#503: Marcus Swanepoel on Crypto in Emerging Markets

Marcus Swanepoel is co-founder and CEO of Luno, a leading global cryptocurrency company on a mission to upgrade the world to a better financial system. In this conversation, we discuss emerging markets financial infrastructure, myths of emerging markets, technology strategies vs distribution strategies, regulatory environments, and the DCG acquisition. ======================= Own crypto in multiple exchanges and wallets? Sync them to CoinStats so you track and manage them from one place. Track 8000+ coins and 300+ exchanges all from the Coinstats platform. Try it for free or go to coinstats.app/pomp and get 40% off your premium subscription. ======================= As one of the largest and oldest Bitcoin exchanges in the world, Kraken is consistently named one of the best places to buy and sell crypto online, thanks to our excellent service, low fees, versatile funding options and rigorous security standards -- but this is only part of the story. We’ve been on the forefront of the blockchain revolution since 2011: http://www.kraken.com ======================= Coinbase Wallets are adding support for .crypto and .zil domains through their partnership with Unstoppable Domains. Unstoppable Domains provides an all-in-one solution for blockchain domains. You can send money using these new domains instead of long Bitcoin wallet addresses, while also storing your domain in Coinbase's collectibles section. Go to unstoppabledomains.com in the dapp browser to register and manage your domains. =======================

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

• 0:00Anthony 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. Let's kick this thing off. Marcus Swanpool is the co-founder and CEO of Luno, a leading global cryptocurrency company on a mission to upgrade the world to a better financial system. In this conversation, we discuss emerging markets financial infrastructure, the myths of emerging markets, technology strategies versus distribution strategies, regulatory environments, and the DCG acquisition that Luno recently went through. I really enjoyed this conversation with Marcus, 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 CoinStats. If you own crypto in a lot of places like

• 0:44Anthony Pompliano?

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• 1:26Anthony Pompliano?

  your portfolio there. Coinstats.app/pomp. Next up is Kraken. As one of the largest and oldest Bitcoin exchanges in the world, Kraken is consistently named one of the best places to buy and sell crypto online, thanks to their excellent service, their low fees, their versatile funding options, and rigorous security standards. But that is only part of the story. They have been on the forefront of the blockchain revolution since 2011. So head on over to kraken.com, K-R-A-K-E-N.com. One of the largest and oldest Bitcoin exchanges in the world, kraken.com. Consistently named one of the best places to buy and sell crypto online, kraken.com, K-R-A-K-E-N.com.

• 2:10Anthony Pompliano?

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• 2:55Anthony Pompliano?

  So go buy your .crypto domain today at unstoppabledomains.com and make sure you have a human-readable name. It's going to be the standard. Unstoppabledomains.com. Again, unstoppabledomains.com. All right, let's get into this episode. Marcus, I hope you guys enjoy this one.

• 3:12Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:38Anthony Pompliano?

  All right, guys. Bang, bang, I've got Marcus here. Thank you so much for doing this.

• 3:42Speaker 02

  Awesome. Great to be on your show.

• 3:44Anthony Pompliano?

  For sure. Let's just jump right into your background. You're obviously building a really incredible company today, but what did you do before? And how did you get into technology?

• 3:52Speaker 02

  Spent about 15 years in finance, everything from consumer finance for, you know, in consumer banking in Europe, also in Africa and Southeast Asia. I spent time in investment banking. I spent time in private equity. And again, across multiple markets, a lot of it, I lived in Singapore for most of the last 15 years. I lived in, you know, I was born in South Africa, so I spent, you know, these 20 years in Africa and then also in Europe. So a lot of consumer banking, investment banking, capital markets, and then of course in, across all these different geographies, which, which I think kind of led me eventually to, you know, doing something in the, in the crypto space because, you know, it takes a bit of, you know, when you, when you know what the existing system looks like, I think you have, you, you, you in many ways, a lot more in awe of, of what this new financial system can potentially do for us.

• 4:38Speaker 03

  Absolutely. And maybe let's just start with, what was the original impetus for the idea from now?

• 4:44Speaker 02

  We, in about 2013, I, I quit my finance career and I said, look, where's, you know, I want, since childhood, I wanted to do something in tech. And, you know, I said, where's the best place in the world to start a tech company? And that was in my view in Palo Alto. So I actually moved to Palo Alto, rented a house from an early Square employee. And I had a guy that was actually an African fintech entrepreneur come and stay on my couch for a couple of, a couple of weeks. He didn't have a place to stay. And he actually introduced me to Bitcoin for the first time. And I think, you know, like a lot of people say, you know, you, you almost have these multiple aha moments. I think when he explained, he was a software engineer, he explained a lot of the technical stuff to me and that was a big aha moment.

• 5:28Speaker 02

  I think it was only a while later when I, you know, the first time I actually sent something, you know, with Bitcoin. I, I remember there was someone in Indonesia open, they had their Skype window open and, and I, I just scanned the person's QR code and it shot through to Indonesia pretty much instantly. And that was a massive, massive aha moment for, for me as well. Just out of interest, when we, you know, the, so, so that was the impetus in terms of, look, this is going to be big. It's about moving value across the internet. What do we do with this? Where things got interesting is we originally said, look, we don't, you know, it, it has to do with money and value. And surely the banks are going to be interested. And so at the time when we started, me and my co-founders, you know, we got together and we decided to build these things for banks.

