The Ryan Hanley Show - RHS 170 - Josip Rupena Explains the World of Crypto Home Mortgages

Episode Date: February 23, 2023

Became a Master of the Close: https://masteroftheclose.comIn this episode of The Ryan Hanley Show, Ryan Hanley sits down with Josip Rupena.Josip Rupena is the founder and CEO of Milo.Milo is reimagining how global and crypto consumers access credit and financial services in a borderless world. They have built the first digital home lending solution to buy U.S. real estate or cash out their equity.This is an incredible conversation you don't want to miss...Episode Highlights: Josip shares about his background in financial services and asset management and what led him to start Milo. (5:57) Josip mentions that he hopes that the current market, in which mortgage volumes are decreasing due to high rates and a lack of inventory, inspires agencies to become more innovative, including discovering other means of insuring income and other factors. (8:18) Josip explains that they've done over $130 million in mortgages and haven't had a single person who hasn't made payments. (13:36) Josip shares what a crypto mortgage is and how it works. (17:29) Josip discusses the loan application and payment procedure. (22:18) Josip mentions that they also release USDC stablecoin for just 40% of the loan amount because it is tied one-to-one to the dollar. (23:31) Josip discusses some of the regulatory issues they faced as a lender, as well as their advantages. (28:35) Josip explains why they chose Coinbase over the other platforms. (30:46) Josip mentions that things are changing with crypto and that it is maturing as an asset class, in addition to the consumers who invest in it. (42:49) Josip hopes that more companies will enter the market at some time so that they can all come up with new ideas and grow quicker since the client will benefit. (45:29) Josip believes that Crypto Mortage is the first mortgage product that can really help a consumer preserve and potentially expand their net worth over time. (47:31) Key Quotes: “We want to make sure that we minimize the risk of who we do business with, that we're compliant. Because ultimately, when we give someone a loan…it's a long term asset. It's not a two month speculative asset, right? People are thinking about this in terms of like, it impacts their life. So we have to take that responsibility very, very seriously.” - Josip Rupena “I hope at some point that there are more companies that come into the space so that we can all ideate and evolve faster. Because ultimately, the one who's going to benefit is going to be the customer, right?, with more companies like ours.” - Josip Rupena “What's unique about this product is it's really the first mortgage product that can really help a customer preserve their net worth and possibly grow it over time. ” - Josip Rupena Resources Mentioned: Josip Rupena LinkedIn Milo Reach out to Ryan Hanley Rogue Risk Finding Peak Learn more about your ad choices. Visit megaphone.fm/adchoices

In a crude laboratory in the basement of his home. Hello everyone, welcome back to the show. Today we have an absolutely tremendous episode for you. It is a conversation with Joseph Rapena, the founder and CEO of Milo, the first crypto mortgage company. Now, I know many of you out there probably laugh at crypto. Ha ha ha, I'm so smart. I work in the insurance industry and crypto is silly and for children. And I think that there's some of that is probably actually true. Many of the cryptocurrencies, tokens, etc. are for children. However, the blockchain technology and the core crypto tokens, the core assets in crypto are still being built upon and there is

major money flowing into them. Bitcoin, Ethereum, USDC, a few others. And we don't specifically talk about crypto because crypto is not the point. What I wanted to get into and wanted to show you guys and talk about are some of these industries that are forming around crypto that are relevant to us, very relevant to what we do as insurance agents. And this, I think you'll just find this to be an intriguing conversation, very interesting conversation about something that, you know, we don't necessarily deal with every day, but absolutely feels like it's going to be something that five, 10 years down the road is going to be part of what we do. I mean, these are going to be conversations we're having with our clients. And I want to get these things

in front of you. That's what I find interesting. And that's why I do this show and share it with you. Before we get there, guys, just always want to give a mention to Finding Peak. It's a kind of blog substack that I created around peak performance and health, mentality, our relationships, our fitness, and how we can use that and harness that as a competitive advantage in our business. And those articles come out every Friday. They're free. You can subscribe and get them by email. And then every Tuesday, I put out very specific content to rogue risk and tactical strategic information.

Oftentimes we use video that things that I've learned at rogue risk that you can hopefully apply in your own agency. So check out Finding Peak. Would love to have you over there as well. But as always, appreciate you being a listener to this show. Love you for being a listener to this show. And I think you're going to really enjoy this episode. Before we get there, quick shout out to my peeps at Tivoli. You guys have heard me talk about Tivoli a lot.

They are a foundational lead resource for us. We have an incredibly high closing rate with them. It's always north of 50%. Sometimes it pushes close over 60%. And if you have people, if you have agents who can sell warm call transfer leads, then Tivoli is the spot for you. I mean, we've been a client for almost two years buying leads from them. And all we continue to do is up our buy rate with them as we get better and better at handling them. We get better and better at writing more business. And I love working with Tivoli. I love the response for the show. And all you need to do is go to tivly.com. And if you haven't heard of Tivoli, they used to be commercialinsurance.net. So go to tivly.com. That's tivly.com today.

