Latest / The Starting Block / BitGo CEO Mike Belshe on Saylor, Stablecoins & the Crypto Wars

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BitGo CEO Mike Belshe on Saylor, Stablecoins & the Crypto Wars · The Starting Block

2:11
Welcome back to the starting block.
2:13
It's Wednesday, happy hump day.
2:14
I hope you're doing well.
2:15
Very, very interesting movements in
2:17
the markets over the past 24 hours
2:19
and we've got a jam packed show to
2:21
talk about all of these things and
2:23
more. We're gonna start with the
2:24
block briefing today, very, very
2:26
quickly and then we're gonna be
2:27
joined by Mike
2:30
Balshi from Bitco
2:31
to have a very wide ranging
2:33
conversation. I'm really looking
2:34
forward to that, but first things
2:36
first, let's get into the block
2:37
briefing and I'll give you a rundown
2:39
of what you need to know.
2:40
From the news cycle in the last
2:42
24 hours, our first
2:44
story comes out of the UK.
2:46
We start in Westminster, where
2:48
reform UK leader Nigel Farage
2:50
says he's resigning his seat in the
2:52
House of Commons and immediately
2:53
standing again.
2:55
Farage has confirmed he's the
2:56
subject of two parliamentary
2:58
standards investigations into crypto
3:00
link gifts, including from crypto
3:02
investor Christopher Harbourn.
3:04
He's calling the probes a foul means
3:05
by his political opponents, and says
3:07
he wants the voters of Clacton
3:10
to decide his future in a
3:11
by-election, though that vote could
3:13
take weeks or even months to
3:14
arrange.
3:15
Faraj won the seat with over 46%
3:18
of the vote back in July of
3:20
2024.
3:21
Our next headline today, over in
3:23
Washington, the SEC has
3:25
published its 2026
3:27
regulatory agenda and
3:29
crypto is one of its biggest
3:30
priorities.
3:31
The agency is laying the groundwork
3:33
for rulemaking before the end of the
3:35
year. With a blueprint to modify
3:36
its rules for exchanges and
3:38
broker dealers.
3:39
On the table, amending the rule that
3:41
requires brokers to hold a minimum
3:43
of liquid capital,
3:46
another designed to protect customer
3:49
assets if a broker goes insolvent
3:51
and changes to record keeping
3:53
requirements.
3:54
All three, the agency says, are
3:56
aimed at clarifying how those
3:57
rules apply to cryptocurrencies.
4:00
Then in the UK again, a big move
4:02
from Coinbase in the U.K.,
4:04
the exchange has received
4:05
authorization from the Financial
4:07
Conduct Authority to
4:10
provide investment services, its
4:11
largest U.k. Product expansion since
4:14
it entered the market in that
4:15
country.
4:16
Institutional and advanced traders
4:17
get access to crypto equity and
4:19
commodity perpetual futures while
4:21
retail users will be able to trade
4:23
equities on Coinbase for the first
4:25
time. The license sits alongside
4:27
Coinbase's existing UK
4:29
e-money license.
4:30
And crypto registration and
4:32
the company says it's another step
4:34
towards its everything exchange
4:36
vision one platform for payments
4:38
trading and more
4:40
then in the us this
4:42
one has turned heads uh and mike
4:44
bolshe was even tweeting about it in
4:46
the last few days vanguard the
4:48
world's second largest asset manager
4:50
sitting on around a twin uh
4:52
12 trillion dollars is hiring
4:54
a head of digital That's it, so.
4:57
If you're in the industry, you
4:58
better dust off your CV and get
4:59
ready to send to Vanguard.
5:01
According to the job post in the
5:02
role will lead Vanguard's crypto
5:04
strategy for a personal wealth
5:06
clients, deal directly with
5:07
regulators and help influence market
5:09
standards.
5:10
It appears to be the first time
5:11
Vanguard has hired specifically for
5:13
crypto. That's a notable shift
5:15
for a firm that has famously kept
5:17
its distance, especially with rival
5:19
BlackRock already deep
5:21
into digital assets with its
5:23
spot Bitcoin and Ether
5:25
ETFs.
5:26
The super app race is heating up.
5:28
Gemini has launched zero commission
5:30
stock trading for users in most
5:32
US states, with Nasdaq
5:34
serving as its official market data
5:36
provider.
5:37
Co-founder Cameron Winklevoss says
5:38
the firm started with crypto and is
5:40
expanding into stocks so customers
5:42
can manage their entire financial
5:44
lives from the Gemini app.
5:45
A few places miss out for now,
5:47
including Texas, Illinois,
5:48
Massachusetts, and Alabama.
5:50
It's the latest in a wave of crypto
5:52
exchanges pushing beyond digital
5:54
assets.
5:55
Coinbase and Kraken making similar
5:57
moves into traditional markets.
6:00
Then a legal win for Kraken.
6:01
The exchange's parent company,
6:03
Paywood, has secured a $22
6:05
million arbitration award against
6:08
auditor Mazars USA,
6:10
which abruptly walked away from a
6:11
nearly completed audit back in 2022
6:14
at the height of the so-called
6:15
Operation Chokepoint 2.0,
6:18
likely under political pressure.
6:19
That's according to reports.
6:20
Paywood is now asking DeLuis
6:23
Court of Chancery.
6:25
To enter final judgment on the
6:27
award. The company says the walkout
6:29
left it with years of reputational
6:30
cleanup and millions in legal
6:32
fees with its co-CEO.
6:34
Putting it blankly, an audit isn't
6:37
a favor, it's oxygen.
6:39
And then a story for the
6:41
Ethereum fans out there.
6:43
Tom Lee's Bitmine is still stacking.
6:45
The company behind the world's
6:46
largest corporate Ethereum treasury
6:48
picked up another $70 million worth
6:50
of ETH on Tuesday as
6:52
40,000 tokens across two wallets.
6:54
According to on-chain analytics from
6:56
Look On Chain, with funds flowing
6:58
from hot wallets at Falcon X
7:00
and Kraken.
7:01
Bitmine hasn't officially confirmed
7:03
this one, but the buying fits its
7:05
pattern of weekly disclosures.
7:06
As of Monday, its stash stood at
7:08
5.74 million ETH.
