Now what Abra's done. Because we've registered this new advisory with the SEC.
We're now offering separately managed accounts where you're not pulling the assets together anymore.
And so this has basically now the benefit that it's legal in all in all
fifty states, and to my knowledge, we're the only company right now in
the US that can even provide staking in all fifty states or lending for that
matter, against crypto holdings. This content is brought to you by Bitco,
which is one of the top crypto custodians in the crypto industry. Bitco works
with many big companies and brands such as Pantera Capital, Bitstamp, and bitcoin
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com link in the description. Welcome to the Thinking Crypto podcast. You're home
for cryptocurrency news and interviews. With me today is Bill Barheit, who's the
co founder and CEO of Abra. Bill great to have you back on Hey,
good to see man Ho's things. Bill great, And I'm always excited
when I'm speaking to you because kind of what I told you the past two
times i've interviewed you, I'm a big fan. You know, obviously your
Web one point zero pedigree, you're now here building in Web three. So
I always appreciate your perspective and thoughts on the market. And there's some huge
news around Abra, the launch of Abra Private and Prime. Tell us about
this, sure so so coming out of what's kind of transpired in the crypto
space the last four years. Obviously, we went through this big boom and
bust in lending and yield, and you know, we took some very valuable
lessons from that. If you look at the companies that aren't here anymore,
most of them were, you know, not necessarily even the ones that had
good intentions that failed, right, A lot of them had significant concentration risk.
The bottom line is is that clients became a liability on those companies' balance
sheets, and when those companies went busted, the depositors had to fight and
it still are fighting to get their assets back. Okay, And the question
became, okay. People want to have a place where they can invest in
crypto, earn yield, steak for proof of steak assets, potentially borrow against
their crypto holdings, which we believe is going to be one of the fastest
growing aspects of crypto, but they don't want to take counterparty risk to the
lending companies. Now DeFi addresses those issues, which we can get into,
but it's way too complex for the average investor to navigate themselves. So what
we did is we started an SEC registered investment advisory that got permission to launch
staking yield lending services within a safe, separately managed account structure for the first
time. And this SMA model that we launched is very common in equities and
even in crypto, but it's not common for staking earning yield borrowing. It's
actually very complicated to give people exposure to DeFi, to borrow, to earn
yield to steak where you're not actually taking counterparty risk to ABRA, and that's
what people want Like I said, they want the benefits of DeFi, but
they don't want to deal with the complex lexity of DeFi, right, and
so that's what we've built with ABRA Private. ABRA Private is basically an SEC
registered investment advisory that allows you to invest, stake, earn, yield,
borrow, or even just hold crypto in a safe, separately managed account.
It's like you getting your own vault, almost like a safety deposit box from
which you can deploy into specific investments. But Abra is not the counterparty,
So if ABRA goes away, you still have your assets, okay. Abra
Prime is our institutional offering that allows hedge funds, mining networks, crypto ATM
networks, venture capitalists to have OTC trading, access, derivatives you know calls
options, structure, products, lending, borrowing in a highly professional environment.
Are are head of op trading. For example, what was that Goldman doing
running the options trading for for them? In crypto, We've got a DeFi
team that and quant team there that's been working on you know, yield and
lending for years. We've got a spot liquidity desk now that's been servicing miners
and managing auto liquidations for bitcoin miners for quite a while. So so there's
a lot of expertise on our desk on the prime side of the business that
is doing a great job of servicing institutions. And so now we have this
private wealth business and prime business that kind of complement each other and actually service
each other in many ways. So, Bill, I have a ton of
questions on there because here's many layers to this. In regards to the private
Yeah, and this is a rookie question. We got the SEC targeting crack
In and coinbase and so forth and regarding their stinking services, So what's the
difference with your service being then register? Great question. So here's my understand
I can speak very well to what we're doing. I think I can kind
of speak to what they're doing and what the issues are. I'll start off
with the basics, which is to say, if you want to steak Ethereum
or Solana or another proof of steak assets, I think there are fifteen to
twenty states in the US where you simply can't do it on an exchange.
The exchange will block you. And based upon where you are, you know
your ID or where your computer is located. When you try to do it
because they're fighting with those states who consider staking to be a security offering when
it's done via a centralized exchange. Now, it doesn't really matter what I
believe, whether I believe that that's you know, legal or whatever. The
only thing that matters is is that you know that's the reality is that in
those states you can't stake Okay, now what Abra's done because we've registered this
new advisory with the SEC. We're now offering separately managed accounts where you're not
pulling the assets together anymore. And so this has basically now the benefit that
it's legal in all in all fifty states, and to my knowledge, we're
the only company right now in the US that can even provide staking in all
fifty states or lending for that matter, against crypto holdings without you going to
a defied network and using meta mask on your own. And even that's you
know, some people are claiming that that might be like, you know,
money transmission or security offering. I don't know. I don't agree with any
of that. It doesn't matter what my opinion is. All I know is
is we worked very hard with our lawyers over the last year to do this
in a way that we're very comfortable works for our clients. So, Bill,
if you don't mind me asking, because I want to make sure I
wrap my head around this. So it's not so much the asset that it's
being staked, but rather the nature or the infrastructure behind it. So if
it's, like you said, centralized exchange, that's what's triggering the securities law.
