#634 Bitcoin, Stablecoins, and NFTs with Kevin O’Leary

Kevin O’Leary is a Canadian businessman, author, politician, and television personality. He is a Shark on ABC’s hit show Shark Tank and has had numerous previous business successes, including when he sold The Learning Company to Mattel for $4.2 billion in 1999. In this conversation, we discuss bitcoin, regulation, stablecoins, yield generation, institutional compliance departments, ETFs, NFTs, inflation, and Larry Fink capitulating on bitcoin. ======================= Whether you're an experienced crypto trader or just starting out, Kraken has the tools to help you achieve financial freedom. With the new Kraken app, you can easily buy and sell over 60 of the most popular cryptocurrencies in just a few minutes. Featuring a sleek new design and an easy-to-use interface, you can now take your crypto portfolio with you on the go, 24/7. Visit kraken.com/pomp to learn more or search "kraken" in the app store. ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp

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. Kevin O'Leary is a Canadian businessman, author, politician, and television personality. He's a shark on ABC's hit show Shark Tank. He has a brand new show called Money Court on CNBC's on Wednesday, and he's had numerous previous business successes, including when he sold the Learning Company to Mattel for $4.2 billion in 1999. In this conversation, we discuss Bitcoin, regulation, stable coins, yield generation, institutional compliance departments, ETFs, NFTs, inflation, and Larry Fink capitulating on Bitcoin. I

• 0:44Anthony Pompliano?

  always enjoy these conversations with my friend Kevin, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Kraken. For the last 10 years, Kraken has been one of the best platforms for trading crypto online. Now with the new Kraken app, it's easier than ever to buy and sell Bitcoin and over 60 of the most popular cryptocurrencies on the go 24/7. Simply download the Kraken app, connect your bank account, and start investing for as little as $10. Just a minute is all it takes to get started. With the new Kraken app, you'll have your portfolio in your pocket wherever you go. Monitor your investments, track winners and losers, keep tabs on your favorite projects, or view the most traded cryptocurrencies of the day. It's got all of the features you need with none of the complexity. It's a simpler way

• 1:28Anthony Pompliano?

  to invest in crypto. Visit kraken.com/pomp now to learn more, or visit Kraken in the App Store. Again, kraken.com/pomp on your web browser, or search Kraken in the App Store. I've had Jesse, their CEO, on the podcast before. I'm a huge fan of all the work they do around Bitcoin developers as well, so go check him out and take a look at kraken.com/pomp.

• 1:53Anthony Pompliano?

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• 2:38Anthony Pompliano?

  Go check them out today at LMAXdigital.com/pomp. Again, LMAXdigital.com/pomp. Let me know what you think once you check out the number one institutional crypto exchange, LMAXdigital.com/pomp. All right, let's get into this episode with my friend Kevin. I hope that you enjoy it.

• 2:56Speaker 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.

• 3:19Anthony Pompliano?

  How are you?

• 3:21Speaker 02

  I'm crispy.

• 3:23Anthony Pompliano?

  You're late. What happened?

• 3:25Speaker 02

  Listen, listen, I got, I'm crazy busy these days. I gotta be honest with you. It's very nuts. It should be the dog days of summer, but it's not. It's just crazy busy.

• 3:35Anthony Pompliano?

  All right, where are you right now? Are you promoting your new show?

• 3:38Speaker 02

  I am. I've been on a pretty big junket, and I will be for another week. As you know, we finished taping it, pretty excited about it. It aired its premiere just a couple of nights ago, again this Wednesday night, money court. I think this show's gonna last forever because there's so much litigation in America, so much.

• 3:58Anthony Pompliano?

  It feels like you sitting there as a judge has gotta be the scariest thing in the world to somebody who wants to actually win. Like, it just feels like somehow both parties lose and Kevin O'Leary wins.

• 4:11Speaker 02

  But you know, the reason these things come together is the concept of arbitration. Because if you're in a dispute, and you know, this is not a judge show where there's a cat screaming next door and you're complaining about the noise. This is real financial litigation where companies or people are suing each other. And they've decided not to go through the court system because they're not going to get near it for the next five years. There's so many tens of thousands of cases jammed up in the system because of COVID that they want to go to arbitration. And this is a really interesting outcome. When they started to sign these contracts to say, are you going to let somebody decide on your case through arbitration? They said, look, I don't really like that Mr. Wonderful Guy, but I trust him. And that's where we're at.

• 4:52Speaker 02

  And I've got a federal judge beside me in Adapozzo, and I've got a trial attorney as well, in Katie Fang. And that's a pretty good group. Three of us decide these cases.

• 5:03Anthony Pompliano?

  I love it. All right, let's talk Bitcoin cryptocurrencies. You and I had some epic showdowns on television. You called it everything from crypto garbage to one time you forbid me from owning any more of it. But I think that there's a lot of changes that have happened in the market, both from a regulatory standpoint and also some of the market dynamics. And you now are comfortable starting to allocate to it. So maybe walk us through kind of what changed and then how you're thinking about allocating to Bitcoin and cryptocurrencies today.

• 5:35Speaker 02

  Yeah, so what changed is exactly what you said, Paul, the regulatory environment. I work in a very regulated world. I'm an investor in so many different financial services companies that are reporting issuers. And so we don't have the luxury of being offside with regulators, not now, not ever. And in 2017, when we were talking about those epic moments, and it's true, because I get those things shoved in my face every day. But I point out that when things change, I change. That's when I took my first Bitcoin Ethereum positions in 2017. Obviously, I've done very well with those. But recently, after the regulators in Switzerland, France, Germany, Australia, England, Japan, Canada, all started to change their stance on crypto, it allowed me to start to allocate to it in a compliant way. And that's really what got me going.

• 6:20Speaker 02

  Obviously, this is an asset class that's here to stay. It's still going through a very nascent phase. I'll be putting a lot more into it as time changes and still the regulator's not 100% on board. We all know that. But things are getting better, not just domestically, but internationally. And so I'm an international investor and in many countries where we're talking about Bitcoin or Ethereum or other assets, other crypto assets, tokens and coins, the regulators opened up.

• 6:47Anthony Pompliano?

