Balancing The Ledger

Kraken's exchange has over 60 cryptocurrencies and 7 national currencies, and services 190 countries.

Balancing the Ledger: Jesse Powell talks possible Kraken IPO, Elon Musk, and new app

Fortune_Crypto

Kraken CEO Jesse Powell on possible IPO, Elon Musk, and more

Kraken CEO Jesse Powell talks possible IPO, Elon Musk, and new app

He teamed up with Impact Theory’s Tom Bilyeu and artist Maciej Kuciara.

Balancing the Ledger: Steve Aoki launching NFT collection based on 'Neon Future' comic book

Fortune's Robert Hackett and Lucinda Chen with Steve Aoki and Tom Bilyeu

He teamed up with Impact Theory’s Tom Bilyeu.

Steve Aoki launching NFT collection based on comic book

Steve Aoki launching NFT collection based on 'Neon Future' comic book

Hello and welcome to balancing the ledger where tech and finance intersect. I'm robert Hackett and I'm losing a son and we're here today with steve Aoki, the electronic dance musical mastermind, and Tom Bill, you co founder of the Digital Studio Impact Theory. They were going to be talking about N. F. T. S. Or non fungible tokens, the latest Blockchain collectible craze, steve. What got you excited about this? What was the moment that really piqued your interest and got you into this whole, this whole field? So when I found out about N. F. T. C. Last summer, 2020 and um I at the same time, this was like a few months after, you know, I was like, okay, we're bunkering in, we're staying in our homes. Um I was locked in the studio for a few months because I didn't know I thought this would, this would end shortly, but when I knew that we're in this for the long haul, then that's when different things started happening and changing. like the way I was like, well collectibles cards, all these things started coming out at the same time. Like I started collecting uh sports cards, Pokemon um And I was on Ebay all the time I was looking for like, like you know, unique vintage rare one of one this that and the other, I'm already an art collector. So I was expanding my collectible reach at the same token. Um My my management was also managing an artist called Blau and an artist called R. I. C. And they were already doing the N. F. T. S in like May april may remember I was talking to Justin around that time and he's telling me about, he's always telling me about what he's working on early. He was already pretty early of crypto and he's like, I'm doing this N. F. T. Thing are I see the same thing, he made a cassette tape and he was like I'm dropping this N. F. T. With a cassette tape that people will buy. The N. F. T. A. You know a digital asset of the cassette tape and it will trade on its own in the in the digital space in the crypto space. That tape ended up selling, started $20 to end up selling as the highest uh sold cassette tape in history beating prince. So I remember all this was happening while I was getting into cards. And I'm like well of course, you know this is right up my alley. I'm a collector, I'm an art head and almost obviously I'm a creator. So that's when we started looking to how um we can make something be disruptive, do something different and add to the community. And in october of last year we found the platform and we spent five months developing the very first collection. We dropped it. It was overwhelmingly successful. And um and so much fun to do so tom and steve the two of you connected over neons future. So tell us a little more about what that is and how an N. F. T. Fits into all of this. It's all about how we view the convergence of humanity and technology where we're going with A. I. Um and the expansion of creativity really its expansion of our species in a way in a positive light. Um And and we built a whole comic book story around that. And we're building a lot more to this I. P. Um But definitely the evolution of this right now to go deeper is is building out this collection is an empty collection with this incredible artist Mashaei who we absolutely love. We worked with before tom brought him in and and he just blows our minds and I created exclusive music to all the different pieces. And tom myself, Mashaei went into detail um on every single piece, looking at the intricacies of the technical detailing of the art, to the feelings that is supposed to provoke and make you feel when you're looking at the pieces. Um we expect the people to be looking to pieces to be looking at the same way that we're looking at with that same kind of detail and and it's all about feeling. You know, these are these are pieces that have uh different perspectives. I mean, the whole idea is how you look at this piece can be so many different ways and but in each way it should make you feel what we feel, where we're getting chills, where we're like, wow, this is a moment. Part of what we wanted to do is really bring to life the I. P. That we created a neon future of the comic book in a new way two really get a chance to take these images to a. Level that you could never justify doing at the comic book level. Their speed is so much of the issue and obviously the narrative needs to be in the driver's seat. But the concepts are high concept enough that you don't need to have background in the comic to enjoy the pieces. So we felt like we really walked that line well of taking a sort of irreverent look at the ip. But making these standalone statements that um you know we refer to as a futuristic Rorschach test where depending on who you are what's going on in your life, you're going to see something different than other people which is really an exciting moment. So we've created something that is both um married to the I. P. And clearly born out of neon future of the comic. But also something entirely new that people will be able to just enjoy for the quality of the art and the artistic statement that we make with each piece tom on twitter. You said that you want to build an N. F. T. Marketplace or animate web comics films. It's your agenda to make the next Disney. So that's not small ambitions there. So tell us a little more what does that mean? What does that look like? Yeah. So it definitely is not a small ambition that is for sure. Uh And impact theory as a company. Our goal is to tell stories that empower people and you know when my wife and I have worked in the inner cities a lot and that's really what gave birth to the desire to create a studio and we realized that the way to get people to really make change because we've seen a lot of people, they were smarter than us, there were people that had more entrepreneurial instincts and we had but they just weren't gonna do as much because they don't have the right frame of reference. And so we offered what we called at the Time Quest University now Impact Area University and we said, we'll teach you anything you want to know about entrepreneurship And by telling people think like this act like this. There were radical transformations in about two of the people, But I'm somebody who's obsessed with scale. And so I started asking the question, what does it take to get the 98 and when you want to have impact at that level, which is of course exactly what it's called impact theory, um, telling stories is my theory on how to impact people at scale. And so looking at who's done this well, and Disney becomes the clear example. They have the discipline to only tell one kind of story and they told it over and over and over from 1000 different angles and in doing something, they established the brand to mean something. And so we want to do that same thing with impact theory, where we want to tell stories that empower people over and over and over from 1000 different angles, so that ultimately the brand of impact theory means something. The way that kids were taking in stories back in the day are very different than the way that they're doing it now. And so the whole idea in business Wayne Gretzky is famous quote of skates where the puck is going to be, rather than where the puck is, and if you're going to skate to where the puck is today, then sure you go, oh Tt you go streaming, and we will do some of that, but where the puck is going to be, the puck is going to be where technology is leading it, and N. F. T. S are really a clear signal about how the Blockchain is changing everything. Um and then just consumer behavior in terms of how they get their stories in is radically changing. And so we're making a big bet on N. F. T. S with the marketplace. Um, as I learned a very powerful lesson in my last company, um, which was whoever controls the audience, controls the negotiation. And so a platform moment is really a moment for you to build a much deeper, richer connection to the audience. Um so that you have a a longer relationship with them, high touch and can really build a community. And so that's our focus and that's why we're building the NFC marketplace and that's how it fits in the grander vision of building the next Disney. There was a recent Bloomberg story were quoted in Tom and it was talking about how sales of entities have sort of been on the decline recently. I mean it's hard to top people's record $69 million Christie's sale at auction. Um So it's not terribly surprising that maybe there's a dip, but you mentioned that humans are prone to getting overly excited and you think what's happening is a bit of an early correction. Um So I'm wondering why continue to pursue N. F. T. S. Right now, if there is a market tip you know if what we're entering is potentially a little bit of a bear market for it. Are you concerned about that? No definitely not. Um So Warren Buffett I think sums it up best when everybody else is panicking is exactly when you want to buy um and when everybody else is buying that's when you want to be conservative. So what we're banking on isn't that the numbers are just going to keep going up and up and up. What we're banking on is that more and more customers are going to want this highly interactive relationship with the properties and projects that they care most about. And so we're very bullish on the technology. We're very bullish on the vision of people continuing to pour into the ecosystem. We're not betting on a coin or anything like that. We are simply asking one question is the transition to the Blockchain going to be exciting and new and different enough that people will continue to pour in and expect that level of um decentralization and interactivity with the um the projects and intellectual property that they're most excited about. And so we believe that that is absolutely going to happen, that we are definitely betting heavy on but has nothing to do with the need for the cost of each item to keep going up. And that's all people are really talking about coming down and as a company were primarily aimed at kids, so we don't want to be just doing ultra high end art. There's a lot of pr to be gotten from it, a lot of amazing art to create their, but our primary focus is going to be um lower cost items, higher volume and that's just again, all of it on, we think a lot of people are going to pour into the system based on the technology and not just wanting to be flippers, but actually wanting to buy something that you love and think is amazing and want to hold onto. Um and as long as we're right about that bit of psychology I think will win in the end Steve, I want to ask you about one that you sold as one of the highest selling to date. Uh a piece called Harry, I believe. And it was sold for 880 8000 $888.88 significance of all those eight. But I did notice that the former Ceo of T. Mobile bought it john legere, do you know you have a, I don't know john he's he's an old friend of mine and he's been very supportive of of just of me and um just a really good guy and he's also believes in the future of N. F. T. S. And he's collecting art by our estimate. He loves, I think if you follow his wallet, because that's the great thing about this space and the great thing about crypto and the whole thing is all transparent. You see you show like you can call one thing that you can flex or you show how you support, who you support. It's all it's all in your wallet. What like how we identify yourself to the world, it's going to be not just your instagram profile, That's what it is now, that's 2021, but in the future it will be your wallet, it'll be like all these different things that will be like, oh that's what you know, so and so loves this kind of music. Where is this kind of clothing? And he, like, they spend so much time in this kind of thing, and they love these kinds of things, and that's how that's identifying your interest in who you are. So, I think um You know, like, I know I'm digressing here, but uh with John, you know, I think he's just like, I want to support artists, I love that, that, you know, that moved him in a certain way, and, you know, he uh he went in and just spent $880,000 on that piece. The piece is incredible. It's absolutely an interesting, unique. It stops you in your tracks. Um but, you know, the eye, the eye of the beholder, and this one is john steve, I'm curious as we're talking about investing in supporting artists and f keys and and more broadly, cryptocurrencies are generally considered pre volatile assets. And so when you're thinking about how to invest and how to build your portfolio, do you think about risk aversion? Do you think about putting in a certain amount of your network because their currency and leaving it there? Or do you think about um kind of limiting your exposure? Yes. Good question. So I have a team, I have a money management team, investment team, business managers have a lot of managers. Uh It's good for me because I am like, I follow my heart almost too much and I'll just go, we're going in and uh and and then they're like, whoa, whoa, whoa, whoa. And actually a lot of them are very conservative and don't really understand. I have to explain them, lock them through why I'm investing so much in certain things, certain assets, um certainly as volatile speculative assets. Um But at the end of the day, it's my money. So, you know, they could they could talk me down off the ledge, but um I just I just I just jump off the ledge at a lower level, you know, um you know, without them, I'd probably be doing like swan dives um into unknown pools that I don't know the depth of. But um yeah, I get very excited. I'm I'm very high risk in certain cases because I follow my heart and you know, obviously, like when you, when you hit on those, you reap large rewards, I jumped into Gamestop 11 week before that thing blew up. I couldn't believe it. Uh You know, I mean it's crazy like when those things happen, right, my team is like, what, what, how do you know this stuff? You know, I'm like, I mean there's like five other things that flopped but like it wasn't so disastrous for me, you know, so it's like about testing the market following it boom. Um You know I also put into dodge coin as well, you know like before that went up and I pulled out I got made a little money, it wasn't like a lot. Um But I've been very lucky with a lot of investments, like being very early like first round of stock acts uh early with Spotify um early with Uber. So it's across the board, but I'm my ears are open to things that are part of culture, you know, I follow the culture and of course even if it's popping in culture it still goes down of course, but that's you know, you can't be afraid of of the rise and falls of these things are everything has to correct everything has to like go down a little bit. Um, and some yes go to zero, but that's very rare unless you're you're you're just going blind and just betting on a bunch of different things that some wise financial advice follow your heart, follow the future, ignore the volatility and most importantly be lucky. Lucky, I love that word. Oh well, excellent steve and tom. Thank you both so much for joining us today on balancing the ledger. Thank you. Thank you. Thanks for having us. I'm robert Hackett, this is lisa Anderson coming to fortune dot com for more balancing the ledger.

Balancing the Ledger: Anthony Scaramucci talks new Bitcoin fund, GameStop, and Biden

Jeff Roberts, Jen Wieczner, Anthony Scaramucci

SkyBridge launched its Bitcoin fund in January of 2021.

Anthony Scaramucci talks Bitcoin fund, GameStop, and Biden

SkyBridge Capital launched its Bitcoin fund in January of 2021.