• 6:12Speaker 02

  Now bear in mind, this is 2013. This is the Wild West days of crypto. We've got Mt. Box, we've got, you know, Silk Road. And we at the time actually built a crypto system, fully integrated for Africa's largest bank. Where you could actually log in with your customer details of this bank, you could buy Bitcoin. We, we started installing it into the ATM systems. You could send and receive it, similar to how you would use a mainstream kind of crypto product like we have now. And we announced that early 2014 in London at Finovate. And you know, I remember I was standing on the stage then I had to slide up and it had the bank's logo and it said Bitcoin. And as soon as that slide went up, people started getting up and taking photos and all hell broke loose. And you know, in a good way,

• 6:55Speaker 02

  because you know, a lot of banks all over the world started phoning us and asking us, okay, hold on, are we missing something here? But then also, that particular bank got a bit stressed out because they had so much media attention. So they kind of publicly backtracked on it and said, look, you know, it's it's just a pilot, we're not rolling it out. But the reality was, it was live on their system. We built this in conjunction with the banks, compliance teams, and the central bank in in South Africa at that at that point. So, so, you know, we took about the next year, working with a lot of big banks on a lot of problems, right? How do we solve interbank settlements? How do we make, you know, trade finance better? All these things that you, you know, at some point saw, quote unquote, blockchain companies trying to do. And to make a very long short

• 7:39Speaker 02

  story short, you know, we we came to two conclusions through that process. The one was, the banks were going to take 10, maybe 15 years to actually do something in the space where customers can actually use it. And we also realized at the time, look, you know, for better or for worse, the best use case of a blockchain is a decentralized cryptocurrency. And so a lot of this blockchain stuff at the time didn't make sense. And so what we then eventually did is, you know, we had a lot of banks that build this for us or experiment on this. But we said, look, there's consumer demand, we've already built something that is genuinely robust from a security and a compliance point of view. Let's just launch our own consumer products on top of this platform. And so we went straight to consumers and we, you know, we built what we now have is our, you know, crypto wallets to just make it easy for people to buy and sell, send and receive, and for all intents

• 8:24Speaker 02

  and purposes, building a consumer version of a of a global, you know, crypto bank. And and that started about 2015. So we've had a few, you know, changing direction along the way, but it was a very valuable valuable experience for us. And of course, it also helped us build a lot of relationships and gravitas with a lot of regulators and banks throughout that period, which has really helped the consumer business a lot over the last few years.

• 8:48Speaker 03

  Absolutely. I want to talk a little bit about emerging market financial infrastructure before we kind of get into the solutions, right? So some of it is good, some of it is bad. Maybe walk us through your evaluation, and even if you want to break down certain markets as to how people should think about that emerging market financial infrastructure.

• 9:05Speaker 02

  Sure, that's a, that's a good question. You know, the, I think the most important thing is, you know, it sounds like an obvious thing, but we have to recognize that emerging markets is a very, very broad category. It's like saying the Americas or, you know, the Northern Hemisphere. There are so many countries in emerging markets and they are all so, so, so different. So even within Africa or within Southeast Asia, you know, the difference between Malaysia and Indonesia is massive, the difference between Nigeria and South Africa is massive. Now, again, we all know this intellectually, but I find that, you know, you almost forget it if you're not careful, even for us, that, you know, we have a massive presence in all these markets, that if we're not careful, we start thinking that people are going to behave in a, you know, in a similar way.

• 9:46Speaker 02

  So I think, you know, recognizing that upfront and knowing how to build a business, or at least, you know, target customers in all these markets, I think is, you know, that's the, that's the, um, you know, key important thing. I think, you know, broadly in terms of, you know, trends, you know, for us, emerging markets really is Africa, Southeast Asia, or, you know, that would include, you know, India as well, and then there's North Asia, which is China, Japan, Korea, we don't really blame those markets. The, what we've seen, just again, like generalizing a little bit here, but, you know, Southeast Asia tends to be a little bit ahead of the market than Africa, and we've seen this with, you know, mobile adoption, we've seen it with e-commerce and so on. So what, you know, and crypto is a good example.

• 10:31Speaker 02

  There's a lot of stuff happening in Asia, both being built in terms of consumer adoption, that's really encouraging, but it's still, you know, three or four years ahead of where we see that same kind of cycle in, in Africa. The other thing I'd just say is, you know, there are, you know, a couple of other misconceptions, I think about some of these emerging markets, which, you know, I think is useful to know about. I think the one is, you know, there's, this is one example, everyone loves talking about MBEZA, right? Whenever people talk about fintech and emerging markets, it's MBEZA, MBEZA. Now, MBEZA is a very unique story of something that happened in a particular country at a particular time, but that's not been replicated broadly across emerging markets, certainly not across, you know, Africa. In fact, it's failed many, many, in many, many other countries, right?

• 11:15Speaker 02

  And that was, you know, the short version of that is, it was just, there was a company with a lot of market power that just introduced a new product and everyone started using it. It's a bit more nuanced than that, but. So I think, you know, it's easy to latch on to one or two success stories and then just assume everything else that we do is gonna be like that, whether you're normal fintech or whether you, you know, the crypto side of things. And I think that's, that's important. And then the last, I guess, important thing is, you know, in a lot of these markets, it really, the problems are around distribution. It's not a product issue. You know, if I, if I had, you know, one Satoshi for, you know, every company in, in the UK or the US that phones me, you know, once a month, you know, twice a month and

• 11:56Speaker 02

  says, you, we have this amazing new technology, it's gonna really help, you know, solve all of Africa or Southeast Asia's problems. Um, please, can we, you know, can we put it on Luna? And then I go, oh, but why, you know, why, why should we be involved? You know, you've built this amazing thing because they don't have distribution. And so a lot of the cool stuff that, even in our industry that people are building, whether it's around use cases for remittances or investments or, you know, online e-commerce and so on, they are great ideas with a huge potential, but you have to get to all these people and it's very hard to get to all these people, very, very. We are dealing with low trust environments. It takes a long time to build this trust, not just with the consumers themselves, but also with the regulators and the banks and all the other play, you know, stakeholders.

