We Study Billionaires - The Investor’s Podcast Network - BTC198: Institutions Adopting Bitcoin w/ Max Kei and Pascal Hugli (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On today's show, I have CEO and founder of the institutional Bitcoin borrowing and lending platform, Debify Mr. Max Kai. And I'm also accompanied by Pascal Hugley, who's from the Swiss bank, Merski Bauman. During this conversation, we talk about institutional Bitcoin adoption, what the institutions are getting right, what they're getting wrong from a custody and risk mitigation standpoint, how Bitcoin is a completely different animal compared to how they traditionally think about managing

Starting point is 00:00:32 risk and collateral. Personally, I thoroughly enjoyed this conversation mostly because I think it's one of the most important things traditional finances missing and needs to deeply understand. So without further delay, here's my chat with Max and Pascal. Celebrating 10 years, you are listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pitch. Hey, everyone, welcome to the show. I have Max and Pascal here to talk about all things, institutional, borrowing, lending, Bitcoin adoption, conference that we just were able to spend time together. So, guys, welcome to the show.

Starting point is 00:01:22 Hey, Preston. Yeah, thanks for having us. All right. So this is where I want to start. So I was there in Riga. I've never been to Riga. And this is in Latvia for folks that if you don't know your geography, this is over there by Poland, kind of in. that part of the world. I've never been to this part of the world. I was blown away. Riga was a

Starting point is 00:01:42 beautiful city. It wasn't as hot as it is here in the south in the southern part of America in the US. But guys, thanks for hosting the event. Max, you're the guy from Hoddle Hoddle and DeBify that put this conference on. Is this the oldest Bitcoin conference that's been going? Talk to us about that. I think it's the oldest running, so far running Bitcoin conference in the world. Maybe one of the few, I don't know, the others. Definitely one of the recognized. Once we started this in 2017, it was actually November,

Starting point is 00:02:16 so you're lucky that you got it in August. Because that five of November in Riga is like freezing. It is what it is, you know. I started in 2017, three in a row, then two years of like MJ. He had a baseball, we had a COVID, so we had like two years in a row, a break, eventually from conference,

Starting point is 00:02:37 And then 2022, we kick started back. So it was the sixth edition. We don't know whether there will be a seventh one, we'll see. But so far I'm pretty much satisfied. And we also have Nostriga, so it was kind of cool. I know that the topic of this episode is actually institutional adoption, but just wanted to say that I was a bit skeptical about Noster before last week, before Nostriga. And then I actually miss a lot of the talks from Nostriga, but most of the people who went to Nostriga, they went also to Baltic Honeybeger.

Starting point is 00:03:13 And then the magic happened at the Baltic Honeybatcher, you know, especially intersection Bitcoin, social media, especially for me as a former journalist, it's kind of very much based social media protocol, which is Nostr, and I like it. So I've kind of become very much bullish about Nostr. general. And yeah, it was just general, great week. You know, we get lucky with the weather, many high-quality speakers like you, Jack Mallors, Jack Dorsey, a lot of interesting topics being brought up. And it was just a great week overall. I'm tired, but I'm happy. I'm tired as well. You guys, part of the branding or the marketing for the conference was it's the most OG Bitcoin conference that there is. And when it kicked off, it was, I was, I was, I was, you know, I was just kind of like smirking because there's Adam back, Peter Todd, like all these OG programmers

Starting point is 00:04:09 from like the very beginning on the very first panel. I was like, all right, I get it. Like, this is pretty amazing. And the conversations were very tech heavy compared to some of the other conferences that I've gone where I don't know. I'm not going to call out which conference, but it was very tech heavy. And you could tell that the people there are truly the builders in the space. And the highlight for me, it's interesting that you bring up the Noster piece because I agree. That was kind of the buzz the whole week that I was there was how important Noster is in order to basically be this skeleton ID protocol in order to allow free flowing conversation and money exchange to whatever else was being. There's people that are presenting on a decentralized version of GitHub, which, you know, if we're thinking about making everything more robust and we're thinking adversarily from the state trying to attack whether it's free speech or money itself, If you can go into GitHub and prevent people from downloading the code depositories that are all out there,

Starting point is 00:05:09 it's just yet another attack factor. And it was fascinating to sit there through the Nostriga portion of this. And this person goes on stage, I think his name was Colby. He goes on stage and he presents this solution to decentralize GitHub. And so there's just people building things that, for me, it was kind of mind-blowing to sit there and watch some of these talks and these conversations. I want to throw it over to you, Pascal. Your takeaway, you had a banger of a presentation when we were there.

Starting point is 00:05:36 I just want to say the name of this presentation. Pitching Bitcoin to Boomers. Which was epic. But what was your takeaway from the conference? Well, yeah, my takeaway is I didn't get to attend like the entire conference. I only flew in on Sunday. But still from what I got, that was because really, yeah, flabbergast. So it was really nice, you know, because I haven't been to that many like Bitcoin conferences,

Starting point is 00:06:01 at least not in a while, like back in the days, there were a few conferences that I intended. So it was really refreshing to be at one of these conferences. And then I was just getting to meet you, Preston, was really nice and getting to know Max as well, a little closer and just talking to all the people. So yeah, and in the end, it was the same for me. You know, the Noster thing, I kind of got Noster pilled at that point in time, I would say. I mean, I dabbled in Noster for a few, like, days already in the past. But then I just left to the side.

Starting point is 00:06:29 and now it really kind of struck a court with me again, that this is so nice, you know, and that there's like, when you get on Nostra, and now that I come back from Riga, I was like, the last three or four days I spent on Noster, and it was really, yeah, the vibes that you get, it's really nice. So, yeah, it really just fired me up and happy to maybe go to more conferences in the future again, yeah. So I want to give the audience a little bit of background on you, Pascal. So you're from a Swiss bank. Marsky Bauman is the name of the bank.

