The Road Ahead for Cryptocurrency: Opportunities and Challenges | KBW2023

[Music] hello it works yes sir everyone had good lunch welcome back Anthony welcome to Korea it's good to be here yeah I understood your flu in this morning how's what's your impression so far uh listen I love Korea this is my sixth time here and U it's a great country it's uh one of the leading technological innovators and obviously your cryptocurrency markets are very deep yeah and super liquid and so U it's good to be here you know I'm uh I'm hoping we're closer to the end of a bare Market yeah you know certainly we're closer than we were last year so that's good news y um one of the things I noticed as we're both out of New York most of the time is there's a huge difference in sentiment within the New York institutions like uh and then compared to Asia what we see and observe through KBW and also someone translat to token 249 in Singapore and Hong Kong do you feel like um the sentiment in New York has been uh to put in crypto terms down bad the worst ever or so I I you know I think it's very mixed so let's start with Jamie Diamond who's I think he's called Bitcoin a pet rock a Ponzi scheme a decentralized Ponzi scheme I think there's a group of large scale Money Center banks that have gotten guidance from the regulatory people that live inside those Banks or their General counsels to be mean and nasty towards crypto yeah uh Jaimie understands that he's probably one of the smartest people in financial services but he's chosen that direction because that gives him an easier path with people like Gary Gensler on the other side you have people like Larry f or Abigail Johnson who have made a decision that they understand the technology and they understand that this is the future of finance and so they're more entrepreneurial they're less regulated and so they've made a decision that they're going to make massive amounts of U investments into the space and so I like that and so if those guys get their ETFs approved and they start gravitating business into that area they'll push everybody else into the pool because I don't see how a bank like JP Morgan has a huge private wealth management business and after an ETF is eventually approved in the United States I don't see how they could not have one I don't know how they could go into a presentation and when one of their potential prospects says well what's your digital Properties or your digital asset strategy they say oh no we don't have one our CEO says that bitcoin's a decentralized pet rock I don't think that's going to play well and so what ends up happening is if you just look at a vend diagram um sort of a game theory analysis of this once you get the ETF approved I think it's a Tipping Point uh you combine that with the happening that's coming likely in April uh I think it boods very well for the industry that makes a lot of sense do you think um understand you're also doing an Asia tour at the moment a lot of folks are especially from New York London is there specific things you saw in this market that you found interesting and also that didn't like not too common in New York where something out of ordinary well listen I mean this is a this is a this is a deep Market let's talk about U China for a second I think that U president XI was probably looking for some power consolidation over the past 18 months and so I think certain things like Bitcoin Bitcoin mining Etc got pushed out of mainland China although interestingly enough 10 10 plus perc of the market is still in mainland China uh but I think that they've made a decision to allow for experimentation in Hong Kong licenses in Hong Kong the graduation into exchanges Etc yeah and um and I think this is just a very deep Market listen the uh the growth of the world is here in Asia and so uh an American like myself understands that whatever the long-term geopolitical issues are I think they will transcend the current short-term geopolitical issues and so I'll make a prediction that the uh us Chinese relationship is bottomed and going to start improving I think secretary Rondo's trip last week was a was a big deal I think it was a big signal to people that the United States recognizes the economic interdependency with China yeah and I think it's very important for us as Business Leaders to be here in Asia to push that agenda and to explain to our political leaders uh that it doesn't make sense for us to be fighting we have to figure out ways to do more business together and to become more economically interdependent and so less rhetoric less hostility I think is preferred and so that's one of the many reasons that I'm here uh as you know we do something called the sa conference uh we've done that in Singapore we've done it in Tokyo we've done it in Abu Dhabi and of course in North America uh we'll likely be doing one in Hong Kong uh over the next 12 to uh 18 months uh going back to our previous uh discussion on the side stage about how sou came to be is there a specific reason you started conference uh specific vision and how it helped Sky Bridge as well yeah so our conference business was very accidental we sort of backed into the conference business uh it was the 2008 Global financial crisis at that time the US government put a lot of money into the money center banks with the tarp program uh and Barack Obama at that time he didn't do it on purpose but he basically said now's not the time to go to Las Vegas and if you're a fat cat you