• 12:39Speaker 02

  And so, you know, we, we have to be smart about how we take these technologies and take it to the market and, you know, not, you know, I don't wanna say, don't be over enthusiastic. I think the enthusiasm of the crypto community is probably one of its strengths. But there is a bit of a reality check on how we need to go, go about doing some of these things. But again, it will be very different by country and by market, how you build that trust and how you, how you kind of distribute those products.

• 13:02Speaker 03

  Absolutely. And so talk a little bit more about this idea of the balance between technology and distribution, right? And I, I think that it's a very interesting and valuable framework for people to understand because just like in the early days of the internet, we saw a lot of people who built some amazing technology, but it might not have been as user friendly as it needed to be. They might not have actually had the distribution that they needed. So how do you think through that kind of balance between the technology innovation and the distribution actually that it people's hands?

• 13:32Speaker 02

  Again, very good question. I think, you know, if you look at, certainly on the consumer side, if you look at most consumer companies in, you know, certainly in the tech world, they are mostly successful because of their distribution, at least from, from the data I've seen. There are some exceptions. Now, of course, you know, I think it's important to know there is a minimum level of quality that you need for a product, right? Like, you, you know, if the product needs to keep people's money safe, it needs to keep people's money safe. Or if it needs to be able to send something from A to B, it needs to be able to do that. But at some point, and, and I, I think it's also, you know, when, when markets start maturing and when competitions start picking up, the distribution part of the equation becomes a lot more important. So I think in the beginning, like crypto is a good example.

• 14:14Speaker 02

  In the beginning, it was all about product because there were generally issues, you know, there were risks that, you know, you're going to say, oh, we, you know, we're some crypto company and it's really exciting and, you know, buy your crypto with us, but then it gets stolen the next day, right? That's a problem. So you solve that with building really good products. And I think, you know, the crypto industry and for a lot of kind of the larger players, we all have to be, you know, we have to acknowledge that a lot of the growth and the traction we've seen in our industry wasn't because we had the most amazing products. It was because the media wrote about crypto the whole time. And if the media are, and I'm talking more like two thousand and seventeen, eighteen cycle now.

• 14:55Speaker 02

  If the media are writing about it the whole time and there's no competition, I mean, at that stage, there was very few places you could buy Bitcoin, even in the U S and most other markets. People are gonna, you know, go to your platform and it's gonna create this illusion that you've built a product that is just so amazing that you never even have to think about distribution. I think we are way beyond that point now. I think the next cycle, so there I would say, you know, the right thing was eighty percent product, twenty percent distribution. But that is gonna swing over the next few years and I think it's gonna be the exact inverse of that, where as long as you have the minimal, minimum level of product quality, it is gonna be, you know, distribution where the game's gonna be won, certainly from a competitive point of view. The, the, the last thing I just mentioned there as well, and, and, you know, again, very pertinent for a lot of people in our industry, right?

• 15:40Speaker 02

  So, you know, remittance is fantastic use case for crypto.

• 15:45Speaker 02

  I'm, I have no doubt in my mind in the next ten or twenty years crypto is going to form the basis of, you know, most global remittances and it's going to be completely transformative for people and for countries and yeah, but if you were building a remittance crypto remittance product today or over the last few years, you need to understand that the product, you know, just the fact that it's being moved with crypto, I don't care if you're using the Lightning Network or whatever, I mean, we've built many products like this, you know, previously, your competitors are the Western Unions, the TransferWise, the Remittlys of the world and because they are distribution companies and so they've built those distribution channels, they've built those brands because consumers are not going to care how the money

• 16:28Speaker 02

  gets moved as long as it's just, you know, it moves and unless you have a massive price advantage, which you don't have at the moment because there's not enough liquidity in these markets to do it. So it means that when you are building a company, you have to understand what company you are building. If you are targeting remittances, you are building a remittance company, which means you're going to have to raise capital to compete with remittance companies that have raised hundreds of millions of dollars that have licenses in all of these markets. It doesn't mean you can't win, it doesn't mean there's, you know, there's not a, you know, a, a, a business to build there, but you have to understand the game that you are playing and then you are 90% playing a distribution game. Whereas, you know, when you're in the DeFi side of things at the moment, that's more product game because we're

• 17:09Speaker 02

  not at that level of competition on the, on the, on the consumer side or on the distribution side again.

• 17:15Speaker 03

  Yeah. And I think what's really, really interesting is this is one of many myths in the emerging market space, right? It's kind of this idea that if you just build it, they will come. Obviously that is not true and distribution is king. Talk a little bit about some of the other myths that maybe people in the Western world have about these emerging markets, right? There's all these narratives that kind of float around. And so which ones are accurate and maybe which ones are maybe not so accurate?

• 17:44Speaker 02

  So look, again, I'll generalize for emerging markets because we're going to see various, you know, varying degrees of this across, you know, particular countries. I think the one certainly in our industry is this thing about people don't trust their governments in emerging markets, right? Oh, they trust, they don't trust the government, get their Bitcoin and then they're so happy. The problem in emerging markets is because so many people trust their governments. That's actually, that's the big problem. Because that's why the presidents keep on, you know, or the governments that are corrupt in, you know, keep on getting voted in because people actually think that they're helping them. Now, it doesn't mean that no one, you know, everyone trusts the government. There's going to be some segments of the market, you know, people that are maybe, you know, highly educated or have a lot more disposable income or maybe lived abroad.

