The Wolf Of All Streets - Dave Chapman, Executive Director of BC Group on How OTC Bitcoin Markets Work and How Big Money Moves in Crypto, China's Bitcoin Policies, Why He Is Always Bullish on Bitcoin and More

Episode Date: May 12, 2020

Dave Chapman is the Executive Director of BC Group and OSL, Asia's leading digital asset platform. He and Scott Melker discuss how big money moves in and out of Bitcoin, the over the counter market, China's seesaw policies on crypto, Tether's role in Bitcoin price movement, why he is always bullish on Bitcoin, "dirty cash" and how people's behavior is likely to change after COVID-19, Hong Kong's effective measures to stop the virus, the growing distrust of governments and central bodies and how that helps Bitcoin, mainstream adoption and it's inevitability and more. --- ROUNDLYX RoundlyX allows you to dollar-cost-average into crypto with our spare change "Roundup" investing tool, manage multiple crypto exchange accounts in one dashboard and access curated digital asset content and services. Visit RoundlyX and use promo code "WOLF" to learn more about accumulating your favorite digital assets when making everyday purchases and earn $4 in free Bitcoin. --- VOYAGER This episode is brought to you by Voyager, your new favorite crypto broker. Trade crypto fast and commission-free the easy way. Earn up to 6% interest on top coins with no lockups and no limits. Download the Voyager app and use code “SCOTT25” to get $25 in free Bitcoin when you create your account --- 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, everybody? This is your host, Scott Melker, and you're listening to the Wolf of All Streets podcast. Every week, I'm talking to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports, politics, and basically anyone else with an interesting story to tell. So sit down, strap in, and get ready, because we're going deep. Let's go. I'd like to thank my sponsors, Round the X and Voyager, for making today's episode possible. We'll hear much more about them later on in the episode. This podcast is powered by BlockWorks Group, the only events and podcast production company I trust. For access to the premier digital asset conferences and in-depth podcast content, visit them at blockworksgroup.io.

I promise you will not be disappointed. Do you want to know how institutional and big money moves in the digital asset space? Are you curious as to what's happening in the Asian market, especially in China, where crypto seems to be alternately embraced and banned on a regular basis? When it comes to world events in finance, today's guest has literally seen it all. Not only was he an investment banker through the Great Recession, but he made the move to digital assets early and designed and implemented a wide range of trading platforms that have redefined the space. Dave Chapman is the executive director of BC Group, which is Asia's leading public technology and digital asset company.

In his role there, he runs OSL, which is Asia's leading digital asset platform. I'm so excited to welcome Dave to the show. Thank you so much for being here today. Hey, Scott. Thank you very much for having me. It's always a challenge when guests are on the other side of the world to find a time that works. So I know it's like first thing in the morning for me and somewhat late at night for you. Maybe we're both yawning. That's right. I will never stop yawning as long as I have kids and I'm stuck in the house with them. So that's inevitable for me.

So first, can you give us the quick background on BC Group and OSL and your role there? Yeah, most certainly. And again, thanks for having me on the show this morning. So BC Group is Asia's leading public technology and digital assets company. It's a main board listed Hong Kong stock exchange company. And OSL is the digital assets arm. OSL is Asia's premier institutional gateway to digital asset capital markets. It provides a number of different core businesses, but we predominantly focus on our brokerage platform. So when we talk about

brokerage, it's not so dissimilar from traditional financial brokerage services. So we offer OTC trading, systematic RFQ, over-the-counter options, and a various suite of other products. We also offer an exchange product. We also offer digital asset custody. We were actually the first in Asia and second in the world to be afforded insurance on both hot and cold wallets. And then finally, we wrap all of those three core services, the brokerage, the exchange, the custody, with a software-as-a-service white label solution. So, we actually very quickly stand an instance up and brand it as your own. And that's really the core list of our services. I've actually been down the OTC rabbit hole a few times, attempting to help facilitate large Bitcoin purchases off exchange.

And every time we ended up hitting a brick wall because either one party was completely full of it or someone panicked at the last moment due to security. It was sort of like a game of chicken over, you know, you show me yours, you show me yours and who do it first. Can you offer insight into the over-the-counter market and how the big players are buying and selling Bitcoin? Yeah, I mean, so with respect to what you first started saying, as in whether or not the deals that you hear about are legitimate, you know, we at OSL, the trading desk refers to those type of deals as unicorns because they, you know, quite simply, a lot, we shy away and don't really service a retail demographic. From our perspective, we focus really on professional and accredited investors, funds, family offices, asset managers, private and investment banks. That being said, we do definitely service what you'd call a large ticket, aka whales. It's not so unfamiliar for us to service, you know, in the, you know, five or six digit numbers in terms of the size of the Bitcoin

trades that we do facilitate. So it's not uncommon for someone to offload 10,000, 20,000 Bitcoin for us and at the desk will do their best to facilitate, liquidate, or acquire in a manner that doesn't move the market. So the institutional whales and the institutional participants do exist. It's really the service that we facilitate. And so there are a lot of other OTC services or there are a lot of other competitors who claim they do OTC. I mean, the easiest way to qualify someone would be to say, do you operate

24 by 7? What sort of market capitalization do you have to provide some legitimacy and credibility to the participants you serve? Who is your auditor? Do you provide insured custody? Can you facilitate multi-million dollar transactions and settle within the hour? If you can tick all those boxes, they're doing a tremendous job because it's something that we've been working towards for a number of years and it's no easy feat. Well, you just touched on this. You said that you have to service these orders without effectively changing the price. How do OTC transactions not affect the price on an exchange or how do they affect the price that we see as retail traders on an exchange?