7:10
That's roughly 4.8% of the entire
7:12
circulating supply, closing in
7:14
on its 5% target with
7:16
total crypto and cash of over
7:18
$11 billion on its balance
7:20
sheet. Our final story of the day,
7:22
Jack Mallers' strike has launched
7:24
what he calls a volatility proof
7:27
Bitcoin loans.
7:28
The pitch, borrow dollars against
7:30
your Bitcoin with no margin calls
7:31
and no price triggered liquidations.
7:34
No matter how far Bitcoin falls,
7:36
your collateral stays untouched as
7:38
long as you keep making your
7:39
payments. Strike says it's scrapped
7:40
the loan to value triggers that
7:42
catch borrowers out in a crash.
7:44
There is a catch though, missing
7:46
interest or maturity payments and
7:47
fail to make it up.
7:48
And part of your collateral can
7:50
still be liquidated.
7:52
Bitcoin back lending, but it's
7:54
rebuilt for the volatility averse.
7:56
If you wanna hear more about that
7:59
and Jack Mallers' strike,
8:00
we caught up with him at BTC Prague
8:02
a couple of weeks ago.
8:04
That video is up on
8:06
my account actually.
8:07
So if you just go and search for at
8:09
Gazza Jenks on
8:11
X and swap over to the
8:13
video tab, you should be able to
8:14
find that down the timeline.
8:15
About 20 minute conversation with
8:17
Jack Mallers talking about strike
8:18
Bitcoin lending and of course
8:21
recent goings on at strategy
8:23
and Michael Saylor.
8:25
That's it for the
8:28
block briefing.
8:28
We're going to be moving on to our
8:30
next segment with Mike Balshi, but
8:31
we're going take a very short break.
8:33
Don't go away.
11:39
Welcome back to The Starting Block.
11:40
We are continuing with the show and
11:41
we're gonna amalgamate the market
11:43
pulse and the hot seat today because
11:44
we've got fantastic guests with
11:46
us. BitGo CEO, Mike Balshi,
11:49
who is of course very knowledgeable
11:50
on markets and
11:52
one of the leading figures in the
11:54
industry. So I'm putting you
11:56
in both segments today, Mike.
11:57
It's great to see you again.
11:58
We last caught up at Paris
12:00
Blockchain Week a couple of months
12:01
ago and I think we have a bit more
12:03
time than we did in Paris
12:05
to catch up today.
12:05
So I am hoping to pick your brain on
12:07
a lot of things. But first things
12:08
first, how are you?
12:10
Great, sounds good.
12:11
Good to be here, Gareth.
12:12
Good to see you again, and glad
12:14
to see the shows moving along.
12:16
Yeah, thank you.
12:17
Yeah, it's been an interesting two
12:18
weeks. A week ago, we launched last
12:20
Monday with a
12:21
big interview with CZ live in
12:23
Abu Dhabi. It was a great
12:25
undertaking to get that done, but it
12:26
was really good, and it kind of set
12:28
the tone for the overall show, and
12:30
we've been forging ahead.
12:32
Yeah, I think first things first,
12:35
just in terms of the markets and
12:36
where we're at right now.
12:37
Probably the biggest story in
12:39
the last couple of weeks has been,
12:41
you know, Michael Saylor selling
12:42
Bitcoin.
12:43
Myself and Jordan, my producer
12:45
backstage, were at BTC Prague
12:47
the week after
12:49
he first sold that 32 Bitcoin.
12:51
And then obviously, last week, he
12:53
sold significantly more Bitcoin,
12:55
$260 million worth.
12:57
Quite surprising that Bitcoin didn't
12:59
react sharply to
13:02
that news.
13:03
I want to get thoughts on that.
13:05
Your general kind of thinking
13:07
about Sela selling so much Bitcoin
13:09
now and what
13:11
it all really means for his strategy
13:13
going forward and Bitcoin.
13:17
I guess in terms of guessing around
13:18
the price, I'm not
13:20
one that usually likes to do that.
13:22
In terms of strategy,
13:25
look, there's nobody that's more
13:26
invested in Bitcoin than
13:28
strategy.
13:30
So they're going to figure out
13:33
a good way through this.
13:34
It reminds me a little bit of
13:36
having seen in the past,
13:38
there are market cycles that go up
13:39
and down. There was Netscape way
13:41
back when.
13:42
I remember Netscape, you know, it
13:44
had such a stratospheric
13:46
heights.
13:47
And then, you know, Microsoft comes
13:49
in and Bill Gates says it's a sea
13:51
change. And he comes completely
13:52
after it uses a full strength of his
13:54
monopoly to try to crush Netscape
13:56
stock price gets hammered all the
13:58
way down to like 15, 16 bucks
14:00
a share.
14:01
Just when everybody thinks like
14:02
everything's down and out, never
14:04
going to recover.
14:05
What happens? Well, look, there's
14:07
smart people running the running the
14:09
company and they're
14:11
not going to just take it.
14:12
They're like, oh, well, I guess it
14:14
didn't work.
14:15
No, they're going to
14:17
figure the way out of it and you
14:18
know of course Netscape figured out
14:20
a path, ultimately was
14:23
acquired by AOL at somewhere around
14:24
$100 a share.
14:26
So you know.
14:28
My point is, and not
14:30
that Michael Saylor is going to
14:32
need to be acquired or anything like
14:33
that, but my point is that smart
14:35
people that have strong business
14:37
interests in a particular direction
14:39
aren't affected by
14:41
market cycles being up
14:43
and down every
14:45
month or every quarter.
14:47
The Bitcoin game is
14:50
not measured in a quarterly
14:51
cadence, even though
14:54
our public companies.
14:56
So he's a public company.
14:57
He's going to be measured on a
14:58
quarterly cadence, but
15:00
that's not the real
15:02
game. So look, I think he's
15:04
proceeding forward.
15:06
I think he'll be responsible.
15:09
He has a large pile of Bitcoin.
15:11
I think there's an interesting
15:12
question for Bitcoiners generally
15:14
as to like, what's too large of a
15:15
pile for any single concentration of
15:18
risk? And I'm sure that strategy
15:20
and the team there is
15:22
working on that.
15:23
I think overall, actually, the
15:25
the industry is getting a little bit
15:26
more comfortable. They're like,
15:27
okay, look, there's gonna be a
15:29
management through this.