Starting point is 00:06:57 You work in the division called R-chip, which is this Bitcoin crypto-focused portion of the bank. Tell the audience a little bit about your role and kind of what the bank's trying to accomplish with this particular arm. Yeah, well, I actually joined about a year ago. Maybe to give a little context, I was really like self-employed like 100% in the Bitcoin and crypto sector, but mostly focusing on Bitcoin. And then obviously I was even like a digital nomad traveling the world, like total, total sovereign individual stuff, so to say. And then a year ago, I got approached by this bank. Like they were,

Starting point is 00:07:33 we are looking for someone who could help us on the private client side to scale things up. And I was like, dude, I haven't worked at a corporate in ages. Why would I ever go back to a bank like this? And then it's like a you, it's like a real traditional bank. 90 years old, quite established, quite trusted by many folk. So I was like, okay, let's give it a try. And then I got to meet all these people. Very nice crowd over there at the bank. They have also been in Bitcoin for the past five years already. So it was mostly on the corporate client side where they have been big in sort of like banking, like different foundations, different companies. Like some of the names probably would sound familiar. They're really an OG bank, so to say, when it comes to Bitcoin. And that really convinced me.

Starting point is 00:08:20 And then also just the way they approach Bitcoin, also from a sea level, like they are quite open. And they do understand Bitcoin. They do understand what it's about. So I was like, okay, it's time probably for me to go back to this corporate world once again. Also kind of help get them to understand how Bitcoiners think and what their preferences are because I've been in the sector for eight years as well. So I have some experience, I would say. And that's how I got to work with the bank. And I'm now more on the private client side, just helping in the investment team with portfolio analysis and just try to get convinced people to invest in Bitcoin. So Max and I have had conversations about the future of borrowing and lending. I would highly encourage people to go back and reference those conversations.

Starting point is 00:09:08 We'll have links in the show notes to those conversations. But if I was going to summarize some of this very quickly so people can kind of understand why we're going in the direction that we're going with the conversation for the rest of the show. Max ran the hoddle-hoddle exchange. This exchange is a peer-to-peer borrowing and lending platform. And in the conversation that we've had in the past, we've talked about this idea that peer-to-peer seems to be the lowest risk way in order to conduct borrowing and lending because instead of tranching assets like you typically see in these fractional reserve banking systems and then like distributing the risk across all of these different vendors or participants, you know

Starting point is 00:09:51 exactly who the other side of the trade is. So as an example, let's say Max and I did a borrowing and lending agreement with each other. Let's say I was borrowing dollars and they would be dollar stable coins and I would have to post some collateral. I would be posting that collateral in an over-collateralized way. So let's say I'm borrowing $100,000. I would have to post $150,000 in a joint collective escrow account between the two of us. If the price of that underlying $150,000 worth of Bitcoin is dropping below the amount that I borrowed, $100,000, it would immediately get liquidated and then the lender would be paid back their $100,000 of the amount that they lent out. And because this is a 24-7 market and it's happening all day long, this reference rate of the

Starting point is 00:10:38 collateral that's being posted is always there and always being referenced and always being checked, and as long as it's over collateralized, both sides of the exchange are being protected in a pretty riskless way. Where it gets convoluted and there's more risk, is let's say that there was two people on one side of it, and the one person was really, and it's not over collateralized, and the one person's underlying assets are dropping, and it's not something that's super liquid, this is where a ton of risk really enters. So if you want to learn a lot more about, like, what I just said, if that sounded like it was just a bunch of terminology, that didn't make any sense. Go back and listen to the conversation with Max and I, because we go into

Starting point is 00:11:17 a lot more detail on these ideas of a much more riskless way in order to conduct borrowing and lending. Where I want to go with this, sorry I'm talking so much, but where I want to go with this conversation is taking this idea and talking to a person who literally works at a Swiss bank and try to piece together like their ability to start wrapping their head around. What, in my opinion, and I know Max's opinion is that this is the direction that borrowing and lending needs to go in order to reduce risk to all the participants in the system because Bitcoin works very differently than legacy fractional reserve banking. What did I miss? Let's start there. What did I miss or what would you say is additive to what I just described? And did I get any of that wrong, Max? Because I'm not the expert.

Starting point is 00:12:00 No, no. It was good. The only thing that the Hottle Hottle Hodel was not exchanged is actually trading and lending platform. Another thing is that Hottle Hodel Hodel was actually microlendings. and specifically last time we discussed Debify, which I think would be a good reference why also one of the reasons why Pascal is here, not only because he's a banker who's into Bitcoin, but also because Debify is actually a product that we're building for banks, in particular for banks that are already in the space for those banks who want to enter the space, it's kind of institutional peer-to-peer. And another important part, which is when the liquidation happens, a lender not only gets

Starting point is 00:12:40 100,000 that he land out or she land out. He actually gets 100,000 plus the interest that the borrower owns him. So it works like this. So it's basically, I don't like the word in Chris Cree, obviously because it's a meme already in the Bitcoin space.

Starting point is 00:12:58 But I think it's pretty much the way to do it. Again, because it's all work for a lot of it because it's Bitcoin, it works 247. And you have, as a trade fight people, you have now tools, such as Debbie where you don't need to use a middleman and the good thing that we actually bring you borrowers and bring your customers.