  What's the current allocation percentage? I think at one point we talked and you said you were at 3%. Are you still at 3%?

• 6:54Speaker 02

  No, I've, I'm, you know, I've told everybody, I've disclosed that by the end of the year, I'll probably be at 7%. That's the target. Because I've gone beyond Ethereum and Bitcoin. I have a pretty big position in USD right now, USDC. I'm moving into some other assets that I'm negotiating right now. I have been struggling with this ESG issue around mining my own coin. As you recall, that topic was really forefront at Bitcoin 2021, when I moderated, and I think you were there, the major miners and how they're trying to deal with this carbon offset issue. I still get people asking about that. I still have, I still have sovereign funds that I service to some of my other companies asking, what are you going to do around this ESG? Because they have these compliance committees. And I know a lot of

• 7:39Speaker 02

  people debate this issue, but it's not going away. And so I think you're going to see a real move towards places like West Texas, solar, wind, ideas around new gen generation, where it's completely compliant. I'm a shareholder in there now. Jamie Leverton does sustainable mining with flare gas. So I mean, there's, there's ways to get around it, Paul. And I'm using that to increase my allocation. But I think by the end of the year, across all crypto assets, it'll be a 7% weighting. And it could go as high as 20% if I wanted to. But I'm just taking it one step at a time.

• 8:15Anthony Pompliano?

  What would it need to take, or what would have to happen for you to go from the 7% target today to 20%?

• 8:21Speaker 02

  Performance. Performance, I mean, that's basically, you know, I'm not a cowboy here. I'm actually allocating capital towards achieving a distributable return of between six and eight percent a year. And so, you know, we have a lot of volatility in Bitcoin. And right now, we're kind of 61% back from the lows, and that's great. But not every crypto asset has to be that volatile. So when you start to build out your portfolio, let's go to USDC, you know, you actually can take that as a relatively stable asset and write contracts on it for 60 days, 30 days, 90 days, and you generate three and a half, 4% yield, which is what

• 9:04Speaker 02

  I'm doing right now. And so I look at it as a portfolio approach. Some of these things have volatility, some don't. But, you know, the biggest problem, which is holding all of us back in the crypto industry right now, is compliance at the institutional level. You know, you go in and you say, look, everybody's talking about this, all right, I'm running, let's say I'm running a billion dollar mandate, that's not uncommon, and I want to put 10% into crypto. You have to be able to find a platform that can link to your internal reporting and your external regulatory. You know, it's not like I got a hundred, if I'm putting a 10% allocation on a billion, that's 100 million. I'm not going to download an app on my phone and put 100 billion, 100 million dollars into it. I'm going to have

• 9:47Speaker 02

  to have an institutional compliant platform. And the industry's not there yet, Paul. It's got a lot of work to do on that front. And the more we move towards that, the more capitalism will be coming in.

• 9:58Anthony Pompliano?

  How do you think about the breakdown between Bitcoin, other coins, and then what I'll call like, the miners or more publicly traded cash flowing type businesses? Do you have a framework as to how you're trying to allocate across these?

• 10:10Speaker 02

  Yeah, the 7% allocation is allocated across all of the above. Let me give you an example. I talked about how I have no, you know, I'm just a shareholder. And the reason that I met Jamie was when we were making a reallocation of some of her office space, she took some of my office space, which I'm very proud to have done that deal with her, and we got to know each other. And I was, I was telling her back then, it was a few months ago, the challenges I was having. Coming out of the Bitcoin 2021 conference and all of that, that stuff of an ESG and which coin do you own and all that. She said, well, look, I keep every coin that we mine at HAD8. It's sitting on the balance sheet. Every time I get a one of the coin stays there. I lend it out so I can get fiat currency to pay my expenses, but I own the coin. So that you're going to trade

• 10:55Speaker 02

  my stock in a very high correlation to the price of Bitcoin because the more I mine, the more it stays on my balance sheet, I'm a proxy for the coin. I said, that's a very interesting model. I'm interested because I know every coin you've got since you started has been built on a compliant basis towards ESG. So I'll become a shareholder. So I bought some of her stock and the stock is volatile as Bitcoin is. I think I'm up 61% and Bitcoin's up 61% since I bought it. So she's really starting to trade with the value of her balance sheet. That interests me a lot to solve for my mining issue because if I want more allocation of mining, I have no risk of getting called out from compliance around ESG with HAD8. Now, I'm not, I don't want to sell like

• 11:37Speaker 02

  an advertisement for them, but if more of the miners did what she is doing, you get more institutional capital coming into the mining infrastructure, which we don't have right now. It's very hard to raise money for mining infrastructure because if you got a facility in Tennessee or Mississippi or something like that, which is not compliant because there's coal energy there, you get all these headaches and that issue's not gone away yet.

• 11:59Anthony Pompliano?

  So I think that we talked about this last time you were on the podcast. My take on it is the ESG folks are, have lost their minds. They're putting all these undue pressure and they don't really understand Bitcoin and mining and all of that. I think that you're trying to solve not for what I'll call personal belief and you're on some crusade, but more so from a compliance says I have to do X, I got to figure out a solution so I can allocate capital to an asset that I want to allocate to. So it's very much like you're giving a box and you're trying to play within that box, right? With that said-

• 12:29Speaker 02

  Paul, I wanted to get detail on that. I have no choice. I have it. I have a compliance department. They have an investment committee. On top of that is a sustainability committee and the ethics committee. I don't have a choice. There's no negotiation. I got to do what they say. And that's the same for another trillion dollars worth of buying on Bitcoin. Same problem. You don't have that problem. I have that problem.

• 12:51Anthony Pompliano?

  So when you think about this, the Bitcoin that ends up getting mined, that-

• 12:59Anthony Pompliano?

  Meets all the milestones on this ESG kind of talk track. Why are people not willing to pay more for it? I think at one point, there was a thought process and maybe we just haven't seen will they or not? But it seems like folks, they want that Bitcoin. But from an economic standpoint, I haven't seen anyone paying more for it. So one, have you, I guess, have you seen anyone pay more for it? And then two, do you think that's something that will happen? Or do you think that, uh, that that's unlikely to happen in the future?

