Kevin O'Leary's Crypto Journey: Bear To Bull Shark | Bankless podcast

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Kevin: Welcome to the show! How are you doing, man?

Interviewer: Very good, thank you very much. Hey, so you are in Washington right now. That's why you're all suited up and looking spiffy. What's the conversation in Washington? What are you there to do?

Kevin: Well, as you know, the Lummis bill has dropped a couple of hours ago. It's been long awaited. This is a bipartisan effort. Very important. It sets some parameters around whether, you know, chains or commodities or securities. It contemplates all kinds of different attributes, such as stablecoins. It's important to get this off the ground. This dialogue has been sorely needed. But it's not the only bill. There's also the Hagerty bill, the Toomey bill, other initiatives going on. So you've got a lot of policymakers finally addressing this issue, but for the first time, basically knowing that there's a huge institutional demand waiting to get involved when they finally bring policy forward. I'm just here to be part of it. There’s many private citizens involved. It's important to get to Washington, important to talk to these leaders, important to give your ideas. They're basically soliciting the industry, and I think that's important.

Interviewer: Well, Kevin, thank you for being there and representing all of our interests and the interests of the crypto industry as a whole. I just want to pick your brain a little bit more about how you are trying to move the needle yourself.

Kevin: Yeah, you see, Cynthia Lummis and the bill, Cynthia Lummis and the bill is exactly the kind of legislation that we need to promote the merits of this crypto industry. I'm wondering, like, what do you think that you can help do when you are in Washington, and how are you helping move the needle there?

Kevin: So, you know, what I’m suggesting — and I'm just one voice, but I try and say this over and over again to policymakers — is let's pick one thing. I mean, the crypto universe is so broad. It's so huge. There's so many different things going on at the same time. Let's bring policy on one thing and get that done, and what I’d like that to be is stablecoins. Because as a payment system right now, it would be very, very productive to bring forward some policy on stablecoins and let the market compete.

Now, I personally prefer ones that are backed by hard assets like the US dollar, but there's many ideas out there—some work, some don't. Obviously, what happened with Luna was a bad outcome, but that's okay. This is an evolving industry, and we're trying different ideas. But the need for an international payment system is so huge. It's such a huge opportunity to save costs, to provide transparency, auditability, liquidity, speed—all of those things! That's what I’m suggesting: let's pick one thing and bring policy on stablecoins, let’s nail that, and then we’ll move into Bitcoin, we'll move into blockchain, we'll move into other things, but NFTs.

Let’s nail one thing that would feel good for Congress to tackle, because they’ve been largely silent on crypto. We’ve had no clarity in this space, and I'm curious, since you're there in Washington, Kevin, you're kind of plugged into some of these circles. A lot of people in the crypto industry, the crypto natives of the world, are somewhat skeptical of Washington. Like you mentioned Washington, you mentioned Congress, and they just kind of recoil, like, we don’t need government, sort of thing. We’re more on the side of, you know, we want governments to bring forward sensible regulations so that America won’t miss out on crypto and they won't miss out on DeFi and all of the innovation—not for the sake of DeFi, but for the sake of the United States.

Let me ask the question. As you're in Washington, you're looking at the Senator Lummis legislation and some other legislation, are you optimistic that they're going to get it right? Like, do they actually understand crypto this time? What do you make of this bill and similar efforts?

Kevin: They don’t need to get it right. They just need to get it. In other words, we've got to move forward on something here. And I’ll tell you why. For all of the people in the crypto universe—and there are many—that don’t think we need regulation, let me point something out that would get everybody on board. It's a very simple quantum mathematics, and here's how it works.

The majority of invested capital on earth is held by sovereign and pension plans, about 90-plus percent of it. They own zero crypto. Nothing. And so, for all the excitement about Bitcoin—800 billion—that is absolutely a giant nothing burger. It is totally irrelevant. It's not held by any institutions that matter.

Now, I'm an indexer, and I've talked about this many, many times. There are many indexers in the world, but we service sovereign funds, pension plans. Let’s say you’re an oil-rich country in the Middle East, you’re making 250 million cash a day, US dollars, in oil revenues. You don’t want to reinvest in oil; you want to invest in every other sector. So they’ll go to an indexer like me and say, "Index the S&P 500 less energy, less airlines." That’s the kind of index we do.

