What You Need To Know About The Future of Finance | Griffin Milks

So let's get right into it. I'll start with you, Ben, since for my audience you're more of a new face here. Tell us a bit more about yourself, your background, and really why you chose to pursue a venture in the decentralized finance space.

Ben: You bet! Yeah, it's great to meet you. Thanks for taking the time to chat with us. So, my background? I'm actually a recovering securities lawyer. I practiced law for about five or six years at the start of my career, helping companies raise capital, go public, and mostly in the oil and gas sector. I was living in Calgary, and then in 2016, I decided to move to Vancouver to get more involved with technology companies. That's when I discovered Bitcoin, and everything changed from there, basically. The rest is history. It was just a great kind of turn of events. Being a lawyer at that time, I saw a lot of what was happening in the space. I got involved with advising some of the first crypto projects in Canada and the U.S. There were some super interesting stuff going on at that time. From there, I just sort of saw the potential of crypto and got out of legal practice and more into building products and really just trying to bring more users into the space. One of the things I noticed really early on is it doesn't matter when you get into crypto. Somebody's always gonna be talking about, “Oh, I've been in this space for two years, or three years, or four years, or five years.” It can be a pretty insular kind of space, and I think the whole purpose is really meant to be inclusive and accessible to everyone. My focus and career in the crypto space has really been trying to bring more users and people into the space.

Interviewer: Awesome! So great strong background in crypto. And on that vein, can you explain a bit more wonderfully really what this new platform's about? Because it's completely new, especially to my audience as well.

Ben: Yeah, absolutely! So, the decentralized finance, or DeFi area, is definitely the highest growth sort of space within DeFi. We've seen, over the last 18 months or so, a lot of activity. A lot of it's focused around decentralized lending and decentralized exchanges, but there's a lot of different applications. People are excited about it because it's the future of finance. It's everything that we could have dreamed of back in 2016 and 2017 for those of us that were in the space that time—a really great application of smart contracts and more efficient, faster, cheaper transactions in a lot of ways. One of the things that we've seen, and I think for any of your audience that has played around in DeFi will be able to attest to, is it's overwhelming to go into DeFi and try and figure out what the hell is going on. We really looked at this from an entry-level user's perspective. How do we simplify this as much as possible and just lower the barrier to entry? So it's all about simplifying and creating better access to DeFi. WonderFi plugs into kind of the best functionality that we see in DeFi that we think users should have access to, and then we really just streamline that process for them.

Interviewer: Awesome. So Kevin, I'm assuming the reason why you're wanting to get involved more in decentralized finance—by the way, DeFi is decentralized finance for anyone who wasn't following—is most likely just because this is such a new space. I saw online you were saying that prior to higher levels of compliance and stuff it was harder for you to get involved in the space. Could you speak a bit more about what your motives are right now about getting into crypto while it's kind of booming?

Kevin: Well, yeah, I'll let you answer that for sure. Right now, it's true, crypto is booming. There's no—it’s particularly getting a remarkable amount of time in social media, in the press, for good and bad reasons. I mean, there seems to be a desire by the popular press to vilify the participants in crypto and pit them against regulators all around the world, and that's simply not a fact. It's great fake news, but it's not the reality. Decentralized finance—the potential of it—is to make the financial services industry far more efficient and less costly to transact, and that's the baseline by which there's so much interest in why I’m certainly involved and why most of us that are participants in financial services have no interest in getting involved in crypto against the regulator. We want the regulator to regulate it like all the other products and services we're involved in.

