TOKEN2049 - Investing in Crypto Equity - Simon Dixon (BnkToTheFuture)

So, I spoke here last year and it was a really, really packed audience. And one thing I'm noticing at different giving different speaking events is you get a more intimate audience during the bear market. But having been here since 2011, I can say and having run the largest community of investors investing in crypto companies, I can say that most of the wealth has been generated by people that still hang around during the bear markets. The crypto market has given us some golden investment waves and I personally spoke at the very first Bitcoin conference in the world in 2011. And since then, it was a very different environment.

It was probably about the same amount of people in the room today as there was then. But the difference was is that everybody was kind of either fitted into categories, computer science geek and saying things that I just couldn't understand at the time as me being a finance geek. And activists that wanted to change the world through this thing that was very uncertain whether it would succeed called Bitcoin. And for those of you that want to grab me on Twitter, take a little quick scan of that and I'll answer some further questions as well. On Twitter, I tend to do that.

I'll put that up at the end as well. But this talk is a quick talk on investing in crypto equity. And for those of you that don't know me, banktothefuture.com really in 2000 We started in 2010, spent about four years on securing all the regulatory environment needed to be a securities business. Um and uh we were investing in the equity of things that no venture capitalist in the world wanted to touch until about 2012-2013.

Um if you were looking to invest in this industry, then there was only really two ways of doing that. Either about 2013, um you were invested in a venture capital fund, um or you were banktothefuture.com investor. Um and so to help you understand some of the trends that we're seeing right now, um here's some of the equity that we picked up over the years. Um so we did Kraken, Bitfinex, Bitstamp, Circle, ShapeShift, Coinbase, blockchain.

com, Ripple the company, and over a hundred other different companies in the industry. Um and uh at banktothefuture.com, we created a platform whereby uh whatever we were investing in, people could co-invest on the same terms as long as they're a qualifying investor. Interestingly, fast forward to today, and everybody's talking about securities tokens. Um and everyone's trying to put together what we kind of were working on for many years, which is global securities laws, unique onboarding process depending on the jurisdiction of every investor.

Um and now really this asset class seems to have uh reached its time. However, we seem to be getting very strange and interesting products as the security market evolves. Um obviously, if you've been around, um the the very first attempt at this was kind of uh the ICO market, which was uh it started by Mastercoin, which would which tried to It was this whole concept of smart contracts and creating these other assets that existed on top of Bitcoin. And the very first attempt at that was Mastercoin, one of the the first ICOs that we invested in. I believe the first ICO that existed.

Um and this created this kind of new breed of people that didn't know whether they're investing in a security, didn't know whether they were purchasing a cryptocurrency, but the rest is kind of history. Um and so what we've seen over the years as obviously Ethereum came around and Vitalik what was originally attempted on Mastercoin and the other attempts like Counterparty on Bitcoin and colored coins and everything else. I think the previous speaker was speaking about some of these things. In the meantime, we were just still continuing to investing in equity and also many of these tokens and the companies that we were working with started doing things like issuing those tokens. Um and no matter what happened to the token, if you were invested in the equity, you were benefiting from the network effect of the token plus the equity value cuz many of the companies were still holding the largest inventory of these tokens.

So whatever happened to the token value was reflected in the equity value plus the equity had all of the intellectual property and everything that the company was doing on top of that. Now while the downside was that you didn't get the deep liquidity of tokens, the upside is that this is really the huddle strategy. It forces you because of the lack of liquidity to ride out the entire wave of the growth of the company. So some of the companies that we've invested in because equity forces you to ride out the whole growth without the liquidity, we've now got Coinbase last valuation 8 billion, one of the unicorns. Um Kraken the last valuation 4 billion dollars.

You You the original round that we did was at 20 million. Bitfinex, um which has paid more in dividends than the whole valuation of the company. Circle last valuation 3 billion. And so we've there's several unicorns that have popped up throughout this. We've done about over 120 different companies and six of them have gone on to be unicorns.

About 10 of them have just gone bust and disappeared and the rest are trading, you know, making decent progress but haven't reached that unicorn station status. So the diversification approach has always been the right approach. And the reason that we created banktothefuture.com in the first place was to allow people to build that diversified pool. For those of you that don't know, in 2010 I wrote a book called Bank to the Future.

And that book was discussing how the entire technology was going to take on every single financial product that exists. We were looking it was a fictional non-fiction book where we traveled back in time, fixed the banking crisis through technology, traveled to the future, and started looking at all the real financial crises that came after that and then traveled back again to try and solve the problem with a new technology that we know exists today. After writing that book I was really really excited about the crypto sector. Um got invited to that first Bitcoin conference to speak on the finance side. And that led me to wanting to be really diversified across the industry.