All right, let's get on to Joseph Rapena and learn about crypto home mortgages. Here we go. Hey, how are you? Hey, how's it going? Good. How's it going? Very well. Very good. Appreciate you coming on the show. Yeah, absolutely. Absolutely. I decided to restart my machine just in case. Yeah. It's all good. I, I'm working from home today, too, for a couple different reasons. And for some reason, when I go to the office, I'm like, pretty, pretty certain everything's gonna like fire up and work exactly the way they should. And whenever I'm at home, I'm like, what's gonna break today? Like, what is going to be the thing like doesn't work, but we're, we're, we're fine. It's all good. So, so I'm super interested in what you're

doing and I, and I'd love to get right into it because, you know, so our, our industry one of the things I thought was really interesting about that, the industry that the primarily the listeners to this podcast are all in the insurance industry. So we, we have, you know, over the course of the next month, something close to 10,000 people will listen to this from all different walks. And some of them write commercial, personal, you know, all different lines, but primarily they tend to be independent agencies. So they own their own agency, can work with multiple different carriers. They're not locked into a state farm or whatever. I don't know if you're familiar with the property cash and

insurance market, but a lot of them sell homeowners insurance. And when I came across you and what you were doing, and I want to talk about in a broad sense, everything you guys have going on in your perspective and with all the different things that are happening in crypto, how that impacts us. But this idea of a mortgage either backed by crypto, and I will say, I don't understand all the nuances, so I'm super excited to learn from you. But this idea that just kind of originally hooked me was, as we see rates going up on standard mortgages and everyone kind of thinks about the standard way, this seems, one, like an alternative way to get a mortgage or at least to provide collateral for a mortgage. And then, two, where do we see this going? How does it impact? And I kind of wanted to make all the people that listen to this show aware of this alternative form of financing for a mortgage if some of their clients start to come to them and ask questions or whatever in terms of homeowner's

insurance. So for all those reasons and all those things that we're interested in what you're doing, maybe just start by, let's start with the origin story. Like where did Milo come from? Where do you come from? Like what's your origin story? Yeah, I guess that's a great place to start. So first of all, thanks for having me on the show and giving me an opportunity to share the story. My background is not in mortgage. It's primarily in financial services on the asset management and private banking side, working with clients and helping them make some smart financial decisions. A lot of my clients were international.

I started my career at Goldman Sachs. I ran a family office with multiple international clients. And most recently was at Morgan Stanley prior to starting Milo. And what I saw through that experience is that there's a lot of really great consumers out in the world, both US and international. But the way that most financial products have been built is for mass market, for consumers that fit a really nice box. And depending on what type of financial product they want, it could be very challenging for them to qualify or not qualify for it. So I started with the company really wanting to help international clients be able to get mortgages. And through this journey with the company, I've seen that these gaps are pretty big and the opportunities to work with customers that are less conventional is a sizable opportunity. And that was sort of how we evolved from working with international clients to most recently launching a crypto mortgage. But it's because customers today and their backgrounds and how they make

their income and all that, it's different than it was maybe 20 years ago. And companies like ours can sort of fit that box and help them out. And the issue tend to be both the international nature and the non-conventional methods of creating an income, that's what, I don't want to say confuses, but tends to kick people out of the standard financing system. I mean, I know when I first started my business, in thinking through loans and stuff, the fact that you don't have a standard W-2,

even just having a business in which you're taking, you know, either dividends or distributions out of versus taking, you know, standard W-2, there's all kinds of additional hoops that you have to jump through in order to prove how much you make and, you know, whatever, even though you're- And you really only know that when you want to get the mortgage, right? Yes. Yeah. Yeah. Yeah. Like if you're self-employed, you're like, all right, I'm going to have an LLC. I'm going to structure my business in a certain way. And the way you set up your business may not be great if you're trying to get a mortgage and you're trying to basically conform to the

way that standards are. So I'll say the mortgage market here in the US probably works better than anywhere in the world, right? You know, we're able to originate, you know, 2 trillion plus of mortgages that get delivered to Fannie and Freddie. So it's hard to say that that system doesn't work. It does work. It does work if you work for a company, you've got really good sort of stable income, you've got a good FICO score, you know, you've got everything that you need to basically conform for that loan. But what you describe, right, the self-employed, I'm buying an investment property or I'm international. I don't have a social security number, but I have wealth and I've got a private

banker in the US, right? All of these particular situations where I've got crypto, right? Like, you know, all these things make you fall outside of that. And the Fannie Freddie machine is not designed to consider those factors. They're really concerned around how do we help 95% of the people that actually fit in this really nice situation. And they don't have time to figure it out. Now, what I think is that the world is changing somewhat, and there's a lot more people that are self-employed, right? Like, mortgage really hasn't evolved and qualifying hasn't evolved if you are a gig economy worker, if you're self-employed, right? If you're a social media influencer, right? Like there are so many ways where you can make income today that just doesn't fit an ISW too.

And I don't think that's changing anytime soon. I think what will happen, though, is that as more mortgages get originated for these differentiated consumers, maybe that prompts some changes at the agencies to think about maybe including alternative ways of underwriting income and other factors. But that's going to be an evolution, right? They're going to have to sort of see, all right, this is actually something that we should consider. And in a market that we are today where mortgage volumes are going down because rates are high, because there's less inventory, it might prompt them to have to become more creative, which is what I'm kind of hoping for. Yeah. It's almost like in order to do trillions in mortgage volume, origination volume or

whatever, you have to put everything in a box. Like you can't do that much volume while still considering these kind of more bespoke solutions, which is really what it sounds like you did. It was, you started to look at these people who were struggling and come up with a customized kind of white, white gloves type of solution. And now through Milo, you started to almost create a storyline process for those individuals. So what was, you know, I'm interested in like

that like light bulb moment that, and maybe it probably happens like all things, it doesn't happen in a moment, it happens over time, but where you started to feel enough friction that you decided it was time to create a repeatable solution to the problem. Yeah. I mean, for me, it happened at Morgan Stanley.

