#438 Diogo Monica on Crypto Custody

Diogo Monica is the Co-Founder and President of Anchorage. Anchorage brings the world’s most advanced and proven security architecture to cryptocurrency custody, to deliver the services institutions expect from a traditional custodian. In this conversation, we discuss institutional custody requirements, Anchorage’s new national bank charter application, why every bank now needs a crypto strategy, and what he thinks about DeFi. ======================= LVL is a new crypto investing platform that I'm an investor in. They allow anyone to trade an unlimited number of times per month for only $9. If you buy or sell more than $500 in Bitcoin on any exchange, you're spending too much on trading fees. Use LVL to save money and trade as many times you want, but only pay $9/month. https://lvl.co/pomp ======================= 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. ======================= Pomp writes a daily letter to over 90,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com =======================

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. Let's kick this thing off.

• 0:13Anthony Pompliano?

  Diago Monica is the co-founder and president of Anchorage. Anchorage brings the world's most advanced and proven security architecture to cryptocurrency custody to deliver the services institutions expect from a traditional custodian. In this conversation, we discuss institutional custody requirements, Anchorage's new national bank charter application, why every bank now needs a crypto strategy, and what he thinks about DeFi. I really enjoyed this conversation with Diago, 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 Level, LVL. They're a new crypto investing platform that I'm an investor in. They allow anyone to trade an unlimited number of times per month for only $9.

• 0:58Anthony Pompliano?

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• 1:43Anthony Pompliano?

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• 2:28Anthony Pompliano?

  You don't get worried that it's going to get sent to the wrong place. And frankly, it's pretty cool because you have your own domain name. So if you want your domain name, whether it's your name, your company's name, a word you think will be valuable in the future, whatever, head on over to unstoppabledomains.com and go ahead and buy your domain. It's just like regular domains in the URL world. If somebody else buys it before you get it, then you can't have it. There's only one. So if you want to reserve your domains, head on over to unstoppabledomains.com in the DApp browser and you can register and manage your domains there. Unstoppabledomains.com. They're awesome and you need to go get your domains for the decentralized world.

• 3:10Anthony Pompliano?

  Lastly, don't forget that I write a daily letter to over 90,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, let's get in this episode with Diogo. I hope you guys enjoy this one.

• 3:32Speaker 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.

• 4:04Anthony Pompliano?

  All right, guys. Bang, bang. I had Diogo here with me. Thank you so much for doing this, sir.

• 4:10Speaker 02

  Thank you so much for having me.

• 4:11Anthony Pompliano?

  All right, let's jump right into your background. What did you do before Anchorage?

• 4:15Speaker 02

  Yeah, so maybe we can start 15 years ago. My, uh, my career started in the academic realm. So I did a bachelor's, a master's, and a PhD in computer science. Funny enough, 12 years ago, I was publishing academic papers in things like hash cash and presenting full tolerance, you know, before it was cool and definitely not applied to monetary policy. But, you know, academic research that I thought it was absolutely useless alongside my PhD, absolutely useless. But it turns out that 12 years later, there's some modical amount of utility here. And so then in 2011, early 2011, a company called Square flew me out of Lisbon into, uh, into the US to San Francisco. I remember that I landed on a Sunday night at 11:00 PM, 8:00 AM, Monday morning, I was working.

• 4:59Speaker 02

  So it was a very, very fast transition and I was a very early employee at Square. A cool claim to fame there is that I actually have the patent on the little encrypted credit card reader. I'm sure you swiped your credit card on and also that it was Square the same week. Nathan and I, I'm now co-founder and the person that I've been, you know, alongside for the past 10 years. We met at Square the same week. So that's actually kind of the beginning of the story of Anchorage is that first week at Square. And so leading the platform security team at Square and then after four years, Nathan and I moved together to a company called Docker where we led a security team there. And then three years ago, we started Anchorage. So that's kind of like the short version summary of how we got here.

• 5:39Anthony Pompliano?

  So you have the patent for the actual physical reader that Square uses?

• 5:45Speaker 02

  That's right. The encrypted version of the reader, uh, both Nathan and I are on that patent. And you know, at this point, there's a lot of different readers and a lot of different variations, but I still think it's actually pretty cool.