But let me give you a use case that I've just lived through over the last year that makes me highly interested in getting much more involved in crypto and decentralized finance. We reduced our holdings in commercial real estate over the last 18 months in our operating companies portfolio. It was over a third, and now it's down to eight percent. That generated a lot of cash, and traditionally what we would do is go to cash desks that we work with and look to put that money to work in a short-duration fashion. We were offered 21 basis points of interest—21 basis points—in inflation, which is currently around 2.1%. So effectively, we are losing 2% of the buying power of that cash every 12 months. That is not acceptable. So that forced us to go and look at alternatives in the DeFi space around the ideas of stable coins that we could stake or lend and garner theoretical interest rates of 3.8% to 5.2% based on 30, 60, or 90-day contracts, which is what we attempted to do. Now when I say “attempted to do this,” we can't do that without being compliant to our internal compliance, our external auditors, and reporting to regulators. It took me months to set that up—almost six months, plus three new hires just to get that done at an operating company level—so I could be compliant and structure this in a way that was compliant. Now, it was incredibly hard to do.

So if you think the average person—it's why I invested in WonderFi. I'm really interested in creating an app for people. So if my daughter wanted to put $14,000 to work in a staking program, she's not going to do what I went through. She also has to be compliant; she has to be able to report her capital gains and her interest to the tax authorities. The trouble with the crypto space today is there is no infrastructure for compliance, and that's what WonderFi is attempting to do. It’s to provide all of those services, make it easy to use, consumerize it, commercialize it, and make it a platform anybody can use, and above all, be compliant with tax authorities.

Interviewer: Yeah, so there are a couple of things to unpack there that my audience might need some more context on. First and foremost, could you explain a bit more the idea of a stable coin and then also the process of staking to incur interest on those amounts? Because right now, for sure, we're seeing a level of interest on high-interest savings accounts pretty much null, and the idea of putting money into the equity markets right now, especially when people are trying to save money, is not necessarily the best option for some of my audience members who have asked me. So really, how does that work for staking, and how can someone ensure that they're incurring interest on their amount deposited?

Kevin: I think they should be. I mean, there's nothing wrong with scrutinizing. I'm not telling anybody to put all their money into crypto. I certainly don't do that, but I have increased my weightings, and I'm going to continue to increase. I originally had a target of 3% in crypto, and I think we'll probably be close to 7% by the end of the year in the operating company. But having said all that, let's talk about stable coins. The concept of a stable coin is just to build a coin that's backed by a stable currency like the U.S. dollar, and that's what DAI and USDC do. Now remember these have been very controversial of late because the regulator—think about a money market fund that's a regulated entity. When you put your money into a money market fund at a dollar, there are a bunch of instruments inside of that, that might be short-term treasuries, there might be other things that the regulator looks at; you have to report on it. But stable coins are not regulated yet the same way, and so the regulator has gotten very concerned about these because they've grown from a very small amount. USDC is over $30 billion now, and so there's lots of interest in it. So you have to think of it that way. It's a coin that theoretically is backed by the U.S. dollar, and that's why the regulator is taking an active interest in it.

The idea—and here's how you stake it—if you take $100 U.S. dollars and buy USDC with it, you can then write a contract for 30, 60, 90 days or longer and stake it—or in other words, lend it out for yield in USDC. So maybe you're going to make an annualized basis of 5% paid back to you in USDC. You can take that USDC and convert it back into U.S. dollars, and that’s what some people are attempting to do. Now I'm not telling you that's easy; it is not easy to do. It's very complicated; the average person is never going to do it. I talked about that earlier—the whole concept of WonderFi is to allow—that's one use case. The whole idea of decentralized finance with WonderFi is to allow you to do that in an easy fashion that's transparent and allows you to report your taxes. Because when you make that interest, if you want to call it interest, of that 5% in USDC, that's something you have to report to the regulator, to the tax authorities, and you need reporting standards to do that, and that's what WonderFi is attempting to do.

Interviewer: Awesome! Yeah, so I looked over, obviously, WonderFi, what the use cases are supposed to be, and some of the products that are upcoming. So let's speak about some of those quickly. First of all, there will be a high-interest savings account. So maybe you can speak a bit more about that. So a user comes in, deposits, let's say, $10,000. What could they expect from that type of account?