• 18:26Speaker 02

  Of course, there's going to be, you know, you know, double-digit percentages of people in every country that don't trust the government. But the mass market, the critical mass to keep governments in power, they a hundred percent trust the government and they love the government because the government keeps them social security, you know, some form of welfare, they, you know, that's what they grew up with. So that's a big misconception. And I think, you know, that is to rely on that to say, oh, people will shift to crypto economy just because they don't trust the government. I think that's a bit naive. It doesn't mean that crypto can't play a really strong role in starting that shift now. So, you know, even, even something like, you know, just educating around how money works, that's a really powerful thing that Bitcoin has. You

• 19:09Speaker 02

  know, I said, I remember many years ago, I said to someone, you know, if, if the whole industry just collapsed tomorrow, and the only thing it did was educate people about money, it's a success story, massive success story. And so, you know, just, you know, laughing about people playing around with Dogecoin and things like that. I mean, there's, if, if the purpose is to educate, then there's value in it. And so in that sense, I think, yes, definitely, we can, we can in emerging markets change that. But it's going to take a generation. It's not going to happen in, you know, two, two or three years. The other one, you know, I think that that's maybe worth just also talking about is this IP inflation, every country with, you know, if there's IP inflation, everyone's going to run to Bitcoin. If, you know, if the currencies are depreciated. Now, again, on a macro and a purely intellectual level.

• 19:54Speaker 02

  That is true, right? If there is going to be, you know, in a lot of these markets, the currencies aren't strong and people are looking for alternatives. I can tell you now that that alternative typically is US dollar. And after that, it might be gold a little bit. And in a, you know, way after that is something like Bitcoin. Now, we've seen in some countries, not necessarily where there's hyperinflation, but where there's, you know, real big depreciations in currencies, we have seen increase in activity of people buying crypto. And then, of course, we speak to our customers and we, you know, want to know what they're doing. And, and some of them are genuinely doing, you know, they're buying it because they want to hedge against the currency or they want to put it somewhere else. It does happen, but it happens in a very, very small amount of cases.

• 20:37Speaker 02

  And certainly if it's people with a lot of money, they don't put all of their money into that, right? Again, they're going to go mostly to US dollar, uh, maybe some gold and so on. But the, but the other interesting thing a lot about a lot of these markets are because they're trying to control their currencies is that, you know, they don't allow you to just buy US dollar. Some countries outright ban it, other countries make it very difficult. And so I think, you know, that's also where there's this interesting opportunity for stable coins, you know, to come into play, which, you know, it, it might be that in some markets, that's the intermediate step people have before they actually start choosing the other things. But, yeah, it doesn't mean that in these economies, people don't buy crypto to, to deal with these issues. But it's, it's, it's not nearly as prevalent as where people, you know, at least publicly say it or want it to be.

• 21:22Speaker 02

  Of course, I also want it to be like that, but that's not the reality that we're dealing with. Not yet, it will, you know, over time we will get there. But again, we're like 10 years away from that.

• 21:30Speaker 03

  Important is it that, uh, the emerging markets, maybe 10 years ago, 15 years ago, there wasn't as much internet penetration, there wasn't as much, uh, kind of cellphone, smartphone, uh, adoption. Today, that's changed drastically. Is that playing a big role in, in kind of the adoption we're seeing in some of the emerging markets?

• 21:49Speaker 02

  Yes, that is definitely true, right? The, the, I mean, it is, internet penetration is growing like crazy. People have multiple mobile phones. I mean, just to give you an example, in South Africa, where we, you know, have, you know, run the biggest crypto company in South Africa, about eighty percent of our users only use their mobile, which is a big, big number. Other markets would be a lot less, or in the UK, you know, maybe be half or even less. And so that is definitely not a misconception, and it's happening, and it does actually sow a fertile ground for people to be using these type of products and services that are kind of mobile first, to use them a lot, a lot easier. And that, you know, that kind of cliche about African, Africa leapfrogging other technologies,

• 22:33Speaker 02

  I, there's something true in that as well, right? It doesn't mean that we go from someone that has, that's never had a bank account to putting all their money in crypto. I think that's a bit of an extreme jump. But it doesn't mean that they are, you know, going to be sitting around, you know, a table with their friends and everyone's going to be, you know, doing things on their mobile phones and be keen to try new things a little bit and share things. Very social-driven, you know, markets where people share a lot of what they're doing and products that they're using, definitely. So it is gonna, I, I think, I think it's gonna definitely accelerate the adoption. But, you know, with a lot of these technologies, what they always say that, you know, it's always happening, you know, faster than, you know, when some people want it to be and slower than other people. So I think we, we just need to find that middle way.

• 23:17Speaker 02

  But that's a big factor that's, that's gonna be, you know, driving a lot of adoption a lot faster, for sure.

• 23:22Speaker 03

  Yeah. And what do you think the biggest opportunities? So like the, in terms of these emerging markets and understanding, you know, each market is different, but what do you think the biggest opportunities are for technologists and entrepreneurs? They really do want to make an impact, they do want to kind of affect change. Is there specific things that you're saying, look, this is an unsolved issue, or this is the area that I think more people should be paying attention to, but they're not yet?

• 23:47Speaker 02

  Yes, I think, look, I think there's two, two, two parts that are kind of the big kind of areas where the, the, the work needs to go into and, and where the opportunities lie. The one is unfortunately a little bit tricky and that's around regulation. You know, we've, again, it depends on the country. We've seen some countries like Malaysia, you know, look, they're very forward thinking in terms of how they think about technology and financial services. And, you know, we, we spent a couple of years working with, with their government and regulators to come up with the, essentially the first properly reg, you know, licensing regime in emerging markets, which they issued and, and, you know, thirty companies applied and, and, you know, we, we, we have their license now and operate legally in, in Malaysia. So you have examples of that,

• 24:30Speaker 02

  but they're few and far between. In a lot of countries, in particular in Africa, you know, the regulatory regimes are not adequate yet for, not just for crypto, but for mass market kind of consumer finance products. It's not because I, you know, I'm not sure if it's because people really don't want it to be like that. It's just the markets have not evolved like that and, you know, there's just not been the economic, you know, activity to support bringing a, you know, another bank or another challenger bank or a crypto company into the, into the market. So a lot of the work that we are doing and, and, and other companies in the space as well, not just, and other fintech companies, is on the lobbying and regulatory side, how do we create an environment where people,

• 25:13Speaker 02

  companies can actually flourish? Like, there's no, you know, in the US and, and the UK, you can apply for a challenger bank license. You can become a payments, I mean, it's very easy to become a payments company or remittance company. In a lot of these countries, those classifications don't even exist. So, so that's a problem for fintech generally. The good news for crypto is that because they don't exist, as long as the regulators are pragmatic and open, they are, it, it presents opportunity to create new legislation that's specific to crypto. Because one of the worst things I think that can happen in the industry in crypto, you know, globally is that people are forced into other licensing regimes that don't apply to crypto, given how unique, you know, the industry is. So I think that's where a lot of the work goes in.

