Antoni Trenchev - Bitcoin Bear Market: Nexo Co-Founder Talks About How To Survive The Crypto Selloff

Full transcript: Antoni Trenchev on London Real

2:31 This is London Real. I am Brian Rose. My guest today is Antoni Trenchev, the crypto enthusiast, decentralized finance entrepreneur, former politician and co-founder of Nexo. Your journey into crypto began in 2013 when you became interested in the blockchain and its potential to offer a better financial future for billions of people around the world. In 2014, as a member of parliament in Bulgaria, you pushed for legislation to enable blockchain solutions for a variety of government services, from e-voting to database storage.

2:59 In 2018 you co-founded Nexo, a platform that now offers instant crypto loans to over 2 million users and more than 40 fiat currencies across 200 jurisdictions, with currently over 15 billion dollars in assets under management. Antoni, welcome to London Real. Thank you so much for having me, Brian. It’s a pleasure. It’s great to have you here, and it’s nice to have some Londoners in here talking about crypto and DeFi.

3:23 So, in person, I know we had Stanley Culichavave here last week. We’ve got Richard Muirhead of Fabric Ventures, who’ve got, I think, 130 million dollars to invest in the blockchain. It’s exciting to have you here. Also my wife is from Bulgaria, and I know you have some ties there, so dobar den, that’s what she told me. Talk to me about London before we jump into everything.

3:49 Nexo, how is this city when it comes to you know blockchain and decentralized finance? We saw it do pretty well in fintech over the last eight years, because, you know, this city’s almost like Washington DC, LA and New York City rolled into one. Because there’s so many things. We’ve seen some good fintech startups. I had the TransferWise guys here, I think, on the show, like eight years ago, and we’ve seen some things happen, but also there’s not like, I can get 50 people in here talking about crypto and blockchain.

4:18 So why is London an important place for you? Do you think we’ll get bigger? Well, I’ve always loved London, that’s for sure. I don’t remember whose quote it was, but they said if you’re tired of London, you’re tired of life, and that has been true in many venues of life. Now, you know, quite frankly, I’m surprised that we don’t have such an active blockchain scene as we had, you know, with Revolut, Monzo, etc.

4:41 It’s a pity, because, you know, some of the fintechs, they like Revolut, they became profitable once they started providing blockchain services, and quite frankly, the exchange service. That was a major revenue. That was the first quarter they ever were profitable, so you would think, you know, we would have more blockchains. I haven’t really dug into the realities of why that is, but I wish we had more. You know, Nexo is based in London, so, you know, that’s a positive example, but we definitely need more here in terms of the ecosystem.

5:21 And, you know, postcode now, I see things normalizing, people without masks, now being scared all the time. There’s something we’re gonna work on, because London needs to be on the map on this one as well. Yeah, it should be at least the second or third largest place in the world, I think, when it comes to this space. It’s got, again, it’s central. Okay, fine.

5:40 There’s Brexit and stuff, but it’s still a great place for talent to aggregate. You know, a lot of people are building up here, so we’re gonna be a big part of it. Yeah, and you know, I always thought that, Brexit having such a negative aspect on London, I didn’t quite buy it. I mean, I’m born in Germany, I love Germany, but like who wants to live in Frankfurt when you got London? Right.

6:04 Yeah, all the trappings here that make it such a great place. But you know, crypto is decentralized from its onset, and you know, when somebody asks you where are your clients based and I say everywhere, it’s like, crypto, you can have a whale in the Philippines who was very, very early on to crypto and he changes the total mixture of your clientele just because it’s one guy and he’s so large. And I think that has enabled a lot of entrepreneurs to accomplish great things, build companies in a decentralized manner, meaning from everywhere.

6:39 And that’s why you don’t have, like, you know, you got to have Wall Street to make a career on Wall Street, so you got to be in the States, so you got to have the City. Crypto inherently is such by design that you don’t need the concentration in one place. Yeah, maybe that’s the answer. I think it is the answer. And fintech, even London fintech, ultimately some of the big winners, they still had to stay in the UK, because that didn’t transfer to Texas or Florida or to Singapore.

7:07 And yet with the blockchain and decentralized finance, a lot of things you guys are doing, it really is global business. Volumes around the clock, and you don’t necessarily need to be on Wall Street or City of London. Oh, do I miss the days when I was trading the S&P 500, then gold, and you know, Friday, 4:30 New York time, you’re done for the weekend. You can relax. No matter how bad the week has been for you, you have the time from Friday night to Sunday night to, you know, relax.

7:41 And this is not possible in crypto, but crypto creates a lot of opportunity as well. Yeah, it’s a weird space. I have, we have our DeFi Academy, and I teach my students, you know, when there’s low volume, you have to be questioning the price action. And then you look at crypto, and like, there’s always some volume, and I used to trade, you know, fixed income derivatives and government bonds in New York City for Bankers Trust, and like you said, on Friday night to Monday morning you could trade some bonds in Singapore over the weekend, but most of the volume was quiet.

8:07 You could relax, you could relax, and there was a real, you know, your time decay would be three days and it was, there was very little volatility. But in this market it’s happening all the time. Absolutely, and it’s exciting. So look, we’re gonna push London forward here. Talk to me about Nexo.

8:20 If I were just to ask a simple question, what does Nexo do? How would you explain what you do and how you do it differently than other companies? We provide banking services for the blockchain space, and since everything is slowly coming on chain and onto the blockchain, we’re providing banking services for everything. You know, not to toot our own horn here, but we were the first ones to do that in a systemized, institutionalized manner, and we got some first mover advantage.

8:49 I like to think that we still are doing a better job than others. I’m not engaging in trash talking competitors. I wish some of them you know would share my philosophy in that regard, but you know, we just let our success and our products and our clients speak for ourselves. But as a financial institution, bread and butter, what we started off with were the crypto- backed loans, the notion that you can take out a loan against your crypto holdings, and there was no central entity through which to do that.

9:24 When we started, late 2017, you know, there were forums and folders and Reddits and subreddits and Bitcoin talk discussions where people were, you know, very primitively exchanging and borrowing against one another in a peer-to-peer manner with a lot of scams and exit scams, and you know, a lot of people losing their crypto. And we were the first ones to come in and say, okay, we’re going to be the lender. We’re going to go through the licensing procedures.

9:53 We’re going to set up as an entity, build trust in the community, so that you can reasonably well expect to get your Bitcoin back once you repay your loan. And, you know, it just built it from there. Then the earned interest came in second, which was super exciting, and we came a little later than some of the other guys, but it has to do with the sustainability of the business model. But we now give people the opportunity to earn up to 12% on their asset, and it’s being paid in kind.

10:23 So if you’re earning on Bitcoin, you get Bitcoin. If you’re earning unstable coins, you get that stablecoin. And in the low interest environment, you know, you can understand quite easily why this has been the success it has been, and how we’ve grown to close to 15 billion, ranges by the day, when China comes and announces something and Bitcoin’s down 10%. So that’s the overall book. It shrinks a little bit, but, you know, double-digit billions is quite something now.

10:49 And back in 2018-19, as you said, there was no entity or institution that would necessarily give you loans against your crypto. The DEXes hadn’t really yet come aboard, so there wasn’t that option, and you guys were doing it in a trustworthy manner and almost like a financial institution. Do you have a banking license or something? Or we’re working, and we have been working on our banking license. We have pending procedures from you know, applying for a banking license from scratch.

11:18 And also we are working on a minority stakeholding in a U.S. bank, you know, slower than I would have hoped. And I’ve had it announced in the past, and people are zealously following. When is it going to happen? The thing is, with such things, there’s no fixed deadline, and, you know, it can take longer than it does. And then when Gensler and the SEC, they start talking about crypto and maybe stablecoins are securities, and whatnot, it gets even more complicated and challenging.

11:49 But we are working on a banking license, and we’ll have it sooner rather than later. Okay, good. And we’re going to talk about borrowing against and stablecoins for sure. How is Nexo different from say a Coinbase or from an Aave or from like a Binance, right? And maybe for people watching, so they can kind of understand.

12:07 It’s interesting, because Coinbase, Brian Armstrong just got back from DC. He met with all these government entities. He said the SEC refused to meet with him, and he has some of his takes on that, but you are not trying to be any of these entities, are you? No, we’re not. First of all, like, those entities, apart from Binance, are all U.S.-based, and they have like 70, 80, 90% of the clientele in the U.S.

12:31 For us, the U.S. is an important market, and we love the U.S., and we have big plans for it, but it is one market. We operate in 200 jurisdictions. We are more diversified, meaning we have some more flexibility. You know, we can exit the States and we’ll be fine, whereas if Coinbase cannot exit the States, you know, it’s a listed company, it’s the only listed company, but it’s trickier for them than it is for us. Now, those companies, apart from Aave, they are predominantly exchange, centralized exchange, and we have an exchange service, and it’s been a great revenue driver.

