The Wolf Of All Streets - Simon Dixon, Early Bitcoin Evangelist and Investor on Reshaping Traditional Finance, the World's Largest Ponzi Scheme, the Economy in Crisis, Why The Future is Bitcoin and More.

Episode Date: June 4, 2020

Simon Dixon, Ex-Investment Banker and Crypto Expert has been involved in Bitcoin since its conception. His background in finance allowed him to establish himself as the lead early investor in the space . His company BnkToTheFuture offered early funding to some of the biggest names in the industry including Coinbase, Kraken, Shapeshift, BitPay and more. Simon is developing the future of finance, one that looks far different from what we know today. Simon Dixon and Scott Melker further discuss a central bank digital currency, the world's largest regulated ponzi scheme, the world's first bitcoin conference and so much more. --- CHOICE IRA by KINGDOM TRUST Don’t be part of the 7.1M Bitcoiners who have bitcoin and a retirement account but don’t have bitcoin in their retirement account. With Choice IRA by Kingdom Trust you can hold bitcoin in your retirement account. The first 1,000 users to open a Choice IRA will receive $62.50 in free BTC - visit RetireWithChoice.com/WOLF to join the waitlist and secure free BTC. --- 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. Today's episode is brought to you by Choice, by Kingdom Trust, and Voyager. We'll learn 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. Simon Dixon is an ex-investment banking insider and crypto expert that spoke at the very first Bitcoin conference in 2011. He's the first published author in the world to include Bitcoin in a book and is an early investor in the largest companies in crypto and Bitcoin, including BitPay, Bitstamp, Kraken, Coinbase, Circle, Ripple Labs, Bitfinex, Blockchain.com, and Robinhood. I know, it's a crazy list. It's hard to discuss the early days of Bitcoin without hearing mention of his name,

especially if you're talking about the companies that drive innovation in the space. I'm particularly excited to hear his thoughts on the current market and what he thinks is coming in the future. Simon, thank you so much for taking the time to be here today. Oh, it's my pleasure. Thanks for having me. So I'd really love to hear more about your background and how your experiences led you to Bitcoin and cryptocurrency in the first place. Sure. Yeah. So I guess for me, it's been a bit of a 20 year journey now. I turned 40 this year and it all started with me when I studied economics and was somewhat perplexed with

what I was being taught about money and how that relates to different economic models. But after graduating, I went straight into the banking sphere, started as a stockbroker and then worked as a market maker in the London Stock Exchange for an investment bank and then went into corporate finance and investment banking. And after doing that for a while, in 2006, I started really looking into many conspiracy theories around money.

And it actually started to connect with my traditional academic understanding of economics and put the two together into a non-conspiracy theory, but really started to get fascinated by money and how money creation affects different economic models. So I decided to throw in the corporate towel in 2006 and give lectures around the world on monetary reform and really dug into 5,000 years of monetary history and even started looking at academic papers from the Bank of England and various other things. And at that time, it was very hard to even let somebody know how money is created, that

banks actually create money and used to get a lot of resistance in those days but then the financial crisis came around and suddenly not many people being interested turned into quite a lot of people and then I guess the the changing moment for me was when I was featured in a documentary called 97% owned and it has now had about 3.2 million views on that documentary. And suddenly everyone was interested in this topic. So I started writing the book, Bank to the Future, Protect Your Future Before Governments Go Bust. And I also co-founded a company called banktothefuture.com, which at the time was designed because I was

just fed up of speaking with governments and banks and various other... and getting so much resistance. But I wanted to actually figure out how to create a non-fractional reserve bank. And that kind of led to me... I wanted to create a bank around what I discussed a sustainable bank was in the book. And I didn't realize how much resistance and problems would be involved around that. And that really led me to the Bitcoin community. So I'm somebody that was part of that monetary reform community. It was a community that was very small, but we were talking about monetary issues. And one of them sold their house.

His name was on Twitter. His name was Johnny Bitcoin. And he sold his house to move into a squat in London to work with some early developers, Amir Taki and others in London on the Bitcoin call code. And this got me invited to speak at the very first Bitcoin conference, which was in, there was one in New York and then there was one in Prague, the first one in Europe. And then really for me, Bitcoin was a solution to a problem we were experiencing. How do you create a non-fractional reserve bank?

How do you create a bank that doesn't have exposure to the debt monetary system? And the more we tried to solve that problem, the more we realized it wasn't possible. So Bitcoin with me and my co-founder, which is my wife, Ballistics, it was like a solution to a problem. We saw it as a way of creating that bank. What we didn't know is that it would really... We got so excited by Bitcoin that we actually just started investing in Bitcoin because it did well. We started investing in companies that were building, making Bitcoin more useful. And then we decided to pivot banktothefuture.com to focus on securities laws. And so then we could help companies in the Bitcoin space raise funding because no venture

capitalist was interested in investing in any of these companies at the time. And many of the early companies like Kraken and Bitstamp, they used our platform where we syndicated investors together to actually invest in early funding rounds. And that really led to where we are now. So we just wanted a way to be able to diversify into the industry. We believe that the future of finance looks very different from the past. And banktothefuture.com became a mechanism for us to do that. It kind of brings us to where we are today after seeing, and I'm sure we'll go back into

many different areas of the industry, but after over a decade, we're now the longest standing company in the industry. When we started, there was only a couple of companies like Mt. Gox and BidInstant that are no longer around, obviously. But it brings us back to where we are today, that we now think that the Bitcoin industry has come so far that it now finally has all the infrastructure to actually be able to operate a bank that fully exists outside of the financial system. So we're really somewhat invigorated in this lockdown because we get the opportunity to think and return back to what we

originally set out to create. And now all the technology exists. So we think the industry's just getting started. The last 10 years, we think is nothing compared to the next 10 years. And that kind of brings us to where we are today with what I think is going to be a really major monetary renegotiation of our financial system and our monetary system and many of the reforms that we've always been looking for. I think we're going to start to see those in this year and the years ahead. It's interesting. It sounds like you initially, at least, were looking for a centralized solution to the banking problem that existed. And then you found Bitcoin, which was obviously decentralized. But now it sounds like you're hinting at, and I could be wrong, still a potential Bitcoin

bank of sorts. Yeah. Well, you can now combine the legal structure of the traditional system with the technology of the decentralized system to actually get most of the financial services that would be... So when I wrote the book, I talked about there were three concepts. So before Bitcoin came along, I was criticizing banking for three reasons. And those three things are that when you deposit your money with a bank, the bank becomes the legal owner of that money. So why I was so excited by Bitcoin is I saw a way of actually owning your own money, just like cash or gold or an asset.