And so we see these fund flows—trillions of dollars of fund flows—every year just going through the system. Indexers see that every 24 hours. And I always ask these institutions and these sovereign funds, "What allocation would you put into Bitcoin? Just one Bitcoin, which is the granddaddy digital asset. Everybody knows that. What would you allocate if you could?" And they said, "Well, we can’t because our compliance department won’t allow it, because the SEC hasn’t ruled on it yet, and Larry Fink doesn’t like it, and he’s our biggest money manager," and all those other reasons.

But they would allocate 50 to 100 basis points. Now, when you’re running a trillion-dollar mandate or 800 billion-dollar mandate, which is some of the size of these funds, that’s a ton of money, and that’s a huge amount of demand that would come into the market. As Bitcoin prices went past that one percent allocation, let’s say they’d sell it back down to one percent. But, just importantly, if it dropped below one percent, they’d buy it back up. So, there’d be an internal bid forever. The volatility would drop dramatically. There’d be price appreciation in Bitcoin. It would be good for everybody involved in crypto, but we can’t do it without policy.

So everybody should just get off this "let's be rogue, let’s be crypto cowboys"—forget all that crap. It’s time to get this real and get a tremendous amount of capital going into crypto because it's policy, and it gets regulated—and it's good for everybody.

Interviewer: Kevin, you’ve talked to so many people across the whole world, the whole landscape of investors and regulators. And I've actually been keeping an eye on your trajectory in the crypto space, going from the 2017 skeptic to the 2021 bull. And I'm wondering, as you are now talking to so many people and as the world becomes peaked by crypto and interested in crypto, what’s your generalized pitch for why crypto is here to stay? Why crypto is good? Whether you're giving it to a legislator on Capitol Hill or a hedge fund manager with a billion dollars in their portfolio—why crypto? Why is crypto good? What do you have as like a generalized pitch for people?

Kevin: Because the largest economy on earth is financial services. I think crypto will be the 12th sector of the economy within 10 years because it adds so much liquidity, so much productivity, so much transparency, so much auditability. It's so much better than what we're doing right now, which is so expensive and so slow. If I want to transfer capital over to Zurich to buy Nestle stock and Swiss francs, it takes me days and it costs me a fortune, and it's incredibly inefficient. I could do it in two seconds with a stablecoin, and I can't yet because we don’t have policy on both sides of the ocean that let me do that. But it's coming one day.

I think crypto and blockchain and the services and financial transactions, microtransactions, all of it are going to lend itself to this blockchain auditability, transparency, the ledger system—it all makes sense to me. And I think regulators are starting to figure that out now. As an investor, I don’t know which of these chains is going to win. Is Solana going to be Polygon? Should I be in Poland? What about, you know, all of the others—Ethereum, of course, the big one right now, but too slow for many, many financial services? What's going on with, you know, Helium and all of these different ideas out there?

So my strategy is to do the same thing I do with stocks: get diversification. I own 32 positions, 32 chain projects, 32 different coins and tokens. I have no idea which ones will win over the next five years, but I don’t need them all to win; I just need a few to win, and that's what diversification is all about.

I've made some investments in the infrastructure. You know that old adage in the gold rush? You were better owning and selling picks and shovels and jeans than you were trying to find gold, because that was very hard to do. The infrastructure of crypto—our companies like FTX, I'm a shareholder. Circle, I’m a shareholder. Wonderful, I’m a shareholder. Immutable Holdings, I'm a shareholder. I've given money to all of these projects because they make a lot of sense to me, and I use them all. And they’re centralized, decentralized, there's stablecoins in there, there's the FTX platform, which is the first compliant institutional platform I can find that my auditors and my compliance department finally agree to let me use to store value.

And these are the kinds of things that really matter to me, and I have to disclose, yes, I'm a shareholder in FTX, I'm also a paid spokesperson. So I'm, you know, I'm eating my own cooking, but I'm also talking about the merits of their compliance platform.