13:07 I understand why people want to build exchanges, but our core business has always been the lending side, giving you access to your liquidity that is locked up in your crypto. So that when you need liquidity, you don’t sell your Bitcoin. And if you look at the past 10 years, selling your Bitcoin at just about any moment has been a terrible decision. So we actually make it easier for you to hold on to your assets, borrowing at a loan-to-value ratio of 50%, meaning that if you deposit 100,000 dollars worth of Bitcoin, we give you a credit line for 50,000.

13:45 So it’s, we’re deleveraging the system to a certain extent, and this allows you to hold on to your assets for longer periods of time in a money-management, sound way. And this has been, you know, we were the first ones to offer this, and then with Aave, you know, they have pivoted, because they weren’t always having, they had a product somewhat similar to ours. Ethan, it was a peer-to-peer. Yeah, I didn’t quite take off, and to stand his credit, you know, he was very determined and bold to pivot so rapidly into Aave as we know today, which is decentralized in the sense that you don’t have this intermediary that you need to trust.

14:33 Now, this, you know, it’s everything in life has pros and cons. You know, at the one side, a centralized entity has easier interface. It’s user-friendlier. It has the on and off ramps to fiat currencies. Direct fiat currency is not a programmatic algorithmic stablecoin.

14:51 Then you know, the flip side of it, you have to trust us, and we’re doing a lot of things which build our trust. And, you know, just being around four years and nobody having lost a single penny or a dollar. Well, penny. We’re in London, seven penny, you know, it speaks volumes on itself. But, you know, with Aave, then you’ve got to know what a MetaMask is and how you connect your Ledger and the interface.

15:18 It’s getting better, but it’s not the easiest thing in the world, and the longer the code is, the more complicated it gets. And that’s why we see the DeFi hacks every other week, 100 something million gotten stolen. And it’s not just that, it’s also economic exploits, so it gets really complicated. But I like to think of the two, you know, CeFi and DeFi are complementary to one another rather than, you know, competing with one another. Would you call Nexo a decentralized finance organization or a centralized one?

15:50 Right now it’s a centralized one, but we work with a lot of the DeFi protocols, and we have in our pipeline inherently DeFi projects. So we are taking what can be made trustless and transforming it that way. It’s gonna take a while. Not gonna lie to anyone, you know, it’s gonna take a while, because we have things that are inherently off-chain, you know, pounds and the euro, the whole connection to the legacy banking system that has to it, simply cannot function in a defined way.

16:31 But there are other things, you know, like different stablecoins and the offerings there that you can do in the lending, and we’re working on that, and I’m very excited. And you know, just historically we have always worked with the protocols, for instance MakerDAO. They had this problem where until they figured out the peg, they had this, you know, people borrow at 4%, and then overnight because of the peg and they couldn’t keep it, it went to 24, and you know, the whole industry was like really upset.

17:02 We came in and refinanced everybody back at 8%. So we work with those guys, and we are transitioning, but it’s going to be a transition. Yeah, and look, I believe there is definite benefit in both. You know, there’s benefit in more centralized network and a more decentralized network, even though in the space maybe like Bitcoin maximalists and DeFi people can get into camps, right, and they can say one is bad and the other is good, and I don’t think that’s true.

17:27 You know, I’ve had an interesting reaction when I take, like, one of my students and put them through the centralized exchange experience. So say they go on to Coinbase and they try to buy some crypto, and they got 1,200 people they work for that organization, great customer service. And then the next week I forced them to go on Uniswap and do an exchange, and they’re like, whoa, this is a different animal, and I don’t know how to connect my wallet, and blah blah blah.

17:52 And it’s again from a user experience perspective, it’s not for everybody, right? No, it’s not. Even the tech-savvy people, amongst which I would count myself, and you, you know, sometimes it just simply doesn’t work, and you can’t figure out, you get an error, I don’t know, 117, and you gotta Google what it means, and Google doesn’t give you any results. You gotta dig into the forums and subreddits and, you know, ask the community, wait for response. Everything has its pros and cons, right?

18:18 So you want to be able to just handle that, so someone who doesn’t want to go down that rabbit hole or doesn’t understand it, they can just come to Nexo. They do some KYC, but once they’re in, they can have the crypto lending, interest earned, exchange, and you kind of have that service for them, and then they don’t have to have a MetaMask wallet. Absolutely, and as long as we know who you are, you know, from a blacklisted country, you know, you know terrorists or dealing with the dark markets, we can service you as long as you have the collateral.

18:48 This was the founding principle. We wanted to be as inclusive as possible, because if we were doing credit checks, we have been very limited to the Western Hemisphere, you know, where you have good credit scoring: the United States, Europe, United Kingdom, and that’s about it. You know, you can’t service a client in Nigeria, and we did want to give them access because there are a lot of bitcoiners there. You know, everywhere we want to give them the same assets and tools that we Westerners have, and it’s very easy to have a Western perspective and centralized view on, you know, why do I need that?

19:28 I have my Bank of America and, you know, HSBC or whatever, but there’s close to four billion people that are underbanked, so we wanted to be, you know, as inclusive of them as possible as well. And are your customers where are they based? Europe, Asia? Absolutely, everywhere, just like Bitcoin is everywhere. So our customers, we are servicing 200 jurisdictions, as you said in your very kind intro, and we have people from everywhere.

19:57 Southeast Asia is a big market, Europe, U.S. being from Europe, the States, more well with recent action, we’re going to see how that plays out. We might have to cut back a little bit on the States, but we’ll see. So but everywhere, and it’s very, because, like, just from a pure number of clients, it’s one picture, but then you have whales in the Philippines, and I don’t know, in South Korea, and then it totally transforms the picture, once, once you do weighted assessment of where your clientele base is, and the truth is we have clients from everywhere, and it’s amazing.

20:32 You know, it’s also very satisfying when you go on Twitter and you see, I don’t know, a guy who was flipping burgers in a fast food chain, and they started investing a little bit in crypto, and they never sold it, because they were borrowing with our products, and four years later this guy, you know, has this new Tesla, and then, and then the license plate says Nexo, because he’s so happy that, you know, we were around to just offer him the possibility of accomplishing that, which he never thought was possible. It’s very satisfying. That’s what, you know, helps us wake up in the morning and get you through the days, those kind of experiences.

21:11 Yeah, those are great stories, and I want to talk about what’s happening in the U.S., but just to finish up with the DeFi summer last year and the massive explosion we saw in the decentralized yield swaps and things like that. Is that ultimately good for you? Were you surprised that that happened? Is that good for the blockchain, for business? I was surprised by how fast it happened, how massive it was, and how long, you know, almost a year now, how high the rates still are, because you can get some amazing deals, and, you know, once some of the SushiSwaps and PancakeSwaps and what not, uh, in terms of naming came around, and now I’m a conservative guy, you know, I was skeptical at first.

21:58 It’s like, what, 44 a year, this is gonna last a week, but it has not, it’s not gone away. You know, if you’re a DeFi farmer and you’re down into the rabbit hole and you are putting all your spider senses and spending all your time, you can get very good deals to this day, which surprised me, and also just like the volume and how people would put this amount of money in protocols that had zero track record. but this is one of the exciting things of our space, so I was taken by surprise.

22:33 You know, I haven’t farmed anything myself, so, you know, me being conservative and skeptical. The names are just crazy. I cannot trust you. I mean, but yeah, and now, you know, a year later all of this looks so mature when you start talking about NFTs and some of the valuations there and some of the concepts. So, you know, I sometimes feel like I’m losing touch with my own generation.

23:02 It’s a clear sign that I’m getting old, and the white hair is testimony to that as well. Slowly but surely, you know, graying out here, but you know, it’s just, I don’t know, it’s fascinating, and it is, it’s a lot of potential. It’s scary sometimes, but it’s just like with something we’ve never seen before. I know this is like you being a former Wall Street guy, investment banker in the City. You know, the most expensive words are “this time is different,” but I truly feel like this time is different, because you were just telling me about stories when you went on, you know, to the news media in New York City in 2019, and they wouldn’t even mention the price of Bitcoin.

23:45 If that would be a new thing, and so you’re right. The system’s moving so fast. A year ago there wasn’t massive liquid lending markets through decentralized, and now there’s, you know, 20 billion assets out there, and it’s all becoming normal, and now they’re talking about financing NFTs, and it’s like, okay, it has changed, but there will be much volatility going forward. Let’s talk about regulation, because you guys sit in an interesting space, whereas, and that’s why I think what makes you guys really interesting, because Coinbase, like you said, publicly traded company, it’s kind of the chosen one of centralized exchanges in America.

24:20 It’s got a lot of customers, and they’re dealing right on the front lines with regulation. They came out with this potential Lend product they were going to do, to offer, I think, four percent returns on some stablecoins, but they never actually got out of the gate because the SEC kind of signaled that they were not going to be allowed to. The CEO, Brian Armstrong, who’s a Silicon Valley-based guy, um, I think, yeah, Y Combinator startup and all that, just went to DC, met with a bunch of entities, but he said I reached out to the SEC, tried to get a meet with them.