I was at a bank. I had started my career 10 years earlier at Goldman. And having been at Morgan Stanley and sort of seeing that, it was becoming much harder for an international client to do business in the U.S. and want to move their assets. And Morgan Stanley was one of those firms that was doing business with them, but they were using domestic platforms, right? A domestic mindset to onboard that customer, to do KYC, to do AML, anti-money laundering, right? Like all these things that you need to do.

You know, if you were a US customer, you can open up an account in 10 minutes. If you were an international customer, it might take you two weeks, two months or two years, right? Or never because the process was very, very manual. And we had customers asking us for mortgages. We just weren't doing it well. And then I would talk to my other peers and say,

hey, like you get the request. And they were saying, yeah, absolutely, all the time. They want to buy property here. They've got an account with me here. They want to spend more time in the US. They want to send their kids to school in the US. And we can't do this well. And it was that aha moment of saying, well, it's never going to work well because you can't underwrite an international consumer the same way that you underwrite a US consumers consumer right it just it just doesn't fit yeah um so then that was sort of that moment they're saying all right well we have to basically start and understand what is the consumer what can they provide and is that sufficient for you to get comfortable deciding to do a loan for that customer as opposed to saying all right i'm going to start on the other

side and say all right like these are all the things that I need. Well, the reality is that this person may only be able to satisfy three out of 10, not because they don't have the other seven. It's just because it's just not native to them. They're never going to have a social security number. They said, okay, you've got to start on the other side. You've got to say, okay, these are the 10 things that I know I can get every single time, create a unique process for them, build a risk model around it, build an underwriting model, and then start in that way. And fast forward today, we've done over $130 million of mortgages where we don't have any person that hasn't made payments.

Performance has been spectacular from that perspective, but it's because we understood that we were going to work with customers that were different, not necessarily riskier in the conventional sense. How many countries have a credit score similar to the way, or maybe not calculated similar, but similar in methodology or philosophy to the way we do? Where literally I have both my bank and my credit card tracking my credit score at all times so i can kind of have a a feeling of like where we are and what's nuts is like you know you if if you pay your bill off and i'm what i'm starting to realize like you pay your bill off

earlier your credit score will jump seven points it's like this number is so important to how you financially operate your life you know how do do do most western countries uh have something similar is this a completely foreign concept like how does that i mean most of our nations have it you know i would say sort of of the sort of major countries i think the majority of them do have um credit scoring systems um you know i think there's there's companies like nova credit that are trying to basically bring that international scoring system and convert it into something that is more relatable to a US FICO score. What we've found out though,

is that we don't just get customers from five countries. Last year, we had clients from over 90 countries apply. So then how do you standardize a process where if you have customers that don't have, come from a country that don't have a FICO score or some type of credit scoring system, how does that turn into something where it's not necessarily a ding because they don't have it? And then you have to think about, well, like, what are the things that if I were to talk, you know, work with people from 90 countries, what are most of them going to have? And then

have that be my standard process, opposed to saying well this is pass or fail pass or fail you just say no like i think that they can all give me more or less these 10 things yeah and then i can basically make a decision around that so i think we've we've gotten more down the path of saying what has fanny done with a credit box but doing this for the crypto consumer doing this for the international consumer and saying, well, these are the things that I know they can provide every time. And I'm comfortable with that. That's the way that's the way we thought about it. Now, with an asset like crypto, which, you know, I don't want to go down too many like third rails with crypto.

But but like, let's say in general, a much more volatile asset than the US dollar, just for purposes of conversation. I guess we're talking to different individuals. They may have different points of view, but just in general, I think most people would kind of say that's true. So especially what's happened even in the last year to the crypto market in general, if you, when crypto is sitting in the 40s, you have a million, let's say you're sitting on a million dollars in crypto, and now all of a sudden it's sitting in the low 20s. Now you have 500,000. That seemingly could be a major hit to your ability to pay or what you can put up for

collateral. It seems like, I don't want to say risky, but certainly you're taking a risk by creating a model around this. I guess, what gave you the confidence to step into this market and start to allow people to use crypto as both a payment and or collateral and maybe just explain what a crypto mortgage is in general. Yeah. Yeah. So we announced and launched a crypto mortgage last year. And it was really rooted in a couple of sort of very, very basic principles. One of those being that this is a market that people are choosing to invest in. For many of them, it's becoming a significant portion of their net worth.

And for others, almost all of their net worth. And they've owned this for greater than five or six years. Many of the clients that we've worked with bought Bitcoin at $15, $20. So that has been a very, very important aspect of their life of how they've created wealth, which today puts them in a position to potentially afford that home. And for many of them, they've been putting off that decision because it was really one or the other. Well, if I go to a traditional lender, they're going to ask me to sell my Bitcoin, turn it into cash, season it for two to three months, and then try to qualify for a mortgage.