I think. So it seems to be the case, right, So
the commonality there is is there the states have this opinion that we're several states
like California being their biggest, that staking via a centralized or pooled exchange model
is a security offering. I don't necessarily agree with. That doesn't matter my
opinion. My opinion is irrelevant. What matters is is that's their opinion and
as a result, in many states, I think it's like California, Washington.
Why. I don't know the list, I can't memorize it, but
if you try to stake it won't let you. Yeah, the same thing
happened to me here in New Jersey. I got blocked and got my services
turned off. So Bill, I'm going to go back to you know,
the way ABRA is structured now with this, which I love. By the
way, this absolutely makes sense and I think is the forward because man,
I have PTSD for what happened in twenty twenty two and all these collapses.
So you said you're eliminating counterparty risk And is it because the assets are on
chain versus you custoding them directly. So if ABER goes out of business,
use no, nothing happens. Yeah, that's that's basically right. So let's
there's two parts to this. The first part is is there a counterparty to
the transaction? Right when you stake you don't want a counterparty to the transaction.
You don't want to become someone else's liability. I mean, when you
deposit your cash at a bank, you are now a liability on the bank's
balance sheet. Why because they have to pay you back at some point.
When you deposit into an SMA account, you separately manage the account. You
are not a liability on my balance sheet. I am not a counterparty to
the transaction. So if ABER goes away, it's still your SMA and you
can see that when you make a deposit to do custody, you can see
the assets on chain. That's part one. Part two is you're deploying directly
to steak directly from the SMA into that staking pool whatever it is. May
not using me the right terms, but you're staking directly, meaning meaning we
may be pushing. You may be pushing buttons and using APIs that we provide,
but you're doing it directly to the network. The counterparty is the Internet,
right, So like the counterparty is the staked contract to the counterparty is
the DeFi protocol. Depending on what you're doing. Wow, Bill, are
you guys the first to do it this way? I'm quite confident that we
are. It's very hard, so I think about what we've gone through.
First of all, just to survive this this mayhem. Let's put that aside.
Right that nobody cares, it's my problem. But to have the legal
understanding, we had the lawyer up, multiple firms. We had to rebuild
our platform from what we had with the old retail app, which doesn't work
in the US anymore. Everybody has to use this model now. So to
go from retail trader and borrow to ab a private trader and borrow was a
complete rework from an architectural perspective, and it's still a work in progress.
You know, we're adding more capabilities to get back to parody with what we
had with the app, but using this separately managed account model. Right,
so we're getting close. You can do most of what we had before,
but not everything. And my goal this year is to have all of that
back in place and then eventually have an app again. But one step at
a time. And so it's hard. It was very hard, and it
continues to be hard. You know, we have ongoing compliance issues. We're
now an SEC registered investment advisor, which brings a whole set of requirements to
the company. Compliance, compliance, training and oversight and audits. And you
know, again most viewers may not care about this, but the rules are
the rules, and and we care right and and and so you know we've
gone very deep to uh to follow those rules. Wow. So I guess
my my next question is with specific assets. So let's say there NI thirty
two, eth, the steak, other token of blockchains like Algoran or Cardano.
Not necessarily so you mentioned that you know, you're not part of the
counterparty, You're just providing the buttons in the pathway. So is it going
to like public decentralized pools? Uh? The staking versus avarice staking it in
a pool. Yeah, so it depends on the asset. In some cases,
the user will go directly to h you know, an non chain service
provider that that we basically disclose for them. In some cases it's a yield
generating you know, service like a DEX or like a GMx or something like
that, depending upon where the opportunities are. In some cases you're just straight
staking, and that's always disclosed, So there's not like, oh, we're
just generating yield. No, you actually know it's your investment, right,
it's not abro like just arbitrarily deciding what's the best place for you to get
yield. Today doesn't work that way anymore, and so you always see which
yield opportunity you're getting. Is it's straight staking? Am I? You know,
borrowing and lending into from a DEX? What's going on? And I
have the option to choose that, and I can give ABRA discretion to make
those decisions. But the decisions are transparent, and what I'm getting is transparent,
and the risk disclosures that are required you know, by the regulators are
there as well, which I would pause it. You know, I would
go on podcasts and talk about the risks in the last kind of model,
but now like legally, they're laid out very clear star terms. Bill,
A tough question for you, do you think this is what the future of
staking looks like? Because what you're saying makes sense. At some point we're
gonna have to meet in the middle of the road with these regulators because they're
fighting, Right, We're going to talk a bit about the SEC and so
forth, But what are your thoughts on that? So, look, does
the average web user know what HTTP is and how it works? Does the
average Netflix watcher know what RTP real Time Streaming Protocol is and how it works?