Starting point is 00:13:17 So that's, I think that's the direction that we're going. However, of course, from my experience, we had this conversation with you specifically for institutional peer-to-peer lending five months ago. Then we launched DeBify or right at the time. So we did we launch DeBify. It's actually still in beta, although it's operational and we already see Voli-EGy. But from this five months, I can tell you like two things. First of all, Switzerland is really, really amazing in terms of attitude towards Bitcoin.

Starting point is 00:13:52 Corporate attitude, I mean. And I'm not telling this because that defies in Switzerland. I'm telling this because that's actually market where banks understand Bitcoin. And they do provide your loans. They do open your accounts. If you go out and took at the train station, there will be a huge bank. from one of the continental banks saying, literally, like, you have a Bitcoin come to us open an account.

Starting point is 00:14:16 Did it all make you guys? And the second thing is that actually, I'm surprised how many trade-five people actually gets the institutional peer-to-peer lending, judging by the amount of requests we have to be imported on Debify. I wasn't skeptical, but I thought it will take us a lot more effort and work in order to explain to them why it's a great opportunity. why it's a future. Like, for example, at this Baltic, returning to Riga at the Baltic Honey Badger event, we had representatives on the sea level from three Swiss banks that actually

Starting point is 00:14:52 came to Riga, not only because of Baltic Honey Badger, but because they wanted to know a bit more about Dengi. And these people are actually hard for Bitcoins. They're less into crypto. They're more into Bitcoin. And I'm surprised about that. And they do understand the value proposition of institutional pure lending. But you need to understand that, again, Switzerland is very conservative. Banks in Switzerland are very conservative. And it's not only about bit corners being in these banks and getting basically shit done by me, making a decision. There's like a bunch of people who needs to coordinate to make a decision. But I think again, we're getting that. So I would say the future is pretty much right in terms of institutional peer lending. And I heard

Starting point is 00:15:38 multiple times from not only Swiss trade-five people, but also from other regions that they believe that institutional peer-to-peer lending, multi-sign, overcollateral as long is actually the future of Bitcoin lending. We're not there yet, but we're getting there. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Form is. From June 1st through the 3rd, 2026, the Oslo Freedom Form is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the

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Starting point is 00:19:53 Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right, back to the show. Just a little proof in the pudding from my point of view for people when they're thinking about this and hearing this. So, Max, you've been doing the peer-to-peer borrowing and lending for two cycles now, two pretty much 80% downturn cycles of what people are posting as collateral and has never like the Hoddle-Hoddle and now DeBify has never blown up.

Starting point is 00:20:26 And I think when you look at all the competition, especially in that last cycle, you You had the, you had FTX, you had the Gemini Lend program, you had BlockFi and BlockFi Celsius. BlockFi Celsius, all of them, right? They were tranching collateral. They were taking collateral from institutions and then they were taking collateral from retail and they were mixing them together, which gets to this idea that we were saying earlier, that peer to peer really seems like it's the only way to do this in a responsible kind of way that platforms and individuals don't blow up. You've experienced two full cycles and have never had an issue to date. Do institutions, this is questions for you, Pascal, do institutions understand how insanely

Starting point is 00:21:08 powerful that idea is and that a person like Max, you're the only person that I know in this space for two full cycles that have done what you've done without blowing up. So do the institutions recognize this for what it is from a risk appetite standpoint and for how to do this responsibly? Well, good question. I mean, I can't speak for each and every bank, obviously. And also maybe there's different like opinions and knowledge, like distribution in the bank as well where I work. But I would say generally, maybe we're not quite there.

Starting point is 00:21:43 I mean, there's a few people obviously within the bank who are passionate, again, who have been in the Bitcoin space for quite some time. And they might be getting it because they're talking to peers like you and others and they really understand this. But then within the broader sector, within the broader, like also then these people, I'm not sure if it has really clicked for them already. Because what I've always heard when I talk to bankers, it's like, okay, you have this Bitcoin, it's quite volatile. And I mean, lending and borrowing is usually in the field, done uncollateralized.

Starting point is 00:22:15 Because the question I often get is like, dude, why would I take up a loan? Why would I borrow if I have the money in the first place? It doesn't make sense. And then the people are like against crypto. or Bitcoin, you don't want to land uncollateralized, you know, because that would make it even worse, so to say. And that's really where I think we still have to kind of work on the understanding. Also, as I said, maybe how Bitcoiners think, if you then kind of understand, okay, these Bitcoiners, they now have the Bitcoin, they're a fully orange pill. They believe in its future. They also

Starting point is 00:22:45 have a clear understanding of where it's going. Then they're like, okay, I don't want to sell. But at the same time, I kind of want to realize the value of this Bitcoin already today. So that's why I want to do the over collateralized borrowing. So I can kind of actualize some of the value already today, you know, and then maybe keep it as a generational wealth and hand it down to my kids and then their kids and stuff. So that's really where I think we still have to do some teaching and get that across that idea.

Starting point is 00:23:14 So people really understand that, as you said, a lot different. And then also with the risk, yeah, I think they would learn along the way. because again, it's not something that maybe Fiat banks are used to because there you don't work with collateral that much at least, or I mean, sometimes it's not fully reserved. Maybe with a Swiss private traditional bank, it's a little different. It's not one of these systemically important banks. So again, maybe there it could click further because, yeah, there might be more used to this. So that's where I have my hope as well.

Starting point is 00:23:44 But yeah, we're working on it. But I don't think we're just there. Yeah. This is such a salient point. because for people that haven't held Bitcoin for, I would argue, a whole cycle, and I'm calling that four years, they don't appreciate the Bitcoiners lens or how they're viewing this. And let me define this for people. As a person who's gone through a full cycle and a Bitcoiner, they're saying, the last thing I ever want to do is sell these Bitcoin, right? That's the last thing you want to do because you've literally watched them go up by 50% annualized through that cycle.