15:30
It's gonna have some buys, it's
15:31
gonna some sells, but let's
15:33
not overreact to
15:35
every 32 Bitcoin
15:37
sale.
15:40
Yeah, for sure. We had Jesse Meyers
15:41
on the show yesterday, and he was
15:42
talking about the ratio of
15:44
Bitcoin sold versus Bitcoin
15:46
bought in Q2.
15:48
And I think it was something like 1
15:50
to 22 and a half with the
15:53
3000-ish Bitcoin that Saylor
15:55
has sold in the last quarter versus
15:58
the 80,000 that they've acquired.
16:00
And he was kind of just saying that
16:02
he needs to prove to the
16:04
credit market that they can
16:06
sell Bitcoin when they need to
16:08
in order Thank you.
16:09
Satisfy dividend payments
16:11
and keep
16:14
everyone happy
16:16
and also not nuke the
16:17
market.
16:18
Do you think that's a fair
16:19
assessment?
16:22
Um, mostly, look, I mean, yeah,
16:24
buying is a far outpaced,
16:26
the selling.
16:27
Okay. Um, but I think really more
16:29
what's going on is like, how do you
16:30
manage, how do you, how, do you
16:31
think about strategy as a management
16:33
team and, and what they're doing
16:35
and they have a strong vested
16:37
interest in making sure that Bitcoin
16:39
remains healthy.
16:40
And I don't think that, uh, there's
16:42
much risk that they're not going to
16:44
manage that reasonably well.
16:45
Um, so anyway, I, I'm
16:47
not too worried about strategy.
16:49
And I look forward to actually just
16:51
seeing.
16:53
Bitcoin further diversified across
16:55
many, many holders.
16:56
I think that's really the number one
16:58
thing that we want.
16:59
How do you get there?
17:00
Continue to make Bitcoin strong,
17:03
continue to make bitcoin understood
17:05
and used globally.
17:07
We keep down that path.
17:09
It's going to take years, but
17:11
you shouldn't be afraid of that.
17:12
This is like normal
17:14
long-term trend type of thing.
17:17
Yeah, you also made mention very
17:18
briefly there and my last question
17:20
about Sailor, I promise, the
17:22
concentration risk,
17:24
you've got guys like
17:27
Bitmine and Tom Lee kind of
17:28
saying like they only want to hold
17:30
maximum 5% of the e-supply.
17:32
Do you think a similar sort of
17:34
cap needs to apply to how
17:36
much an entity like
17:38
strategy holds in terms of the
17:40
total amount of Bitcoin on
17:43
the market?
17:45
Well, it's an interesting conundrum,
17:47
right? Like on one hand, these guys
17:48
want to be great stewards and
17:50
they're like, hey, I'm going to be a
17:51
great steward and I'm gonna just
17:53
buy it and never sell it.
17:55
Okay, that was the initial story.
17:58
But of course,
17:59
anytime you have a company that's
18:02
holding it, like, well, you
18:03
might trust Michael Saylor, but,
18:05
okay, well then who
18:08
replays is him.
18:08
And of course Fong's running it now.
18:10
I trust Fong as well.
18:12
But over the arc of time, management
18:13
teams change And they might have.
18:15
A different philosophy, and they
18:17
might have a different set of
18:18
priorities.
18:19
So I think it's difficult for a
18:21
company to be
18:23
acting that way over
18:25
the long term. And then certainly,
18:27
if he acquired 50% of Bitcoin,
18:30
everybody would be like, oh, that's
18:31
too much.
18:32
So what is the
18:34
number that's too much?
18:37
I'm not really sure how you run that
18:38
business that needs kind of a
18:40
perpetual
18:42
At some point, yeah, it sort of
18:44
needs to plateau and move into
18:45
other things.
18:47
I don't know what the exact magic
18:48
number is.
18:49
I'm not sure there is a magic
18:51
number, but there's a point where
18:53
you acquire so much that you start
18:54
to affect the price of the
18:56
asset in that other people are
18:58
like, hmm, I don t know if I can
18:59
invest in this because there's one
19:01
guy that could really
19:03
affect my investment.
19:05
So that's something that
19:07
has to be addressed. I don't know
19:08
what the magic number is.
19:10
Yeah, I think single digits, single
19:11
digit percentages is probably,
19:13
probably right.
19:15
Yeah, that does seem fair.
19:16
And I think, I mean, we could just
19:18
judge by the market reaction
19:20
to this biggest
19:22
sell now, $260 million.
19:24
I mean in the scheme of that, I
19:26
don't even think it's 1% of their
19:27
total holding.
19:28
So it's very small.
19:31
Yeah, you could look at, you know,
19:33
corporations, I mean, often times
19:35
have concentration risk on
19:37
individuals, right, that hold
19:40
far more than 10%.
19:42
Those are usually companies,
19:44
they're kind of a smaller scope.
19:46
You know, Bitcoin is supposed to be
19:48
a global asset.
19:50
So I don't know exactly if the same
19:52
percentages apply or not, but the
19:54
same psychology applies,
19:56
which is like, okay, if I have
19:57
concentration risks on a small
19:59
number of people or a a party.
20:01
Then of course, how's
20:03
that gonna affect how much I'm gonna
20:05
value this thing because there is a
20:06
real risk and risk should come
20:08
straight off of the price.
20:10
Yeah, definitely.
20:12
Okay, enough about strategy.
20:13
Let's talk about the Clarity Act.
20:15
We've had lots of interesting
20:16
conversations with different people
20:18
in the industry that are, you know,
20:20
highly connected to what's going on,
20:22
you know, in US politics.
20:25
And everyone's been kind of saying
20:26
Clarity act is going to be passed
20:28
in the summer.
20:30
We're not midway through the summer
20:31
yet. We kind of you know into the
20:32
beginning of summer proper.
20:35
What are your general thoughts on
20:36
the timelines here?
20:37
And what's your
20:40
overall thesis in terms of what
20:41
clarity will mean in terms
20:43
of the crypto industry in
20:45
general? Is it going to kick off
20:47
this sort of Wall Street super cycle
20:49
that a lot of people have been
20:50
talking about, especially with this
20:52
move towards tokenized equities on
20:55
exchanges like Bitco, for example?