• 5:54Anthony Pompliano?

  Yeah, that's awesome. And so when you guys left Docker, talk to me about what was the impetus to go start Anchorage? Kind of why did you guys want to go do this?

• 6:02Speaker 02

  Yeah, what happened was, I would say, the universe handed us in a silver platter, the one business that we're uniquely qualified for. If you think about the background, you know, academic experience in distributed systems, financial experience in payments, you know, moving hundreds of billion dollars of payments, and then infrastructure security at Docker. And the Venn diagram is literally private keys that are worth hundreds of billions of dollars. That's it. That's the only thing that I'm qualified to do is to protect private keys that are worth hundreds of millions of dollars. And so what happened was, people realized that and started reaching out to me in early 2017, when, you know, the prices were booming at the time. And the first client that reached out just for consulting had lost the passphrase to

• 6:47Speaker 02

  a $10 million Bitcoin wallet, and it was offering me 20% if I could break into it. So that was just the introduction to the business and the introduction to how hard it is to actually do custody. And so that one thing led to another, more consulting gigs started coming in, until I really didn't have time and the day to deal with all of this. And Nathan and I had been working together for seven years. We were the perfect team with a perfect background to start this. And so that's kind of how the original idea came to be, was from out of client's need.

• 7:17Anthony Pompliano?

  When somebody calls you and says, I have $10 million, I'll give you 20% if you can get in, do you say, yes, I'll try?

• 7:22Speaker 02

  Oh, yeah, absolutely, you do. Absolutely, you do. Especially when you realize that it's going to be a lot easier than you thought it was going to be, because they actually have the seed. The seed has just been generated, an old version of the software, and they do not know how to get the old version of the software together to actually recompute the private key. And if it's that easy, you absolutely say yes.

• 7:41Anthony Pompliano?

  And that's literally what it was?

• 7:42Speaker 02

  That's literally what it was. There was no need to attempt to brute force the key or any kind of fancy, you know, like, and nothing fancy. It was just minimum competence. But it really speaks to, you know, you know, number one, how hard this is to do right. And number two, how even the easy stuff is easy to screw up. And I think that's actually pretty clear, because we've seen, three years ago, there were no institutional custodians platforms in the space. And now, and three years ago, self custody was very common and running rampant, and a lot of people were having issues. And now that's, you know, it's long gone. Self custody is no longer really a relevant part. People are trusting custodians like ourselves and platforms like ourselves, like Anchorage, to actually do these services. And so it's been a dramatic shift over the past three years.

• 8:27Anthony Pompliano?

  Absolutely. And so talk a little bit about when you went from the consulting gigs actually building Anchorage, what was the original product? Was it just, hey, we're going to go protect private keys? Or kind of how did you guys think about the business and the product?

• 8:39Speaker 02

  Yeah, the immediate needs were very clear. People wanted to protect private keys for a whole slew of assets, not just Bitcoin at the time. If you remember, it was kind of like the beginning of the ICO boom. So there was a whole slew of assets. Ethereum was very much, much a thing at the time. And people wanted to have a safe place to store it. But we also had very, very large crypto funds, venture capital firms, some of which were registered investor advisors and needed third-party custodians to actually host them. So it was very obvious to us that going the qualified custodian route, a regulated platform to store these assets was actually the right path. And that's what actually started Anchorage. So now Anchorage is very much a regulated digital asset platform.

• 9:23Speaker 02

  And we can call ourselves the platform because we provide both the services and the infrastructure that institutions need to participate in the space. And I really mean all the infrastructure and all the services. It's not just custody. It is trading, it is financing, borrowing and lending, it is staking, it is governance participation, it is DeFi integration and yield generation. It is all of these different things that you can now do with these assets, which are really exciting, and you couldn't do then, and that we allow you to do in a regulated, safe manner, insured, and you know, all the bells and whistles that institutions are expecting.

• 9:57Anthony Pompliano?

