#933 Bill Barhydt On How Bitcoin Will Disrupt Everything

Bill Barhydt Is the Co-Founder & CEO of Abra In this conversation, we discuss regulation, crypto payments, DeFi protocols, building Abra, bringing Crypto to the mainstream, and how Bitcoin will take over all financial institutions sooner than we think. ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Imagine coinmarketcap - decentralized. 3X in valuation is 15 billion dollars from the current price. Cryptotoday.com starts at zero, at fair launch on 7th of March. No VC. No pre-sale. Team tokens locked. For the people, by the people. For decentralized crypto. Visit http://cryptotoday.com and read the whitepaper for the details.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Bill Barhite is a CEO of Abra. In this conversation, we talk about everything from regulation to crypto payments to DeFi protocols and how we can bring all of this technology to the mainstream. I really enjoyed this conversation with Bill and I hope that you enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by BlockFi. BlockFi provides financial prizes for crypto investors. Those products include the BlockFi Wallet, a US dollar loan collateralized by your crypto, and a no-fee trading product. BlockFi also released the world's first crypto rewards credit card. It's a Visa credit card that gives you crypto

• 0:45Anthony Pompliano?

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• 1:27Anthony Pompliano?

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• 2:12Anthony Pompliano?

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• 3:38Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 4:02Anthony Pompliano?

  All right, we next have my friend Bill Barhite. Bill is the founder CEO of Abra. He spent a ton of time in the intelligence world. He spent a bunch of time building various mobile money, financial service platforms, etc., all around the world. Abra has become a very large business today, and he's got some very unique thoughts, I think, about just the crypto market in general, but also where some of this technology is going. Bill, how are you?

• 4:34Speaker 02

  I'm good, man. How's it going?

• 4:35Anthony Pompliano?

  All right, let's do this. Maybe let's start with just kind of your overall read. Obviously, we had a lot of like various price action in Bitcoin, lots of excitement, lots of drops, whatever. We saw plenty of macro hedge fund managers, billionaires, etc., all coming into the market into 2020, beginning of 2021. We started seeing institutions coming into the market. We got public companies with it on their balance sheet. Like, a lot of progress has been made in the last two years, nation-states, etc. Like, what's your general read? Is Bitcoin winning? Is that maybe like a fair way to phrase it?

• 5:06Speaker 02

  I think Bitcoin is gaining acceptance. I think winning... I mean, what does winning mean, right? I mean, Bitcoin doesn't care. So Bitcoin is gaining acceptance. And I think where we were at the beginning of last year was that everybody was saying, "Oh, the institutional money is coming into Bitcoin and crypto." That really wasn't true. I think two things were happening. One, a ton of high-net-worth money, family office money, was coming in. You can call that institutional money. I don't, but that's one. And two, we had this kind of grayscale arb, which wasn't really an arb, as you know, which was basically causing a lot of money to come into the grayscale trust,

• 5:49Speaker 02

  which was basically causing more Bitcoin to get hoarded. When that opportunity ended and unwound, obviously, kind of coinciding with the China mining ban, the network effects kind of paused. Now, what we're seeing coming out of last year and into this year is true institutional interest. Asset managers, even larger family offices, other types of trusts, hedge funds that aren't just crypto-native. Obviously, we have a ton of crypto-native hedge funds now who do nothing but hoard crypto. But the true asset managers are now looking hard or holding or saying, "If we don't get into this, we're going to miss the boat."

• 6:34Speaker 02

  That is a different narrative. We saw this in all of the Q1 allocator meetings that traditionally happen. January and February in particular, that the the the volume of interest from the institutions was unparalleled, nothing even close to what we saw last year. And and that's a big change. Now, combine that with what's happened in the traditional capital markets over the past kind of six months. And given the incremental extreme volatility that crypto has traditionally faced, and the fact that we're at, what, forty-two, forty-three thousand Bitcoin, thirty-two hundred Ethereum, wherever we were a few minutes ago, tells me that, okay, this is really interesting. Now, there's always a chance the bottom falls out temporarily,

• 7:19Speaker 02

  but the fact that we've basically held this level when stocks have had an extreme sell-off is is really impressive to me. And I think that basically crypto is looking for a reason to go higher at this point.