I knew that you know, my investment philosophy was that the future of finance is going to look very different from the past. That we're in the midst of the disruption of a multi-trillion dollar industry. I just didn't know which companies were going to succeed, which technologies were going to succeed. So we built the platform so that we could diversify widely, invest a smaller amount in lots of companies, um and then we embarked upon this four-year journey of landscaping global international um securities laws. And so, um forwarding on to 2019, um we're very happy now that we've got two routes that we can go.

Now that we've accumulated all this equity, we got 69,000 qualifying investors um on banktothefuture.com, uh we've got the emergence of the securities token industry, and we got the emergence of um some innovation that we've been doing on the regulatory side. And this is synonymous of how I see the Bitcoin industry growing and the crypto industry in general. We're going through and all the companies that we've seen that have gone through that have been having significant growth is in two different very two different routes, both of which I believe are going to be very big markets, um but dominated by different players. The two markets that we've been exploring um that we believe are very important to both and and synonymous and they often people think they fight together is the regulated and the decentralized.

And the reason that I think the decentralized is so important for the regulated as well is because I see Bitcoin as a regulator of the regulator. Now that's a very strange concept um and might maybe the first time you've heard it put in that way, but because I believe that Bitcoin is going to be this um apolitical exit from the traditional financial system that for the first time in history allows people to own their own money, unlike a bank where you can't own it, the bank owns it when you deposit it. Spend your own money peer-to-peer, unlike a bank, if you've got a larger amount of wealth and they don't like how you're spending it, then you need to explain to them and if they don't like it, then they can intercept the transaction. Um and also a monetary policy that cares nothing about the country that you live in. And I think it's important to have fiat currency that cares about the countries that you live in.

But then it's important to have an a-political currency that doesn't care about the country you live in. And the reason that is because it creates an exit from the financial system. It creates a monetary policy that is based upon maths and code and not upon the goals of your country, which might not necessarily be aligned with your interest. And you can pick and choose when you want to transact, store, or save in a currency that's being, you know, either inflated away or you don't like the monetary policy, or you can exit altogether and go to an a-political monetary policy with a fixed supply that is a wave, a mountain, bringing in a mountain of savers for the very first time. One of the beauties of the crypto market throughout this whole thing, um while we've had our a massive amount of challenges, pumps and dumps, bear markets, bull markets, scams, everything you can imagine, um what it has done is it's created a next generation of uh younger people that were never ever going to invest, that were in debt, credit card to credit card after their student loan, and they took for some reason some of that debt, some of that money that they managed to scrape together, and for the first time got interested in investing in the crypto market.

Obviously not equity because that's for a qualifying investor, but cryptocurrencies, tokens, and everything that came. Now, some of them might got wrecked. Some of them might have learned investment lessons for the first time. Some of them might learn about doing due diligence, but they were never going to learn that because they were never going to invest in stocks. They were never going to go in bonds.

They were never going to invest in commodities. Yet cryptocurrency gave them a something that they could grab hold of and start thinking about saving and investing for the first time. And those that have generated significant wealth in this industry, um in my experience, were not the traders that caught the short-term trend, but the savers that got into Bitcoin because they believed in its principles. They got into Ethereum because they believed in that. They got into some ICOs that, you know, and then they learned the the whole risk matrix of the different risk classes.

These are value diversification These are valuable lessons for a lot of people that were never ever going to enter the market. And that's one of the things that I think has been fascinating about this. But, um so yes, uh a bit of a tangent. The two routes, you've got the regulated route. So, if you have fiat currency and you want to onboard into crypto, then you're most likely in the future going to need to go through a regulated institution.

Um that that area of traditional fiat money um is going to create lots of opportunities for custodial ETFs, everything that comes through from that. And that area will boom. But at the same time, we are not here to create the same financial system that a bunch of shysters um created the 2008 financial crisis by regulators, investment banks, and retail banks, and governments all colluding in order to stimulate the economy in order to prop up some of the biggest Ponzi schemes in the world. And at the same time, we need the decentralized and we need the exit from we don't like the way that you're doing that and now I have a choice. And that is where I see that movement going through.

And this is the harder route. It requires people to take personal responsibility for their own security and finance. It requires you to get up to date with how things work today by creating unique passwords for everything you do so that somebody doesn't hack and steal your wealth. It requires you to learn um how to use two-factor authentication, and it requires you to learn how to use a hardware wallet, so that you can benefit from the true freedom and sovereignty that owning your own money, being able to spend your own money, and having a monetary policy that's independent of governments that may not have the exact in micro agenda that you have, but they're looking at the macro. And so, this is that these two industries of unregulated and regulated.