Interviewer: Yeah, Kevin, so I'm interested in that comment you just made. I like them, and I use them all. All right, so here's the position of so many in Washington, so many of our lawmakers, so many that are kind of outside the crypto space is probably similar to your position in 2017—your pre-conversion position on crypto, which is like, I don’t understand this. I don't even like it. It seems like a bubble. I don't know what your takes were back in 2017, but I know you were bearish. You were negative. Can you talk, as somebody who has been converted, who has started to use these products in your everyday life? Can you speak to that skeptic? What do you tell the skeptics in DC or in the finance space or, you know, the thinks of the world? What do you tell them about crypto? How do you explain it? How do you convince them?

Kevin: So, I'm an investor. I'm constantly trying to find a way, the path of least resistance, to invest my capital, redeploy it. I have to look around the world for opportunities. I have to be diverse. And you know, crypto, to me, when it was being frowned upon by regulators in a very harsh way—if you recall, 2017 was probably the height of when regulators were clamping down on tokens and different ways to tokenize assets like hotels and everything else back then—and as a result, I'm so involved in the traditional financial services market where I'm highly regulated. I have to report almost monthly to both my internal auditors, compliance department, and external regulators all around the world. That's the world I'm used to, and I saw no relief coming from regulators.

What turned me around, what changed me completely, was when the Canadians — the OSC — granted the very first crypto exchange license attached to a dealer broker, a compliant platform. It wasn't rogue anymore. They told Canadian citizens, "You can transfer your cash out of your bank into this centralized wallet, and you can trade Ethereum, Bitcoin," and slowly more and more coins were added. Then they announced in Canada the very first Bitcoin ETF, then they announced the very first ETF that was for Ethereum. They were moving forward with policy that was regulated, and I immediately started investing in that because I saw it coming. I saw the writing on the wall, and I've also made the assumption—this is a personal assumption—that the OSC, the regulator that granted that world order for the first time a dealer broker, was well in touch with the SEC and other regulators around the world. They talk to each other every day.

Maybe Canada was being used as a petri dish or an experiment to try it, and it’s been wildly successful. That's when I got involved in Wonderful. I became a shareholder there. Wonderful, I bought Bitbuy, which was the first regulated exchange. Now that company has 800,000 registered compliant crypto accounts; it’s the model for the rest of the world.

So I got on a plane, I went to the United Arab Emirates, Switzerland, England, South America, and I started showing these different regulators: look what the Canadians are doing. Can we do the same thing here? And that's exactly how I'm spending my time now—trying to open up these new markets with the policies that have been put in place, tested, and proven to work in Canada.

Interviewer: It's always wonderful to see just the well-informed investors of the world, with insane respect and renownedness from their communities, go down the crypto rabbit hole and turn into crypto evangelists. And Kevin, I was watching a podcast you did with our friend Anthony Pompliano, where apparently earlier in your guys' relationships, he said that he had 50% of his portfolio in Bitcoin, and you thought he was absolutely crazy for that. But that was before you really went down the crypto rabbit hole.

So I'm wondering, over the years, as we’ve gone into the 2020 to 2021 bull market, but now into the 2022 bear market, how has your portfolio allocation into crypto changed? Has it been like up only, as in more and more crypto exposure over time, or has it gone back and forth as the markets have changed?

Kevin: How are you 50 yet, Kevin?

Interviewer: 50, 50 or plus?

Kevin: No, basically, what's happened to me is I've been layering in now for 36 months. I started at two and a half percent, went to seven, then we went past 15.

Now in portfolio theory, if you're running a mandate, such as a sovereign fund, let me give you the rules by which those big boys play, and I'm using the same philosophy for crypto. We have 11 sectors in the S&P 500. Portfolio theory would tell you, "Never more than 20 in any one sector, never more than five percent in anyone's stock or bond." That’s diversification, and that’s basically how 99% of sovereign wealth is managed by indexers like me.

So I’ve done the same thing in crypto. I’ve said, okay, I think crypto will be the 12th sector of the economy in 10 years. I’m going to treat it that way. Now, in the operating company, that means I can put up to 20% of our operating capital into the crypto space. And then I want diversification. So, I’ve basically done exactly that. My largest holdings right now are Ethereum and Bitcoin. That’s not a big surprise. But I also have a big position in USDC, a big position in FTX as an equity, which is a private company. And then on down, Polygon — I got involved with Sandeep. I liked his story. I met him in Dubai, you know, trying to reduce gas fees on top of Ethereum. Makes a lot of sense for India and other countries like that, like what he's doing.