should land your private plane and so all of these big moneys Setter Banks including meril Lynch City Bank Goldman Sachs because of the political environment canceled their conferences in Las Vegas and so we saw that as a big opportunity we were buying rooms at the Encore Hotel which is attached to the wind yeah for like $99 back in 2009 and so we started the conference in May in Las Vegas small was only three or 400 people yeah uh by 2010 I got up to 1,200 people and today you know our delegate size is average between 2,000 to 2,500 uh and it has been a very big help to our business because there's a lot of cross fertilization of ideas potential marketing potential marketing of our products but I always tell people we didn't really do it necessarily for that we did it more for the thought leadership aspect and we did it more for the uh the interconnectivity AC ity now we did a a Bahamas conference which you attended Justin with Sam bankman freed in April of 20122 and so that was a quite a spectacular event uh but unfortunately Sam turned out to be somebody that none of a slau that he was uh so we haven't we're not doing that event anymore for all the obvious reasons speaking of the devil we'll be back we'll be back uh do you think um going back to all our mentions of government officials of regulations we have seen drastic change on um sentiment within New York and with government um what are you seeing day-to-day with your experience with government officials with DC for example block Works they're doing a big uh regulatory conference uh in DC uh in DC I believe sometime in February or April next year I think it's April the whole Focus has been shifted to regulation government government a lot of those names come up is there specific that looking off for and something that catches your tension well again I can only give you my editorial based on having uh had a short stay in Washington but I know a lot of Washington people and I think people know that once you're in the American government you're sort of always somehow tangentially tied to it I would say that Sam was actually very close to getting margin approval from the ctfc uh there was a scenario back in October of last year where if we were on a stage like this and you would said to me what's Sam's likelihood of getting margin approval and that would have put him in a different Pantheon of exchanges because he would have been up there with the CME or the New York Stock Exchange had he gotten it I would have said to you that the probability is you know 70ish per that he was going to end up getting it and so uh you have to imagine that The Regulators that were about to give that to him the effect that the exposure of Sam and the fraud that took place uh how that became like this sort of very harsh regulatory pendulum swing to the opposite side and so I think this is one of the big motivations by the SEC and the cftc I think it's also Sam gave a lot of money to uh elected officials uh not just Democrats as was reported but also Republicans and I think that put egg on the face of many of these people and so I think the regulatory response over the last 12 months has been way more aggressive uh and lacks commercial sense frankly it's not it's not great for the United States U um again I'm I I think of the world not from just a US Centric point of view it's my 35th year on Wall Street so I try to think of the world from a very Global Perspective uh but the US has been one of the leaders if not the leader in the financial services industry because we've been been willing to try new things and we've had what I would say mama bear or medium like propitious regulation if you're going into an overzealous regulatory environment you all Force Capital both uh capital capital and intellectual Capital off the shore of the US which is not great for the United States in terms of its need to maintain the man manle of financial services leadership so I'm hoping that this regulatory pendulum swings back into the middle um and obviously if a republican gets elected next year I think it'll get closer to where we want it to be with that in mind with with the fund you're running skybridge what what did you do a like a huge revisit of your strategy that you're looking to do for digital assets internally or was there uh your thesis stay the same or you double down or anything that any lessons or well you know again I what I would encourage people to think about this stuff long term so we made a decision and I'll just take people back briefly uh I wasn't in the White House very long but when I was there the Federal Reserve was uh uh writing a white paper on digitizing the US dollar in fact u i was I attended a meeting in the White House and it it was on a Wednesday because I know it was a Wednesday because I was only there for one Wednesday so that's how I know it was a Wednesday but I was in the meeting with two fed officials and these guys were explaining to me what they wanted to do over the blockchain in terms of US dollar digitization so that was July of 2017 it didn't come to pass I'm not saying it won't ever but it was certainly a speculation back then and so when I left Washington it was incumbent upon me to get up to speed on the blockchain and to understand it better uh most traditional finan Financial people like myself swore it off you know I I can even Michael sailor I've had long conversations with him I was just in Italy with him last week uh we were naysayers on bitcoin