24:50 They told me they weren’t meeting any crypto companies. Um, and so he, I think, is trying to figure out what to do. You guys don’t seem to be under, you know, that control of the U.S., so you guys are going ahead and offering these services out here, and you have your own customer test case, and yet Brian is really having to deal with the realities of the U.S. because he can’t break those rules necessarily. So we’ll kind of find out where the regulations are.

25:16 Yeah, what do you see when you watch that? And I know you run your own legal here for you, so here you have background in law, so you can really tell us a lot of what’s going on here. I will try and do it. Okay, right. Well, first of all, you know, the first line, uh, were the U.S. companies, right?

25:33 That’s why Coinbase and BlockFi and Celsius, the U.S. companies, they got the first rounds of questions. It was directed to him because they are in the U.S., so no surprises there. Nexo does the U.S., being one of the markets we know, further down the list. And I’m sure that everybody who is, uh, offering these products will eventually get the same questionnaires and go through the same procedures. Now, what are the challenges the challenge is that, you know, we had a administration in, uh, Jay Clayton before Gary Gensler, who was very quiet about crypto.

26:12 He didn’t pay much attention. You know, yes, there were some enforcement actions against ICOs, but against, quite frankly, the obvious scams, and they, and now we have this new administration and a guy who has been teaching about, uh, blockchain and crypto in his university, MIT I think it was, and he’s like, uh, a career, um, legislator, so it’s a very different, very different administration that, uh, we are dealing with. Um, and you know, when they try and try pass the infrastructure bill, you know, there has, there was the crypto lobby, and you can, you know, have constituents.

26:51 This guy does not really care about re-election. He has got demanded, he’s appointed, he is here to stay. So, uh, anyone who underestimates, uh, him and his resolve to, uh, deal with these things in the way that he’s dealing is going to be disappointed, you know, to say the least. So, um, it’s a good observation. It is a personal story.

27:14 It’s always a personal strategy. You have to look at it, and you’re right. You look at his career. I was looking through his Wikipedia page. I mean, he has been at the forefront of a lot of, you know, government institutions.

27:23 Um, ex- Goldman, ex-MIT. He used to teach this stuff, and yet he comes out with some pretty strong statements. Um, calling the crypto industry the Wild West. Uh, he had a quote by saying, “We got a lot of casinos out here in the Wild West, and the poker chip is stablecoins.” Yeah, so it feels like he’s signaling that you maybe, maybe he’s signaling that, guess what, you are going to have to do something, and we want to let you know.

27:48 Right? But I, you know, you worked in politics for a while. It works in different ways. Right? Yeah, it does.

27:52 When, like, you know, some of the states that have raised concerns and seized, issued C&Ds and cease-and-desist, letters to comparable services, you know, we stopped onboarding new clients instantly. Would we want to comply? You know, we want to play by the rules, but the rules haven’t been very clear. You know, we have the securities laws that were coined somewhere in the 1930s, the vast majority of them, and they just don’t live up to the realities of the new world.

28:23 You know, and then the administration says, okay, this might be bad rules or rigid or not all-encompassing as they should be, but these are the rules. You know, so it is, it’s a it’s a very complicated situation, but yeah, no, I’m just, I agree it’s complicated. I’m just surprised that some of these people seem to be coming out with statements like poker chips and Wild West, and you know, the Office of the Comptroller of the Currency, Michael Hsu, said, I quote, “I’ve seen one fool’s gold rush from up close in the lead up to the 2008 financial crisis,” and he’s like, “I feel like we’re on the cusp of another, you know, fool’s gold play with crypto and DeFi,” and I was just like, “It’s very surprising to hear.”

29:04 Guys, it’s a very different thing. The financial great financial recession. It was caused by the most regulated entities in the world, and the institutions they have, the most oversight ever, right? And, you know, people are very quick to forget. And this is, I think, one of the problems with Wall Street in particular, because every five years you have a new generation of traders and bankers, and they don’t remember even the great financial recession.

29:33 This was back in the old days, where you had bear markets, and what’s a bear market anymore? You know, nobody knows. Everything’s been, I have been shorting the S&P since 2010, and I can tell you how that worked out. You know, not amazingly great. But what I wanted to say is that, you know, back in the ’80s, you could have your Treasury bond yielding you 30% per year, right?

29:58 And they have been cutting rates and cutting rates, and great financial crisis even more so. I, as a student in London, I had a deposit at HSBC, a fixed term deposit, was yielding six percent a year. I can find the documents and show this is not some fantasy by someone who’s getting older. Uh, but this was a reality. And now with this expansive monetary policy, we’re to the point where you know, everybody’s got to be in the stock market, and what’s that doing for consumer protection, and why is our product, which is yielding six percent, and I can very clearly show you how the money is being generated.

30:40 How is that dangerous, and how and why have we all, the sun being due, the Wild West, because we are offering high-yield products, which are dangerous. You know, it’s, yeah, so I’m like making that argument in Washington, though. I know, and so I have some guests that come on and say, well, you know, Washington is policymakers that are ex-Goldman, all the bankers. They don’t want to see the crypto and DeFi party ruin what the banking industry has done. I mean, the banking industry is one of the markets that it was never actually made more efficient by the internet.

31:15 Was it? Yeah, you got to do online banking, but, and I worked in finance for 15 years, there was a lot of money to be made by keeping the customer slightly ignorant. Um, telling them, “We’ll handle your money.” Yeah, and then crypto now offers to completely throw that on its head and go peer-to-peer. You take control of your money, you feel your assets, and see your assets, so whether you think that they’re trying to stop this, or it’s just an innovator’s dilemma, it’s a natural resistance because this is their business model.

31:43 Yeah, but then at the same time, their customers are asking for this, right? Absolutely. I, that’s one of the things when people ask me what’s going to happen with crypto is it going to peer severe, and I’m always saying this. You see the banks adopting this because it would be the pressure from the clients. They will want to see that they will want to see, you know, anything from the SWIFT transfer not taking seven days and costing 800 dollars to send some money, I don’t know, somewhere in Australia, from something as simple as that, and then the transparency and the opportunity for you to earn a little something on your money for them working with it.

32:24 You know, having this for free, so absolutely, it’s going to take some adapting from the bank. At the same time, I’m not a big fan of conspiracy theories. You know, is this all have they sat down in a dimly lit room with their cigars and made a decision to consciously ruin crypto? I don’t think the world works like this anymore. It’s gotten too complicated and complex for any one entity to push it in one direction, because if anything, crypto is very quick to adapt.

32:57 Unless we have, like, you know, a coordinated action by the G20 to shut down crypto, it’s just going to move away around the world as you saw with mining. You know, they banned it in China. Next thing you know, they set up shop in the United States, and wasn’t that positive because of renewable energy sources for mining, etc.? So it is very flexible, and that’s the genius of Satoshi, having designed Bitcoin in such a way to be so fluid and to adapt to the circumstances.

33:27 But of course there is, like, you know, the concern. We all grew up with the concept that bank is the safest thing in the world. You know, it’s a bank, like I have insurance on it. Yeah, you have insurance up to the first hundred thousand dollars. If you’re lucky enough to have 200,000 euros in Europe, 250,000 of FDIC insurance in the States.

33:51 You know, anything above that, if you’re lucky enough to have that, it’s just as insured as you know, any other asset. So it gets complicated. I understand the mandate of the SEC and the regulators to protect regulators, and I, I have a close friend who’s a former, um, prosecutor for the SEC, and he quite frankly told me what the regulator, at this current stage at least, what he thinks they worry about. They worry about the offering itself: is it a security?

34:21 If it has been a security, have you disclosed in proper way how the money is going to be handled, what you’re going to do with it, how you’re going to generate the yields that you’re paying? But this is more of the form and the package. This is what it’s known. It’s strict liability, getting into my legal lingo here, but it, it’s either a security or it’s not, and it’s, you know, if it was a security, gotta stop offering it, you gotta repackage it and register it.

34:49 It’s not that big of a deal. Okay, it is a big deal, but it’s not the end of the world. Where it gets trickier is how do you generate the money, and here is what they’re concerned about, because their thinking is that a lot of the projects are Ponzi schemes, and this is what is going to separate the good actors from the bad actors. Can you show convincingly and documentarily how you are earning the money that you pay off? And here is going to be the differentiators.

35:20 It’s going to be different actions against those that can and cannot prove. And what else is not mystery. You know, we do arbitrage between the interest rate that we borrow from our clients and, uh, the interest rate that we, uh, pay out, that the client pays us. That’s pretty simple business. It is a business.

35:40 And again, like, again, I think Brian Armstrong just came back, and he said, look, at the end of the day, we’ve got 20, 30, 40 million customers that are U.S. citizens. They clearly want these assets. They also vote for their politicians, right, who then appoint the SEC directors, but as an indirect chain of events. You see, you know, you’re not directly, uh, elected, and then when you have constituents and voters directly, that’s, you know, yeah, it’s different.

36:06 It is different, and, you know, you’ve run for for all four. I have, I want to talk about politics, and then yeah, you get figures in the States that then stay around, and these institutions are not appointed. You get J. Edgar Hoover and the CIA. You get, you know, not making a comparison, but Anthony Fauci, who’s been behind the scenes for 30 years doing medical policy, where they’re unelected.

