The Pomp Podcast - Hany Rashwan, Founder and CEO of Amun: An Egyptian Born Entrepreneur Talks Crypto

Episode Date: March 12, 2019

Hany Rashwan is the Founder and CEO of Amun, the company behind the first crypto ETP approved by a public stock exchange. In this conversation, Hany and Anthony Pompliano discuss the intersection of crypto and finance, how regulators are thinking about digital assets, and what the public markets for crypto look like moving forward. ----- Join the Off the Chain newsletter. Pomp's daily email analyzes the crypto market for institutional investors. Simply, it’s the best crypto newsletter delivered to your inbox every morning. No frills. No bullsh*t. Just everything you need to know in a 3-minute read. https://offthechain.substack.com/ ----- BlockFi BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. ----- 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. Hani Rashwan is the founder and CEO of Amoon, the company behind the first crypto ETP approved by a public stock exchange. In this conversation, we talked about the intersection of crypto and finance, how regulators are thinking about digital assets, and what the public markets for crypto look like moving forward. I really enjoyed this conversation and I hope you do as well. Before we kick off this podcast, first a word from our sponsor BlockFi. As many of you know, crypto investors store their digital assets on exchanges or in cold storage for long-term

safekeeping. However, this strategy doesn't help them grow their investment holdings or build overall wealth. With the new BlockFi interest account, users can now securely store their Bitcoin or Ether at BlockFi and receive 6% annual interest paid monthly in cryptocurrency. 6% is an absurdly high rate. It's the best rate in the industry. I highly suggest you go check out BlockFi.com slash Pomp. Again, that's BlockFi.com slash Pomp to sign up and start earning crypto today. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any

opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys, I am super excited about this. I have somebody who not very many people know today, but many of you will know his name in the future. So, Handy, thank you so much for joining me. Thanks for having me. There's no pressure, obviously, with that lead in. The only way to go is up. Yeah, perfect. Let's do this. Tell us your background and then we can get into the super cool stuff you guys are doing overseas. Sure, absolutely. So I dropped out of school when I was 20. What a shame. I have since finished the degree, I'll have you know.

But moved to Silicon Valley, created a couple of companies. One was a flaming disaster. Learned a lot. The other one was moderately successful. We ended up selling that. My lead investor in both companies was a venture capitalist called Tim Draper, who was and remains a very large Bitcoin bull. Legend. Yeah.

So that's sort of how I first got introduced into this space. All the companies prior were fintech, payments, lending, all within the financial space. So it was also somewhat familiar. What's the thing you remember the most from talking to Tim Draper about crypto? Oh, OK. So here's a really fun story. He invested in the company in 2011, 2012. OK.

And I would have these quarterly investor meetings with him. And I think it was in 2012, mid to late 2012, that he would, I would present the company, what we're doing, et cetera. And it was a social payments app. So pay for stuff inside of Twitter, inside of tweets, inside of Facebook posts, et cetera. And so I'd present whatever it is we're doing, metrics. And then he would ask me in one year, this is 2012, in one year when everyone in the world is only accepting Bitcoin for payment, what is your plan? and i would look at him and have to come up with an answer you know what was your answer you can't not honestly it was it was it was very bs but you know i i would say something along the lines well

if that happens uh we'll come up with something then you know but what a legend but oh my god He was a bull before anyone has ever heard of Bitcoin. I think he heard about it and then immediately, intellectually, politically, emotionally, was so invested in it. And it's obviously paid back dividends. And he still remains very much a proponent to this day. But yeah, I was surrounded by crypto bulls, actually. So a bunch of my other investors ended up being early investors in Ripple. One of them was founding team Ripple. And so I was constantly surrounded by people that were really bullish on crypto. And I just never, frankly, thought much of it. All right. So let's, well, it's funny you say that, because let's talk about what you're doing now. And then we can get into some of the nuances of it.

Yeah, absolutely. Um, so it was, um, something happened later in, um, after we, we sold the company, um, while we were doing the sale, actually, uh, end of 2016. So, um, I'm Egyptian born and raised there. Um, and at the end of 2016, after, um, decades of, uh, ineptitude and corruption and bad luck, the pound was going to be floated by 50%, which means that for every dollar you would get eight Egyptian pounds and overnight it would be 16 and people would lose literally half of their net worth. And I remember when I was first born, that rate was two and a half to the dollar. And I've seen it go up all the way to 20. And it was during that time that part of being around crypto and just dismissing it over and over and over again is that I never

thought it would apply to real geographies. So whenever Tim or Greg Kidd was another investor of ours or anyone else would talk to me about Bitcoin, I'd think, okay, this is great for the Silk Road. It's great for ordering hits, drugs. It's great for North Korea, Somalia, those kinds of economies. But then because of these macro economic conditions in Egypt and people losing half of their net worth, and when you couple that with inflation of 35% even more, we started seeing doctors and engineers getting arrested for buying Bitcoin in Egypt on local Bitcoins for a premium of 20 30 percent and egypt's not an economic superpower but it's a regional one it's the probably the 20th largest economy in the world by ppp probably um so it's it's it's very much um