Watch: Anthony Scaramucci talks new Bitcoin fund, GameStop, and Biden

Today we are joined by Anthony Scaramucci, the founder and managing partner of Skybridge Capital, also nicknamed the Mooch. Welcome. Anthony, Thank you so much for being here. So you recently launched the Bitcoin fund and have started buying Bitcoin for skybridge capital. Tell us a little bit about when that started. Um and, uh and where you got it? Oh, well, I mean, we we've been looking at Bitcoin for the last three years after my debacle in the White House. When I got back to the firm, I registered the u. R l skybridge Bitcoin dot com. I wasn't ready to pursue Bitcoin until a couple of things became clear. The first one was I thought you needed exponential growth in the network, meaning you have to have a lot of users of Bitcoin. There's now over 140 million people that only own Bitcoin. Secondarily, I thought that there was a need for some level of regulatory rubric around it. We were We were getting that as early as 2017. But we haven't more robustly today and then the third thing, which was super important to us because we're institutionalist more than we are Bitcoin Ear's, which are classically libertarian. Uh, we needed a place to store our coins where we felt it was safe. And so all of those things came together in 2020 and we started making our first investments on behalf of clients in October November. That was sort of in the 15 to 18,000 per coin zip code. We then opened up once we got regulatory clearance and we got the paperwork done on a Bitcoin specific fund were Bitcoin only if you will, uh, we launched that on December 22nd with our own capital. The firm put up about 25 million into that fund. This way, clients would be assured that we were eating our own cooking, and we opened it up to outside investors on the Fourth of January. And so so far. That's also been pretty good entry points as well. And we're very happy with where we are, jump in and just ask you to make the case for such a fund because some people tell me what's the point? Why not buy it directly? I know some institutions by laws that require them to, you know, perhaps not do that but it seems in the long run. Pretty soon there'll be an E T. F will be regulatory permission to just buy it directly. So why go to a fund like yours? Well, you know, listen, I think if you get an e t. F or a mutual fund, you should definitely go in that direction, and you should not buy our fund. But if you're comparing it to buying it on certain exchanges or certain Internet platforms, there's some fishing. It's to those Internet platforms meeting where people are fishing people over the Internet. There's been some steps. There's been some security issues. Apple just disclosed on their latest upgrade on their phones that there may be an encryption security issue there. And so what? I would tell people if you were going to buy and scale, and by scale, I mean 25. 50,000 or more. You may want to pay us our fee to get our safety to get the layer of defense from our accounting and legal team and the fidelity cold storage of your Bitcoin. And if you believe that point directionally is going where we think it is, uh, the charges that were charging 75 basis points is the minimus. Moreover, Michael Sailer is having an event related to institutions and corporate treasurers about putting some Bitcoin on their balance sheets similar to what Michael strategy is done. And if you understand the Gap accounting laws there, it is better for people to put it into a limited partnership structure. So then, whatever the prices of that limited partnership, they can put on their statement if they buy Bitcoin directly because of the way it's treated from a tax purpose. It's an intangible on their balance sheets, so they have to market at the price that they paid for it. They can't mark it up if it's going up, but if it goes down, they have to mark it down. So they sort of have this asymmetry from an accounting perspective. So those are some of the reasons why you would be with us. I'm merely telling people this is a cheap access point in the current regulatory rubric to buy Bitcoin in size. And if you do get to an e t f. And it's anybody's guess when that e. T. F comes. But if you get to a TTF my guess is that these coins will have appreciated a lot because there'll be lots of demand, uh, to meet those E t s or those mutual funds. And I would like to get my clients in position before those things. What is your expectation for a potentially TF and is that your end goal? I mean, we'll see average offer those options that they are become legal. Uh, well, I would I'm probably more inclined to the mutual fund side of it than the e t f side of it. Uh, again, just nuances there, and e T. F is a daily trading or daily liquidity. The e T f. You can trade inter day, and so I think skybridge is more equipped to handle the mutual fund aspect of it. Then the e t f there will B E. T s. And as we all know, E t s and mutual funds do coexist in the current market place. And so some people like CTS vs mutual funds or vice versa. But there's market share for both of those products. And yes, we will be filing for a mutual fund. Uh, it's anybody's guess, Jen, when those things will be acceptable for the SEC. But here's the thing. If we're right about the direction of Bitcoin and we sort of feel like Bitcoin could easily be $100,000 per coin by the end of the year. And there's no e t f that I don't want clients to wait for that e t f. I would rather have them positioned in our fund. And then we could look at the landscape. Once the regulatory rubric in the United States evolves and becomes, it becomes more acceptable, as it happens at the end of the year. How do you get to that number? Well, you know, it's really based on making an assumption of whether or not you believe Bitcoin is a store of value, and it's based on the exponential growth of the network and for us. When we look at Bitcoin from a fundamental perspective, I would make the case to you guys that it is a decentralized monetary network. Apple is a computer network, if you will, and it coexists on its platform with other services. If Google is an ad and search network, Amazon is a retail network. Facebook is a social network well Bitcoin over the last 12 years has become a decentralised monetary network with 100 and 40 plus million users, and you can look through Bitcoin, and I think it's really priced in a number of different ways. But the one way that we think is the most likely way it's priced is users and the exponential growth of users. And so as the users grow, we do believe the price will grow. And if we're right about its acceptability standard and it becomes like digital gold, if you will, a store of value. Well, then, if you look at the math, gold is trading at 78 $9 trillion. It depends on the trading day. Bitcoin is in the 5 $600 billion own. Uh, just going to a trillion and a half to $2 trillion would be an easy move for Bitcoin. Uh, if you get that demand, if you get that level of acceptability and things are happening now that is evidencing that endowments have announced that they own Bitcoin like yeah and Harvard, uh, groups like Black Rock have said that they've made it acceptable now for their fixed income funds to own Bitcoin or Bitcoin futures, and I think that is starting to happen. We're still in the early adoption phase of the S curve. So over the next 6 to 12 months of those things evolved. I think a price target of 100,000 is very doable. And they sure like going on the market these days from the flight to Bitcoin and all that. But I'd like to just approach current events for a second. What's going on with Robin Hood and their decision to suspend trading in the Civil Reddit shares like Gamestop and stuff like that? Your hedge fund guy. So who are your sympathies with your sympathies with the hedges or retailers? Or you know who is doing the right lung thing out there? All right. Well, Jeff, I'm an unusual guy because I grew up in a blue collar family and my dad was a crane operator. Nobody went to college until my brother and I got there. So my sympathies are always with the common person, you know, and I'm a little bit of a libertarian. Having said that, it's fully disclosed. I have about 10% of my money with Steve Cohen. He's a personal friend of mine. I sold him my interest in the New York Mets at the back end of 2000 and 20. And, you know, we have several $100 million with Steve. He's down as we're speaking, probably seven or 8%. He got down as high as 12 and a quarter as a result of the short exposure that he has through, um, Melvin Capital, but also his own balance sheet related things like Gamestop. So, um, you know, my my heart is with the people. My wallet is with Steve. Uh, and you know what I will say to you is that they made a mistake. Robin Hood did. And these other trading platforms by blocking that because all that does is it enforces or reemphasizes to common people that the system is rich and we can debate whether or not there should be a bee swarm attack, uh, to blow out a short position and to crush hedge fund managers that have heavy short interest. We can debate that whether it should be allowed or not. But under the current rules, it is. And so pulling the plug on these people, you have a situation where representative Ocasio Cortez and Senator Ted Cruz are a little bit of an odd couple. Ideologically, they are both in agreement that there needs to be some type of congressional investigation into what Robin Hood is doing, and this could be a precursor to a potential transaction tax for Wall Street. I think that this was a mistake for them from a public policy perspective, Uh, and I don't think you can change the rules fairly admits drink. So whether you like what happened or you dislike what happened, I think the the outcome from a policy perspective is a disaster for Robin Hood and for broad swaths of Wall Street. Speaking of policy, you were involved obvious. Bruce Lee in the Trump administration. What are your expectations now for the Biden administration, or whether you're hope? Um, what do you hope to see from them? Well, first of all, I think they I think I think President Biden has shown his centrist ST Gen uh, this notion that the radical left is going to take control of him or he's going to be a puppet of the radical left. I think it's unfounded. Uh, 7 to 10 days into his administration and just look at the pics of his Cabinet. Somebody like Secretary yelling as an example. I applaud her career. I applaud her policy vision. I think she is, by and large a centrist, and she also recognizes the need to be dovish. In a situation like this, where we're imperiled economically, a stock market might be doing well, but middle and lower income people and service centre jobs like restaurants, the entertainment sexual like Wall Street have been devastated. I think having people like her in that position is very good. Long term for the markets. Uh, and so I will make a prediction. I think that they will be lighter touch on regulation than the Obama administration. I don't know if they're gonna be where the Trump administration has been over the last four years, but I do think that they learned something, frankly, from the Trump administration and in my dealings with Obama and Biden, economic team slash staffers. I've made the point that you gotta let businesses, you know, run a little bit and you've got to trust business executives around our country because hopefully if you do that, you'll create more jobs. I certainly don't want them to stifle business. I think that was one of the criticisms of the Obama administration. It was, frankly, one of the benefits of the Trump administration. I want to be fair to the Trump administration. I've been publicly critical of what they've done. Uh, the the regulatory rubric, I think, was good from a business perspective, and I'm hoping that the Biden administration learns from that. One more quick question asked me the next big milestone in crypto. It's like they're going to be the coin disciple, which is going to happen in February. Um, what's the evaluation? Could be, uh, 50 billion shares are reportedly trading around 200. Um, what do you think? He ended up with a fair evaluation, too? Well, it's going to trade higher than I think. Let's just hold up your book, by the way. Look at that. I got a copy of your book here. Okay, Look at that. There's there's power in pink, Jeff. God bless you. Uh, I think these guys have built a brilliant business. I'm halfway through your book. You have a brilliant exposition of the personalities that have driven the early stages of this business that have helped the mainstream digital currencies and so yes, couldn't trade to a $50 billion market cap. I do think that, but because of the low interest rates because of what is happening in this decentralization movement, Gamestop, Bitcoin, Ethereum, etcetera I think it's going to have a higher evaluation than that. If I could buy into the pre I P o secondary market on something like Coin Base, I would put a lot of money in that. Well, that sounds foolish. Your net short game stop. But it sounds like overall pretty, pretty bullish on the market. I am bullish on the market. I'm accidentally net short game stop. I didn't I didn't think you'd have that much Gamma or that high level of in predictability of where that short would go. But the good news is we have a diversified portfolio is not really hurting us. We're up this month and the month of January despite the Gamestop situation, and I think that is the message I'd like to leave everybody with. Even in Bitcoin, we have small amounts of Bitcoin. We're big believers, but I'm not, uh, betting the ranch so to speak, and I'm not irresponsibly long Bitcoin. I think it's a prudent strategy, however, at this point to have some of it. That's a great note to end on. Anthony, Thank you so much for being here. It's going to be a good luck with your book, Jeffrey. Thank you. Alright. Holding it up there and I'm Jeff Roberts to more balanced and leisure to got a fortune dot com.