But actually having legal ownership of your own money is something that you can't do today unless you're dealing with cash. The second problem that I was criticizing banking for is once the bank becomes the legal owner of your money, they actually spend it as they choose. And so you think it's your money, but as we see from bail-ins, it's not actually yours, and they could use it to recapitalize their bank. They also use it to issue loans. And that tends to, because most money is now digital, 97% of all the money in the world is actually used based upon what the bank sees as creditworthy. So the reason we have real estate market pumps and why it's such an interesting asset class

is because essentially your money is being used as collateral in order to lend money through the mortgage market. And so when 40% of all banks' money is being directed into the mortgage market, inevitably, that's a lot of liquidity to push into real estate. And banks are deciding those types of movements. With Bitcoin, it actually gives you the ability to suspend your own money. So you can spend it globally, you can spend it digitally. And if you own the private key, you can transfer that to anybody else. The third and final problem that I talked about is obviously the way money is actually created,

the monetary policy. And so while banks own your money and spend your money, they also create it every time they issue a loan. So you end up in this, what I call the world's largest regulated Ponzi scheme called traditional digital currency. So when I think of the dollar or the pound, I think of money, which is, or currency, which is created by a government which is cash and coins and then you have a digital representation of it which is when you log into your online banking you're essentially got a a digital currency representation of the government's currency so the digital dollar or the digital pound or the digital euro and it's's backed by debt 100%. So the only way for that money to get created is for somebody else to borrow it. So if you've got a positive balance in your online banking, somebody else has got a debt and a negative balance. And so you create

this cycle of individuals, businesses, and governments having to increase debt levels forever. And it's the world's largest regulated Ponzi scheme we've ever seen. Contrast that with the Bitcoin monetary policy. You know, it's just simple math and code and algorithms where there's a fixed supply and the supply is released to a fixed schedule. Every 10 minutes, new Bitcoins get created. And every four years, the number of them are halved. And so the simplicity and elegance of having this has created the world's hardest money. And so because that can be sent digitally

and globally, so you have these three forces that are in opposing to each other. Combine that with some of the legal structures and you actually have the ability to have a financial institution where you can own your own money, spend your own money, and the monetary policy ensures that it's a hard form of money where you understand the monetary policy

and that never changes. Yeah, it's fascinating. I mean, I think that the world is really opening its eyes to this more now than ever with obviously infinite quantitative easing and endless money printing, helicopter money. Can you speak to that, to what's going on now specifically? Because obviously you saw this happening in 2006. We saw, as you talk about mortgage-backed securities, we saw what happened there with the banks in 2008, 2009.

And here we are again, right? Yeah. So in 2010, I created a video on my YouTube channel, Simon Dixon, called The Great Depression of the 2020s. And it was simply following the belief and the cycle that the governments would use economic theories in order to recycle the debt cycle. And so, essentially, traditional Keynesian economics teaches the governments that in times of economic depression or recession, then they should

spend money in order to make up for the shortfall in the money supply as a result of debt destruction. And the bit that everyone gets wrong is that Keynesian economics also teaches in times of economic prosperity, you should pay down the debt. And so we don't actually get Keynesian economics, we just get debt creation in times of economic recessions, and then continued debt creation in times of economic markets. So conveniently ascribing to the half that we like and ignoring the half that we don't. Exactly that. Yeah. So, you know, I mean, I'm not a Keynesian economics by any stretch of imagination, but you can't really blame this on Keynesian economics because it's not been followed. But where this starts to get, you know, so in 2008, we saw that all the individuals were

maxed out on their credit cards. So, you know, when you try and get people to borrow more. So remember, the way that we structure our money system is in order for money to be created, somebody has to take on debt. If you want less debt in the economy, then you have to have less money. And so the business cycle to me is just simply, you put interest rates down and encourage people to borrow. So more consumers, more businesses, and governments go deeper into debt. And then you take the individuals, because this bogey called inflation comes along, and then you put interest rates up, and you take the people that

borrowed the money and save the economy into bankruptcy in order to cool down inflation. And you end up with this continual business cycle. But then at the end of every business cycle, because people defaulting on their debt leads to debt destruction and a contraction in the money supply, the government come along and step in and take on the debt. So the government's debt always exponentially increases. So we don't need to pretend that we're trying to balance our books because it's just simply,

if a government ever balanced their books, it would be a depression, which is something they're trying to avoid. And so what you end up at the end of a debt cycle, so we're now at the end of a 75-year debt cycle that should have ended in 2008. But they found another organization to stimulate the debt, which is that the central banks could create new money, new digital currency, and they used that to purchase a couple of asset classes. One was government bonds and the other was corporate bonds. And so what ended up happening is the government essentially borrowed the money, which is an interesting question because the government has full authority to create

the money. Why would it need to borrow it from the central bank? And secondly, because that just adds a lot of interest in efficiency into the market. But secondly, the corporations took those cheap loans. They used it to purchase their stock and we entered into another 12-year stock market bubble where the stock markets were propped up by money that was borrowed in the bond markets as a result of quantitative easing. So then we pushed it to the limit. And so what I was forecasting by 2020 would be a systemic risk event. I didn't know it would be a global pandemic. I mean, you nailed it to the year.