• 13:24Speaker 02

  Uh, you know, at the beginning of this journey, I thought it might happen that there be some kind of wrapper on clean coin versus non-clean coin. I don't believe that anymore. I think you need fungibility across every single coin, all 21 million of them. And I think what's going to happen is for incremental buying coming in, and I'm saying a trillion dollars. If the, if, if, if my clients, just the institutional and sovereign funds alone, and not, not all mine, but that whole asset class of investor just did a 1% allocation towards just Bitcoin. That's a trillion dollars worth of buying. So we really, really want to solve this problem as an industry. So it's not because you, you, you get on one side of the bait or the other. They simply can't check the box and invest until their compliance committees say yes.

• 14:06Speaker 02

  So all of these new mining operations, so what I think is going to happen is you got the existing coin out there now. Providence known or not known, got it. But if you're setting up a new operation to mine coin for the next 30 years, you're going to get a lot of institutional interest in that infrastructure cost. Let's say it costs a half a billion bucks to set up in West Texas. You could, you could probably fund that if you guaranteed those institutions, that every coin awarded would go on the balance sheet, stay there. And they could claim to their compliance committees. It was mined sustainably through wind and solar, which you can do in West Texas. So that's, and you know, you got the China thing shutting down. You've got all these compliance issues in Eastern Europe. All of this stuff is happening in the background.

• 14:47Speaker 02

  And it started, you know, the height of this frenzy, but it was in Miami at Bitcoin 2021. When you saw that debate raging and Elon Musk said he wouldn't take it anymore for payment on Tesla. All of that stuff was happening at the same time. Issue hasn't gone away. On the other hand, I see it as a huge upside potential to solve the problem. I want to be long Bitcoin when that 1% gets allocated to the rest of the funds. Cause that's when you're going to see really amazing incremental valuations.

• 15:16Anthony Pompliano?

  So today we're sitting around 45, $46,000. When that trillion dollars gets allocated, any thoughts in terms of what happens to Bitcoin?

• 15:25Speaker 02

  Katie Bar, the doors pump. I mean, it depends how fast they come in. I mean, that's when you get extreme extension of valuation. You just don't know. Anytime people say, "I know the ceiling on the price of Bitcoin," they have no idea. It could go anywhere. And it's just because it depends. And here's really what I'm, when I talk to institutions, there's a change in philosophy about their thinking. Let's just stay with Bitcoin. Bitcoin used to be considered for many institutions that hadn't owned it yet, the ones that were just looking at it, as a currency. They're not thinking that way anymore. They're looking at it as a property. So you would buy it in the same way as a AAA office tower in Manhattan.

• 16:08Speaker 02

  You buy an allocation to coin that you're allowed to own, you never trade it. You own it as an asset. You know it's compliant, it checks the box. You own it on your balance sheet, your providence, and it's something that you can own as property. And that's where I think we're going. Some percentage will still be traded. But for the big institutions coming in, this is an asset class that is a property.

• 16:31Anthony Pompliano?

  I think I just heard Kevin O'Leary say that Bitcoin's price is unlimited. That's what I think I heard, but who knows?

• 16:39Anthony Pompliano?

  In terms of public companies putting it on their balance sheet, we know MicroStrategy, Tesla, Square. We also know a number of the Bitcoin or kind of crypto-focused companies in the public market have done this as well. Is that something where you expect over the next year or two, more and more publicly traded companies will start to put this on the balance sheet? Or are you thinking more exclusively this days in kind of the investment organization corner of the financial market for now?

• 17:01Speaker 02

  I'll tell you pragmatically what it's going to take to get the S and P 500 putting an allocation to their treasury and their balance sheets. Because, you know, they are interested in starting to explore crypto in exchange for cash reserves. And we'll go into that in a second on USDC, okay? But let's just stay on Bitcoin. That letter that Larry Fink puts out every quarter that dictates BlackRock's positioning for sustainability, we've got to solve for that. We've got to get Larry on board for Bitcoin on a sustainability model. And if he's okay with it, because that letter actually sets

• 17:40Speaker 02

  policy for, think about the way this works, for sovereign funds, who he sees the largest asset manager in the world, and for domestic pension plans, and for universities and everybody else. He started this a few years ago with the sustainability issue. And all of a sudden, you saw the market capitalization of hydrocarbons like oil companies start to get crushed. Because if you're an institution, and let's say you've got, you know, $5 billion under management at BlackRock, and Larry's telling you, "Look, we're not investing in hydrocarbon distribution companies anymore," whatever his edict is, they're going to be selling those. And so

• 18:20Speaker 02

  what we need is, you know, I'm calling out for the guy that really sets the standard, it's Larry Fink in that letter, and his ESG committee and the consultants he uses, we've got to get them on board. And if he said, "Look, you want to own Bitcoin? This is how you can own it, and still fit the metrics around global sustainability," that's where we're at. Now, I've taken it upon myself, because I'm not ready yet, I want to go there and see his team and say, "Look, I'm going to bring a bunch of representatives from the mining community. We've got to talk." I mean, I want to be an investor in mining. I don't want to be outside on compliance. I don't want to be outside on ESG. I can't. I don't

• 19:02Speaker 02

  have that option. I can't go against that mandate. So I'd rather get them on board.

• 19:08Anthony Pompliano?

  What happens if you and I go see Larry Fink at BlackRock, you've got your nice suit on and your expensive watch, and I show up dressed like this. Do you think that he takes the meeting?

• 19:18Speaker 02

  I think he takes the meeting. I think Larry's a pretty pragmatic guy. I work in the institutional world, you know that, Pomp. That's where I am every day. And so, you know, I'm sure that, you know, and I think probably, and I'm just speculating now because I haven't done my due diligence yet, but I'm going to guess that inside of his organization, there is a sustainability committee that's setting up these mandates and help publishing that quarterly letter. But you've got to understand something, Pomp. That letter is, it is actually policy. That's what that is. It's not officially policy, but every institution reads that letter. The institutional committees read that letter on sustainability and they try and abide by it because Larry's a pragmatic guy. That's where we're at in the mining community right now. We've got to,

• 20:00Speaker 02

  we've got to solve this. You want to see Bitcoin and a million bucks a coin? You've got to solve this.