If you have a significant amount of Bitcoin, the reality is that you may be living off of your net worth, right? Your Bitcoin, right? If you've got 10 million or more of Bitcoin, right, you may not need a standard day job today, right? You may be financially wealthy and independent already. So this was really around that idea that people would want to continue to hold this Bitcoin and were getting into this age demographic where they were going to want to buy homes. And we felt that we could come in and come up with a solution that would bounce both things out. And thinking about it from a credit and underwriting perspective, we felt that the Bitcoin was not, and Ethereum wealth was not a detractor, but actually it was a positive aspect because of the element that it was liquid. Whereas when you give someone a mortgage on a home, the foreclosure process can be very expensive and cost upwards of $50,000, can take over 12 months.

It's ultimately not good for anybody, but it's even worse for the consumer because they lose out their equity that they've worked really hard to build up. So we looked at it and said, can we combine both? Can we combine the real estate transaction and think about their asset that's liquid and combine them? And that's what we did. So crypto mortgage is really the ability for a customer to buy a home, let's say a million dollar home. Today, we're going to require them to post at least a million dollars of Bitcoin. That's going to be held at Coinbase. And they're not going to have to put a down payment. So we can finance 100% of the transaction. And that's significant because they're no longer having to sell for a 30% down payment, which would trigger potentially a long

term capital gains tax of 23% or more, right, depending on the state that they're from. And at the same time, it will allow them to continue to hold their Bitcoin position, which they've held for a long time, long time, they still remain very, very bullish over the long-term viability of Bitcoin. They're able to continue to hold their position and at the same time buy a house. So we're really giving them optionality to now say, I don't have to wait to buy that home. I can actually do that today because Milo is going to consider my net worth to be able

to purchase that property. And from our perspective, we're looking at it and saying, well, the fact that they're posting this Bitcoin, it's really non-payment protection for us, which actually hasn't existed in mortgage and real estate, right? No one's created that concept where you could basically take two forms of collateral and reduce the risk of working with a particular borrower. Okay. So I want to, there's a couple of concepts in there. I just want to clear up in my head. So you, so I want to, I'm going to get a mortgage. I'm going to get a mortgage from you. I have a million dollars. And, you know, the loan amount for this is going to be a million bucks. I need to have a Coinbase account that has a million dollars in currently valued. It doesn't have to be at Coinbase.

You could have it in a wallet. It could be in any place. There's a wallet. There's an address. There's a wallet address that has a corresponding amount, a one-to-one ratio amount of crypto. Bitcoin only, other coins, or just Bitcoin? Bitcoin, Ethereum, and USDC, which is a stable coin. And then I essentially still own that Bitcoin. I'm making payments out of that Bitcoin to you as payments are due. So you're not making it out of the Bitcoin.

So the way the transaction would work is that they would come in and they would apply for a loan with us. They want to buy a million dollar home. We will tell them we can finance the million dollar home. They're going to have to take the million dollars in Bitcoin that you have at any number of wallets. They're going to transfer it to Coinbase. It's going to sit there effectively in escrow. They're still going to own it.

And then they're going to make monthly payments like they have with any other mortgage. It's not going to come out of those proceeds, but they're just going to be making mortgage payments like any other type of loan transaction. So think of that as just sort of like this escrow reserve. And that escrow reserve is really in Bitcoin, right? That makes so much sense. I gotcha. Okay. So what you guys are basically saying is to us, a million dollars in Bitcoin, Ethereum, USDC is a good enough collateral, which seems to make sense to me, a good enough collateral for us to trust that you're going to make payments because you know that if you don't make payments on this, that becomes ours. And that holding- Yeah, we can liquidate a proportional

amount. Yes. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Not just ripped away from them, but that's really interesting. So we asked for a million dollars. Yeah. So we asked for a million dollars, you know, because of the volatility. Yes. Right. It's if it was less, right. Then we would ask for, for less. Um, we started off with that concept because we wanted to make sure that individuals that took out this mortgage wouldn't be in a margin call potentially, where they would have to post more Bitcoin or reduce their loan amount. And after doing this now since last year, we had no margin calls, even in spite of the price of Bitcoin and everything going down. So we feel that our models proved to be right that that was the right level to start at.

We did come out with a USDC stablecoin at only 40% of the loan amount because it's tied one-to-one to the dollar. So there's no volatility. So that's also something that we launched because people were asking us for that as well can they stake the this is like maybe but can they stake the usdc while it's sitting in the account like they can't because what we do with the digital assets it literally sits in cold storage yeah so we're not turning around and re-hypothecating it and lending it out. Like all of the things that you read over the last couple of years. Yeah, which is why everything blows up every seven to eight years.

Yeah, exactly. So our perspective is this customer is posting this for us. It's non-payment protection. It's not ours. It doesn't belong to us. We cannot speculate with it. We do not speculate on price action. It literally just sits there.