Starting point is 00:24:15 And so you're saying, the last thing I ever want to do is sell this thing because it might keep moving at this page. And if I'm not the one that owns it through that period, my buying power is getting the base by half as much through that holding period. And so if I'm at a bank or I'm at an institution and I'm saying, well, if you have $150,000 worth of Bitcoin, why do you need to borrow $100,000 against it in this over collateralized way, which was exactly what Pascal just said? And the answer for that institution or for that executive that's maybe listening to this over in Switzerland or wherever that works at a bank, the reason why is because this thing

Starting point is 00:24:49 moving out so freaking fast. The last thing I ever want to do is sell my Bitcoin. I want to borrow against it. But I want to do it in the most risk-free way possible by somebody not tranching my Bitcoin with somebody else's garbage collateral, right? That's the Bitcoiners lens. That's the Bitcoiners perspective. And there's going to be more and more of us that are kind of looking at the world through this lens moving forward. And I think let's pivot this to where I think the biggest use case is. Lots of Bitcoiners with substantial amounts of network. in Bitcoin, want to go buy a house, but really struggle to basically borrow against their Bitcoin in order to go do it. And they don't want to sell their Bitcoin to do it. So they continue to live

Starting point is 00:25:30 in like a pretty, what's the word I'm looking for? They live very humbly because they don't want to sell their Bitcoin to go buy a nice house. How do you see this evolving in a way that, and this is really important for people to also understand, real estate is very low frequency turnover. It's very illiquid and it's not getting priced, you know, by the second, like the speed of everything else. So how can we possibly incorporate this in a way that doesn't become irresponsible because we just talked about peer-to-peer. Bitcoin is the ultimate collateral being like, you know, the way to do this. And now I'm talking about mixing it with real estate, which is super low frequency turnover in illiquid markets. I mean, mixing it with real estate,

Starting point is 00:26:14 I think sometimes we kind of overcomplicate thing. You know, why do you need to mix it? Just borrow against your Bitcoin, go buy real estate. That's it. You don't need to mix it up. I mean, there are Bitcoin back mortgage products, and we're also thinking about creating one in the future. But the problem with that is every market,

Starting point is 00:26:35 the real estate regulation in every certain region or in every certain country is very much complicated. Starting from how as a lender you will liquidate the collateral that is real estate in case borrower fails to repay the collateral, ending with how you form that, how you, you know, if God for sake, borrower dies, how their kids, their family. So it's very much complicated. I mean, in some regions like Bitcoin back mortgage products, they seem to be very rational and logical. in particular, we have some regions on our roadmap.

Starting point is 00:27:12 I'm not going to disclose them, but they're both Bitcoin friendly and also very much friendly in terms of real estate regulation. And also these markets are pretty much good in terms of real estate investment. I mean, like, not just buying a house, but also buying your house, living there, and then at some point maybe five years after you want to sell it, and there will be a secondary market that you will even make money. But overall, I don't think we need to overcomplicate things and mixing Bitcoin with real estate. I mean, if we have enough liquidity in just Bitcoin back lending through such a products

Starting point is 00:27:47 that we find, you know, building a global liquidity aggregator for every Bitpinter, then what's the point? You can just go and borrow against your Bitcoin and buy real estate. That's it. But Max, to that point, so I agree with you. I agree with you. But I think the person who's listening to this, that understands this market pretty well, the interest on this is very high, like double digits. And if you can lower that interest expense by

Starting point is 00:28:12 half as much, because maybe the value of the properties, 500,000 or a million bucks, and then you're posting a similar amount of Bitcoin in value terms. And your LTV on it is, what would that be a two, LTV of two, then I can maybe get a 5% interest rate. I think there's a lot of people that are going to be, and I want to hear your opinion, I think there's a lot of people that would be interested in a product that reduces their interest expense by a ton by incorporating this in there because they're just dealing with such a high interest expense when it's not. So I know that's not what you're interested in doing at DeBify, but I see the market maybe trying to move in this way. And so really kind of a question to Pascal or Max, either one of you guys, how do you see that evolving? Because I think

Starting point is 00:28:55 the appetite's going to be very high. Yeah. Maybe if I can quickly speak to this, the way I see the way I will, I think this will unravel is really, why are we offering Bitcoin to buy now for our clients? Now, why can they custody it with us? Why can we buy it? Why can we put it into their portfolio? It is really because of two reasons, I would say, you know? For one, it's like people who are passionate about this and have like entered the bank and maybe they have worked for the bank for quite some time. And they have pushed for this because they want to see this industry grow as well. That's one of it or one reason. And the other one is surely like client demand. were actually demanding this, seeing like their peers right and left invest in Bitcoin and

Starting point is 00:29:36 I can't do it, then you're going to pressure the bank. So either I can do it at the bank or I will probably move to a bank that makes it possible, you know. And the same thing will probably happen here as well with the borrowing and landing because like as you said, there are a lot of wealthy bit corners and they want to do it and they will possibly want to do it through solutions like Debify that Maxis building, that it's also as transparent as possible that they can remain like self-custody some sort or like collaborative custody. So they remain in the possession of the keys and just have the transparency. So I think that's really how it's going to go.

Starting point is 00:30:09 And from the banks perspective again, I mean, it makes sense to kind of also broaden the services that you have, you know, because now maybe you're still in front if you offer Bitcoin as custody and just as a portfolio add-on. But in maybe two years time, every bank, at least in Switzerland, that's what I feel will have that offering. And then how do you differentiate? And that's exactly where something like this comes in and why the bank is already looking at this. Okay, this is the way for us to differentiate. And then further down the line, maybe you dabble in it with a few designated clients. You go super conservative just to test things out. And the more you grow in experience, the more you familiarize yourself also with the risk management side of things.