• 20:06Anthony Pompliano?

  Is Larry Fink, in your opinion, the most important person in terms of getting institutional capital to flow into the market? If Larry Fink kind of capitulated, put together this framework and said, okay, here's how to do it, do you think that that would be the inflection point?

• 20:22Speaker 02

  He is the most influential. Why? Because numbers don't lie. He's the number one asset manager on earth. Every geography works with him all around the world. And so, look, I'm just calling it what it is. He's the big dog and he's put those sustainability mandates out there and every industry. You should talk to the guys in oil and gas. They're not exactly happy.

• 20:43Anthony Pompliano?

  Yeah, it makes sense. You, last time, told me that you had made an investment in a DeFi company and that you were starting to really spend more time kind of pushing into that, understanding it, starting to do all sorts of things around yield generation. What exactly are you doing there? Any update?

• 20:59Speaker 02

  Yeah, sure. I mean, so, met this wonderful team in Vancouver, Canada, brought to me by some of my guys. We look at a lot of deals, obviously. You're aware of that. And let me talk about the problem. I do a lot of work in consumer goods and services. A lot of the stuff I do in financial services is for the consumer model, for the large, not, you know, for trying to figure out how to solve a problem for 100 million users, not 10. So, here's a classic case. I have a team here that actually can write contracts on all the different platforms when I want to do interest income on, let's say, USDC. That's not easy to do. You don't snap your fingers and do that. You've got to actually do it, and I have to do it on a compliant basis. So I have to have

• 21:41Speaker 02

  all the reporting. I have to do the 1099s. I've got to do all of the mark-to-market positions every day, and I got a whole team of people doing that. And I've put a lot of our cash to work. We sold off a lot of real estate in the last two years, the commercial real estate, and now we're putting it, it's sitting in cash, making 20 basis points in USD. All I have to do is go USDC, and I can start writing contracts, which I am doing now, on 30, 60, 90 days, making about 3.2%. We wrote contracts this morning. Now, that's not easy. So my daughter, who's 27, who's got a bank account at a big money center bank, says, "Hey Daddy, I'm getting nothing on my cash. I'm getting 18 basis points, and you're making three and a half." How much for that doggy in the window?

• 22:25Speaker 02

  And I said to her, Savannah, "It's a nightmare. You're never going to figure this out. You're not going to get set up to do this. It's not easy to do." She needs an app on her phone that she can simply say, "Go fetch." Move over 1,400 bucks out of her, you know, her bank account, set it up in a series of contracts, get an accounting basis so that she can actually report to the IRS at the end of the year, get a 1099. That's what WonderFi is. That company started as DeFi Ventures, and I said to the team there, "Look, let's take advantage of all the people that know Mr. Wonderful." This is a rip-off of Richard Branson. He does everything virgin. I'm doing everything wonderful.

• 23:08Speaker 02

  We renamed the company, WonderFi. We raised a ton of money for it, and now it's working on its applications, and I'm luckily be able to launch it soon, and it's going to solve that problem that Savannah has. She, all her friends, and another 100 million people. Because there's not enough ease of use, right, yet in crypto or in DeFi, and that's what I'm trying to solve.

• 23:30Anthony Pompliano?

  I am blown away at the fact that two, three years ago, you were forbidding me from doing this, and now you're the one who's telling your daughter to get into it. I love it.

• 23:39Speaker 02

  Well, you know, USDC is interesting. It's a way that you can actually, if you understand what you're doing there, it's a less volatile crypto. You know what it is. And you can actually write contracts on it and get a decent yield, at least more than inflation. If inflation's 2.1%, you gotta make three, otherwise you're losing money each year. That's my thinking on it. And USDC is the way to do it. But yeah, you know, I have really had a major turnaround in crypto. You were part of it. I remember being on the set of CNBC with you on Squawk Box and barking at you like a dog. But at that time, the regulator was barking like a dog too, if you recall. And so I didn't want to be offside on that. Now we have a much more, let's call it laissez-faire environment, but you still have to be compliant. You still

• 24:21Speaker 02

  have to report. You still have to mark to market. You can't be a cowboy about it.

• 24:25Anthony Pompliano?

  Yeah, it makes a ton of sense. When you think about just the broader market, you mentioned inflation and kind of crypto. A lot of people jump when they think of crypto and public companies to put Bitcoin on the balance sheet, right? And I think that there's obviously some that have done it, some that will do it. Is there a middle ground where this USDC strategy that you're employing, you'll see some public companies start to do that as well? And it's merely a low-risk, volatile value, kind of high-yield generation type strategy from like a treasury management, rather than try to jump straight from US dollars to Bitcoin?

• 24:58Speaker 02

  No, that's a great question. And that is the question.

• 25:01Anthony Pompliano?

  All I do is great questions.

• 25:02Speaker 02

  No, no, but that, I'll tell you why that's a great question. Because when you go to the actual compliance departments of large institutions, and I've had many of these dialogues just in the last, you know, two weeks. Can you convince your compliance department that USDC is not Bitcoin? And that you should somehow get a pass on USDC versus Bitcoin? And it shouldn't be regulated in the same way. And that's where you have a lot of gray zone. Because, you know, you think about what it, if you're going to be on the treasury side of your balance sheet, let's say you're managing, you know, $100 billion of cash, and you want to put a 10% in USDC. So instead of getting 22 basis points, you can get 3.2%.

• 25:49Speaker 02

  And you go to compliance and say, I'm going to take this cash and convert it to USDC and I'm going to start writing contracts on it. What do you think the compliance department is going to tell you? They're going to say, wait a second, have we ever done this before? Show me where? Show me where you got the sign off on that from the board? Show me where you did the reporting, not just internally on the mark to market, but you reported successfully to the IRS on the quarterly and annual basis. The problem isn't that the product isn't desired. The problem is there's no infrastructure for compliance yet. You know, and you know, pump, we're not talking about small dough here.