Sure, Scott. It's a very good question. So for us, we have a number of price that we see as retail traders on an exchange? Sure, Scott. It's a very good question. So for us, we have a number of avenues that we can actually use to either acquire or liquidate a very large position. So we can either naturally match the orders with an order of the opposing side that would probably be the best execution and the best outcome, not something that's always readily available when you're dealing in such large ticket sizes. And so, the guys and the girls on the desk do actually have a number of tools that they can fill a safe, whether that be algorithmic trading, smart order routing and

whatnot. Now, that being said, if the order is large enough, regardless of how you do execute, there will be times when the market does move and naturally retail investors and retail traders will see that on retail exchanges as well. That's really interesting. So you're definitely the guy to ask this question that everybody wonders and has wondered for years. And just, I guess, bluntly put, is institutional money heavily in crypto and are they interested? Okay, sure. So it's a narrative that's been used for a number of years. And so I'm glad you asked the question because usually when I talk about institutional participation, I'm sure some of your listeners would probably roll their eyes as a result of this narrative being used for a number of years. Coming from investment banking and leaving the

space in 2013 to focus on building crypto businesses since then. It's been an interesting journey. When I did first leave investment banking, I think a lot of my peers thought it was a comedy moment and that I was losing my mind to leave a respected career to go and play with magical internet money. But it's been an interesting phase or interesting journey since then, Scott. In 2013, Bitcoin was very much disregarded.

They saw it as a fad, and this wasn't something that was going to be around for very long. Over the next couple of years, we saw the narrative change from Bitcoin is bad to blockchain good, and then we saw blockchain was something that was undoubtedly one of the most overhyped technologies since big data and cloud computing. And then finally, as we're seeing now, is we're starting to see true institutional adoption

and the blockchain narrative is starting to diminish. And the real push now is how do we participate in an asset class with these public blockchains now that they're being globally recognized and that regulation and regulatory clarity is coming into play? And so there's no denying that we are seeing interest. We are receiving inquiries from the likes of private investment banks who they want to know how to route orders to our desk. They want to know what types of technology that we can offer to facilitate their consumers the ability to enter the crypto market. And interestingly, but probably unsurprisingly, no matter what the inquiry originates as, it very quickly turns to custody. You know, the reputation in the, you The reputation in the crypto space for managing and holding customer funds in a secure way or in a secure manner rather is woeful. And that's what scares a lot of people away. I think there's two main reasons why you haven't seen faster, true institutional and traditional finance adoption. And those are twofold.

One is the lack of regulatory clarity. And we're seeing that become more clear and more black and white in a number of jurisdictions, including in Asia. And secondly, the lack of quality custodians. In traditional finance, you have traditional custodians like state street. And whilst things are improving in the crypto space for the longest time, you have not had a quality custodian by quality. I mean, you know, it's something that is audited provides insurance on both hot and cold wallets

and whatnot. And we're starting to see quality custodians in the crypto space emerge, even outside of, of OSL. You've seen the likes of other investment banks that are really starting to look at how are they going to participate in this space. And for us, that's very exciting. And it should be very exciting for everyone in this space, to be honest. So does that imply that there are a lot of banks, family offices, or other institutions, what have you, who are looking very closely, but still it doesn't fit their risk management strategy, or they do a risk analysis and they just can't trust that their funds will be secure. So basically like we need a little more

regulation and we need a little more security and then they're going to come in. I think it's fair to say that the funds for the majority of the funds that we do service, they are crypto-focused funds. And we do service a number of private banks. We are definitely vetting and fielding inquiries on a very regular basis with a number of, you know, bulge bracket investment banks who are, you know, looking at this space with great intent. Some of those have started to materialize those inquiries and whatnot. But for the most part, there's still a lot of people interested in this space. And I think that's growing with momentum as a result of the

regulatory clarity and the licensing and the quality custodians that are starting to emerge. That makes sense. I mean, I'm reading through your resume and you touched on this earlier. I mean, as you said, you were in a very comfortable position working as an investment banker. I mean, we'll go through, I guess, some of the experiences that you had later, but you did make this jump to internet, you know, magical internet money as people joked. I mean, what initially drew you and, and, and really made you decide to, you know, go into the digital asset space and to make a bet on a nascent asset like Bitcoin? Uh, it's a little bit of a story. I first discovered Bitcoin, I think, in around late 2012. At the first time, I was fortunate enough to come across it. I'd come from a very technology-centric background,

had started computer science at a young age and whatnot. I'd also come through the peer-to-peer file transferring era with eDonkey and Napster and what else. And I think from my perspective, I was most drawn to the decentralized nature of it. But that being said, you know, the elements of it were also quite scary. You know, this was the first time the world had ever experienced or had been unleashed to a decentralized technology, something that, you know, really couldn't be shut down. And so there were, you know, the initial thoughts of, you know, what happens and if it can't be shut down, is that going to have negative connotations or is it going to have the ability to do bad things?

But that being said, you know, for me, the ability to transfer value from one person in the world to any other individual in the world 24 hours a day, seven days a week without any, you know, any intermediary, that was for me the most compelling argument. You know, there are times when I've answered this question and I've talked about financial inclusion. I think that's huge. Whether it's Bitcoin is going to solve that problem or whether it's something else that comes in its place. For me, for all of those reasons, it was enough for me to say, you know what, investment banking isn't going away.