  What's really interesting to me is, most of the early businesses in crypto, they really focused on brokerage models, right? Kind of the exchange businesses. And those are fantastic businesses to be in. They can be highly profitable. And kind of there's, you know, pick your example that you want to look at across the world. But what we know from the traditional finance world is the companies that focus on deposits and payments tend to actually have much more scalable business models that can grow to be much bigger, right? I always use actually the example of the difference between like a Robin Hood and a Square. When I, when I talk about this framework, you having worked at Square makes it even better. But it's kind of like Robin Hood's ability to go into other types Financial services is actually much more difficult than Square,

• 10:40Anthony Pompliano?

  which starts out with the deposits and payments and can quickly add brokerage, crypto, all these other things. And so it sounds like you've almost basically replicated that again with Anchorage where, hey, you go ahead and deposit, we protect your deposit or your assets in those private keys. And we basically give you all sorts of functionality and financial services around it that you can then basically put to work these digital assets that you have with us, right?

• 11:03Speaker 02

  Yeah, absolutely. Actually, so let's use that comparison. Let's look at the traditional prime brokerage stack, right? You do have custody in the traditional prime brokerage stack. And you have custody services, administration services, and then you obviously have brokerage. You have securities lending, you have capital introduction, we have all these services. But one thing that you note that is fundamentally different between crypto and traditional world is the fact that in the traditional world, all of those building blocks are independent. You can come at them in any, there are people that primarily do cap intro. There are people that primarily focus on trading. There are people that primarily are custodians. So you can come at it in any kind of angle. In crypto, the interesting thing that happens is that every single service is dependent on one thing,

• 11:47Speaker 02

  which is you have to have custody. You need private key custody. If you do not have the internal competence of private key custody, you can't do lending, you can't do trading, you can't do settlement, you can't do, you can't actually keep even the collateral if you're just a borrower. And so what has been happening is there's definitely been, and I'm sure you've seen this, vertical integration of custody into everybody's stack. It doesn't matter where you start with. If you start as an exchange, you now have a custody product or you partnered or you bought. If you started by doing lending, now you have a custody service that you're trying to add. If you started by, you know, just doing a best execution service, you realize quickly that you actually have to own some portion of the stack. So custody really is the building block that is in common with all of these other services and stacks.

• 12:31Speaker 02

  And that's why we're so excited, because we really have the best platform, the best technology, and it's battle tested over the past three years, and we've already built all these services on top of it. So our approach was always, you have to do the hard thing first. And the hard thing is, how do you have better security than cold storage without the trade offs, without the humans going around and doing things? How can you get better security than cold storage without sacrificing time as the trade off? So that's what we've done.

• 12:59Anthony Pompliano?

  And so you now have a much, much larger aspirations. But before we get to those larger aspirations, let's talk about just who's using the product. Right. So what are the types of customers? I don't want any names, but just that you see either coming inbound or you guys reach out and end up going ahead and choosing to work with you guys. Are these large asset managers or these just wealthy individuals? Is it a mix? How do you break down your customers?

• 13:22Speaker 02

  Yeah, three years ago, it was primarily crypto funds and VC firms. That was very obvious, people investing in these assets. And you know, the goal was an investment. The goal was obviously to have these assets appreciated and betting on these protocols. Now it's a completely different story. We have clients everywhere from still crypto funds. So some of the largest crypto funds, think folks like Paradigm, Polychain, E6 and D Crypto, all the way to very large institutions like Visa. So it really ranges the gamut. And what we've seen in the market is that there's a lot more types of clients that didn't exist before. So now miners are clients that are very exciting. And it's not just Bitcoin mining. You also have Filecoin mining. You also have the protocols themselves. Anchorage has the protocols treasuries.

• 14:05Speaker 02

  So people actually leave the assets with Anchorage or protocols themselves. When they're, when they're launching a new project, they want to keep the treasury with a platform that gives them all of these types of services. The financing, the custody, the APIs. And so they use it. So protocols is a big, big portion of client base for Anchorage. Large institutional asset managers, traders, active traders that use our trading APIs. Think about all of these different types of client types that are just getting to the space that are really filling the edges. So now it's very much moved away from the traditional crypto fund and VC firm. And I would say that the majority of the growth is elsewhere. In fact, one of the things that is worth pointing out is that one of the highest, highest growth areas that we've seen this year has been the banks.

