Latest / The Income Show / Stephen Cole: Building a High Yield Account On Bitcoin | The Income Show | Ep. 3

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Stephen Cole: Building a High Yield Account On Bitcoin | The Income Show | Ep. 3 · The Income Show

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Bitcoin fundamentally kind of represents this transition from a debt-based society to an
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equity-based society. So that store of value use case, Bitcoin as a balance sheet asset,
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has been a big part of my life. I've been thinking about Bitcoin as the hurdle rate for a long time.
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All of the implications that come with that have just been fascinating to me. We see a very natural
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stepping stone being this digital credit type of offering where you can get rates that are higher
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than 11% 3 or 4x what's available in traditional finance. This, in my view, is the ultimate carry
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trade because it is the one that is rooted in something with a supply guarantee that nothing
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else has.
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Stephen, thanks so much for joining the show.
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Thanks for having me, Joe. Excited to chat.
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Absolutely. This is going to be a great conversation. I want to ask you about Castle and what you're building. But first, I kind of want to start off with how you think about like treasury and capital allocation from a personal perspective and for businesses as well. Where does digital credit and Bitcoin fit?
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Oh, man. Great starting point for this, I think. So I've been involved in and excited about Bitcoin for a while now, since 2013. And my thinking has definitely evolved in, as you can imagine, in big ways over that decade plus.
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initially was very excited about payments and then a couple of years in just realized that
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store of value i think as a broadly speaking kind of comes first and payments and progress
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on payments is wonderful but people have to be comfortable holding bitcoin and kind of pull
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bitcoin like prefer to receive bitcoin desire to hold bitcoin in order to really drive a lot of
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demand to fuel payment adoption in later phases of Bitcoin's just adoption as global money.
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So that store of value use case, Bitcoin as a balance sheet asset, has been a big part of my
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life personally. I've been thinking about Bitcoin as the hurdle rate for a long time. All of the
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implications that come with that have just been fascinating to me. I think that whether you are
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a retail individual walking through a mall deciding if you need that new pair of jeans
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or that new watch, or you are a capital allocator, institutional, deciding where to deploy.
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Having an asset like Bitcoin that is fully liquid, 24-7, global, gives you supply-side
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assurances that are unprecedented and unmatched and really just limits the surface area for
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uncertainty to the demand side because supply is fixed. All of the implications that come with that
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are fascinating. It makes you more thoughtful about how you deploy it. It is helpful for
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fixing problems of capital allocation at kind of every level of society. And so I think that is
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good for the world in so many ways. And Bitcoin has been the biggest part of my portfolio
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personally for a while. I, you know, prior to co-founding Castle, was in the venture capital
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ecosystem and measuring, you know, in the same way a lot of funds think about, can we outperform
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the S&P because for our limited partners who are trusting us with their capital, they could easily
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just buy that and access that. And so thinking about Bitcoin becoming that new hurdle rate,
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the new benchmark, and you needing to have a compelling and true story about how you can
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deliver them returns beyond Bitcoin is I think where we're headed. And that type of thinking
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becomes more ubiquitous. A lot of not many businesses yet hold Bitcoin on the balance
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sheet. And that's a big focus, of course, of ours at Castle. And I think just the theme of the next
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couple of years is simply going to be get off zero. Yeah. Get that from zero to percent to one
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percent, whatever that number is, start there. And then, you know, one percent to something more than
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one happens fast from there. I love that. So Bitcoin as a long-term store of value makes perfect
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sense to me. And it's cool that you've been involved with Bitcoin for quite some time and
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had a very successful career before Bitcoin as well, which is awesome. What made you want to
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pivot out of the VC investing world and become a founder? Yeah. The founding story of Castle has
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been really special. So my co-founder, Joao Almeida, was previously co-founder and CTO of OpenNode.
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They were the first company in the world to commercialize lightning payments for Bitcoin.
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And so, you know, a lot of his experience in that helped realize some of the challenges of just how
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early we are for both sides of the transaction to be ready when it comes to payments. Because you,
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as maybe a business or maybe a merchant, even if you're all about Bitcoin and you want to receive
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Bitcoin and you go through all of the hard work to like set up your point of sale, understand
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wallets, understand custody and storage. Even if you do that, we're still so early that very few
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people might walk into your brick and mortar or go through your digital checkout flow and have
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Bitcoin and be ready to spend. And there's a bunch of exciting progress on that front, like Block is
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crushing it, doing amazing things and Square. So that's very exciting. But we kind of thought about,
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okay, well, how do we, how do we invert that? How do we give merchants the ability to get paid
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in fiat and then behind the scenes in a way that is frictionless and invisible for their customer
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base, let them seamlessly convert into Bitcoin behind the scenes. So our initial product was
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the ability to convert a percentage of your revenue into Bitcoin automatically. So that's
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what we've had, you know, live for the last year plus with businesses in the US. And then just last
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week, we announced a couple more products that we're very excited about. And one of those is
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centered around digital credit. And, you know, we kind of see holding spot Bitcoin as wonderful,
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But businesses, depending on their cash flow profile, they just oftentimes can benefit so much from predictability.