naysayers on the blockchain the more homework you do uh and the more that you recognize what a wonderful delayering mechanism this actually is the more excited you get about it if you're a traditional Financial person so so I migrated into the space made a decision to put about a third of our assets into the space um I think we peaked at about 50% of assets primarily because things went up a lot in you know let's call it like the end of 2021 November uh we didn't sell anything we didn't add any more to our positions this was just to through appreciation they're now back to sort of 30% um and so they were below that uh because of the crash that took place back in November December of 2022 uh and and so we haven't changed our view uh and we're long-term holders of the assets that we have uh long-term Believers in the space um we did file for a Bitcoin ETF which was rejected which was great irony because it's the exact same application the exact same lawyers and so forth that black rock has filed their ETF with uh but we have yet to resubmit one right now not saying that we won't we're open to it um but I do really believe that if Black Rock gets this approval and I don't want to say if I'll say when when when Black Ro gets this approval I think this will create a seismic change of energy in our in our industry yeah with um for the audience what what was the first year the skyd started allocating with for crypto yeah so the first year our first Investments were in October and November of 2020 oh wow and so I looked at it with my team and we made a decision there were three components of that decision decision number one one was Bitcoin scaling to 100 million wallets at that time I think Bitcoin was approximately 80 million wallets but on its way up um I can just go off of the Kathy Wood estimates it's probably closer to 300 million wallets today just gives you a sense for where things have gone over three years uh the second thing for me was regulation could we get comfortable with regulation in the US I just want to remind people about us property rights and this this is one of the fundamental cornerstones of American capitalism uh us property rights date back prior to the origination of the United States to go all the way back to the Magna quarter because we adopted British common law and so once the IRS deemed Bitcoin and other digital assets property you know so for your tax purposes Bitcoin is considered intangible property I got very comfortable that Regulators despite their political motivations wouldn't be able to disallow Bitcoin um and again just for people that are not us-based us property rights uh despite the political environment despite the tribalism that has been a sacran fundamental Cornerstone of America of the American legal system for 200 plus years so so once they said that I got very comfortable and you can see these cases that are coming despite chairman gentler motivations he can't get these cases won because all of the stuff is grounded in this common law uh Bedrock this foundation and then just the third thing which I think is very important is storability if you you own nine figures of Bitcoin and and at one point we were at the 10 figure number you got to be able to store it somewhere and so places like Fidelity we got very comfortable with yeah combining all the themes that came out of our talk just now government Asia China us United States States fed uh when when you were when you're serving in American government was there a lot of discussions around seeing Bitcoin as a tool to undermine US dollar potentially benefiting the Chinese government or any any country that's not a good Ally in the United States so it's it's it's it's a really good question so the short answer in 2017 I would say no so when I was in government I would say no in 2023 I think there is an open discussion of that and I think that our governmental officials in the United States are hostile to bitcoin because they see it as a threat to the US dollar but but I don't see it that way in fact if you were thinking about it as a good policy maker us governmental policy let's say that the policy for the United States is to continue dollar Global Supremacy where the US dollar is the currency standard for the world uh then you would want Bitcoin in your Marketplace because ultimately uh a stronger economy a stronger GDP is going to require you to have some of it centered around digital assets and some of it centered around the efficiencies of delayering the economy using the blockchain and so I think that what sometimes happens is that policy makers get defensive and they're operating off the heel of their foot as opposed to operating off the ball of their foot and I think the more important thing for you regulators and policy makers to think about is you want this industry in the United States it will lead to more growth it'll lead to more economic efficiency it'll lead to more cost savings for our businesses large and small um I own a restaurant in New York City as an example if we can bypass the credit card industry uh if our if our margin is 15% and we can go direct to our consumers is a wallet to- wallet transfer uh that's a three possibly three and a half% savings for the restaurant you're talking about a 20% improvement in our gross margins and so I just want you to take that across Industries and so when I'm with regulators and they're talking about oh no that you know bitcoin's a threat or it's going to unduly help China