[MUSIC PLAYING] ROBERT HACKETT: Hello, and welcome to Balancing the Ledger, where tech and finance intersect. My name's Robert Hackett. JEN WIECZNER: And I'm Jen Wieczner. ROBERT HACKETT: And today we're here with Paul Grewal, the chief legal officer of Coinbase. Now, Paul, you formerly were a federal judge, and you've taken a job at Coinbase in the past year or so right around the time that Coinbase is going public. Now, I know you're probably not allowed to say that much because of the quiet period restrictions. But what can you tell us about the company's decision to go public right now? PAUL GREWAL: First of all, thank you for having me. It's a pleasure to be on here with you both. What I can say is that this next step for Coinbase is really just one of many in our journey towards building the crypto economy. And we look at Coinbase's current role in the economy as just the beginning for the company and for the industry. We're at an early stage in the evolution of crypto where the focus remains primarily on investing, buying and selling of assets, trading, those sorts of things. We're excited about the next at stage of that evolution, which is the stage where we're talking less about investing, although that will remain very, very important, and much more about the utility of crypto, and how crypto can help people do real things for real people-- buying, selling, lending, borrowing, those sorts of things. Tremendous opportunities ahead. And we think, as a public company, we'll be able to help achieve some of those goals. JEN WIECZNER: Paul, at the end of the Trump administration, we saw a number of policies rolled out or announced that could be viewed or are viewed as unfriendly to cryptocurrency. Does that potentially threaten or delay your IPO plans? PAUL GREWAL: I think it's less about threatening or delaying any public offering, much more about what this means for crypto as a whole. The most significant rule that rolled out in late December was a rule from the Treasury Department concerning self-hosted wallets and the obligations of exchanges and other intermediaries like Coinbase to collect data from people who rely upon self-hosted wallets to interact with others in the crypto economy. We think there are real issues with the way that rule is rolled out. We think there are real issues with the way that that rule would apply as it's currently drafted. So we're hopeful that in engaging with the new administration we'll be able to address some of the most serious flaws. JEN WIECZNER: And just give us a quick update on where that rule stands now, now that the bottom administration has taken over. PAUL GREWAL: Well, we learned as recently as yesterday, that along with a whole host of other rules that were rolled out in the 11th hour of the previous administration, the proposed rule on self-hosted wallets is now being paused. But we think there are still significant issues that need to be addressed. It was certainly frustrating and disappointing for the industry as a whole to have to respond to that rule over the holidays with very few days to really address the significant flaws in that rule. And so the pause is helpful in that regard. But we think the underlying issues remain. And we're eager to engage in a conversation with the Treasury Department to hopefully address them ROBERT HACKETT: Paul, were you able to enjoy your holidays, or was it just totally you were working to draft this commentary? PAUL GREWAL: Well, I did manage to enjoy the holidays a little bit, but we had over 70 or 80 pages from the Treasury that we had to grind through in order to understand what the rule would encompass. And we also had dozens of questions, specific questions that we needed to respond to over that short period of time. So it was a bit stressful for not just those of us here at Coinbase, but many in the industry. But it was important for us to try to provide that input as best we could under the circumstances. And so while we were able to do that, we look forward to a more complete opportunity with this pause in place and with the new administration in charge. ROBERT HACKETT: Aside from the tight timeline and just the generally terrible timing coming amid the holidays and during presidential transition, what were your big objections to the government's rule? There were a lot of valid concerns about money laundering and illicit financing in the cryptocurrency world. So what are your objections to the way the government is trying to get on top of this problem? PAUL GREWAL: Well, while there are a number of legitimate concerns that we share with the government about illicit activity, there were three big problems with this rule. The first problem was the burden it imposed on regular consumers and the industry as a whole. The second was the privacy issues that were implicated by the way in which this rule was drafted. And the third were the security concerns that many of us have about what the government will do with this information and how it will protect it once it's been collected. The burden here really falls on individuals who rely upon self-hosted wallets, because we now have a rule which would require exchanges like Coinbase and others to collect the names and addresses and potentially all sorts of other information about individuals who use self-hosted wallets for the very first time. That obviously raises real privacy concerns for people who rely upon self-hosted wallets in order to conduct trades and other transactions involving crypto. And the biggest concern we have are really the security questions because, as I think many who've been following the space know, the government's own ability to secure information it collects as part of these reports is something that is a topic of a lot of concern and discussion right now. So we think there are basic issues that need to be resolved and worked out. We're hopeful we can get to a place where everyone's interests are balanced and managed But as drafted, the rule doesn't do that, and we continue to have concerns about it. ROBERT HACKETT: We're certainly seeing some of the cybersecurity concerns that you mentioned with this solar winds debacle that the government is trying to get [INAUDIBLE]. PAUL GREWAL: Exactly. And the main problem is that the information that we would have to collect under this rule isn't specified. The rules talks about names and addresses, but it specifically gives the Treasury Department the discretion to require all sorts of other information be collected from these self-hosted wallets. And it's important to understand that these aren't customers of exchanges like Coinbase. These are third parties to the exchanges. These are people that are interacting with our customers. And so in many cases, we don't even know who these parties are or how we would actually collect this information. So it's a real concern. JEN WIECZNER: Coinbase, according to your CEO Brian Armstrong, is an apolitical company. But cryptocurrency has clearly become such a political issue. Besides the fence-in rule, what are your hopes for the Biden administration? And do you view it as a potential positive or negative as compared to this act going on? PAUL GREWAL: Well, we're cautiously optimistic. There's still a lot that needs to be done and a lot for us to learn about how the new administration will approach many issues. First and foremost, what we'd like to see are clear rules for the industry, so that regardless of whether or not we agree with or what we understand how to comply with it. The self-hosted wallet rule is a great example where there are still real open questions about how we would even gather this information from counter parties involving self-hosted wallets, when in many cases, there aren't individuals at all on the other sides of these transactions. They are automated or self-executing contracts that apply that don't even attach to an individual. So clarity around the rules is very important. We're also eager to see greater clarity, for example, in the definition of a security so that we can understand what crypto assets qualify as a security under the SEC's rules and which assets do not. We want to have confirmation that crypto really is understood as a force for good, even as there are legitimate concerns about money laundering and other illicit activity. The new administration has made very clear that it will focus on things like access for the unbanked and underbanked to our financial system, equity, and having access to the basic elements of a financial system like credit, for example. And we think crypto can play a very important role in addressing some of those concerns. And then just one other aspiration we have in our conversations with the new administration is to hopefully get to a greater sense of support and sense of enthusiasm for things like stablecoins that are backed by US dollars that allow individuals to get the best of both worlds to have the security and stability of a reserve currency issued by a central government with all the benefits that attach to digital assets. So we're cautiously optimistic about each of these things. But so far at least, the early signs point to the potential for real progress. JEN WIECZNER: Janet Yellen, who's Biden's pick for Treasury Secretary, said during her confirmation that she views cryptocurrency as being primarily used for legitimate transactions. What was your reaction to that? And does it scare you? ROBERT HACKETT: Well, we have a lot of respect for Secretary Yellen and obviously her incredible experience even before coming to the Treasury. We think there's an opportunity for education. Even as we sit here in 2021, in various quarters and circles of the government, there still remains a fundamental misunderstanding of what crypto is about and how prevalent illicit or illegal activity actually is. Just recently, a leading analytics company released a report indicating that less than one half of 1% of transactions involving crypto are even associated with suspicious activity, let alone criminal activity. And we think basic facts around what crypto is being used for and its potential for good still need to be understood. And we're eager to play some part in sharing what we've learned over eight or nine years of experience with crypto in ways that we think will be very helpful to the new administration. JEN WIECZNER: You've touched on the issue of whether cryptocurrencies are securities or not. I know that's a hot button issue at the center of an SEC action against Ripple. And I know their associated cryptocurrency XRP does trade on Coinbase. What does that mean for you, and is it worrisome? PAUL GREWAL: Well, I can't speak to the merits of the SEC's case. A court's going to have to sort out the various allegations and claims it makes in its complaint. We have paused our trading of XRP while this SEC case is pending. I know a number of others in the industry have done the same. And we're just hopeful and eager to see a resolution of that case and of the issues that it raises as quickly as possible so that, again, we can move forward with a clear understanding of what the rules are and fully comply with whatever the courts and/or the SEC decide. ROBERT HACKETT: Given your legal experience, having worked on cases involving some of the biggest tech companies around from Oracle to Google to Apple and Samsung, which way do you think the winds are blowing? How is this lawsuit against Ripple going to shake out? PAUL GREWAL: Well, I think that what this lawsuit shows is that crypto's time has come and in many ways. I mean, one thing I have learned over two decades or more of practicing technology law is that the government and others only take an interest in an industry once it has arrived and once it becomes material and meaningful not just to people in the industry, but to the public at large and importantly consumers. So I think that however the SEC's case gets resolved, I think it's clear that the SEC will continue to focus on this question of what crypto assets qualify as a security. And I think that it's important that as that question is debated, that everyone's views are taken into account and that there's an opportunity for a real conversation between the government, various agencies, and the industry. And again, we're very eager to be a part of that. We don't pretend that we have all the answers, but we think we have a lot of experience to share that hopefully we'll allow the government to get to the right result. JEN WIECZNER: Paul, you were at Facebook as they were launching the Libra project, which is now sort of up in the air, which has changed a lot. What's your view on that project or the potential for stable kinds of projects like it going forward? PAUL GREWAL: I'm still very bullish long-term on stablecoins. And I think that one of the real lessons from the experience Facebook had with Libra was that it was an issue whose time had come, regardless of whether or not individual regulators had particular concerns about that stablecoin. We're seeing tremendous interest in developing stablecoins in a variety of different settings. And I think that the widespread appreciation that crypto can be a force for good and help digitize currencies and allow regular people to do things like cross-border remittances to expand their access to lending, those types of things, suggests that, regardless of one project or another's challenges, stablecoins are here to stay. And the only question now is what's the right way to implement them and promote widespread adoption? ROBERT HACKETT: Stablecoins are certainly very interesting. Coinbase has one it's working on itself, USDC, which has gaining a lot of traction lately. But something that is catching a lot of investors' attention is Bitcoin. As we kind of mentioned at the start of this conversation, Bitcoin has been taking off like crazy. The price is up higher than it's ever been. What is your sense of how investors should be thinking about Bitcoin? Right before Coinbase announced that it was filing to go public, Brian, your CEO, he issued a warning to investors saying, be careful. The price of Bitcoin is extremely volatile. So anyway, I'm just wondering what guidance you can offer people who are looking at cryptocurrency maybe for the first time? PAUL GREWAL: Well, I think one of the things that our CEO Brian Armstrong has been very consistent about over the entire history of Coinbase since he founded the company has been that it's important to always take the good news and the bad news with a certain degree of skepticism. Things are never as high as they appear, and they're never as low as they appear I think is one way I would summarize Brian's perspective on this. I think that for new investors or for seasoned investors, it's important to understand that we're just at the very beginning of this journey as I mentioned. That we very much look at the interest in investing in crypto assets, including Bitcoin as an essential first step in the overall evolution of the crypto economy. But there is so much more that lies ahead. And we think that as decentralized technologies take root, as we see greater development of opportunities for people to make micropayments, cross-border remittances, and other features of the financial system really become popular using crypto, we're going to look back at this first phase with some degree of amusement at all the excitement because-- and we're very hopeful that this is just the very beginning. ROBERT HACKETT: Where do you expect the price to settle in the coming months or by the end of the year? PAUL GREWAL: Oh, gosh. I have no idea. I have no idea. I'm too busy thinking about the rules and the regulations that apply to the crypto economy as a whole to focus on Bitcoin pricing. ROBERT HACKETT: I had ask. Well, thank you so much for joining us, Paul. It's been a pleasure having you on. PAUL GREWAL: Thanks for having me. I enjoyed it. [MUSIC PLAYING] 

Balancing the Ledger: Coinbase is “cautiously optimistic” about Biden administration 

Finance

Coinbase’s top lawyer Paul Grewal discuses.

Coinbase “cautiously optimistic” about Biden administration

Coinbase’s Chief Legal Officer Paul Grewal discuses his hopes for Crypto in the next four years.