No, they shouldn't have to. And I think DeFi protocols are the
future of banking, and the average user won't know how they work. The
average money market account holder doesn't know what a reverse repo is or why money
market rates are affected by repos and things like this. And I think banking
is going to become decentralized, borderless, always on and very efficient. Right,
The rates that DeFi sets are true market rates because it's a marketplace based
upon supply and demand. It's not a bunch of old white men sitting around
a table deciding what interest rates be arbitrary to grow and shrink an economy.
That's nonsense and that's antiquated eighteen hundreds concept that doesn't work in an always on
Internet world anymore. And watch what happens to crypto when Israel and Iran or
fighting over the weekend when the markets are open twenty four to seven and the
ETFs can't play because they're only open thirty hours a week tradable thirty hours a
week. So, DeFi is the future. Whether the existing banks are in
a position to embrace that it become far of the future, or whether they
become blockbuster and go away in favor of the Netflix of banking remains to be
seen. My bed is is in twenty years, most of them are gone
and they're replaced by Internet native you know, DeFi native banks, who will
be some of the biggest companies in the world that don't exist today. Just
like Netflix didn't exist twenty whenever we started twenty plus years ago, or Google
or whoever. These companies didn't exist in the early nineties. They're trillion dollar
businesses now. That's going to happen to banking, and so it's not really
that hard of a question. It's just I'm not clear on I'm not one
hundred percent sure what the path is. But there's no way you can create
an always let me start off, there's no way you can create a twenty
four to seven always on banking, investing infrastructure for the public that is,
you know, super competitive, hyper competitive, globally accessible, and not have
that be the future versus the monolithic, you know, open thirty hour week
run by white men in a closet system that has pervaded you know, banking
for the last hundred years. The choice is clear, The path forward is
clear. It's just what's not clear is, Okay, did the existing banks
play or do they just go away and die and whether like like blockbusters and
codecs. Yeah, so to your point, in the short term, that
could be maybe a merge of e FI DeFi kind of like what you're doing,
but eventually in mores ten years from now, it's more fully defied.
Yeah. I think c FI ultimately becomes about packaging user experience, you know,
advisory navigation, uh, and less about you know, uh counterparty risk,
which is, you know, we have we have this fd I C
insurance to deal with the fact that there's over leverage by design in the banking
system where everybody has counterparty risk to the banks and the government. But the
fd i C represents, you know, the ability to cover one percent of
deposits, where most banks basically are if you actually value their their you know,
long dated bonds using mark to market standards that everybody else has to use.
You know, the fd i C is a deep ship and and and
and so what do you want long term? Do you want a system where
you don't have that counterparty risk, whether it's to a crypto company or bank,
or do you want to keep the system where you know the government is
going to have to print eventually trillions of dollars to bail out the banks.
So yeah, question for you on the SEC at a federal level versus state
level, are they in alignment with staking and all the different things. Have
you noticed any differences in your you know, working with different states as well
as getting the approval from the SEC. I haven't had a lot of discussions
more nor have my lawyers on the states on their opinion on this, because
federal law Trump's state law is my understanding and I'm not a lawyer, So
that's just kind of builds. Rudimentary perspective on this is federal law generally Trump's
state law. When there is two you know, when there's two sets of
rules, federal comes first. So so at that point, state opinion on
what is what is a security offering and what's not I think becomes a secondary
issue. And you know, in terms of of how the SEC views this,
my understanding is is that when you're an RIA and you're committed to the
separately managed account model and you follow the qualified custody rules, they have to
let you do what you're doing, right, So as long as you follow
those rules, it's more of an approval process as opposed to a licensing process.
It's just very hard when you're doing DeFi to follow those rules. And
so that's why I think we're the first to do it. But I don't
think as it relates to advisory services, the SEC cares that much as long
as you follow the rules, and if you don't, then they care a
lot. How does the fur agenda of the SEC to categorize certain all coins,
many of which are proof of stake, Like there's reports that they're going
after Etheroreum. Obviously they listed Algoran and Cardano and Solana and so forth in
different lawsuits. If they classify those as secure, does it affect the staking?
Have they mentioned anything like that to you, guys? No, No,
it doesn't, just because again the separately managed to count can hold commodities,
it can hold securities. It doesn't matter bonds whatever. Look, I
I have very strong opinions on this topic as it relates to what's the security
what's not doesn't matter. I mean, if you want to get into it,
you know, have fun, sure, happy to share my opinion,
which I'm guessing you can guess. But but as it relates to our business,
I don't think it matters. It's fascinating, Bill, They're just h
and it's it's so interesting because I see almost like this is the way forward
because I don't know how this battle ends, because you've got Congress has to
act. But will they act is a question because politics comes into play.