• 26:32Speaker 02

  We're talking about hundreds of millions of dollars moving fluidly off balance sheets into these contracts. And the only way you're going to get that done is prove to compliance and prove to the regulators that you can do it in a way that you stay on side. So the good news is from, from an institutional guy in terms of my thinking, what an opportunity? What a huge, huge opportunity this is for somebody or multiple platforms to solve this for the trillions of dollars that want to use it.

• 27:09Anthony Pompliano?

  Yeah, makes, makes sense. I've got two of my brothers here. I don't think you've ever met them before, so be careful because they're way smarter and better looking than me, but they got questions for you as well.

• 27:18Speaker 03

  I'll go first, Kevin. Thanks for doing this.

• 27:20Speaker 02

  No problem.

• 27:21Speaker 03

  And now that we've clarified, you've gone from Bitcoin being garbage to a significant allocation. We'll have to get you one of these hats.

• 27:26Speaker 02

  You guys are never going to let me go. I mean, you're never going to bring it up again. Like, what, I'm going to like a hundred years from now, you're still going to roll out that tape?

• 27:35Anthony Pompliano?

  Yes, yes.

• 27:36Speaker 03

  Well, maybe, but I respect the fact that you, you did the work and you changed your mind and you've now allocated a significant portion. That's awesome. So my question is, is pretty simple, I think, maybe complex to some degree though, which is we have a lot of young people that watch this show who are early on in their investing career and their call it personal finance journey, right? Just getting things in order, investing some money, allocating some capital out of each paycheck, et cetera. Knowing what you know now, if you had to go back to your early twenties in the current market environment, how would you think about kind of just starting out investing?

• 28:09Speaker 02

  I would have listened earlier to the concept of diversification because you know, I live by a rule now. It's very simple. I never let one position become more than 5% of the portfolio and no sector become more than 20. And I consider crypto to be a sector now. I can invest in mining, I can go coins, I can do tokens, I can do Bitcoin, Ethereum. There's a lot of different things. So I consider it a sector. So technically for diversification, I could go to 20% in crypto, but Bitcoin would never be more than 5% of a mandate. You see what I'm saying? A single asset. And if I were starting, there's two things I would do if I could talk to myself again. Because I'm guilty of having bought a lot of crap I

• 28:50Speaker 02

  didn't need when I was young. I wish I'd simply taken 10% of my income when I started working. And that was like when I was 17 years old and simply invested it into the market. And if crypto existed then, I would have put some in there too. But had I done that, I'd be way better off than where I was, you know, 15. Because it was only decades later that I figured out investing and started to scramble. I got married, I had no money. And so I was able to solve for it later on by taking some chances. But investing from the beginning is the key. And that's that pair of genes you don't need, or that crap you don't need. You can always save 10% of your income and just stick it into an investment. Long term, you'll be way better off.

• 29:36Speaker 04

  Makes sense, John. Yeah, Kevin, thanks for doing this. Nice to meet you. I am curious about where you see. So you've come a long way, like Joe said, and Anthony as well. Where do you see the regulatory environment and discussions around Bitcoin, crypto? Where do you see it going? So example, the ETFs that have been proposed have not been passed. Where do you see that entire space?

• 29:57Speaker 02

  Yeah, it's a great question. And everybody, I mean, I'm in that indexing market as well. And we have this conversation every quarter. So as you know, the Canadian regulator allowed both Ethereum and Bitcoin into ETFs. And there's multiple offerings and they've all been successful. And they definitely are correlated to the price of Bitcoin. And so you can trade that volatility up in Canada on the TSX. And they're not the only country that's going to allow that. So I'm optimistic that the US regulator will follow suit at some point, but not next year. There are multiple applications waiting. And the reason they're going to go cautiously is A, they can, and B, they know when they make that index, when you actually can trade a Bitcoin ETF, that that will be incredibly

• 30:42Speaker 02

  popular. And in terms of just saying, look, I want to trade the volatility of Bitcoin and I can't or I'm not allowed to own the Bitcoin for compliance reasons. But an ETF is considered for most compliance departments, a compliant equity. So if you had an ETF today, it would fit under the radar screen of many institutions who could allocate immediately to it. And so that's why I think the regulator has been very cautious in terms of how they allow for it. My guesstimate, and it's only a personal estimate of what will happen, is we'll see this first in 2023, so we're still a ways off. But the interest in all things crypto institutionally is huge. And it goes back to what I said earlier.

• 31:25Speaker 02

  The reason that you haven't seen these allocations, there's a lot of excitement around Bitcoin, but the truth is, most institutions aren't playing yet, is you simply don't have the compliance infrastructure linked together yet. You can't download an app and put $100 million into it. That's not going to happen. You're going to have to have... When I buy a stock or a bond or another asset class, for decades now, compliance has already got structure. It's a mark-to-market on a four o'clock at night. All the compliance automatically occurs. The positions are known. They're disclosed to the regulator. It's all done. And that infrastructure's been around forever. We don't have that infrastructure yet in crypto.

• 32:07Anthony Pompliano?

  What would be the sequence of events for an ETF approval in the US? Would they just say, hey, Grayscale, you get the approval? Or, you know, one individual ETF application gets approved? Or do they have to, from a market structure standpoint, approve three, four, five, 10 of them all at once and then kind of let the market decide? Like, how does that play out?

• 32:28Speaker 02

  I would think they would allow multiple competitors in the market simultaneously. All of the files have been sitting with, if you want to call them shelf prospectuses for a long time. And so to say that one's ahead of the other or ahead of the queue, I don't think even exists anymore. I don't know that. But it would make sense to me as opposed to just give it to one issuer. Do three or four Bitcoin, do three or four Ethereum, maybe do maybe a USD, whatever has been filed for. But bring the market forward simultaneously and let the financial services compete. Because, you know, look at it this way. If somebody said to me, "Look, you're going to have to pay 80 basis points to maintain your Bitcoin

• 33:11Speaker 02

  holdings inside an ETF." I wouldn't do that. That's crazy. But if you had three competitors, maybe they go down to, you know, sort of an index weighting, maybe 11 bips or 14 bips, and I get compliance, and I get reporting. Okay, maybe that's worth it. Because I want that, right? The great thing about an ETF is it's already on my statement, on my mandate, and it's going to be compliant. And so I'm willing to pay something for that. But right now, I'll tell you, one of the other problems in the crypto industry is most of the platforms, I don't have to name names, but you know, I know the same platforms you do, and I'm well aware of all the initiatives going on, are not priced for institutional pricing. You can't charge an institution 300 basis points to maintain any crypto anything. They're

• 33:56Speaker 02

  not going to pay that. And so you've got to go to scale, and you've got to get fees way down. And we don't have that yet. Most of the stuff that's out there, that's on your phone, has really a lot of friction in terms of fees, and they're just not going to pay it. So there's lots of work to be done. But the good news is, it's here to stay. And the amount, and I keep saying this, the potential is, it's just, there's never been an asset class with more potential than this.