Watch: Coinbase is “cautiously optimistic” about Biden administration

[MUSIC PLAYING] JEN WIECZNER: We are so lucky to be joined by Changpeng Zhao a.k.a. CZ, who's the founder and CEO of Binance. CZ, so great to be with you. Thanks for joining us. CHANGPENG "CZ" ZHAO: Thank you for having me. It's good to be here. JEN WIECZNER: So tell us where you've been these past eight months of the pandemic. How's your quarantine going? CHANGPENG "CZ" ZHAO: Yeah. So I've been just stuck at home for the last eight months. Yeah, so limited travels, but I got a lot more time to do like big chunk stuff, right? Before I was always on the road. And you don't have time to do all the big chunk stuff. And yeah, so there's a lot of conference calls. And yeah, things are going pretty well in general. JEFF ROBERTS: CZ, I'd love to jump in with some crypto questions and start with the big picture. Because we've all been trapped at home, but cryptos is full of action and change as ever. One thing we were talking about before we started the show was central banks. And I'm curious what you think of that initiative by the People's Central Bank of China. And I know Mastercard is doing something. How much do you think this is going to affect the crypto world? And is it a threat or an opportunity? Or just give us the big picture of where central banks and digital currencies are. CHANGPENG "CZ" ZHAO: Sure. I mean, based on my limited understanding, from my perspective, I think anybody who's doing anything blockchain or digital currency-related is good for the industry. Right now the industry is so small, we probably have less than 1% penetration. So having a central bank, launching a digital currency, a blockchain currency is really good for the education purposes if nothing else. So you'll basically legitimize blockchain technologies, legitimize cryptocurrencies. And it gives people the idea that digital currencies and blockchain currencies are totally legitimate. And that there's a central bank issuing currencies. I think we are in a situation where different central banks may have a little bit of a race going on, so with China, US, Japan, a bunch of other countries. So now, there's a little bit of a race going on to see who's going to issue the digital currencies first, and who's going to take over the world with digital currencies. So I think that little bit of a race is probably a good thing for our industry. I think the first iterations of most central bank-issued digital currencies are likely to be more restrictive than having a lot of freedom. But over time they may evolve. So I think having something is better than having nothing. So I always think it's all positive. JEFF ROBERTS: But if they succeed, do you think that's going to be a threat to Bitcoin and the other sort of exciting decentralized currencies? CHANGPENG "CZ" ZHAO: I don't think so for the moment. I think Bitcoin is very different. Even though you can issue many different cryptocurrencies using the blockchain, so you can have the blockchain as the engine behind it. But depend on what kind of rules you set for your digital currency. I would guess very few central bank digital currency is going to have the same freedom as Bitcoin. And most likely, the central banks will still want to reserve the ability to mint additional coins, quantitative easing. There's probably a central authority controlling the issuance or the governance of the currency, which is a central bank. They're unlikely to be a sort of decentralized, as decentralized as Bitcoin. So I think even though they probably will all use blockchain technology, but the fundamental-- there will be some fundamental attributes that are different. And so I don't think in the short term it's going to-- I don't suspect it will affect Bitcoin that much. If there's a government pushing another cryptocurrency that's even more open, more free, have less restrictions than Bitcoin, and faster to use and cheaper to use, then that would threaten Bitcoin. But that's good for the industry. It's just something that's better than Bitcoin and will replace it. So that's the same as HTML5 replacing HTML4. JEN WIECZNER: Yeah. CHANGPENG "CZ" ZHAO: It's not a bad thing. So depending on how they structure it, I don't think the first versions of it will be a big threat to Bitcoin. JEN WIECZNER: Is it a true cryptocurrency though if it's run by a government? JEN WIECZNER: Well, it depends. I think there's many different definitions of it, right? So everybody have a different definition. If you ask a crypto OG, anything that's issued by a central party then that's not decentralized. That's not that's not cryptocurrency. But I think, technically speaking, you can have a central party issuing a currency and still have full governance control over it that's relying on blockchain technologies and encryption technologies with cryptography technologies involved. So is that cryptocurrency or not? I think different people have different-- will probably argue about the semantics and different definitions of it. But I think that's not super important. What's important is what will people use at the end of the day, how much adoption each different currency will get, so how much usage each different type will get. I think there could be centralized versions of cryptocurrencies that will get high adoption. And there could also be decentralized versions that will get a lot of usage. So I think as long as people use it, you will have value. It could be that people will use both types, but just in different scenarios. So we'll have to see. JEN WIECZNER: Yeah. I know Binance has launched stablecoins tied to a number of different world currencies, but not yet in China. I don't believe you have a stablecoin tied to the yuan. Do you think that's coming? Or what are the barriers there? CHANGPENG "CZ" ZHAO: Yeah. No, I don't think we're-- I don't think that's coming anytime soon. So China has a pretty strict controls on capital flight, so for any currencies moving from onshore China to outside of China. I know of a number of people who have talked about different initiatives of doing a stablecoin for the offshore RMB, the CNYH or something like that. So that's the offshore already. That's the money already offshore version. But I think today, given the restrictions on the RMB it's generally quite difficult to do a stable point based on that. But mostly the RMB does not fluctuate too much against the US dollar. So the US dollar stablecoins are still the most popular. And that's most of what we based our stablecoins on. And they're also algorithmic stablecoins. And we have recently issued one by next March. And that's based on algorithms. So that's also getting popular now. JEFF ROBERTS: CZ, I want to talk about regulation for a bit. How did you feel when you saw the BitMEX arrests? Like is this trouble for the industry more broadly, or were they treated fairly, or was that just a one-off example? How did you feel about BitMEX? CHANGPENG "CZ" ZHAO: I was pretty surprised to be very frank. But in these type of situations, without knowing the details, just looking from a third party perspective, it's very difficult to comment. So it's very difficult to know what are the intricate details. Which things were the problems? Which actions triggered which other actions? So it's impossible to comment on that situation. So I think even for the people involved, they may or may not know the full picture on either side. So I think from our perspective, we just want to maintain a very careful and fully compliant structure. So we want to be sure that we recheck our compliance mechanisms. We want to make sure that we don't service any US users. And Binance US service all the US users. So we want to be very sure that we're doing all the compliance checks, and we're not stepping on anybody's toes. So I don't really know what's going on there. But it is a surprise. And it is I guess a wake-up call for the rest of the players to be more cautious, to be fully compliant. And also as the regulations become clear over time, we need to adjust our approaches. So back in 2015 you can probably like do anything because there was no regula-- like no one's talking about classified Bitcoin as something. But I think in 2018 and in the last couple of years, there has been a lot of regulatory guidelines. So we just want to be able to-- we just want to be very respectful to those rules and change our approach so that we're fully compliant. JEFF ROBERTS: Here in the US, there's a lot of talk. This maybe too much regulation. I was talking to Brad Garling-- or Chris Larsen at Ripple. And he was saying Ripple is thinking of actually moving its headquarters because US regulation is so onerous. Where is a more favorable climate right now? I mean, which countries do you think are doing regulation right? In the past, we always talked about Switzerland, but some of the Asian countries? What do you think? Which country do you think has got the best balance between consumer protection and fostering innovation? CHANGPENG "CZ" ZHAO: Yeah. To be honest, that's also a very difficult question. I think the smaller countries typically move faster because they have less government. Basically, if you have a large government, if you look at the US, there's so many different agencies, so many different states, so many like federal agencies, et cetera. Just coordinating, you just have a bigger body to deal with. So things generally move slower. That's not anybody's fault. It's just that if you have a large structure, they turn slower. And also US is very established in terms of traditional financial industry. So there's a lot of rules in the traditional financial industry. So anything new you do, you have to worry about. You have to think about all of those rules. Whereas a smaller country probably will move faster just because they have less people. They have a smaller government. But at the same time, I think just in the world today, this is a very fluid, dynamic space. China's moving. China was slow for a while, but it's moving really fast now. But whether it's moving in the right direction that it takes, I'm not so sure. I'm not saying that they're moving in the wrong direction. But it's just sort of a lot of this-- even the regulations that's coming out, they are kind of experiments. So it's usually what I would expect to see is that the first iterations of most regulations will be overly restrictive. What they're going to do-- What the logical thing to do is basically borrow from the traditional financial industry and use that on crypto. But crypto is different, right? So people can transfer bitcoins on the blockchain without any interference. How do you control that? So I think the first iterations will be more restrictive, will be more likely to be overly restrictive. And over time maybe the competition between different countries may cause people to sort of recalibrate. So I think some of the smaller countries like Singapore are probably going to have an advantage because they can adjust faster. But they also have smaller economies. So the impact will be less. So it depends. So I think US has a very strong advantages in terms of the core foundations of technology innovation. So there's a lot of technology innovators. There's a lot of VCs. The industry there is just a lot bigger. So we can see a lot of the DFI innovation are coming from the US. So things could move faster in the US as well. So it's very hard to see. It's very hard to predict. Yeah. JEN WIECZNER: Yeah. Let's talk a little bit about the markets. I know when the coronavirus was really picking up steam in March, and we saw definitely some big market movements both in stocks as well as cryptocurrency and Bitcoin falling significantly, overall do you think the pandemic, has it been bad for crypto, good for crypto? Where do we stand? CHANGPENG "CZ" ZHAO: To be honest, I think overall the pandemic has been good for crypto. I mean, we did see a sharp drop on March 12 together with the stock market, but after that I think the Bitcoin price dropped to $3,000 on that day or $4,000 on that day. But now it's recovered to $11,000. So and not only that, we see a lot more users coming in. So from the web traffic, from number of users, we're now seeing all-time high traffic, higher than when Bitcoin was at $21,000 or $20,000. So even though the Bitcoin price was higher then, but now there's a lot more users. So I think basically potentially a number of things contributed to this growth. Number one is people staying home, probably getting bored. So anything that's online or virtual gets more attention. So cryptocurrencies, you can basically trade them online, buy them online, and send them online. So that's easy. And also with the other sort of macroeconomies, the changes in the macroeconomy, quantitative easing, printing of money, stimulus packages, all of those things push people more towards crypto. So I think, and also we have the DFI innovation in this year. So DFI really picked up in the summer. And so I think all of those things help the growth. So we are seeing a lot. So I'm not sure if everything's contributed by the pandemic, but we're definitely seeing a very strong growth in the crypto sector now. JEFF ROBERTS: CZ, we're running low on time. But I do want to ask you about a lot of the big projects are launching their mainnets. We're talking about Filecoin and DeFinity and Cosmos and Polkadot are all sort of coming online. Is there's room for all of these projects? Do you see one as doing very well and some that might not succeed? CHANGPENG "CZ" ZHAO: To be honest, I think the majority of them will not succeed by just the rule of, the law of nature. So like most of the innovations will fail. But even if they fail, they may be the-- they may build inspirations for the next iteration of that, which eventually may become successful. So it's very hard to tell which ones are going to be successful like say five years down the road. Which one's going to be alive? Which one's going to be dead? It's very hard to tell. But there's no way to do innovation without a high number of failures. So if we don't try, if we're just going to say, OK, we're only going to do one thing and that thing's going to get guaranteed to be successful, then we're not going to have any innovation. So I think it's just a nat-- it's just the law of nature. So I think we are in a new industry. There's going to be a lot of failures. It's going to be a lot of risks. But I think innovation is going to continue to go. And the projects getting bigger file. Filecoin's pretty big. Polkadot is pretty big. So they're getting bigger and bigger, which is good. But it's highly risky. JEN WIECZNER: Yeah. When you look across the cryptocurrency landscape, what are you most bullish on? CHANGPENG "CZ" ZHAO: So I'm pretty bullish on Binance Smart Chain, which actually didn't come from me. So it's a community-developed blockchain. And that was an additional blockchain to the Binance Chain, which is the original Binance blockchain. So the company developed it. It's really turning out really well. So it has less innovation from a feature perspective, but is one of those things where it's very innovative from a capacity, and speed, and low fee perspective. So for mass adoption, I think the current blockchains are saturated. And you can't really put more transactions online no matter how much more money you throw at it. So for mass adoption, we need scalability. And Binance Smart Chain is one step in that direction. I wouldn't say it will solve all the problems. But it's definitely a promising step. So it's looking really promisingly. And there's a lot of projects on there. I don't really know who is building them, who's running them. But it's a pretty lively environment now. So I'm pretty excited about that. JEN WIECZNER: Well, CZ. I think that's all the time we have. Great catching up with you. Thanks so much for being here. CHANGPENG "CZ" ZHAO: Thank you so much, Jen. And thank you so much, Jeff. Yeah. JEFF ROBERTS: Bye, CZ. CHANGPENG "CZ" ZHAO: Thanks for having me. JEN WIECZNER: For more Balancing the Ledger, go to fortune.com. We'll see you next time. [MUSIC PLAYING] 

Balancing the Ledger: Binance CEO says BitMEX arrest is a 'wake-up call' for crypto

Changpeng Zhao is this week's guest on Balancing the Ledger.

Binance CEO: BitMEX arrest is a 'wake-up call' for crypto

CZ joins us to talk BitMex arrest, central bank digital currencies, and the pandemic's effect on crypto.

 Today, I want to start off by talking about one of the biggest deals we've seen in a while, which was Coinbase, which is the largest US bitcoin exchange buying-earn for a rumored price of $100 million. And what do you think the strategy of this is? What's the logic behind it? Well, politician of Austin, the CEO of earn is an amazing technologist. And so obviously, it's incredibly strategic for them to get someone like that. But beyond that what's interesting about irn is they're really one of the first companies that created a utility component to cryptocurrency as opposed to just a speculative one, which is what we've mostly seen today. And what's interesting is, I'm actually in earn.com users. So I allow people to message me, and stuff like that on the platform using Bitcoin. And so I think it's really marking a big move towards utility, which also basis is involved with. I think this is a key acquisition for Coinbase. They're basically going to try and get cryptocurrency into the hands of more people. And this is a great mechanism to do this. Balaji Srinivasan, he' created this company that basically disperses cryptocurrency out to people for completing tasks, whether it's responding to an email, or filling out a survey from a company. So I see it like AOL handing out seedy rooms to get people online. It's going to be very key to bringing more people into the cryptocurrency universe. 

Coinbase has made Earn CEO Balaji Srinivasan its chief technology officer.

Coinbase Buys Bitcoin-Based Social Network Earn.com

Earn created a utility component to crypto.

[MUSIC PLAYING] All right, so let's kick things off by talking about venture capital. You've been known to go around the venture capital circuit, the conference circuit, wearing a sweatshirt that says venture capital is dead. Yes. Is it dead? Has cryptocurrency killed venture capital? Look, I don't know the answer to that question definitively. I think cryptocurrencies, tokenization, ICOs, have introduced a new dynamic into early stage capital formation and venture firms are definitely taking notice. I also think there is a rising tide of companies who are looking at the venture ecosystem, who are looking at the power dynamic between investors and entrepreneurs, and who are asking themselves is this really the right way for me to capitalize my company, or are there other ways to do it that reduce some of the potential conflicts of interest. And so the shirt really is intended to be a bit incendiary, if you will. I've been known to be a little bit of a troll from time to time. But I think it gets people thinking. It gets people asking questions, and so it kind of helps spice things up. Sure. We just saw this week, there's reports at Andreessen Horowitz, the renowned venture capital firm, is launching a crypto-focused fund, which would be a big deal. Andreessen's since actually been investing in crypto assets since 2013. They were investing early on in companies like Coinbase, many, many others, and so they've built a considerable equity portfolio in the crypto asset and blockchain space. What they haven't been able to do, because of their current LPA, or their LP agreement, the way they raise capital from their investors, is invest directly into cryptocurrencies using investor funds that are dedicated to the main fund. So I think part of the motivation is creating a new fund with a new LPA that gives them more flexibility to invest in cryptocurrencies. Some of the established venture capital firms are running into some obstacles. Like we've seen Sequoia is now engaged in a lawsuit with Binance, the biggest crypto exchange out there. They said they were going to invest at a certain price in this company, but then all of a sudden all of the crypto coins started going bonkers. And now that company wants to get a better deal somewhere else. So it seems like there is some kind of mismatch between the traditional thinking in venture capital and what's going on with all of these cryptocurrency-focused companies. Well, I think the primary driver there is the power dynamic between entrepreneurs and investors. I think over the last decade in America, the venture community has engaged in something that I like to call the Thought Leadership Olympics. It's really fascinating. You know you see VCs sitting on stages, talking about all of these different themes and trends, but really it's the entrepreneurs who are doing a lot of the hard work. A venture capitalist is an allocator of capital. If you're allocating someone's capital and focused on maximizing the return on that capital, you're going to behave in some ways that may not necessarily be in the best interest of the companies you invest in. And I think the Sequoia lawsuit is one that, to be very frank, just kind of makes me laugh. It's like they're stomping on the table going, hey, we wanted to invest. Let us invest. So I don't know what they thought the outcome would be. But if I was a company raising money, I might think twice before taking a check from Sequoia or signing any sort of legal document. [MUSIC PLAYING] 

Are Cryptocurrencies Killing Venture Capital?

Entrepreneurs may not want the influence of investors. 

Athena Capital’s Meltem Demirors explains.


[ MUSIC ] Welcome to balancing the ledger where finance and tech intersect, I'm Jane Wieczner. I'm Jeff Roberts. And today we're jouned by Chris Baniskey, a partner, a venture capital firm placeholder and co author of the new book Crypto Asset. Thank uyou so much for being here grace. Thanks for having me. So we have to talk about gold and sacks getting into cyrptocurrency. They've confirmed now officially that they are opening a BitCoin trading operation to trade BitCoin futures nad other derivatives, not actual BitCoin yet, but they say maybe that's coming. This is a big Wall Street institution getting into BitCoin. Chris is this a big turning point for the industry? I think this is more signaling of Bitcoin's legitamacy Goldman has built a reputation for itself certainly over the decades, and especially as a technology first investment bank. And so the fact that they are venturing into this new technology, this new asset class It's just indicative of what's to come I think from other financial institutions. But Chris, on a practical level some people are pointing out they're simply creating a derivatives product to help clients trade futures. So presumably this will not introduce a whole bunch of more liquidity or having a kinda of immediate effect on pricing. Yeah. I believe it's a non deliverable And it's Goldman's way, at least I'd say it is Goldman's way of wading into the space, but not going directly to trying to custody physical BitCoin. They're not exposing themselves say directly to crypto exchange risk. They're working secure ties puzzle pieces so to speak, that fit into their existing Financial infrastructure while still offering their clients more direct access to BitCoin. If I understand correctly, I mean the lot of the price rise that we've seen so far in BitCoin has actually largely been driven by individual investors, retail investors And so now, to have this institutional money coming in, this that mean you know, this gonna be the next leg up for the industry? I think institutionals are important, and they are a few questions that remain certainly right now there's a regulartory over hang, like people are holding their breathe to see what ball drops next with the SCC and CFTC. There's also concerns around custody because As we just brought up, Goldman is not directly handling the client itself, tax, [ UNKNOWN ] especially as you get deeper into something like a [ UNKNOWN ] around like sticking, how do you tax those things. So there are as of yet unanswered questions that as so answered you will have more and more financial institution coming on board With examples like Goldman as the earliest indicator. [ MUSIC ]

Goldman Sachs Is Adding A Bitcoin Trading Desk

Goldman Sachs Adding A Bitcoin Trading Desk

[ MUSIC ] The other big news this week too was this firm called Andro Capital. They've raised $ 500 million for a tokenized venture capital firm. Their target I guess eventually is $ 1 billion. So basically it's a cryptocurrency to allow people to invest in a venture firm and then venture capital backed firms. And the name silicon valley coin come on Exactly It's a big race, I dont think of this as a crytpo asset though, I think of this as a tokenized ownership in a venture capital fund. And I think we're gonna see a lot of more of this tokenization of existing asset classes. Just as I think it was 2004 when we had our first gold ETF exchange rated fund. And that is just adding existing asset classes that have existing well known value drivers But adding them to new world wrappers, and so it's interesting but I see it as incremental innovation as opposed to disruptive innovation. [ MUSIC ]

Andra Capital Brings VC Funding to The Blockchain

Silicon Valley Coin is an asset-backed security token.