And then it seems like I don't know if you agree with me here,
but there's a clear agenda to slow down cryptos startups while Wall Street is wrapping
up ETPs, doing tokenization customing funds for certain crypto companies. So where does
this end? Do you see, it needs it needs to go to Supreme
Court. Congress needs to act. What do you think? So let's let's
remind everyone how this because your questions have been very US centric. Let's remind
everyone how the US system is supposed to work. We have three branches of
governments, not four. The three branches of government are the executive, legislation,
legislative, and judicial branch. Now in our world it feels like there's
four, and the fourth being the regulatory branch. There's no such thing as
the regulatory branch of governments. It's a made up idea, okay. The
regulators reports to one of those branches depending upon what the law says and how
they were created, okay. And the three branches of governments, executive,
legislative, and judicial are meant to have extreme checks and balances so that there's
no concentration of power within those branches of governments. And that's been the beauty
of the American system for two hundred and thirty years, is that we have
avoided i would say, up until twenty years ago, and it's significantly changed
in the last twenty years. Up until twenty years ago, we avoided the
significant layers of corruption that have invaded i would say, other well intentioned systems
over hundreds of years because of these checks and balances. About twenty years ago,
for whatever reason, right, the regulatory capture model of business in the
United States took root. The regulatory capture model basically says companies that are in
a position to take advantage of the system, work the regulators, work their
network of lobbyists and whatever can create regulatory models that give their business a competitive
advantage. Then we refer to this in Silicon Valley as a regulatory capture and
it's just not an opinion, it's a fact. There's all kinds of businesses
that take advantage of this. Then I get it, I get why vcs
want that. Okay, the reality is is that it's an abuse of the
system because most people, most of the public doesn't understand what regulators do,
what they're supposed to do, and the fact that they're basically there to implement
laws. They're not there to create laws. They're not even they're really not
even there to interpret laws. They're to implement the letter of the laws that
are passed, and the checks and balances that exist between legislation, legislative branch
executive branch and judicial brands are meant to deal with the nuances of interpretation,
differences of opinion, et cetera, et cetera. So now back to your
question, my humble opinion is is that we are not in a position to
deal with this regulatory capture issue head on right in any branch of government right
now, whether it's Food and Drug administration. Look at what happened during COVID,
you know FAA, look at what's happening with Boeing, you know financial
services where where you know, the warrant camp is on a on a on
a one woman mission to kill our industry using the SEC and the fd A
C and the O c C and you know fincean and what other arms she
can she can use to basically work around the the checks and balances of the
three, you know, the three monolithic organizations that run our government. And
and so unfortunately that means we're going to be dependent upon the checks and balances,
which means the courts right until until somehow we can change that regulate regulatory
capture model. Uh and and sorry for this long entire rade, but you
know others have written about this. Ray Dalio and his latest book on the
principles of a changing World order. Uh, the Fourth Turning is here by
how which is a great book, or the original Fourth Turning book. They
describe late state empires and the things that we're going through are very clear.
And you know, we didn't invent this. This has happened over and over
again in late stage empires that can't get out of their own way. And
unfortunately that's the position we find ourselves in right now. But history has left
so many clues that we are in a position to deal with this if we
can just get our heads out of our asses and recognize that we're creating this
problem for ourselves. And we have, I mean over the last twenty years
that we have created this problem for ourselves because you know, we did have
some issues in the nineties. You know, when I was at Netscape,
I remember it was a little you know, we had the export version of
the web browser that we couldn't export because of Munition's great cryptography law as they
go back to World War Two. But that was the exception. You didn't
sit in a room and make every decision with this. You know, Oh
my god, what are the regulators going to say? Now? It doesn't
matter what industry you're in. It it's a significant part of the discussion.
And it's crazy. We're the only country in the world that I do business
and that's not communists or dictator based where we're having this discussion. And when
I talk about crypto to people in Dubai and Singapore and places where they feel
free to do business, they think we're nuts. You've all lost the plot.
What's going on over there? That's the basic kind of like narrative that
I get back from people who aren't American, And they said, you all
had the power, why are you punting it away like a football or a
rugby ball? It makes no sense. And I don't have a good answer
for that other than what I've just said, which is, unfortunately, this
is historically what happens when you go from a good checks and balances system to
a regulatory capture model that we find ourselves in today the bill. Do you
think that part of it is generational, that the Elizabeth Warren generation will eventually
pass away and it will be a changing of the guard. And as blockchain
technology becomes more prominent, there's better iterations and people being able to use DeFi
like we've been talking about, and can be their own bank, so to
speak. Right the convergence of these different factors, would we can at least
fix some of this And maybe an example would be for voting it goes on
the blockchain and campaign donations and these things are more transparent and instead of raising
from corporations, you're raising from people. It's on the blockchain, it's verifiable.