• 14:50Speaker 02

  The OCC clarity that came from the OCC around national banks being able to work as custodians for digital assets and the backing for stable, stable currencies has just created a boom. The clarity just made all of the banks come to us and want to partner because everybody's seen post PayPal, post Square, that they want to offer these services to their clients too. And so all of a sudden, that type of client, which was in existence three years ago, it is now, you know, one of the, one of the places where we're spending the most time on.

• 15:22Anthony Pompliano?

  Talk a little bit about when you walk in, I'm assuming that there's a conversation around technology and then what I'll call kind of career risk mitigation, right? So from a technology standpoint, I can't think of a better group in terms of that custody and kind of your guys' background and understanding the technology and the people you serve, et cetera. But your name is not Fidelity or State Street or, you know, kind of one of these custody providers or custodians from the legacy world. The institutional world, for those that don't know, is highly, highly conservative. And a lot of times there is this mentality of like, you don't get fired for going with IBM or with State Street, et cetera. How have you kind of navigated that, been able to convince people that Anchorage is the best

• 16:04Anthony Pompliano?

  solution in the marketplace, even though you are relatively young compared to, you know, somebody's company's been around for 100 years?

• 16:10Speaker 02

  Yeah, I think one of them is show our work. And the way that we show our work is if you get a demo of our platform and if you see our systems operating, you immediately get a sense of you understand that the quality that you're seeing reflects itself throughout the whole stack. You really, you feel when you're getting a demo of the product and when you're seeing Anchorage that this is the safest platform. They have thought about so much, so much more than any single other player in the market in terms of expanding the attacker model and being very considerate about what they're actually doing and thinking about the usability and thinking about the use cases of institutions, that everything else must be at that level of quality. So that was an immediate thing for us is like the product really speaks for itself.

• 16:53Speaker 02

  And then what we have is we obviously have proxies now, three years later, for that type of competence. We have a SOC 1, we have insurance by Aon, we have lending licenses, we have a qualified custodian as a church chartered South Dakota company. And so we have all of these checkboxes that people are looking for. Let's look at Anchorage as a company. SOC 1, check insured, check qualified custodian, check. All of a sudden, the people that are just, you know, nobody has ever gotten fired for hiring IBM, nobody's ever gotten fired for like following this checklist and saying, oh no, this company is perfect on all these aspects. By the way, look at the product, it really is self evident. And also at this point, we really have a humongous track record.

• 17:37Speaker 02

  You know, we are a top platform. There is very few other people that are even at the same level in terms of assets in your custody, in terms of assets transferred on the platform, in terms of services offered. People see a safe counter party that has all of the services that they want. They see a one stop shop. They no longer see, they no longer see the need of them going and picking out all of these other services. And so that really drives people towards Anchorage. And then finally, what I would say is the brands that use us are the most technically sophisticated brands. As I mentioned, if you, if you really care about crypto and if you know who the right, who the right clients are, our rolodex of clients really speaks for itself. And so nobody ever got fired for using the same custodian as Visa is also something that, that you can say.

• 18:21Anthony Pompliano?

  I love that. Let's talk about the recent news, which is that you guys filed for a national bank charter. I don't think that people were supposed to figure this out or find out, because I don't think you guys announced it. But kind of what can you say there? And, and maybe explain some of the thought process behind filing for that charter.

• 18:41Speaker 02

  Yeah, that's, it definitely got leaked because all of these are publicly, publicly announced and posted on the website, on the OCC website. I think it's really exciting. It is really exciting. Not only the OCC letters provided guidance around what national banks can do, the fact that Anchorage might be the first federally chartered national bank to provide crypto services and being crypto native, that really is a huge step for, for, for the space. So I think for us, there's a lot of advantages in having that charter around preemption of MTLs and expansion of potential business lines, but really about the fact that right now, in 2020, all the banks are coming to us and it becomes a lot easier for you to do business with a bank when you're a bank yourself and when you're actually also a national bank. And so the, the regulation is the same.