Andra Capital is a blockchain-based fund using that uses an asset-backed security token called Silicon Valley Coin.

[ MUSIC ]. In your book Cryptoassets, you've actually laid out a model for valuing some of these crypto assets, I mean a lot of people think BitCoin, just trades on whatever the headlines are or whatever the hype is. What people are saying on Twitter but you've said that actually there might be some more fundamentals underpinning all of this. Mm- hm Part of the thinking with cryptoassets is they're not businesses, right? And they don't have business models, they don't have profits. They're really single or multi good economies that deal in these digital services. So what I end up doing is I use an equation known as the equation of exchange. Which is MV equals PQ, where, in the left side of the equation you have M, which is the size of the monetary base, multiplied by V, which is the velocity of that money. The number it times it turns over in a year. So, if you take, say, the US dollar, monetary base of roughly four trillion right now, velocity of roughly five. That equals 20. On the right hand side of the equation, you have PQ. P is the average price of the basket of goods offered by that economy and Q is the quantity of goods. And together that represents the size of the economy. So again for the US, that's 18 trillion, but approaching 20 trillion. And so those two sides need to match. Umm what I end up doing... Which is a little unorthodox, is I solve for the necessary monetary base of a crypto asset to provision an economy of size, PQ, at velocity, V. And so that requires me setting up models that actually look somewhat like a DCF. If you were to just look at them from 30, 000 feet, In terms of each year I'm projecting out the prices of basket of goods. Say it could be file storage or transcoding or bandwidth. Or whatever it may be. The quantity of that good to give me a dollar size of that economy. Divided by a velocity of the CRYPTOASSET To let me know, okay in that year, what is the monetary base need to [ CROSSTALK ] How does this metrick work [ UNKNOWN ] currency for like a Bitcoin or Lightcoin, does it apply equally? I'm sure [ UNKNOWN ] basket of goods in that case? It does apply. It's a little bit more [ UNKNOWN ] say conceptually in terms of the good services actually a currency money over internet protocal But you can use for different example to break it down, if we were to take remittances say, remittances globally I think is roughly $ 500 billion. And if we say, okay of that flow, Bitcoin will provision 10 % and that means, there will be a flow of $ 50 Billion Using BitCoin's block chain, so really the economy of BitCoin moving money as a service. And then if I say, okay, BitCoin's velocity is going to be ten, I divide Divide that 50 billion by ten to get a monetary base of size 5 billion, specific to that use case. But then I can do it for gold, I can do it for business to business payments. I can do it for all kinds of things, and This year cases to get a network value of for these assets. And last year, the end of last year. People were talking about World being a bitcoin, is it a bubble, it's approcaching $ 20, 000. Now we're a litlle bit under 10, 000 How do things look through that lens of the network value and valuation metrics compared to where we were? Sure, the idea of a [ UNKNOWN ] ratio brings us into the relative valuation side, which can be instructive for where we are currently. And so the most common ratio used right now is called the network value to transactions ratio, where you have network value, which is really the number of coins outstanding multiplied by the price, divided by the on- chain transaction value. And the reason we use the on- chain transaction value there, cuz that's really the utility of a crypto network. Again, supporting this economy size PQ Just as the utility of a company is to create profits that benefits the shareholders, and so if you look at this ratio, this NVT ratio we were getting into bubble territory at the end of 2017 and so that was an indicator that things might be overheating that the market is valuing Bitcoin's network value At a richer valuation than it historically has given the transaction value. And we corrected, and we're right now, at least the last time I checked, in a historical norm situation. Norm, so we're about average, not relatively undervalued or overvalued? Around there. Around there, okay. So there's no clear signal whether it's a good time to buy or not. Well if you take say the avergae of the MBT ratio over time and then again it depends exactly how you calculate the enumerator, how you calculate the denominator, it's somewhere in the 80's So you can use that as a historical baseline. I don't know, again place holder now being a venture capital firm, I don't focus on the day to day of the markets like I used to at ARK Invest. But the last time I pulled these numbers, it was just below that historical norm, which would say it's a little under- valued. But I would caution people of reading into these indicators too much. It's still very early days for crypto. We have just about a decade of data, actually really less because markets really only started to come online and be robust with " Mt Gox ". Robust. And so we need more data. We need more historical norms. And I think a lot of the theory will conform to the fact. As these network values persist, as transaction values grow, we will just see these patterns and these ranges that these relative valuations fall into. [ MUSIC ]

Why Now May Be A Good Time to Buy Bitcoin

How to Decide if It's a Good Time to Buy Bitcoin?

‘Cryptoassets’ co-author Chris Burniske explains why.

[ MUSIC ] Which clients really get it, would you say? Which kind of the shining stars or examples of taking this technology forward. Yes, so one of our shining stars, I think, just in terms of the attributes of block chain about effeciency, but also being good for the world. Is Walmart and a group of consumer package goods companies and retailers such as Unilever, Nestle, Doll, Kroger who are supporting the food trust blockchain we've built. And this has been going on for about a year and half, that means it's improving, it's working. And focus of this blockchain is to. Take the very unwieldy, kludgy food safety and food recall components. Which today, best in class, Walmart, takes six days and 18 hours to recall a food. And it reduces it to two seconds. And so we've already loaded hundreds of SKUs, hundreds of thousands of transactions And the idea is this becomes a digital approach to food safety, that can allow instant recall, and the significance of that is, 30 % of the world's food is rested today, about 420, 000 people die a year from food poisoning, so if you can fix that, it's massive for the world. So I'd say, that group has a clear leader. [ MUSIC ]

These Companies are Blockchain Superstars

Tech

Walmart, Nestle, Unilever, Dole and Kroger use blockchain. 

Bridget van Kralingen of IBM Global Industries provides insight.

[ MUSIC ] And you've also seen some of the big names in business and finance this week, such as Bill Gates and Gary Cohn, saying that they're not fans of BitCoin, but they really do believe in this underlying blockchain technology, and you also have Facebook, which is a huge tech company, saying they are starting a team to explore blockchain What do think the strategy, or the opportunity, is there in front of them for a company like facebook. I think for facebook the fundamental issue that they're grappling with is very suited to the technology of Blockchain. So what they're grappling with is securing data and making sure that if people want privacy. Or trackability of their data, they can actually secure that. Whether its on the ads side or the personal side, they have both an opportunity and a business reason to think about those issues. And inherently what Blockchain does is it actually makes sure that if you share data, It's permissioned at what you want to share, you permission to share, and what you want to keep private you can. So it can do that for them. It can also track what happens to people's data. I think it's a technology that fits very well with some of the business model challenges that they're actually facing. And I think they're very right. To take this very seriously. [ MUSIC ].

Here’s What Blockchain Can Do for Facebook

Blockchain could solve data and privacy concerns. 

Facebook Exploring Blockchain Technology

[ MUSIC ] What other ways do you see for it to change our daily lives? How is this going to look in the future? So some really, here and now examples are last week we announced a A block chain for jewelry. And so Richline, Helzberg. Richline is a manufacturer. Helzberg is a retailer. And for the first time you can put diamond rings end to end on a block chain. So not just the diamond or the metal but you can figure out does the diamond conform with the Kimbley Act. Are there any conflict metals involved? And you can buy a diamond ring that you know has been mined and produced in a sustainable, ethical way. And that's really significant because 73 % of millenials will pay more for something that is sustainably and ethically sourced. So that's one way we'll change your life. With Marsh McLennan, also a week ago we announced a Blockchain where corporates and small businesses and individuals can put all their insurance documentation in the Blockchain. So instead of scrabbling around if you're a small contractor every time to repeat your documents to prove that you have insurance, and you can legitimately work, it's on a block chain, anyone can tap into. [ MUSIC ]

Blockchain Will Change the Way You Shop 

It's already being used to show source of diamonds. 

Blockchain Can Track Product Origins

Here’s what blockchain will look like in the future.

[ MUSIC ] Turning to your news, Adam, Coinbase is opening up its office in Chicago? That's right, yeah, we're really excited that we have an office in San Francisco, an office here in New York and an office in London. And just announced, we're opening up an office in Chicago. What's really unique about it is it's an engineering office, right. What we're looking to do is scale that office from right now to about six or seven employees To upwards of 100 employees over the coming year or so. And that will be primarily engineers that are helping work on kind of new institutional- grade infrastructure for the products we offer. Wr think Chicago, we think derivatives market, and also High frequency trading, is this what you're sort of designing it for? I think when we think about the institutional space we think there is core products that they want to have access to. First and foremost is custody, they need the ability to safely and securely store cryptocurrencies. Especially the kind of history of the space which is wraught with thefts, and hackings, and lack of safe storage. So that is a core product that we're offering. The second one Coinbase markets. And that is the matching engine or the centralized pool of liquidity for all the different Coinbase products, be it Coinbase. com or [ UNKNOWN ] And that team is gonna be based at Chicago and there is an exceptional access to kind of talent there that comes from kind of deep- exchange architecture experience. So obviously the CME, the CBO You have a number of exchanges that are there. And we're really fortunate to have that. GDAX is really your baby, right? Yeah, so I look after GDAX. That's our kind of institutional rate exchange. And what we've done is, GDAX used to allow both individuals and institutions to sign up, right? It would allow direct market access. And it was either the active crypto trader that said, hey, I really wanna be able to trade directly on a central limit order book, and they would do that through G- X. But it was also very large institutions, right, that would trade primarily programmatically via our API, they would also come through G- X. What we realized over time is that those two customers had very different needs, right? Individuals wanna kinda be walked through the onboarding experience. They wanted a very easy- to- use interface. Whereas institutions kind of wanted more powerful tools and kind of features that only institutions could have access to for legal and regulatory reasons. That's why we're really excited this week to announce a new product we just launched called Coinbase Prime. And Coinbase Prime, as the name evokes, is kind of there to provide the prime brokerage services that institutions are missing. Things like lending, algorithmic orders and access to market data and even research one day. So a lot of this stuff sounds like a little bit like banking services where they had Goldman Sachs announce they're going to start trading BitCoin derivatives and maybe eventually BitCoin. Does Coinbase see itself as a bank or what's the vision here? I think very kind of simply said we want to be the Google of crypto right? That said we're spending most of our time and our resources right now helping to build the infrastructure. So that's the ability to safely store cryptocurrency. The Ability to safely kind of trade it. But that will not be successful long term if we don't also move into this utility phase. How do our customers, if not the whole world, start utilizing crypto currency to solve real problems, to provide real service. So we've already started making a few investments there, we've got a product called Toshi, which is a user controlled wallet, kind of decentralized application store that you can use services on. We also have Coinbase commerce, which allows our customers and businesses to be able to send and transact crypto- currency for business. So we do not see ourselves as necessarily a crypto- currency bank Right, that's a core part of our offering, and especially as we appeal to institutions. But long term, we really want to be diversified, supporting not just the investment phase, but also the utility. [ MUSIC ] [ BLANK_AUDIO ]

Coinbase just launched a lineup of apps geared for institutional investors.

Coinbase’s Adam White: “We Want Coinbase to Be the Google of Crypto”

They cater to both institutions and investors. 

Coinbase Makes it Easy to Trade Crypto

> Circle recently launched a product called, buy the market that let's you buy a bunch of coins spread across by market cap. And we're also seeing a bunch of banks kind of getting interested and involved, for instance Goldman Sachs is looking at spinning up a Bitcoin trading desk. Do you view this as an opportunity or threat? I do it really as an opportunity. So, there is so much food left on the table, and so many seats left around the table that the more firms. That come and are offering products and services that allow people to access the digital currency asset class the better. Goldman Sachs being able to get into the digital currency space is a fantastic step forward. That's not a conversation that we were having a few months ago. And actually, it reminds me of 2015, which was about a year into when I'd gotten into the space. No bank, no insurance company. No global corporate company had made an investment in a digital currency firm. And it was when Goldman- Sachs co- invested with the Digital Currency Group, into Circle, that it then started to provide enough air cover to start seeing Visa and MasterCard, and every other bank and insurance company, broker- dealer, etc. JP Morgan. Yeah, JP Morgan, to be able to put money to work in the digital currency space without it being a reputational risk for For them. And so, if i look at my crystal ball, I would say that Goldman Sach beginning to get into the trading space, is gonna have a similar snowball effect. And you're gonna have to see other firms begin to participate in a similar way. Care to share any price targets for us? No price targets, but I will say that as we look at assests like bitcoin and look at the unbelievable adversity its faced over the last ten years, Every day that Bitcoin doesn't go away, every day that Bitcoin overcomes a new challenge, for me, makes me feel that Bitcoin will either do one of two things. It'll either survive, and become all these amazing things that we think it can be, which will cause its price to be a lot higher than here. The native currency of the Internet, maybe, as Jack Dorsey said the other week? Maybe, maybe Or it is possible something else might come along that will displace it, and Bitcoin goes to zero. It likely will have one of these binary, a binary outcome. That being said, you have to think about Bitcoin, again, as an open- source protocol. So if you want RobertCoin, and I don't think you're gonna do an ICO anytime soon, but- He already had one. I did, I did one. You did? Hedge. coin. Okay Okay. Thanks for letting me know about the presale. The, as you look at that, you know, and any other currency that comes along that allows for another feature, another action that maybe BitCoin doesn't have, as an open source protocol, it's able to accommodate, to integrate, to add that aspect into it. And I hope, and continue to believe that as new features are added into BitCoin and other digital currencies They can continue to thrive and grow and not be displaced. [ MUSIC ]

Bitcoin's Two Possible Outcomes

Bitcoin can survive if it continues to adapt and improve. 