36:26 They have a lot of power, and again, whatever their agenda is, is what’s going to play. Um, we’ll talk about politics. Let’s finish with this on stablecoins. That seems to be what they’re going after now, in their crosshairs. Again, you know, Gary calling them poker chips, New York Times article yesterday said 75% of all transactions are with a stablecoin, and again, it seems like the direct threat to the bank deposit.

36:51 Tell me about stablecoins. They didn’t really exist a couple of years ago. No, they didn’t. Now they are Tether, and right there’s a bunch of them, and a bunch of them, and they’re the highest volume instrument traded in the blockchain, and they’re probably the reason why so much liquidity is here. And now it seems like they will be the first regulated focus, because Bitcoin, I had Michael Saylor on the show, and he’s got five billion dollars of Bitcoin on his public, you know, company balance sheet, and he said, I like Bitcoin because it has low aspirations.

37:19 Bitcoin’s not trying to change centralized finance. All it wants to do is store value. It’s not going to be programmable, and I’m happy to invest in it, but the stablecoins, they are trying to eat the lunch of CeFi. So, right. Well, a couple of thoughts.

37:32 Now, first of all, you know, those being called poker chips, it’s not a legal category. That doesn’t mean anything. The more interesting thing is that Gary Gensler considers stablecoins to be a security, and in the United States, not to get too technical, but there is a test, on Howey, on whether something is secure. It’s called the Howey test. Yeah, everybody in crypto has heard about that.

37:56 How is it? Tell us about it. It is whether it is a common enterprise, for the profit by the f, for profit by efforts of others, and with the expectation of profit over yield or profit or for profit for return. Okay, so, you know, and it has to take all four boxes to be considered a security. Yeah, but it has, it can beat three of them, and if it’s not the fourth one, or either one, if it’s not, then it’s not a security.

38:26 Now, how exactly do you expect to profit from a stablecoin if it’s one-to-one, pegged with the dollar? You know, I understand why Ethereum might be your you know, some of the tokens, because you know, there you have a company, it’s putting in the work, it’s the infrastructure, you expect to make money, but something, expect one-to-one to the dollar. There is inherently no expectation of profit. Right. Right.

38:51 So that is that is a curious thing to say, and ultimately, at the end of the day, you know, the authority of what security and what’s not a security is the SEC, and if you disagree with them, you got to take them to court, and I’m not going to do that personally myself. I was hoping that perhaps Coinbase might, there, but it will appear they’re not going to do that either, so it might they might. The other thing, uh, that’s curious is what you said. You know, you’re trading, you know, the out of the market.

39:19 You want to trade out. You go into stablecoins early on during the 2017 boom. You know, you were trading the different assets, you, and your base currency was always Bitcoin, that was why one of the reasons why we saw the huge run-up in 2016, 2017, when volumes picked up and people use that as the currency of account. Now, that is stablecoins, and then the other thing is that you see a lot of trading in markets that don’t have access to great banking systems, or have currencies that are prone to debasement, you know, printing, like in Zimbabwe or Nigeria or even Turkey, quite frankly.

40:03 You know, there’s inflation fears that are running wild, and they come to fruition. So you know, you have something like the border of China and Russia, where they do trading in stablecoins now, and I understand why this might be of concern, but banning it outright doesn’t solve the solution. I mean, the number one currency of choice is the United States dollar, and more often than not, large-scale money laundering occurs from the banking system. We haven’t thought about, you know, abolishing the dollar and the banking system.

40:39 So it’s applying the debt to crypto. How does that solve the problem? Yeah, if you look at most of the money laundering, it happens where most of the money is, which is in the banks. Yeah, especially the ones that pay the fines every year, like HSBC, for all their money laundering violations. No, but you nailed it here.

40:54 It’s about the incentive. As long as you can make 10 billion dollars as a banking institution and then you settle with the DOJ or whoever for a tenth of that, and there’s never been criminal prosecution, hardly ever, it’s all civil. What exactly is the incentive for you to stop? Yeah, yeah, I think Brian is just saying that, uh, one percent, I think, of all crypto is attributed to money laundering and illegal dealings, whereas three to four percent of the U.S. currency is considered in that as well.

41:28 I’m sure there’s money laundering in, glasses, you know, drinking cups, people having 0.1% of all transactions being done in something that’s not even money. And also the majority of stablecoin trading is probably taking out, taking place outside the U.S. Anyways, so you’d be always curious to see what would happen. Um, let’s just finish off with best case and worst case scenario. Say 12 months, 18 months from now, say Gary just gets, goes crazy and decides I’m just going to take all these people to task, or Gary, um, just decides to take a snooze for a couple years.

42:02 Like, what do those two realities look like for us in crypto? Well, let’s start with the worst off. Yeah, and on a positive note, but I think they’re very focused on the earned products. They’re not concerned about other spec aspects, even though some currency exchanges I’m going to face some challenges, because, like, I’m gonna get too technical again, but very briefly, but I think it’s interesting. I don’t know, you’ll tell us how the viewers are viewing, but, you know, with current, um, there’s so many tokens that you cannot go after individual tokens.

42:35 You cannot go, as a 5000 probably right now, so you, any regulator has limited resources, so what they’re doing, or appear to be doing, they’re focusing on the trading venues and saying we’re not going to go after XYZ coin, but we’re going after you, because this might be a security, and you’re trading securities, and you don’t have the license to trade security. So this has been sort of, because Brian and Coinbase have been so vocal about the Lend product, this has been pushed back, but it’s very important, because that might come back to bite us, and, uh, you know, in the sense that venues might get shut off, you know, just trading activities. They have to register, SEC, registered broker-dealers.

43:18 We, by the way, are buying one in the United States. So that’s how they’ll stop the trading of it. You can’t actually go after the coin, so they’ll go off there. You’ll have to make exchanges. Yeah, and that’s where that has been in the speeches, but it hasn’t taken the headlines.

43:38 You know, it’s the Lend product, uh, but it’s curious to see, and that could affect negatively, uh, in the midterm, short to midterm, and then we’ll figure it out. You know, everybody is going to get a broker licensed or you know, trading while it will go off short. That’s a downside. If you keep innovation out of states, just go somewhere else, it doesn’t uh disappear. And then the other thing would be, you know, for, I think this will have more repercussions for uh, the general public.

44:10 They wouldn’t have access to high-yield earning products, so it will be a net loss for, uh, you know, uh, the customers and the clients and the investors and the consumers, the self more than the companies, because the companies, you know, they, uh, worst customers, they’ll need to pull out of the United States, but I don’t think that something has been done so terribly wrong to, you know, have criminal indictments or anything like that, at least for the vast majority. Like, okay, clear scam and frauds. Yeah, but this is not the industry as I know it.

44:49 Yeah, a similar thing was done in the UK, where they banned Binance from selling you know, their services to the customers here, and I had a bunch of students in the UK that said, oh, so I can’t do it. I’m like, actually, you can buy them. They’re just not allowed to sell them. So it’s weird how they can try. The FSA can try to put some restrictions, and then Binance says, we’re not based here.

45:08 Yeah, so leave us alone, and so it does become this weird cat-and-mouse game, but it’s a good point you bring up. You can’t whack them all, every stablecoin, right? Because, and some of them don’t even have, you know, locations. They’re doubts. It’s easier to go after the exchanges, right?

45:22 This is like sort of the worst case, and then good case, to have something positive to say. We don’t want to draw negative pictures. We’re going to have a framework, which is going to have clear guidelines, clear procedures, that you know, companies. Yes, this is going to get more expensive for them to comply, and some of the actors gonna get shaken out of the market, but you know, I would be very happy with having clear guidelines. You do step one through twelve, and then you’re good to go.

45:58 Then you can all continue to offer this products and not having to guess, is this all right, what is the regulator going to think? But you know, up front, where they’re going to think, and when you set up the proper way, then you have to, you know, you, you get to put this to rest and just focus on your business, because like, you know, I understand consumer protection. I come from the legislative, uh, but you know, the the risk of stifling innovation with good intentions is always there.

46:32 Let’s talk about politics briefly, because you’ve spent two years in the parliament in Bulgaria. I’m sure you could tell me some very interesting stories. I spent six months of my life, uh, maybe seven months campaigning to be the next Mayor of London. Yeah, and, uh, we had the best ideas, the best policies, the best business focus, you know, plans for this city, transport, crime, everything. We put it out there.

46:53 We went out there but we came up against two very powerful brands, the Labour Party and the Conservative Party, and all the infrastructure that goes with politics, and at the end of the day the best ideas didn’t seem to win, and the government, strangely enough, for London, which is such a, I mean, I always used to say London was built on business. You know, the Romans didn’t come here because of the view. They came here because that was business, you know, and the climate, definitely not the climate either.

47:17 And yet, you know, in my opinion, the last mayor and current mayor almost does everything opposite to stop business from happening, but it didn’t seem to make a difference when I ran for office, and I’m wondering what you see from being in government to maybe explain to people out there, how does government think? I always say politicians care about your vote, they care about money, which is taxes, and how they can spend more money to get your vote. So tell us how you see that whole piece differently.