Let's go and try something else. And so I was very fortunate to also have two others with similar backgrounds who wanted to go try something a little bit crazy. And so the three of us left and this is where the journey has ended up for us. So you were a true believer. I mean, you actually made the move because you believed in the use case and in financial inclusion, which is interesting. Yeah. I mean's whether i was a true believer i wanted to have a bit of fun i think they probably i think there's an intersection of those two things at some point um i don't think you know a lot of people that i was meeting back

in 2013 um you know including you know the likes of roger veer and and cz and and and others i mean you know meeting these guys in in china and singapore and and japan I mean, you know, meeting these guys in China and Singapore and Japan and whatnot, you know, I'll be the first to put my hand up and say that I don't think we saw it being as adopted or maybe not adopted, but I guess from my perspective, as much as I wanted to believe, and I was a believer to some extent, I'll put my hand up and say I don't think we saw it appreciating in value as rapidly as it did and as quickly as all of that occurred and matured. And obviously, you know, a lot of the original positions and a lot of the original stances

of what we had has changed. You know, when we first started doing business, it was a retail exchange. It was one of the first, if not the first exchange in Hong Kong, providing the ability to buy and sell Bitcoin for retail traders. And as we've grown and more so matured and outgrown some of these businesses, obviously our focus right now is to facilitate, you know, the institutional space. And getting back to, you know, the way I first started answering this question with respect

to, you know, our view has changed. You know, at the end of 2017, we had a very successful, profitable, privately owned business facilitating some of the world's largest flows in Asia with a very successful OTC trading desk. And we had the fortune of taking a step back, taking a breather and saying, okay, well, what is going to be required next to provide even further legitimacy and credibility to the counterparts that we were servicing at the time. And, you know, at this time, at the end of 2017, there was no regulatory clarity really anywhere.

You had the New York Bit license, you had Japan that was regulated, but very much a Japan-centric license. You had some of these licenses also appearing up in the lights of, you know, Liechtenstein and other sort of lesser known jurisdictions around the world. And so for us, we took the opportunity to say, well, if we're going to focus on institutional players, and we do believe institutional adoption will take place in this space, what is required to actually set yourselves up and facilitate such flows and to be able to onboard and counterpart and provide a very legitimate and credible service. And for that reason, that's why we entered and we took controlling stake of the main board listed company

on the Hong Kong Stock Exchange called BC Group, and then we built an entirely new digital assets arm underneath the parent company called OSL. And so if you look at what we've achieved to date, there are very few firms in this world that operate in digital assets or virtual assets or crypto that are main board listed, that are big four audited, that do provide full crime and specie insurance on a custody solution.

And really, Scott, the icing on the cake for ourselves was in the sweet spots that we operate in, primarily being Hong Kong and Singapore. Whilst going throughout that journey to put all of those stepping stones in place, we were very fortunate to have innovative regulators in both Singapore and Hong Kong, who have since come out and provided some very clear and very innovative licensing around virtual assets, of which we're currently in the process of going through that journey as well. Can you talk about how that regulatory clarity has changed since 2017? It's funny because if you're on the outside looking in, and I know Hong Kong is sort of its own space, but as I touched on in the intro, when you see the news about China,

it seems like one month, everything's banned, they're shutting down miners. And the next month, they're talking about their own digital currency and hyping Bitcoin. So from the outside, it's very confusing, but it sounds like you're on the inside and know what's actually happening. And it sounds like you're saying that there is a lot more clarity now, which I think most people wouldn't have expected. Can you talk about that? Sure, most certainly. I mean, China is an extremely difficult region to navigate from a regulatory perspective, especially when it comes to crypto. And you rightly state, Scott, that since 2013,

we've seen China ban Bitcoin and crypto a number of times. But then, as you say, also, there are conflicting reports as to how you can operate and whatnot. For ourselves, we largely don't service China as a region, mainly because of the, whilst it sounds ambiguous, still clear stance that it's a no-go zone for a lot of the services that we provide outside of China. In Hong Kong, the Securities and Futures Commission at the closing end of 2018 announced or proposed a sandbox to facilitate and to potentially license digital assets in Hong Kong. And they are looking at providing licenses for brokerage, for exchange activities and for funds for asset managers. And so we're still, I was actually about to say that we haven't yet seen a virtual asset license

actually issued, but that's not true. About a fortnight ago, the SFC, the Securities and Futures Commission, which is unsurprisingly by name the equivalent to the US's SEC, they issued the first virtual asset license for, it was a type nine asset manager fund license. And so that's pretty positive given the fact of what we're seeing in Hong Kong with Corona, that they're still pushing ahead and issuing these virtual asset licenses. So we're pretty optimistic in both Hong Kong and in Singapore. And I think it's one of those, as I said before, it's one of those stepping stones that a lot of traditional finance, especially already existing license participants need

or would see as a requirement before entering into a crypto space. They really want to see, okay, are you licensed to perform this activity? Do you provide insured custody? Okay, who are you audited by? What is your balance sheet? These are all probably things that or attributing factors that not a lot of people in the crypto space consider when thinking about entering. But when you're starting to deal with institutional investors, traditional finance, these are all very, very plain vanilla questions that need to be answered, need to be achieved, frankly, prior to them even considering to enter this space. RoundlyX.com is one of my favorite companies in the entire crypto space.

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or search for Voyager on the iTunes or Google Play Store and get $25 in free Bitcoin when you use the promo code SCOTT25. That's investvoyager.com, promo code SCOTT25 for $25 in free Bitcoin and start trading today. Yeah. So you said that basically your OTC desk was doing exceptionally well at the end of 2017, which is obviously not hard to imagine considering the bull run of that year and how that year ended. But 2017 was a dream, but 2018 was a nightmare, at least for most people who were trading or invested. And it sounds like you were actually building a crypto business throughout that entire bear market when you purchased BC Group and

created OSL. What was that like? Did you ever have doubts that maybe your bet had been wrong, Bitcoin was going to zero, all those things that you heard? Or were you still pretty much retaining your bullish bias and continuing to build? Yeah. If you speak to anyone that knows me, I'm pretty sure that they'll say that Dave is always bullish on Bitcoin. I guess it also helps that my co-founders and I and a large part of the team had been through a number of periods where Bitcoin had retracted. And we had gone through a number of periods of time when, you know, things didn't look so positive. And you had to, you know, button down the hatches and go on cost-saving initiatives and whatnot during those phases. On the idea and on, you know, the clear objective that, you know, we believe that it was going to come out the other side.