or other countries uh rise in power I see it the opposite I I think it's very very important for us to not be afraid of new technologies and to advance those new technologies particularly in a country like the US on that note aside from uh just the micro thesis and long-term thesis in crypto that you have within crypto is there specific vertical that you're looking at do you find interesting especially lately like uh place like gaming or any others vertical that you've been paying attention to well I you know I I I'll disclose some of our positions so we have a you know we have a fairly large stake on our bank ban at skybridge in salana we have a you know reasonable size stake and something called Vulcan forged uh the CEO of that company or that token is speaking here he he'll also be joining me in Singapore uh the symbol of that is pyr uh it is a uh gaming token it's a decentralized uh gaming business I think the technology there and his studio is is quite good and I think he's he's here today or tomorrow going to be making some announcements about that and so we have that on our balance sheet uh I own alaran which unfortunately has not done well but has great technology so I'm hoping there'll be a revamping there uh but those are basically our larger positions uh one of the one of the positions that I'm very fond of is something called Casper labs for those of you guys that don't know what that is it's cspr and again it's a it's sort of decentralized uh sort of enterprise software uh and I think this is something that's also going to be adopted as we get out of this current bare market so those are just some of the names that we hold in addition to like core positions in Bitcoin and ethereum uh aside from your current positions uh and then when whenever you're looking at new deals or new projects that are popping out is there a specific metric or technology you're looking for for example like this this project seems more decentralized or more scalable more secure or so I mean skybridge is a I'll just give an example so I skybridge is a seed investor in a layer two it's an ethereum based layer 2 that we believe is creating a solution for the kyc AML problem that these large institutions are worried about and so there are kyc AML Solutions on other chains but ethereum being the arguably it's obviously the large largest in terms of Market Gap and it's I would make the case that because it's the largest it's the most scalable there may be better Technologies out there uh but I'm old enough to remember the big fight between the Microsoft operating systems in the in the 80s and the Apple operating system Apple may have had a better operating system but because Microsoft had IBM behind it it became a much bigger market share and at least at that time a more successful company than Apple was it until Steve Jobs got back back to Apple to recreate the vision that he had for Apple which we're living with today but but the point I'm making is that ethereum is here to stay and it's welded into the fabric of what I would call the blockchain economy or the digital asset economy and so we need a layer layer one that has a AML kyc sort of layer on top of it a layer two and so we're a seed investor in in in in a project like like that for all the projects you mentioned do you see APO region and especially Korea and Japan with a lot of population and Adoption of Technology would you say those are the biggest markets I expect those project to do well especially I do I think I think the listen I I think that you have to you have to look at the world the way it is and the way you want it to be but you also really have to focus on where the world is going and so if you go back to the 1830s uh the Chinese economy was roughly 30% of the world's GDP by 1965 it got down to 2% of the world's GDP uh but by 2065 it'll likely be 40ish perhaps even more percent of the world's GDP and so if you look at that move um I want to be a part of that and I want people to get comfortable with that and and you don't have to think about it as a threat in my mind I don't see it as a threat as much as I see it as an opportunity I think it's very important U as Business Leaders and people that are thinking about common sense um uh what do common sense people want we want peace with each other we want more interdependence uh we want more acceptance of each other less tribalism and so for all those reasons I do believe that this is uh this is where things are going to grow and this is where I want I want to be a part of it and I understand you're off to Hong Kong and Singapore as well after career and for skybridge what kind of specific I thought you were going to ask me what where the food is better the food food is better here in I think the answer is already settled for that one but uh um for Hong Kong and Singapore is there a specific thing and value you guys are looking to capture per Hong Kong and per Singapore well again I just think if you look at the geography of the region you know American Centric people they sort of think that Hong Kong and soul are like New York and Boston they don't realize the distance since traveled between these places and so if you think of the demography uh whether you're in Soul or Hong Kong or Singapore those markets are gigantic and so a place like skybridge needs to have a presence in all three of those markets uh and for the audience uh where in Asia is All Conference being held at the moment or regularly so right now