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And, you know, a fixed income type of product that offers them returns beyond what are available at traditional financial institutions is incredible.
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And so we're trying to build the financial stack that is powered by Bitcoin and Bitcoin-based products to just supercharge businesses and help them, you know, not just kind of stay where they're at, but hopefully finally give them a way to get ahead.
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I like that a lot. Where do you see digital credit fitting, like, in the treasury in relation to Bitcoin? Like, how should people be thinking about that?
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We kind of think of it as a funnel and we're designing a lot of our product offering to try to meet business owners where they're at in terms of, you know, an entry point.
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And on Castle, for example, we have a cash account so they can simply part cash, almost think of it like an operating account for their dollars.
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Earn, you know, 3.5 percent kind of the traditional industry rates, but have that interest be paid to them in Bitcoin.
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So that's one way to accumulate. And then kind of a next step often is this digital credit.
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So we kind of see it in between, you know, park your operational cash and, you know, holding Bitcoin and maybe even holding your own keys.
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eventually, we see a very natural stepping stone being this digital credit type of offering where
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you can get rates that are higher than 11% in some cases, 3 or 4x what's available in traditional
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finance with a risk profile that rate almost seems shocking initially to people who are not
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deep in this industry yet. And I think it spurs a lot of questions of how is this even possible?
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What is going on? But when you analyze from first principles how these digital credit products are
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structured and are being made possible, the fact that it is enabled fundamentally by Bitcoin's
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unique attributes, and you stack it up next to the alternatives like, you know, high risk
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corporate bonds that give you, you know, maybe 6% for a much riskier type of balance sheet that
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everything is dependent on. You just think it's an incredible risk reward proposition.
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So what do you think most small business owners get wrong about treasury allocation or just capital
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allocation in general? And then it can include Bitcoin, it can include digital credit, it can
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include something else completely?
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What do you think most people get wrong?
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Feedback that we've heard, and so at Castle we serve
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everything from small businesses up to mid-market,
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corporates, and so that could be business owner,
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like family owned business, and the business owner
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is kind of managing it all and doing it all,
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and it could be sort of a larger treasury team
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where the decision makers, CFO, VP of treasury,
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You've got multiple roles that need access to the platform and, you know, maybe view access and manager access into the treasury and the operations and our platforms built to accommodate that.
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Interesting feedback that we've heard, especially from businesses on the smaller end initially, was that they were surprised by their ability to say, like when they took the step to kind of carve out some allocation.
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to this asset. And then they've seen it increase in value. And then we engage with them afterwards.
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Their feedback to us was, you know, this has been incredible. And I don't even know
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where that money would have gone. Like I know that I would have spent it on something for kind
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of operations, but it just probably would have almost like gone out into the ether is the way
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they kind of characterize it. They're not really sure where it would have gone. But because they
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decided to carve it out and put it in Bitcoin or these Bitcoin powered products, it's really just
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had this return that's enabled them to do more or now be in a stronger position to access credit and
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other types of loans. And so that type of feedback is what gets us excited about this.
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It's interesting. Yeah, because like, you know, you mentioned Bitcoin as the hurdle rate, like
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that general idea. Do you think digital credit also like kind of raises the hurdle rate for like
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short-term capital allocation? I think so. Yeah. And I think it's just going to become
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more ubiquitous, you know, um, obviously strategy and, and stretch, uh, you know, that's what is
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fueling our high yield account currently, the, the digital credit product on the castle platform.
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And, you know, we see that as a very exciting starting point. Um, but as this ecosystem,
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you know more offerings come to market maybe it ends up being a blend of various products
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and you know we're love what you all at strive are doing and seda and we think that that's an
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incredible product too and so it's going to be very exciting to see how this all evolves and i
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think it all just maps to more opportunity to empower businesses yeah that makes a lot of sense
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thinking about like broadly investing for the future like the 60 40 portfolio was a common thing
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that you know people still use to this day but now it seems like that large of an allocation to
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bonds or fixed income kind of seems to be going out of style one i guess why do you think that is
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and two do you think digital credit could play a role in kind of revitalizing the income portfolio
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I think so. I think Bitcoin fundamentally kind of represents this transition from a debt-based society to an equity-based society.
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And there will still, in my view, there will still absolutely be credit in that future.
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But having that credit be ultimately anchored by this hard asset that does have these properties that make it easier to verify that someone has what they claim to have, you know, kind of digitally over the wire in a way that is provable.