• 7:36Anthony Pompliano?

  So when you think about kind of Bitcoin as an investment asset, there's also Bitcoin plus other technologies that people are trying to do around the payment technology. Have we gone mainstream yet? And if not, what is it going to take to get kind of mainstream adoption where maybe fifty percent or more of payments in in a society or an economy are actually done on crypto rails, not on fiat rails?

• 7:59Speaker 02

  Yeah, I think this is, we're not even close. I mean, we've barely started, but this is coming, and I think it's going to happen. And this here is a couple of things. One, I think there's going to be broad acceptance that in international markets, people are going to want to hold Bitcoin and not spend it. And but they're going to realize that they have instant collateral for credit. And and this is going to become a booming business in international markets. I don't think it'll have a huge impact on the price of of Bitcoin in the short term, because those payments will tend to be smaller. But you're going to see billions of dollars in in in dollar-based or fiat-based payments using Bitcoin and Ethereum as collateral for those payments.

• 8:42Speaker 02

  Okay, and and these are markets that are traditionally exclusively debit markets, right? Pretty much, you know, India, Bangladesh, Turkey, Philippines, just a mass, Indonesia, massive countries that have no credit markets, okay? They're going to basically, over the next ten years, start to adopt Bitcoin, probably the next five years, adopt Bitcoin as savings and then leverage it for. For credit. Okay?

• 9:06Anthony Pompliano?

  So when you-

• 9:07Speaker 02

  So that's part one.

• 9:08Anthony Pompliano?

  Okay, go ahead, keep going.

• 9:09Speaker 02

  No, so, so, so part two is, um, you know, what really happens in, in the US and in established credit markets? And this is where I think you're going to start to see the credit card networks play a huge role. You know, I, I think that, uh, stable coins are going to become the backbone for settlements, uh, in, in different, uh, uh, payment systems, including the card networks. Uh, I think, uh, this demo that, that, that was published of, of, uh, tether over lightning was super interesting to me because you can do true, uh, uh, micro transactions on debit rails without actually having used any credit for settlement whatsoever. Debit rails in the United States actually are credit-based, meaning that somebody is extending credit

• 9:54Speaker 02

  to someone else in order to facilitate a debit transaction because the system doesn't have what we call straight through processing. All of this is going to be changed by the finality of crypto settlement in, in the next couple of years, maybe five years, uh, for certain transactions and then for every transaction over the next 10 to 15 years.

• 10:16Anthony Pompliano?

  When you think about kind of crossing this chasm or, or bringing the mainstream adoption, the payments, I think is, uh, uh, as you outlined, like, it's pretty clear cut. There's a whole bunch of what I'll call crypto native stuff, though. This is all sorts of, uh, DeFi staking or automated, uh, market making and, and kind of all these things that if you're in crypto, you're like, oh, I get that. But if I told, you know, my mom or somebody on the street, they'd be like, dude, you sound like a crazy person. Like, how do we get that stuff into the mainstream as well?

• 10:45Speaker 02

  So, so that's a great question, right? So you tell the average person, I'm, oh, I'm making, you know, 17% on USDC and Anchor. They're like, what the fuck are you talking about?

• 10:54Anthony Pompliano?

  Scam!

• 10:54Speaker 02

  What is, what is USDC? Well, first of all, I don't understand what you just said. What is USDC? What is Anchor? You may as well be making 17% on Jujubes because I don't understand- We could talk about. So, so I think there's a few things. Yes, the computer science and crypto native folks will continue to push the envelope and, and take that free money. If you will, and, and the risks that go along with it. And it's acting as a big global test. That DeFi can basically act as lending, payment, trade rails for a, a kind of new banking system. And then what happens over the, the next kind of five to 10 years is that these DeFi rails become plumbing.

