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Warren Buffett’s latest big investment likes cryptocurrency

June 11, 2021, 3:51 AM UTC

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This week at Fortune Global Forum, our flagship conference, I interviewed a few top cryptocurrency and fintech CEOs from Microstrategy, Binance, and Nubank.

Tuesday evening, I chatted with Microstrategy CEO Michael Saylor. The interview came soon after the company said it planned to raise half a billion dollars in junk bonds to buy Bitcoin. I asked why anyone would buy these issues versus just buying Bitcoin itself. As the Wall Street Journal’s Charley Grant commented on Twitter, “So with these beauties you get to participate in all the downside crypto risk but not the upside.”

Saylor disagreed. “If you have hundreds of billions of dollars that you have to invest in corporate bonds [like some big bond funds], this is high-yield, very secure, it’s a great choice for you,” he said, noting that the bonds have yields exceeding 6%. “We’re making it easy for various investors to get exposure [to Bitcoin] and the nature of the instrument that they want.”

Maybe—but isn’t this all a big distraction from Microstrategy’s core business of selling analytics software? Again, Saylor offered an opposing view. The company’s stock price has quadrupled to more than $500 per share over the past year, he said. “So the shareholders don’t think it’s a distraction.”

Saylor had backup on the panel. Speaking alongside him was Changpeng Zhao, who goes by “CZ,” CEO of Binance, the world’s biggest crypto exchange. Asked about the bitcoin junk bonds, he applauded the sale. “There’s a large market of people who are much more comfortable buying bonds or buying equity in your company, because that’s what they understand,” he said.

I asked CZ to comment on an investigation the IRS and Justice Department reportedly opened into his company earlier this year. The government is aiming to determine whether and how people might use the crypto exchange to launder money or evade taxes. “I can’t discuss or confirm or deny any investigations, or the non-existence of it,” CZ demurred. He added that crypto “is a new area and we just want to be cooperative” with law enforcement.

Could all the recent ransomware attacks trigger stricter regulations on crypto exchanges, like Binance’s own? “It’s very possible,” CZ said. “I think there probably will be more scrutiny in terms of KYC AML checks,” he said, using shorthand for “know-your-customer and anti-money-laundering” rules.

“Hackers may want Bitcoin because it’s a better form of money. It does not necessarily mean that it’s bad,” CZ continued. “I hope and think most regulators around the world understand that.”

The next day, on Wednesday afternoon, I spoke to Cristina Junqueira, cofounder and CEO in Brazil of Nubank, the world’s largest digital bank. The interview came shortly after news broke that the bank challenger raised $750 million in new funding, including $500 million from Berkshire Hathaway, the centerpiece of Warren Buffett’s investment empire.

“It is rare for them to invest in tech,” Junqueira acknowledged. But she added that Todd Combs, a Buffett protégé and Geico CEO who has a penchant for financial tech (see his backing of India’s Paytm), “has been doing a lot of great work to get them updated on the latest trends.”

Tantalizingly, Junqueira said Nubank has plans to give customers access to cryptocurrency. “There’s a lot of demand,” she said. “We do see an opportunity to offer some exposure to our customers on the investment side, for instance.” The company’s crypto-friendly stance is all the more notable, given Buffett’s famously hostile attitude toward Bitcoin. Despite his stake, it’s hard to picture Buffett coming around on an asset he once described as “rat poison squared.”

Separately, Junqueira appeared on the latest episode of the Fortune Brainstorm podcast, alongside Zach Perret, CEO of the hot, Visa-disowned startup Plaid. If you haven’t yet had your fill of fintech, listen here.

And one last note. We are shedding a tear for Gamestop here at Fortune. The frenzy-prone game-seller’s revenue fell to $5.09 billion in its most recent fiscal year, officially knocking the company off this year’s Fortune 500 list. (It’s now ranked No. 521; the cutoff was $5.4 billion.)

Our sincerest condolences, $GME gang.

Robert H. Hackett

@rhhackett

robert.hackett@fortune.com

In the latest Ledger survey, we asked you to weigh in about the recent Bitcoin Miami conference. Perhaps it shouldn’t be a surprise that most respondents said they were attending, per the results below.

DECENTRALIZED NEWS

Credits 🚀

Bitcoin rallies as global regulators show signs of growing acceptance ... El Salvador approves Bitcoin as legal tender ... American Bitcoin traders are the world's most profitable ... Coinbase is letting people add crypto to 401ks ... Kraken considers a traditional IPO ... Ethereum competitor Solana raises $314.5 million ... Crypto hardware-maker Ledger hits $1.5 billion valuation ... It's boom-times in DeFi ... SoFi adds Dogecoin ... FTX renames an e-sports team ... Square backs "green" Bitcoin mining ... And could make a crypto hardware wallet? State Street opens a crypto division ... Redditors dig some stocks, like Clover Health and BlackBerry ... $AMC could have made you a lot of money ... U.S. recovers majority of Bitcoin ransom payment ... Switzerland and France send central bank digital currency over the border ... European Central Bank to keep buying bonds despite brighter economic outlook ... But rising inflation could change that ... Facebook Messenger adds QR-codes for payments ... Cow poo for crypto mining? Latin American lawmakers get laser eyes ... Wired: "Blockchains...financialize fandoms"