a uh non-north korea non-somalia non-venezuela um and that's sort of when it clicked oh they're doing it because the pound when I was born was two and a half. And due to no fault of their own, just by simply being there, now it's worth so much less. And if it's applied to Egypt, then it's applied to Turkey, Russia, Saudi, India, China. And all of a sudden, it becomes a much, much larger opportunity and a much, much larger potential solution to a big problem. And so I think that's when it clicked in my mind and um first thing i thought was uh we should make money off of this so i i tried to get my family to make a meaningful investment in the space and um being egyptian with capital controls um the lack of infrastructure that frankly still remains to this

day in crypto it took us about five and a half months to actually get up and running and um put our money in all right so hold on i want to really spend some time on most people hear about capital controls government censorship um you know all these things in you know what for many people it's just like these far away places you have a unique uh perspective and experience understanding in growing up in egypt specifically help people understand like when you talk about capital controls, how does that affect the everyday citizen? Like, what does that actually mean to them? So Egypt is fortunate enough in that it didn't have that much capital control, but it did in this specific time period, very recently. Um, what it means is that you are,

again, it's very important to note due to no fault of your own, you're simply being, you've simply been born there right um your food goes up um if you're exporting business if you're uh importing supplies that is impacted less people are able to buy things and you end up having an entirely different economic system um in addition to what's what's happening officially and so you have in egypt for example you have a black market and black market is typically denoted in the West as something nefarious and crime-ridden, et cetera. But I forget the actual term. There are nicer ways of saying black market, but in places like Egypt, our informal economy equals our GDP. And so what that really means is that Egypt's GDP is probably closer to

five, $600 billion, of which 300 is in the official economy. And a bunch more is barter, cash, literal gold under mattresses. It's a country that growing up, despite being very much an economic force and a real economy, diversified, etc. I think at some point, 90% of people did not have bank accounts in my, in like five, six, seven years ago. Wow. Which is, it's a very cash driven economy. And part of that is the inability to trust banks, the inability to trust deposits. Imagine having a thousand dollars at the bank, but that's sort of, you're a hostage there

and you're not able to really move it. And if you start moving more than, you know, 20 or 30, the bank can ask you, what are you doing and why and how is this happening and report to you. And so no one feels safe, which greatly inhibits the, constrains the economy on every front. um and again like uh we have great examples of bad economies around the world when it comes to a high middle income country like egypt uh like turkey like russia etc it's just a much larger opportunity set versus just thinking about failed states and if you're living in a heavily cash oriented society and economy you're really by proxy cut off from the global financial system right because you don't have a bank account you can't access other markets like it is so um kind of boxes you in right because you only have the opportunities in which physical

paper or coins is accepted and can be moved right and i think even you don't even have to go that far. Think about the issues internally. So forget about trading with other countries and having those constraints. You don't have great access to credit. You don't have a great informational system. You have an inability to grow at the same rate, to borrow at the same rates as people in other countries would. And that's a very, very big problem because when you see like access to capital and access to financing is such a big deal. And it's part of what makes economies boom. If you have enough access to capital, you can grow faster and you can grow period, right? And even out, what I'm saying is people in Cairo and Alexandria, which are the two largest cities

in Egypt, might not have great access to capital. But I assure you, it's even worse in the villages, right? It's even worse in the rural areas. And that just goes all the way back. And so I don't even think you have to think about being cut off from the international system um there's some people at the at the top that are connected to it there are exporters that are connected to it but the thing about it is that for the vast majority of the people 100 million um you just don't have a proper economic help once you're constrained once you decided to start looking of crypto right you and your family did what what was kind of the low-hanging fruit so um so my family my family has been uh import exporting we had um created uh western companies

we had western holding companies and yet it was still difficult getting money out of egypt um and it was specifically difficult at that time to make a large allocation into crypto um i remember thinking, uh, my mother could just call her broker up and, um, tell him to buy her shares of Barclays in London and Nestle in Switzerland. Um, and five minutes later it's done, but she didn't have the ability to do this. And so we, we, we had to create this new, um, you know, uh, European entity and then do all the KYC ML, even though we'd done it before, even though we had decades of history, uh, in order to, uh, actually go about making allocations, um, often working with exchanges that I would not prefer to work with, you know, and based on all of that work, you end up with a

moon. Yeah. So maybe talk a little bit about what you're doing now and then we can get into the nuances. Sure. So, um, I was thinking throughout all this time, wouldn't it be really nice if you could just buy this like you can buy a share of stock. And so Amoon today, our mission is simple. We want to make buying crypto, investing in crypto as easy as buying stock. We listed the world's first crypto index exchange traded product on the Swiss Stock Exchange about a month ago. Besides being the first index that is publicly listed, it's also the first physically backed a crypto product that um has been uh released on the public markets it's 100 collateralized by design um what does that mean so a lot of a lot of people will have heard physically backed right

uh whether it's with you know futures you know all that kind of stuff but describe what you mean when you say physically backed 100 collateralized so it's it's super simple it means that for every share of a stock that is sold or issued or created, there's an equivalent amount of, let's be very, very simplistic and just say it's only Bitcoin, Bitcoin in a vault. And so for every $10 of shares that we issue, we buy an equivalent amount, $10, and put it very safely in a vault. So we listed in Switzerland. And when you think about Switzerland, And the Swiss have a very rich, long history of trading and storing gold. And so we did the same exact argument.