Starting point is 00:30:52 And then at some point, you can start mixing up real estate, Bitcoin. So this will be a natural way this will involve. It might take another two to three to four years until we're there. But I can totally see this happening. One of the concerns that I'm seeing right now is just the proliferation of ETFs and the Bitcoin ETFs. And I suspect that traditional finance is going to start using that as what they're posting as collateral.

Starting point is 00:31:20 And where I get concerned is the weekend, the spot price is still moving like crazy. And depending on how much of a loan to value ratio, traditional finance is using mixing that with their fractional reserve system, I think it poses concerns and issues for anybody kind of posting ETFs as collateral as opposed to underlying Bitcoin. Is this a concern that you share with maybe the directions that institutions, particularly here in the United States are taking? And if so, help define that more so people can understand what we're talking about here. Yeah, well, like, I literally care less about the ETF as a collateral because we don't provide services for the ETF as a collateral in that way.

Starting point is 00:32:04 You know, we only provide services if you have Bitcoin. But I mean, in general, I do understand where you're getting. I think that that's fortunate or unfortunate. That's just how the market works. And it reminds me to some extent, like a lot of synthetic products during the subprime crisis back in 2008, well, some companies are just going to get burned. That's just a cycle. You cannot prevent like you cannot prevent these things. And usually like ETSs, they get collateralized for short term loans, you know, I mean, trading liquidity, that type of stuff. So me, being a Bitcoin, I think in

Starting point is 00:32:45 a short term is not actually on the same page. I don't think that it works. But I think that if some companies, I don't wish this to them, but I think if some companies are going to get burned with the ETFs, Bitcoin ETFs, as a collateral or just as a Bitcoin ETFs, that's just going to speed up the educational process and then coming to actual Bitcoin standard, meaning holding your own keys, meaning using the actual Bitcoin, meaning understanding how the multi-six coal storage is worked. That's just going to speed up the process. So far, I think, the good thing about Bitcoin ETF, for us it actually helps to talk almost the same language or at least say the word Bitcoin and they're just not going to say, okay, we don't understand

Starting point is 00:33:35 that too volatile. They already know that there's BlackRock doing this stuff. They already know that there's a bunch of huge institutional liquidity makers, market makers doing this stuff. So for us, it's kind of easier. It actually helps must adoption from the trade-fi institutional perspective. I I think that, again, there's also a very important question or a very important thing we need to distinguish mass adoption in the corporate world and mass adoption in everything outside of the corporate world. I mean, like for Bitcoin being mass adopted, tools like Noster, tools like lightning, tools like easy, multi-six cheap coal storages helps to be mass-adopted across the globe, whether it's an emerging market or it's more developed market for individuals. for corporate ETF helps a lot. I mean, I have a similar hunch that what Max is saying. I mean, whenever I get asked, like, what are the biggest risk, maybe next cycle or maybe

Starting point is 00:34:35 even this cycle with Bitcoin, I usually point out that this could be one, the ETFs. I mean, we all know Caitlin Long and he's stressing this point again and again, there's no central banks in Bitcoin. So if you mess up there, things can get nasty. And I think at some point, one institution will mess things up, which will then be, again, a learning curve for others. When I talk about Swiss banks, and that's the great thing again with a private, traditional Swiss bank, they are really conservative.

Starting point is 00:35:01 So they also want to on the risk side, they want to keep things as conservative as possible. I mean, how they think it's more like, okay, if we have this service and we allow Bitcorners or other people to borrow against their Bitcoin collateral, we might not be competitive enough because we will have a very low TDL. You can't really max out your Reddit lines, so to say. And that's why they are more like anxious or not anxious. They're afraid that they might not be competitive enough. And there again, you maybe are not competitive enough if you have a person who really

Starting point is 00:35:33 wants to borrow against their Bitcoin and max it all out. But if you have like a very conservative hodler, and I would again say many of the Bitcoin hoddlers I know, they are exactly this conservative type. They would actually be fine with this and say, okay, cool. Yeah, just do it with Bitcoin, no ETF, obviously. And again, really low TV. so I don't run the risk of getting liquidated. And there again, this is also how I try to talk to these bankers

Starting point is 00:36:00 and try to tell them how Bitcoiners think that they didn't, oh, that's a lightboat moment. I didn't know that there could be a business case in the first place. So again, that's just interesting where we still have to go with that. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business.

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Starting point is 00:38:56 in the last few years. Visit fundrise.com slash WSB to invest in the Fundrise income fund in just minutes. The fund's total return in 2025 was 8% and the average annual total return since inception is 7.8%. Past performance does not guarantee future results, current distribution rate as of 1231, 2025. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. The ultimate irony for me, If we go back two, three, four hundred years, like, what is the essence of a bank? And the essence of a bank is being able to custody securely collateral and deposits, whether that's gold or whatever it was, right? Like at the essence of what they provide, it's security of custody. And it's ironic to me that as all these ETFs are being rolled out, that they're leaning into owning these and kind of using those as collateral. And they're just a wrapper on underlying. keys of the underlying Bitcoin, right? They're not wanting to custody that. And what Max and Pascal

Starting point is 00:40:13 are talking about here is using the real Bitcoin, the real keys, in securing these real keys in custody to over collateralize, you know, the shrewd bucks or the paper slips of Fiat. And I think it's just, it's so ironic to me that this is lost on the largest banking institutions on the planet, that they're playing on a rapper and not the underlying thing and learning how to custody it and manage it and secure it at all costs. It's just crazy. It's nuts, actually. I mean, one of the things that you mentioned that I think they went from secure custody to just custody. They just want to custody your funds, you know, and then there's a bingo. Like that type of asset is Bitcoin, which completely changes the game.