Ben: So really what we're doing is just providing better access to the most high-value things we see within DeFi. I should clarify, and it’s helpful for me to hear where your users are at with crypto and what's keeping them out of the space. So one of the things we're really focused on is curating the experience. We're keeping people away from a lot of the more experimental stuff that's going on with DeFi—some of the more high-risk assets. Because I think if you read the headlines, you’ll see there's hacks happening where customer funds are being lost and issues like that. A lot of that’s happening on these really experimental protocols. There are other protocols which are audited, tested, they've had billions of dollars of transaction volume go through them—like Compound, for instance, which is one of the most popular lending protocols. What we're doing is steering users toward those avenues because we see them as being more suitable for somebody that's entering the space for the first time.

So on the sort of savings earn product that we have, it's really enabling people to earn on their assets through Compound. For again, users that are new to this space, some might not even be comfortable with the volatility of Ethereum or Bitcoin or some other crypto assets. So having something like USDC—you asked about the concept of a stable coin. It's a crypto asset, but it's tied to the value of the U.S. dollar. So the U.S. dollar goes up or down; it just tracks that. It's not something that's going to change with the price of Bitcoin.

Interviewer: So like someone's not going to deposit $10,000, just for more clarification to my audience here. Someone wouldn't deposit $10,000, and then that $10,000 is highly exposed to the fluctuations of Bitcoin, for example?

Ben: Exactly! It's not at all. It's just tied to the value of the U.S. dollar. USDC was created by Circle, which is a company that's been doing a lot of great stuff in the space. We're partnered with them to offer that product through our platform. To me, that's such a good entry point for people because you get to understand what it is to own and control a digital asset. You're not exposed to the price volatility, and like Kevin's point, you can earn interest on it. That’s why USDC, which is the stable coin, that sort of application is such a good entry point for people that are being kept out of the space. I would be super curious to also hear, from your audience, what else is keeping them out of the space. Because I think one of the things I've discovered from talking to a lot of potential new users in crypto and DeFi is there’s so much information, it’s too overwhelming for them to come in.

Interviewer: I mean, right now especially, so many people have so much access to information about their various different investments and stuff like that. I think it's really just the volatility and the fact that most people still, to this day—there's a lot more information about decentralized finance and crypto, but it's still quite unknown. So, Kevin, you're pretty strong in the world of indexing, though, and I see that WonderFi is coming out with a crypto index essentially. So is this going to be composed of, for example, some of the top coins, or what can we expect from something like that?

Ben: I think that it's important, but I think exposure to just overall—as an investor—many people don't yet know how to get exposure to the crypto markets. I mean, I know there's a lot of excitement out there, but I want to point something out. Much of what's going on in crypto is happening at the individual level, or at the hedge fund level, or the high net worth level, or the family office level. It is not happening yet at the institutional or pension or sovereign fund level. Those customers that I know through my work in indexing have told me there's great interest in allocating to crypto, but no compliance infrastructure that allows them to do it. They have compliance committees, they have compliance departments, they have regulators that oversee them. So the way to look at this is it's so nascent, it’s so early, that if you believe there’s a future of decentralized finance and cryptocurrencies, which I do, you have to make that binary decision: either you believe it or you don’t. There's no—in my view, it's a personal opinion—I'm not telling people what to do, but I see no reason in my own personal position what not to get some exposure while this grinds through the global compliance regulator in every geography.

I think over time, because of the really persuasive argument of reducing fees, transparency, and speed of transactions in just the payment systems and the global currency markets, there’s so much potential. I'm a believer in it, so I see no reason not to participate. And in terms of using WonderFi to get that exposure—I’ll let Ben answer that.