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that just it reduces the the surface area for a lot of shenanigans that have been possible up until this point And so you know I think that yeah absolutely in the future that just you know it kind of forces through free market dynamics
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a lot more transparency and makes these products ultimately more reliable. And there's this irony
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with the point I think where we're at right now, where the market is in some cases meeting these
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products with a lot of skepticism and a lot of like, like, is this a Ponzi scheme? Because they
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just see these rates that they've never seen before. And so it triggers a lot of the same
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neurons to fire as, you know, just, is this a scam? How do you do this? And I think it's kind of like
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the, the early days of the internet, you know, where, where a technology is so transformative
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that it just has these implications and makes these types of benefits possible that in some
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cases we've not been able to conceptualize before. If you had told someone, you know,
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50 years ago, 100 years ago, that you'll be able to communicate instantly with millions or hundreds
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of thousands of people per day, that wouldn't have even worked in their mental model. They would
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probably think, what does that mean? I would have to write 100,000 letters a day? I would have to,
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I would have to make 100,000 phone calls a day? Because they're kind of trying to think about
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how that happens, given the tech that they've had access to so far. But with something like
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the internet, you know, you can post, you can email, and you can reach millions of people every
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day. You take an action online and you're effectively communicating with so many individuals
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that it just, it's this amplifier. And, and I think that Bitcoin and these Bitcoin based digital
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credit products offer that same type of paradigm shift, um, with, with the monetary stack.
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When you guys have been talking to like prospective clients for, for Castle,
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who is most interested in digital credit? Is it like the people that already
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understand Bitcoin or is it just a completely new segment of investor? Right now, I think it's the
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people who understand Bitcoin or are at least Bitcoin curious. They're kind of seeing the
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headlines, you know, understanding these offerings. And I think that or they're at least like aware
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the offerings exist at the kind of headline level. And the theme of the next three years is going to
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be an enormous awakening of mainstream that these not only exist, but that they are here to stay.
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And in the same way that if you were a business owner in the early 1990s,
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it might have been easy to think, well, my business is, you know, maybe I'm a, you know,
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you're a, you're a plumber, you're a contractor, you own a lumber mill, you kind of think
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this internet thing is for computer companies and I'm not a computer company so it's not relevant
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to me and it turns out that the internet was so transformative that every business ultimately
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needed to understand it and if you were one of the earliest businesses to embrace it then
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you just crushed it you know if you were one of the first to have a website an email address to
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do online marketing, then even if, you know, the plumber in your region might be marginally better
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at turning pipes than you are, you had an enormous leg up on them because you embraced better
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information technology earlier. And I think in the same way, if you are one of the first businesses
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to upgrade to this new monetary technology and all the products made possible by it,
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then you'll just have an enormous leg up on your competition.
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It's a great point about like how technology is like new tools that are created and that can empower the individual or businesses.
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What do you think of the speed at which like technology is accelerating?
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And how does that relate to Bitcoin and digital credit?
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Love this topic.
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So there's this great graphic that kind of makes the rounds on social media every now and then.
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And it's got a chart with, you know, adoption curves of various forms of technology and communication technology.
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And so it's kind of got, you know, like the telegraph took this long to happen and TV took this long to happen and then the Internet.
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And what you see in that is that the curve is steepening with each of these.
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And it's because the prior innovations accelerate all of the subsequent innovations.
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Like because we, you know, had TV and these, you know, ways to communicate, like the Internet happened faster than it would have.
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And then because the Internet and email and social media exists, it enables people to communicate in even more real time.
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And so new breakthroughs can be understood even faster and adopted even faster.
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And so I think that adoption of Bitcoin in these types of products will happen even faster than the Internet because we have the Internet to talk about them.
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And in addition to that, Bitcoin also has a 24-7 liquid market and exchange rate.
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And so if you took a while to kind of see what was happening with the Internet, you know, that might have been easier to do because it took a while to see how quickly your competition was getting ahead of you.
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But if, you know, if you are running the numbers on, oh, if I had just upgraded to Bitcoin a little sooner, that math and that ability to quantify things is really kind of in your face.
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It's kind of obvious.
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There's a lot of corporates that rather than putting Bitcoin on their balance sheet, they tried to launch internal blockchain technology projects.
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and tens of millions of dollars, in a couple of cases, hundreds of millions of dollars
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put into these blockchain projects that got a lot of hype, got a lot of buzz.
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And then five years or so pass and they're quietly wound down and written off.
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And I think there's almost going to be this great, if we had only just, dynamic that occurs
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where they realize like, if we had only just put Bitcoin on the balance sheet with those funds
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instead, where would we be? And maybe we should think about this more seriously.
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On that topic of blockchain generally, it's very interesting seeing the amount of misallocation
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of capital that occurred in the past at very large corporations that you would think would
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begin to understand the implications of Bitcoin, but maybe quite haven't yet.
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What do you think of the idea of when most people learn about Bitcoin, they think they're late
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because the price has gone up a lot and so on and so forth.
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Does digital credit change that at all?
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Can you be late to digital credit or can you even be late to Bitcoin maybe first?
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Sachi, it's so true.
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It is just that human tendency to, at whatever point you encounter Bitcoin first,
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it's very natural to go and look at a chart of the price over the last however many years
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and think, I missed the boat.
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and I remember when I first got into Bitcoin feeling like it's hundreds of dollars for one
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Bitcoin and when you look back in time it was like it was a few dollars for a Bitcoin before
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so has this ship sailed have I missed this opportunity and that's you know that's natural
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I would encourage people to just really like punch through that start start small start with
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something that seems small, get it on the balance sheet, even if it's a nominal seeming allocation.