Will Bitcoin Thrive or Die?

[ MUSIC ] So the news of the week, EOS has raised four billion dollars. I mean they've raised more money in terms of an initial coin offering than any other project in this cryptocurrency zany mania world. I mean they haven't even released a Product yet, and yet they've managed to raise $ 4 billion. That's a lot of money. That is definitely a lot of money. That's Uber, Facebook level money. That is, I mean it's more than an IPO for a typical tech company that's going out the gate On the stock exchange. I mean traditionally you would have some sort of pre- money evaluation against that and there would be equity involved and all these other things, but at this point, it's just crowd funded people that want to be involved so. I look forward to seeing the product. I'm not sure if you saw some the security news that came out around EOS as well. Tell us about it. In the same time. There was remote cut execution vulnerability discovered. By security research group in China who published that. And is relatively quickly remediate by of course a bit of a flurry of news that I think the news dropped on exact same day. There's been phishing emails too. When our colleagues got these phishing things and invite you to put in your private key To share your therom for the project and I don't think that ends well. Yeah we were looking at some of those sites yesterday. You've got to be very weary about where your're sending your money and don't enter your private key anywhere. Yeah. I mean I think people don't realize about blotch Systems usually. You might have heard the joke about the cloud just being somebody elses computer? The blockchain is just all of our computers. So when these things have some vulnerability or exploit that goes to one note it can eventually go to all of them and you can end up with catastrophic failures. So it's hard. Product security and development is hard here. Now you're raising money for your own start up, Clovyr. Why didn't you go the ICO route? I mean you could raise tons of money this way. Is there still time? No because I think in a way that's regulatory [ UNKNOWN ] and it's I want to spend more time building products than working with lawyers. But also the type of tooling that we're building and the product and solutions that we're building, we need to sell to and work with people that may be don't wanna interact with people that are token companies. [ MUSIC ]

And a product still hasn't been revealed.

Blockchain Startup Block.one Raises $4 Billion For EOS ICO

This makes EOS the largest initial coin offering to date.

Making EOS the largest initial coin offering to date.

[ MUSIC ] For block chain in general, where are the users? Because what strikes me right now is the average person reads about this, they want to go use some block chain and just as in the past era when the internet came it took a browser, it took Netscape for people to go, that's how it works. And so far I'm not seeing something analagous to Netscape. How far away are we from that when the average person can actually kinda go and explore the block chain for themselves? There's a lot of mobile first development that you see for end user applications. So a lot of the kind of payments apps that you're probably familiar with. And that's great, we could use more full applications. There's some browsers that do exist, like Miss Browser, etc. But people are just starting to download them because you have to know where you're getting to, to want to download them and use them, so 1 ) I think as soon as, as soon as people realize what the heck they can use a blockchain for, we'll probably see more. 2 ) And our Browser Snaps going to be this way to conceptualize it, because remember when the internet came along for magazines, everyone, the magazines like Fortune took pdfs and uploaded it to the internet and said," there's your magazine there ," but the paradigm had shifted and you weren't benefitting from what The world wide web, or the Internet could offer. And in the case of a blockchain technology, are browsers and apps, to restate my question, the right way to think of it, or is there gonna be some sort of new user interface to explore it? Decentralization necessitates a different way to think about how you access these systems. So people that had been playing around with the Things like Mastodon or Riot Chat or Existing Federated Systems or Pirate Bay for example. There are other examples of peer to peer systems that are not blockchain based and they have user bases. So just getting people to understand what the value to them is going to be is All we have to do and there has been too much focus on the investment side and therefore it's really taking away from people, it's the difference. are building, are you investing, it's taking away from the focus on, hey this thing is really cool. I can meet my friends here. We can swap. Crypto [ UNKNOWN ] or whatever it is. But they're still finding their feet as to what that network's gonna look like. How quickly will we start seeing businesses adopt public chains or get involved, start dabbling with them? There are businesses that are doing things on the public chain. I mean, if you mean top corporates to be launching applications that are On public chain I think we will see things that look like a www landing page. In the relatively short term as soon as there is some sort of regulatory decision around hey I need to pay to access this This network and that means I have to hold cryptocurrency on my general books. That's dissuasive. But that doesn't mean that you're going to be moving your core operations onto a public blockchain. I mean we should all hope that no one moves their core operations to a public blockchain. Right away because it would grid the whole thing to a halt. So it's a little early for that. But what they will probably will start doing is say, maybe you have a permission that work and you wanna ping that network to the public chain for added security. Or maybe one of these self solvent identity things really does take off and so you wanna start letting your users authenticate with that or maybe checking Their credit history from what's on their wallet. Then you're gonna say hey, maybe that information is on the public chain. Let's figure out to integrate with that. And that's exactly really what we're doing with Clover is making sure, rather than kind of forcing public chain down people's throat that aren't ready for it Say it's okay, build where it makes sense for you. When you're ready and you want to enable that service, you flip a switch and provide a wallet and you're off to the races. [ MUSIC ]

Clovyr CEO Amber Baldet discusses mass adoption of blockchain technology

What Does Blockchain Look Like?

Amber Baldet says blockchain tech will see mass adoption.

Who Can Use Blockchain Technology?

[ MUSIC ] You made sort of a splash, a consensus, the big Blockchain conference with the launch of Clover. Can you sort of remind us in plain English or what Clover's gonna be? Sure, what we're working on with Clovyr is bringing modern application development to blockchain applications. So whether you are going to deploy something to a public chain, like Ethereum, or whether you're trying to build On some of these consortium chains with Parity or Quorum, or even go Ethereum vanilla kind of permission chain. We want the experience to be as though you were using the software tool that you would use for any other Kind of development. It's a little crazy. If you ask people if they're building a machine learning application you know what toolset do they use. You know like what do machine learning people use? It's a meaningless question. For some reason, the tooling in the blockchain space just hasn't caught up. So we're working on bridging that gap and making sure that there is a discovery mechanisms for those applications. And that the whole middleware layer of services that will make these apps useful and useable whether that's data feeds or core [ UNKNOWN ] on the sexy utilitarian things like DNA, etc. That they exists, we're just making it easy for other people to bring their vision. What sort of people should think of using Clovyr? Who is going to come to you? Who are you going to help the most? Hopefully it's people across the spectrum. I mean it's kind of like asking, who is going to build a website? You know, you're going to get people who want to build their Fortune 500 corporate website, and you're going to get people who want to stand up their small local business, or little non profit, and you're going to get other individuals that want to write a blog. So, the idea isn't to go out and capture everyone who wants to build a website and then say we're going to build this for > For you. It's to create, you know, what- What's the Ruby on Rails equivalent that caused this explosion of web sites to appear and business to get up on the web for the first time? Creating that kind of interconnectivity for that next generation internet is really what we're working on. [ MUSIC ]

Cofounder and CEO Amber Baldet predicts the demand for decentralized apps will be similar to that of websites.

Clovyr Hopes To See Customers From 'Across The Spectrum'

Amber Baldet is bringing the right tools to customers.

Clovyr Makes it Easy to Build Decentralized Apps

[ MUSIC ] So last night there was some news from Coinbase. They've made three acquisitions including Keystone Capital which gives them a broker dealer license pending approval. Now Coinbase has been wanting to get a broker deal or a license ever since the SCC said that exchanges should sometimes register with the SCC if they're going to be selling securities. What does this mean for them? I think it's great news. We are big fans of Coinbase in general. And having a free regulated securities exchange based in the US I think it's a step forward for the entire industry. And I guess like our view is there are certain things that are clearly securities one example could be equity in a company, right I don't think anyone would argue that this is a we've been functioning very well under the current Securities regulations, and if Coinbase can help tokenize some of these things and have a fully regulated exchange where they can trade, I think that would just be a really good step forward. At the same time Circle, which is now valued at three billion dollars, they've been also pursuing some of these regulations, these licenses In fact, I've talked to their founders quite a bit extensively Jeremy Aller and Sean Neville. And they believed that the whole sort of you know, panoply of assets out there are going to be tokenized in the future. Everything is gonna be a portion to tie all digital slices that you can trade around. When you sees the benefit of doing that? If you look at how crypto token generally work, like you know their, They trade 24 / 7. It's very easy to send them from one place to another. Let's just imagine that Circle is also able to get a license and have a fully regulated security exchange, you can transfer these things from Coinbase to another exchange, and at will. Right. So all the benefits that you see of tokens can be applied to traditional securities. And I think it's a very exciting area. We dont directly work in it but we think that it's a very exciting area. [ MUSIC ]

Coinbase Broker-Dealer Acquisition Is a Huge Step Forward

Coinbase has acquired Keystone Capital Corp.

[ MUSIC ] Apparently, you two were advisors to silicon Valley, the HBO TV show. can you tell us a little bit about that experience? Yeah, totally. We were advisors for the season 5 of Silicon Valley. That was a really great experience, we got to speak with Some of the writers and talk about our experience building block deck and the experience building this new decentralised internet that we are working on. I mean that's such a big part of the show- Yeah the new internet to decentralise internet and it's basically based on you guys. Yes, well you don't say it's based on us We have spoken and had some really great conversations with them. They have other projects that have advised them as well. One is Madesafe, a couple of people from the Madesafe team. So we just look at it like we're working on something that we care a lot about. And we want to help them out in any way that we could. How did they execute? How true to life is the show giving your expreience in this kind of wacky industry? They're pretty good. They're really good. I think they get details right to the extent that if you're a hardcore engineer there's something there for you to appreciate and they have something for the broader public as well. So striking that balance is usually very hard and they're experts at that. And spoiler alert, the decentralised internet company in Silicon Valley does an ICO as part of their season. Did you guys recommend that? Or, what was your take, on how to properly depict that? We didn't really, we didn't recommend anything in particular, a lot of the conversations were About what we've been working on. About what we've been doing. What some of our future plans were. And so I think their goal was to draw some inspiration from us and from other projects. And look at the ecosystem as a whole. And then paint a picture about, kind of figure out what are some of the really interesting stories they could tell. So I don't think that there's anything in particular that might have been taken from us. But we just wanted to give them as much Context as possible. [ MUSIC ]

Blockstack Cofounders On Being Advisors for HBO’s ‘Silicon Valley’

They spoke about their decentralized internet plans. 

Blockstack Founders Advisor on HBO's Silicon Valley

Blockstack cofounders Ryan Shea and Muneed Ali discuss what it was like to work with HBO’s ‘Silicon Valley.’