20:59
Well, we get excited about
21:01
particular silver bullets that
21:03
can solve all problems.
21:04
Look, I'm a huge fan of Clarity,
21:06
don't get me wrong.
21:08
Having a legislative pathway forward
21:10
is a huge step.
21:12
Remember, there's a lot of
21:13
unanswered questions by Clarity.
21:14
It sets basically a
21:16
lot work and rulemaking to be done
21:18
by CFTC and others that
21:20
hasn't been started yet because the
21:22
law hasn't even been passed.
21:23
So we don't even get to like the
21:24
meat until we get the law.
21:26
So. I would love to see the law
21:28
passed, there's still a lot of
21:29
questions, there are still a lot
21:30
things to debate and worry about.
21:33
But if you don't have the law, then
21:35
okay, we might have to live
21:37
with this.
21:39
Time kills all deals in business,
21:41
I think is what we say, and I think
21:42
the same thing kind of applies
21:44
at the legislative level.
21:47
I am not expert enough on
21:48
all things political of how these
21:50
bills go through, but
21:53
I don't
21:56
milestone.
21:57
That if we don't hit it, we
21:59
may not get it this year
22:02
or maybe for quite some time.
22:04
It seems like the
22:06
odds are getting smaller
22:09
and smaller that we see this pass.
22:11
So, okay.
22:12
Look, does that mean we're not gonna
22:13
get the institutional super cycle
22:15
that you mentioned?
22:16
Like I'm not sure there ever is a
22:18
single silver bullet that
22:19
like gives you a super
22:21
cycle by itself.
22:24
The good news. Like every
22:26
single major financial institution
22:27
is really moving significantly.
22:30
You've got, of course, the asset
22:31
managers, BlackRock, Fidelity have
22:33
been in for a long time at this
22:34
point, but now the banks are coming
22:36
in. We've got Morgan Stanley.
22:37
Of course, we've got Citigroup.
22:39
We got JP Morgan doing their
22:40
announcements.
22:41
Heck, back to the asset managers.
22:43
Vanguard yesterday or this
22:45
week announced that they're finally
22:46
going to be hiring into
22:49
the space.
22:50
So just across the
22:52
entire sector.
22:54
Adopting. And I think that that's
22:55
going to have a positive effect.
22:57
We still have a very
23:00
positive administration.
23:01
I met with Paul Atkins a couple
23:03
of weeks ago.
23:04
You know, everybody says the same
23:05
thing about Mr. Atkins.
23:06
Like, he is a breath of fresh air
23:09
for how you build great
23:11
capital markets.
23:12
What do we do to make it so that
23:14
more companies are going public
23:16
in the greatest capital market
23:17
in the world?
23:19
And, you know, why is it that they
23:21
haven't been doing that?
23:22
How does he accelerate that?
23:24
And how do you provide a
23:26
mechanism where innovation can
23:28
continue to happen?
23:29
And an interesting thing about
23:30
innovation, especially when you
23:32
think about Wall Street,
23:34
and maybe some of the politics,
23:37
a lot of the folks that are not on
23:38
the innovative side, obviously,
23:40
BitGo comes from, how do
23:42
we do things in a new way?
23:43
How do you build things zero to one,
23:45
as Peter Thiel wrote about
23:47
many years ago?
23:49
Wall Street and of course
23:51
politicians aren't known for the
23:52
zero to one, they're known for how
23:54
to scale it up, how do you make it
23:56
responsible, how to make it
23:57
efficient, etc.
23:58
So they scratch their heads and they
23:59
say, well, you know, what innovation
24:01
are you trying to protect?
24:03
And that's kind of the whole
24:05
conundrum, isn't it?
24:06
Like making room for innovation
24:08
means you're making room for the
24:09
unknown. You're making room for
24:11
something that hasn't yet been
24:13
imagined that could be much
24:15
better. They could provide better
24:16
fees, better rates, more fairness.
24:19
More transparency, less risk.
24:21
And so it's difficult
24:23
to do that, but the current
24:25
administration is super
24:27
understanding of this concept
24:29
and wants to make it happen.
24:31
All right, so even if we don't get
24:32
clarity, I think we still get the
24:33
innovation. I think the institutions
24:36
are already in.
24:37
I would love to see the legal
24:39
pathway because there's a lot of
24:40
people that are on the sidelines
24:41
still scratching their heads saying,
24:43
is this like really new?
24:44
Is this like crazy new stuff?
24:47
Look, at the end of the day, it's
24:48
not, right? We're talking about
24:48
trading of assets.
24:49
We've been just doing trading of
24:51
assets for a hundred years, more
24:52
than a hundred.
24:54
You know, the Yeah,
24:56
we shouldn't be that scared of this.
24:57
It shouldn't that complicated.
24:59
Yes, digital assets have a few new
25:00
risks to address, but this is not
25:02
actually rocket science at this
25:04
point.
25:05
And companies like Bicco, highly
25:06
regulated, and doing
25:08
all of the right things in terms
25:10
of the law enforcement components,
25:12
in terms of understanding your
25:13
clients, in terms to making sure
25:14
that things are being done right.
25:16
And yeah, we want to reimagine
25:18
things a little bit to see if we
25:19
can't make it better. And we're
25:20
looking for administration to make
25:21
that possible.
25:23
So I think we still have.
25:25
A bunch of good things.
25:26
I wish Clarity Act was a sure
25:28
thing.
25:29
I guess it could still happen.
25:31
So you know, not all hope is lost.
25:33
But you know right now we're
25:35
all kind of wondering which way it's
25:37
going to go.
25:39
Yeah, definitely.
25:40
My next question to you, and it's
25:42
kind of staying with policy, you've
25:43
got a new Fed chair in Kevin Walsh.
25:45
What do you think his impact on the
25:47
crypto markets will be?
25:48
I've been seeing some interesting
25:50
takes on crypto Twitter in the last
25:51
couple of weeks.
25:54
Well, I'm one of the people that
25:55
thinks it's a damn shame that we
25:57
spend so much time thinking about
25:59
what this one dude thinks
26:02
about the online, and it
26:04
affects everything, right?
26:06
I mean, he affects the stock
26:08
market, he effects the bank rates,
26:10
he effect, you know, potentially how
26:11
much money flows into higher risk
26:13
assets like Bitcoin,
26:15
digital assets.