Yeah. Well, the cycles, you can just follow the cycles. We've had monetary renegotiations in 1945 through Bretton Woods. We had another monetary renegotiation in 71 when the US dollar became a debt standard rather than a gold standard. And then you had the 2008 debt cycle. And then in 2020, I was forecasting probably some other systemic risk event like a credit card crisis, but something I gave, I released a video explaining how in 2019, how Bitcoin could become a world reserve currency by 2020 under a set of currency wars as a result of a systemic risk event that would expose the weakness of the financial system.

This health crisis is doing exactly that. And what is really, really interesting about this one is that essentially, because of the uniqueness of this unpredictable, unforeseen risk event, governments and central banks are chucking away monetary policy. They're chucking away fiscal policy. They're chucking away any pretense that they're going to balance their books again. And so really, because they're chucking everything at getting us out of this health crisis that then leads to an economic crisis, and then

that exposes the weaknesses of the banks and the financial crisis. Then the only outcome after this is a complete monetary renegotiation like we saw in 1945, 1971, and 1933, and various other cycles. What's interesting as well is I believe that governments are actually going to use a central bank digital currency to do that, but we've actually got historical reference to a similar thing, which is that during the American Civil War, the governments created a new currency. It was a paper currency called the greenback, and it was non-debt based money. And that was used in order to fund and rehabilitate from the civil wars. So it's easy to think that what's happening now is new because we've never experienced it. But there's historical precedent to all these scenarios, and they're just slightly different flavors of similar things. Right. I mean, what's new is the cause, but that doesn't mean that the root is new or that,

as you said, I mean, you were predicting it in advance that the result would be somewhat new. But as you touched on, as a result of it being a global pandemic and a health crisis, they have thrown everything out the window. And now we have a repeat of all these problems, obviously, but on steroids. I mean, you talk about corporate bonds. I mean, we're over a trillion, right? We just set a record, smashed a record for corporate bonds. The government's buying up bonds. There was effectively no bond market in March. There were no bids on the books. I mean, what does this renegotiation look like? What is the end to this? I mean, there's literally almost no way to project in my mind how this will end. Yeah. So I'm looking for a couple of things. There is one thing that is different this time.

And I know I just contradicted myself because I said there's been different here. But there is one different thing, which is Bitcoin, which is a monetary system that exists outside the traditional. So that's why this one is particularly interesting. But let's stick with the traditional. If I were running a major central bank at the moment or if I was advising a government right now, you've got no choice but to chuck everything at it. So what have you got left? What tools have you got left? Well, you've lost interest rates.

You can go into negative interest rates, but that's a very undesirable outcome, essentially just robbing everyone's savings. You have monetary policy, but now you've chucked all your quantitative easing to its limit. It didn't re-stimulate the markets because investors didn't believe that a market popped up by quantitative easing is a desirable outcome anymore. Fiscal is completely through the roof. We've got books that can never be balanced again. So you've got no tools left. What do you have? Well, you've got

a new money supply that you could create. But the risk of creating a new money supply is that you could end up creating a hyperinflation scenario out of a deflationary market, which we're in right now. So how could you introduce a new money supply to bail out the system in a way that doesn't lead to destroying your currency. We're in a US dollar market, so 70% of all currency in the world is US dollars, over 50% of all international transactions are in dollars. That was renegotiated with the Bretton Woods negotiations. So what would you do if you're the us in this scenario well what i would do is i would issue a central bank digital currency in proportion to the level of debt destruction of a bank going

bust let me explain that a bit more um so because all my bank was created every time they issued a loan, at the same time, when someone defaults on their loan, money gets destroyed. When a bank issues a loan, it puts an asset and a liability on their balance sheet and simultaneously new money is created. So the banks are the creators of this digital USD or this digital GBP or this digital Euro. And when people default on that loan, then money gets destroyed. That creates systemic risk in the banking system because it's not fully reserved. So there's only two outcomes that can come from that. One, either the bank goes through an event where it has to bail itself in or request a bailout, or it

actually sold all of the toxic assets to your pension. So there's pension exposure here and there's bank exposure. Some banks just sold on all the assets and therefore they passed on the exposure to you through your pension. Some kept all the assets and therefore the liabilities are on the bank's balance sheet. The problem is that because money is created every time they issue a loan, they can just pass that exposure on to you, which use it to put the bank in a better position. Or they could ask the government to do it. Well, I don't think the appetite in the current environment is going to allow for another banking bailout, especially when most people are living month to month and there are record anxiety levels in their

personal financial situations on a scale we've never seen greater than the Great Depression of the 1930s, which I'm not old enough to have experienced. And so if you proposed a bank bailout for the wealthiest 1% in times when the 99% are in absolute poverty living month to month, the only reason their mortgages are being paid for the vast majority of people is because the government's paying them through universal credits, then a desirable outcome is to just let the bank go bust. But as we saw in 2008, letting a bank go bust is disastrous for everybody. So what you could do is you could just simply let the bank go bust and tell the people that had deposits with that bank to download an app.

And on that app will be a central bank digital currency. And you just simply replace debt-based money with debt-free money based upon how many people had deposits with that bank. You could auction off the debt, which they've done in the past with toxic assets. And this way, you have the introduction of a debt-free central bank digital currency. But what if someone wasn't with that bank? Well, you offer a helicopter money or universal credit, whereby everyone that downloads this app gets access to this new central bank digital currency as a way of stimulating the economy. And so in a very quick period of time, you could have countrywide adoption of your central

bank digital currency with the ultimate incentive of getting free money and replacing the deposits that you had at that bank that went bust. But then the central bank is in the world of money creation and banking now. Exactly. That's good for the people. But obviously, the Fed doesn't exactly want to remove the US dollar as the global benchmark currency. Yeah. And the reason that I think... And this would be a digital USD in the case of the Fed. So there's two things the central bank doesn't want to do. It doesn't want to do customer service. So it will just simply release an API key allowing projects like Libra, Facebook,