• 25:57Speaker 02

  And then the, you know, the second part we briefly covered on is around, you know, we call the distribution, but, you know, we can rephrase that as building trust in these markets. And, you know, if, you know, if you are a highly commoditized product or something that's purely You know, product that's purely focused on price, like Uber is a good example, right? Like, it's just, you know, how cheap can you, I mean, it's how hard is it to get into a car and drive somewhere? It's just how cheap can you make it relative to something else, right? There's not, I mean, there's a little bit of trust required to get into the car, but it's not, you know, that's not, I wouldn't say that's the main problem that they're trying to solve. With, with people's money, you know, people are very strange about their money and that, you know, the trust equation is, is very complex.

• 26:36Speaker 02

  And again, depending on the country or the type of product, you are going to have to do something where people are going to actually trust you that they, you're not going to steal the money, that you're not, you know, the thing's not going to disappear and so on. And that's where most of the work, I think, is going into, certainly from our side and, and, you know, where I think most of the work should be going into is that how do you build trust in these markets where the, you know, again, starting all the way from education to how the product functions, to where it's available, to how it's co-branded with, you know, things that people already know that, you know, and that's the opportunity. Because if you can build trust in these markets, you can, you know, that, that trust you can leverage so broadly. And, you know, again, if you look in China or Indonesia, like some of these super apps, right?

• 27:19Speaker 02

  Where people use one app and they trust that thing so much, and now you can put anything into that product. You can, you know, people start with car sharing and then the next thing they have financial services and, you know, you know, texting and whatever. So that trust is so valuable in these markets, again, given they are generally low trust environments. But once you cross that threshold, then, then you have a lot to, to work with. And that's, I think, the biggest opportunity for any company, whether you're crypto or just kind of a general consumer company in, in tech.

• 27:47Speaker 03

  Absolutely. I, I want to talk a little bit about, you mentioned kind of regulation, but an aspect of regulation I've been thinking a lot about is centralization versus decentralization. Is there any sort of bifurcation between the developed world and the emerging markets in terms of how people are receptive to decentralized products versus centralized products? And do you see maybe some of the more adversarial regulatory regimes are almost making it default that we need to have decentralized products in order to allow people to be on boarded without the governments being able to kind of be egregious in, in their lawmaking?

• 28:25Speaker 02

  So, so I can, you know, I can tell you that from an emerging markets perspective, if you ask me about like Singapore and, and the UK and so on, I can, you know, I can tell you, you know, a certain answer. But for most of emerging markets. We that commerce, we we like two years away from that conversation. We are literally still trying to explain to people what Bitcoin is. That's it. I know, you know, and and you know, decentralized finance versus centralized finance, all of these things, it's, you know, we. These are things that from a consumer perspective is interesting, especially if you're an early adopter in the in the crypto space. And maybe in some kind of more advanced regulatory regimes or somewhere in New York where, you know, the bit license was issued many years ago. And now, you know, you're starting to have conversations about these other things.

• 29:10Speaker 02

  Um, but it's not even on the agenda, not even close, right? So so I think we, you know, we we still at that early stage. What what I can say is, what we regulation. Where the big pain point is, you know, originally with with a lot of regulators, it was around AML and, you know, and and anti-money laundering and so on, right? And that obviously is just kind of a generic risk factor. But in emerging markets, what a lot of people don't realize is these countries have capital controls. Now, if you grow up in the U S or the U K, you might not even know what that means. But it means that you can't just send your money in and out of the country freely. In some countries, you're completely prohibited. In some countries, there's a limit on how much you can send in and out.

• 29:51Speaker 02

  But in almost all cases, you need to actually report how much money you send or receive. Now, I think we all know, given where the, you know, financial technology is going, is it's going to be really difficult for governments in the next generation to have effective capital controls. At some point, those things are going to break. And, you know, whether it's because of Bitcoin or whether it's just because of globalization or, you know, countries, you know, competitive advantage. It's going to be very hard to hold on to those things forever. But the unfortunate reality is where we are now and certainly for the next few years, those are the rules of the game in a lot of these countries. The and and the risk for them is using crypto or these kind of products to move money in and out of the country.

• 30:32Speaker 02

  Now, again, the reality is people are not, you know, we have a lot of data that we can see, you know, what people are doing with their crypto, because it's obviously all on the blockchain. And we have a lot of visibility and it's not actually a major problem. But there's a perception that it is a problem or that it could become a problem in the future. And that's where almost all of the energy is going on at the moment. And if you see some of the kind of regulatory reactions around the world of regulators in emerging markets, if they're not positive, then it's usually because of this factor. So, yeah, so I I don't think there's there's much else to add there. But yeah, on the decentralized point, I think, you know, they. The ones that know a little bit, I mean decentralization is obviously kind of a broad topic, but let's, you know, if I could throw peer-to-peer crypto trading, maybe just, I

• 31:17Speaker 02

  know it's not really decentralized, but it's in that direction, right, at a very basic level. If you look what the regulators in Malaysia did, they said, look, you are not allowed to buy or sell crypto in Malaysia unless it's with a company that's a regulated business. And they specifically do not allow B2B transactions. Now, can they control it? Probably not, or they can try and make an attempt. But they are very overtly saying that that is something that they don't want to happen. And so they are looking to have some kind of central oversight into something. Now, again, you know, the market's still really small. Let's see where it ends up in a couple of years. Maybe that conversation has to be revisited.