Just like you can buy shares on a stock exchange and be buying gold in the background, someone literally takes bars of gold and puts them in safety deposit boxes, underground vaults, et cetera, to protect your assets. We do the very same thing, but with laminated plastic pieces of private keys and crypto. And so that's what we mean by physically backed. That should provide additional comfort to investors. It's not the debt instruments that we've seen before. People have tried doing various methods to bring crypto to public markets, and it's often either carried a very high premium. So, for example, I think during the bull run last year, there was a public instrument out there and people were basically paying the equivalent of $40,000 per Bitcoin on that because it had a premium of 100% or less professional instruments that just are debt instruments that are not fully backed. And so if something goes wrong, well, there's nothing backing the investment. And so we try to, in typical Swiss custom, make it as boring and conservative as possible, which I think crypto is missing some of the more reputable perspectives and products, and modeled it after something that has been traded for a long, long time, which is gold.

What were the challenges in going through that process, right? So you're trying to make it as conservative as you can. You've got a general sense of, hey, let's go get this approved on the Swiss exchange. But what were the things that maybe were bigger obstacles than you thought, or maybe even some obstacles that popped up that you weren't expecting? So there's two aspects of bringing the product to market, right? One is the regulatory permission. And if you look at crypto ETFs and ETPs around the world getting rejected left and right by various jurisdictions, that's not exactly easy. And there's no guaranteed way of doing it.

And so we, in our experience, went around the world. We visited or spoke with 28 different jurisdictions on every continent except Antarctica and tried to see who would be amenable, who would be open to opening such a product on a public stock exchange. And we didn't honestly get that many bets. Like of the 28, maybe three or four were open to it, were open to it with the other ones like vehemently against it or they were just indifferent. And hey, this isn't a focus. So some were vehemently against it, some shocking notes, some the conversation quickly delved into this is terrorist financing disprove that. And you don't want to have that conversation. That's a bad start. But in a lot of cases, I think, aside from a couple colorful examples, in a lot of cases, we found regulators to be incredibly smart, more in tune with the latest developments than you would think. and just worried about, well, we need to let the market be more mature.

Or in most cases, it was, we need one of the bigger players to approve this. And so if Hong Kong or the United States approves this, maybe we'd be willing to take a closer look. And I think a lot of people around the world, a lot of jurisdictions around the world are doing exactly that right now. And so that was one of the biggest hurdles of just trying to convince people. And there were a few very small countries quite excited, less regulatory constraints, but also less attraction for professional investors. And so at the end, Switzerland was the only model that fully accepted us in a structure that made sense and was reputable, professional, etc.

But that took a while. that took a while. One of the things is that, you know, we've been working on this. I've been thinking about this for two years. We've been working on it for close to that amount of time, maybe a year and a half. And the company was only incorporated like five or six months ago. And a huge reason behind that was that we didn't know which jurisdiction we would be in. And so you can't just become, you know, a German company or a English company before actually realizing where are we actually going to list that's amazing um and so yeah for the longest time it was just privately funded credit card funded no corporate backing um and then you know lawyers

had a fun time putting all that ip back together what um what's been the response so far because so before before we get into the response in addition to the regulatory thing the thing that no one's thinking about because no one has gotten regulatory approval uh is operationalizing this And there's some really fun issues associated with that. I think we talked about one before, but you go to all the service. Great. Congrats. You have regulatory approval.

Now you go to all the service providers. I need an accounting system. I need an audit system. I need order creation. I need a platform to trade these things on a daily basis. You know, you have a product that's live 250 trading days a year. No one understands anything. No one gets what you're doing.

um the big companies tell you that oh we need 9 to 18 months to build fairly simple things um my favorite thing is the accounting systems uh only go up to two decimal places well crypto goes up to 8 or 10 right how do you how do you fix that and you know they tell you where we have an index so they're like well just um round but when you round and it's seven decimal places out six decimal places out you go to zero sometimes and so we spent about as much time and it was actually harder to operationalize this than it was to get regulatory approval um which is which is uh you know something that others will start facing and hopefully uh uh what we've built can be used by not just us because we we very much believe in um you know a great tide lifts all

boats for sure um the upper operationalization i don't even know if that's a word at this point i like um is uh it is interesting because it's one of the only crypto products in the market that actually can't have a bunch of uncertainty oh totally like like the accounting actually has to be accurate the auditing has to be accurate right there's no like you know i don't know is tether backed or not like so there people want to know is this backed or not and there's a lot of eyes on us as well so like we we've been humbled by the reception that we've received um we've we've only been live for a month right but uh we did our first million dollar trading day uh a few days ago and that means that one million dollars was traded by as or by or sell or all by

on the product i think it's one direction i'd have to but i think it's one direction which is which is pretty crazy crazy given that the um like put differently we traded about 20 percent of our instrument in a day that's that's very very liquid so so if you were going to go like really hardcore hyperbole you could be like you have the most popular uh exchange traded crypto product in the world that's that's a fact but but in addition to that we are also the top um not by market cap but by volume by trading volume we were the top exchange traded product on the swiss stock exchange last month that's crazy and within you know it's how many do you think there are how many etps um i don't know dozens hundreds hundreds something absurd but