[ MUSIC ] Well, let's dive in and talk about block stack. What are you guys working on? We're building a new decentralized internet, and the goal is for people to be in control of their digital lives, and we have a full application platform and developer community, Around making this happen. That means that we give developers with the tools that they need. We provide support and an environment where developers can communicate. We provide some funding as well. Really, this whole thing is to build an entire economy that is decentralized. One really valuable thing that we provide and that we're building out as we release the block stack blockchain, is this thing called App rewards mining. What that means is that, developers who have applications on Blockstack that are used, and tha provide real value, they will get a constant outflow of funding of money from the block chain itself, right? This is part of the mining system And we have a system where these app reviewers can actually indicate what applications are being used and what applications are of high quality and they can actually sustain themselves and be able to have a certain amount of revenue where they can go forward. So, it provides a baseline sort of business model while they Get started and can figure out their long term business model. They would receive tokens, Blockstack tokens. Blockstack tokens, exactly. So what's an example of one of these apps and is this kind of payout mechanism working right now? No, so the payment mechanism is not working right now. That's when the Blockchain goes live. We are really exited about our Open source community and the developers who are building apps right now. I can give you some examples, one of them is called Graphite. It's alternative to Google Docs. So, imagine just like you are used to using Google Docs or Spreadsheets, Google has all your data. In the Graphite example, you download the Graphite app locally and you would plug in your private storage which we help with. And after that, it's very interesting that you are using something exactly like Google Docs but it's local, it's decentralized and your data is backed up in the Cloud under your ownership. Right? So, you control all that data. Another app is called Stealthy, it's a secure messaging app. It's interesting that we had Edward Snowden as one of the keynote speakers at one of our developer events in Berlin. He was actually playing around with this app. And it was very interesting to see that people were like that concerned about privacy are actually trying out these Decent Lines Apps for messaging. And what are some of the benefits of having a decentralized Internet that currently don't exist or maybe what are some of the problems with what we have today? Yeah, I think what would happen with the traditional Internet is that you can think of it as people started designing the courses, and it's not like, you know, aliens gave us the technology. Like, those people are still With us were some of the fine years of the existing internet. And didn't build out everything perfectly, right? And some of those gaping holes that you see, fundamental things that should have been part of the [ UNKNOWN ] infrastructure Those holes were filled by large companies like Google or Facebook. One specific example would be Facebook built out an authentication protocol and then a lot of developers used that authentication protocol so that you don't have to make like new accounts. But the thing is now every single app that is using it, they're actually sending data back to a single company, Facebook. Right. If that was a fundamental internet protocol, then users are basically they are in control of their own username, their own data, and a single company cannot just track them. That's just one example, but there are many things that the traditional internet didn't get right and there are many efforts, including us, who are actually trying to fix those problems. And give developers a new platform that completely just changes the game, right. They can build fully decentralized applications where it's actually easier for them to build these apps than to build them in traditional ways. Now you're actually putting your money where your mouth is. You've recently put out a request for proposals for people to submit ideas for social networks. Decentralize social networks. Decentralize social networks and there's a million dollars up for grabs. Tell us about that initiative and what you're hoping to garner from it. Yeah, so the goal there is to provide resources for developers for start ups to build decentralized apps. And really it's about opening up. Allowing people to be as creative as possible. We expect to see teams that will build decentralized Facebook or decentralized Twitter equivalents. But we also expect to see things that we couldn't have ever imagined. You even think of GitHub is a social network, SoundCloud is a social network. There's so many different things. But there's even new things that haven't been imagined yet. And we want to really empower teams to be able to do that. We've had over 100 teams actually apply so far, and we're really excited about being able to support them in any way we can. And this is just one of the types of applications that we are supporting on top of BlockStack there's many more. We believe that we now have that infrastructure Where you can build these apps that can get millions of users. If you remember, cryptokeys on Atirium became really famous last year. How could we forget? And as it was getting 400, 000, 500, 000 users, and you basically couldn't use Atirium because the underlying platform was not ready for getting that many users. So this is our way of telling developers that you can now give our platform a spin and try building out the next breakthrough on top of Blockstack, and you'll notice that this infrastructure has years of R & D work going into it, and you wouldn't notice some of the problems that you might with other platforms. So these are early days but long, long terms. Do you see, you know, everyone on Facebook today switching to one of these decentralized platforms? Everyone on the internet today is switching to block stack. How does that look in the future? It's hard to say exactly what the future will hold. I would say we and many other projects, we're working to building the decentralized future. And it's very possible that if all of this works out, if all of this The vision of decentralization has realized that decades from now, people will look at storing the data for billions of users in one central location as preposterous. Because at the end of the day this, what we call the new decentralized Internet, will just be the Internet if all works out and What that'll mean is that we will all be in control of our digital lives, and it might look something more like each person has their own private cloud, each person has their own keys on their devices and they control their identity and their data. And they can bring their data with them from one application to another. And it's more about the empowerment of the individual user. [ MUSIC ]

Blockstack’s Case For A Decentralized Internet

Blockstack Wants to Decentralize the Internet

Cofounders Ryan Shea and Muneeb Ali explain the startup’s goals.

[ MUSIC ] You used to own Trigger Finance. This was the startup that you founded that Circle acquired in the fall. And I think what Trigger did was it allows some kind of rules based investing, or functionality for investors looking for. For maybe some guidance on when to trade. Do you think, will there be more functionality to Circle's offerings in the future that will help investors when to buy and things like that? Absolutely, I mean the mission and the vision of Trigger was to have a rules- based approach to investing. Really removing the emotional aspect that consumers generally tend to have with money. And with highly volatile and speculative currencies. First, moving that through automation, so simple you know conditional automotive trades that can happen based off of either a price move in or a tweet or announcement or you hitting a certain target thresholds. The, I think rule based crypto training intrigues me, I know it's really days but What might some of the inputs be? I mean I know Wills base for traditional investing might be the federal reserve does X or like you know Apple Share is fall Y and a response kicks in. In the case of Crypto what would be the kind of Macro factors to trigger that? Yeah that is super interesting, I mean a trigger we saw around 40 to 50 percent of all triggers being created and this was Last year in 2017. Mostly right now they would be technical indicators, specifically all of the active trading type of audience they'll trigger on Fibonacci sequences, moving day averages, volume. You could have the flippening trigger if Etherium passes Bitcoin market cap, etc. And because crypto is so news driven heavy then you could also have Tweet based triggers if Fitelli is Tweeting about something or parsing the SEC news announcement. For an active trader that absolutely makes sense to have a conditional approach to automation. [ MUSIC ]

How to Apply Rules-Based Investing to Cryptocurrency 

Automated traded might be triggered by other crypto moves. 

Circle Could Apply Rules-Based Investing to Cryptocurrency

[ MUSIC ]. You guys currently only trade Bitcoin and Ethereum but we got some guidance from the FCC last week about neither of those [ UNKNOWN ] securities but there's still some concern about these ICO or initial coin offering tokens, which I think Robinhood is actually tracking right now. But not allowing trading of. That's right. I mean, does that effect your strategy. Is it something your hoping to expand to more cryptocurrencies in the future. Yeah, we're definetly looking to expand the future set and add more coins in the future. We're avtively working on those things. Before kind of deciding what to announce, what to list, what to trade. We look at a combination of factors. One of them is obviously. What have the regulators said about it, or what are they likely going to say about it, that's very important. Then we also look at what's the team behind this coin doing. Are they legitimate, what are their backgrounds? And then customer demand and Things like the stability and resilience of the coin against protocol level attacks. Like 51 % attacks for instance, which we know happened bitcoin golds a couple of weeks ago and that was very eyeopening, I would say. [ MUSIC ]

And keeping a cautious eye on initial coin offerings.

Robinhood Is Working To Add More Cryptocurrencies

Initial coin offerings are being watched.

Robinhood Trades Bitcoin and Ethereum

[ MUSIC ] So you guys are known as a stock app, used by millions of people. But can you tell us a little more about what your app does? Yeah so we're an investment platform. We allow people to trade US equities Options and crypto currencies, commission- free. So no per trade charges on all three of those. We're available on mobile and on web as of late last year in the US. You guys have said that you plan to offer banking services in the future. I think you even said you hope to offer Everything that Bank of America offers. And you guys just raised $ 363 million series D round valuing Robinhood at $ 5. 6 billion. So you've been compared to the Amazon of financial services. But do you really want to be a bank? I mean, is that what you see yourselves becoming in the future? Well, the way we think about it is we wanna solve Customer problems and the precise regulatory structure we sort of figure out around the problem. So it became pretty clear at first when we wanted to launch the stock trading product that we had to be a FINRA registered broker dealer. So we went and got those licenses but We didn't start saying, okay, let's be a FINRA broker dealer. What can we do now that we have that license? It started out by understanding that customers are getting ripped off in investing and trading. They're paying up to $ 10 a trade, sometimes even more. There's high count minimums and the user experience, I mean, these services effectively haven't changed for 10, 20 years when you look at discount brokerages. And we took that approach kind of organically to options trading where customers are getting charged even more for making options trades. you get charged twice per transaction in two different ways and some customers came to us and said " well, we're paying thousands of dollars a day in trading fees ." So they wanted that product out of us and we figured out how to how to make that happen as well. And crypto trading, same story. The majority of wallets and exchanges, customers are paying exorbirant fees right now. Imean, anywhere from 1. 5 % to 5 % which is a very very sizable fee. So our approach is use technology and automation to put the vast majority of the value of that transaction back in into customers pockets. and we sort of find the regulatory structure around that and I think it doesn't stop with investing products. I think customers are getting ripped off across the board in financial services so I can't really comment on the licenses or anything like that but the philosophy is if people hear Robinhood Five, ten years from now and it's a very long term business. I mean everything that we're talking about here will play out in the span of many years. We should establish a connection between I'm using Robinhood I'm getting the best deal. [ MUSIC ]

Co-CEO Vlad Tenev on Robinhood's plans for rolling out banking services.

Robinhood Wants To Go Big With Their No-Fee Model

The investment platform wants to offer banking. 

Robinhood Wants to Expand Low-Fee Model

[ MUSIC ] Basis, the stablecoin project, that just this week announced that they are giving back of all of their money to the investors. Bain Capital Ventures is one of the big investors in basis. Maybe you can tell us what happened, what went wrong, and where are they going from here? So nothing went wrong. Basis was an ambitious project and it was trying to create a purely decentralized, non- collateralized, algorithmic stable coin. And that's different from a centralized collateralized stable coin, like Tether or True or Circle or Gemini. And it's different from a decentralized collateralized Stablecoin like Maker. So a decentralized non- collateralized Stablecoin is the hardest kind to create. It's the holy grail of Stablecoins. The things went great throughout all of this, by the way. They've been working with regulators And over the last few months it became clear that there was really no way around the bond tokens and share tokens in Basis being securities. And with them being securities, they would have transfer restrictions. And the basis team would have to do KYC, maintain an an accredited investor list, have a centralized white list of entities that are allowed to own the share tokens and the share bonds. Which is all; doable, it's a pain but it's all doable. But The bond and the share tokens were an important part of contributing stability to the system. And it had the economic incentives that allowed participants in the system to help the system maintain the peg to the dollar. So with all these restrictions, liquidity would be reduced, and the reduction of liquidity would result in the Productional stability. So the Basis team explored a whole bunch of alternatives for what to do about this. And there are a lot of discussions, well, maybe we change this little part, or that little part. But [ LAUGH ] to make an analogy, if you're playing tennis And you decide instead of tennis rackets, you wanna start using tiny little paddles and instead of a tennis ball, you want to use a small plastic ball. And then you wanna play on a table instead of a tennis court. At some point along that way, it stops being tennis and starts becoming ping- pong. So If you change enough things, it became like the other stable. Of which there are a couple dozen. So it didn't seem like a big contribution to the world if we did that. I've just a question a little bit, Salil. There's some skeptics out there who said this was sort of a silly idea in the first place. In that, for a stable coin, the others ones are backed one for one by U. S. dollars. And Basis had this ambitious plan, where if it Rises above the value of a dollar, they'll issue more. Makes sense, it'll buy and it'll be equivalent again. And if it went below, you'd issue these bond tokens and people would rush in to buy these bonds hoping that the bond coupon would somehow pay off and offset the risk of this thing. Falling below a buck. And I think some people are sorta saying, wait a minute, this is just too complicated. Was this even possible in the first place? It was certainly complicated and it was ambitious. And you could argue that if something is complicated enough and ambitious enough, then it's silly. So in that sense, it's sort of a pointless debate. But a lot of venture investments are silly or seem silly. They have Less than 10 % chance of working, but when they work they really work. And all of the investments that I've made that have worked had many of those characteristics. We actually [ UNKNOWN ] on the show very early on when we first launched this show. And his team is packed with top technical talent, very impressive So I wanna drill down just a little bit more in understanding exactly what happened. It seems like there wasn't the foresight tos see that the regulatory regime would not allow for this to occur. Is that right? There was some hope and some assumptions that the regulatory environment would be a little more Favorable to the bond tokens and share tokens then it actually was. Yeah, I'm a little skeptical of that too. Not to be a negative nelly on this show but the official explanation was regulatory headwinds. But I mean an outfit like that has got very good lawyers. And I think they raised a proposition not so long ago. I mean, it was surely, their legal counsel was saying be careful guys, or did they just kind of get blindsided by the SEC? No the whole construction of this was. First of all, they raised the money on a SAFT, a simple agreement for future tokens which laid out very clearly that The token may not launch. And if the token does not launch, then everyone gets their money back. So this was a very well- anticipated possibility and the whole last year was to make sure that whatever was built was sound And compliant, and this is why they took the time. And their conclusions were result of many, many conversations with regulators while they were building the system. They certainly didn't want to build the system. Launch it and then start having conversations with regulators. [ MUSIC ]

Bain Capital Managing Director on Why Basis Shutdown

The company was a big investor in the cryptocurrency.

Bain Capital Explains Basis Stable Coin Meltdown

[ SOUND ] Recently India and Pakistan their central bank said that they were going to force banks to no longer work with companies that are working on cryptocurrency or have relationships with cryptocurrency companies. And we have seen other crack downs. What is your sense about what is happening around the world? Is this Also happening in Africa, we're seeing the same kinds of things .>> Yeah, so I mean unfortunately in an early sector and in an early frontier and I know a lot of people in the sector say this, we're at the very early stages. So there has to be a lot of education And not like a pedantic whether they must be educated to our values. But it's also just like a lot of understanding. What are the risks? How do they relate to this economy? How do we mitigate those risks? And unfortunately when there's other economic factors happening, sometimes the Central banks make a quick move or place blame where it shouldn't be. But the positive news is we've seen a couple of this crack downs reversed. We have definitely seen that happen in Japan after Bangkok still like, What gonna happen? And then last year they came up with some beautiful regulation about that topic >> And they are at the forefront in that regulation >> Exactly, exactly and they didn't have to do that and in Kenya ourselves our home country where we started, where I lived for seven years And we saw the Central Bank of Kenya do the same thing and say wait a second we're not sure what's happening. This company's getting pretty big. It's getting a lot of attention. We haven't had time to really assess this. So all banks stopped working with companies like this. And then just a month ago we saw the creation of a block chain task force and the government get very vocal about really wanting to reopen this. So it took two years but it happened. And the best news also is that in the South Africa the South African Reserve Bank came up with a very detailed piece in March about the risks that this technology could pose, the ways to mitigate the risk, and the overall conclusion that there was no systemic risk on the country. From cryptocurrency itself- Exacty. so this is nothing that's going to crash the economy, create a globa crises. Exactly, and there are things to watch out for, but they're nothing that you can't kind of meet with, compliance or normal AML / KYC. For me it's always, do we throw all of the knowledge we have about compliance and finance out the window because we have a new technology. No. We use what we've learnt in best practice and we adopt that to new technologies as they arrive. So the very vocal stance from the South African Reserve Bank was very encouraging and I think I would hope everyone to see that India and Pakistan follow suit. You know, they are mum for quite a while [ UNKNOWN ] in South Africe and out over few years ago, Valinanum. Avsivik was teasing me saying, they are never gonna say yes and I was like, they will. Have faith. And we had a bet over it. So here we are in- You won a bet. Well, Yet to be settled. But I mean it's 2018 before that happened. So I think we just need to be patient. [ MUSIC ]

"Sometimes the central banks make a quick move or place blame where it shouldn’t be.”