Debits 🐻

Oddsmakers are betting Bitcoin will fall below $10,000 ... U.S. regulators rain on the DeFi parade ... DAOs prepare for winter ... China kills online searches for crypto exchange like Binance, OKEx, and Huobi ... After its earlier crypto crackdown on Bitcoin mining ... Ripple won't go down without a fight ... Bitcoin partiers catch COVID ... Gamestonk tanks on news of SEC investigation ... Private prisons get the meme-stock treatment ... Biden tax plan will hurt billionaires ... Colonial Pipeline CEO defends paying Bitcoin ransom ... Profile of a prolific ransomware gang ... Meat supplier forked over $11 million ransom ... FTC says people lost $82 million to crypto scams in Q4 2020 ... Hong Kong IPOs are at a dribble ... Senator Elizabeth Warren doesn't like crypto ... Elon Musk hints at Bitcoin break-up 💔 ... Did Tesla sell?

BALANCING THE LEDGER

Kraken CEO Jesse Powell joined us on the latest episode of Balancing The Ledger, Fortune's show about the intersection of finance and tech. We discussed the cryptocurrency exchange's new app for U.S. customers, its rival Coinbase's spotty stock performance, and his own plans for an IPO next year. Tune in here.

FOMO NO MO

Earlier this year, Ryan Klein had a near-death experience.

While cleaning out a gutter at his California home, the 32-year-old IT professional took a misstep and tumbled 10 feet off a ladder into a fortuitously placed wintergreen shrub.

Sprawled out on the ground, gazing up at the cerulean sky, a terrifying thought crossed his mind.

“I realized that my wife didn’t have access to my cryptocurrency,” he told The Hustle. “If I’d died that day, that money would’ve just disappeared.”

There's nothing like a reminder of one's mortality to jolt everything back into perspective, especially after the outrageous Bitcoin bacchanalia that took place in Miami last weekend. Being your own bank sounds nice in theory, but what happens to your cryptocurrency should you meet an untimely demise? Media outfit The Hustle has as thorough a look at the issue as any I've seen. As author Zachary Crockett observes, "Had Klein died without sharing his private key with his wife, it’s likely his crypto holdings would’ve been stuck in permanent purgatory on the blockchain."

BUBBLE-O-METER

311,000+

That's the number of people Chinese police arrested on money-laundering charges in five rounds of crackdowns since October 2020, according to a statement posted to WeChat by China's Ministry of Public Security on Wednesday. The suspects were said to have used cryptocurrency in attempts to circumvent the law. The round-up is part of a nation-wide effort called Operation Card Broken.

What crimes might get someone lumped into the headline figure is unclear. China has strict capital controls, which limit the money people can send overseas. People who tried to flout those rules could have been included, as might have phone hackers, ransomware perps, and others.

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Why inflation could end the truce at Europe’s central bank over Fed-style money printing by Christiaan Hetzner

China’s crackdown raises the profile of the crypto mining hub next door by Yvonne Lau

El Salvador’s Bitcoin plans: Disruptive or dangerous? by Jessica Matthews

A meme stock’s downward spiral: GameStop’s 14-year Fortune 500 run comes to an end by Lance Lambert

Everything to know about how President Biden wants to change the corporate tax code by Geoff Colvin

Inflation is here—that’s bad news for these stock sectors by Bernhard Warner

5 highlights for CFOs from Fortune’s Global Forum by Sheryl Estrada

Top takeaways from Fortune’s biggest annual gathering of CEOs by Lee Clifford

Cybercriminals now have marketing departments by Sophie Mellor

Bitcoin, IPOs, and post-pandemic travel—here’s what tech CEOs are saying at Fortune Global Forum by Robert Hacket

(Some of these stories require a subscription to access. Thank you for supporting our journalism.)

MEMES AND MUMBLES

At the Bitcoin Miami conference last weekend, someone ripped off his suit on stage and shouted: "Attention everybody! We have a very important announcement—DOGECOIN TO THE MOON!" (Speakers were advised to keep the conversation about Bitcoin, not other cryptocurrencies.)

Aaron Levie, CEO of Box, a digital storage company, shared a clip of the disrobing and noted that "Bitcoin conferences operate at a different level." Matthew Prince, CEO of Cloudflare, a website performance-boosting company, piled on, adding wryly, "Stable store of value."

We are indeed very stable geniuses, aren't we, crypto fam? Besides, it's not like the guy actually mooned the audience. That's something, right?

Interested in joining Fortune's The Ledger as a writer? We could use another pair of (diamond) hands. Contact robert.hackett@fortune.com.

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