• 34:23Anthony Pompliano?

  I tend to agree. You recently announced a deal with FTX. And I think the reason why I like you so much is when you go from no to yes, you immediately say, "What do I bring to the market that is unique?" And this deal with FTX is really interesting because I think it's an investment, plus like an ambassador or some sort of spokesman type role. Explain kind of how the deal works and what the thought process here is.

• 34:48Speaker 02

  You know, it was hap- it was hap- you know, it happened, actually, when we were together in Miami at Bitcoin 2021. I was having meetings with most of the major players in crypto at that time for various reasons. And I met Sam Bankman-Fried, and he was a really impressive guy, and his team. I met his team after that. And we started, started to think a little bit about, you know, what's, what's it going to take to get? In the same conversation we're having now, I was having with his team, saying, "Guys, what matters is compliance." And, you know, because we, we talked a little bit about me investing in FTX, which I was interested in. It's a private company, obviously. But I, every day, and I can't stress this enough, but Sam understood this.

• 35:32Speaker 02

  Every day I deal with compliance, not some days, every day. Tomorrow, I have a two-hour session, my quarterly session, that I have no, it's, it's not, is it, you know, can I go or not go? I have to be there for two hours with my compliance officers. Otherwise, I'm not compliant. So you got to understand, and I'm not the only person that goes through this. I live and breathe compliance. I was explaining this to him. He understood it. He was one of the first big crypto guys that got the joke on compliance. And the more we talked about it, and the more I met his team, I realized, these guys are institutional-grade compliance.

• 36:16Speaker 02

  I can do something there that I can't do anywhere else and be totally compliant. Now, it took months to get my compliance people to, to figure it all out. But now, I can go into many different places in crypto on 100% compliance with a heck of a great team in FTX. So I'm willing to be ambassador. And they, you know, they hired Tom Brady too, so I'm happy to work with Tom. Maybe I can play some football with him. I'm going to show him how to pass, you know, that kind of thing.

• 36:52Anthony Pompliano?

  Did they pay you in dollars or in Bitcoin or something else?

• 36:56Speaker 02

  I said to Sam and his team when we were negotiating this, I said, I do not want any fiat currency. I don't need any more fiat currency. What I want is all crypto. I want, look, I'm getting involved with you for compliance reasons. And, you know, I think, I think Sam liked the idea that, you know, you've got a spokesperson here that once was a skeptic, just like you keep poking me pop all the time on this, that has turned around completely and now endorses this. But I have a different mindset than the typical crypto advocate. You've heard me say compliance 400 times since we started talking, because I have no other way to operate except to be compliant. The minute I'm offside, I am screwed.

• 37:40Speaker 02

  So there is no option for me to be offside. And with FTX, I can go into this journey with a full compliance infrastructure. These guys are big, they're global, they have the technology to link, they can give you your mark to market, they can do all the things you need to stay compliant, and you can expand your crypto holdings. You're well aware of their breadth.

• 38:02Anthony Pompliano?

  Yeah, absolutely. All right, we're gonna do a rapid fire and then I'll let you go. You've, you've withstood our, our poking over, over your sins of the past, now that you've atoned for them. First one is, what is the breakdown percentage wise in the portfolio between Bitcoin and Ether?

• 38:19Speaker 02

  Yeah, Bitcoin's still the big daddy. I mean, you know, right now I've only got three positions on. By the end of next month, there'll be almost 15. I won't disclose what those are, but right now it's primarily Ether, a little Litecoin, Bitcoin, and a ton of USDC.

• 38:38Anthony Pompliano?

  Guy, but Bitcoin is the biggest out of those four?

• 38:40Speaker 02

  It's, it still is, because I started putting on that weighting back in, in 2017. And, but you know, I must tell you, I think, I don't think Bitcoin only anymore. There's so much other, there's so, there's so much other portfolio work to do. You're well aware of it. I think what we should do is every couple of Months, you know, maybe I'll get into the idea of just disclosing what I own because within a couple of months, I'm probably going to be at 17 positions.

• 39:07Anthony Pompliano?

  I, I think that once a month you should come on here and we'll just ask you all the hard questions. Anywhere in the world that you are.

• 39:13Speaker 02

  I'm happy to do it. I'm, I'm all about total transparency and compliance. And I'm just, you know, people ask me, what do I have in Dogecoin? What have this, what have that? You know, like for me, it's asset based, but I am so intrigued with what we're doing in DeFi. That's where the puck is going. I want more assets to do more DeFi with because I think I can actually build an income stream. You know, when I start, start talking about 7% weighting, that's a lot of dough. In, in my world, that's a lot of dough.

• 39:45Anthony Pompliano?

  You're rich. We got it. You're rich.

• 39:47Speaker 02

  Well, I know, but it's, it's, you know, if, if I make a mistake with one or 2%, no hot dog for me. If I blow 7%, I'm going to cry like a baby. So I'm going to think a lot about it.

• 40:00Anthony Pompliano?

  All right. What is the thought process in terms of this infrastructure bill? All of the taxation, regulatory debate? Don't get into the politics. I don't care about the politics, but do you think that it's something where the US basically ends up embracing this? Or do you think the US is adversarial toward over a long period of time?