47:47 Also, we see places like Texas that are going super crypto friendly, and Florida, they’re going super, uh, pro-business, we might say, as opposed to California, New York, that are, you know, more, um, more, you know, slow to unlock. What do you see from all that? Right. Well, first of all, the democracies such as the United States, the United Kingdom are very different from a democracy like Bulgaria, because like you see, when you said politicians here care about money, and I was like, on the edge of my seat, and then say how that translates into more support for them.

48:21 Whereas back home they still care about money, but the ones that money that ends up in their own pocket, so that is quite problematic. And I’ve been blessed to be born into a family that we, we haven’t, you know, you know, we haven’t had immediate financial needs, let’s put it mildly. Yeah, we’ve always been fine, so this has given me the freedom, uh, and the privilege to be able to think, you know, in idealistic ways about the world and about politics.

48:58 I wasn’t in politics to fatten my own pockets. I was there to make a change because I didn’t like what I saw, you know, Bulgaria being one of the most corrupt countries, uh, in the European Union, the most, uh, corrupt country. So you know, this was very painful for me, and I am a person who believes that you live in a society you have this duty to try and make it a better one, and, you know, I quite quickly came to clash with the status quo, and it was frustrating because you have to you have the good idea.

49:35 You have, uh, you know, the legislation in place. All it needs to do is for people to see the merit in it, and it gets voted. Right? Of course not, because there’s so much at play here, and uh, you know, at some point that was really frustrating for me, and then we didn’t perform in the after the one of the elections so well, and I just, like, you know, I said on exiting politics and back into the private sector and, you know, I think you’re most valuable when you have real life experience and accomplishment, something to be proud of, building companies, etc.

50:12 I don’t believe in career politicians, you know, that might work in the most advanced of societies. Not sure that it does even there, but if you haven’t gotten the experience of, you know, putting a company from the ground up, or even, you know, meeting your financial goals in life, what, how can you have the audacity to think you can fix out of other people’s lives and a society, which is the most complex of enterprises ever? So I’ve had a very mixed experience with politics.

50:48 I am far from it now, but knowing myself, it might be that I return at a later stage. Yeah, I used to constantly say that the current Mayor of London never ran a business in his life. Yeah, so how would he understand the business of London, which is basically 98% of London, in small businesses, you know, what for the taxi driver to the restaurant owner, to all these things? And yet you’ve never had to make payroll, put capital at risk, to create something, you know, to add value.

51:18 But London was based on that. Even our culture is based on that, you know, from the guy that makes my suits, to all these things. People come to London because of all the entrepreneurs. And yet, um, so I spoke about this, and I got a little bit frustrated, like you did as well, because you know, we were these clear policies. These are things that weren’t working out, but there’s a whole strange machine there that I’ll probably go try to figure out another time in life, where the media is involved with the parties, with the regulators, and it’s hard not to crack.

51:45 Um, and just especially here, from this very, uh, you know, you have very few parties, very little space for new actors. And it’s not like that everywhere. Yeah, but here is especially hard. It very hard, and, um, it was weird. It was like a little oligopoly, and trying to get in was hard.

52:03 I mean, very hard to even get into a debate. Um, which was tricky. So, well, we learned a lot. If you come from a business perspective, you’re used to being able to create an idea, if it’s got legs, then you have support, and in politics is quite different. Um, but yeah, and business usually, the better, right, idea succeeds, and in politics there’s no guarantee that will be the case.

52:23 That’s true, but it’s interesting to see how they think and kind of what’s on their mind, and so you can kind of see, you know, why politicians, you know, are not always embracing the new stuff, where they’re quick to hedge what they’re thinking about, you know, their own votes, and then how they appoint people, and how they look at regulations. So, you know, at least you can see a little bit behind. And then the other thing is that, you know, the best and the brightest, they have so many opportunities in London that, you know, politics is not the first career choice.

52:54 It might be that, uh, you know, yeah, the best minds are perhaps doing something else. I had, um, a member of parliament on my show very early on, about eight years ago, and he said, “Brian, uh, politics is show business for ugly people.” Okay, that’s a case of self-irony. If he was a politician, yes, it was. But I mean, like, again, I was looking at taking, like, a major pay cut to go into a job with tons of headaches and tons of stress.

53:21 Why would you want that job? Like, again, why would you want to be that person? I don’t know why you want to be even Boris Johnson to a certain extent? Why not be an entrepreneur that can literally change, you know, a billion lives that are unbanked? You could probably be more effective, perhaps.

53:35 So, to be continued. Yeah, on the politics discussion, let me ask you about a couple things that you’ve commented on that are interesting in this market, and you know, I know you’re not necessarily going to be financing, say, NFTs anytime soon, but what do you see in this explosion of non-fungible tokens? It’s currently I think about 14% of the DeFi volume, about 28 billion dollars. It’s not going anywhere, and most people have a hard time understanding what’s happening here.

53:59 When ETH rocks, you know, black and white PNG images of rocks with, uh, self-proclaimed no value added are trading for millions of dollars. CryptoPunks, Degenerate Apes. Um, it’s a big market. Standing owns 2,000 NFTs. He showed me them when he was here.

54:16 He’s never sold one. Um, and, uh, you know, tell me about what you see happening. Does this affect your market? Will we be able to finance those NFTs on Nexo or other things going forward? And is this a blip or is this new reality?

54:29 Oh, that’s a very good question. I mean, another sign that I’m getting slowly older is that I, you know, quite frankly, I had a very hard time wrapping my hand around it. You know, I am very native to the blockchain space. DeFi, I understood, was somewhat skeptical, but I understood it at a conceptual level, and then with NFTs, I’m only now trying to, uh, you know, uh, have some success in understanding it. It is, you know, when people say it’s just, uh, speculation, and, you know, people buying and to sell at higher prices, this is how crypto began, ultimately, right?

55:07 This is the first wave of activity. So I’ve come to view that as not a negative thing but the first stage. So out of this, you know, after the run-up in 2013 around the Cyprus crisis, we had Bitcoin touching a thousand dollars for the first time, a year after we’d had Ethereum with some real-life use cases, smart contracts. So I think we’re very early in NFTs, and we’re going yet to see how they’re useful, because I do question the, uh, how sensible it is for black and white, uh, PNGs to cost a few million dollars.

55:45 And, you know, they’re even ugly. You know, quite frankly, they’re not beautiful to look at. I understand they’re scarce, and they were made back in 2017. Yeah. Well, but, you know, there’s not the aesthetic aspect, so there must be something else to it, but once you start digging deeper, there are, you know, metaverse platforms where NFTs is not just a picture.

56:08 These are items that give you access, much like we talked about watches earlier. You know, having a nice Swiss-made, uh, watch, and this, you know, ideally the bouncer at the club or the restaurant sees you watching, he knows, uh-huh, this is a guy who I better let in because he’s gonna spend some money. Now NFTs are taking this, uh, concept of status, of access, to the next level, because there’s going to be, and already are, virtual realities, and people living them as enthusiastically as they do in real life.

56:47 Well, you and me maybe not, but you know, the next adults, uh, or the younger adults, they do that, and you gotta take things from their perspective. They’re spending half of their life online in a virtual reality, and these things they provide some utility there. This is valuable, and we got to keep an open mind of how valuable that could eventually become, because uh, there’s some merit to it, you know, if it gives you access, if there is truly scarce, in this sense of giving you an experience that you can otherwise not see.

57:22 And get this, this is different from a picture, which the pixels are uniquely positioned. So there’s potential there. Uh, we’re slowly getting a little bit excited. When does that translate into assets that you can borrow against on Nexo? I don’t know.

57:41 It has to be liquid enough, because, uh, you know, we have people who borrow from us and people who earn from us, and at some level they intertwine, meaning the assets that are earning, they go to finance the guy who’s borrowing, right? And we got to be certain that at all times we can guarantee the principle of the guy who’s earning. So, you know, the easiest thing would be to, you know, onboard NFTs, but the liquidity dries up very quickly, and we have to protect, uh, the people that are earning.

58:12 So I don’t have an ETA on that. As soon as we have abundant liquidity, that’s the beauty of blockchain. Eventually, even this building can be tokenized, and you know, you can borrow against it. You can share the revenue the tokenization of the world. You know, um, but yeah, liquidity is very important to protect everyone.

58:34 It’s an interesting space to observe. Um, like you said, you know, the use case of Bitcoin early on, in early days, was the Silk Road, right? And that’s one of the reasons people actually used it, and God bless it, because it allowed people to initially transact. So you always have to kind of be thankful for what brought these instruments liquidity, and right now NFTs, which are non-fungible tokens, which can mean anything in the future, a piece of real estate, a business, but now they are currently JPEGs.

59:00 Um, just like, as Andreas Antonopoulos said, our first version of the internet for me in 1989, when I got to MIT, was I could send an email to my brother at Stanford and nobody else. That was the internet. Yeah, and it was kind of boring. Right now, NFTs for most of what we know are JPEGs, and we think that’s what NFTs are, whereas the internet was much more than my email. As we saw later, it was Web 1.0, 2.0, 3.0.