I bought a piece of that. Love what’s going on in all in the Serum project. Solana, I’m a big fan of what, you know, Sam Bankman-Fried is doing. These things all make sense to me. But in the, you know, in the proportions of diversification, now that portfolio, I’d say about eight weeks ago was at 21. Now it’s down at about 18. There’s been a big correction in the market. But you've got to hold your nose and get used to the volatility, and it lets me just position.

I can add a little bit to my USDC. My compliance department doesn’t consider USDC a money market or a proxy for cash; they consider it a highly volatile equity. That's because of what's been going on in stablecoins, so I'm limited to a five percent weighting there. And I’m trying to get some policy while I’m here in Washington. Remember, we go right back to that—give me one thing, just give me policy on stablecoins, and let the market compete, and I could put a lot more into that space because I've got a lot of cash on my operating company balance sheets and I have nowhere to put it, and inflation is six, seven, eight percent, and I'm getting 45 basis points in a bank—that's really crazy. I could do a lot more with stablecoins.

Interviewer: So that's funny. So you're saying even compliance is trading USDC, which is a stablecoin, which is one-to-one, pretty much one-to-one backed with money in a bank—actual dollars in a bank. You're saying that they're still treating that as a speculative asset?

Kevin: So, that’s the challenge. That’s a challenge. You can’t get your compliance department on board because they say, "Show me the policy." Well, there is no policy—that’s the problem. Is it FDIC insured? We don’t have that yet. We’ve really got to get this stuff nailed down. That's why I keep telling everybody, get behind policy, because you're going to get a whole lot more capital into this space.

There’s 52 billion already in USDC. Tethers out there that broke a buck, so I can't touch that. And, of course, Luna was insanity. Well, we now know algorithmic-based stablecoins? Well, they don’t work so well, do they? So the market will figure that out, and they'll basically adjust accordingly based on risk and return.

So there are a number of different ways to get upside exposure in the crypto industry, and I would imagine that you take every single way that you deem legitimate. And like, some of the easiest ways obviously are just buying the crypto currencies like Ether, Bitcoin, which you said I think are your perhaps your biggest exposures. But there are also other strategies too, like yield farming with stablecoins. But then there’s also buying crypto equities, like FTX or Coin stock, but then there’s also angel investments and private market investments. And I’m wondering how you weight all of these things and if there are any other categories that I miss that are worth mentioning as well. Just how do you weight these things with your attention and with your capital?

Kevin: Well, obviously, when new projects come to market, I’m very fortunate I see pretty well every deal, and there's a reason for that. There’s a direct correlation between market capitalization and telling the company’s story. Everybody knows I have millions of followers, millions of investors, and I like to talk about the cooking I eat. I mean, I don’t invest in projects that I don’t use. I don’t care whether it’s a product or it’s a crypto product or whatever. You don’t see me in a lot of these very speculative tokens because I don’t use them.

I’m looking for value there. I’m intrigued by the NFT market in authentication of physical assets around the watch industry. That’s a space I’m very involved in—that's a private investment along with other giant collectors and watchmakers and horological societies. But that’s just my personal interest, so it’s the things that I really want to dig into that I invest in.

But you're right, there’s a lot of room for private projects because, you know, I look at it this way: you talk to any grad coming out of MIT or Waterloo or Temple or McGill or any of these really high-end engineering colleges and universities, and a third of the engineers all want to go onto the blockchain. You can’t take that much intellectual capital and not expect some incredible outcomes three to five years from now. So you want to invest in some of these people. These are the smartest hands over keyboards all around the world. They’re not working for the traditional industries; they're on the chain.

And that means there’s going to be a lot of productivity there. That’s what you want to bet on. It’s like betting on Steve Jobs when he was just drawing fonts with a felt pen—that kind of idea. It’s the same thing going on now. These guys are going to be big productivity for the economy, and you’ve got to put your money behind them.