• 40:18Speaker 02

  No, I think we're going to embrace it. I'm actually happy the deal didn't get rushed through. I'm in the camp that says I'd rather have the policy match the objectives of innovation. And I think the US should lead in crypto innovation. We should be developing the technology. Some of the companies that you showed me months and months ago are very forward thinking. They need to work in, you know, the stuff we looked at together. They need to work in a compliance environment. Every single company that wants to raise institutional capital has to embrace the regulator and, and I'm waiting for it. So I'd rather see policy develop that, you know, does not, if you're a broker dealer and you're trading assets, you're, you have to go with a certain level of compliance based on broker dealers that trade financial assets.

• 41:03Speaker 02

  But if you're a miner and you're actually an infrastructure player in mining coin, maybe the regulation should be a little different for you. I'd rather have the policy developed with the, you know, the actual industry participants in a way that makes us the global leader. Now that China is shutting down all those, you know, those miners, particularly the ones that were using coal to burn electricity, this is a huge opportunity for US. And so we should take leadership on sustainable Bitcoin mining and other, you know, all the talk about Ethereum and proof of state and proof of work and all the things that are going on there are very interesting. This sector requires the regulator to issue policy. And once policy is issued, let the competition begin because I'll tell you a ton

• 41:48Speaker 02

  of capital is going to be coming into the space.

• 41:51Anthony Pompliano?

  We've seen in the past in financial markets, and this is a little bit of a tangent, but I was reading about this over the weekend, an absolute drastic increase in America's position in the global financial system. The more that we pursue deregulation, that comes with risks, but historically that has been a positive. Do we think that that framework applies here as well? Where you basically need some boundaries of, hey, this is really, really offside stuff. This is really bad. You can't commit fraud, no scams, you know, all the stuff that is kind of common sense. But within that sandbox, if you will, the less regulation, the better from innovation, experimentation and really pushing us forward? Or how would you look at that with that historical context of deregulation and America's place as the leader on a global scale?

• 42:35Speaker 02

  Yeah, that's a good question. Here's the way I look at it. You know, there's billions of dollars being invested in DeFi, all the different payment solution opportunities, all the different things that could be done around crypto assets there. And that's definitely where the puck is going. And I've got several bets going on in that space. And Paul, we haven't even talked about NFTs. I mean, that's, you know,

• 42:52Anthony Pompliano?

  What do you think about those?

• 42:54Speaker 02

  Well, so let's, so let's just think about that for a second. If I'm the regulator, okay, and I'm trying to, I want innovation. They always want innovation. They don't want to, you know, stifle innovation. Maybe the way I look at it, and I'm just speculating on what they might do, is they'll say, okay, let's do it this way. If there's an off ramp and on ramp with fiat onto a DeFi platform, I got to regulate that because I'm taking regulated currency,

• 43:20Speaker 02

  A deregulated decentralized platform, but when it goes back to fiat, I want the tax reporting. Was there a capital gain or loss on the trade? Was there interest, which is interest income? I want the regulatory environment to apply to that, even though it's innovation, so that I can get a 1099 or whatever I need to do for external regulators. And I think if the industry understands what those policies are and what those rules are, that'll accelerate innovation. Now, when it comes to NFTs, I'm going to make a statement here that you may not believe, but I think that in the next five years, the market capitalization of the NFT markets will exceed that of Bitcoin itself. I really believe that because the potential for all of these industries

• 44:02Speaker 02

  that are, you know, dealing with physical assets that want to give them accreditation, give them providence, or sell NFTs from that is billions of dollars. It's billions of dollars from the Mona Lisa to my watch collection. And so I look at it and say to myself, which of those verticals should I become an investor in and stake my claim? And the one that I'm starting with, I haven't talked much about this and I don't think I've ever mentioned to you, is I'm building a team around the watch industry. I mean, I've been a watch collector for 40 years. I've got a massive buildup in that asset class. And I want every single one of my pieces to have an NFT associated with it.

• 44:48Speaker 02

  And I know all of the large collectors around the world, and I've talked to them and they all want the same thing. It's a multi-billion dollar space waiting to emerge in the next 24 months. And I'm going to lead the charge there. It's a very arrogant thing to say, but nobody knows the people I know in terms of how to put this thing together. But that's just one tiny vertical. So here's my question. And you answer it for me. Is an NFT of a watch a security or is it a piece of art? Which is it?

• 45:20Anthony Pompliano?

  I love you. I wouldn't buy it, so I don't have to worry about that. But I know you would buy it, and I bet you you know what the answer is. My guess is they would deem it a security only if the purchase was made to try to increase the price. You're buying it specifically for the price appreciation, not for collection or wearing the watch, etc. But how do you determine that? I don't know.

• 45:43Speaker 02

  Well, that's a very interesting answer because that's the debate going on right now. Because the same thing for art, if you buy a piece of art, because let's, let's face it, the NFT I want to buy, let's say I know a collector named Bill and he's got a one of a kind JP, FPJorn watch that I can never have because it's one of a kind. And he's got three NFTs. I'm a buyer. I'd like to buy that NFT. I don't know what it's going to trade for, it's going to get auctioned, but I bet you in five years it's worth more. Now that's no different than buying a Warhol, right? So I think we need to get policy on that. Meanwhile, back at the farm, the reason I want to get all my watches turned into NFTs is I've gone to the insurer and they've said, if you can go get them accredited with an NFT

• 46:26Speaker 02

  and authorized by the original manufacturer, and that becomes a 000 serial number to your watch serial number, we'll give you a discount on your insurance.

• 46:36Anthony Pompliano?

  Why?

• 46:37Speaker 02

  Because what they're going to do is say, look, if we can identify that watch in perpetuity, so when it's stolen, we can simply let the entire world know that if you don't own that NFT, your watch is stolen. That takes a lot of pressure off thieves and stealing watches. If all the world's one of a kind watches were NFTed with authorizations, who's going to buy a stolen one of a kind unless they get the authorization, the NFT? I wouldn't do it. And it makes the value of the stolen piece drop dramatically. That's why there's so much rush to do this, because right now, even the original papers for old one of a kind pieces are forged. You can't forge an NFT of a one of a kind

• 47:19Speaker 02

  Patek Philippe. You just can't. And that's why there's such an interesting opportunity here.

• 47:25Anthony Pompliano?