And crypto. Yeah, the Amun Crypto Basket Index was the top exchange traded product on the Swiss exchange by just total volume. Wow. And today, it's very much a Swiss product for Swiss customers. We're working with regulators and other people to bring it to more markets, etc. And so, if anything, the trading volume is really surprising given that it's just the Swiss market today. Yep. So, when somebody buys it, what do they get?

um they get they get shares that go into your local brokerage account um and you hold that and then uh we just like any other public equity just like any other public equity and we use um we use the money that you put in to uh purchase crypto um and then again put it in the secure vault in the back and then and this is you're buying bitcoin you're buying a basket so it's a basket of the top five, up to the top five. So they have to match certain requirements. Right now, our basket is Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Litecoin. But we can also include Stellar and EOS. And it represents about 75% to 80% of the crypto market. And the cool thing about it is that it's a self-rebalancing index, right? So you get that diversification. You're not just

constrained by being in one asset subject to its whims and moves and on a monthly basis if one goes up and the other goes down we rebalance to adjust for that and so at any one point you're index investing uh you're buying just 75 to 80 percent of the crypto market i don't know how much you can talk about the security and the way you guys have designed that system and some of the nuances that go into securing crypto um in a regulatory compliant way that is uh also available for relatively high volume i mean you talk about whatever whatever you can here but but uh so the talk about this a little bit the the cool part about this is that even though some most of the operations was very hard we've also um we've also gotten some really good partners right um there's

some very large companies that I can't announce yet that are coming up soon. But even the companies that went live with us from the very beginning are banks and market makers like Jane Street and Flow Traders. And so- Big names. Huge names. Our index is administered and calculated by Envis, which is a unit of VanEck, which is an even larger name, especially in gold trading and such, right? And And we're able to rely a lot on their infrastructure and their specific products and security, as well as utilizing and putting even more safeguards on our own. And so, again, in a very safe and secure Swiss way, we do not directly control our index. It's updated once a quarter with like a 60-day notice.

We do not directly store our coins. That's with an independent third-party administrator. We do not directly price our assets. We do not directly market make our assets. And that's, again, to give investors the comfort of there's not going to be nefarious, one-sided, selfish economic incentives here. It's structured like a very safe, conservative Swiss product. what's your argument to or your pitch to investors as to why they should have exposure to crypto so i think there's there's ample research that shows that um the return versus risk profile of

crypto is actually quite attractive right um so you can you can mathematically analytically go after that i don't think about it that way what i think about is if you look at use cases if you look at people actually again getting arrested or being subject to uh potential you know local crimes or going the distance and you know going through immense pains to buy this there's something there um and if it only achieves one percent of what literally the smartest people in the world in silicon valley are convinced it will right in the same way that they were convinced about the internet and the cellular phone etc you know geez that is worth throwing 10 bips at right there's nothing that's going to hurt from doing something like that that's

Yeah, that's just, exactly. It's an option on a future that would be, at its minimum, one of the best things from a social level to the vast majority of the world. There's something that I think Kyle Simani wrote about, which is- Shout out, Kyle. Shout out Kyle. Read his blog post. He's amazing. He asks this question of, if you had to invest your entire net worth in just one of six currencies, sorry, if you had to invest all of your net worth in just one currency, would you choose one that wasn't one of these six, which is the US dollar, the British pound, the Japanese yen, the euro, and the Swiss franc? And I think if anyone answers, honestly, there might be an exception here or there for the Singaporean dollar with a million people here or there, but no one would really choose something outside of that. And the amount of people that live in countries that issue these currencies are about a billion people. Put differently, over 85% of people in this world are in a country where their local currency is not their first choice and so that inevitably to me makes it seem like

a reserve currency just for those people would aside from the economic incentives just be a very good boom for these people socially um and that's worth taking a bet on that's sort of how i see it you're getting now into the argument um and people get all upset about this but i mean imf literally released a paper toward the end of the nineties that said, uh, inflation is one of the largest contributors to economic inequality, right? Or income inequality. And, um, the reason is a whole bunch of structural issues. But if you take away a currency that's based on inflation, you can actually create a more fair and equitable world. Absolutely. And you see that in places like turkey um where they they recently they've had a very bad summer from a currency standpoint um

the lira took a pounding the lira took a pounding and there are reports out there that uh bitcoin usage in turkey bitcoin uh buys and sells uh has gone up three four hundred percent in dollar terms while the lira was taking a beating and so if you really think about it it's actually much much more of an impact on the local level and again turkey turkey's gdp is probably seven eight hundred billion um very much a very large economy and if enough people are finding things like that i was reading this report that someone was estimating that 45 of turks in the next five years or so will be bitcoin or crypto buyers that is worth taking a bet on because again from a social level it's very good for the turks but also from an economic equality and from an economic

perspective it's it's great for everyone involved one of my favorite things to do in in all of crypto is to sit down incredibly intelligent people and say the only two things you have to believe to have a chance at understanding why bitcoin could be more valuable you have to believe in supply and demand economics and you have to believe there's a non-zero chance that demand could increase anywhere in the world and when you break it down to just two very simple decisions i've yet to meet anybody who's told me they don't believe in supply demand economics and the second thing is is even more right it's that non-zero chance of anywhere in the world factors exhibiting this. That is such a low bar. It's not even funny, right? For this to be