But some people will say, "Kevin, but look at the bear market! Okay, the bubble just burst." They’ll point to Luna, of course, but then they'll even point to Bitcoin right now, which is down 60 percent, Ethereum down 65 percent, the Solanas and the Polygons of the world down 85 plus, and they’ll say, "Look, you know, this asset space is too volatile. Normal investors, you know, shouldn’t get exposure to this space. It's too risky." Some will even say, as this bear market continues, I'm sure that crypto is dead the way they said that in 2018 and 2019.

What's your response to those kinds of criticisms? And should we be concerned about the bear market?

Kevin: I think I read a quote by the way—Kevin, would you called it nightmarish. And I think for people, it's their first time on the merry-go-round here—the crypto merry-go-round. This is a ride for them that they don’t want to be on. They’re starting to get nauseous. What’s your thoughts on the bear market, and what do you tell people about this?

Kevin: Well, you know, I give an example that everybody can relate to because in the early years of Amazon, 18 years ago, I was a shareholder both in the equity and in the preference shares they used to have in those days. That stock corrected every 12 to 18 months between 38 and 58, every single year, over and over and over again. People just couldn’t get their heads around what Amazon was doing, and it continued that way for a decade. It’s no different than what's going on right now with Bitcoin and other cryptocurrencies because there's no institutional demand yet for the product.

People keep saying institutions are involved, but they're not. Not at all. So if we get one of these bills passed here in Washington, which is why I’m here, I would love to see this agenda item move forward so it can be decided on after the midterms. I'm sure Biden's very, very busy on other issues right now, but this isn’t going away. These senators and congressmen and women know this, and that's why they're bringing these and advancing them. All of these senators are all over cable TV today, talking about this bill dropping.

And it’s not the only one, and certainly many of them will be discussing it in the weeks ahead. But the point is, as an investor, do you want to be ahead of this or behind it? Because I think what happens is you get a binary increase in the value of crypto the minute people even sense policy, and that’s going to happen sometime January, February, March. So I want to be positioned before then. You don’t have to, but I think it’s the way to go in terms of being early, and it's like being involved in the internet in its most early days.

The same thing is going on here. Long term, it’s a great investment. But boy, volatility? Yeah, it’s tough—fifty percent up, fifty percent down, sixty percent swings. Well, that was Amazon 12, 15 years ago. Now, it’s Bitcoin today.

Interviewer: What would you say are the obstacles preventing good legislation from getting through in Capitol Hill? Like, why isn’t this a slam dunk? Because if you're in the crypto space, like, we're just asking for like very basic good legislation, and from our perception, it's obvious what needs to happen. And this says there are some crazy low-hanging fruit things like stablecoins perhaps not being securities that seem so trivial. What’s getting in the way? Like, who's getting in? Who's presenting obstacles for us? Like, why can't we just have a slam dunk legislation around crypto clarity?

Kevin: One word: education. This is the most misunderstood sector of the economy that’s ever existed because of the complexity of how it works. Basically, policymakers do not understand it, and when you don’t understand something, you tend to mistrust it. It requires education. It’s taken me years and a lot of hours of reading and a tremendous amount of travel to get to the place where I’m comfortable making these investments now and understand how this works. But that's not easy to do.

And the whole idea of a centralized and decentralized wallet—very many people don’t understand the differences between it, and yet you need both in the crypto environment. You really want both. One of the biggest investment theses I have about investing in Wonderful was it gave me both. There’s a decentralized wallet; there's a centralized wallet. And I don’t want to lose those customers. If all of a sudden you started by setting yourself up on Bitbuy, which is the Canadian regulated centralized wallet, and all of a sudden you decided you want to have a decentralized wallet with your NFTs in it, I don’t want to lose you as a customer. I spent hundreds of dollars acquiring you. I want to offer both with a know-your-customer platform that provides the compliance.

That’s what they're building up there in Canada, and that software itself and all the millions of dollars of development they’re doing is going to be cookie-cutter for other markets, like potentially the Middle East or South America or Switzerland or England. That’s the whole idea of being part of these things and pushing these projects forward. But it’s education that’s holding everybody back. We’ve got to simplify this stuff.