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And once you have that and you've gone through that, it is so much easier to kind of dial things
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up from there. And yes, I think digital credit plays a very important role in that. It allows
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you to benefit from this in a way that offers more near-term predictability, which is critical
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for most profiles of businesses.
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And ultimately, that still translates to downward pressure.
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It's a buy pressure, and it is demand on Bitcoin.
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So I think it's an incredible unlock from the industry.
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Are you surprised at the amount of success
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that STRC and digital credit has had?
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You know, it's a little over a year old, I guess, at this point,
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the idea of digital credit.
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Are you surprised at how successful it's been?
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I wasn't tracking it closely enough early, like even 12 months ago, the whole notion of digital
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credit was beginning to get thrown around and I wasn't appreciating it enough at that point.
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And only in the last six months have I and like we at Castle really internalized what an opportunity
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this represents for the world and done that first principles type of analysis of of the you know how
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how reliable we we believe that it is and um and despite how great the reception has been from the
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market so far i think given the size of the global fixed income market it is just incredibly early
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to this. And so, you know, I think Bitcoin conferences in the next few years will maybe
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be recording some of these episodes and laughing at how this was just a drop in the bucket and a
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small starting point at what has maybe by then become this multi-trillion dollar industry.
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How much different do you think digital credit is from like more traditional fixed income
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investments like is it very different is it like a complete paradigm shift or is it like actually
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not that different i think it's very different it's very different because of what it's rooted in
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it is a i've been thinking about it as almost this self-reinforcing carry trade where you know the
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the whole notion of a carry trade that term may not be you know kind of mainstream understood or
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at least a way that people think about something today. But carry trades are ubiquitous in finance.
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They've been around for decades in various forms. Hedge funds have been doing carry trades in
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foreign exchange markets very successfully for a long time. You could even maybe characterize
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the insurance industry as a carry trade. And this, in my view, is the ultimate carry trade
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because it is the one that is rooted in something with a supply guarantee that nothing else has.
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Yeah. Thinking back to the Bitcoin price, you know, like last year peaked around 126,000.
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This year fell to a low of 60,000. Yet digital credit held up pretty well.
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Do you think that was an important moment? Like, are you surprised at how well it actually held up?
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Did that give you guys conviction to add STRC to Castle?
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It did.
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As exhausting as the last few months of price action had been in some ways when it comes to Bitcoin,
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I think it's really been this almost blessing in disguise for the digital credit ecosystem.
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Because if digital credit had really hit the market and it had just been this raging bull run
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that would still be ongoing at this moment.
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Of course, it'd be nice in some ways near term,
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but I think that it's been an important early test
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of resilience for this category.
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And having that test happen early is important
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and I think is ultimately just going to position things
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more strongly for the years to come.
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What would you say to someone that, you know, logs into Castle or checks out Castle's website and they see this, you know, actually, how are you guys framing it, first of all?
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Like, does it just say, like, STRC or does it say, like, high yield saving, high yield account?
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Like, how are you framing it?
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High yield account powered by STRC.
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Nice.
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Okay.
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Yeah.
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Yeah.
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And, you know, we didn't, like, we love STRC, you know, fantastic offering.
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We didn't want that to be in the product title just for a number of reasons.
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But frankly, most of our customer base might be new to this whole ecosystem.
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And so in the interest of just not hitting them with an acronym that they don understand you know at the headline level but still of course offering them all of the transparency and understanding of how this product is being made possible and you know that something we have been very thoughtful about in our platform design what information we convey to them when
27:46
So they log into their CASEL account,
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they see a high yield account,
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and then they can kind of click through
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and see more about how this is possible,
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what in the world is STRC,
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all of the appropriate disclosures.
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And we're very high touch.
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Like we have endless energy for talking to business owners about all of this.
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It's a great part of the job and just something we all enjoy.
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And so everyone who onboards to our platform talks to us and that human dialogue where we can really understand their circumstance and their goals.
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and be able to help them just gauge these types of products
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and understand how they can accelerate their businesses is a blast.
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What would you say if a business owner approached you and he's like,
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this feels too good to be true, what would be the castle response?
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Yeah, it really would be just kind of stacking it up against the alternatives.
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Like it is it it might seem at first too good to be true.
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That rate of potential return might seem like a shocker.
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And here's why, you know, here is the first principles kind of reason why, because it's rooted in Bitcoin and it does have this self-reinforcing mechanism to it.
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It is backed by a balance sheet that is that is very transparent.
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and some of the alternatives that you can use to try to get returns globally are opaque
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and are much riskier and much higher leverage.
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And so those conversations are a lot of fun for us.
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And we welcome and we expect and hope to have many more.
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Do you think most small business owners really feel the pinch of inflation and debasement?
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Do they feel it? And then also, do they grasp why it is happening?
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Increasingly so. I think 2020 really brought inflation more into the mainstream zeitgeist.
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And, you know, part of our branding when we've done booths at events before has just said, like we said, like, you know, eggs get cheaper in Bitcoin.