26:17
It's almost, you now,
26:19
it's almost ridiculous how much
26:21
we...
26:22
Hold our breath just waiting for
26:23
what this one guy is going to say.
26:25
I think also others have talked
26:27
about how, like, if it really
26:29
is so critical to get this
26:31
reserve interest rate right, like
26:33
why is it that we only tweak it a
26:35
few times a year?
26:37
Why isn't it tweaked daily?
26:38
Why isn t it all done
26:40
algorithmically?
26:42
Why isn it done with something
26:43
that's paying a little
26:45
bit more attention to the
26:47
mathematics of what's actually going
26:49
on in the economy.
26:50
Rather than having these quarter
26:52
basis point swings that we
26:54
hold our breath for
26:56
kind of every quarter.
26:58
So, anyway, whether he's good or
27:00
bad, I don't
27:02
think he is good or Bad.
27:03
I mean, he's got a job.
27:04
He's doing the best that he can, I
27:05
suppose.
27:07
I had.
27:08
Roughly expected, he would probably
27:09
be cutting interest rates based on,
27:12
similar to everybody else, thinking
27:13
that President Trump would
27:15
get someone that wanted to do that.
27:18
I'm glad that he acts independently.
27:21
I think he should act independently,
27:22
to some degree, and
27:24
we'll see what happens.
27:25
I don't think he's bad for Bitcoin.
27:27
I think that he's got a different
27:28
job. It's not to
27:30
set the success or fail of Bitcoin.
27:34
It's managing the Fed, which is very
27:36
different.
27:37
I wanted to get your thoughts on
27:39
AI as well.
27:40
The impact on the markets.
27:41
There's been a lot of people saying
27:42
that obviously the AI boom
27:44
has sucked out a lot of
27:47
liquidity out of the Bitcoin
27:49
sort of space as well and general
27:51
crypto.
27:53
What are your thoughts? On that and
27:55
if AI is a really big deal.
27:58
Well, let's see, certainly AI is a
28:00
lot focused in the financial world.
28:02
Obviously they are sucking up
28:04
trillions of dollars.
28:05
It affects potentially everyone.
28:07
There's a lot of drama with like,
28:09
are these models going to
28:11
hack everything and break the world,
28:13
et cetera?
28:15
Look, I think one thing about the
28:17
internet having connected everybody
28:19
and having all of this communication
28:21
and everybody's in communities.
28:23
And it's led to some amount of
28:25
polarization and extremism but I
28:27
think also maybe on the investment
28:29
side a little bit too.
28:31
So let's back up.
28:32
Look, I don't know, here at BitGo,
28:34
we are very excited about what's
28:36
going on with AI.
28:37
We are, our productivity is
28:39
way up in terms of what we can
28:41
build. The quality of it is
28:42
way out. I know there's a bunch of
28:44
dangers around AI, but like,
28:46
of course we're not just like
28:48
handing everything off to AI to go
28:50
run this stuff.
28:51
No, no, no. We use it as a tool.
28:53
It makes us way more efficient.
28:54
We put huge guardrails, we got
28:55
harnesses around it.
28:56
We've got tons of measurements, tons
28:58
of QA, the product's never been
29:00
better, it's never been growing
29:02
faster, the ability to do
29:03
more things that are amazing that
29:05
people like, the innovation cycle is
29:07
awesome.
29:08
So, you know.
29:10
One of the things about a company
29:11
like BitGo, we actually kind of like
29:13
the cooling off periods of
29:15
the crypto winters.
29:17
It's a time where if you've
29:19
got a great set of resources
29:21
you assembled that are ready to go,
29:23
it's a timing where you can build.
29:24
There's a little bit less defocusing
29:26
and hopefully coming out
29:28
of this bearish cycle, which of
29:30
course we will.
29:31
Maybe it'll be the end of this year.
29:32
Maybe it will be a little long.
29:33
I don't know.
29:35
But we can build through this and
29:36
come out with all kinds of
29:37
innovation. So.
29:39
I am ecstatic about AI
29:41
and the amount of
29:43
growth it gives us the ability to
29:45
do.
29:47
As for those dangers
29:48
that are out there and all that, I
29:50
think there's a lot of
29:52
games being played,
29:54
IPOs to be had, markets to be
29:56
made.
29:57
I think actually those of us in
29:59
crypto are much more about like,
30:01
hey, how do we build really good
30:02
stuff that affects really everyday
30:03
people?
30:05
How do we make it so it's
30:06
transparent and fair?
30:07
You know, getting back into the...
30:08
Market structure of things.
30:10
There's a whole bunch of people that
30:12
their entire existence is just
30:13
making money off of other people.
30:15
Like, you know, why, why does the
30:17
banking sector make so much money?
30:19
These guys don't produce anything.
30:21
They produce nothing.
30:22
They live off of the
30:24
build that everybody else does.
30:26
So I'm excited about the
30:28
builders having tools
30:30
that allow them to be better and
30:32
better builders.
30:33
And then interestingly, there's
30:35
like way too much discussion about
30:37
the financiers.
30:38
You know, leeching more and
30:41
exaggerating some of those
30:43
build claims in order to leech
30:45
even more and more.
30:46
So I hope that the build here
30:48
gets us to a place where we get a
30:49
little bit less of that in the
30:51
future, but hey, you know humans,
30:53
this is kind of what humans do.
30:55
So we probably will see this
30:57
for many, many generations to
30:59
come.
31:00
Look, you're
31:02
a renowned computer scientist
31:03
yourself. I'm very curious what kind
31:05
of AI tools you're using day-to-day.
31:07
I'm sure many people out there want
31:08
to know.
31:10
Well, we use all of them
31:12
and then, you know, like I'm CEO
31:14
of Bicco, you know,
31:16
prior to AI, my own
31:18
ability to touch code, just I've
31:20
got a job I've got to do, I've
31:22
gotten 600 people to
31:24
manage and, you know, global
31:25
operations.
31:26
So I haven't been touching code, but
31:28
with AI actually I do a bit.
31:31
And the thing which I
31:33
think is going to really
31:35
accelerate for us is the ability
31:37
to experiment with applications.
31:40
On top of our own platform.