• 31:59Speaker 02

  But I suspect that once we get over the basic capital control issues and what is Bitcoin issues, when it comes to that, it's not going to go down well with most regulators, certainly not in emerging markets.

• 32:10Speaker 03

  Absolutely. And I guess part of this too is the constant cat and mouse game, right, between the technology and innovation, kind of getting ahead of regulation. I forget who told me at one time, but they were like, what we don't want, I think it might have been Tony Thomas, who was a former Force Corps general, who said, you basically don't want regulation to get ahead of innovation because then you're innovating to the regulation, right? You're basically only doing what the government and politicians, and as we know, they might not be the most groundbreaking thinkers.

• 32:39Speaker 02

  Exactly.

• 32:40Speaker 03

  And so I think that that's a pretty interesting way to look at it. I want to bring this back to Luno, which is, what are you seeing from growth in specific markets and also within the product suite itself? What are people doing, right? What do they want to use? Which products are most interesting to them? And which markets should people be aware of that seem to be growing the fastest?

• 33:01Speaker 02

  So, so, yeah, what you just mentioned reminds me, you know, about six or seven years ago, we were sitting doing some training for a big central bank and a bunch of regulators. And there was a guy sitting behind me from one of the regulators and he was in his late sixties and he'd been working there for like thirty years. And we were explaining Bitcoin and dark markets and blockchain traceability. And I, I just remember the guy, he was talking to his colleague and he just said, I, I just, I didn't sign up for this, you know, like what, it's just, I don't have, I, I wanna retire in a couple of years, like, you know, I don't have time to try and understand this thing because it's just, I just wanna, you know, relax and do my job and not have to deal with this. And so you kind of have to feel a little bit for people that are, you know, now having

• 33:43Speaker 02

  to basically relearn an entire new, you know, industry. But yeah, so, so certainly I, so I, I, I agree with you on that. I think, you know, um, now, it, you know, there, there is a lot of education work that we do, obviously as a, as a company and, and, and industry where we try and lobby and we try and educate. And, and what I can just say about that, before we go into the, you know, kind of the, the, the markets and the opportunities is generally speaking, the regulators have been surprisingly pragmatic. We, we've had a few exceptions, obviously, you know, every year there's something happens and there's, you know, some miscommunication or so on, but generally it's been, it's been pretty good. And what I've also, you know, every now and again, strangely that I hear in these regulatory

• 34:26Speaker 02

  conversations is that people say, oh, but, you know, look at, you know, look at what Airbnb did, look what Uber did. Now, those are completely different, not incomparable companies compared to the risk of, you know, what we're doing in terms of financial regulation. But I think that's kind of just stuck in people's heads that like technology is, yeah, you know, the world's gonna change and, and, you know, at some point we're gonna have to just deal with this, right? So, so what has happened and, and, and you, you obviously know this, but the de facto regulators in our world has actually been the banks. Because the banks are the ones that are saying, look, if your product, it depends again on the type of product that you have, if you have a kind of a fully decentralized product, it's, it's not, it's not relevant. And if you have something where, for example, in our case, you have to deposit money into our account, we need a

• 35:11Speaker 02

  Bank account and they will set the rules. They will say you have to do the AML KYC and so on. Obviously, you know, we self-regulate, but that, you know, the regulator isn't really guiding everyone. And the problem is that a lot of financial institutions are just de-risking, generally speaking, right? It's not about, a lot of people like to say, oh, look, the banks don't want to work with crypto companies because they're scared of what crypto is going to do. That's not the reason, right? They're scared of getting fines for remittance clients, nonprofit organizations, you know, crypto is somewhere in that kind of higher risk category. And so that's kind of been the issue and you, one would hope by now it would have been sorted out, given how, you know, prevalent crypto is and, and at least the, you know, the, the, the, the macro narrative is, is obviously changed to be a lot more positive.

• 35:54Speaker 02

  But it, it still continues to be a problem across the world, developed markets and, and emerging markets. You still see banks cutting off accounts, um, you know, and, and, and that's, that's a big, big challenge. Um, but just, yeah, just on the, on the, on the opportunity side and, and the markets to watch. I think the, you know, certainly the big ones in Africa on Nigeria and South Africa, they are by far the biggest markets by any measure. It has a population, GDP per capita, all of those things. And, and the crypto kind of trading volumes and, and that kind of re, uh, re, uh, reflects that as well. Um, and in Southeast Asia, the markets to watch are, are Malaysia and, and Indonesia.

• 36:35Speaker 02

  Um, Philippines to maybe some extent, but it's not as, you know, maybe as, as big as one, one would think. Um, and then of course, Singapore is, you know, uh, just launching their kind of new licensing regime. A lot of crypto companies are moving there to, to work under that license. So I, you know, we're expecting some big things from Singapore as well. But, you know, in terms of what people use it for, you know, it's, it's, I would say a couple of years ago, it would be very similar to someone in a city in the US, for example. It's someone that. Is educated, has a bit of extra money and so on. And so that has been traditionally the demographic. They they certainly are people that use it for transactions, right? So so we we also integrate into e commerce systems.