Ben: I think we look at it just like, you know, traditional investors. We’re trying to look at it through that lens. There are traditional investors that want to be able to buy individual assets, get exposure, and pick and choose. Then there are others that just want to enter the market and get broad exposure through an index. That’s a really important point and learning from the traditional markets that we’re taking and applying into WonderFi. There's always going to be people that just want to, in one click, get access to the top 10 assets that are driving a lot of value in the DeFi space. That’s also a very good entry point for new users. I think for anyone that's been in the crypto space during the last five years or so, you’ll know there was a lot of hype around different coins back in 2016 and 2017, followed by a big crash, where really the only things that survived in a meaningful way were Bitcoin and Ethereum. That’s because there’s real value behind those assets. It’s digital gold, and it’s programmable smart contracts.

I think there's a lot of excitement about crypto and DeFi again now. For people that are looking to get into the space for the first time, the same principle should apply: where is there actual value? To me, that's a really good place to focus.

Interviewer: Do you, Kevin, think that once there’s a lot more regulation and compliance around this space, we’ll continue seeing the same level of volatility in, let’s say, Bitcoin and Ethereum—up 30% in a day, down 30% in a day? Do you think that’s something that would continue, or would it stabilize over time?

Kevin: No, I think these products are innocent; they’re very, very early. I think they’ll be very, very volatile if you’re getting involved in owning Bitcoin and Ethereum. The thing I would point out though—and certainly, I’ve expanded my holdings a lot—owning cryptocurrencies is beyond just Bitcoin and Ethereum. There are so many other projects going on in level one blockchains, and level two blockchains, and all kinds of tokens and coins that are very interesting projects specific to different markets, and even the NFT market that’s emerging. I want much more exposure to that too. Volatility will remain, and you’re very astute to point that out—until this thing becomes more of an institutional product. Because institutions allocate one, two, three percent to portfolios, they don’t day trade it—that’s not their interest. They own, you know, I’m speculating when I say this, but many of the people I talk to—institutional owners treat Bitcoin as property, no different than real estate. They’re interested in owning a building in Boston or maybe one or two percent holding of a Bitcoin that they can find that’s mined ethically and mined sustainably—that’s another problem that the industry is facing, but I’m sure it will resolve over time. They’re gonna hold it for the long term.

My plan—and what I plan my strategy with this—is I’m going to disclose my holdings after I’ve... I don’t want to be accused of being somebody that buys some illiquid coin and promotes it and you know that’s not my interest in this. I’m going to say, “Look, here’s what I own.” By the time I finish collecting these positions, there’ll be about 20 or maybe 25 of them, and I’m going to be an investor in these for various reasons. I hope it creates a dialogue of the pros and cons of owning these different coins, tokens, positions, blockchains, level ones, level twos, because I've been working very hard in terms of understanding which of these spaces I want to be a participant in. People call me all the time, asking, “Are you going to own any Dogecoin?” I’m interested in things that have very long-term digital potential, and that’s what I’m going to do. I’m very interested in being part of the community, and I certainly am now, and I’m a big advocate for this.

Above all, my number one thing, if there’s anything I want to talk to crypto about, is I think the real potential is getting the regulator to regulate it, and I want that to happen. Because that will open up the floodgates of institutional capital that will create a lot of value for everybody, and therein lies the challenge. I think the regulator is doing a great job, obviously at different speeds in different geographies. Canada is different than Switzerland, different than Britain, Australia, New Zealand, and here in the U.S., where everybody’s debating when this is going to be regulated. The regulators are making a lot of communications about their focus on this; they’re going to get it right, and they’re the lead regulator globally. So we want them to get it right and encourage them to do so. I think these are very exciting times.

So a platform like WonderFi, that's going to have a certain amount of coins available, and it will all be regulated and fully compliant. Right now, I was looking on CoinMarketCap this morning—there's over 12,000 different projects that someone can possibly buy, you know? Yeah, it’s crazy! So at that point, when, and if—I don’t know right now—there will be compliance, let’s just speak United States for now. Will any of these other coins trading essentially not be tolerated or allowed? Or any platform that does allow the trading of those, let’s say non-regulated coins, will that be something that’s tolerated? How do you see that working?