I know I'm spitballing here a lot, but do these things help to
solve some of the problems that we have? Oh? Oh, they clearly
solve the problems. The question is, you know, is it going to
happen regardless of our stupid decisions or are we going to kill ourselves in the
process. So then I keep referring to us as the US. So I'm
convinced that what you're saying is going to happen in places like Africa, you
know, parts of the Middle East, Southeast as you like saying, poor
Indonesia where they don't have the baggage that I'm talking about in terms of our
regulatory capture model to get in their way, other than maybe the politics of
having their partnership with the US be be heard in some way, But long
term. I don't think that's going to matter, right. You know,
Dubai was a fishing village fifty years ago, and they have a better chance
of becoming the financial center of the world in twenty five years, in my
opinion, than New York does given the momentum. Now that sounds crazy to
people in New York right now, but they're looking at the ground from five
feet I'm looking at the ground from five thousand feet, going, this is
where the momentum is going, and you don't get it right. And so
the world is going to do what it's going to do. The question is
what role are we going to play in the future financial system and are we
going to be Is the dollar hegemony going to continue from a place of strength
or is its value just going to keep getting eroded, eroded, eroded and
not matter at some point in twenty five, thirty, forty fifty years.
I don't know the answer to that. I know what I would like the
answer to be, but a lot of things have to change for what I
would like the answer to be to happen. So on the dollar, right,
we know it's the world reserve currency, but there's other countries. Bricks
countries and so forth, which are challenging that. I guess this is a
tough question, but one part one of it is if we get stable coin
regulations right, because we see the world really wants US dollar back stable coins,
USDC to other whatever it is. And then second, is it a
digital dollar CBDC that's coming, which has its own baggage and problems, potential
problems which can be dystopian? Is that also a solution? Okay, they're
two different issues, right, So the dollar is the world reserve currency,
has its own set of issues which have nothing to do with technology. It
has to do with the fact that we switched from a commodity backed, commodity
based currency in the early seventies to fiat, which basically, you know,
fiat basically means you know, managed by government decree, and so in other
words, the government decides to tell us that this money has value and therefore
it has value, as opposed to post Brett Woods, when the money had
value because there was a certain amount of gold in the banks and Fort Knox
that represented the value of the money. And so I don't think the world
is going to accept that for another fifty years. I just don't right,
because the military industrial complex, the bargain of that is eroding quickly. People
don't trust us anymore to cut to the chase. And it's not that I
don't want that to happen, and it doesn't really matter what I want.
It just is right. So can we reverse that? It's possible, but
given our debt structure and the rate at which the interest is rolling over into
principle on the debt now, it's very unlikely. I mean, we would
have to absorb a solid twenty years of pain as a society to undo that
that I don't think we're willing to absorb or even fully understand the level of
the problem we've created, and the fact that it's now become a hockey stick
in terms of the rate of change of the problem and the increase of the
problem. And so I think the dollars days are numbered as a world reserve
currency in that regard, I think that there will be competing reserve currencies over
time, and I think different factions will create different reserve currencies. And it's
simply a function of this problem that we created, which has been there for
fifty years. It's just, you know, it wasn't acute until now,
and it's becoming acute, and so there's no stable coin rules or central back
digital currency rules that are going to fix that. Right, you can make
the dollar a stream of ones and zeros, doesn't prevent you from printing another
twenty five percent of the float. And so now, in the short term,
do I think that having stable coin legislation and making a kind of network
of competing stable coins is a good thing for America and the world. Absolutely,
you know, I think there should be a thousand stable coin issuers all
competing with each other and let the good ones win and survive and flourish.
I think having the government basically create a world monitor coin, which is what
a cb DC probably is, is a really bad idea, and it scares
the hell out of me. Right, It's like every dystopian nightmare that I've
ever read about kind of all rolled into one. And so, you know,
is it possible to create a central back digital currency that isn't isn't a
monitor via Big Brother token? It is, but it's unlikely. And so
I think a stable coin set of rules that creates competition at both the state
and federal level is very interesting to me. Doesn't solve the long term structural
issues, but it definitely helps from a short term technology adoption perspective. So
the long term issue that we're facing right that we're heading down the path with
let's say Argentina or Venezuela or something like that, is there any hope that
maybe blockchain tech and maybe even bitcoin as a truly hard asset that's find out
and it could be the future generation's gold, right and bretton Wood's I don't
know what are we up to two three? But the central banks could go
to that model, and like you said, it may not happen, and
there's a lot of pain ahead to do fix some of these problems. But
could they do that, of course, But again the problem is we don't
have a technology problem, right, we have a a governing by decree problem
when it comes to money, which is what FIAT is, right. So
if we changed the system back to be the gold based or commodities based,
even eventually partially bitcoin based or whatever, that would solve the problem long term.