successful in any way, shape or form, however minimum that success might be, it's actually quite a low bar. Then it's easy to see a world where this has even that incredibly low impact and be incredibly rewarding. So I'm going to blow your mind right now. here's my big theory as to why young people, uh, usually kind of 25 to 35, that age group specifically is so, um, open to this idea. So if you think of our parents, right, you and I are about the same age. Um, if you think of our parents, uh,

media organizations, financial organizations, the government say, I'll be all, you know, infallible. Um, just they turned it over and said, you know, my life is, uh, going to be a mirror image of what you want it to be right so the bank's going to do what's best for me that government's going to do what's best for me for etc we happen to enter into our formative years kind of 16 17 up to like maybe 24 25 during the financial crisis and we literally saw some of those big stodgy you know infallible uh financial organizations on their knees and and begging for the government to save them and some of them went out of business right and

then there was some that had to get saved by was private investors you know consolidation all of this stuff where right when we hit those formative years we saw that that was a lie and i think what that did was it one created this rut of like just distrust with a lot of these organizations but two it showed us that wait a minute this thing may not be what everyone's told us our entire lives and so now there's this idea of like hedging and crypto is the perfect hedge because it's based on nothing else other than math and i think another way of phrasing that is we're sort of one of the first generations if not the first one to sort of see the the wizard behind the curtain you know and like the wizard of oz is no longer

magical to us we sort of see how the sausage is made and it's and it's crappy it's inflation driven it's um corrupt it's not built on anything and then from that you know after seeing people lose their homes, after trying to get a job and not being able to, after seeing how shaky the foundations of institutions like AIG and Lehman Brothers, right? Like AIG, I remember that on Manchester United's jersey. That's how big that was, right? And so it's not hard once you see that to make the leap into questioning more and more. And I think the more you unravel this cookie, the more you realize, well, well, what's gold?

What's money? Our grandparents had a gold standard. What's that about? Why did we not do that anymore? Why did they tell us that we were only going to get off of it temporarily and go back? And then we never went back. Exactly. Exactly.

And then you realize, oh, it's so much better here in the United States than it is anywhere else. Oh, this gets so much worse. the scenarios could be horrible and then on top of that you you then see this thing that you know you can you can buy and trade on your mobile on the cheapest of android phones and it's it's it's fun it's easy it makes sense but i also think that uh we have been able to question everything because of how bad things got i'm gonna take a couple of pieces of arguments um or stories that i've heard from both you know some of my partners and then others in the crypto community but like if you ever sit and you think about this idea that there are different colored pieces of paper

that are accepted or not accepted based on imaginary lines in the earth like that is wild in 2019 when we have the internet right and that that and that are printed at a rate that is very much driven by politicians who are seeking re-election from the mob. Like, that doesn't make sense. And I think this is why when you take a step back and you just realize I can send an email from Mongolia to Mozambique very quickly,

but try Western Union and then you want to rip your hair out. it's sort of um astronauts get this uh there's this condition that astronauts get when they first see the earth from above and see a how fragile it is but b the absence of borders oh that's the same thing like this is the same lake that we're all sort of you know surrounded by um and i think you crypto allows you to do that without going to the space shuttle so basically it's not when when moon right exactly is that we already went to space perfect exactly i heard a term recently that uh that somebody came on the podcast and they talked about uh moon math which is basically just too complex math for any of us uh you know you're on earth-based humans to do this was called moon

math um all right so let's talk a little bit about the regulatory arbitrage across uh jurisdictions because you probably more than anyone i know have spent a bunch of time going to these different geographies and really understanding the nuances um kind of give us like a global report of where are we where are the good spots and the bad spots and how you think i think also we have to talk about regulatory arbitrage because i don't think enough people think about it okay um but um like one of a fun example that's that's american related is um if you think about cannabis weed is illegal in the united states on a federal level sure a few states have legalized it but very much it is illegal federally a lot of cannabis companies have seen the the issues with that

it's very much legal in canada because it's legal in canada an american can buy a canadian wheat company stock yeah or the whole company you know they have enough money an american can buy wheat in amsterdam where it's legal but more than that um a canadian company can list on the new york stock exchange and they have in the last year because their home jurisdiction is canada because you know there's what laws are you applying we're applying our home jurisdiction and this allows you to then in you know back to the imaginary borders that um the imaginary lines that you don't see from space optimize uh based on where you are because everyone has benefits and drawbacks so you're telling me i actually didn't know this you're telling me that i can as an

american buy a weed stock on the u.s stock exchange that is based and the company's based in canada yes i forget the actual company's name um so basically but like weed is illegal but i can buy there is a canadian so there's a couple companies that were listed in toronto that also dual listed in new york but there's a company at least one company that i know of that listed in new york without even listing in toronto i love it's just it's a weed company um and there's not a problem with that from a legal perspective and so that's sort of how i look at the world is that we need a reputable professional jurisdiction let me let me ask you this question what uh what happens first uh weed is legalized in the united states or uh the federal reserve and or the