And if that customer calls us up this afternoon and says, I want to pay off my mortgage, we're going to give them a payoff statement and we're going to say, okay, remember when you pay, we're going to transfer it back. This is yours and it's there. It's in cold storage

and we can track all of it on chain. Okay. So I really like this concept because essentially what you're doing is saying, instead of having to go through all the hoops of FICO scores and social security numbers and you know all this all this stuff and anyone who's bought a house you know I mean this is months and months of data collection and back and forth and then a meeting where you're signing

10,000 documents and all this and you're passing checks and instead what you're saying is we're you know you hit these 10 data points that we need for whatever and post this collateral, which we're willing to accept in these three tokens, that is enough proof for us to have to go, you could have a 600 credit score in Argentina, but if you hit these 10 data points that we need and can post, say, half a million dollars in Bitcoin because you're purchasing a half a million dollar home,

we're willing to accept that trade-off that the stick of, we have this Bitcoin that we can take from to make these payments for you is enough that you're most likely not going to put that in jeopardy. And that's what you found, right? Yeah. And our crypto mortgage, the majority of it, I would say almost all of it is for US customers. Yeah. It's the individual who's the first time home buyer who's never bought a property, who's looking to now get his first home and is looking to do this.

So it's really fascinating because there was a data point that came out last year from Redfin that said one out of every eight first-time homebuyers sold some form of digital asset. And that's really the theme that we're playing in with this particular loan program is that we expect people to continue to want to invest. If this appreciates faster than their equity portfolio or their other forms of assets that they hold, something like this is going to be necessary for them. And someone's going to have to think outside of the box of how do you qualify them? And right now it's a one-to-one, but in the future, it might be different, right? We're constantly thinking about how do we allow more people to qualify for this? Do they want to put a down payment?

What if they want to put other forms of assets? Does it only have to be crypto? Could it be other forms of assets? You know, does it only have to be crypto? Could it be other other type of collateral? So that's how we're thinking about solving this. But understanding that if we can underwrite a consumer and they're willing to do certain things to reduce the risk for us, then, yeah, we should be able to lend to them and come up with a good solution for everybody. This was the question that we would always get from consumers saying, well, I've got enough money where I can buy this home without a loan, yet for some reason, no one can lend to me. I'll just go and buy that home and pay for it in cash. And then something there is like, well, something's missing there. I understand why it's happening, but it doesn't mean that it's right. Right. And there should be a solution for it.

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Yeah. Now, did you have to go and get, and again, I don't know all the licensing and stuff. Did you have an issue as a lender getting approval from whatever financial institutions you need to or whatever regulatory bodies? Obviously, I don't work in the mortgage industry, so I don't know.

Because this is obviously much different in terms of a type of collateral that you're taking versus say what a standard mortgage would. So what were some of the hoops that you had in like regulatory stuff that you had to go through? Yeah. I mean, one, it's, it's, it's, it's significantly more complicated. I think what our advantage as a company was that we started off working with international clients. So we started working out with customers that were already different than a conforming conventional customer. We've been audited from day one. We're licensed on a state-by-state basis. We're registered with FinCEN. We're registered with different regulatory bodies. We work with bank partners. They're governed by the OCC. Therefore, we do quarterly reports and audits, and we disclose what we're

doing and what we have on our balance sheet and our financials. So we've always had a pretty high bar of compliance and regulatory oversight to the business. What we end up having to evolve to be able to do this is spending a lot of time, money, and effort with legal counsel and trying to get comfortable with the people that regulate us and explaining what we're doing and why it's different than a lot of the other companies of how they're really intersecting with digital assets. For us, it's really more like an escrow. And for them and those companies, it's more of how do we maximize return off of customer assets and potentially generate returns for themselves? So when we started to explain that to them and said, well, this is no different than what you

experience when you have a stock portfolio and you're trying to margin it and you're trying to borrow some cash, it's very, very synonymous to that. And I think that that's given comfort to them and that we have the rails and the experience and enough oversight to be able to do this. I think I probably know the answer to this question, but I'm interested in your answer. Why Coinbase versus the other platforms that you could potentially use?

I'm assuming it's the fact that they've been regulated day one. But obviously, you know, you got the whole FTX thing that recently happened. And, you know, all these, you know, there's just, you were in a volatile time in the maturity of the crypto space. So why Coinbase? So Bitcoin has been around for 14 years. And there's these pretty significant cycles every three or so years,

where you have people are very excited about it. And then you go into these markets where you get a lot of the critics saying, this is going to disappear. And I think in the beginning, we looked at a lot of different options around custody. And we decided we weren't going to hold customers' assets directly by ourselves. We needed to have someone that was trusted.

We're going to hold lots of customer assets. And we didn't want that level of responsibility on our side. So we looked at all the players. And we really boiled down to only two and it was coinbase and it was gemini um that we felt comfortable with at the time and we were working with gemini you know they were set up as a trust structure right which removes a lot of the issues which you're seeing now with bankruptcy um and uh coinbase had a similar structure. And we were working with Gemini. Gemini had a product called Earn,

which got entangled with Genesis and some of that. So we were never really a fan of that. Even though they were structured as an agent, we decided that we were going to work exclusively with Coinbase because of the element of the quarterly reporting, the filings that they have to make with the SEC. You can know exactly how many loans, what do they have on their balance sheet, where the assets are, what's in cold storage, what's not. And we felt more comfortable with that structure where we could basically, customer could move their assets on chain. We could look at it.