It would require massive pain in the short term because of the debt load.
The debt burden, we would have to stop investing in other things in
order to pay off the debt because you can't put money anymore, right,
and so are we willing to absorb that pain that hasn't Again, I'm sorry
to keep saying that that is not a technology problem. It's a mindset problem.
It's a belief problem. You know. I see these clips of the
Bill Maher types lately that I've been talking about how bitcoin is a Ponzi scheme,
and I just sit there, I go, oh, my god.
The government has been running this overt Ponzi scheme in front of your face for
fifty years, and you're calling the tech works and that creates a new monetary
system, the Ponzi scheme. It's literally the opposite of what you're saying,
and that's what we're up against, right, And it is fun talking heads
that don't understand, because it's they don't understand how money works in the first
place. So if you don't understand how money works in the first place,
how in God's name are you going to understand that what we've built to fix
it actually fixes it because you don't even believe that it's broken, right,
you know, funny, it's funny built. And as you're saying stating that,
I've been talking to people about that at like what the US government does,
and that the whole barring and lending treasury and the FED and all that
it's one giant ponzi. And then I realized that some of these talking heads
are they just distracting us from that. That's why you don't teach us about
how money works in school. No, I don't. You've given them too
much credit. I think the monetary system is a boiling frog. You put
a frog in cold water and you turn the heat on. It doesn't know
it's dying. And I think the monetary system is a boiling frog. And
we're all in We're all in the water. And a few of us that
that focus on the monetary system, that deal with the tech, that understand
the intersection of the tech and capital markets and decentralization and bologies and networks,
the state ideas and Toshi, you knows, white paper, we get it,
and and and and yes, there's a chance that we don't have at
one hundred percent right, and that we are wrong in many ways. But
I think when it comes to the basics, I don't think we are okay.
But for everybody else, they're like a frog being boiled in a vat
of water slowly. Bill, you've been a bitcoin whether you knew a bitcoin
for a very long time. I saw your ted talk and everything. You've
been here a long time. I would love to get your perspective on the
spotty tast and how significant that was when the market. What are your thoughts
and the performance and outlook for the rest of the year. I think,
what do I think about this? So I think the couple of things.
One. I think having black Rock and other institutions, major institutions market bitcoin
to the public is great, right, just creates awareness. Why is black
Rock interested in this? That's the question that a lot of people are asking.
That's good. Right, is an ETF the best way to have an
insurance policy on everything we're talking about? I don't think so. But again,
who cares, right, it's just Bill talking so so marketing value love.
It certainly helps ABRA because our high net worth clients and aber private right
once they dig in, an SMA account that's accessible one hundred and forty four
hours a week is significantly better. Not only not only can I hold other
assets besides bitcoin, but but it's significantly better than an ETF that trades thirty
hours a week, five hours a week, whatever it is. And it
was, like I said before, that was very acute when when Iran was
sending drones and planes to Israel a few weeks ago and the bitcoin price fell,
which you know, it recovered, but if you wanted to do something
about it during that timeframe, you couldn't because the banks and the stock markets
were closed. And so that's not the way the markets are supposed to work.
Bitcoin as an asset doesn't mesh well with the existing banking system. It's
its own matrix, and the ETFs are trying to build a hard line into
the matrix, and that can take you so far. It creates awareness for
the matrix, but it doesn't put you fully inside the matrix. Do you
want to be inside the matrix? You use bitcoin the way it was intended.
The SMA model you know, gets you like very very close because they're
your assets, right, do you have title to your assets? Still,
regardless of what happens to ABRA. So again, great marketing tool helping us
tremendously. Obviously, the price narrative find You know, I hope bitcoin,
I hope it goes to Balhalla. That's fine, but I care just as
much about the system as I do about the price, and the ETF is
good marketing for the system, but it doesn't represent the system. Yeah,
I have this similar feelings love hate relationship. I see it as a kind
of a trojan horse almost because I believe in self custody. I do self
custody majority of my crypto bitcoin, of course, But is it you know,
I always think in the back of my mind because I know human beings
were the same, the same psychology and emotions and things play out. It
could be decades generations. Could they confiscate bitcoin now easily? Because of that?