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Your rent gets cheaper in Bitcoin.
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You know, when Bitcoin becomes the denominator, then on long time frames, if you look back historically, things have become cheaper rather than more expensive.
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And that really lands with business owners because they feel it.
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You know, if you're a small business, you've just been brutalized by inflation.
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You don't have a full time in-house treasury department that is kind of tasked with making sure that the impact of inflation is mitigated.
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And so they feel it the most and they are really hungry for ways to protect themselves from that.
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And we see holding spot Bitcoin as an important part of that.
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And we now see offerings like digital credit as a very important part of that.
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And then, you know, even when you get up to mid-market corporates, even if they have financial operations teams that are very good about mitigating the impact of inflation, hedging and doing all of that, it's work for them.
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Like that is, that is, you know, human time and energy and thought that has to be given to, to all of that. And so we see this as an exciting opportunity to let them diversify and eventually let them just simplify their operations.
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What do you think is something that in five years from now is going to be very obvious in hindsight that you probably believe today that most people would be like, that's crazy.
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Yeah, I mean, I think as, you know, not to make it all come back to like number go up, but I think that the Bitcoin price and the amount of capital that has found its way into digital credit products will just be staggering.
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And it will cause us to look back at days like today and think of them as, wow, how early we were.
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I think over the last even couple of years, even those of us very deep in Bitcoin have almost forgotten how bullish the opportunity is.
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You know, like Michael Saylor has been doing great work, I think, in terms of helping the corporate finance world understand a lot of this asset.
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But but so much of the spotlight has has really just been taken by strategy and and a lot of these companies.
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And we forget that Apple and Meta and Google, you know, they don't have any Bitcoin on the balance sheet.
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And at some point, like that changes at some point, I truly believe.
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And there are still single corporations in the U.S. with a market cap larger than the entire Bitcoin network.
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I think we're going to look back in hindsight at how quaint that seems someday.
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I think I saw a stat that showed like this recent rally in traditional markets.
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Nvidia's market cap has expanded by about like 1.5 trillion. And I believe Bitcoin is
33:38
about 1.5 trillion right now. Yeah. Yeah. When you stack those two things up
33:43
next to each other and, you know, Bitcoin's nature, completely global, no matter what
33:48
financial market you're in, permissionless, the ability to prove reserves, the ability to take
33:55
custody of the underlying asset, if that's appropriate for your circumstance, it's just
34:01
unmatched. Yeah. How about stable coins? Like, do you guys think about that at Castle? Does that
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serve a role at all for businesses? Or is it not necessarily a big deal for your target client?
34:13
Actually, stable coins are powering our cash account. So the cash account that we launched
34:21
recently, the ability to park dollars, that is powered by a stable coin under the hood.
34:25
So we're using USDB, which is a stable coin from Stripe.
34:30
And it is, you know, fully backed one-to-one by cash and cash equivalents, audited regularly, quarterly, bankruptcy, you know, segregated accounts, protections for holders, even in the unlikely event that Stripe Inc. were to, you know, have problems or cease to exist.
34:50
And I think one thing that's going to be very interesting over the coming years is more kind of first principles analysis of where like liquid operating cash is parked.
35:05
even things like FDIC insurance, you know, is very important. And I think it's kind of become
35:14
this mental shortcut that everyone has used for is something safe. If it's not FDIC insurance,
35:23
it's not safe. If it is, then it is safe. FDIC insurance has limits and, you know,
35:30
fractional reserve banking is how everything's operated. And in this new paradigm where you have
35:36
things that are fully backed, audited, transparency that things like stable coins bring,
35:43
I think it'll be very interesting to see how the thinking about risk and assurances evolves
35:51
in the banking and the finance sector in the coming years. And so I think stable coins have
35:59
a lot of potential in the near term. Ultimately, I kind of see them as a stepping stone towards
36:07
Bitcoin. But maybe AI agents will make use of stable coins for payment rails. Businesses can
36:16
use stable coins for payments. And for a lot, that can be really meaningful. If your margins are thin
36:22
and Visa and MasterCard transactions eat up a meaningful percentage of that,
36:28
then stablecoins are a really great near-term way to improve things there.
36:35
And then over time, seeing where the capital that is at rest being saved
36:41
might start to find its way more and more into Bitcoin
36:45
with stablecoins kind of being a broader part of the top of funnel.
36:48
You brought some interesting points there that got my brain swirling.
36:54
You mentioned earlier about this idea of the carry trade, too.
36:59
And you can think about the banking system kind of as a big carry trade.
37:04
The bank has credit-based assets that may yield 5%, 7%, and then they have their liabilities, which are deposits, which might be yielding 3% or 0%.
37:15
And then stablecoins, kind of the same thing, right?
37:18
I like tether my own a bunch of T-bills and other assets and pay 0% on UST or USDT.
37:27
Do you foresee a future where like stable coins or banks adopt digital credit as part of their balance sheet?
37:35
I can definitely see it.
37:37
Yeah, that's not an area like I haven't given a lot of thought to sort of the when or if and what would really like be the initial spur or like the timing in which that happened.