Starting point is 00:41:02 you know, provides a great self-custody opportunity and provides collaborative custody opportunity. And that's the trick, you know, because like centuries, banks where, like, there were like historians of the funds, literally, they had the possession of your funds, which is not a bad thing. Like, for some people, that's the way to do. For a majority of people, that's the way to do. But then there's, again, as Pascal mentioned, there's, like, new type of people emerging now, on the like winners or people who understand that Bitcoiner actually is as a like super asset provides a very nice self-custody or collaborative custody in this case like properties.

Starting point is 00:41:43 And that's where the part of the should needs to be happening. Because like many banks, I still want to ask, can we add it to our balance? Can we do this in a custodial way? Can we do this and that? And again, when they pitch to them, I usually say, Like, guys, you can actually just provide multiple, like, options to your customers. You know, we have a custodial lending, which will be a bit more cheaper. But then again, every saying Bitcoin I understand what custodial lending means,

Starting point is 00:42:13 not your keys, not your coins. Or we have non-custodial lending, whether it's through the Bifide or any other platform out there, where the interest rate could be higher because obviously banks need to compensate because they cannot relend that money and make more on top of that. But then again, it's just better for the customer. That point there, that last point, that they can't fractional reserve it. And then the money multiplier is what we're really talking about. And the revenues for these banks are so heavily reliant on their capacity and their ability

Starting point is 00:42:46 to exercise this money multiplier. And for people that aren't intimately familiar with this idea, basically a $100 deposit turns into and excuse the math because this math isn't right. But let's say you put $100 in deposit and deposit. of the bank, that then turns into a thousand dollars worth of lending because of the way the fractional reserve system works. So if you think about how much proceeds they can make off of a thousand from only $100 deposit, it's a lot. And what we're talking about here is collapsing this money multiplier down to what the core deposit is, which would be call it $100 and that

Starting point is 00:43:20 they can only make revenues off of the $100 deposit. That's bad for the banks. It will collapse their multiples many times from where they're at right now because they can't play these fractional reserve games. Where I wanted to go next, Max and Pascal, is dollar stable coins. One of the core ingredients to borrowing and lending is if the underlying collateral, let's say we put $150 worth of Bitcoin into escrow and the price fluctuates and now the value of the Bitcoin's $100, and you have to liquidate the borrowing lending agreement. Time is of the essence in order to execute this transition. You need 24-7 markets. You need a dollar or a euro or whatever Fiat is on the other side of that to be, in my opinion, to be tokenized in order for this immediate settlement to

Starting point is 00:44:10 happen so that there's no risk in, oh, well, that was over the weekend and we weren't able to turn it into dollars for two days or whatever it was because we couldn't access the Fed Wire or whatever, you know, whatever Swift network we're talking about. Talk to us about your point of view on this idea and the future of stable coins and how important this immediate settlement into some type of fiat is. And what do you think that the regulatory environment is going to look like moving forward as this becomes more and more popular? Yeah, maybe from my point of view, I think that that's exactly right what you described here, you know, that you don't have this mismatch and then some sort of settlement risk. If you can't

Starting point is 00:44:50 then not settle it because it's just the markets are not open or you don't even have like the fiat that you need on chain, so to say. I think it's a huge risk, and it's also something that we have been discussing inside the bank, and people who are maybe not that close to Bitcoin are asking exactly this type of question. Maybe one step back, there's even the problem that these people don't work on the weekend, and then they're like, oh, then I have to work on the weekend. And so, no, but if you could then kind of automise it through on-chain stuff, then it

Starting point is 00:45:17 wouldn't have to be like this. But for this, fiat needs to be represented somehow in a tokenized way. And I think in Switzerland, this has been discussed for quite some time. We just had the regulator publish, I think, a paper on stable coins again. I haven't really read it in thoroughly because it wasn't that well received. But I think in the end, we have to go down that route. And there have been some approaches like with a Swiss stable coin for sure. You know, the S&B is testing things out, like this is our national bank.

Starting point is 00:45:50 So they have also been looking at this because they want to provide this. cash lag on chain, you know. But then again, I mean, we had this one stable coin issued by one of the institutions in Switzerland, which kind of interfered with the negative interest rate environment that we had in Switzerland. And people were flocking into this stable coin because the stable coin didn't have negative interest rates. And then a lot of a sudden, I guess the Swiss National Bank didn't like that because it was kind of destroying their business model, which again, why this stable coin was probably calmly taken down, so to say. So there are all these moving parts, I would assume at some point it needs to come just to count this risk that you

Starting point is 00:46:28 described. And I think it's really this knowledge of symmetry that we have to tear down and then people will get it. And that's one of the moving parts that will come. Max, did you have anything? Yeah. Yeah. Yeah. I mean, I would say probably a very bad thing in terms of being a Bitcoin. But I actually like stable coins because again, like if we say that fiat is a bad form of money, then stable coins is just a better form of bad money. I mean, in the way that it's direct settlement between two individuals or two entities. There's always a blockchain record, which is amazing, especially like if we do a deep dive into peer-to-peer lending.

Starting point is 00:47:08 I mean, you don't need to prove me that you have sent me stablecoin. You just upload the transaction ID and like in hoddle, hoddle or in defyify, we automatically show that, okay, success, you have received the loan to your address or you have repaid the loan and a lot of things could be automated. But eventually, I think that Stablecoins also helps a lot into, in terms of Bitcoin adoption. I mean, as soon as an individual has access to Stablecoin, automatically he has an access to Bitcoin because you can literally swap any stable coin to Bitcoin, and that just helps.