We could see it. It was in cold storage. It wasn't commingled with a basket of other customer funds. And that was really important for us is to basically have that level of transparency. And I think Gemini has it. Problem is that Gemini came out with a product

that may have some reputational risk to them. And we have very little upside to have to defend a counterpart that is going through that. Whereas Coinbase has gone through, you know, 10 plus years of now cycles and we feel they can manage their business and weather the storm of what's happened last year, much better than other players in the ecosystem. Yeah. Yeah. Earn, earn is going to be a big hit i mean they just what took a hundred million dollar loan out uh to try to get back

you know to kind of get some of the assets back to the earn users and stuff yeah yeah yeah earn was was roughly seven eight hundred million dollar exposure right to genesis and genesis filed bankruptcy yeah and um so so that's going to take some time to play out. And that's why it's important for us that we don't operate that kind of business, right? We have really no upside and nothing to gain and only downside, right? So we want to make sure that we minimize the risk of who we do business with, that we're compliant. Because ultimately, when we give someone a loan, right, this is something that is a loan to buy a home, right? It's a long-term asset. It's not a, it's not a two months speculative asset, right? It's people are thinking about this in terms of like it impacts their life. So we have to take that responsibility very, very seriously.

Yeah. It's funny how, you know, that, so I live in New York state where we're headquartered in New York state and in New York, there were only real two options to trade crypto. There was Coinbase and got, you know, what at the time when it first launched, like 25 or 30 tokens that you could, that you could buy and purchase. And it was very frustrating as someone myself, who's very interested in the space and, you know, sees a lot of what's possible and upset. Okay. And it was very frustrating. And then the more I started to read and learn and understand how these are the platforms were making money and the fact that you would deposit these funds, but all they were really doing was kind of what happened in 2004 to what, 2007, right before the market blew up, that the financial banks were taking them, pulling, ripping them out of, you know, whatever,

you know, account you thought you had, and then putting them into these loan programs. And I kind of just kind of settled in on Coinbase and said, whatever, this is what I'm going to use and play with and became very comfortable. And to me, that people have knocked Coinbase. They move too slow. They do this. And I'm like, yeah, except your money is actually there for the most part. Like there are so many people

looking at this thing. They've already paid multiple fines for what's interesting, seemingly innocuous things like how FTX, oh, I mean, I guess it was a Bermuda company, which is why, but like how FTX does all the things that it did and Coinbase makes seemingly small errors that have no impact on people's funds and they're being fined 50, a hundred million dollars. And like, yeah, those, you know, if you're an investor in Coinbase in terms of the actual stock, it probably, it takes a small hit when they have to pay those loans that the security and longevity of these systems is so crucial to the crypto space. And that while the speculation can seem fun and almost seem like a casino with some of the platforms,

it does not help to mature the space. And these shakeouts to me have been, I mean, I know watching Coinbase drop into the 30s was like, made me light up because it was like, oh my God, FTX getting knocked has just created this amazing investment opportunities because the regulated companies are the ones that we need to, I mean, this is how the space matures and allows us to do things like what you're talking about is to have stable platforms that will keep these assets around.

That's why it's so important. Absolutely. And the consumers want this. I think there's been very, very strong sort of product market fit that consumers want to invest in digital assets. Questions, who are they going to get that from? There's always been a critique of the banks that they move slow, but because the cost of getting it wrong is very, very high in both fines and reputation and trust and everything that happens. And you're absolutely right. I think Coinbase, by the fact of going public, they decided to basically introduce an additional level of scrutiny to their business and transparency. And there's not too many companies that can do that, right? You know, the tens of millions of dollars that cost them every single quarter to be able to file and report, right?

They've got bonds that they've issued. They've got their earnings that they have to report, right? There's a discipline that you need to have to be able to do that. And there's a lot of people both internally and externally that are looking at your business all the time saying, should you be doing this? What are the risks? What are the potential harms? How does this affect the brand? Where where I think they're positioned very, very differently than any other crypto company out there. And I think that that makes a difference. And, you know, I wish there was more of them, right?

And, you know, I think that maybe this next wave of companies, it's going to be maybe you buy your Bitcoin no longer through a Coinbase or through other players, but you might buy it through E-Trader. You might buy it through Ameritrader. You might buy it from Fidelity, right? Some of these established platforms that have the history of protecting customer funds that people expect. What will be interesting is, you know, not to get stuck on Coinbase, but like what I find interesting about Coinbase is that what will happen is what you just said will most likely happen. But that business will probably still be transacted through Coinbase like coinbase will be the will be the pipes layer don't be market makers you still need to intersect with the credible companies that have the approval of real institutions right to do business with them you mean we shouldn't do business with a guy who is pitching VCs while playing Counter-Strike? That's probably not the best. I think a lot of people have learned

that lesson, unfortunately, the hard way. Unfortunately, I feel like they haven't learned that lesson. I feel like the next hot thing that comes out, people will just throw money at it because that's what we seemingly do. But the good thing about that is these mistakes and blowups seemingly serve to harden the system in general, the survivors harden and get better and create, you know, you, you almost need a Sam, Sam Bankman freed blowing up, you blowing up the space for a moment to create more stability in the survivors. And as much as you don't ever want to see that happen, and obviously it's the people that lost money and are still waiting it back, it's all terrible. But those types of things, especially in what is still probably, I don't want to call it immature, but certainly not fully mature market like crypto.