• 37:18Speaker 02

  And so we, you know, ran for over 10,000 merchants, I think that. And we could see people buying things online. It was very small, but it was happening. But people do use it to move money. They use it to move money in and out of the country. And, you know, from from what we can see when they do do it, it's not because they want to circumvent capital controls. It's just the convenience is a lot easier than having to go through all of the process of declaring the money and filling in all the forms and so on. So, um, yeah, so, but then, you know, even to this day, I would say it's less than 10% of total volumes are transactions. The rest is broadly into this category of investment. So that could be, you know, seeing it as a store value or seeing it as, you know, some kind of asymmetrical return or even speculative trading, right?

• 38:04Speaker 02

  The the one thing that is changing those over the last, you know, 18 months is that that kind of investment group where it's people with a lot of disposable income and so on, that's starting to move into the mass market and into that longer tail. And you're starting to see the people that will eventually probably benefit the most from crypto are starting to come into the crypto ecosystem. But it's a it's a very recent thing. It's it's not, it certainly wasn't like that for the last six or seven years. But that's the exciting part, right? So we're starting to to tap into that market now.

• 38:32Speaker 03

  Yeah. And so when you think about kind of the future prospects of what you're building, you guys obviously recently did a transaction with DCG. Maybe talk through a little bit as to what the logic behind that was, kind of why you guys were excited about it. And then whatever you can talk about in terms of how the business will change or the structure of of Luna going forward.

• 38:53Speaker 02

  Thanks, Yau. Good question. I think, look, we, you know, we love what we do. We love building, you know, what we. perceive as really, really good value for our customers and the, you know, the opportunity to impact, you know, not millions or tens of millions, but billions of people with our product is, you know, it's, I, I don't think there's any doubt within, you know, our team and, and, and, and that, you know, that's what we can do. So the idea of like selling the company has actually never been top of mind. Um, I know a lot of people used to say, oh, but you know, what is your exit strategy? It's like, I've literally not thought about it. Um, so, and we've had some acquisition offers over the years, many years ago as well. And, you know, we, people talk to us and we say, no, look, you know, Luno, we do things

• 39:37Speaker 02

  in a way that we think is best for our customers and our market, and we don't want someone else to come kind of spoil that, spoil that. But, you know, DCG, what maybe a lot of people don't know is DCG was our very first investor, Barry, you know, Barry Soldut. And when we were, you know, four or five people sitting in a room, building that initial product for that big bank in Africa, I was on the phone with Barry regularly, just talking about crypto, talking about our business and so on. So it's been seven years that I've worked very, very closely with DCG. And the, and the one thing that we, we realized as the market started maturing and as it started growing is that, you know, you have to ask yourself, what is the best business model? Like what is going to be, you know, from a, from a, other than just building products that your customers love, what is from a company point of view going to make the most sense?

• 40:21Speaker 02

  Because we are going to see massive increase in scale, we are going to see consolidation in the market, we're going to see all of these things. How do you position yourself for that? And, and the thing that I loved about DCG always, other than just being very culturally similar and, and knowing them really well, is that they, if you look at what they do, you know, again, a lot of people think that they just do crypto investments, but they, that's not really their main business. They own and operate some of the biggest players in the space, Genesis, you know, crypto trading and lending, um, Grayscale, which is now the biggest, you know, asset manager in the space, um, CoinDesk. So, so, so they have these, these, these groups of people that really focus on particular segments of the market and particular problems.

• 41:04Speaker 02

  And the one part that was kind of missing there was mass market, consumer, retail, if you want to call it that. And obviously DCG is a little bit more US centric and we very international. So it kind of made sense, if you think from a business model, point of view, like, okay, but you know, what is the best way to succeed in this industry? And I honestly think it's by allowing teams to focus on doing the thing that they do really well. Too many crypto companies are trying to be everything to everyone. That is okay in a very mature industry. If you hundred years of banking and you want to consolidate to get some cost synergies, that strategy will work. It doesn't work when you're at the beginning of an industry and everyone's still trying to figure out what actually to build and what is the best value proposition for whatever segment of the customers it, you know, it happened to be.

• 41:47Speaker 02

  And so for that reason, just DCG have a unique business model. If we could be part of that, I think it's just purely objectively speaking, the, you know, the best business model, I would love to be part of that. They have a massive balance sheet behind them and they have a 20, 30 year time horizon. I'm thinking to this, there's no, you know, they're not a public company, they're not under pressure to do things in the short run. And let's be honest, you know, as excited as we all are about what's happening in the crypto space right now, this is a 20 or 30 year project. And so, so for all of those reasons, it made sense for us to, to, to, to be part of that group. And, you know, the, the easiest way I sometimes just explain it to people is, you know, instead of having seven shareholders and four board members, I now have one shareholder and one board member, but it just happened to be my favorite one.

• 42:31Speaker 02

  So that works for everyone. So we run completely independently. Nothing's changed in Uno other than the scale of our ambition and our access to capital. But, you know, that's, you know, we, we, you know, it's, it's business as usual in that sense. We all operate completely independently.

• 42:49Speaker 03

  Yeah, makes a, makes a ton of sense. What is the one thing that you're looking forward to moving forward?

• 42:57Speaker 02

  It might not sound like the most exciting thing, but you know, this, this thing about buying your first Bitcoin, that's a problem that's still not actually been solved in most markets. I, you know, I could, you know, in our industry and if you can take and finance, okay, sure, you kind of know what you want to do. But, you know, I can walk out of this house now and I can walk into a restaurant with 10 random people at a, you know, at a table and I can ask them. Go and buy your first Bitcoin. And I can assure you that none of them have heard the word Luno, Coinbase, blockchain. I mean, they wouldn't even know, like, do I go to my bank? Do I go to 7-Eleven? Is it online? Is it offline? I mean, it is completely, completely, you know, early stages in our industry.