Starting point is 00:47:49 Look at Argentina, look at Latin America. In Argentina, you can actually leave off with stable points. And that simplifies a lot of things. In terms of regulation, again, region by region, you know, there's always some regions that lack development, they tend to overregulate some stuff or even ban some stuff. And there's always regions who are more like, they're more adopting to the current thing. And I think, again, like, stable coins is amazing.

Starting point is 00:48:18 And I would actually prefer them being used frequently, more and more frequently. I would love actually to see other types of staple coins being used frequently. Like, we have mostly the most common stable coins now are Thessor and Circle, U.S.C, which is backed by dollar. I would love to see something with Euro as well and Swiss francs and other currencies, because at the moment is basically all liquidity in UISD, which is good probably for UIS, a consumer user, but I would prefer, like, as a European Union citizen, I would actually prefer seeing more opportunities to use euro as a stable point.

Starting point is 00:49:00 Max, I agree with what you just said. The only thing that I would push back on, and I think that this is a really, really important point for everybody to keep in mind, the size of these stable coins, tether and circle are so huge. And I don't know that. I have no idea like what the reality is, but I would be blown away if there's not some type of close government connection between them and just because of the sheer amount of treasuries. Like I know Tether, I think they're at 118 billion of AUM, and they're number 18 on the list. And I've just talked to Paula recently on the show. So like, I have the utmost respect for these guys and what they're doing. But I would imagine that, let's say that there

Starting point is 00:49:41 are tether in somebody's hands and the government, the U.S. government doesn't like who that person is. I would imagine they could go to them, tap on their shoulder and say, we don't like these people having $300 million worth of tether on their books. We want you to basically take those dollars away from them. And I think they're in a position that they have to comply, right? The reason I bring this up as a risk is if you are that person, if you're that bad actor, quote, I'm using air quotes here because everybody's got an opinion who's bad and who's good. If you're that person and you're using these dollars as collateral or whatever, it's not like Bitcoin in that there is still kind of a voting member in the loop of whether you're actually allowed to use it or not. And I just

Starting point is 00:50:24 want to throw that out as a highlight in something that I think is just an important, you know, side note. Of course. Yeah. Yeah, it's true. But then again, as at the beginning of my monologue, I said, it's just a better form of bad money, you know. Yes. If you are, again, if you are like in having your money in the bank, then if you're a bad actor, as you said, then your account's just going to be frees. Same way it works with stable coins. But the essence of the stable coin is that actually, if I'm not a bad actor, I can freely transact without being relying on the bank. Just, you know, I can set you now. Yeah.

Starting point is 00:51:04 And your phraseology of it being that is perfect. Pascal, I'm sorry. I interrupted you. Go ahead, sir. I just one last point on this. I mean, exactly. That's what also what I've been seeing. I'm lecturing on this topic. I'm talking to the bankers, you know. And like maybe four or five years ago, people were always asking this question, how is a CBDC or is stable going to be different than Bitcoin, you know?

Starting point is 00:51:25 And nowadays, I think Sailor and all these people, they have done a great job and like really pointing out why Bitcoin is so much different and why there's so much, it's just a different beast. And people have been getting this more and more. And that's why I think I'm not. worried when there's stable coin adoption within banking. And I think it will come because like if we look at where stable coins have come from, they have been adopted with the crypto exchange is first place because like all these people were speculating and they needed to have some

Starting point is 00:51:51 settlement layer there. These exchanges didn't want to have like the fiat risk again, the one that banks will now be confronted with. And that's why they came up with these stable coins. And that's how they initially found adoption. And I think it's going to be the same with banks. You know, when they now build out these products, the borrowing and lending, and potentially more products where they integrate with Bitcoin, they will have to kind of have something where they can, with as least risk as possible, settle the cash lag. And that's why I think these stable coins will inevitably make it into banking for sure. Max, we had an interesting exchange on stage. The gentleman that created a stalker, which is an exchange over in Europe, that is tokenizing

Starting point is 00:52:31 real equity, not some clown coin. They're taking, as an example, they have a micro strategy stock that they have taken custody of. They've issued a token that you can freely trade 24-7 over the weekend, whatever. And when we were on stage and we were talking, this came up as a point of discussion as why can't basically the micro-strategy tokenized micro-strategy be used as collateral in borrowing and lending. Talk to the audience about this, because I think you and I understand the risk. Why don't you explain what the risks of this is today, at least, but where maybe some of this is going, call it five or ten years from now? I mean, like, gentlemen's name is not enough.

Starting point is 00:53:11 So they're actually providing liquidity on their B-Fi and very much sophisticated in terms of securities and everything else. But there's another thing which is called Liquid, and Liquid is kind of layer two solution or more solution on top of Bitcoin, which allows you to create a different type of basically wrapped securities on the kind of liquid blockchain, but it's like very much similar. And you can actually use liquid to build a multicid. And then you can use the same approach, meaning that you can take your securities, which is micro strategy. You can put it in a multi-stick and you can borrow accounts that.

Starting point is 00:53:51 So there's like the security risk are similar. The only difference is that price of the underlying asset. I mean, if you do this with Bitcoin, the underlying asset, is Bitcoin. If you do this with micro-stratage stocks that are wrapped into liquid, then the underlying asset is micro-stratage. And the difference for me is very clear. Bitcoin is decentralized, I would say, hard-manipulated form of money or assets. You know, there's no one single person who can go out Friday evening and say, okay, I'm done with Bitcoin. I'm, you know, I'm buying Dodge, whatever. We have that person who's doing this. But, you know,

Starting point is 00:54:31 you know, like Honeybeger doesn't care, we already don't care about what he's saying, literally. And with the company or with an entity, with stocks of the company, there's a certain risk. As from my perspective, that there's always one person who can decide on how this company is going to evolve and what this company is going to do. Like imagine if at some point Elon Friday evening after markets are closed, he's like going out to Twitter and saying, okay, I'm done with building Tesla's. I want to build fridges or whatever. Like iron boards, whatever.