31:41
So a lot of times we talk about what
31:42
we do as infrastructure, right?
31:44
We've of course got wallet services,
31:46
we got custody services, we got
31:47
trading, we got settlement, we've
31:49
got staking and stable coins and all
31:51
this.
31:52
When you actually build the
31:53
applications, you learn a lot.
31:55
Now it doesn't matter if these
31:56
applications are the winners.
31:58
Actually with innovation, what you
31:59
do is you create a
32:00
hundred applications.
32:01
You know, most of them are gonna,
32:02
you know, not really go anywhere.
32:04
I won't say fail, like they may not
32:05
be super interesting, but a few of
32:07
them will really spark.
32:08
How do you make sure that your
32:10
infrastructure and your platform
32:11
really works?
32:12
It's by making sure that you're
32:13
actually running through it and
32:14
using it. And I think when you look
32:16
at the usability of crypto,
32:18
you know, Bitcoin is not the only
32:19
ones that have discovered this.
32:21
You know, the promise is huge.
32:24
The potential is amazing
32:26
for what we can do.
32:27
Stablecoin is absolutely
32:28
revolutionary.
32:30
However, try to use them
32:32
in a way that everyday
32:34
Americans can without being
32:37
technology Geeks.
32:38
Um, it's difficult.
32:40
So, you know, uh, in particular
32:42
paying, you know,
32:44
the stable coins typically run on,
32:45
you know, Ethereum and Solana, but
32:47
in order to move them, you now have
32:48
to have a little bit of ETH or a
32:49
little of Solana.
32:50
It's like, wait a minute, I, I was
32:52
just trying to move some dollars and
32:53
now you're saying I have to this,
32:54
this third currency.
32:56
Um, now there's some solutions
32:57
coming out. Your Tempo and ARK are
32:59
two blockchains that have come out
33:01
recently.
33:02
Uh, Tempo from, you know, Stripe,
33:04
ARK from Circle.
33:05
They're both in their infancy.
33:07
So, they're just kind of coming to
33:09
life now.
33:10
But they're addressing this
33:11
particular problem.
33:12
When you really try to take stable
33:14
coins mainstream, how could you
33:16
possibly do it without solving the
33:17
fee problem? I mean, it doesn't make
33:18
sense. You barely convince grandma,
33:20
oh yeah, this USDC thing
33:22
is the same as a dollar.
33:23
And then she goes and tries to move
33:25
it and says, hey, I don't have
33:26
enough fee. It wants a Solana.
33:28
What's a Solona?
33:30
This would be like going to
33:31
McDonald's and you're paying $10
33:33
for your burger and they say,
33:35
hey, we want a 50 cent euro fee.
33:38
Doesn't make any sense, right?
33:40
So anyway, I think AI
33:43
allows us to go deeper
33:45
inside of Bicco, inside of other
33:46
companies, to hopefully
33:48
really tackle these usability
33:50
problems, make sure that we've got
33:52
them really plumbed through so
33:53
they're ready for scale and ready
33:55
for growth and easily understand by
33:57
people.
33:58
Anyway, I don't mean to be negative
33:59
on the crypto industry for not
34:01
having done this. Actually, what I
34:03
want to say is like the AI stuff
34:04
accelerates our ability to
34:06
knock down these problems.
34:08
These are perfectly natural problems
34:09
when you've got something that is
34:11
such a revolutionary change as
34:13
what we have with stable coins or
34:14
blockchains or Bitcoin, et cetera.
34:17
Yeah, definitely. Look, I think when
34:19
you talk, people listen, and it's
34:20
good to be very, I
34:23
don't want to say critical, but very
34:24
honest about the situation.
34:26
And it takes a long time to solve
34:27
these problems because they're very
34:28
difficult problems to solve.
34:30
And I think we're getting there.
34:31
I wanted to shift the conversation
34:33
very quickly to the European Union.
34:35
You tweeted in the last couple of
34:36
days about Bicco's
34:38
Mika license.
34:39
So you guys are licensed to
34:41
offer services here.
34:43
The likes of Binance are not at
34:45
the moment.
34:46
Sisi was telling us last week that
34:48
he thinks that this is a bad
34:50
thing for Europe in general,
34:52
especially just in terms of the
34:53
liquidity that Binance offered the
34:55
market.
34:56
Do you have any big thoughts on
34:58
the gap left in Europe with
35:00
the likes of Binance not being able
35:01
to attract and offer
35:03
their services to users here right
35:05
now?
35:07
Well, look, stepping away from
35:09
the current situation, should
35:11
you have regulation of money?
35:14
I think you won't find very many
35:16
people that don't say that there
35:17
should be a strong regulatory
35:19
framework around money.
35:20
And this is money.
35:21
And it's not just money.
35:22
It's the future of money.
35:23
Everything is going digital.
35:25
Every stock is going to be digital.
35:27
So the reason people are so excited
35:28
about tokenized equities here in
35:30
the U.S., look,
35:32
All of crypto today is like two
35:34
trillion bucks.
35:37
Equities are like 70 trillion and
35:40
it's not that we're going to just
35:41
take like one percent.
35:43
No a hundred percent of that
35:45
is going to be digital.
35:46
So the need for a
35:48
strong regulatory framework around
35:50
it of course is is
35:51
high and that applies in the
35:53
U.S. And applies in Europe.
35:55
So actually I applaud Europe.
35:57
Look Meek has been a
35:59
slow and steady pace and
36:01
what's happened here is finally it's
36:03
gotten to the phase where it's like
36:04
okay You have to do it.
36:05
There's been a grandfathering period
36:07
There's been a get your licenses
36:08
together period.
36:10
All of that has passed.
36:11
And now it's at the, you have to
36:13
have the license in order to
36:14
operate. So, you know, Bitco does
36:16
have that.
36:17
We've had it for quite some time,
36:19
actually.
36:20
And we're happy to provide service
36:22
to a bunch of clients that do all
36:24
kinds of activities in digital asset
36:25
space. We're regulated by Boffen in
36:27
Germany, which is considered
36:29
to be one of the strongest
36:30
regulators kind of in Europe.
36:32
And so we're proud of that.
36:34
Now, is it a bad thing?