BitPesa CEO Comments on Crypto Crackdowns in India and Pakistan

Crypto still scrutinized by central banks and regulators. 

BitPesa CEO Talks Crypto Regulations in India and Pakistan

[ MUSIC ] So I wanted to start off by talking about this ongoing SEC crackdown in inital coin offerings. There was the big news this week, they made two arrests of the co- founders of an ICO called Centra that was backed and promoted by people like Floyd Mayweather, DJ Khalid. David, you've invested in companies that have done ICOs. What do you make of all this? Well crypto's a wild space, up and down the whole stack and certainly one of the most wild spaces of it all is initial coin offerings. Very little information given to buyers. Not a lot of regulation really none in the U. S. up til now. Investors aren't protected, not a lot of disclosure. So it's kinda a messy space. It's inevitable that a bunch of different U. S. regulatory authorities are going to put some rules and regulations around this and. And hopefully go after bad actors. There have been a number of bad actors in the crypto space. So this is good. The space should be cleaned up. But a lot of times we lose sight of the fact that there is an incredible innovation happening in the space that the notion of pre- selling coins can serve a really interesting purpose to diversify access or democratize access. To technology and allow other people to participate in wealth creation that they wouldn't get to participate in. So we hope you don't through the baby out with the bath water here. But it's important to get some regulation around this stuff .>> I got to say we've seen some of these celebrities posting the Instagram the Snapchat they got like Champagne bottles they're popping off, fat stacks of cash on private jets, it's crazy and it's really not a good look I think because they're duping consumers, people who don't know any better who think look my favourite star is getting rich. Which I'm going to get rich too if I invest in this thing .>> And it's not just celebrities either. We say John Macafey from the anti- virus software .>> Debatbly a celebrity .>> Yes, well he's actually taking getting paid $ 105, 000 per tweet to promote an ICO. So can you really trust somebodies opinion whose really just makijg money to promote it to other people ?>> Yeah pump and dump schemes for stocks, particularly penny stocks I remember during the dotcom days in 1999, 1998, there were all sorts of [ UNKNOWN ], IPOs, and companies that were pursuing reverse mergers to become publicly listed and then pump up stock prices. And they really had no business being public nor do they have a business. So this behavior happens whenever there's Wealth creation, an easy money and it's also paints the entire space negatively. But we wanna find ways to get this bad behavior away from the ecosystem as quickly as possible. And it's not just the regulator source stepping in here, we've also seen big tech companies, Google, and Twitter [ UNKNOWN ] block cryprocurrency ads. Actually, Google said this week that Chrome extensions will no longer be able to mine cryptocurrency Even Mail Chimp has blocked all cryptocurrency newsletters. I think there are bad actors in the space. And so as a platform, like if you're Google or a email platform like Mail Chimp, you want to keep your platform clean, and get the bad actors off of it. Sometimes that takes some work. It's just a little bit too convenient for my taste to see a platform ban an entire ecosystem or entire market segment just because they don't wanna spend the time figuring out who the bad actors are. We're talking about Highly centralized platforms who in theory have the most [ UNKNOWN ] from the advantage of decentralized technologies and platforms. So- Even that's what entirely would block chains in cryptocurrencies afford to route around big centralized entities. Yeah. So it kinda underlines the point of why Alternative structures for platforms are needed, because on a whim a single platform can ban an entire market. [ MUSIC ]

DJ Khaled and Floyd Mayweather recently promoted Centra, which has been charged with fraud by the SEC.

Are ICO Celebrity Endorsements Fair Play?

Initial coin offerings are controversial.

Should Celebrities Endorse Cryptocurrency ICOs?

[ MUSIC ] Welcome to Bouncing The Ledger where tech and finance intersect. I'm Jen Vietnam. And I'm Robert Hackett. And today we have Jason Brown, the co founder and CEO of Tally. Thanks so much for being here, Jason. Thanks for having me. So, Tally specialises in financial automation and you also do some debt repayment, can you tell us a little bit about how that works? Yes. We are a financial automation company which means that we are building a service that can do all of your financial thinking and your financial work. We started about four- and- a- half years ago building what is now the first and only automated debt manager And it helps people get out of credit card debt faster, and save money along the way. And then we recently added an automated savings service that helps people save towards goal, or build a rainy day fund And ultimately what we're working towards is to be able to do all of the financial thinking and work for consumers so that they can, set really big objectives like I want to be a homeowner. And along the way, we're getting rid of their card debt, saving a down payment, improving their credit score, and then eventually financing a home. So it's about being able to Really take that, that emotional and cognitive load off consumer shoulders and, and do that in an automated fashion with software. So walk us through exactly how this works. So with tally you just download the App, scanning your cards and then we actually take responsibility for paying your cards for you. And then you pay tally and the advantage there is anytime we detect you're getting charged interest by the cards. We actually sweep over your balances overnight and move them over to Tally at a lower rate. And we guarantee your not gonna have any late fees. The way our algorithms manage your cards, they get you out of debt quite a bit faster. And our average customer saves over $ 5000 in interest. So it's really about taking that burden away but also making people better off financially. How much debt does your average customer have? It looks pretty close to the American average which is about $ 15, 000 of debt. Another fine tech start ups out there, they advise you on what credit card you should actually use. Credit karma, nerd wallet, things like these. Do you give recomendations and take affiliate marketing in some of the ways that these other start ups do? Well, there's there's two things I want to jump in there first around business model is we think it's critical to only ever make money if we're actually delivering economic value to consumers, and not to make money through advertisements or things that are not aligned so we'll never do any kind of advertising or anything like that. Separately I think the thing that is pretty fascinating is there's really three ways of consumer fit tech, the first wave was post financial crisis and this was the emergence of the online lenders, student loan lenders, and after that came mobile tools. And that's really where we're at right now. So that's where you've got Credit Karma, a lot of the neo banks Online stock trading. And these are just really easy to use mobile tools that you can open up the toolbox and do your financial work. The place that it's going is it's going to a world where there's an intelligent service that actually Is doing that thinking and work for you and instead of you having to spend your time and figure out what should I do? It has already figured that out based on your goals. So you just communicate in human language about what you as a person want and then it actually does those things for you. So our view is very strict which is automation means we do all the thinking and work. And if you look at, for example, the Tally home screen, It's a picture of a person with their feet on the table drinking coffee. There's no ads, there's on drop- downs, there's no recommendations, or charts. We've built a system that can actually do it all for you. And that's really what we're focused on. I'm interested in the shift you described toward full financial automation. One of the major issues we see in technology right now is you've got these companies like Facebook and Google. And they've got these black boxes, they serve you recommendations and whatever they like and you don't really know exactly what they're doing, whether it's you know, in your interests or in their interests. So when it comes to financial automation, how can someone be certain that a startup such as Talia is providing, you know the best possible recommendation for them. Same thing for robo- advisors and people making investment choices on behalf of other people. Yeah, well, I think it really starts with the business model. I mean, when you have an ad- supported business, your customers really advertisers and and the product is the consumer, and that puts you in a difficult situation because you're not always going to do what's best. If you shift it and say well the customer is my customer, and I will align my business model with Delivering them value then you bring the incentives in line with each other. So again, taking a look at Tally cards, we only can make money if we're actually saving a customer money on interest. So people are using Tally that let's say don't have any interest charges They get to use Tally for free and they get all the benefit, which we're fine with. But anytime we can see hey we can save you money, we're going to do so. And then Tally will actually earn revenue. So I think it has to do with just the general focus around what is best for the consumer mathematically and doing that. And I think that's the power of Having computers do your financial work, cuz let's just take a real human financial adviser, right? They're supposed to be doing what's best for you but are they getting fees and incentives from different financial products to kind of nudge you in one direction or another, whereas Tally effectively has an audible log in every decision that the system made on your behalf, we can justify why mathematically that was the best thing to do at the time. And even 100 years from now, when I'm dead and gone, if, let's say, auditors wanna come in and look at what happened? There's actually a trail on every single move, so that's one of the things that I get excited about, is moving actually away from human advisors and to computer systems where you have that kind of mathematical accountability. Because at the end of the day, computers optimize towards goals. And if the goal is make this customer better off, then you really shift the power, if you will, to the consumer. Earlier this year you raised about $ 50 million from venture capitalists including entries in horowitz. And you also launched an automated savings product. Can you explain a little bit about how that works, and is this a sign of other areas that Tally will launch going forward? Yeah we were really excited to have the support of [ UNKNOWN ] and Angela Strange joining the board. She's A huge proponent of making people's lives better from a financial standpoint. So that's been exciting. And yeah, so tally say was really born out of, Hey, we just built this automated debt management system that's working really well. We have 99 % retention, monthly of our users. They're out A third of our growth has been organic. So we saw the power that automation can bring. But solving credit card debt is only half of the issue. For most people, it's either getting out of credit card debt or it's building up a cache buffer so that they have the ability to Handle uncertainties, and when we would talk to our customers we found that universally, every single one says you know what, I know I should save. And we really dug in and said well why aren't you saving? It came down to two things, it's either hard or it requires sacrifice, and so we said okay, well we can solve the hard part by automating it. And let's just make it completely free so that there's just no reason not to have Tally. You know, setting money aside for you every week so you can make progress. But we had to think really hard about how do we make it go from feeling like a sacrifice to feeling like something rewarding or luxurious when it happens and we actually stole a page out of the credit card playbook ironically, which they have very successful systems that Pay you points to spend. So their incentives are to get you to spend more and more. And we said, what if we flip that on its head and we actually design a system so that every time Tally sets money aside for you, you actually get points for the moment? So now the actual act of having money being set aside for you Feels rewarding and you can literally in the app you can go to redeem those points for gift cards from top retailers. So Uber, Amazon, whatever your most interested in. And so we're able to take those good intentions that That we all have which is to make ourselves better off. And make it so that there's now, there's nothing that's hard about it and it actually feels like a rewarding experience. To the account rewards them with points but it doesn't actually pay interest if I'm correct. Yeah. That's interesting to me when a lot of other FinTech, you know betterment, wealth front Credit Karma sofa, have launched high yield savings account that usually pay above 2 % interest. What was the decision to. you know, forego that. Do people not actually care about interest on their savings? Well, so, again, what matters a lot is who your consumer is. With our focus being squarely on getting a complete financial automation, we believe it will first happen with the middle 50 of Americans who have more generally standardized jobs. Okay? When you look at normal consumers They do not care about 30 cents a month in interest, or 50 cents in it. It only matters if you literally have five or $ 10, 000 in savings. Where you're like suddenly now, the interest each month Months turned into dollars. And so what our insight was, is that for most people APY on their savings account, it does not make them save more. It's not solving this issue or the fact that they need a cash buffer and they don't have it. We said we need to bring all the incentives to be in the moment, the moment that that money goes out of your checking account and into the Tally save account. That's the moment where we want to say, hey, you should feel really good about yourself. Because that's what matters most is the actual saving itself. So we decided that we are gonna put all of the economics, if you will, upfront so that people would get immediate payout, rather than having to wait years to get $ 10 in interest. Giving all the insight you have into people's bank accounts and credit histories, how are you feeling about the economy? Are you nervous? So from a consumer standpoint, all the data that we have suggest the consumer is very strong. Unemployment is extremely low. We see people getting jobs or even changing jobs and getting more money. So So the actual raw underlying consumer here is very strong. If we do have a recession, I do not believe it's gonna originate from consumers. I think there's obviously a lot of uncertainty around trade and the administration. So if something does happen, it's gonna come from this kinda external and above, instigator, but I think it's I'd be more nervous if consumers were struggling, but at least for now they are stronger than they ever have been. So, I think that we'll be in a good position at least for the next 12 or 18 months. It sounds like they're saving? They are saving. Great, well thanks so much for being here Jason. Thank you so much for having me. I'm Jen Wieczner And I'm Robert Hackett. For more Balancing the Ledger, come to Fortune. com We'll see you next time. [ MUSIC ]

Balancing the Ledger: How Automation is Ushering in the Third Wave of Fintech

Jason Brown, cofounder and CEO of Tally, stops by the Fortune studios to discuss new products and the future of financial technology.

Balancing The Ledger

Balancing the Ledger: Jesse Powell talks possible Kraken IPO, Elon Musk, and new app

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Kraken's exchange has over 60 cryptocurrencies and 7 national currencies, and services 190 countries.

Episodes (79 episodes)

Balancing the Ledger: Jesse Powell talks possible Kraken IPO, Elon Musk, and new app

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Andra Capital Brings VC Funding to The Blockchain

Why Now May Be A Good Time to Buy Bitcoin

These Companies are Blockchain Superstars

Here’s What Blockchain Can Do for Facebook

Blockchain Will Change the Way You Shop

Coinbase’s Adam White: “We Want Coinbase to Be the Google of Crypto”

Bitcoin's Two Possible Outcomes

Blockchain Startup Block.one Raises $4 Billion For EOS ICO

What Does Blockchain Look Like?

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Blockstack Cofounders On Being Advisors for HBO’s ‘Silicon Valley’

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How to Apply Rules-Based Investing to Cryptocurrency

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Robinhood Wants To Go Big With Their No-Fee Model

Bain Capital Managing Director on Why Basis Shutdown

BitPesa CEO Comments on Crypto Crackdowns in India and Pakistan

Are ICO Celebrity Endorsements Fair Play?

Balancing the Ledger: How Automation is Ushering in the Third Wave of Fintech