president acknowledges uh bitcoin as a uh option as a national currency uh i think i think weed has been struggling for acceptance for decades and there's been drug wars you know waged on it that they're probably much closer to the finish line than crypto is i think um bill gates has this uh line of thinking this quote about how people overestimate what happens in two years and underestimate it in 10 yep my favorite quotes it's beautiful and i think that um crypto will take a little bit longer than most people realize and that's okay um we're very much early and if you compare the internet in 93 and 92 and then when did facebook actually come along when did twitter come along when did uber come

along it could easily take another 10 15 years for crypto to touch the world in its entirety um hopefully less because you know we have increased access now but um i think we will cross the finish line soon medium will suffer because there will be everyone have already written everything on medium i don't yeah twitter won't even be fun anymore by that point i i don't think it's possible to uh i don't think it's possible for medium to run out of crypto content i think i think there there's there's uh plenty more for the next 100 years all right so where where do you think uh if you're somebody sitting at home uh and you're interested in geographic arbitrage what what are some interesting jurisdictions or plays there that

they should look at? So I think that the places that come to mind are Switzerland, Malta, Singapore. And even if you look at the amount of crypto companies, blockchain companies that are starting there, they're getting a lot of attention by the regulators. There are rules and procedures. And that's what most people don't realize is that when you're saying that you want to be accepted, You're asking for additional rules. You're asking to be regulated, right? Tell me what not to do. And I promise that I will follow that. And so I think those are the top three jurisdictions people should research what exactly they're looking for and what each jurisdiction has. I think Switzerland and Singapore are probably the leaders in terms of that from a European and an Asian, Western, Eastern perspective. Malta's up there, but not quite as built up as Switzerland, just because Switzerland had a bigger head start. But I think that it's also like a lot of people in the crypto community dismiss regulators.

I think regulators are incredibly smart and they're frankly trying to just do their jobs and they're excited about innovation. They just want to do it in a safer way. And my point behind that is that despite whatever regulation, whatever jurisdiction I'm in, I'm in constant contact with a lot of territories that you might perceive as to be hostile towards crypto. And that's OK. You know, so I would caution people in just choosing, you know, one jurisdiction and forgetting about the rest. Everyone needs to be educated and everyone will switch at some point. Of course. Every technological innovation that we've had, everyone has switched at some point.

It's sort of, I think it's analogous to how Uber has spread, right? A lot of cities, a lot of countries, scooters, we're seeing this in scooters today, right? Are saying no. Scooters are amazing. But you just know that this will be around the world in every country, in every city, it will be inevitable that Uber will be there, scooters will be there, that kind of thing will spread. And so it's so dumb to just dismiss that and not keep thinking, keep talking, keep educating. yeah um my favorite part about the whole scooter mania that's going on right now is like the segway was was so much cooler like it really wasn't it just it was too early it was way too early and they should have done you know more fun things than playing polo with it i don't remember

i don't think they did much besides mall cops and polo and so you ever see him do the like this the downtown city tours and yeah he's like tier two cities right now he's got the helmets on it's like a whole family going out for the city tour on a segue it's sort of it's sort of the difference between you know uh snap spectacles and google glass right just not much the future is bright the future is bright um all right what is the one thing going through the process you did to get this etp listed that you wish every crypto entrepreneur knew that they probably don't that's a hard question i'll ask some really tough questions here so welcome um so i you brought up medium before i think it's so incredibly um

powerful to be able to explain oneself and the industry to people. I think in my experience, and I've built fintech companies before, I've built API companies before, so it's a fairly technical background. Just explaining what something is in a couple of sentences is very difficult. And you're only able to do that if you fully understand it well. And on top of that, You've thought about what the other side would perceive it as. And I think we have a colossal marketing optics issue within the sector that is crypto as a result of not being able to do that and not being able to point to enough examples of literature, resources, etc. It has gotten so much better. But I was surprised. My team was surprised. And again, just how it sounds dismissive. And this was completely our fault. But how intelligent and professional regulators are, like when you really sit down with them and you explain what this is, they understand it because they're actually quite qualified at their positions. There's a reason they've been doing what they're doing.

And I think that this communication issue has set crypto back so much because it enables a lot of bad narratives to stay because they don't have enough simple defensibility. I'd agree with that. I'm on board. Before I finish up, I always ask a rapid fire round of questions. Are you ready? Let's do it. What's your most controversial thought in crypto? Um, I think that, um, Bitcoin maximalist and altcoin maximalist probably have it wrong

and both will not be the top one in the long run. And so there's somewhere in between of not maximalist. There's something that hasn't been created yet that we haven't seen. Ooh, I'm not even going to go there. I just, I, you know, like no one is searching on Lycos or AltaVista anymore. Odds that Bitcoin is not the king five years from now. i think it takes takes takes probably a little bit longer than five years i messed you up with the time probably a little bit longer than five years but but again like again yahoo was a really

big deal in the 90s and there were sites that no one has heard of like lycos and alta vista And, you know, I don't think that anyone has that much staying power. And whenever people believe in someone's staying power that much, I tend to want to throw 10 biffs the other way. All right. Most important company in crypto other than your own? um i think what binance is doing on a global level is um absolutely absurd in every way he's on another level he's on another level and um and i'll even go a step further u.s entrepreneurs don't get it because they're so their heads are so wrapped around US rules, regulations, the way that you build companies, et cetera, this dude is out

executing everybody. And that by itself could be a controversial thought that I agree with. I think innovation and crypto is not going to come from the US because you sort of have to be your own user in order to create a huge product. And this is very much done for Uganda and Kenya. And who's opening up exchanges there. Binance. Who do they compete with? Nobody. Meanwhile, Africa will have a higher population than China pretty soon. And it's rising. And so I think that in terms of the ecosystem and just the breakneck speed at which they're doing it, it's unbelievable. I've had a lot of people come on and they're always talking negatively about the business practices and all this stuff.