36:36
Look, I think it's a transition
36:37
period where we go from the
36:39
previously either unregulated
36:41
or optionally regulated to now
36:43
unregulate it.
36:44
And so, are there going
36:46
to be some players that like,
36:48
would we like to have Binance,
36:50
Europeans have access to Binance?
36:52
Of course we would.
36:53
So, from that degree, yes, CZ
36:55
is right.
36:56
As to what causes that hiccup,
36:58
look, there's a lot of things that
36:59
are going on that are political and
37:02
due to kind of the circumstances
37:03
around the globe.
37:05
So. Yes, I would rather see, of
37:07
course, Binance be operating
37:09
in Europe right now, but
37:12
no, that doesn't mean that
37:13
regulation in Europe is bad
37:15
for the citizenry.
37:17
No, it's definitely not and that
37:20
wasn't quite my read of the
37:21
situation as well, but I think it's
37:23
a fair comment to say when one of
37:24
the biggest exchanges in the
37:26
space is kind of 4-star
37:29
at that
37:31
point, it's not great,
37:33
but look, life will go on.
37:35
And I also noticed that you...
37:36
Is that you don't
37:39
want winners and losers being
37:41
decided by regulators.
37:43
And I think this has happened in the
37:44
U.S. We've seen it in other parts of
37:46
the world.
37:47
Regulators have a job that is
37:49
the law says if you want to do this
37:51
activity, you need to do A,
37:53
B, and C. And the regulator should
37:54
say, okay, you're doing A, you are
37:56
doing B and you need to do better on
37:57
C before it can approve you.
37:59
And they should be specific about
38:01
it. But that's it. That's their job.
38:02
Their job is not to decide, I like
38:03
you, I don't like you.
38:05
And unfortunately,
38:08
some administrations do get into
38:09
that. We saw it in the US under
38:11
the previous Biden administration
38:13
where they just said, we don't like
38:14
you. And it didn't matter whether
38:15
you passed A, B, and C.
38:18
And some of that may be happening in
38:19
Europe as well.
38:20
I don't know.
38:22
But if it is, that needs
38:23
to stop.
38:24
Regulation needs to be applied with
38:26
an equal hand across all
38:29
parties.
38:30
Yeah.
38:30
Yeah, for sure.
38:31
I noticed that you also shared an
38:33
interview that I did with Paulo
38:35
Arduino from Tether last
38:37
year, actually, where he was talking
38:38
about the reason why, you know,
38:40
he didn't he decided not to adhere
38:42
to to Mecan.
38:43
It was concerns around, you know,
38:45
the banks and the across the
38:47
continent operating essentially
38:48
fractional reserves.
38:50
And if he is the issue of USDT
38:52
needs to redeem users
38:54
redemption requests, USDT,
38:56
you know, back to dollars or
38:57
whatever. The bank doesn't have the
38:59
money, that's a problem for him.
39:00
He can't run his business properly.
39:04
It made me think very deeply about
39:06
the way that these regulations are
39:08
done and also just how interesting
39:09
it was that someone like Paolo who's
39:11
operating the biggest stablecoin
39:13
issuer by a country mile is like,
39:15
you know what, we're not even going
39:17
to play around here.
39:18
This is not where USTT has the most
39:20
use anyway.
39:21
So we're not gonna do that.
39:24
But...
39:25
Contrarily to that, I think
39:27
finance very much want to be in
39:28
Europe, and they'll be pursuing
39:30
other avenues to do that.
39:32
Mike, my last question to you.
39:33
I also found another interesting
39:34
tweet that you put out, and it was
39:36
after Anthropic
39:38
had announced that the US government
39:40
had imposed this export control
39:41
directive on Fable and Mythos.
39:43
We've now got access to Fable once
39:45
again, but you made a very
39:47
interesting connection to Netscape
39:49
going through a different, very
39:51
similar situation back in
39:53
the day. Can you talk a little bit
39:54
about that and.
39:55
Similarities between the two and
39:57
what you think of, I
39:59
guess, government control and
40:00
oversight over AI and if that's
40:02
a good or a bad thing.
40:04
Well, on the
40:06
cryptography encryption front,
40:09
the U.S. Has always had export
40:11
controls on certain types of
40:13
encryption technology.
40:15
As you know, governments kind of
40:17
have a love-hate relationship with
40:18
encryption. They're afraid that
40:20
encryption will be used against them
40:22
for their intelligence gathering,
40:23
and yet they also want to use it for
40:25
their own selves to
40:26
protect them against other nations'
40:29
intelligence gathering.
40:30
So it's a little bit, you know,
40:32
they need it, but they hate it.
40:34
And so all the way back to
40:36
the 1990s, of course, we had
40:38
the beginnings of the internet and
40:41
the browser, your SSL protocol,
40:43
which is the HTTPS that you see in
40:45
your URL bar that's encrypted.
40:47
And at the time, we were using
40:49
RSC, I think 128-bit
40:51
encryption, just 256, I forgot
40:53
exactly.
40:54
But that was considered too strong,
40:56
and so you couldn't export it
40:58
outside the U.S.
40:59
And so,
41:01
you know, I guess the
41:02
idea is you're somehow going to
41:04
prevent foreigners
41:06
from being able to use this
41:08
heavy duty encryption, which is
41:10
a complete false.
41:11
It's not going to happen.
41:13
And so the solution was to ship
41:14
a version which only used
41:16
40-bit keys.
41:18
So it's the exact same algorithm.
41:21
There's nothing different.
41:22
All you did is you configured it
41:23
instead of using 128-bit
41:25
key to use 40- bit keys.
41:27
Now, if anybody gets
41:29
the technology, they can...
41:31
Think of change it, change the 40
41:33
to 128.
41:36
You're back in business.
41:38
As we started to think about
41:41
export restrictions on
41:44
AI, I know it's not
41:45
directly the encryption field.
41:47
I suppose maybe it's the encryption
41:49
breaking or software breaking field.
41:51
It just seems to me quite
41:54
fool's errand.
41:55
That is, I get it.
41:56
I get the intent.
41:57
The intent is that you want to
41:58
protect national security, make sure
42:00
that foreigners don't tools that
42:02
can be used against the US.
42:04
Unfortunately, when it comes to
42:05
software, the cat is pretty
42:07
much always out of the bag.