  All right. I hear you. We got to get you a watch that works. You were late. I had everyone tweeting you that you were late though.

• 47:31Speaker 02

  You are such a ballbuster. Unbelievable.

• 47:34Anthony Pompliano?

  Only because, do you, do you want to know why I give you a hard time? Only because I greatly, greatly respect your ability to change your mind. Most people, and we've had some of them come on, and they've been anti-whatever in the space, and they get very stuck there and they won't look at new information, they won't change their minds. So I will give you Massive credit for that. I think you're probably the person that I know that went from critic to the most in in the entire space, which is a huge kudos to you. Two last questions and then I'll let you go and you can walk in the park behind you. First is Dogecoin. Do you own any? And what do you think about all these folks who are claiming that it is, it's a good medium of exchange?

• 48:16Speaker 02

  Yeah, you know, it's, I don't own any, you know, it's, and the reason is, I really question this long-term asset value, but I'm not against it. It's the meme stock of crypto. That's the way I look at it. It's been able to garner tremendous amount of interest on social media. And I'm the first to admit today over the last two years that there is a direct correlation to market capitalization of assets and social media. It's been proven over and over and over again that if you can get a strong group of followers or apes, or whatever you want to call them on Reddit or on Robinhood, you can actually elevate the value of a company. And for good reason. The more people know the story, the more they buy the stock and the more they hold and stay along the stock.

• 48:58Speaker 02

  And that's why Dogecoin's done so well. It's become a, almost a character of itself. But no, I don't own it. It doesn't fit some of the metrics I care about. It's really easy to understand why Bitcoin is a property. You know, you've got a diminishing number left to be awarded and all the rest of that. It's the same with Ethereum as a, you know, form of payment and blockchain. But I'm having a hard time with Dogecoin. In an allocation, I don't mind, you know, having some fun with it on a wallet on a phone, but if I'm putting real dough into it, like a 2% or 3% allocation, no, I don't think so.

• 49:32Anthony Pompliano?

  All right. Last question, every single person gets asked. You answer it however you want. End of 2021 Bitcoin price prediction. What do you got for us?

• 49:41Speaker 02

  I think we revisit and go through the highs again. The only thing that has me concerned is everybody's made the assumption. Now, I'll stick with that, but here, but the one thing I would say, and I'm spending a lot of time talking to institutions about this. I'm on my way to the UAE in the Middle East on September 3rd over Labor Day weekend. This topic will definitely come up. Everybody's assuming we're marching towards the ESG resolution. I know a lot of people that own Coin now don't care about it, but it's the incremental buyer that cares about it. And, and I think every, and they're making assumption in the next 24 months will resolve this problem.

• 50:23Speaker 02

  If you want to see Bitcoin crack that 100,000, we got to have a solution. And this is only my opinion. Nobody else's, okay? I'm not putting it out there anywhere else. When I see that Larry Fink letter with the word Bitcoin in there, when he writes and says, you know, I'm okay with Bitcoin mind sustainably, that's when you see the 100K price.

• 50:45Anthony Pompliano?

  Put your C plot on then.

• 50:47Speaker 02

  Yeah.

• 50:48Anthony Pompliano?

  Yeah.

• 50:48Speaker 02

  I'm not saying he's going to do that. I'm not saying he's going to do that anytime soon. But I go right back to the beginning of our conversation. The potential is so huge. Even at a 1% allocation, that is why you should own Bitcoin. You have to make the assumption the industry is going to solve this problem and Larry will write that letter one day. And when that happens, Katie bar the doors.

• 51:15Anthony Pompliano?

  I love it. All right. Money Show every Wednesday, what is it? 10:00 PM Eastern?

• 51:20Speaker 02

  It's Money Court on CNBC.

• 51:22Anthony Pompliano?

  Money Court.

• 51:23Speaker 02

  Money Court, yes. And I think you will see yourself in these cases. Every family will see themselves. I've just, I think this is, I think this show is going to go forever because you can't stop watching it. That's what happened. It just, when I was taping it and all the, all the crew, which aren't supposed to watch TV, they're supposed to make TV. They were all stuck watching the line fee monitors going, wow. I mean, these are gut wrenching. These are people that really, really are suing each other for real money.

• 51:57Anthony Pompliano?

  Is it, and you answer however you want, but is this kind of like a Judge Judy? You're kind of watching a slow car crash, but you can't turn away? It just has the seriousness of real money and actual like financial disagreements? And then you're there providing kind of decisions and insight and guidance?

• 52:16Speaker 02

  No, I'm the ultimate decider for the outcome. They have signed a contract, so instead of going into court and litigating and waiting for the outcome through a court trial, they're going to wait for my outcome. But I really, I listened to the federal judge on the panel, and I also listened to the trial attorney, but ultimately, I try and save the business. In next week's episode, you're going to see something very, very crazy. A couple of partners that sued each other, not over failure of a business, over success. They were so successful that they had a breaking up of their long-term partnership between doing their expansion corporately or doing it through franchising. And they actually went after each other, even though they were the most,

• 53:01Speaker 02

  I've never seen a more profitable business on a percentage of free cash flow than this. I was blown away, and I said, "You guys are insane. You're suing each other over this?" And they were. And I decided, "Watch that show. You're going to find it interesting."

• 53:16Anthony Pompliano?

  Anybody who's got a royalty in their plans, I know they're the winner. So, yeah, I appreciate you. I appreciate you coming on. Everyone, make sure that you watch Money Court on Wednesday, 10:00 PM Eastern on CNBC. Thank you so much for doing this. And we're going to do this once a month, and you're going to come on here, and you're going to tell us what's going on in the institutional world.

• 53:36Speaker 02

  I think it's a great idea, Pop. The industry's changing so much. There's so much happening, and the regulatory environment is getting more and more interesting. I think it's all to the upside.

• 53:45Anthony Pompliano?

  All right, we're going to send you a hat, too, so next time you can wear a Bitcoin 100K hat. Perfect. All right, thank you very much, Kevin. Appreciate it.

• 53:51Speaker 03

  Thanks, Kevin.

• 53:52Speaker 02

  Take care. Bye-bye.