• 11:36Speaker 02

  In next generation banking services. I know at Abra, we use DeFi to generate a certain amount of yield that we pay. To our high net worth investors today. And it's in the background. They don't know it. They just know that the blended rate is eight percent or whatever it is. And it's a risk adjusted rate. We go through a risk committee process and it's. You know, you know, this with, with other companies you're involved with and. You know, it's, it's all in the background. And, and so that's the future of banking. The future of banking is going to be. Consumer facing, high net worth, retail, business facing services that all. Use these DeFi rails, but in a way that hides the complexity. Of those rails to the average investor or bank user.

• 12:18Speaker 02

  And this actually represents a big problem because for regulators, there's no border here. Right? There's no off switch. They're 24 seven. Think about it, right? Stock markets are closed more than they're open. These DeFi services are open 24 seven. You can use collateral, Bitcoin as collateral to get a loan through your DeFi 24 seven, 365. Uh, and you can pay it back 24 seven, 365. You know, you can tokenize equities and those markets are open 24 seven, 365. So the DeFi markets are, are the plumbing of the future. They represent a, a, not only a technology shift, but a regulatory shift because there's no borders. There's, there's no off switch. Eventually there's an off switch today, but eventually there'll be no off switch and the regulators will have no chance.

• 13:03Anthony Pompliano?

  What do you think their response to that is? Do they change the? Rules or or what happens?

• 13:07Speaker 02

  I think in the short term, the regulators, for lack of like legal clarity, meaning regulators interpret laws. There's no law today that uses the word DeFi or Bitcoin in in at the federal level, right? So so what will happen is is they'll try to interpret existing laws to kind of make this oval peg fit in their round hole, just like they did with the original Fincen guidance and the original CFTC guidance that basically alluded to Bitcoin being a commodity, which I never agreed with. It's just software, but that ship has sailed and so we have what we have. They're going to try that, but eventually what they're going to realize it's untenable because it's a big ass planet. And when you have something that has no borders, our rules may not make any sense. Or they may not any value, or they, you know, certainly won't protect anyone.

• 13:53Speaker 02

  And and so at some point, the rules just won't matter, but they will try in the short term, probably the, you know, certainly five to 10 year timeframe. And that'll help institutions that that prefer to ask for permission, that don't really understand the the basis for which our constitution works. You know, it's not Germany where you actually have to ask for permission to do everything. But a lot of institutional investors like to ask for permission because it saves them in their minds a lot of hassle later. All that's going away. It's just a question of when.

• 14:22Anthony Pompliano?

  Yeah, it's fascinating. Another thing that is kind of related to this is not regulators, but we'll call it accounting. I'm going to read this because I don't want to mess this up, but there's a staff accounting bulletin 121. And it says it noted the high technological, legal and regulatory risks associated with the custody of crypto assets relative to traditional assets. You think it's

• 14:46Speaker 02

  Unlike Netflix.

• 14:47Anthony Pompliano?

  Yeah, you you you think it's short sighted. Why?

• 14:50Speaker 02

  It's not that it's short sighted, it's just wrong. So, I mean, it's like saying, you know, like, I'm sorry, I didn't mean to interject, but like, look at the Netflix example. If you're if you're long Netflix, and I know a lot of people who've got the vast majority of their wealth in the FAANG stocks. And I know people have got the best, some people have all of their wealth in Apple. And they just borrow against those shares and pay no taxes, which is perfectly legal, perfectly reasonable way to live. Except if Apple was to basically miss on iPhone shipments and the stock was to fall 40%. That guy might start getting a lot of margin calls on all the loans it has outstanding, which could cause a cascading effect on having to sell some of the Apple shares, which is making this position even more precarious.