Because you put it all in ETF and two, you know, are
they going to do the same leverage bullshit on top of bigcoin now because they
have it, They're in the majority of capitals coming in like they would real
estate. And who knows what happens in the future, right, Yeah,
I agree, I agree, We don't know. Again, I think the
operative point here is that bitcoin itself, and Caitlin Long has been the master
of making this point for five or six years, Bitcoin itself doesn't mesh well
with the traditional banking system. You have settlement issues, you have timing issues,
you have banks or closed issues, you have leverage issues. You know
banks can leverage themselves significantly. Well, we you know, bitcoin and re
hypothlication don't really mix very well, right. You know, it is possible
to generate a relatively safe DeFi yield on bitcoin today, right. I think
there's been times this year where you can make seven eight nine percent on the
carry trade. The long term yield on bitcoin is zero, right, So
that's an issue because the natural yield on a deflationary asset at scale is zero,
and it's it's simply a trade of productivity for bitco point at that point,
whether I'm mining or I'm working and you're paying me in bitcoin, or
I'm giving you goods and you're paying me in bitcoin, right, and you
may have a return in equity for your business, but the natural yield on
holding the asset should be zero. So anyway, my point is is that
the two systems don't mix well, and people should be thinking about bitcoin as
an insurance policy on government run amok and not oh, let's you know,
integrate bitcoin into the banking system. Bitcoin is pristine collateral for lending, but
I don't think it's going to be banks that own that market, right,
I think it's going to be companies like ABRA that help people borrow via DeFi
so that you can avoid the trials and tribulations of having Tom know how defile
works in detail, right and still safely borrow without having to take counterparty risk
to a bank or to ABRA for that better. And that's the future of
lending. Right. You have this pristine collateral that Araid's twenty four to seven
where you don't have to worry about somebody's credit score because the Defie network is
holding the collateral. I want to get your thoughts on the Etherorem's BODYTF because
there's a race for that as well. But there's complications going back to what
we were talking about before, the SEC seemingly trying to categorize as security in
addition to other blockchains and tokens. Do you think we see that approval of
this cycle or this thing goes to the courts again. Yeah. I think
it goes to the courts again. But I think there's a two different issues.
I think whether whether the eth is a security shouldn't matter, because obviously
there can be ETFs of other securities happens all the time. I don't think
ETH is a security, but that's irrelevant. But I do think it goes
to the court just because they'll drag their feats and they want to delay it
as long as possible, and the logical outcome is the court. But given
the precedents that have been set, I would suspect that they would lose again
and we'll have our ETF. And now whether that takes nine months or eighteen
months at this point, I don't know. But and I'm trying not to
be pessimistic or sarcastic about it, I do I think, I do genuinely
believe that this is headed to court again, and I don't see any reason
why the outcome would be any different. Staking makes no difference in the day.
It's just a really consensus algorithm. So right in regards to Etheroreum,
we saw black Rock is tokenizing bonds, Well, it's gonna be funds and
so forth, and there's a big move for tokenization, taking real estate,
taking stops bonds and all these things putting on the blockchain. What are your
thoughts on that? And is Abra exploring any of these opportunities. No,
I love it. I'll give you two reasons why I think it's interesting.
Tokenization of real world assets I think is interesting for two reasons, at least
to me. One, it creates fungibility across asset types. I can trade
bitcoin for real estate. And two it basically, well, it's kind of
related to one. It creates fungibility for trading, and to it creates fung
ability for lending because now you can basically collateralize everything easily and have a single
lending network that was traditionally access accessible to the wealthy. So in other words,
prime businesses at Goldman and Morgan Stanley like you know, and those desks,
they would traditionally lend against equities to the wealthy. Robinhood doesn't do that.
They don't they don't pay you interest on your equity holdings while they're lending
them out right. So so, but with tokenized assets, everyone can play
in that world, right you can. You can stake your collateral on a
decks, whether it's real estate or stocks or whatever, and you can earn
a yield on that collateral, or you can borrow against that collateral, and
you've got a normalized, interoperable way to do that across all asset types.
And it creates tremendous liquidity opportunities that don't easily exist today, right because you
can get liquidity in gold, the yacht, real estate, stocks, bitcoin,
whatever a and homes that you know where you have complicated helocked processes and
and and it's all fungible in some way. That's where I think this is
headed. Not there yet, but but I think that's why companies like black
Rock are interested in this because it unlocks a tremendous amount of liquidity in trillions
of dollars in assets. Mhmm, are you are you guys trying to do
anything on your end or you're just watching right now? And then stable coins
are a form of real world asset. I would actually positive Bitcoin has become
a real world asset in so far that it's a it's a digital physical ass
you can hold that that you can borrow against. What what's too early is
is other stuff, you know, real estate, you know, other other
assets. We're interested in it. It's unclear to us how DeFi markets will
evolve, but I do think it's going to happen this cycle, and I
think it's going to happen outside the US first, for all the reasons that
we that we've been toscussing mhm, and we'll figure out what our you know,
what our clients want and how they can take advantage of it when it
when it's ready. I want to get your thoughts on meme coins, and
not that I watch your meme coin picks, but just the speculation and human
psychology here because you've been here since the dot com boom and bus all right,
uh and seeing speculative bubbles. What are your thoughts on meme coins and
how human beings are interacting it seems you know, it started with AMC game
stop. Now it's much greater with with tokens. Yeah. So when I
was at netscape, there was this animated gift of of I don't know if
it was an animated gift, but it was a video. I think it
played the an animated gift of this thing called the Dancing Baby. Do you
know what the Dancing Baby was? I remember that there was in around two
thousand, I think, when Push was running against Carry, this company called
jib jab that made videos. Yeah, Okay, where I'm going with this
is is that we've had these kind of memes that were culturally relevant for decades.