37:48
in a big way, but I could absolutely see it happening. And I think even seeing things like
37:55
some of the Bitcoin treasury companies that are holding Bitcoin and now in addition to that,
38:01
incorporating digital credit into the balance sheet and the portfolio is a really positive
38:07
development. And so, yeah, I can definitely see, you know, whether it's Tether or any of the other
38:13
stablecoin companies, I think there's a really great potential fit there.
38:18
Back on the size of Bitcoin and digital credit, like we mentioned, Bitcoin is still smaller than
38:26
NVIDIA, Apple, Google, Microsoft, Amazon, so on and so forth. Yet, if you look at the Bitcoin ETFs,
38:32
some of the largest, fastest growing ETFs in the world, or you look at Stretch, STRC,
38:37
I believe it's the largest preferred equity in the world. Do you feel like we're at some sort of
38:41
inflection point for both Bitcoin and digital credit in terms of how big and large these markets
38:48
could be? Yeah, I do. And, you know, a lot of the work that you all at Strive have been doing to get
38:55
the word out around these types of products and, you know, Michael Saylor and Fong Lee's strategy,
39:01
I think it is this eye-opening type of phase where heads of treasury are going to be looking
39:11
more seriously at this. And what some other interesting feedback that we've had from,
39:18
from the market, especially when it comes to corporates is that they, you know, that they see
39:26
the headlines around what maybe Michael Saylor strategy is doing, or kind of name your, your
39:31
Bitcoin treasury company. And if they're not deep in this world, then in some cases they kind of
39:38
just feel like, oh, well, that's what it means to be a Bitcoin treasury company. It kind of means
39:45
going all in. It kind of means this, you know, almost like bet the farm on Bitcoin.
39:51
And I think that, you know, like the sort of betting the farm on Bitcoin in the sense of
39:58
what strategy and others have done, I think can work tremendously well for them. But there are
40:04
35 million businesses in the U.S. alone. And the way that most of them become Bitcoin treasury
40:12
companies is not going to look like that. It's going to look like, you know, a very gradual
40:17
allocation of cash flows and profits over time. And some of that will be channeled into, you know,
40:25
spot Bitcoin holdings. And some of that will be digital credit that is, you know, ultimately
40:31
Bitcoin under the hood. And then over time, one other thing that our product at Castle does is it
40:37
allows holders of the high yield digital credit product to opt to take a percentage of that
40:46
dividend in Bitcoin. Nice. And so over time, we give them a slider bar and they can just kind of
40:55
choose. Do they want it all in cash? Do they want some percentage in Bitcoin? Dial it to whatever
40:59
is appropriate for their circumstance. And so I think it is going to be this very exciting time
41:07
where a lot of capital realizes the opportunity and finds its way into the asset class.
41:12
You made a great point about companies adopting a Bitcoin or digital credit treasury. You don't
41:18
have to necessarily go all in Obviously back in 2020 MicroStrategy at the time kind of did go pretty close to all in for the most part Are you surprised that you know now it 2026 adoption is not you know accelerating maybe at the rate that you
41:35
thought it was, or is it going at the pace that you did expect? I think like one inflection point
41:43
that I'm looking for, and I thought it would have come a little bit earlier, but I feel like, you
41:47
know, it will come in the next couple of years and it's very important for the industry,
41:52
is when a household name, very large corporate, allocates to Bitcoin on kind of, you know,
42:01
it could be one time, but I think even more excitingly would be in this ongoing way as
42:06
part of their strategy, not driven by trying to be perceived as forward thinking and doing
42:13
this new tech thing, but simply as their duty as a fiduciary, seeing this as the best
42:20
way to protect shareholder value. And, you know, it's not some name that is foreign to everyone in
42:31
the country. It is really a name that might be just recognized and trusted as a household name.
42:36
You know, if Walmart, Target, Costco, like, you know, name your business. When companies like that
42:42
start allocating to Bitcoin, then I think it will cause their peers in treasury and in corporate
42:51
finance to look around and go, wait a minute, this is, you know, it's not just these Bitcoin people
42:57
doing this. This is something that we should all be thinking about. And we're on zero. And are we
43:03
missing out? And be very exciting. What do you think is going to be the catalyst for something
43:08
like Walmart? Is it like a combination of Bitcoin price going up, people getting excited about it
43:13
again? Is it, you know, an internal realization that their money is being debased and their
43:19
treasury is, you know, earning a little bit of yield, but not really? What do you think will be
43:25
that catalyst? I think it will be just some early adopter, you know, some head of treasury who
43:35
starts to dig in more and to realize that that you know this it's not necessarily that bet the farm
43:44
type of allocation it can be a modest sounding percentage of the balance sheet and if you
43:53
incorporate that into your strategy with a long-term orientation then it just makes the
43:59
business more robust and you know what exactly spurs that and who that sort of first mainstream
44:06
mover is tbd excitedly awaiting to to see it but when that happens then i think that
44:14
triggers kind of a you know a cascade of thinking in the industry um that that will be very important
44:21
and and on a personal note too you know this is kind of less large corporate and more like
44:28
Main Street USA. I grew up in a small town in Missouri, you know, rural community. And something
44:35
that's very important to me is that, you know, Main Street is able to participate in this.