um John what is it November 14th so it's going to be November 14th to the 16th at the Marina Bay Sand in Singapore uh we're looking to potentially have one here uh and we're also going to be in Hong Kong talking to uh some business leaders and the government about potentially having one in Hong Kong but I'll say something very bold I would love to have a conference like ours in Beijing or Shanghai at some point and I'm hoping that over the next three to five years that'll be possible is there something I like to do with people who went through a lot uh since November and just a lot of my friends and also good industry colleagues obviously got affected with FTX and then I think everyone is still there making their way out of it or somewhat Consolidated uh what's your advice on people and also how are you dealing with how we go from uh building From the Ashes and how we build things better how we do it right this time mhm is there specific advice as you have where philosophy I don't want to be overly reflective but this is my 35th year on Wall Street and so uh in 35 years I've been through nine bare markets uh been to two crypto be markets uh the last one being incredibly painful uh everybody in this room knows I had a relationship with Sam uh Sam bought a 30% stake in our business last year uh and so you just have to imagine me for a moment I went from hero on September 7th uh where I was going to be working with what I thought was the second largest global crypto exchange and we were going to be helping him grow that business and create sort of a technology transfer and a relationship generational transfer I just want you to think of the magnitude of this I went from hero to zero or hero to Goat September to November so I was on CNBC on the 7th of September announcing the deal on November the 9th I was back on CNBC uh explaining that uh it was a very high likelihood that Sam was going to get arrested and of course he went out to get arrested and so I just want you to think of the magnitude of that oscillation uh and the pain that comes with that and also listen I was close to Sam's dad I mean to see the pain that he went through I mean you know I'm a I'm a dad I have five children if one of my kids did something like with Sam did you know I would be inconsolable so so when I think about the magnitude of what happened uh I think there are three lessons from that that I'd like to share with everybody number one there are only so many things in your life that you can control um you know try to eat healthy sleep well be honest live your life with high integrity but there are other things you can't control and that's the behavior of other people number two I want to stick on that word integrity for a second uh because if you have high integrity Integrity is very close in the dictionary to opportunity um and so even if you're going through a bad moment now or you slow your portfolio get decimated if you stay in the game and you have high integrity you'll get amazing amounts of opportunity I can't tell you the number of things that have been presented to skybridge over the last 12 months that have been very valuable to skybridge and then the third thing is I don't know a entrepreneur that hasn't gone through a dire straight but had the intestinal fortitude to stay in it and I'll be brief but I want to give three quick examples uh let's go to Steve Jobs fired from Apple computer has to return to Apple computer Michael Dell uh who frankly helped me start skybridge uh his laptops were catching on fire in 1993 stock went from 41 to seven had to revamp the entire company uh in order for that company to survive uh in March of 2000 we watched Amazon which was one of the industry leaders of web 1 go from $116 a share to seven uh and people were calling it amazon. bomb and they said that Jeff Bezos was finished but last time I checked I think he shot himself in outer space in his own rocket okay because he adapted and he pivoted and he had the intestinal fortitude to stay in something and so I think that is a very big lesson of the last 12 months you have to stay in things uh and give yourself a good long-term perspective and then as we wrap up things um what would you want to take away from your visit to Korea blockchain week in Korea um is just relating to skybridge and salt and all your experiences combined well listen you know I I uh I want to meet as many people as possible so if you you see me walking around please introduce yourself I think that at the end of the day I come to events like this uh first of all you guys have done an amazing job so congratulations to you guys it's an awesome event um so congratulations I I I see you guys in the black T-shirt I know how hard this is because we do our own event so congratulations um but I would say that uh for the delegates here there are three things right you want to meet people uh that you can potentially learn from or they can help your business uh you want to attend some sessions where hopefully you get a an idea that Sparks your behavior and then the third thing is I mean you're in Soul you should be here to have a great time I know I'm here to have a great time awesome and uh lastly for all the New Yorkers here what's the name of your restaurant uh it's called The Hunting Fish Club I I named it after John Gotti the old Mafia Dawn I named it after his social club awesome we'll be there and thank you so much for joining appreciate it thank you for having me Justin thank you