59:24 So, um, to be continued on where it goes. But also, as humans, we’re constantly social signaling. You’re in London right now. You’re going to dinner at a place in Knightsbridge later. You’re going to be surrounded by, uh, guys going by in Lamborghinis, not just the Lamborghini, but the special limited version Lamborghini, right?

59:42 Having a Lambo in London, that’s an NFT right there. Yeah, it is, right? Off-chain NFT. It is an NFT. And again, the car in the garage is one thing, but a picture of your car on Instagram is worth a lot more, probably.

59:55 Yes. So that’s metaverse a little bit, right? And again, the women are going to be wearing high heels with the red bottoms, on, right? What does that mean? There’ll be labels there.

1:00:03 Even being at the restaurant you’re at is quite a cool thing to do. Not everybody can get there. You know, this is what I’m saying. So as humans, we’re constantly social signaling, whether we want to admit it or not, and NFTs is just almost a way of taking that to the next level, to where now I can just, you know, casually upload a CryptoPunk image to my Twitter. What am I implying?

1:00:21 That I own it? I might even have a blockchain link. You can check that I own it, and that means that I must be pretty cool, right? And if Jay-Z’s doing it, yeah, and, uh, Snoop Dogg is now the godfather medici with 17 million in NFTs. You know, it is a cool thing, and when your digital identity is everything, that half a million dollar for the ETH rock just got you a lot of credibility, maybe more so than your LinkedIn profile does, or your interview with CNBC.

1:00:48 You know, it starts to become this pecking order. The thing is that the guy with the Lamborghini in front of the restaurant will probably have a better time tonight, especially if the ladies with the high heels, red bottoms, see it. You know, he’s gonna probably have more fun than the guy with the with the ETH rock, maybe, but distant gratification, right? It doesn’t scale either. No, it doesn’t.

1:01:11 It’s crazy here, because, you, yeah, you have a point. Um, it might work out, but also the other one scales by potentially 10,000x. Absolutely, so it’s this weird space, and it’s real, and people are investing in them, and they’re collecting them, and, uh, it’s going to be issues. It’s early days, and there’s much to unfold here, and the potential is starting only now to grasp the potential. Quite frankly, I’m not scared to admit that it’s only now that I began to understand it when you see someone like Michael Saylor, as a public company CEO of MicroStrategy in America, stick five billion dollars worth of Bitcoin on his balance sheet.

1:01:48 Yeah, when you see that happen, what do you think? Because you’re a company that’s dealing with, you know, regulators, and these kinds of things, and balance sheets, and you see someone do that, stock price goes up on the back of it. You know, he’s now trying to issue as much more debt as possible and buy more Bitcoin. What do you see there, pros and cons, because he might come up against regulators at some point as well? Right.

1:02:09 Well, first of all, he is the closest thing we have to a Bitcoin ETF right now, because the whole company is essentially Bitcoin. It moves almost one-to-one with Bitcoin, and I understand why he did that. Uh, this is a huge opportunity. It was unexplored. It gave access to a lot of institutions that don’t have the mandate to even have a Coinbase account to buy Bitcoin outright, and then they have to worry about storage and pricing it, right, etc.

1:02:41 They don’t have the mandate, so this was very important last year when it happened, because it ensured an influx for off institution coming into the space owning Bitcoin. Yes, indirectly. Not your keys, not your coins type of, uh, mentality, uh, where we are coming from. But you know, that was really, really important, and I thank him for that. Now he is taking it almost to a religious level.

1:03:11 I am more open-minded towards other things, and I think that if you are too focused on just this one particular thing, it opens risks, you know, what if you get it wrong? I don’t think he’s wrong on Bitcoin, right? But I think there’s great assets and opportunities in the entire blockchain space, beyond even Bitcoin. So these are some of the challenges. I don’t think necessarily that the regulators are going to cause humanity trouble, because it is very transparent what he’s doing.

1:03:44 He has been a CEO of a public company for quite a while. He knows the disclosures that need to be in place. Where it could get, you know, dangerous is for, uh, deeper corrections of Bitcoin, where he starts having investors who’ve lost money with it, and that’s when the trouble starts. But just from a regulatory perspective, I think he’s in a good place, right? What if he starts putting billions on a stablecoin on his balance sheet, then it’s a whole another ball game.

1:04:14 Well, yeah, then, but why would he do that? I don’t know. Best not to hold a dollar. You know, I had him on the show, and again, he’s considered a maximalist, but compared to Max Keiser, he’s not as, nobody, nobody is a massive, compared to Max. I agree.

1:04:29 Max is the maximalist of Max’s inappropriately named, his mom knew what was coming. Um, and Max is all about Bitcoin, and everything else is, quite frankly, a s***coin as Max texts me back and forth. But when I had Michael on the show, you know, he talked about Bitcoin as digital property. He made some amazing analogies. He’s a great spokesman for sure.

1:04:46 Um, but at the end, I said, but you know, stablecoins, you know, this is a real innovation. This is a real use case scenario. This is a real gateway drug for this space, and he at the end said, yes, you will need a currency that’s digital. He says, as opposed to Bitcoin, which is more of a digital property, you need something that’s liquid. So at the end, without saying I’m in, he basically said there is a real use case for this.

1:05:08 It’s going to be needed in the world. So I don’t know. I don’t know if I’d be totally surprised if Michael changed game and bought some of the ETH, etc. But then again, that might bring more regulation issues, and whereas right now he’s probably very safe buying another 10 billion Bitcoin from a regulation perspective. So absolutely, we’ll see.

1:05:26 Yeah, yeah, we’ll see, we’ll see what happens there. As far as this space here, you guys provide obviously, you know, the basics: Bitcoin, the Ethereums, all the other coins. The big question I’ve been asking everybody that’s coming on here is the Cardano effect. Like, we’ve all been hearing about Cardano for many, many years. I’m sure you’ve been hearing about it.

1:05:45 If you’re new to the space, it’s new to you, and Charles is probably, aside from Michael Saylor, one of the most prominent single-person spokespersons for the space. Yeah, and he’s telling us all the things that Cardano was going to be, but we just got the smart contract. Do you have any thoughts about the future of that? If it will replace Ethereum, or is your money on the Ethereum and the, and that ERC? Yeah, I mean, we know Charles.

1:06:09 We work with him. He’s a great guy. He was early on in the Ethereum camp, and, you know, branched off, so he understands the whole concept. He really gets it. Now, the thing is, with valuations in the blockchain space, things can get out of hand, and quite frankly, I think the valuation is exorbitant for the current level of tech, but you know, the markets, as you, as a market participant for so many years, know these are discounting mechanisms of what could possibly be and what will be, rather than what the current state is.

1:06:51 So obviously a lot of people have put their faith. He’s made some people fabulously rich. I have a friend, he runs a studio, graphics, video graphics, a studio that produces great content, and he’s like, he has three guys quit their job because of Cardano. They’ve made so much money, and, you know, it’s a self-fulfilling prophecy, on the level that once you have a certain amount of believers, you convert more, and it starts becoming a self-fulfilling prophecy.

1:07:22 You know, everybody’s made money, everybody’s keeping on, forever. And this propels the whole machine. Now, whether this is sustainable in downturns, whether general or just crypto, I do have my doubts, because like, usually when in crypto, it’s interesting, you sell those positions once the market corrects, and that you have the highest percentage gains, and what has the highest percentage gains right now is probably Cardano and Solana and a few others.

1:07:55 So we’ll have to see how they perform in a bear market, in something like 2018, which, you know, might or might not happen. The U.S. SEC administration might help, you know, some acceleration of processes here. It’s curious to see how it played out. I wouldn’t rule out Ethereum so quickly, though.

1:08:16 I am a fan of Lindy effects. You know, what has been around the most tends to stick around the longest, and there are some great people working on that, and like, you see, you know, if this is launching now smart contracts, this has had smart contracts, and it’s had some great applications. So, uh, if I were a betting man, I would put the vast majority of my funds on Ethereum, not this, not being financial advice. That’s the no. A cool thing on Twitter to say.

1:08:47 Yes, yeah, you’re right. I mean, it’s third-largest market cap right now. It’s had a big move. There’s a lot of people super optimistic about it, but um, most of the guests I speak to, they call it the Ethereum, the Microsoft Office of blockchain. It might not be the best software out there, but it’s what everyone’s using, and so it’s going to be here for a long time.

1:09:06 It’s got the developers. It’s got, you know, it’s gone through the market moves. Um, so we’re gonna have to see what if Cardano can deliver. Um, obviously Charles has a great vision, but then we’ll see if they build on it. Um, you mentioned things like Solana.

1:09:18 There’s been a few other real big movers net lately in these, you know, first-layer solutions. Solana, which just stands for Solana Beach, actually, where I’m from, strangely enough. Uh, they didn’t airdrop me any, but, uh, Solana, you know, drop everybody who lived in the vicinity. No, right? I didn’t get, I didn’t get it.