And when you've done that two to three times, it really becomes BAU. With respect to building the business during that period, for sure, I won't suggest it was difficult. I was very fortunate and we were very fortunate rather having such an excellent team. We do have a very large team. We have around 130 people in Hong Kong. We're fortunate enough to have a great team in Singapore and a great team in Mexico, among other areas. But it does take a long time and it does come at the cost of revenue sometimes. As I said, we don't focus on and we don't service a retail business. We had the opportunity to, you know, compete with, you know, with other venues that frankly were killing it and have killed it. And

that's, you know, I wish them all the best. Our goal and our objective is going to take a little bit longer to achieve. But, you know, the outcome and the goal at the end of this journey in my strong belief and then in our collective strong belief is going to be a much larger reward and a much larger piece of the pie simply as a result of the segment that we were servicing. I mean, you said you're always bullish on Bitcoin. I happen to share that assessment. I mean, I'm just an uber bull regardless of what happens in the short term. Long term, I just really believe that we're going to see much higher prices and more mainstream adoption. But you actually recently penned a Twitter thread on why you

believe Bitcoin will reach an all-time high in price, specifically this year, which is maybe even more bullish than me. So can you present that case, why you believe that's a possibility? Sure. I mean, I think that was after a CNBC interview that I posted that on Twitter. And it was just at the time, you know, there was just so much positive news coming out in this space, specifically around Bitcoin and also being actually, you know, frankly, very fully endorsed by the people that I would consider extremely intelligent and likely to be right at the time. People like Peter Thiel, Chamath and whatnot. But I mean, rather than talk about what was my bullish case back at the end of February, even if we just talk

about now, Scott, I mean, by the time this podcast comes out, we'll have either been through the harvening or we'll be almost going through it. I think it will likely be on that day actually. Wow. Okay. Well, that'd be very interesting. I mean, it's interesting with the harvening because this event for most people, it's the, it's something that just creates so much speculation as, okay, what's the price going to do? What's the price going to do? What's the price going to do?

For me, it's not exactly the, yes, it's going to be interesting. It would be great to see it happen. But the reality is, for me, is that Bitcoin just survived one of the largest, if not the largest financial crisis that we have ever experienced in our lifetimes. And you did have, you know, the Bitcoin naysayers are saying, oh, look, it's not a store of value. It's not uncorrelated.

But the reality is, you know, and they're saying, oh, the Bitcoin price dropped by 50% and whatnot. And, you know, as of today, the Bitcoin price has recovered since the Black Thursday, March 12th event. financial crisis of our lifetimes. And it did that without any circuit breakers and did that without any government or regulated intervention, no quantitative easing, no economic stimulus. It did that, you know, without any, it did all that to, and to survive. And so for me, you know, Bitcoin chalks this up as just another test, another battle scar. And it's quite an amazing feat. And so whilst it looked volatile, and don't get me wrong, it was an extremely volatile day for our trading desk. And we did enormous volumes like most in this space over that period.

And also shook out the weak hands. But for me, for it to go through that period and also shook out the weak hands um but for me um for it to go through that and as it has always it's always coming out the other side stronger and so no matter what happens on the bitcoin halvening uh for me i'm actually just very optimistic and very long-term bullish as a result of of this test and every test it's gone through in the past yeah the halvening kind of gives me me the same feeling as Y2K did. I know that you're old enough to experience that, which is like all this speculation and hype about what's going to happen

and most likely it'll just kind of fall short of all the expectations of gloom and doom or the moon boy side as well. But it's going to be interesting to see how it does play out and people react. So you touched on this here, and I agree with everything you said. But to play slightly devil's advocate, you said there's no QE, obviously, in the Bitcoin space. But there are a lot of people, I'm not one of them, who would argue that that's Tether's role in the Tether treasury. How do you address Tether's role? I mean, Tether's got a pretty colorful background.

It does, and it continues to have a very colorful future. I guess, what is happening there? I mean, obviously, there's a lot of debate as to whether or not Tether is fully backed. Obviously, Tether's had a volatile history with respect to trying to be audited to provide some sort of transparency and color. Now, that being said, it would be very difficult to audit such a service. And then what's more interesting is that you've currently got competition to tether, you know, with such as PACS and USDC and others that have tried to take its place with something that's, you know,

undoubtedly more legitimate and more credible simply by saying that, you know, it's audited, that it works under a trust structure and whatnot. But the, you know, the reality is that Tether remains the king because it doesn't have any compliance features. There is nothing there that with some of these other more legitimate stable coins, they do have compliance features. They do have the ability to lock coins. And so, when you're talking about the velocity of money and people wanting to move value in an extremely fast manner, they don't really want to worry about KYC. They don't really want to have to take into consideration what's going to happen if something does get locked up. Now, does that mean that Tether survives forever? Or does that

mean that Tether has a finite lifespan as to when you will no longer be able to use it? Now, I know that that's quite a massive claim, and I'm not saying that that may happen or may not happen, whether it happens under what time horizon. I think that there will become a growing segment of the market that will turn naturally towards more transparent, credible, legitimate, audited stablecoins simply because of the nature of the regulatory environment that they're working in. Well, we're seeing an all-time high actually

in stablecoins and by a mile, right? Last I read, it might've been a week ago, but there was 8 billion basically sitting on exchange in stablecoins. I mean, that has to be exceptionally bullish for the space, right? Yeah, I do agree. I mean, stable coins are definitely providing a number of capabilities or a number of functions rather in this space. They do serve a very strong purpose. Obviously, there's been a number of people who have written or provided findings and studies saying that when Tether does print, Bitcoin does, or provided findings and studies saying that, you know, when Tether does print, Bitcoin does increase in appreciation value. And there is equally just as many studies and findings.