that wanted to create a digital currency, they'll let them do it on the backbone of this central bank digital currency. They'll let financial technology companies have access to the APIs and turn banking into digital banking using this as the backbone, and they can take care of all the customer service. And so essentially, you'll get a much more competitive financial system built upon technology. But there is definitely a real problem for the consumers. And that is the effect that this will have on your personal liberties, freedoms, and privacy. Of course. So I think that this is inevitable, predictable, and guaranteed because it's their last card. But this central bank digital currency

is definitely going to come with... You just got to look at trends. So you look at an event like 9-11 happens. In order to counter terrorism, we have this ginormous bunch of anti-money laundering laws, which everyone opts into because of an event like 9-11, they want to combat terrorism and money laundering leads to people opting out of their personal freedoms. Right. And those are liberties that you never get back. You never see these things reversed. Exactly. Yes. Now take the current situation today. You've got record levels of dependency upon government interventions. You've got a population that is experiencing at the edge of psychological mental issues and abuse of being stuck in their houses and willing to do anything to get out.

You've got people that are stuck in situations of domestic abuse that if they had to give up some of their personal freedoms in order to get themselves out of this situation. You've got businesses all working from home that are going to be experiencing record levels of bankruptcies. You've got individuals that can't pay their mortgages that are only paying them because of these currencies, because of these support packages. The ability for someone to just opt out of their freedoms by downloading this app. And you can imagine what comes next after this. So me and you are in two different countries right now.

You may or may not be in the U.S. We're on a Zoom call and is routed through a U.S. server. With the central bank digital currency, if me and you engage in an international transaction, that will be connected to the other central bank digital currencies. And my government will think I owe them tax. Your government, if you're outside of the US in a different country, may think that you owe them tax. And the US might take the opinion in order to try and balance their books that anyone doing a transaction over Zoom through the US servers owes the US tax. And so now you've got

three governments that all believe that they should have got their piece of that central bank digital currency connected to the app where you've opted in to automate tax collection. And you then end up in a scenario where you have to argue with three governments to try and get your money back. And then maybe you decide to fly over to another country to try and resolve that with another government. You didn't get the vaccine.

Therefore, that was connected to your central bank digital currency because that's part of their lockdown exit strategy and border opening strategy. And therefore, your passport just gets switched off because that's also connected to the central bank digital currency. And then maybe you decided that you wanted to send some money to support a cause in Zimbabwe. And one government has a sanction against that country. Your government doesn't have a sanction against that country, but because you've decided to send money over to this charitable organization in that particular country, because it went

through the central bank digital currency that's connected to the dollar, the sanctions in that country might end up to you not being able to enter a flight, your passport being switched off, and we're entering into a really, really tracing-style scenario where you're opting into these apps, essentially going to be tracing and tracking everything you do. I believe the drug to get people hooked on this is free money, and it simultaneously meets the obligations of the government and the central banks. And so the effect that this is going to have really concerns me.

But at the same time, thank God we've got a force whereby you can own your own money, spend your own money, and have a monetary policy that's independent of politics and certain governments' goals. I think every fiat currency should be something that the government actually uses to achieve the goals of that domestic country. But it's when you get in the international markets and when you start and then you have a competing market

with a currency like Bitcoin that you start to get really, really, you know, a more competitive market with a currency like Bitcoin, that you start to get a more competitive market and a force that really drives adoption into people experiencing why it's important to own your own money, why it's important to be able to transact digitally globally, and have this kind of hybrid model that Bitcoin has where you have anonymity, but you have complete traceability, which means that if your identity is connected to an address, it's a really bad way to commit crime because there's a digital footprint forever that can't be deleted. But you have the ability to be anonymous. So you have like that hybrid system that Bitcoin gives people. And you have a counterforce to quantitative easing, which is essentially quantitative

tightening. You know, in Bitcoin, the money supply actually contracts because people lose their private keys. It's a ruthless, brutal system whereby if you lose your private key, then that contracts the supply of Bitcoins that can go out in the market. And therefore, in an ever contracting supply of Bitcoins that can go out in the market. And therefore, in an ever-contracting supply of Bitcoins, where there's only ever going to be a maximum of 21 million with probably 5, 6, 7 million of them being lost, and there's only another 3 million to be mined, the only place that

people can go in order to scramble for those Bitcoin is by paying a higher price for them. So I think we end up in what I think, what I consider to be one of the most interesting speculative opportunities to really transform the definition of a store of value. And I've probably, you know, I've covered a lot of ground there, but there's so much we can unpack in that as well. Don't be part of the 7.1 million Bitcoiners in the United States who have Bitcoin and a retirement account, but don't have Bitcoin in their retirement account. Seriously, you can hold Bitcoin in your retirement account, not just GBTC. How can you do this? Through a self-directed Choice IRA by Kingdom Trust. The first 1,000 users to open a Choice IRA will receive $62.50 in free Bitcoin.

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crypto assets, and you can instantly transfer cash from your bank account so you never miss a trading opportunity. Even better, you can now automatically earn interest on your crypto holdings. Currently, they're offering 5% interest on Bitcoin and 6% on USDC. Yes, you heard that correctly, 6%. And there are no limits or lockups, which means your funds always stay liquid. Find out why so many people are making the switch to Voyager. Visit It's funny. I mean, it sounds like in this future, if that happens, that individuals will basically have a very simple choice, which is be broke or be free, is what you're saying. If you want the money, you give up all of your freedoms. Otherwise, you're kind of out there on your own. Or I guess your other option is buy Bitcoin and opt out. Is that a correct summary?