Most people, the first time that try and set up a decentralized wallet on, let’s say, MetaMask, lose their money because they don’t know about security of the passphrase. And that’s an important lesson to learn. And that’s why I tell people, start with $200. Don’t go crazy. Figure this stuff out slowly. Learn about security. Learn about password protocols. Learn about centralized versus decentralized. Check it out slowly—baby steps into it—then you can put up real money.

Interviewer: So what is your advice for someone who wants to get educated? Is it just that you have to start using these applications? I mean, I think a lot of people in the early days of the internet didn’t understand the internet until the first time, you know, they typed in a Google search or they received an email or something like that. That’s how the internet was propagated. What’s your advice for someone who’s new to crypto and wants to get started? Is it just start using these protocols? How did you school up on it?

Kevin: It was really out of need. I mean, USDC, for example, and what Circle has done with their corporate accounts. You know, I was very early on that platform. Spent a lot of time with management, talking about how we could make this work with compliance departments, how we could make it work with audit firms, because the first thing that happens when you take a new asset class and you call up your auditor or your regulator or your compliance department, say, "Look, I want to transfer five percent of our cash into USDC," they say, "What?! Where's the compliance infrastructure that marks to market that at four o'clock when the market ends?"

I said, "There is no market end for crypto. There’s no beginning; there’s no end. It’s just trading 24/7." And there's no infrastructure, and that is very uncomfortable when your compliance department is used to just looking at your mark-to-market positions at 401 and saying, "Hey, that position is a six percent waiting, it's got to get sold down to five tomorrow morning," or "You put too much leverage on that position." That’s how the world works. We don’t have the infrastructure yet.

And so I tell people, look, start slowly. Now for me, USDC has become a very powerful payment system. More and more, time is going by, investors are willing to take it. I’m willing to take it when people want to pay me for goods and services in other countries. I say, "Give me USDC, if you're allowed to. Don't ACH me any capital out of a bank. Don’t send me Swiss francs, euros, or British pounds—that's just a total headache for me. Go figure out USDC, and I’ll take the risk myself on it."

But, you know, that’s going to take a long time to happen. I tell everybody this is the future of currency. It's the future of payment systems. It's the 12th sector of the economy. Get over it and start learning about it. You know, before the pandemic, if you were 65 years old, sitting in a condo in Miami Beach, and you never used your phone to order groceries, well, now you do, because otherwise, you would have starved to death. You couldn’t go to the grocery store. You figured out how to download one of those apps and start ordering food, and now you're totally hip to it and you live your life on your phone, and that was because you had to.

The same thing’s going to happen in cryptocurrencies.

Interviewer: Kevin, I just got to say, man, I love that you're in the space! Like, on behalf of David and me, I’ve been doing crypto education, doing this podcast for a long time, and you are reaching an entirely different demographic than we will. And it's so cool to have you saying the same thing, using different words, and reaching other people about this. And I think that’s your skill set—it's really telling stories and spreading a narrative.

I'm curious: where do you see your brand, the Mr. Wonderful Kevin O’Leary brand in crypto? What do you hear? What are you here trying to do? Is it to spread awareness? You're trying to build product? What’s your brand in crypto going to be?

Kevin: My brand is about compliance. My brand's about institutions. My brand's about allocation and diversification, about investing. And so I'm able to have those conversations with regulators. They know me already. I can get the meeting in any country in the world. I can meet the head of a bank in the Middle East and sit down with the CEO and say, "Look, here’s a compliance strategy to bring your world into crypto. Let’s work together because I’m a hundred percent compliant. I am not a crypto cowboy. I’m talking about bringing the real money into crypto—the real sovereign wealth."

And so for everybody that used to criticize me about saying, "Let’s get this thing regulated," now they understand why. They want to get it regulated too. It’s the trillion dollars that’ll come into this market overnight when it’s regulated, and I’m just one of those people out there trying to make that happen.

So yes, it’s baby steps, but if you’re sitting down with the head of a bank that’s got five million accounts and a trillion dollars sitting in those accounts, they’re not interested in being a crypto cowboy either. They don’t want to be offside with their regulator. They want to work on a compliant basis and make sure their internal compliance is completely 100% nailed down so they can report to their regulator and not be offside. That’s the kind of people I want to work with. That’s what my brand's about, and I am on that mission, if you want to call it that, for the benefit of everybody in crypto.