1:09:36 On that, I mean, some other protocols have just shown some real powerful moves lately. Um, when you see something like a Solana come up and be 10th largest market cap, are you thinking, okay, let’s see what happens in the bear market, or does it make you think, okay, there’s going to be a lot of potential layer-1 solutions that are going to compete? I had another friend calling me recently, and he said, I’m buying a car, and it’s a great, congratulations.

1:09:58 He’s, he said he’s got it’s going to have your name on the plate. He was joking, and so why, and he said, well, you put me up to buy Solana when it was a 20 bucks. I sold it to 210. I have completely forgotten about that. He asked me what should I put my money in, and let’s just say it’s Solana.

1:10:15 I haven’t bought any for myself, but you know, I’m not very good at examining protocols, so at their technological level, but what I hear is that the protocol is solid, and then it gets fortunate enough to be pushed by Sam Bankman-Fried of FTX, and he is a great crypto leader, and it’s just like, it seems like this guy can do no wrong, like whatever he does, you know, becomes gold. So, you know, if he is back on this, you know, um, I will be watching for the next project he endorsed, and I will be allocating a little something there, because he’s a true visionary, and, you know, I remember him from the early Alameda days, the research group he had in trading group, and it’s just amazing what he has accomplished thus far. And this is like, you know, when you’re unsure of what exactly to be doing, just see who the leaders are, take their lead.

1:11:21 Obviously don’t put your kids’ college funds in it, but you know, experiment with a little bit. And this is the thing with crypto, it has this asymmetric return potential that you don’t get anywhere. You know, probably Apple if you bought it in 98 or something, but apart from that here, like, what in traditional markets takes a decade can unfold within a month, so even modest amounts can deliver substantial returns. Yeah, and it’s been exciting to watch.

1:11:52 They got a little pop after some NFT action on that chain, and they have some pretty interesting, very fast tech, so, uh, and some good backers. So we’ll say, speaking of backers, you guys didn’t have venture cap backed to create who you are, which is a rare story these days we’re seeing. And Andreessen and Horowitz place a lot of bets, putting a lot of smart money out there. Uh, Pantera Capital as well. A lot of them are really funding these things, and sometimes it’s a blessing, and it gets a lot of buying on the back of it.

1:12:21 What are your thoughts on VC? Are you glad you stayed out of it? And for people starting off, yeah, would you ask people to do this, to get in touch with VC? Stanley said he emailed them from Helsinki, and they all ignored him, so he had to go to the community and go to the tokens. But these days maybe there’s more access.

1:12:38 So what’s your take on VC? Right. Well, we have been very blessed to meet our funding ground via private token sale. We didn’t even make it to an ICO. We gathered money from 100-something investors, so, and we called the last train, like the week after we finished.

1:12:56 Nobody was again meeting their funding targets. So we raised 52.5 million dollars, few years ago, 2018, okay, March and April 2018 private token sale, right? Yeah, nice. And, um, you know, this gave us the freedom to build the company. We delivered the platform a month after we finished that, like, six percent of all ICOs ever delivered the product.

1:13:23 A month later, it was literally unheard of, but it was fintech, our background, so there was no question. Are we going to do it? You know, and when it was, uh, almost ready by the time we finished the token, so it’s easy for me to, you know, stand up and say do it without VC money. I know why this is not a viable option for everyone. We were blessed to have the initial bootstrapping, and for quite a while, so you know, I don’t, not everybody gets this lucky in that sense.

1:13:59 And then, uh, it’s also about the business model. You know, this past couple of years, I, I said I’m a conservative guy. I like the business to be making money. I don’t want to have a projection for next quarter that I’m going to burn 200 million and go with that pitch deck to investors and say, okay, give me your money, I’m going to burn it, but we’re going to have so many clients that ultimately, in five years, you don’t, will not know how much money you make.

1:14:26 You’ll not be able to believe it, and, funnily enough, that turned out to be true, you know, for a great number of companies. But we always wanted to have a business case that makes sense. It can be sustainable, they can be profitable, and not that much worry about valuation, because we knew that it’s a longer-term game, ultimately, in this way, but it gives you more freedom. You retain your company, because we have competitors who are doing their series, I don’t know which series, around the financial, yeah, whatever it is, and they’ve completely lost control of the company.

1:15:02 It’s not even a company anymore, and then you know, you take a regulatory hit as an industry, and all your VC people, they get really nervous, and everybody wants to get out, and, you know, we have to do down rounds, which is like the worst thing possible, uh, and with what the way we have built the company, of being self-sustainable, we can now do a funding round just for the prestige of it, you know, to have the official valuation and the great backers who are going to be mentoring you, because you know, finances is just one part of the VC game. Is the great minds that come sit down with you and help you achieve the next level. This is to me actually the more important thing than just pure financing.

1:15:49 Yes, we’re for-profit, and I love being successful, and I love all our people being successful, from the founders to the last employee. I think there’s no nobility in poverty by any means, but at the end of the day, it’s very important that these VCs guide you, because they’ve seen the cycles. You know, somebody like Andreessen Horowitz, those two, they have seen, like, you know, any side of the business, and they can give you insights and have you set your mind on things that you don’t even phantom are possible.

1:16:24 So I think that’s the most valuable thing here. So will you be doing a round? We are preparing for a round. Okay, with potentially some strategic PC for strategic VCs. Predominantly, the challenge for us is the same that the blockchain space has, is auditing the financials.

1:16:41 It’s quite complicated, because the Big Four, they want to be the cool guys who can do blockchain audits, but truth to the matter is, they don’t even have the tools yet in place. So it’s a very lengthy process. We have been working, our finance department has been working on that for the past two years, just helping them build out the tools. You know, it’s, you’re paying the accountants and helping them build the tools at the same time. It’s somewhat twisted, but it is what it is, and we are the finishing line.

1:17:10 You know, just yesterday we released the first-ever for a crypto lender proof-of-reserves audit in real time. You can see our auditor. We work with Armanino, which is one of the 25 largest public accounting companies in the United States, and you have it on their website and hours, a real-time, at the station, that our assets exceed our liabilities by more than 100 percent at all times. You know, and this, no crypto lender has this. So we’re moving in that direction.

1:17:42 It’s going to take some time, and you know, VCs do give money to unaudited financials, but obviously lower valuations, and we’ll know Russia, it’s going to be a strategic play all out. That’s good, because again, you can, you can set the terms. That’s the one good thing about not needing that funding. Yep. Um, you know, I was speaking with Danny.

1:18:01 We were talking about how VC is almost a Web 2.0 mentality as opposed to 3.0. I mean, and the Web 2.0 mentality is that we make all the money for our shareholders, and the Web 3.0 is that all the peer group makes the money. So it’s a weird it’s a weird kind of passing of the baton now, in this guard, where, you know, you come from a space where the token holders are part of the success, and then you go back to the VC model, where they’re not. It’ll be interesting to see how this plays out.

1:18:31 But again, you got people like Andreessen and Horowitz, who have been through the start of the internet, who are basically saying this is bigger, and we’re going in on this, right? And that’s always a good sign. It is, and they have some challenges, because they have so much money, they have to invest somewhere, right? I mean, the cheap money policies, they’ve created some problems for the VC. They have too much money on their hands.

1:18:56 Yeah, that’s a challenge, and that’s the thing. I mean, you were talking about running a profitable business, and like any entrepreneur wants to do that. I love doing that too, but if you go to Silicon Valley and raise money, that’s sometimes the last thing they want to see. You know, they want to see big burn rates, you know, of billions of dollars. And then I have a psychological problem with that.

1:19:14 I don’t know. No, I know. But you know, with some of those mega rounds that happened last few years, like you said, they’re, they’re looking for the play that’s going to dominate, and now we’ve seen successes in Amazon and Google and Apple, so people in Airbnb, people can see when you dominate a market what the potential prize is. A unicorn beast, to be a big thing, and now that’s not anymore, right? No, you have to, what is it called now?

1:19:36 Now, what was it? Unicorn. Yeah, exactly. Even that’s probably not, that’s not the one we’re talking about. A billion-dollar valuation versus a 10 billion dollar valuation.

1:19:43 A billion dollar evaluation used to be a big deal. Yeah, now it isn’t anymore. No, no, but it’s the same thing. Like, uh, you remember the movie, The Social Network, where Justin Timberlake was playing Sean Parker, and he said, uh, a million dollar is not cool anymore. You know what’s cool?

1:19:59 A billion dollars, and now even a billion dollars is not cool anymore. Yeah, it’s such a good line. I know, and like, the last, I think, five guests I’ve had on the show, I basically said, uh, so what’s like being a billionaire? You know, and they’re like, well, you know, it was interesting at first, and I flew my parents first class, and yeah, then I got back to work on my blockchain business. Yeah, so I was talking, I think I was talking to Sandeep of Polygon, and he said, well, Brian, he said anybody in the space was around the ICO market in 2017-18, so you had to be an idiot not to make 20 or 30 million, and then they put it back in their businesses.