• 43:40Speaker 02

  And so a lot of what we are doing over the next 12 to 12 to 15 months is continuing to address that problem of like, where do people just go the first time? All the way from the, you know, the, the, the, the, the brand, top of kind of mind, brand building and education, all the way through that funnel of being able to trust you with their money and being able to get KYC properly and, and so on. So again, it's, it doesn't sound as sexy as, um, as DeFi, uh, or a few other projects, but it's an important problem that's not being solved. And it's a crucial problem for us to solve to enable the rest of the industry, right? If there's not a critical mass of people that are using Bitcoin or buying and selling it, all of that infrastructure that we're building and all of that liquidity that we

• 44:22Speaker 02

  are creating in all of these markets enables other companies to then come and build on top of that and say, okay, well, now I want to do remittances. If, you know, there's a lot of liquidity in Nigeria and, you know, countrywide, now the product will actually maybe work, right? So, so I think that's where a lot of our attention is going on and, and something I'm still very, very excited about seven or eight years into the, into the journey. Um, but on top of that, we're going to be launching a couple of new markets. We've got a lot of demand in, in a few other markets, but yeah, we haven't announced too much around that, but I'm sure, um, you will, you will hear more about that. And I'll also, I mean, I'm, I haven't been spending that much time on FinTwit the last few years, but I'm, I'm, I'm making a comeback and, um, yeah, we're going to be posting a lot more on Twitter around updates on all of these markets, what's happening on the

• 45:06Speaker 02

  ground in Nigeria, what's happening on the ground in Indonesia. Um, and, and hopefully that'll be useful for people to, to, to, to, to kind of get a better idea of what's going on.

• 45:14Speaker 03

  I love it. Before I wrap up, I always ask everyone the same three questions. So the first is, what is the most important book that you've ever read?

• 45:24Speaker 02

  I actually didn't know that these questions were coming, so.

• 45:30Speaker 02

  The most important book I've ever read. Can I just, I'm just stalling a little bit for time here, but just so you know, I have a bit of an obsession with reading books. I buy about five books for every two that I read. So, so I just need to also think that have I actually read the book?

• 45:51Speaker 02

  I think.

• 45:55Speaker 02

  Yeah, that's like asking what's my favorite child, right? It's just impossible. But okay, I'll just be, I mean, a fictional 100 Years of Solitude, Gabriel Garcia Marquez, really amazing book. I know there's 100 business books, but you know, I'm gonna, I'm gonna pick that one out for, for now.

• 46:13Speaker 03

  So yeah, that's a great one. Second one is a little bit more personal, your sleep schedule. So I used to be somebody who slept only for, you know, five or six hours. And then I recently started to, to work with and invested in the company Eat Sleep. And in that business, they've got a thermo-regulated bed. Essentially, you can make it really hot or you can make it really cold. I sleep literally on an ice cube and sleep like a little baby now. What's your sleep schedule and how has that changed over the years?

• 46:40Speaker 02

  Same as you, you know, I did investment banking, right? You don't sleep, other than maybe under this every now and again. And, and I changed my schedule to go to bed early. I now try and get like seven or eight hours of sleep where I used to do, you know, four or five. I try and wake up at, at the latest six. I've tried the 5am thing a little bit. It's a bit tougher than it sounds. But yeah, seven or eight hours, go to bed very early, complete game changer. And can I just, this, this, this sleeping company you mentioned, I am absolutely dying to get their product in the UK. I can't find it. So if there's a way, someone I can talk to, someone can ship me something, I am really keen to take.

• 47:19Speaker 02

  You know, I'm all in on the sleep thing now. That's something that I've, I've seen, you know, and read about extensively. So really, really keen on that. If, if there's a way to get it.

• 47:29Speaker 03

  We will, we will work on it for sure. Last question is a little bit more fun and you get asked me one to finish up. The last question is about aliens. Are you a believer or a non-believer?

• 47:42Speaker 02

  I am actually a believer. I, you know, just basically, but just on, you know, statistical odds, you know, from a beer, you know, that, that's why I, you know, I don't believe because I, you know, I think I'm going to see one in my lifetime, but just statistically speaking, I'm pretty sure there's life somewhere else in the world.

• 47:59Speaker 03

  I tend to agree with you. I don't know if they've come to earth, but, but I definitely think that they're out there somewhere.

• 48:05Speaker 02

  No, they're there, they're there. Well, maybe they sent us, uh, sent us Bitcoin, uh, in, in, you know, from the future. You never know.

• 48:15Speaker 03

  Absolutely. You could ask me one question to finish up. What do you got for me?

• 48:21Speaker 02

  I'm going to ask back what your favorite book is. I know, maybe it's a little bit boring, but that is a really good question. And it says a lot about a person when you ask that question. So.

• 48:30Speaker 03

  Yeah. So, I mean, look, I, I always say the same three books, which is Rich Dad, Poor Dad, The Richest Man in Babylon, and Thinking Girl Rich, just because they were kind of life-changing for me. A book that I recently read that I thought was really good was Morgan Housel's The Psychology of Money, or, or also, uh, the, I think it was the Almanac of Naval Ravikant, uh, which is just basically a bunch of Naval's thoughts all put together. I think both those are great books as well. So I'm similar to you. I could go on and on and on and, you know, a hundred books and, and feel like I didn't do it a good service. So.

• 49:04Speaker 02

  Yeah, that's fine. That's good. They're good ones. Very good ones.

• 49:08Speaker 03

  Right. Awesome. Well, listen, Marcus, I really appreciate you taking the time to do this. Where can we send people to find you on the internet or find more about Ludo?

• 49:16Speaker 02

  So Ludo is ludo.com. The Twitter handle is Ludo Global and my Twitter handle is Mark Swain. You'll find it through the, through the Ludo handle as well.

• 49:28Speaker 03

  Got it. Well, listen, thank you so much for taking the time to do this. What else to do to get into the future?

• 49:32Speaker 02

  Awesome. Thanks so much for your time.