Those types of moments are important. Yeah, and the asset class is maturing. The consumers are maturing. And this is where I hope that our company, Mylarite, can have a positive impact where now these individuals that have amassed some of this wealth aren't always subject to this boom and bust, but that some of that wealth does help to personally diversify and buy that home, right? You've made this wealth.

Don't leave all your chips on the table where you've got your net worth spiking and going up and down 70, 80% over every three years, but that you take a little bit of that, you buy your home, you get yourself situated and fine, continue to basically play, but get yourself set up so you have something to really show for it. And then you're not just very, very happy. And then all of a sudden you're like down in the dumps

because markets are down, right? But at least you've got a roof over your head. Yeah. The two things are one of the things I find the most interesting is that while the non-educated, the person who isn't paying attention, I'm not educated to crypto. The person is paying attention. The skeptic, which there are a lot of, particularly in the insurance industry. I mean, most people think because I'm still interested in crypto that I'm crazy or that, you know, whatever, which is fine. I don't care.

But what's very interesting to me is while there's all this narrative going on, and it's why I feel that this is now is such an interesting time to either just be dripping in or maybe taking a couple of small positions and continuing to build. And, you know, not that I necessarily, I'm not a financial advisor and I certainly don't recommend anyone doing anything based on my recommendations. But, you know, the idea that crypto was this thing that happened and now it's gone is so incredibly short-sighted, in my opinion, because if you really dig into it and you look at companies

like yours which is which is another one of the reasons why i wanted to have you on is to kind of show everyone who listens to the show or at least listen to everyone can hear what you're saying that while while everyone's kind of talking shit i guess you could say you know what i mean it's very common to get some old school guy on CNBC blasting people who still talk about crypto or whatever. And behind the scenes, there are all these highly regulated, highly regulated infrastructure projects that are just continuing to being built, continue to be solidified. There's, there's these, these industries developing around them, like what, like what you're doing. There's traditional spaces adapting and morphing and all this additional investment that's being made kind of behind the scenes, specifically while the asset is down. Because it almost allows people to operate without all the scrutiny that would, if it was still cranking, even though there may be more capital available to you, you also may not be able to build behind the scenes as well.

Well, a lot of people came into the space for the wrong reasons. They were looking at how do we make a quick buck as opposed to saying, well, how does this technology really help to transform the way things have been done in so many different industries? industries and you know you go back to 2015 2016 right individuals were trying to come up with any type of problem and saying all right let's let's just let's just throw some type of coin at it they realized that it was it was unnecessary yeah um today i think that there's a lot more innovation that's happening around web3 and you know what nfts could do the legal um framework needs to catch up to it and sort of come up with some nice balance between both of them. But I think we're going in that direction. I don't know how long it's going to take. The regulation that's happening right now and the public commentary that's out there,

I think it's going to help create a discussion. Some people will be happy the way it turns out, and many people will be unhappy. But at least there will be some type of framework that people can adopt and utilize, but people are building. And I think the way that I think about this a lot is just, it's an asset class, right? People decide to buy stocks. They decide to buy bonds. They decide to buy REITs. They buy physical real estate. This is just another asset class. It's a very young asset class. If you think about stocks, they've been around for over 100 years, 130, 140 years in the US with our stock markets. They went through a lot of really, really difficult times in the 20s, the 30s, the 40s, the 60s, the 70s, the 80s, the 90s. They've been battle tested with markets, but nobody ever stops to ask, why is the right

PE 15% for the S&P or 17% or 21% of earnings, right? Like that PE ratio. It's just because historically over time, that became acceptable figures that people lock into. Bitcoin's only 14 years and many of the things that we're talking about are six or seven years or less. So things are evolving and it's maturing as an asset class, the consumers that are investing in it and what is actually happening.

So I think it's very, very short-sighted to expect it to be as mature as the stock market when that's been around 10 times longer than the digital asset ecosystem. Yeah. Yeah, I completely agree. So how has the traditional mortgage industry responded to you? Have they, are you, you walk into the conference and everyone starts booing you? Has everyone come running over and asked you how you're doing? Is it, what has been the response to what you're doing in the standard market? Yeah, I think there's a lot of curiosity.

There's a lot of curiosity. There's a lot of questions. I think people are interested because many people have gotten the request from customers that have digital assets. They don't really have a good response for it, except please sell your Bitcoin and come back to me when you have. So this is something that gives them some type of tool to be able to help that customer. And most people that are in the mortgage and real estate industry, they're customer-centric. They're trying to figure out how they help their customers.

So they are interested in how this can help the customers and help them as well. So I think that's what's been interesting about us coming out with this product is that it's both the people that are in the crypto and digital asset ecosystem, as well as the people that are in the more traditional

mortgage, financial services, real estate industry. And we're somewhere in the middle trying to educate both sides. And what I hope at some point is that there are more companies that come into the space so that we can all ideate and evolve faster because ultimately the one who's going to benefit is going to be the customer, right? With more companies like ours. Yeah, and very selfishly for the mortgage companies, I mean, if you have 500,000 in crypto that you would want to use to purchase real estate,

if you have to go the way that you described, like you said, you're going to either have a capital gains tax or whatever you're going to sell that Bitcoin to use as cash for payment, you're going to take a hit. And all that does is reduce the purchasing power of the consumer that you'd otherwise be wanting to use. So if you think about a pool of investors who would use crypto, you're taking, if you force them to liquidate the position in order to purchase the property, you're taking some significant double digit hit just in the taxes they have to pay and in originated mortgage value. I mean, just thinking about that concept right there feels

like enough of incentive over time to probably push people to consider what you're doing and to start to consider it. Absolutely. I mean, here's a real world story for you. So we closed on a $3 million crypto mortgage transaction in December. That customer, absent of us, would have liquidated their Bitcoin for that. The value of their Bitcoin 12 months before that was four times higher. So it was over $10 million. They had gone down, they wanted to buy this home and they came across us and we were able to finance the transaction. So that alleviated roughly 23% of capital gains on $3 million.