1:20:30 So he said pretty much everybody’s billionaire these days. So yeah, we’ll have to remake that movie. Yeah, what’s Timberlake going to say? A trillionaire. Trillionaire.

1:20:37 Yeah, Jeff Bezos is getting there. So, right, we don’t have one yet. Um, just want to finish on your thoughts to anybody who’s tuning in who isn’t part of the space, who still thinks, you know, crypto is weird and risky, or they think that it is weirder than risky? Yeah, yeah, well, well said. Well, how should they start to get their head around space?

1:20:56 What’s the best way to start, and is it necessary for everybody, or should some people not bother with It’s not necessary for everybody at this stage, but the earlier you get in, the better of an advantage you get. So I would encourage everybody to read up on just the theoretical side of it, and you know, allocate a little something, you know, five percent of the liquid assets, just to experiment, just to experience it, just to see whether it’s a good fit for them. You know, It’s not for the faint-hearted.

1:21:33 You know, these things can move 20-30% in either direction overnight, and then, you know, I’ve lived through a few bear markets. In 2018, Bitcoin lost 86% of its value. Oh, it’s quite something. How do you bank it through that? How do you make it through that?

1:21:51 Well, I was, uh, consumed by work, so I didn’t pay much attention to that, but you have to take the right time horizons with your crypto investments. Yes, it can happen over a month. You can be 10x up, but you know, Bitcoin is the best perform, and I’ve grown hoarse repeating it’s the best performing assets, whether you’re taking on a one-year, three-year, five-year, 10-year basis, and depending on which cycle you got in, you know, it might take longer than otherwise.

1:22:21 Other people, even, you know, you hear the war stories and everybody making money, as you said, with ICOs, 20, 30 million. It’s pocket change for some, uh, but yeah, it’s a new way of investing. Well, buy and hold has always been a very good strategy, so with crypto again, but you have to have a small allocation, just learning about the tech, just seeing the price action, because you grow immune to it. I mean, a 20% drop now does not raise my heartbeat at all, and it hasn’t always been the case.

1:22:57 Um, and you know, just be open-minded, something that might be ridiculously sounding, as, uh, you know, pictures of rocks on Ethereum networks. It might have some merit to it. So it takes some adjusting. It’s a brave new world, but I encourage everybody to you know, at least dip the toes in it. You had a Bitcoin prediction of 100,000, probably in the shorter term.

1:23:21 Do you make a longer-term prediction on that? Uh, well, people got interested in my prediction because I was on Bloomberg, on Bloomberg in January 2020. It was around 8,000, and I said we’re gonna hit 50k by the end of the year, and I was with Matt Miller, great guy and a friend of mine, and he was like, uh, well, I don’t see that happen. He was very skeptical. Then he had me in April when we dipped at around three thousand.

1:23:48 Do you still stick to your prediction? And I did, and it turned out to be, uh, to be accurate, and it didn’t quite randomly come at it. I saw that out of COVID will have a lot of printing, which will percolate towards crypto at some level, and then I just calculated that if we were to capture just 10% of the market cap of gold, you know, Bitcoin to me has always been gold 2.0. We will be at 50,000, and I made this prediction and stick to it, and it turned out to be accurate, so I got asked after that for my prediction.

1:24:25 I do think that by mid-next year we’re going to see 100k. Um, Longer term, I dare not predict. I’m bullish, but, you know, I like for the returns to be in real dollars. And if you see the decline of the dollar since they’ve taken it off the gold standard, it’s hard to measure, you know, the real value in dollar terms anymore. So, you know, in 10 years, if we keep printing like this, you know, I read a statistic that 37% of all dollars currently in circulation have been printed in the last 18 months.

1:25:05 You know, then who cares if it’s, if Bitcoin’s a billion, a million dollars, right? It’s going to be a different thing. Might be less valuable than it is now. Yeah, you can argue in 10 years we wouldn’t even bother quoting that, because who cares what it’s worth in dollars, because nobody uses those anymore. Now, Bitcoin has to be the currency of your internal accounting.

1:25:28 That’s how you know you’ve gotten the flu. Yeah, the Bitcoin flu, because when you’re just calculating things with Bitcoin, right? And it could be, you know, my I have two young sons. They’re four and five years old, and one of them came in here, and he went over to the typewriter on the wall, and he said, what’s that? Yeah, I have no idea, and I said, it’s what you type on pieces of paper and letters, and he was just like, what’s that?

1:25:48 Yeah, and so I’m sure one day I’ll take him into the lobby of a bank that’s now, you know, uh, yeah, that’s not your headquarters or something. They’ll say what’s a bank, and I’ll be like, used to be these institutions where we give them all our money, and he’d be like, but I do that on my phone, right? Well, they used to be a bank, and then maybe one day it’ll be like something in dollars, and you’ll be like, what’s a dollar? You know, or who cares? I love the drive-through bank counters in the United States.

1:26:14 Yeah, we’ll have trouble explaining that to our children. I used to go with my grandparents, and they used to have that with the tubes that would go underneath, so Yeah, look, it’s going to be interesting world to see what happens. I also think we’re going to see potentially another big bear market. You know, it’s going to happen probably in crypto, a 70 or 80% retrenchment in the next 18 to 10 18 months or two years, right? I’m not going to make any friends in the industry, but I say that you know, everyone, and every now and then we do need bear markets, because this is the clear sign that we have a free market, and I would argue that crypto is the only free market we have right now.

1:26:51 Every time the S&P you know, dips 5 to 10%, and we’re back at asset purchases, printing, the plunge protection team buying assets, uh, on the exchanges, and you know, this creates moral hazards, risky behavior, and a systematic risk, and deep depreciation of fiat. So it’s, I think that bear markets are the sign of a healthy market, and we do need them. Yes, they’re painful. I have assets in Bitcoin. I don’t like Bitcoin, uh, going down, but you know, this is the price you’re paying for a free market, and ultimately the free markets have built everything around us.

1:27:35 Yeah, it’s basically a transformation, it’s communication, that’s what the free market is, it’s telling you something is now worth this, and before it was worth this, and now this is all you get. And Bitcoin is one of the only ones out there that doesn’t have limits, and stops, and, uh, you know, quantitative easing. It gives you the truth, right? Ultimately, what you can use to make the best informative decisions about business and capital and everything.

1:28:02 So I agree. Um, also, as Dan Moore had reminded me, in 13 years it’s never gone down, and you can’t say that about a banking network or Google or Facebook. No, it hasn’t been hacked, and lord knows every terrorist organization and every government has probably tried to hack it as well. Yeah, so it’s got a pretty good track record. It’s got an amazing tracker.

1:28:21 Yeah, and it’s, it’s real. So, but I think we will see a correction. I think it’ll be difficult for the newer investors, but this is crypto, this is what I talked about, time horizons. You know, we got to be prepared to lose 30 to 50% at some point from your entry point, and that shouldn’t, you know, if you have sound money management techniques, uh, that shouldn’t, that shouldn’t bother you, right? Okay, good.

1:28:47 Uh, how can people learn more about Nexo, learn more about you? What’s the best way? Well, nexo.io is a website. It’s the portal to the next world. I’m on Twitter, uh, more often than I would like to be, you know, but it’s crypto Twitter.

1:29:03 It’s crazy. My handle is Antoni Nexo, all in one word, so, you know, anybody who’s interested can hook me up, look me up, and, you know, drop me a line. I’ll try and my very best to respond. We’re gonna do some links here for this great talk we had, and, you know, people who are interested, they’re gonna always find a way to come to the space, explore it for themselves, and, you know, we’ll help along the way every way we can. Yeah, I think it’s important that everybody starts to at least play in the space, so, you know, put on a tiny small piece and start to understand, because this will be a future reality for you.

1:29:42 It’s going to affect you directly or indirectly, and you better start sooner than later. Probably in this space, sooner is better. Now yeah, seems definitely better. So, well, thank you for doing this. Appreciate you.

1:29:53 You’re always out there educating. Right? You realize that getting the message is almost the most important part of your job. It’s gotten a very important part of my job. You know, sometimes I made a mistake where I talk as if everybody already is into it, so, you know, we always have to be conscious that not everybody has all the knowledge and experience, and, you know, education is very, very important part.

1:30:17 We have started an initiative about financial literacy I think that is very important. The educational system, you know, they’re still doing stuff that is very relevant, and not doing a lot of what could help them prepare for life. Yeah, I don’t know who’s going to teach my sons about finance, is going to be me, because I don’t think they’re going to learn about it in their school. Well, you’ve got them covered, so yeah, I should. So, all right, Antoni, thank you so much, appreciate all the work.

1:30:44 Next so, uh, let’s make sure London is an extremely viable and vibrant system here when it comes to crypto. Yeah, we’ll each have to do our part here. Yeah, we will. So all the best. Follow this man, uh, nexo.io.

1:30:55 Check out the platform. It’s great, super user-friendly. You can get your loans as well, and it’s got a very CeFi feel to it, which is what a lot of people need in this space, so check it out. And we’ll see you around in London. All right, thank you so much, appreciate you.

1:31:11 All right, we’ll see you all next time on London Real. Bye. You.