Because if we can get this policy nailed down, everybody benefits. Everybody’s values go up. I’ll bring that to the table. Everything goes up in value because the real money will come in.

I alluded to earlier how you were skeptical about crypto in 2017 and 2018, which really makes sense, because that era of crypto was really just the Wild West. Famously, we call ours many people in the crypto industry "crypto djinns," like crypto degenerates. They’re gambling all their money, they’re not paying attention to securities laws. But now going into 2020 and beyond, like we have actually figured out fundamental utility that has attracted fundamental investors like yourself into this space.

And I think what you’re telling me, Kevin, is that crypto is ready to really grow up and really get mature and really start bringing in capital from people who would have been turned off by the Wild West of 2017 and 2018 but are turned on by the more sustainable yields, the more sustainable utilities and use cases that crypto brings.

You alluded to it a little bit, but I’d like you to go into it a little bit more: you know, prices go up when crypto matures because it brings in not just billions of capital but trillions of capital from all over the world. Can you just picture—give us that—paint that picture of crypto in 2023 and 2024 as we get regulatory clarity, as we get more comfortable with bigger institutions? Why is this good for the crypto industry, and why does it need to happen for us? Make us bullish, Kevin.

Kevin: Well, look, I’m going to lay it out the way I see it and the way I’m investing. All right, what’s going to happen is nothing before the midterms, but we’re getting close. After the midterms, when the House is settled—and who knows what it’ll look like, but I have a pretty good idea—we’re going to get some policy.

In my opinion, personal opinion here, is going to be around stablecoins. And here’s what it’s going to look like. It’s going to be an open competitive market, just like you can find a money market at Schwab or a money market at Fidelity or a money market at some other financial institution that are slightly different. You know, stablecoins are payment systems, but they’re also stores of value. If you’re willing to stake them out, you can make four and a half percent on an annualized basis on a 30-day contract today, right now, on USDC and other stablecoins.

But here’s the policy I see coming. It’s going to look like this: 30-day audit on the assets underneath it. You can bring any kind of stablecoin you want, but there’s going to be a 30-day audit and what’s in there; no assets supporting the token or coin with a duration more than 12 months. So if you’re going to use T-bills, they’ve got to be short duration, probably average of six months duration, and that’s very much like a money market is run and completely FDIC insured.

There may even be one or two of these stablecoin operators that apply to become a bank and become FDIC insured, in which case they would get trillions of dollars. And the reason this is going to happen first, why the stablecoin market will happen first with policymakers here in Washington, is that it perpetuates the US dollar as the default currency of the globe. When we get that worked out, the US dollar becomes King dollar in perpetuity. Even other countries, even other sovereigns are willing to bring tokens out backed by the US dollar because they know in terms of attracting people to use them and store them and save them, they’ve got to have the king dollar.

This is why policymakers should get off their you-know-whats and get this thing done, because we don’t want the Chinese doing that with the yuan. I would never buy the Chinese yuan as a stablecoin. Why? Because I know they’re watching it. I don’t want them watching my dollars, and I don’t trust that currency. I trust the US dollar. So I wouldn’t like to find out the Swiss franc did that before us. We’ve got to get this thing done and make the US dollar King dollar all around the world. Everybody will be happy with a product that is backed by the US dollar, one to one, is liquid, transparent, you can transfer immediately with a full ledger.

And finally, I could say to my compliance department, "Look, we finally have policy. Let me go to a ten percent weighting in this, as opposed to locking me down at five." And they probably could get there because they may consider it a cash equivalent at some point, very similar to money market accounts that very rarely break a buck. That’s the whole idea, and that’s what will happen next. Then we’ll get policy on Bitcoin, then we’ll get policy on other chains.

Okay, we’ll start to debate, is Solana a commodity or Solana security? What about the NFTs? One by one we’ll knock these puppies down, and that’s the way it should be. But we don’t want to try and solve everything all at once; we’ll never get it done. We’ll never get it done. One thing at a time. Let’s start with stablecoins.

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