Now, when you have an exit from traditional finance, you have the ability for the traditional fiat currencies, the traditional financial institutions, the traditional financial products to compete with these. And so, they have to get more honest. They have to do things differently. They have to regulate better because of this environment that's being regulated by mass and code and creating an exit to the traditional financial system. I believe both of these are going to be multi-trillion-dollar industries.

This one will probably be quicker just cuz humans are used to doing things the way they are used to doing. The unfortunate thing is that most people are going to onboard through a company like Coinbase that's doing the regulated environment. If they generate significant wealth in there, they're going to struggle to get the money out because they're going to have to pass a million loopholes if it's worth a lot of money, but the faster you can get to the decentralized environment, hardware wallet to hardware wallet, then the faster you can experience the freedom of whatever comes next in the traditional financial system. And please do remember, we have not solved anything since 2008. Nothing.

In fact, the financial crisis started because the the Federal Reserve in the US had $2 trillion of debt and too and too many people that couldn't repay it. We now have $22 trillion of debt in the US and $240 trillion of global debt and nobody that has the ability to repay that. What do you think's going to happen? Well, the central bank are going to launch their own stable coins. They're going to allow banks to go bust.

And when the bank goes bust, you're not going to lose your money, it's going to be replaced with the stable coin that the central bank created. Why do you think every single central bank is hedging against a financial collapse as well by creating their own currencies rather than outsourcing the digital currency to the private and banks like they did and they have with 97% of the money. At that point, you're going to want to be hedged the regulated onboarding environment into crypto and the decentralized environment of exit from traditional finance where no matter what happens here, um you have your own ability, your own hardware wallet with your own wealth. And I think everybody will eventually need to be on board that. But anyway, um we Bank to the Future have witnessed a similar thing.

Um I think I'm almost done now, so I'll just get the final slides. Um we're innovating in the regulated environment and also looking at the decentralized environment. So, we launched two things. Firstly, now we've accumulated um the largest portfolio of equity um that we know of in this industry. We got $740 million worth of investments that have happened through the platform.

Um we created a secondary market whereby people can buy and sell at the moment in beta, we're live with Bitfinex shares. So, people can now buy and sell equity in Bitfinex through banktothefuture.com as long as they're a qualifying investor and meet the requirements of securities laws in the jurisdiction that you reside in. At the same time, we created the BF wallet and the BF wallet is now available on iOS and Android. And this is a securities token wallet.

We've been working with the Blockstream team to integrate liquid securities. And one of our portfolio companies, Securitize, has built a protocol on top of Ethereum, thus allowing for security token issuance. We've already issued the first security token. In fact, in 2016, Bitfinex was the very first security token in the world when they actually recovered from the hack using a token in order to repay the investors many times over as a result of recovery. So, we're looking at these two diverging markets.

We're not sure where the security token market is going. At the moment, we get all the benefits in a centralized way of creating an order book and allowing people to buy and sell shares in Bitfinex. But at the same time, if people want to opt out, then we'll create the infrastructure whereby they can take those securities onto the wallet, and then they can take those out into their structure. Obviously, with securities, there's going to be a white-listing process because at the same time, governments around the world, if you think that securities are going to be decentralized in the future, then you're asking the government to give up a few things. You're asking them not to care about money laundering, which they do care about.

You're asking their regulators not to care about investor protections, which you may have a theory that they might be you know, whichever route you take, maybe they are protecting investors, maybe they're just protecting their incumbents, but they still care about that control. And the third thing they care about is Lost my head. What was the third thing? It'll come back to me in a second. Um money laundering, investor protections.

Maybe I should have put that on the slide. I know it won't go. I'll get that at the end. But the the the wallet allows people to take that out, and then they can take their asset in a bearer format, and then it will be a not in a bearer format, it will be in a white-listed format, whereby it can send to other qualifying investors that have been through as the whole security token ecosystem evolves. But our approach has always been start in a centralized way, innovate into decentralized, and see which the demand goes.

So I think that's most of my time. If any of you want to ask some further questions, I believe that Token 2049 side event is doing a securities token event tomorrow. I'm speaking at that. Grab me on Twitter, I'll send you a link if it's part of the Token 2049 securities event by Blockpass. I'm an asset community of investors that have all been investing in all these companies, and you can join us on Telegram.

So if I've got time for questions, I'll take some. If not, I'll go out the back and happy to take some questions. Have I gone over time? Or Should I take some questions or not? No time?

No. So I'll be outside, and if anyone wants to ask some questions, thank you for your time, and thank you for joining me.