42:09
You can't pull it back in.
42:13
And in the, I think,
42:15
three weeks after I posted
42:17
that, of course this proved true.
42:20
We've immediately seen
42:22
Chinese models that are
42:24
near at par with
42:26
where Anthropic and others are.
42:27
So,
42:30
look, there's no hiding this
42:32
stuff.
42:33
And I think that that was just
42:35
not the right approach.
42:38
But it reminds me exactly what we've
42:39
seen before. It didn't work then, it
42:40
doesn't work now.
42:42
And we'll probably see another
42:44
episode of this in the
42:45
go-forward as well.
42:51
Europe government sort of overreach
42:52
and decisions are getting super
42:54
crazy. Jordan and I, my producer,
42:55
we're just talking off here about
42:56
this as well. You know, talks of
42:59
cars, you know,
43:01
being manufactured from here on out
43:03
in Europe, being mandated
43:05
to have a camera that's, you know,
43:07
recording the driver.
43:08
And the reasoning is that
43:10
they want to track, you know, to
43:12
make sure that people are paying
43:13
attention to the road.
43:15
This kind of thing to avoid
43:16
accidents. But.
43:18
If there's a camera in your car and
43:20
it's, you know, externally
43:22
accessible,
43:24
that's might just be a little bit of
43:26
a honey pot, whether that's, for a
43:27
government or an nefarious sort of
43:29
organization to surveil
43:31
you, you never know, but the
43:33
camera's there so it could be.
43:34
We saw this in France,
43:36
right? So in France the IRS there,
43:38
the tax service had
43:41
a special tax collection for
43:44
Bitcoiners and so they had
43:46
a registry of everyone that held
43:47
Bitcoin, their name, their
43:49
address and how much Bitcoin they
43:51
had. And then an agent
43:53
that works in the tax services in
43:55
France sold that
43:57
to some gang.
43:58
And then since then, we've seen
44:01
dozens.
44:03
Of real-world physical
44:04
attacks on the people on that list,
44:07
and it's a
44:09
direct result of having had the
44:11
information.
44:12
So we talked about the gang of
44:14
like, the government wants to
44:16
prevent foreign nations from
44:18
being able to use that encryption
44:20
against their intelligence services,
44:22
but wants to use the encryption
44:24
to prevent others from
44:25
breaking into their intelligence
44:27
services. Look, I think we
44:29
have a real thing as humans.
44:32
A conundrum, which is,
44:35
do we want safety
44:37
by way of watching everybody all
44:39
the time, and then
44:41
all the dangers that goes with that?
44:42
You get the honeypot of the IRA, the
44:44
tax service, you get the
44:46
potential for someone to hack into
44:47
your taxi cab camera, like
44:49
you said, or do you want
44:51
individual civil liberties?
44:53
You know, here in the U.S.,
44:55
historically, we have prioritized
44:57
civil liberties. You have rights to
44:59
free speech, you have right to
45:01
privacy, you have rights to these
45:03
things. We have a – I guess
45:05
privacy's not fully in the Bill of
45:06
Rights, but at least you have a
45:08
right to unwarranted
45:11
search. So we
45:13
should be thinking about how to
45:14
bolster those in this information
45:15
age. And if you think about
45:18
freedom of the
45:19
individual first and use that as
45:21
the principle that guides you, then
45:23
you'll end up in the right place.
45:25
There will always be governments and
45:27
statists that want to use that
45:29
information against Thank you.
45:31
I guarantee you they don't want to
45:32
use it against themselves.
45:34
They want to apply it to everyone
45:35
else, except for them.
45:37
And we've seen this countless times.
45:40
But that's the real conundrum we
45:41
have to think about.
45:43
And my own personal belief is that,
45:45
yes, allow the encryption to flow
45:46
free.
45:47
That does mean that it's harder to
45:49
collect information.
45:51
Here in the US, we founded
45:53
the country on the principle
45:55
that it is OK
45:57
for a guilty man to
45:59
walk free.
46:00
So long as an innocent man does
46:02
not go to jail.
46:04
And it's a terrible trade-off to
46:06
have to make, but because
46:08
the justice system is imperfect and
46:10
will always be imperfect,
46:12
it's the only trade- off that makes
46:14
sense unless you want to put
46:16
innocent men in jail.
46:17
So, uh...
46:19
All these things are connected, and
46:21
as the government wants more of what
46:23
you call overreach, I
46:25
understand that they are trying to
46:26
make things safer by someone's
46:28
definition of safer.
46:30
But when you take away those civil
46:31
liberties, of course, you
46:33
make another man unsafe,
46:35
as evidenced by the tax service
46:37
in France.
46:38
And it's not theory.
46:39
It's absolute real, and these are
46:41
people that had their fingers cut
46:43
off. So,
46:46
it's important that people think
46:47
about this as a real thing.
46:49
Yeah, definitely.
46:51
And there's some interesting news
46:52
about that in the last 24 hours.
46:54
Ball Bitcoin and Francis
46:56
Puglio are actually,
46:58
they filed a lawsuit in France
47:00
over this whole
47:02
case as well.
47:03
We'll be getting them on the show, I
47:04
think, in the next couple of days or
47:05
so. So it'll be interesting to see
47:06
what comes of that.
47:08
Mike, thank you so much for taking
47:09
the time to chat to us today.
47:10
We probably stole an extra 15
47:12
minutes that we should have from
47:13
you, but. As always, it's just
47:15
fascinating to talk to you and pick
47:16
your brain on all of these
47:18
topics that we love to talk about on
47:20
the show.
47:20
Looking forward to having you back
47:22
again very, very soon, but thank you
47:23
very much. And to you out there that
47:25
watch the show, thank you so much
47:26
for joining us right here
47:28
on The Starting Block.
47:29
We will be back again tomorrow and
47:31
Friday with another version of the
47:33
show if you missed our interview
47:34
with CZ. It's live.
47:36
It's on YouTube now.
47:36
You can watch the full 70-minute
47:38
version, loads of interesting
47:40
anecdotes and insights from CZ.
47:42
From our interview live in Abu
47:44
Dhabi last week, so go and check
47:45
that out. Subscribe to our YouTube
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47:50
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47:54
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47:59
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48:09
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48:11
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48:12
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48:14
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