44:42
Businesses of all shapes and sizes are able to benefit from this and supercharge their business
44:47
from it. And yes, that's going to mean Wall Street and institutions and large corporates. And,
44:53
you know, we're going to serve mid-market corporates and everything under the SMB umbrella.
44:58
But we're always also going to serve small businesses because Bitcoin is not just for Wall Street, it's for Main Street.
45:06
And the sequencing of adoption of this is a little more interesting than most forms of technology.
45:14
Because if you're one of the first people in the world to drive, you know, a Tesla car, you know, then that's neat.
45:23
You kind of get to experience this for a while before someone else or like use the Internet before someone else.
45:31
But when it comes to something that is the money, if you're one of the earliest to upgrade to it, then the benefits really accrue to you in a more powerful way.
45:42
And so we're excited about making sure that that that is accessible to businesses and building a platform and solutions that really meet them where they're at, speak their language,
45:53
make it frictionless for them to participate in it and benefit from it is what we're all about.
45:57
I love that. I saw a chart the other day. It was called the Global Uncertainty Index,
46:04
and it had reached all-time highs somewhat recently. And I feel like a lot of people
46:09
might be feeling uncertain about the future. A lot is changing, as we talked about with AI and
46:14
so on and so forth. How do you think about the future of America and humanity? Are you
46:20
optimistic about the future? Are you pessimistic? How are you thinking about it?
46:25
I am optimistic and I try to remain a definite optimist in sort of the Peter Thiel framework
46:32
where the future is not just necessarily better because more time passes and we can kind of
46:37
sit back and wait for nice things. We've all got to work for it. Builders and entrepreneurs
46:43
need to build in order for the future to be better. But I am very excited about the future.
46:50
I think, too, that, you know, there's there's this interesting marriage of or at least kind of symbiotic relationship between Bitcoin as hard money and a lot of the efforts to reindustrialize America and restore our manufacturing base and our hard technology base.
47:11
And I think that that, you know, almost hard money and hard tech go together and can really help accelerate one another.
47:22
And so a lot of the importance of manufacturing in America, taking back control of our own destiny, there are such exciting things happening in that world.
47:32
And personally, I'm really excited about bridging the gap and raising awareness to the builders and the entrepreneurs doing that of how Bitcoin fits into that picture.
47:43
That it is not some degen, casino, crypto, short term pump and dump game.
47:50
It is really a sound money foundation for civilization.
47:55
And if everything is built on that and there's no manipulation of the price signals and all of the uncertainty that central banking has introduced to that, then we can all flourish and realize a better future sooner.
48:14
For someone building in the hard tech space, re-industrialization or building real physical products, that does see Bitcoin's extreme volatility as an unstable thing that's kind of a casino-like asset.
48:32
How would you explain Bitcoin's volatility to them?
48:37
There are some types of businesses where a Bitcoin allocation might not yet be appropriate.
48:42
And I think it's important that everyone remain grounded and realistic about that.
48:47
If you're a venture backed startup in your earliest days, of course, if you're pre-revenue and maybe if you're pre-profitability, it just it might not be a fit.
48:57
Maybe digital credit is and could be.
48:59
And that is an important introduction into all of this.
49:03
But, you know, maybe the business maturing there, there's a point at which holding Bitcoin itself on the balance sheet does become the right answer.
49:15
And I think that just being good stewards of this ecosystem and not encouraging any type of business to sort of go too big too soon, introduce unnecessary volatility risks to their business is really important.
49:32
but but ultimately yeah having them primed with the understanding of you know even if it's not
49:40
today here is what this means and here is kind of you know some criteria for you to think about
49:47
in terms of the stage of your business so that you understand whether you know and when is the
49:53
right time to pull the trigger on that and how you can benefit from it do you think digital credit
49:58
is for like longtime Bitcoiners as well?
50:02
Or is it mainly for like newer entrants?
50:07
Tough to say.
50:09
You know, I think it's just so individual
50:11
and depends on the circumstance.
50:14
You know, if you're in a situation
50:17
where self-sovereignty and counterparty risk
50:21
and absolute uncensorability of your transactions
50:25
is paramount to you,
50:27
then maybe the right answer is on-chain Bitcoin and you're holding your own keys and that's fine.
50:33
And it's important that Bitcoin always, you know, make that possible to everyone in the world.
50:40
I think that's a very important kind of check and balance.
50:42
And if we ever drift into some place where that's not practical for even the smallest economic actor,
50:51
then that's a bad thing.
50:53
And but there is a lot of capital out there, a lot of types of individuals and businesses with very different goals.
51:02
And I think broadly speaking, for most digital credit presents something that is very useful, a risk reward that's just not really existed before and and can help them get ahead.
51:18
How do you think interest rates changing in the future will affect digital credit and Bitcoin adoption?