And from December until now, that's appreciated roughly 35%. So just think about that swing of almost 60% on a $3 million transaction, which is $1.8 million in differential to that customer. So if you think about that, that 60% and the rate of the mortgage is almost irrelevant because of what they ultimately saved or didn't lose out on potential recovery and appreciation. So I think that's what's unique about this product. It's really the first mortgage product that can really help a customer preserve their net worth and possibly grow it over time. Yeah. Both sides of that,

because we're not even talking about the real estate appreciation. Yeah. We know for a fact that 90% of all millionaires in this country have made, have become millionaires because of real estate. Yeah. Yeah. I love it. I mean, the concept to me is, is so intriguing.

And I feel like, you know, feel like this is going to be some significant portion of the market as we continue to go here over the next few years. So 30% of all millennials own digital assets today. 30%. Yeah. And so, so this is, this is kind of where I want to take us and kind of bring us in for a landing here is that, you know, the individuals who, who listened to this show are business owners. They have hundreds, thousands of clients in their agencies that they're working with. They're talking to that come to them, not just for advice on their insurance, but oftentimes financial advice or just advice in general around business or how to handle different decisions. It's a very personal relationship.

And maybe to kind of take us into the conclusion of our conversation here, maybe just a few, and I think we've touched on a lot of these things, but maybe a bullet point or two or three that could be talking points for them that guys, once, once Joseph shares with these, I'll make sure the bullet points are in the show notes as well.

So you can go back and check them out, but a few bullet points that they could use when they're talking to their clients to say, you know, they, they find out that their customers have crypto or are interested in purchasing a house. What are maybe just a few things that they can say or ask to, to, to kind of at least, at least see if this is something that could help their clients. Because I think the idea of not having to liquidate the position is such an incredible value add if you can help them do that. It is worth at least having this in your repertoire so you can bring it up with your clients. So is there any tools you could give them so they could use in their conversations if they're having them? Yeah, I think the first one is ask, right?

Do you own digital assets, right? And not be afraid of what the customer is going to tell you. So I think that that's step one, right? Do you own Bitcoin? Do you own digital assets? Yeah. If you do, great. What's your long-term perspective on it?

Are you planning on keeping this for the next six months or the next six years because if you are thinking about keeping this longer term then you should be thinking about like how do you leverage that asset to help you um improve your financial objectives today such as you know we we have this crypto mortgage so you can keep your bitcoin but we recently announced that we are going to be coming out with a crypto loan product. And the crypto loan product is just absent of a mortgage. It's just someone who wants Bitcoin. They need dollars. So those dollars can go into a trust.

They go into an insurance premium. They could go into different things to help them fulfill and start to diversify their net worth away from just Bitcoin. But then now you do have potentially annuities or insurance or equities or bonds or other things through that. So that becomes a very, very important thing. But if they start asking the questions or they're not afraid to say, yeah, this is a component, then they can come across and find companies like ours that can help them sort of bridge that gap. And don't be afraid that they only have Bitcoin because there's ways of basically getting dollars because they own Bitcoin through companies like ours that they can now basically potentially help them with one of their financial products. Yeah. And where,

let's see, it's, it's the name, the company is Milo. It's milo.io would be the place that people, if they're, if they interested that's that's where you'd want them to check out um if people if hearing this and they have questions for you is it okay for them to reach out and if so where should they do that yeah yeah absolutely they can they can reach out to info at milo.io they can reach out uh to me directly uh on twitter they can reach out to me directly through Milo.io. We've got a number of sort of like contact us forums there.

My team wants to be able to talk to as many people that have questions and help educate. So utilize us, even if you don't have a customer, reach out to us so that we can be a resource. And then maybe you can understand

sort of like how are the ways that you can help your customers. So think of us as a resource. Yeah, I love it, man. I appreciate you coming on the show. I appreciate you sharing this with us. This is the kind of stuff that I like to put in front of the audience because we are such a service business and such a relationship business.

And, you know, having even if we're not, you know, obviously very few insurance agents will be an expert in what you're doing, and that's not the point. The point is to know of the resource, to ask the questions, and be able to direct people where necessary. It's incredibly valuable. who invested in these crypto assets and now giving them ability to turn that into not just into digital assets, but into physical assets as well, which, as you said, is an incredibly important part of value and wealth creation. So, man, I appreciate the time, and I wish you nothing but the best,

and thank you so much. Yeah, it's a pleasure to be on. Thank you for having me and letting me share how we can help lots of customers, right? We're in a solutions business, so we've got to be able to help people. That's awesome. Cheers. Close twice as many deals by this time next week. Sound impossible?

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