Kevin: Well, the way I look at it is a regulated coin is going to be worth a lot more to an institutional investor than an unregulated one. So of the universe of 10,000 plus coins, if the regulator starts to regulate, for example, stable coins and says, “This one is compliant, and this one isn’t,” that in itself creates a lot of value. I don’t see a world five years from now loaded with unregulated digital tokens and coins, because the demand for those is going to be a fraction of what the regulated coins would be. That goes for every geography.

The real potential here is to get global regulators in every market—let’s start with Asia, Europe, North America—to say, “Let’s just pick one stable coin and make that a payment system.” Can you imagine the savings we could make in just buying and selling in different currencies like the Swiss franc, the euro, and British pound, or the U.S. dollar? I have to do that anyway because I’m an investor in those countries, and I want to own those stocks in those domestic markets. Well, I get clipped every time by FX traders on both sides of the trade. It’s very, very inefficient, really slow, and very expensive.

The potential of decentralized finance to clean all that up is so big that that’s why I don’t think it’s ever going away. This is innovation in technology and financial services—the biggest market in the world. The potential is massive, and I just think what we're waiting for is regulators to regulate. I’m willing to wait because I know they know the potential is great for this innovation, and I think it's a very exciting time. I’ve said it before, I’ll say it again: to be an investor in digital—it’s a binary decision; either you believe in it or you don’t.

There are many skeptics; I totally appreciate that. I am not one of them.

Interviewer: Okay! So for global compliance then, regulation really comes down to a stable coin being accepted in North America as well as, let’s say, Europe—these countries partaking in a single stable coin, or it has to—

Kevin: Well, no, they could have multiple coins. Each country could have its own stable coin; I don’t know. So that could be a possibility as well.

Interviewer: Yeah, I mean, anything's a possibility. But the core theme here is compliance, and it’s regulatory, governed by regulation, because that’s the only way you’re going to get institutional money. There are no cowboys, you know? This dialogue that’s occurred—that the popular press wants to say that “Kryptonians” or the founders of cryptocurrencies want to wage a war on regulators and never want to be regulated—that's not true. That’s simply not true. The crypto community wants to work with regulators so that they can become an institutional product, because that’s where the real capital is. That’s the challenge and the opportunity in today's digital markets.

Interviewer: Excellent! So Ben, right now utilizing crypto, I hold some various tokens and such, but actually using those on a day-to-day basis is, of course, not something that I’m doing. Not many companies accept it or anything. When do you think there could be a possibility for this becoming more of a used currency in the day-to-day transactions of most people? And right now transactions for doing that are also extremely high.

So, yeah, when do you think we could see an outlook for that?

Ben: I think it’s going to take definitely more adoption for us to get to that stage where we can see payments on a day-to-day basis through crypto. Again, if we rewind a few years, the expectation was that Bitcoin would be the new form of payment, and obviously, that dialogue has changed a lot. It’s pretty universally accepted now that Bitcoin is a store of value. Like Kevin said, it’s property that investors want to hold.

But there are other kind of assets in the space I think that provide— you know, that have lower transaction costs, or even things like the Lightning Network on top of Bitcoin that brings down the transaction costs and makes it more realistic to use that as a day-to-day payment. But we’re going to need to see more adoption. The stat right now is that around 1% of the global population owns or holds crypto. I think we’re going to need to see that number go up significantly.

Again, a gaining item for that is regulation—not just for institutions, which Kevin’s talked about, I think for a lot of retail users we talk to. Regulation is something they see in headlines all the time, right? It’s like China crackdown, SEC, and so on and so forth. I think that keeps retail out of the space—not early adopters, like early adopters are in regardless of what the regulators are saying, and they’ve been in the space for a long time. For the next part of the market segment to come in, the market needs to mature quite a bit more. I think that’s really through—aside from regulation, there’s also education that needs to be done. It’s great like, you know, people like you being able to have a voice and share, like, you know, some of the barriers and opportunities and things like that for people getting into the space. It’s super important.