Now. What's interesting about Web three is you can own a piece of
it, right, And I'm fascinated by that. I've never been the person
who was closest to pop culture. Like you wouldn't come to Bill and say,
Bill, where do you think pop culture is going to go in four
years? You'd have to be a moron to come to Bill to want to
learn where pop culture is going in four years. That having been said,
I've come to realize that there's these patterns in pop culture as it relates to
memes visa be the Internet that we've had since Dancing Baby, through jib Jab,
through Pepe and Bonk and you know, doge and with and you know,
Mew and whatever whatever. I think it's fascinating now. I also,
as part of ABER, we run a token fund for old coins and you
know, it's small but growing. It's done very well the last few months,
and it's got a small exposure to me mean coins, and that exposure
has grown way faster than our exposure to well performing tokens. And it's not
an irresponsible exposure, but I think the couple of percent grew to ten percent,
and we're pretty bullish on it. And so you know, look,
I think it's very interesting this idea that you can participate in internet based pop
culture own a piece of it, the same way that my now grown kids
collected Pokemon cards. There was one they wanted that they didn't get in the
packs they were buying. They could go on eBay and buy it right.
Well, if you want to own you know, with or whatever it's called,
dog we've had because you think that you know it's going to be on
the sphere. When they raised three hundred thousand dollars how much they raised to
do it, go buy it right. Just to me, it's no different
than being able to buy that Pokemon card off of eBay, except now it's
easily accessible twenty four to seven globally, which is pretty damn amazing. And
it's also showing us in an inadvertent back to our way that this is this
is a relevant means of understanding how the banking system in the future is going
to work. You were asking about tokenized assets. Well, here's tokenized non
real world assets memes that we made up. They're not securities, and they're
tradable twenty four or seven to some degree. They represent pop culture and other
things. You know, you know, I was following bank pretty closely late
last year, you know, we put a little tiny amount in the fund,
which grew a lot, and they had this like, you know,
twelve days of Bonk miss and all this crazy easy stuff that I thought was
very engaging, you know. And again, you know, do I think
it's going to change the world the way bitcoin is changing money. No,
But it's changing the world in a different way where it captures people's imagination around
pop culture, in a way where you can actively participate. It's not just
gambling. It's more than that. And I think if you just look at
this as stupid gambling, you're missing the bigger picture. You're missing the point.
And that's why I start with this example of I'm an older guy,
so I start with this example of dancing babies from the nineties, because wouldn't
invent memes in the last three years. But we've been able to put value
on memes for people, you know, and and and I think Chris Dixon
talks about this in his in his book you know, reading right own and
and we can own a piece of that meme culture. Now. Yeah,
it's a great, great point. And I've been thinking a lot about this
because initially I had the new jerk reaction of meme coins. This is all
bullshit, Like, what is this? But then I realized it's culture on
the blockchain. It's just human beings tokenizing their ideas and their husurn or whatever.
And I was young, you know, back in two thousands. You
know, I was in high school. I graduated in two thousand and one.
But I remember all these things, and I remember jip Jab and me
and my friends laughing at the different stuff on there. But now, like
you said, this time around, I'm older. I can participate. I
actually have equity and be part of a movement and get rewarded for that.
So it's pretty incredible. You know, we're coming up on time. I
do want to ask you about what are you most excited about for the future
of crypto. There is obviously a lot of hurdles, right, we talked
about it, But what are you most excited about? Look, I think
I think the future here is decentralized. I think the pundulum towards monolithic centralized
power bases has reached its zenith, at least as it relates to the West.
You know, we'll see what happens in China. And I think this
movement towards decentralization is super early, starting with crypto, and you know,
I think it's going to make its way to AI and other things, and
I'm bullish on it. Right I think we need the checks and balances in
the system that transcend governments because right now we have this kind of fourth leg
of government that wasn't meant to be in the US and in the West,
and we need to check against that fourth legs, you know, unchallenged power,
and I think decentralized systems gives power to the people where it belongs.
And I'm super bullish on it. Bill always a pleasure. I'm really excited
for the future updates around ABER. I think you guys are doing something incredible
and what I potentially see as the meeting in the middle of the road with
the regulators, but we'll have to wait and see. But thank you so
much for joining me. Ye good to see you. Thanks for having me