51:25
I'm thinking post-global financial crisis, we saw 0% interest rates forever.
51:31
I mean, pretty much me growing up, the first time I ever really had a bank account, they never paid me anything.
51:38
I'm used to 0% interest rates.
51:40
And then over the last few years, that's kind of changed a little bit.
51:44
But there is talk about rates eventually going back down, possibly towards zero again at some point.
51:50
Do you think that will accelerate Bitcoin in digital credit adoption?
51:55
I do. I do. The dynamics there of how the rates offered by digital credit products themselves are impacted by that will be very interesting to see.
52:07
But ultimately, I think it, you know, it strengthens these types of products because it grows the balance sheet.
52:17
It makes what these products are rooted in, you know, more robust.
52:23
And so all of the Bitcoin that companies like Strive and like Strategy have accumulated, increasing in value, increases the confidence in the thesis,
52:34
increases, you know, the credibility with potential investors and various pools of capital globally.
52:43
And so I think it's positive. Absolutely.
52:49
Your Twitter handle or X handle for Save with for Castle is called at Save with Castle.
52:56
Obviously, like, you know, the Bitcoin community will kind of understand what that means in regards to like saving Bitcoin
53:02
versus like investing in Bitcoin,
53:04
but maybe someone that's watching this
53:06
and is interested in digital credit
53:08
or interested in kind of hearing about Bitcoin,
53:10
maybe like for the first time in depth like this,
53:14
why did you guys name it Save with Castle?
53:16
Yeah, yeah.
53:17
So our business name is Castle.
53:18
Our handles everywhere are Save with Castle.
53:21
And we really like save kind of,
53:25
we liked getting people into that frame of mind,
53:29
thinking about Bitcoin for savings
53:31
because big picture in this, I think, is that savings has been broken for decades.
53:40
And what we think of as savings today is really investing.
53:47
People who are great at their craft out there,
53:51
whether you're a solo entrepreneur or a larger business,
53:56
you should be able to be amazing at your craft,
53:59
deliver something of value to the world and be able to hold the money and for the money to be
54:05
good and to at least protect your purchasing power ideally amplify it and grow it over time
54:11
and that whole notion has just been forgotten um for you know since the 70s effectively you know
54:18
when when the dollar was de-pegged from gold um and arguably even in in subtler ways before that
54:26
You know, 1913, 1933, 1944, 1971, the money has become broken. You could even argue corrupted over time. And so what that has meant is that everyone working and engaging in economic activity out there who wants to save has been quietly forced to invest.
54:50
they've been pushed further down the risk spectrum and the effects of that
54:56
seem subtle but they're just they're profound for society suddenly oh you
55:01
have to have a 60 40 portfolio you have to have retirement accounts you have to
55:07
have all of this financial complexity and as the money becomes more broken and
55:12
there's more debasement you just get pushed into more and more risk and so
55:18
Where does that end? You know, like taken to that extreme, it's very dystopian.
55:22
Suddenly everyone has to trade options on Robinhood all the time and become an angel investor in early stage stuff just to hope for a grand slam in order to be able to live life and do what they want to do.
55:35
And that would be a tragic place. And I think Bitcoin is the hope for a different future, a future where it's possible to save in a meaningful way and protect your capital.
55:48
So that's that's exciting. And I think it also gets people in more of a long term orientation.
55:58
We have drifted into this place where it's very short term thinking.
56:05
It's very, you know, it's flip the real estate, flip the company, get your liquidity event, you know, have some big bang exit within a 10 year fund lifecycle time frame.
56:18
and sell the business to someone else.
56:21
And the willingness to build something of lasting substance
56:27
with a just long-term orientation has just kind of been lost.
56:33
That idea of build beautiful cathedrals brick by brick.
56:38
Maybe you won't even be alive to see the completion of them,
56:41
but your children will and the future of society will
56:43
and they benefit from it We kind of lost our appreciation for that And I think that Bitcoin and lowering the time preference for everyone globally can restore that to humanity
56:56
Yeah, I definitely agree. If there's one thing that, you know, the audience watching this
57:02
remembers tomorrow morning when they wake up from this conversation,
57:06
what would that be? What do you want that to be?
57:08
Bitcoin is humanity's best hope for sound money.
57:16
Digital credit is here to stay, and it's a very important part of that story.
57:21
And at Castle, we're just excited to try to make that usable and practical today for small businesses.
57:30
We see it as a way to supercharge them and just simply help them get ahead.
57:35
And so that's all that we think about all day, every day.
57:40
And just grateful for, you know, Bitcoin and this ecosystem and everyone who's building solutions that we can make use of in our products to deliver that to business owners.
57:51
I love it. Well, Stephen, thanks so much for taking the time to record with us.
57:55
Where can the audience go learn more about Castle and you?
57:58
Yeah, I'm pretty active on Twitter.
58:00
my accounts i'm steven cole s-t-h-e-n-c and we are savewithcastle.com and save with castle on all
58:08
forms of social media if there are business owners out there any type of business that is interested
58:14
in this realm we would love to talk to you love it awesome well thanks again thanks so much joe