Exactly, 100%. But there's equally just as many studies saying that that's not the case. You know, there's a lot of smart people in this arena. I guess the great thing is that, you know, given that all of this happens on public blockchains, I mean, we're all on the same level of transparency, which is a little bit different from the traditional, you know, finance world where it's behind closed doors. So there is that upside. Again, you know, stablecoins definitely do serve a purpose, Scott. What that means for the longevity of Tether, I guess let's wait and see.

Yeah, that makes sense. I mean, it is an interesting comparison to the money printers, but you operate an OTC desk. You guys are not transacting in Tether, I assume. You're transacting fiat to Bitcoin, correct? We do provide facilities to transact in both crypto to fiat pairs, but we also do provide the ability to do crypto to crypto. There are a lot of larger players in this space who will not always want to go to or from fiat. There are participants in the space

that will do, for example, very large Whipple trades, and then they will actually see Bitcoin more as sometimes a store of value than fiat. And if you look what's happening with the quantitative easing and the money printing that's going on, I mean, you can't blame them flocking to something as Bitcoin, even given as volatile as it is, to move from a non-Bitcoin asset into a Bitcoin as a result of just depending on their circumstances. That's interesting because the safe haven narrative asset was huge for years, but kind of untested because global markets were rising and Bitcoin was rising as well. So it was hard to see. And then obviously we've talked about the March 12th dump and anyone who was a critic

of that narrative basically used it as proof that it was not a safe haven. But as you said, in the last six weeks, here we are back above where the price was. So do you, I mean, clearly you have customers who believe that Bitcoin is a safe haven asset. Do you believe that it's an uncorrelated asset and that it can act as a safe haven? Oh, I mean, it's a very good question. Whether I believe, do I believe it's an uncorrelated asset? I think the dump of the financial crisis that we've seen as a result of the effects from COVID were largely unprecedented for anyone. There's a number of contributing factors here. Is there

any other asset class that offers 100 times leverage? I can't really think of any. 4X, but yeah. Yeah, well, is it 100X? I'm not sure. But the other thing is, is that at the same time, everybody's investments and everyone's positions were getting completely hit very, very badly. And at the same time, people still needed to either cover those positions. So were they selling their Bitcoin? Were they getting

liquidated? Does that mean it's uncorrelated as a result? It's yet to be seen. But if I talk about uncorrelated assets, as you rightly pointed out, Bitcoin has since recovered and further exceeded the price that it was when we had this massive 50% dump. So does that make it uncorrelated as a result of it being better performing asset than anything else in this sector? Or not even this sector, just any sector. In the world. Yeah. I mean, it's interesting because you have all these people say, look at it and point at it and say, they would laugh at it and say, see what happened then. And I'm like, again, I mean, this, it survived and it did what it did without any intervention. It just, and it survived and it continued to operate 24

hours a day, seven days a week without any downtime. And if you think about, you know, as of last week, uh, Bitcoin was the best investment in 2020. Sorry, in 2020. And if you remember, it was also the best investment of the last decade. So, you know, from an investment perspective, it's pointing in the right direction. Is it a highly speculative, high-risk investment? Sure. Is it still the world's largest social experiment?

Maybe. Is it gaining regulatory clarity and institutional interest and slowly starting to get adoption in traditional finance as well? Yes, it is. So I think the name calling around it being a social experiment is probably going to have to start to die soon just simply because it has survived. That's the nature of Bitcoin. No matter what gets thrown at it, it just continues to thrive. And so, you know,

long answer to your question, is it a safe haven? You know, I think the... I feel pretty serious right now. I didn't in March. Are you going to... Would you advise someone who, you know, is not risk adverse to put their lifesavers into Bitcoin? Of course you don't. No. Okay. Do you use the same principle? Exactly. Exactly, Scott. Do you use the same principles? Don't, you know, don't invest more than you afford, that you can afford to lose. I mean, and in some respects diversify, you know, so using those two principles alone and given the performance to date, even though it's only an 11-year-old currency, the narrative starts to change saying, okay,

why don't you have exposure to this asset class? Yes, it is volatile, but over the long term and long time holding, it actually outperforms anything else on the planet. How do you not have exposure to this asset class? Right. I mean, Chamath is very famous, obviously, for consistently saying that everybody, no matter how wealthy or poor, should have at least 1% of their, you know, 1% exposure to Bitcoin of their portfolio. Do you agree? I mean, the number doesn't really matter, but clearly you agree that everybody should at least be exposed if you were to allocate one percent of your net worth into bitcoin for the vast majority of of people um that isn't let's say you you you allocate one percent of your net worth to bitcoin

if bitcoin goes to zero for the vast majority of people that will not change their lifestyles. Now, if Bitcoin goes 100x, that's going to make a pretty big, it'll make a meaningful difference. And I think that that's probably a fair way to look at it. I mean, again, it comes down to don't invest more than you can afford to lose. Is it a highly speculative asset? Yes. Do I agree with allocating 1% of your net worth? Yes, 100% to Bitcoin. Right. And now, obviously, I mean, the situation has even become more clear for that argument, I think, with infinite quantitative easing and money printing and all the stimulus and bailouts that we're seeing. So obviously, everything has now changed globally as a result of COVID. Do you think that the current circumstances are a bit of a melting pot for Bitcoin?