Yeah. And, you know, it gets a bit more nuanced because obviously people living month to month, which is this debt-based system has driven so many people into that, you know, very unfortunate scenario where they've just been consuming, supporting the economy, and now they're in dire debt. You can't afford to take currency speculation. So if your income is derived in Bitcoin and you have to pay your rent in dollars or pounds or euros or yen, and you can't pay that because you earned in Bitcoin, it's not a very good way of managing your personal

affairs, but it's an awesome way for people of managing their savings over the long term. Yeah. Because essentially the way that I manage my personal affairs is I hold an amount in fiat currency, but the way that I think about my money that I hold in fiat currency is the money that I hold at a bank, I fully expect one day that I might not be able to spend it. It's not really mine. And if I can provide enough documentation to the bank, you know, this doesn't really affect people at the minute level. But when you're talking about larger sums, you really start to experience this.

It's very difficult to get your own money out of the bank. Exactly. You know, that's how I see it. And I'm just, I'm okay with that, right? I've come to terms with that. So therefore, I keep the amount that I'm willing to go through that process for, you know, and that is like a year, well, several years worth of expenditure. I do have to say, though, at a lower level, obviously it affects people who are wealthy and have to move a ton of money. But at the lower level, they charge you a fee to access your own cash. Even if you want to take $20 out of the bank in an ATM machine, it can cost you $3 to do so. So it does affect people at the top and bottom. Exactly. And one of the other tools, one of the other last monetary tools is negative interest rates as well.

So the only desirable outcome for the average person is taking on debt. And that's why we're in this situation. Because that's the sensible thing to do in the current scenario. If you think that money is going to be worth less in the future, people don't necessarily think of this because they're living month to month. But when you start to think about the world as a speculation, you realize that you can't just, money is not really money. You have to, you're forced into speculation.

And everyone has to become a speculator in order to really think through, well, how do I manage these monetary renegotiations, these multi-regulated Ponzi schemes? And that's a very tricky thing for people to do. So that's why we've talked about a lot of complexity here, but I think our industry needs to figure out how to make these things more simple for everybody, because unfortunately, we live in a speculative economy and you either speculate yourself or someone's going to be doing the speculation for you. And if someone else is doing the speculation for you, you can guarantee if someone else is doing the speculation for you, you can guarantee you'll be in shafted.

Absolutely. So that actually is a good pivot to all of your investments in these multiple companies. So there's obviously a famous saying, and I always find myself referencing it. It's, you can mine for gold or you can sell pickaxes, right? Samuel Brennan famously made his fortune during the 1849 gold rush by selling pickaxes to miners. Levi Strauss made his fortune selling work pants and was famous because of the rivets that he put in them. So, I mean, was that your thinking when you started funding crypto companies and founded Bank to the Future? Yeah. So, with Bank to the Future, obviously, we started as a mission to try and build a non-fractional

reserve bank. We failed. Then we pivoted to a securities business and we started focusing on global securities laws. And some of the reforms that we tried to do in those early days actually led to big reforms in securities laws. So the JOBS Act was an opening up of securities to everyday investors. And that was off the back that we did when we started in the UK and we were lobbying the regulator to allow for this to happen back in 2010. And in 2012, the JOBS Act came around. So we got distracted. And when we got into the bug of being... Essentially, I didn't know which companies would fail and which companies would succeed. But I just, I really wholeheartedly believe that the future of finance is going to look very different from the past. And every single financial product is going to be disrupted one at a time.

And so I wanted a way to just be able to get complete exposure to all of the different parts of the market. And so now I'm a shareholder in over 100 companies through Bank to the Future. And so the highest performing companies in that turned out to be exchanges. Not surprisingly. There you go. The reason for that is because, you know, when crypto or Bitcoin crashes, exchanges make a lot of money. When it goes up, they make a lot of money. There are hard times when you're in a sideways market, just like it is.

But also geographically diversify. So we had companies like Bitstamp in Europe, Kraken in US, Bitfinex serving more of the offshore markets and Chinese markets. And then we had Unocoin in India, which is doing a bit of a turnaround now, thanks to regulatory changes there, and Bitso in Mexico. And so just to be able to have a complete diversified approach, which really brings us to where we are today. The next range of products that we want to create at Bank to the Future is all centered

around simplicity. How can I get a complete snapshot and complete exposure to the entire industry without having to necessarily pick all these different companies, which is what we've been doing for the last 10 decades or so. So those are effectively structured like an ETF of sorts? Not quite an ETF. So the next range of products that we want to bring is, so, you know, you bring $10,000, you're a qualifying investor. Essentially, it can just automatically buy you a little bit in each of the companies on our secondary market.

So at the moment, you can buy and sell. So the secret sauce with banks of the future is you're not actually buying the underlying companies. We structure everything into a special company that is set up just to hold those shares. So it's your own product that gives them exposure. Exactly. So you can buy the Ripple Labs SPV, the Bitfinex SPV, the Kraken SPV, the Circle SPV. And essentially, we are able to transfer those shares, but underneath it, the company doesn't have to

go public because we're one shareholder on the cap table. So that prevents this problem and allows us to create a product, which very elegantly allows any investor that qualifies to be able to buy securities in these markets. Did you say that qualifying was $10,000? Is that correct? Sorry, just for clarification. Actually, it's different in every country. Oh, God, I hate accreditation. Well, this is why it took us 10 years.

Because if you... So, you know, in the future, our main company is a Cayman Islands securities business. But we also have, if you are from the UK, you're on board via our UK regulated company and therefore you have to comply with UK securities laws. If you're from the US, then you have to comply with US securities laws and each deal will have a slightly different type of thing. But in general, in these major markets, it's the accredited, sophisticated, high net worth, qualifying, professional, and every country has a different definition.