And I pretty much say, look, there's a lot that you could argue with, right? And kind of the execution, et cetera. But the one thing you can't argue with is just the absolute speed to launch a company in less than two and a half, three years, literally a billion dollars in revenue in a quarter. And people hated on Travis Kalanick. People hated and still hate on Elon Musk, right? he's regardless of the methods regardless of whether or not in the long run it will be

successful because again who knows about staying power yep absolutely but what they've done in the time they've done it in the places they've done it with a foresight and ambition that is running this company it's crazy it's ridiculous what um on 15 million in in total raised by the way right that was their ico oh yeah he did like nothing nothing nothing and you compare it's crazy that we're saying 15 is nothing but yeah but still compared to the 250 reasons but it's nothing to a company that has only raised 15 million and i think um monthly sees 20 billion of trading volume something crazy uh if you could wave a magic wand and change or improve any one regulation what would it be oh i think i i think you'll like this accreditation laws don't make

let's go anywhere anywhere um i i i do not i think there are barometers you know to uh there's gotta be something there has to be something absolutely people have to be protected in some ways i get that wealth probably not the best wealth is not it right wealth is not it if you take a look at the celebrities on tmz they're accredited investors some of the early stage engineers are not that sounds like something is messed up we think kanye invests in like you think he's like other than like shopping like actual investments what do you think he's like hey i want to put five percent of my net worth in these buying stocks so i i think that it's impossible for someone to reach that much staying power that consistently

kanye is pretty old like he's not a 20 year old rapper right and he's been he's been at the apex at the zenith for a long time the guy's smart like he very clearly has and he's in an industry where you know it's the first time he he made money it's the first time he really saw a lot of money and he's kept it and he's grown it i i think he has a well diversified portfolio by the right advisors and i i wouldn't dismiss or worry about kanye's economic prowess i uh i love the quote uh tell me a genius uh you know that's not crazy right think of think of all the people you think is really intelligent they got a little edge on them obviously he has an edge but um is it all just in you know hubris and random luck no yeah

there's some luck but in order you can't be lucky for 20 30 years you can be lucky for a couple and i think that um yeah he he probably has very good financial advisors that are growing both his and his wife's uh fortunes and they've both done a great job despite what their optics uh did you see the picture he took with uh the uh the art of jp morgan at jp morgan no oh man you whoever's you gotta go on his twitter account and he took a picture and i forget the exact caption but it's like jp morgan in this huge florida ceiling photo sitting like in a chair oh wow and kanye standing there and basically like a regular you know sweat sweater with a uh with a hat on and he's like me and jp gonna take over the world you know and he's he's a contrarian so if anything i could i could

see him i could see him you know uh latching onto bitcoin his uh his cell phone password is uh zero zero zero zero because when he was in the president's office they saw him hitting it and uh you might not remember this but there was a while where i kept tweeting at him trying to get him to tweet about bitcoin i don't remember this that's absurd oh man every time he tweeted i would respond immediately because here because here was the mistake twitter made twitter kept putting my tweet because it's a verified account with a lot of followers right under his so the first response you would see to all of his tweets was mine this was like free advertising basically are you blocked no even better you're not blocked i kept tweeting about on bitcoin bitcoin bitcoin and all of a

he he tweeted out in all caps decentralized and i was like man the next one's got to be a bitcoin never did it but uh eventually just share a public address exactly um all right what is the most important book you've ever read um has nothing to do with tech um animal farm what is that so you know 1984 the book or the year the book okay the book it's by this author called george orwell 1984 is his best book okay everyone knows 19 uh sorry sorry animal farm is his best book everyone knows 1984 um it's this analogy of um a farm and but every character in it is tied somehow to the russian revolution and so jesus trotsky and stalin are the pigs and the horse is the workhorse that is the russian people and the raven is religion and it is it's like 100

pages and it's super easy to read i think i read it in the fifth grade um still be tough for me but it's so powerful and so simple and and back to you know like my my marketing points and how simple is actually really hard to accomplish i think it's it's it's one of the best shortest things that's ever been written and you could you could read it in a few hours so i should read it yeah all right it has nothing to do with crypto that's fine animal farm we'll see what happens i'll go read it um all right uh we usually end with you asking me one question but before we do that probability that aliens exist um probability that aliens exist i think in in in one reality in the multiverse it is highly likely that there's another

intelligent life form but whether that exists in our own universe as part of the infinite bubble bath that is the multiverse who knows are you on the simulation train um i i um i don't know about simulations um but i i i've read i've read a ton about um string theory multiverse hidden dimensions and uh that astounds me and so that that's that's sort of where that came from i think there's multiple realities multiple universes did you see crazy world out there The head of Harvard's astronomy department is like, yo, there was a spaceship. I know what you're talking about. And he's like, I don't care if any of you don't believe me.