Interviewer: Great! How much time do we have left? Because I have a couple more questions I’d like to run by you.

Kevin: I could do another five minutes.

Interviewer: Okay, awesome! Most of my audience is between the age of 18 to around 35, and I do also have some older individuals. Typically speaking, as people get older, they start allocating a bit more of their portfolio towards fixed income, things of that nature. Do you think that moving towards retirement, an individual who is, let’s say, 40 or above right now should wait to utilize a product like an index? And/or maybe even use a high-interest account like that to gain diversity towards cryptocurrency? Or should they potentially even just buy coins specifically like Bitcoin or Ethereum?

Kevin: Well, the mantra that I’ve lived by that’s really saved me over the years through volatile markets is the idea of diversification. Everybody defines that in different ways, but my mother taught me a very basic metric that I’ve still used today: never have more than 20% in any one sector of the economy. And there are 11 sectors, including real estate. I’d like to argue it doesn’t exist yet, but over the next decade, cryptocurrencies will become the 12th sector of the S&P—it’s my own personal view. So you never have more than 20% in any one sector, and never more than a certain percentage in any one stock or bond. So, you could apply that to crypto as well.

For me, getting exposure to crypto—if I’m successful by the brand in our operating company portfolio—getting to 7% will be made up of a large portfolio of different cryptocurrencies, tokens, coins, level one projects, level two—just a really diverse portfolio. As I mentioned earlier, I will disclose that when it's built, so I can hopefully have a dialogue with people that are interested. I’m certainly getting questions every day about what I own, and I really do find it distasteful this idea that people create these liquid coins. You’ve talked about 12,000 coins—well, the majority of those are never heard of, and somebody’s trying to go online and promote them, which I just find distasteful. I won’t participate in that kind of thing.

But the whole binary decision for anybody aged 18 to 40 in that range of your viewers is to make that decision, the fork in the road—the binary decision: am I going to participate in cryptocurrencies or not? Yes or no. It’s a simple yes or no. If the answer is yes, diversification in my view is what you want to do. You don’t want to just on Bitcoin or just on Ethereum. There are many other ways to do it, so it really comes down to personal preference—well, not preference, but the idea of if you believe in the space or not.

Interviewer: Awesome! All right, and one last question I had—a couple people asked me specifically for this interview—whether or not, right now, we're talking about how Bitcoin is like gold 2.0. Do you still view—do you think that gold, physical gold, still has any place as a hedge against inflation when we have options like crypto? I had a couple people ask me that.

Kevin: Yeah, and I get asked that every single day. I still have a 5% weighting in gold, and I use—I pay for storage of gold bullion and I also use a couple of ETFs to rebalance the 5%. But, you know, as I said earlier, crypto will probably eclipse that in terms of size of portfolio weighting. Because I’m starting to view crypto as a sector, it’s my personal opinion. Gold is a 5% weighting; it’s an asset. As you know, it’s not easy to stake gold or make interest off gold—it's just a hedge against inflation in my view, and it’s been around for 2,000 years; the Romans used to hoard it. So I have no intention of dumping it; it’s just going to remain there.

We’re so early in crypto, but I view crypto as a productivity tool. Bitcoin is an asset like real estate, but level one blockchains—those are productivity tools. I’m going to be working in the watch industry, creating NFTs for watches so that I can have authentication associated with my watch pieces. So there are so many different use cases. For me, it’s a very exciting time, and I just want to be an investor in—not everything I’m going to invest in is going to work, obviously, but I have multiple investments, and I probably spend 60% of my day looking at new crypto or blockchain or smart contract opportunities in just deal flow. It’s an incredible time. It’s like the dawning of the internet, except in a whole new space.