For sure. I mean, you know, if you look at what's been happening during COVID, I mean, I'm not going to, you know, pretend that you have so many talented economists right now that are frankly much more intelligent and can better present than me. So I'm not even going to attempt to sufficiently provide a view that your listeners haven't already heard before. However, what I will say is that I do believe that the ratio of those who understand the impacts

of endless money printing versus those that don't is undoubtedly higher now than ever in the history of time. And I think that is a really good for Bitcoin's case. Another observation is that events such as what we're going through now, they have the capability to change a person's behavior literally overnight. And so, if I give an example of this, my parents, intelligent, successful, lovely people have somewhat shied away from using contactless payments at cash registers and service stations, et cetera, because they're part of an aging

population who have up until now preferred to use physical notes and coins. Now, as a result of this Corona and COVID pandemic, that same demographic have opted to finally adopt contactless payments as a result of not wanting to risk catching the virus from, from touching, you know, literally, literally dirty cash. And so that's, that's a one way transition, by the way, that they won't go back to relying on cash. And so my point is that that's one of the countless examples where we've witnessed just how quickly society,

society's behavior can change and it's interesting to hypothesize what will be that that catalyst for societies to adopt bitcoin and if you look at what's happening right now with libra uh with these you know central bank issued you know blockchain type um coins and whatnot. I mean, is that going to be the catalyst point for people to say, okay, I'm on board with these digital currencies and will that be the stepping stone for them to be more open and finally start to adopt Bitcoin? And time will tell. But I guess my point of that little story was that things do happen very quickly. You just generally and sometimes need to find a catalyst for them to occur. Right. I mean, to that end, I think we're also witnessing a massive and

growing distrust of governments and central bodies that we've just never seen before. I mean, I really think that people lack trust in their governments now. And they also don't trust the media. They don't trust their government. They don't trust any central body. So that has to also mean more exposure and potentially higher prices and adoption for Bitcoin and crypto. I mean, I know we're getting a little bit away from a Bitcoin podcast and I apologize to your listeners if that's disappointing. We're not at all. No, of health organizations and central bodies. Now, if you take into consideration just how blatantly wrong some of the information we all received was, and in some cases contributed to thousands of people perishing, I mean, it's just insane. And for the most part, there was no post-acknowledgement about this incorrect leadership or messaging. So,

what does that mean? So, in the same way, society no longer believes the media, you know, everything is fake news. I actually now see that that's the type of attitude and perception extending further to a growing number of governments and central bodies. And, you know, it could be the perfect storm for one of these catalysts for people to question every single message that's delivered in the future. Now, we've seen, you know, catalytic events happen over the past two decades. We've seen the distrust in the media, as I just stated. We've seen distrust in financial institutions. And unfortunately, for some jurisdictions, we've seen a growing number of countries and their societies now distrust their governments and central bodies. And so, what does that mean?

Does that mean we all turn into anarchists and we don't need law? Of course not. But I think it does make people wonder and question the norm. And so it'll be very interesting what happens there as well. Also, they have to, I think, naturally just start to think of steps to protect themselves if that worst case scenario somewhat plays out with their governments, which obviously we see in the United States all the time with gun laws and regulation, you know, on the, on the polar ends. But I think, you know, somewhere in the middle, uh, when you cut off the head and tail, uh, you find that there's reasonable people who now have

reason, you know, reason to distrust their, their, their governments and the people that they may have trusted before. And it goes interesting. You, you touched on Libra, uh, and national digital currencies. Obviously, China has talked about digitizing the currency. And that could lead to mass adoption for Bitcoin, but I think it could also be a threat, of course. Now, that's taking aside the fact that Facebook is one of the least trusted organizations on the planet and is probably not the right person to take over money. But when you come to national currencies, I see it as bullish on one side, because obviously, it would familiarize people

with the idea of transacting digitally, opening a wallet, all those things. But couldn't that also be a threat to Bitcoin or a replacement to some degree? Yeah. I mean, it's a very sound question, Scott. I guess from my perspective, Bitcoin is borderless and global. And so when China is starting to trial its DCEP and whatnot, that's great. And I welcome the adoption. I welcome the innovation. What that means for privacy and whatnot is a whole big conversation on its own. But if I'm using a digital one or I'm using a digital USD or whatever else be the case and I want to send 23 cents to someone in a remote village in Africa, I'm quite certain as it stands today that those digital currencies

won't facilitate such a transaction. So there's a long way to go. And obviously there's an enormous, there's also the contention as to, you know, there still being an element of control. Who makes the decisions as to who I can pay? It's centralized, of course. Exactly.

So there's,'s there's i think personally um whilst people haven't really uh seen the need or the requirement for something like bitcoin uh that penny drop moment could actually be um encouraged or it could actually uh be expedited as a result of all these digital currencies so that's i'm actually pretty pretty bullish i buy that for sure. I want to talk a little bit about your past history because you've seen some crazy things. I mean, you've been at the epicenter of some of Wall Street's largest calamities, I think it's fair to say. I believe first probably was when you were at Bear Stearns during the subprime collapse, basically the Great Recession. Can you talk about your time at Bear and what you saw? Sure. I mean, it's definitely not all doom and gloom. I was there when Bayer Stearns collapsed,

but it was a fantastic investment bank to work for up until the point that it collapsed the day after Lehman's. I was there when JP Morgan purchased Bayer Stearns at a stock price of $2 per share under the direction of – under the strong advice, plead, or instruction of the government because it was seen as too big to fail at the time. A little bit of a life-changing experience for me. I probably haven't seen so many men cry as a result of seeing their net worth completely obliterated in the space of one evening.

Because it was in bear stock? Correct. And there's a lot of people that had taken, you know, they'd worked there all the way up until, you know, to senior managing directors for, you know, 30, 40 years. And over the span of their career, they'd taken the majority of their annual bonuses in stock. And so, I mean, it hurt a lot of people. Fortunately for myself, I was young and I guess the irony thing is, the ironic thing

was that I wasn't taking bonuses in stock and I was a consultant at the time. But it's disheartening and it hurt. And I feel sorry for the people that were impacted, but I mean at the bank, but I also feel very sorry for all the people that were impacted outside the bank as a result of all of the subprime madness that went on. You and I talked briefly about this, Scott, but I saw throughout my career, I've seen this in a number of different banks. I worked for Barclays Capital a number of years after Bear Stearns, and I was there during the LIBOR rate-fixing scandal. And again, it's just these things come to light, and it becomes a little bit disheartening.