There was a spaceship. And I'm sitting here like, is anybody else reading this? So the head of Harvard astronomy, who's this really famous, I think, Israeli physicist, right? Okay. uh there's an object that he says has entered and exited the solar system in a way that is uh mechanically controlled like this is not a natural projectile it should not move like that according to the laws of physics of just a stationary object um that's fascinating i i i think it's i think the most interesting thing about that is that they they came they saw and

then they peaced right they were like we're not messing with y'all like we are not doing this y'all are way gone from being saved we are not doing this dude if in our lifetime aliens show up i'll literally die so happy uh like what would you do if you met an alien um i mean i think i think at first i would be completely and utterly terrified i mean if you really if you think about it if you think about it what what have europeans done to the natives who look and speak and you know seem exactly like them like there has never been there has never been a case where explorers who are smart enough to traverse the universe to come here in the same way that we you know traversed the atlantic or went to australia it doesn't end well

for the natives listen aliens are coming they're gonna be super peaceful they're gonna okay sure We're going to want to go grab a beer at the bar. Don't worry. They're going to use our bodies for fuel. What one question would you ask me to finish it up? So I have never actually heard how you personally got into crypto. And I think there's always... What's crypto?

Exactly. No, these are always my favorite stories because you see how everyone is sort of like intellectually curious and has managed to find their own way of figuring it out. And so I think you're very well known into security tokens. Talk a little bit about your history of actually exploring crypto. And did you ever believe in Bitcoin, Ethereum, the other coins as much as you today believe in security backed? So 2014 was working at Facebook. First time I ever heard about it. Literally turned to an engineer and was like, what is this?

You're like, man, it's nothing. I was like, okay, you're smarter than me. I trust you. guess it's nothing 2016 like man hey man that kind of that didn't go very well um and so you bought some so in 2016 uh i did not buy any i started building mining facilities ah because uh long story short my family's been in data center business for a long time just grew up in and around it um and uh my business partner and i jason williams had um invested in a uh energy company and so they basically take car tires burn it turn it into oil steel and energy um sell the

oil and the steel as a commodity with this power source uh company's called prti and uh so there was this long conversation what do we do the power do we sell it to the grid and i kind of half joking if i was like i wish to build these rigs and jason like looked into it and then jason like went over you know overboard my overboard and was like we're doing it and uh to his credit i mean he drove the whole thing and uh literally started mining crypto and um you know it was the it's nice to get introduced to such an atomic level like the base layer so this was all like personal interest type stuff we didn't do it out of a fund we had anything and um when you start mining you gotta figure out wallets you gotta figure out exchanges you gotta figure out you

know all kinds of crazy stuff that if you just go on coinbase and buy you don't have to um and when we got through all that we were like man this this is a huge opportunity for somebody to go deploy capital in a really uh effective way and uh so we went all in on it and did anything in that experience like surprise you uh so much were you were you taken back at anyone like do you remember a particular moment where you just yeah the price kept going up no aside aside from the price just just from like the social dynamic how people were treating it anything like that the the biggest thing that surprised me was this idea that um the network could be the customer so in the data center business you have to rent out computing power to customers you got to deal

with going and finding them convincing them you know closing the sale customer service all that kind of stuff the idea that you just completely removed the human-based customer or company as the you know the the driver of your revenue and instead focused on just renting the competing power to a network blew my mind uh and then we built like three more and we were like all right i think this is enough for us um so let's hope file coin releases soon we won't even get into uh my whole theory on uh so i wrote about recently so i can say one sentence on it you can apply newton's law of motion to companies those with no momentum are likely to stay with no momentum and those with lots of momentum are likely to gain more momentum and so if you raised

money in 2017 and we're in 2019 you didn't release your product yet i think less than 20 of those companies that fit that that profiler criteria are going to be successful but we'll see i i i agree with you and i hope that we're both wrong in enough cases by the way i completely i completely agree with you i think 20 is too high but i hope that because you know it's been years and you've you've had tens of millions of dollars or hundreds um yeah i i i hope that the few exceptions there we'll see do something all right man thank you so much this has been awesome uh thanks for having me yeah we'll have to do it again when uh when you've got the uh most traded exchange traded product in the united states one day from from your mouth to god's ears all right man brother

appreciate it thank you all right guys thanks so much for listening to that podcast before i let you go one more word from our sponsor blockfi their new interest account allows you to securely deposit your Bitcoin or Ether at BlockFi and receive 6% annual interest paid monthly in cryptocurrency. This rate actually compounds. So you receive a 6.2% APY, which is very attractive given the alternatives. So you can actually take your Bitcoin, you can deposit it with BlockFi and get paid an interest rate of 6% in return. Go check out BlockFi.com slash Pomp. Again, BlockFi.com slash Pomp to sign up and start earning interest on your crypto today. Hey everyone, Pomp here. If you liked this episode of Off The Chain and want to help us

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