Understood. But what we want to do now, our next wave, is creating products for the masses. And that's really what we want to do next. Because for the last 10 years, you know, we've got 85,000 high net worth qualifying, accredited, whatever you, whichever country they're from, investors. But it's given us tremendous insight into of those 85,000 investors,

you know, without me revealing someone, how well someone performed. We have intelligence around who got really, really wealthy over the last decade and who didn't. And so we've learned a lot about the types of mistakes that investors make in this industry. And so we think we can create a really interesting product that allows people to come on, have an allocation in Bitcoin, have complete exposure to the equity in the industry, and then use some of the financial engineering that has happened in our industry, which has just reached a really interesting phase now with innovations like stable coins and DeFi, but really package those complexities

up into a very easy product that gives people, everyday people, exposure to this industry. So that's what we're really excited about bringing to market next. Well, how do you circumvent the accreditation laws and things like that? Obviously, that's the main barrier here. And for people who are listening and don't understand them, obviously, you can service high net worth individuals, but, you know, it's another function in the whole system of, you know, protecting the wealth of the fortunate few and then not even allowing the poor, basically, or people who don't have enough money to invest in the things they want. You're protecting them from themselves, but really you're not allowing them the same

opportunities as you are wealthier people. So how do you circumvent that and create this product that anyone can invest in? Well, it requires a multi-strategy. The first is, you know, we can't change securities laws. Securities laws are gradually changing. Regulators have taken the opinion that this is a high-risk asset class and you should be able to afford to make losses in order to do that. Right or wrong, that's the majority of regulators' perspective on how they manage the risk between the public markets and the private markets. And there are genuine good reasons for that. And there are also, as you said, wealth inequalities that are driven by giving the wealthiest the

ability to actually take such risk. And that's a debate. It doesn't really matter what we say. It's what the regulators do. Right. It is what it is. But cryptocurrency has created a next generation of products that when they're not securities, you know, everyone can be involved.

And that's really the big game changing thing here. And so while you might, we could create a product that's purely non-securities, that gives you exposure to the industry, and then if you happen to be certified, then you can also add an additional hedge in there with exposure to the equity of the companies. Understood. But we can make products that are suitable for different jurisdictions and different regulations and just allow you to get into the products that are available to the individual investor. That's really, really fascinating. I can't wait to see that come to fruition. I think that people need it. And it's unfortunate that our governments try to protect us from ourselves, which at least that's their excuse. I don't think that's what's actually happening. But you touch on these investment vehicles of the future. I mean, we're at a unique time, which we've touched on a number of times here. I mean, it feels like a depression,

whether you want to define it as such or not. how should your average person invest their money in a depression? That's a really good question and something I've been spending. So, as I said, over the last decade, I've been only able to work with high net worth investors. And so I haven't... But what I've consciously decided to do since this lockdown is actually just really ramp up the amount of content I've been releasing on my YouTube channel because I do believe for the first time, the tools and strategies of the wealthy 1% are now available thanks to Bitcoin and crypto innovation to the 99%. So one of my next missions, as it were, and what I've been working on at the moment is putting together a course for, I'm going to take a million dollars of my personal savings, and I'll tell you how I'll allocate it, but also there's some additional nuances that would require some time. But I'm going to take a million dollars of my savings and imagine that I'll show exactly what I would do with that today in the current market.

I call it the Great Depression of 2020. I'll be allocating that exactly what I would do if I were starting from scratch. The other thing that I'm going to do is imagine that I have no savings and what I would do today if all I had was an income. If you've got no income and no savings, then unfortunately, that's your first problem to solve. Right. But if you do have savings, then how can you rebalance it for the market ahead? And I'll give some insights. And also, if you have just an income, how can you allocate that to actually understand, you know, rearing wealthy, essentially. But if I look at the market now, what I'm doing and what I'll be doing with that and what I'll be sharing exactly the breakdown that I'll be doing with that is everyone's got to have their own determination of the risk level. So I said that we're entering into a monetary renegotiation.

The future of the financial markets is dependent upon political renegotiations. And so you don't know what politics is going to do next. So the best you can do in the traditional markets is build a portfolio that can perform in deflation, in inflation, in times of economic growth, and in times of economic decline. And there's some really interesting, by combining traditional government bonds with stocks and commodities like gold, how you can put together a portfolio in the traditional part. And I do encourage, I can't give financial or investment advice, but I think a lot of Bitcoiners are overexposed to the Bitcoin markets because I'm ultra, ultra bullish and risk reward,

I think it's a great place to be right now. But I don't put all my future on one thing succeeding. Of course. And there's so many variables that we'll never be able to control. The government bans, whether it be regulation, things like that. I mean, there's so many unforeseen things. You don't want to ever be all in anything. Exactly. But what I see in the crypto markets from my last decade of watching Bitcoin, I've seen my Bitcoin go from $30 to $3 in a day. I've seen my Bitcoin go from $1,250 to $250 over a few months. I've seen my $20,000 Bitcoin go to $3,000 in a very quick period of time. And I've kind of built an unshakability where those things don't affect me, but those things affect most people. And you'll learn that

as you be more involved in this industry. But a percentage in a traditional portfolio that doesn't really matter. So as I said earlier, inflation versus deflation. Many people think the amount of money that the government's creating right now can only lead to inflation and hyperinflation. Well, it's not true if assets are being destroyed at a faster rate. That's a better case scenario, actually, than deflation. Well, there you go. So both of those are problematic. And so you don't know what's coming next. But what I believe is that there is a monetary renegotiation and there's going to be a currency war and I cover all these different topics in individual videos.

But you have to be prepared for every scenario with your traditional portfolio. is really, what if the traditional, the financial system really implodes, but also a risk level that can produce returns that are proportionate to the risk that I'm taking. And so really Bitcoin for me is the majority of that. So when I think of Bitcoin, so people always talk about Bitcoin versus the crypto markets. When I think of Bitcoin, I think of Bitcoin as the only thing in our industry that has a short achieving sound money or hard money. And so my strategy is based around accumulation of Bitcoin. Same.