Starting point is 00:55:09 I'm going to do that. I'm going to innovate in that market. Probably Monday, like Tesla stock will go like this, because people will eventually figure it out or think that human crazy. With Bitcoin, that doesn't happen, you know? I mean, it's like, whatever you say, there's no CEO of Bitcoin, there's no person, people even don't know, and that's the beauty of the Bitcoin, you know,

Starting point is 00:55:29 Still, we don't know who Satoshi Nakamoto is. And that's, I would say, that's the leverage that government can use. And that was like very nice strategy in sense not disclosing who is creator of the Bitcoin. So I think that's the difference. I mean, but the promise of liquid and the promise of wrapping all this stocks and using them as a digital alternative. It kind of works similar as stable coins in Fiat, you know, in that way. It's kind of interesting because, again,

Starting point is 00:55:59 You can borrow against your soft and not so your way, which is interesting, you know. Pascal, what's your thoughts real fast? From an institutional standpoint and how they're thinking about tokenizing equity. Yeah, I mean, at Swiss Bank, we're also looking at this because, again, in Switzerland, we have this unique situation that you can actually issue a digital token, a digital share token, and it comes with the exact same rights, legal rights, as with the normal traditional share. because the Swiss law was changed and now you actually have a shared token, which is the actual share. So we have been looking at this.

Starting point is 00:56:33 There have been startups that have been issuing this. We have been trying to maybe custody this because at some point again, yeah, I believe maybe people want to borrow against this as well. And then again, yeah, it's up to the person to understand that it's different from Bitcoin. My feeling is it's going to be either two scenarios, you know, because the way that this whole tokenization thing is happening, you know, and everyone is like jumping on this train. I think it's also, it has to do with the underlying pressure that like our today, fiat money doesn't hold any value. That's why the world is increasingly financialized and everyone has to become a speculator

Starting point is 00:57:08 and like whiskey and shares and maybe everything that you can think of needs to be tokenized so people can speculate. And maybe this will happen in the future still, you know, we don't know, but maybe Bitcoin takes away this monetary premium with all these things. and then people understand, yeah, I don't have to go speculate on the latest tokenized thing, but I can actually just buy Bitcoin. And then maybe a few shares like micro strategy that sent this, like the test of time will be used to borrow against.

Starting point is 00:57:39 But I see really these two scenarios where this could go. All right, guys, Max, I'm assuming if there's institutions listening, financial institutions listening, your DMs are open at Debify. Is that, is that your? Always. I'm always like 24-7, the same way as Bitcoin. We're always there, you know, just send us a message. Pascal, what's your message to the audience?

Starting point is 00:58:03 Yeah, I mean, if people are interested in taking a look at the bank, if they have Bitcoin that they want to have custody with a traditional bank, I mean, hit us up. We would be happy to talk to you. And yeah, I mean, always happy to share knowledge when it comes to investment and Bitcoin and how these two things interact. Max, did you have anything else? I was joking a little, slightly joking, but serious.

Starting point is 00:58:25 Yeah, yeah. I mean, my message would be like, don't be the last in the line, you know. There's a good opportunity to be the first and that goes to the trade fight companies. We already have some funds, large funds that are onboard already talks with banks. So don't be the last one in the line because it's like the base of development, the technological base of development is just astonishing. I mean, look at what happened with, like, when iPhone was first presented, now we cannot imagine, like, using buttons in our phone. That's just, like, literally less than 20 years, I mean, and we're already there.

Starting point is 00:59:02 And Bitcoin is amazing. Like, if you're going to look at Bitcoin technological development cycle, it's even more. And even most or more, you know, less than here or around year, and it's already, like, booming at the moment and purple-pilling a lot of people. And on the other side, in terms of borrowers, I just want to encourage individuals, like if you're using whatever service you're using, whatever bank you're using, and they don't have any proper borrowing and lending, you're a Bitcoin or just, you know, connect us. We've been intro to some of our existing lenders by their customers. We just want to borrow. They want to borrow from the institution they like, they know they've been verified with, but they just don't want to give a custody of their funds. So these are like two things that I just wanted to point out.

Starting point is 00:59:48 Maybe a real last word of encouragement to like Bitcoiners, you know, who want to support trashy institutions and kind of like, don't know if they're betraying the ethos of Bitcoin. I would encourage him to do so because in the end I think it's going to happen anyways. This is just how the world like course of things is going to unravel. And that's why I hope we as Bitcoiners, we do it correctly and we do it in solutions that Max and other people are presenting. that we can push, detritify more to Bitcoin than vice versa, you know?

Starting point is 01:00:19 And that's why I want to encourage these people to actually do this. Guys, I can't thank you enough for making time. Fascinating conversation. I find this just absolutely mind-blowing some of these ideas. And thank God for Bitcoin, right? Thank God for Bitcoin. Yeah. All right.

Starting point is 01:00:35 We'll have all that in the show notes for everybody, guys. Thank you for your time. Thank you very much. Thanks. Thanks, Preston. Thank you for listening to TIP. Make sure to follow Bitcoin Fundamentals on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to theinvestorspodcast.com.

Starting point is 01:00:57 This show is for entertainment purposes only, before making any decision consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - BTC198: Institutions Adopting Bitcoin w/ Max Kei and Pascal Hugli (Bitcoin Podcast)

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