But at the same time, it happens so often in traditional finance, especially, you know, in that period of time that where people just become immune to it. They read about it and it makes headlines in the paper, but everyone shrugs. You know, I was working for HSBC when they were fined $2 billion for facilitating $900 million of money laundering through Mexican hotels. You were at three of the companies that went through three of the worst affecting people. The thing is, I think if you point at anyone's career in investment banking, exactly, they've all been there, right?

And that's the thing. That's what it comes down to in terms of this immunity. It happens so often that it makes headlines still, but people just shrug it off. And it's a little bit frustrating when you're trying to go above and beyond what's required from a KYC perspective, from an AML perspective, from a regulatory perspective. You're trying to set new standards in this new digital asset space. And, you know, people continue to try and point at this, you know, this new technology, this new kid on the block and say, well, you know, he's doing something wrong.

And I'm like, come on, guys. Like, come on. You honestly think that this quarter of a trillion dollar asset class is contributing that badly to society given, you society given the rules that we operate under through traditional finance. So it gets a little bit frustrating. But that being said, lead from the front and do the right thing. And I guess the results will hopefully speak for themselves. I mean, it seems like there are no rules for traditional finance as long as you're the right person. You know, the whole like cronyism versus capitalism argument.

Yeah, I think, you know, it's not, I don't want to be too negative. I do think it is starting to get better. I do believe controls have improved. I do believe that there has been much tighter regulation coming to effect over probably the last decade. And also, even since when I've left investment banking in 2013, in the seven years I've been out. So, I do think things are going in the right direction, but are they going in the right direction fast enough? Are the wrong people still getting penalized accordingly, depending on their wrong actions? That's another debate. I mean, you know, that's another debate.

I mean, you really believe that lessons were learned from, you know, 2008 that are in play now? I mean, it's hard for me to look at it and not compare the situations, given, of course, we have a global pandemic that set it off. But I think, you know, it was just a straw breaking the camel's back, in my opinion. But like the bailouts, the stock buybacks, airlines, I mean, there are companies that couldn't operate for a week once they went out of business that were huge, you know, multi-billion dollar companies. Even I know that I'm supposed to have an emergency fund, right? Yeah. And that is wrong, Scott. I mean, ethically and morally, that shouldn't happen.

And why are some of these sectors bailed out in the way that they have? Will this $9 trillion that has been printed or whatever the current high score is, whether that will save the day, what are the implications that's going to have on society as a result of just this unprecedented crisis, was it the right thing to do? I mean, there are just so many different questions, and it's so soon into this saga to see whether or not those were the right decisions made and whether that will come out the other side. I guess it comes back and really drills home that, you know,

given the uncertainty and political, you know, sort of also political uncertainty and that this is really an environment where something like Bitcoin can thrive. And, you know, Bitcoin has been through so many different types of, you know, tests already. I think that this could be, like I said, a perfect storm for Bitcoin. But time will tell. I certainly hope so. tests already, I think that this could be, like I said, a perfect storm for Bitcoin, but time will tell. I certainly hope so. It'll actually be really interesting to see if the stock market has not bottomed yet, if there's more bad news and it drops again, it will be very interesting to see how Bitcoin behaves in that scenario. 100% agree. Yeah. But that's complete conjecture. I try not to get too deeply into that because I end up looking like an idiot generally if I try to make a price prediction or a guess. And likewise.

So I want to pivot slightly. You're the first person that I've spoken to who actually lives in Hong Kong. And, you know, I think many people had the perception that Hong Kong was struck hard by the coronavirus. But the reality is that Hong Kong was largely insulated and seemingly has eradicated the virus, at least for the moment. Can you talk about how they managed to do this and what your personal experiences have been living in Hong Kong during the COVID-19 pandemic? Sure, Scott.

So COVID in Hong Kong. So first, some statistics. So Hong Kong has had 1,041 cases of COVID and only four deaths. So, four deaths only. It's amazing. And Hong Kong, right, it is amazing. And Hong Kong has not had a local confirmed case of COVID-19 in a country similar in size than that of the city of Los Angeles. And it borders with China.

So, right now, Hong Kong is undeniably, it's the poster child example of how to deal with a pandemic virus. But that outcome, it wasn't achieved through luck. Put simply, at least, and at least my disclaimer is, at least in my opinion, it comes down to many different factors. But in my opinion, the two out of the many differing contributing factors is culture. Okay. Society here is for the most part, very dutiful and compliant and to experience. Okay. So both of these contributing factors are very contrastingly different in

other regions around the world. You know, culturally not many people like what being told what to do, you know, to stay home, don't go out, certainly not here, certainly not here,

not in the U S not in Europe. And, and, and to be honest, it comes down to this, you know, that's the culture part, right? But the other contributing factor was experience. You know, Hong Kong had experience with pandemic viruses in the past, for example, SARS. And people knew just how serious something like COVID-19 could be. And so, they took, they knew what was necessary to take precautions to avoid large gatherings, wearing masks, adjusting life as necessary to minimise the risk and to eliminate this horrible disease as quickly as possible.