• 15:31Speaker 02

  So, so again, I don't see a lot of like, um, you know, accounting rules or SEC statements regarding people holding FAANG stocks. I think what people don't understand is that when you have something that is the fastest adopted technology in history, it trades 24/7, it's highly leverageable, especially outside the US, the chart at log scale looks up and to the right, like when in doubt, zoom out. But, but on the way up in that extreme kind of exponential growth, you're gonna get these kind of volatile spikes. That's exactly what happened to Amazon from 1998 to 2010. It's no different. Um, it's just that the SEC and, and, and these kind of folks that, that do these

• 16:16Speaker 02

  accounting, uh, you know, documents, they're, they're more comfortable with stocks because it's, it's something that they feel that they can control. They can't, obviously, but they feel that they can. And it's just not true. And, and so the reality is, is that all of this, there's these warnings. It's, it's, it's wrong in the sense that they just don't understand what they're warning you against.

• 16:39Anthony Pompliano?

  Yeah, it, it's, um, uh, lack of education and lack of experience using the technologies is a dangerous combination, right? It's a toxic combination if, uh, they start creating rules, but don't actually understand what the ramifications of it are.

• 16:53Speaker 02

  So, so put it in context. If, if, you know, the CFTC and the SEC would agree today that, that Bitcoin is a commodity, at least in terms of regulatory standards. Ask the average lawyer who makes these decisions and, and tries to figure this out, what a UTXO is? And my guess is, is you'll, you'll get a blank stare. So, so that's a problem, right? I, I, if you don't understand first principles and what something is at its core, and yet you're tasked with figuring out how to make this work with, in some cases, 80, 90-year-old regulation, it's, it's insanity. Um, and so that's why in most cases, the best thing to do is nothing and get

• 17:37Speaker 02

  out of the way, let the markets figure it out, you know, go after clear-cut cases of fraud and abuse, uh, and let the markets handle everything else because they get it better than you do.

• 17:48Anthony Pompliano?

  It's, uh, it's wild. Joe, John, what questions you guys got? Bill, my question would just be on the institutional side. Just talk me through kind of what you're seeing. How it looks today and what it might look like in the future.

• 17:57Speaker 02

  Yeah, sure. So, so right now it's pretty basic, right? Most kind of, you know, individual partners at institutions that we talk to are involved in crypto in some way. Oh, I've owned Bitcoin in the past. I own some Bitcoin now. I'm testing DeFi. Like, the number of people that we talk to that are personally involved is incredible. I mean, it's way over 50%, right? And it also depends upon the events. There's some conferences where it's just like a bunch of, you know, boomer, you know, investor types who just don't get it. But, but, you know, for the, certainly the younger crowd, I would say the under 40 crowd, the number of people we talk to who are personally in crypto is incredibly high.

• 18:40Speaker 02

  And so now, those people are really pushing, I think, a lot of these institutional asset managers to come up with crypto strategies, and that's basically starting to take effect. I mean, we are seeing, I've spoken at, you know, probably upwards of, I don't know, 10, at least 10 allocator conferences this year, where, you know, by and large, everyone in the room is trying to figure out a crypto strategy. This is significantly different than where we were last year, when for most firms, it was still too early. So, the last year has seen the biggest shift I've seen in traditional asset managers looking at crypto as a viable component to the portfolio.

• 19:22Speaker 02

  You know, I haven't seen it yet at the sovereign, well-funded level where, you know, they probably feel that they're not allowed to hold directly. They may need securitized versions of the crypto. But for private asset managers, everyone is either figuring out their crypto strategy, already has one, is already allocated, or is trying to figure out an allocation. And even the largest, I've spoken to reps from some of the largest ones that haven't publicly announced, and kind of off the record have said, "Yeah, we're already doing this in very small amounts." And for them, small amounts might be hundreds of millions of dollars, right?

• 19:54Anthony Pompliano?

  Yeah. Bill, can you talk about your guys borrowing product for a little bit? Just who's borrowing the stuff? What kind of collateral are they using? So again, can you just talk about the economics behind that?

• 20:03Speaker 02

  Sure. So, so we run a lending desk, mostly institutional. We have some retail facing as well. We have lending licenses in the US and I think 44 states and, and but our institutional business operates in like 100, 100 countries as well. Our lending book is, I think about one, a little under 2 billion now and, and growing very fast with zero, you know, right at the start of COVID. So, so it's, it's, it's, it's our fastest growing business. And basically what it does is it takes collateral in, in crypto X and lends out in, in crypto Y where crypto Y may be stable coins, for example. So we might take in Bitcoin or Ethereum as collateral, lend out dollars. We might take in USDC as collateral, lend out, lend out Bitcoin, depending upon the use case.