But there's Bitcoin that you hold on your, where you hold the private key. And then there's a percentage of your Bitcoin, which you can lend to speculators and traders. From my perspective, I know this might make an interesting debate, but when I was a market maker, 90% of traders are losing money to the 10% of insiders. But you can be on the right side of the trading speculation game by lending your Bitcoin for those that want to speculate and borrow it and have it collateralized. So that can produce yields and allow you to increase your Bitcoin position. But the sacrifice you have to give is counterparty risk, obviously. So you don't want to put all your Bitcoin there. But I do believe that some of it wants to be there. Then it's different for people in the US. I believe that until there is a radical change,

then the dollar is always going to be the strongest out there in the long term until we have a complete change in shift. And I'm not seeing that anytime soon because every central bank in the world holds dollars, treasury, gold, and everyone's opted into the dollar standard, the death standard. So I don't think that's going to change anytime soon. And so if you're in a foreign country, stablecoins are an interesting way of giving you exposure to the dollar. But then you need to diversify in your stablecoins and you can get yield on those.

So protecting yourself from some Bitcoin volatility using stablecoins, but not all stablecoins are equal. Some of them diversify against bankruptcy of banks. Some are exposed to tight, hard regulations in the US. Some are not exposed to hard regulations in the US. So I think about stablecoins as a way of getting dollar exposure and lending them through these collateralized markets to get abnormal yield in a market where you can't really get yield on your dollars at the moment. I mean, you get 8% on a stablecoin and nothing on your dollars. Exactly.

Yeah. But you need to use some responsible diversification and asset allocation in order to not be too exposed to the inherent risks in those stablecoins. But also I see ETH like, I'm trying to define, I'm a Bitcoin maximus in that I think that Bitcoin is our only shot at achieving hard money in the digital currency space. But I'm not close-minded enough to notice that Ethereum has the vast majority of the developer community's mind, all building these incredibly innovative decentralized finance

products that are actually creating an amazing community that is not competing to try and be hard money, but they might get the vast majority of the innovation in building the next wave of financial products. And so Ethereum to me is interesting from that perspective, and also the fact that you can experiment with proof of stake to actually receive yield, so income at the same time as any growth that may happen. And that can only help you increase your Bitcoin position. So this is what I see.

This is how I see things. And then obviously a diversified portfolio of equity in the industry so that whatever happens, you're diversified across the growth of the industry. And I'm taking a 10, 20 year opinion that we're only just getting started and the next 10 years are going to grow faster than the last 10 years for our industry. And so therefore, when people ask me, what's your exit for Bitcoin? I don't think I have one. Exiting Bitcoin is saying that I want to buy money that I can't own, money that I can't spend, and money that I know will be diluted long term. So why would

I buy that? Well, I'd only buy that if I have a short-term need to have no volatility in my life, which we all do. So as you start to accumulate wealth, you start to think differently about money you spend versus your investment portfolio. Whereas when you're living month to month, you can only think about that as the same thing, your investment and your expenditure and your domestic currency and your bank is all the same thing. But what I want to try and do through this educational program is showing people how I... The reason I said I'll do it with a million dollars on my savings is because that scales to $1,000, $10,000, $100,000, $1,000,000, $10,000,000, $100,000,000. Nice round numbers. Yeah.

But I'll also do it with zero and just taking a percentage of my income and showing that there is an exit to this. Everybody that has an income can do that. Now, I appreciate we're in a time where everyone's losing their, many people are losing their income. That's very unfortunate. But I want people to see that there is an exit from all this madness. There is ways of responsibly doing this. And thanks to technology, all the complexities that I've just described can be built into products that can do that with a flick of a switch.

And that's what's really exciting. So while we're in, for many people, the scariest time in financial history that they've experienced, we're also in the most exciting time in financial history that we've ever seen. Because this crazy little experiment that consisted of 40 people in a room, when I spoke at that first Bitcoin conference, they've actually gone and our whole industry has gone on and created something that I actually believe is genuinely going to change the world at this time. By giving, even making fiat currencies more honest, by making them compete in a market that they can't shut down. I just think that that's such an extraordinary thing and just a freak thing that I don't think we'll ever experience again in our life, certainly in my lifetime. I'm roughly your same age. So same for me. Just for a complete spoiler here, with that million dollars, what would be the

percentage total exposure to crypto? Me personally, So then, you know, this is, I got to put in the caveats and the disclaimers because my situation is not your situation. Of course, every situation is different. There's no one, one size fits all. Exactly. So the danger in this, and the reason I have to say that is if I were, if I was 65 years old, my, my, my strategy would be different than being 40. And so if I'm 20, it would be slightly different to me being 40 in my stage of life where you start to reach the stage where protecting what you've got becomes more important. Whereas when you're young, you want to go out there and take more risks. risk. So for me, I'm still at a stage where I believe that I can put 20% in a traditional

portfolio and I'll be fine for the rest of my life. And so therefore, I can put 80% into what I believe the future of our world is going to look like. And even if I'm wrong, I've still got my... If I'm completely wrong and I'm an idiot and I do get things wrong, I've just cherry picked the things I got right, but I do get things wrong, my financial future is not necessarily going to be affected. It would be horrible for me, but it's not going to, it's not going to affect my lifestyle. And so I can, I can make that type of risk, but you know, you might be in a situation where you want to be indifferent. So maybe you don't believe that the traditional financial system is going to implode. They'll always find a way they'll use financial engineering. I believe in that too. Um, I don't believe that we're going

to end, we're going to going to allow society to enter into this zombie apocalypse world. I think we'll always find a way of... At the end of the day, this is just numbers. It's just engineering. It's financial engineering. And we can always financial engineer a way to ensure that society doesn't end up in a hyperinflating... Well, that is reality for some people, so it's not a guarantee there as well. But I can take that. Some people might want to be 50-50 indifferent

where they believe that the financial system could implode and therefore the alternative could do really well. Some people might just say, I really don't agree with any of that crap you're talking about, Simon. That's just massive, massive, crazy speculation, blue sky thinking. But just in case, imagine if the returns I could get if I just supplemented and hedged some of my traditional. So really, for me, I'm okay with the 20% traditional, 80% blue sky thinking. But I don't think that that's right for other people.