But it's also interesting to note, Scott, that Hong Kong was not at any stage in a lockdown. So, yes, Hong Kong, we did shut our schools, we shut our parks and our gyms and whatnot. But shops, restaurants, and everything else largely remained open for business. And so, it's amazing what is possible and what that contrasting and how contrasting differently that is made when society understands the risks and is willing to adjust. And to me, you know, that's absolutely fascinating. And so, you know, I guess another interesting, you know, thing to note on to now, whilst Hong Kong looks like it has eradicated COVID-19 for now, I mean, the question is what happens next you know how do we and the rest of the rest

of the world how do we establish international travel for example i was just going to say it's it's only eradicated until you let us in well i mean at the moment we still have um you know we are still letting hong kong residents back in in from any country in the world. Hong Kong have done a fantastic job of their screening process and quarantining process. And to be honest, Hong Kong should be super proud of what they were able to achieve for now. I mean, there's no silver lining.

There's no high five. I mean, but it's going to be very interesting, not only for Hong Kong, of course, for the rest of the world is what is the new normal? How does international travel go back to normal? How does commerce adjust? And how does everyone move forward? But it has been absolutely fascinating.

And it has been, obviously, we're very fortunate in Hong Kong to be in the position that we're at. Hong Kong people should be very proud well i have to wonder what the perception of people in hong kong is of europe and americans and the way that we behave um i mean maybe even even even generally and not just specific to government but i guess guess specifically. Yeah. I mean, I'm a Hong Kong permanent resident. I've lived here for 10 years. For me, it's the most fabulous place on the planet. But, you know, and also whilst I can't speak for everyone, I don't think there's anyone that sort of looks at others and suggests that anyone did anything wrong. I think it's largely acknowledged that no one, for the vast majority of people, they just

didn't have experience. They just didn't know how bad this could be. And as a result, everyone is now paying the price. But shouldn't we have been educated on how bad it could be? I mean, you guys learned the lesson by going through it, but it seems like in a global society, everybody should have learned those lessons. Yeah. I mean, it comes back to that, what we discussed before about the information that we were being told and what was right, what was wrong. And, you know, it's extremely difficult to make decisions as world leaders and health organizations as to what do you do with a virus? Do you shut down the economy full stop? Or do you lean in? There's a number of very interesting, you know, I don't want to say experiments, I'll say use cases going on with the way that differing countries are trying to deal with it. And I guess we come out the other side and we get to look at, okay,

well, this is how country A dealt with it. What was the outcome? This is how country B dealt with it. What was the outcome for them? And maybe, you know,, we learned some lessons that we can all benefit from to make the better decisions when and if we ever have to go through something as horrible as this again. Hopefully never again, but this might not be going anywhere itself either. So we could be in for a long haul. It certainly feels that way here. To go back to Bitcoin, we touched earlier a little bit on the concept of mainstream adoption.

In my personal opinion, we don't have it yet, obviously. I think we have mainstream recognition, which is huge. I think that it's on the tip of everyone's tongue. I mean, what is the future outlook for digital assets reaching mainstream adoption? How do we get there what are your thoughts are we talking specifically about bitcoin are we talking about i guess the wider digital assets in general yeah the spectrum is so large um and you know if we if we bundle in public blockchains like like bitcoin if we bundle in, you know, these government issued stable coins and Libra, and if we also bundle in, you know, the future or, you know, the tokenization of securities

and commodities and whatnot, I think it's inevitable. It's pretty, I think it's difficult for anyone to defend a stance in saying that the adoption of digital assets is not going to happen within the next five to ten years. Right. Whether that means it's Bitcoin or something else. I mean, you know, the comparison that I'm about to provide has been provided by many others. You know, we're at that 1990 internet zone. You know, no one understood what it was.

No one really understood or appreciated what it could do. And no one certainly appreciated what applications were going to be built on top of it. And if you fast forward a mere 10 years, then another 20 years, another 30 years, no one could have fathomed what was possible back when the internet was finally starting to make its ways to consumer adoption. So you think we're still early, obviously. Very, very early. Very early. Very, very early. I think that for Bitcoin, I think it's still early. A lot of people are saying that they've missed the boat. I still think it's so, so early.

It's such a small, tiny, limited in supply asset class that it has the ability to grow immensely. I think will the Libra in some shape or form or something similar be finally released to the market and will it be successful? I think in some iteration, it will be for sure. I mean, you could argue, you look at what happens in China with mobile app payments and whatnot. I mean, anyone that says that digital payments and e-money isn't successful clearly has never spent a minute in China. I mean, it's just insane what happens out there.

So in digital adoption, I know I'm giving you a very long answer, Scott. I think digital asset adoption, for me, it's a foregone conclusion. It's a given, 100%. How long it takes and what will be adopted first is still yet to be seen. But obviously, from our perspective, we're very bullish on all of the categories above, whether it be public blockchains like Bitcoin, whether it be security tokens, the ability to tokenize in equities or whatnot, and to complement traditional capital raising measures, or whether it's these government-issued stablecoins and whatnot. For us, our firm is very bullish on all of those.

And as a result, we're building out all of our infrastructure around them. Awesome. Well, to that end, where can people keep up with you personally and follow what you guys are doing as a company? Sure. So if you want to follow OSL, we've made that very easy for you. The URL is osl.com. And if you want to hear some more of my rambling and my thoughts, I tweet somewhat infrequently on Twitter and my handle is I am Dave Chapman. Yeah, you need to tweet more. You definitely take the cake when it comes to tweeting and your tweets are always on point, Scott. So well done. I do enough for everyone.

For 10 people. Well, thank you so much. This has been really, really enlightening. And I definitely personally learned a lot. And it's nice to hear your perspectives, because I agree with so much of so many of them. And it gives me hope that maybe I'm on the right track. I think that a lot of people listening will probably feel that way as well. So thank you so much for taking the time and look forward to seeing what you guys have in the future. Scott, thank you very much. And also thank you for your listeners listening to this podcast. I appreciate it. Let's go. our Apple and Spotify channels are in the show notes. You can also follow me on Twitter at Scott Melker

to continue the conversation. See you next week.