• 20:48Speaker 02

  And, and so we go very deep in, in onboarding potential institutional clients in terms of use of funds, balance sheets, existing leverage of the system, et cetera, et cetera. And then make, you know, investing lending decisions based upon all of these factors. It takes several weeks to do that and, and the rates would be commensurate with risk profile collateral, et cetera, et cetera. We also do a certain amount of DeFi investing today. This is extremely complex because we go very, very deep in terms of analyzing smart contract codes. So we've got, you know, MIT analysts who will, graduates who will go into solidity code and test DeFi positions for weeks at a time

• 21:27Speaker 02

  before making small allocations from our lending book in order to, you know, further pump yield for our, for our users. And so all of this in our, in our lending business creates kind of a blended yield for different products, for Bitcoin product, the dollar staple coins, Ethereum, et cetera, et cetera.

• 21:47Anthony Pompliano?

  Gotcha. Bill, if you had to kind of put money on one thing that most people are not expecting to happen in the next 12 months, leave us with, what's that one thing that you're like, yeah, I think this is going to happen and everyone is not expecting it?

• 22:01Speaker 02

  Oh, wow. Not expecting it. So let's see. So on, on the payment rails, I think you're going to see the first payment services on the card networks that use crypto. collateral this year. Okay. And so there's already cards out there that pay crypto rewards. That's great. I use a couple, but you're going to see the first traditional card network product this year that paying dollars, but determine your credit worthiness in crypto. I don't know if I would say no one's expecting it. I just think that it's a it's a massive opportunity in the crypto space that I don't see a lot of people talking about. I think the biggest problem in kind of

• 22:43Speaker 02

  the DAP world right now is MetaMask. You need you need a PhD in computer science to basically use MetaMask. And if you don't have a PhD and you try to use it, your chances of losing your NFTs or your stable coins or your DeFi investment are tremendous. I've read stats that there's double digit percentages of people that have basically lost stuff via MetaMask. And so I think there's going to be a tremendous effort over the next couple of years to solve the MetaMask problem. And as investors, we both have funds. And so, you know, we're seeing a lot there. And Abra is working on on stuff in this area, which we'll be announcing. I know others are too. But we think that the payment space, as it relates to solving the MetaMask problem, solving the

• 23:28Speaker 02

  credit problem for people who are long crypto, is is the biggest opportunity that we see in the crypto space over the next few years.

• 23:35Anthony Pompliano?

  I tend to think that that's probably a pretty good selection of a problem. And the bigger the problem, the bigger the financial opportunity, right? If you can end up being a part of that solution. So that's awesome. Where can we send people to find you on the internet or find out more about Abra?

• 23:49Speaker 02

  Sure, I'm Bill Barhite on Twitter. You can go to abra.com, obviously, download, download the app and join millions of people who are using Abra today. Our trader and borrower products are live in over 100 countries. And yeah, so just go to abra.com. I'm pretty, pretty active. Not every day, but but some days on Twitter, Bill Barhite. And my guess is if you're motivated, you'll you'll find us.

• 24:14Anthony Pompliano?

  The I'm pretty active, not every day. We got to get it to every day. We need you tweeting every day. You have great insights.

• 24:19Speaker 02

  I have a job. We've we've we've 10x the size of the team over the last kind of 15 months. So I'm pretty busy.

• 24:28Anthony Pompliano?

  Twitter is a job, Bill. What are you talking about?

• 24:30Speaker 02

  Yeah, exactly. It's it's it's a it's a not a job, but it's an adventure for sure.

• 24:34Anthony Pompliano?

  Awesome, buddy. Listen, thank you so much for for coming on. We'll definitely have to bring you back. And anyone who wants to go check out Abra, go ahead and do that or follow Bill on Twitter. Good to see you guys. Better buddy. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.