Because most people can't survive on 20% of their life savings. So it's obviously unique to each person. The first step is to acquire it. Your personal balance sheet, think of yourself as a business and your personal cash flow statement. Put that together. You know, if you're, if you've got, if you are not in a position where you spend less than you earn and you can invest a difference, then your first step is to resolve that. Of course. And, you know, just think long term. And one of the things that's always driving me crazy about the crypto markets is that because everyone, like so many people, made so much money disproportionate to reality, and I'm blessed that I've been involved in some

of the most incredible trends that you will never see in your lifetime ever again. And there's probably more in the market. That's the crazy thing. This market is crazy, but you have unrealistic expectations and disproportionate gambling mentalities in this industry that I think are very harmful. And if through education I can try and put some realism into being more responsible for you because we live in a time when people are going to need to see leadership and people's finances are being destroyed. It's no joke.

Yeah. And I don't want people to be destroyed by excessive gambling and putting all your money into an IEO or trying to find the next Bitcoin or not getting exposure to this because you believe that we're all a bunch of crazy degenerate gamblers. Or even more importantly, trading it all away. I mean, you're talking about making poor investments, but I think in this market, the real risk is that, you know, 100x leverage or gambling on altcoins or whatever it is with people's entire portfolio. I mean, I've always kind of been conservative. I'm a professional trader, how I make a living, but I'll still would never trade with more than 15% of my portfolio. And I think that most people in

this market, because of those asymmetric gains that they've seen in the past, are taking their entire portfolio and throwing it onto BitMEX and such and gambling with 50 and 100x leverage. So they're not going to even have anything left if the maximalist theory pans out, right? Yeah. And it all comes from the you know, the get rich quick mindset. And we're, you know, us as an industry, we're constantly throwing that down people's throats. You know, five coins to $5 million or, you know, the next big Bitcoin and, you know, just all these just unfortunate things that come out of our industry. I love and hate our industry in so many ways, but we're driving people into these gambling

mindhands. One of the things I love about our industry is that many young people that got in our industry during the ICO craze in 2017, they were never going to buy stocks, bonds. They were just in debt and they were never going to invest. They were the generation that was always going to be in debt, never own property, and never buy stocks, bonds, golds, or anything. But because of the speculative nature of our industry, they started thinking about investing and speculating for the first time, which then led them... If that leads you to then later coming into more of a responsible investment

mindset, then that's really served the world because these people were never going to invest. They were just thinking about debt. They were never thinking about it. But the law of our industry got people into that. At the same time, I've seen some... I've been around people that were involved in this industry and as Bitcoin has produced 9 million percent returns over a decade. And I know many people that were there for that whole phase that are still in debt and wealthy. And they are on these exchanges using leverage, putting all their money into IEOs or ICOs or the next big shiny object or the next Bitcoin or the next altcoin. And some people never got ahead of that, or they just had to sell their Bitcoin just simply because they had to pay their rent. They've had to pay their debts because they never got themselves in the mindset of how to build wealth long term.

And I think this lockdown hopefully is a catalyst for a lot of people to change their behaviors because that's all this is, is to shift in behavior. Yeah. I mean, you even touched on it earlier, but pre-crypto when you were trading, you saw that 90% of people were basically losing their money to the 10% of insiders. And then you offer them these tools and unregulated market. And I think it's really just compounds and it's quite sad. I mean, that's my take on it because I see it every day and it really is unfortunate. I just want to pivot quickly and ask you before we're done, what companies and what will you be investing in 2020, 2021? So the goal is a bank. So I do all my equity investing through bank to the future in terms

of the companies. And I am fully exposed to financial technology because it's the industry that I understand. And then I have to just... When it comes to traditional investing, I just do the simple things. Index funds, where you don't have to think much and they're low cost. And most, 80% of the market doesn't beat the S&P anyway. So, you know, I do simple things there. So a business owner through, you know, large scale public markets in the traditional side. On the crypto side, I'm really exposed to fintech because, you know, that's my area of expertise. And I wouldn't know how to do this for other areas. And so what we want to do at Bank to the Future, and I do it all through Bank to the Future, is get

all of the missing companies. So we missed some unicorns in there. We got a lot of them. We got blockchain.com, we got Kraken, we got Bitstamp, we got Bitfinex, we got Coinbase, we got Ripple Labs, we got Circle, but there were certain ones that we missed. companies like Binance, Huobi, and various others. So, our goal is to try and plug the gap of all the companies that we missed so that I can then just fill in all the gaps.

And all I do is I contribute a monthly sum to the complete exposure of all of these companies and just increase the position month by month. Brilliant. Kind of like buying the SPY and dollar cost averaging into the SPY or something and watching your money grow over time. So where can everybody follow you after this and keep up with you and make sure that they catch all these lessons and ideas? So I'm active in two main places. One, if you are interested in building a portfolio, then banktothefuture.com is where you can see if you qualify to invest based upon your

country. But then in terms of everyone else that may not qualify, I have a YouTube channel, Simon Dixon, which I started back in 2008, 2009 before Bitcoin and still got some of the early videos. But now I've got really more active as this giving live commentary is because my best thinking today in this fast changing environment is not necessarily my best thinking tomorrow. So I've got that YouTube channel and then Twitter at SimonDixonTwits. I signed up for that at a time when I started Twitter taking. And then I put the Twits on the end and I've been stuck with it ever since. I guess you have to be able to at least laugh at yourself a little bit, right?

Yeah. Well, thank you so much. I really do appreciate it. And I think that you raised some very, very important points and ideas. I know it was a bit of a whirlwind, but I'm hoping that people will go check you out and follow and really have the chance to hash out these ideas and see your complete thinking. So really, really valuable stuff. I really much appreciate it. Awesome. Thanks for having me. I know, I do, I genuinely think that education is the most important thing in this industry. And so, you know, you producing content, I see that as really important work. So keep doing what you're doing.

Hey, everyone. Thanks for listening. New episodes go live every Tuesday at 7am Eastern Standard Time. Links to 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.