best. Hey, everyone.

Pomp here. If you like this episode of Off The Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off The Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in

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