• 19:26Speaker 02

  And so it just removes a whole swath of conversation and questions that used to appear. So it furthers what I've been saying around, you know, the proof is in the pudding and Anchorage has already done all of the things to prove itself as a very big player in the space. This is just another step. It's helping the space. It's helping everyone, not just Anchorage, and is really showing a path forward to have something that is better,

• 19:47Speaker 02

  more clear from a national bank perspective around partnering. So that's, that's something that we're really excited about and you definitely will see more news about it very soon.

• 19:55Anthony Pompliano?

  Absolutely. And it feels like every bank of financial service now has to have a Bitcoin or crypto strategy, right? PayPal, Square, like, there's just too many players that come from like a fintech perspective that are large, that it feels like now the hand is forced and every single financial institution has to have that. Is that what you're seeing as well?

• 20:15Speaker 02

  That's exactly what we're seeing. We're seeing two distinct things, though. I would separate it between bulge brackets and how they're coming into the space and what they're asking for, and the new banks or the challenger banks, so to speak. The challenger banks are very much coming to the space and saying, hey, I want to connect with millennials and Gen X, and I know I can do that through crypto. PayPal, Square is doing it. I want to do it too. Anchorage, can you help us do this? And we're like, yes, we have all the APIs, we have all the services, all the regulation, you can do that tomorrow. So that's one big driver of growth for us is the challenger banks and the new banks. The other is the bulge bracket banks, which are very, very interesting. But a lot of the bulge bracket banks, and of course, this is not like, you know, a perfect mapping, but a lot of them are coming to the space and saying, hey, I actually want to provide these services

• 20:58Speaker 02

  to my, to my clients, and I want a sub custodian partnership. Can you do this for me? Which is slightly different than what the challengers banks are coming from. Also, the bulge bracket banks are a lot more interested in things like issuance of stable currencies and trying to own that, or they're a lot more interested in lending and how they can actually expend that, that business line for them, and how they can actually use Bitcoin as collateral for fiat loans. So all those services of Anchorage that we already have. So we already have a Silvergate partnership where Silvergate is capital provider and Anchorage does risk management, automatic liquidation of collateral. We keep the Bitcoin collateral under custody within the same platform, again, like, integrated platform for everything. You can just click

• 21:42Speaker 02

  a button on the Anchorage platform and borrow fiat into your account. We're integrated into send and that appears into your account basically immediately. So it's a pretty cool experience, very usable, and it is fiat loans backed by Bitcoin collateral. Some of the bulge bracket banks are looking at this and saying, oh, this is actually a fantastic business. We want to get into that. Who has this already available? And then Anchorage becomes the obvious place of proven custodian, proven platform, already has this up and running, already has clients for all these services. So they just want to come in and partner. So yes, they're coming in and depending on who they are, they're coming in for slightly different sets of services.

• 22:17Anthony Pompliano?

  What's been the most surprising thing when you talk to kind of legacy financial players? Is it what they're asking for? Is it maybe what they're not asking about? Like, what would just what's been some surprises in those conversations?

• 22:28Speaker 02

  Well, what has not been a surprise has been the extent of the RFIs and the RFPs, and the very, very large number of questions that you have to answer every time you participate. That has not been a surprise at all, very much expected, and it's, I can tell you, it's there. It very much is there. What's been surprising, I think it's been the sophistication, and some of the banks coming with very specific businesses in mind. They want to do this one thing. They don't just want to have a crypto strategy anymore, or a blockchain initiative, where they they want to partner with with Enkridge because they want to say they have a blockchain strategy. It is no longer that. That was the case two years ago, three years ago, and before. That was very much the case, where people are just investigating and trying

• 23:12Speaker 02

  to see what the space was all about. Right now, they're coming with very specific services and saying, hey, I want to provide this service. How do you encourage, make it easier for me to provide this service safely? And so that's the answer. And so the RFIs and the RFPs are a lot more targeted. And that's really amazing to see, because it really speaks to a cohesive strategy on their side, and the fact that they've already went through the homework, they're already highly educated in the space, they understand exactly what they want, and they're coming to the right set of players that they identified in the market, and they're trying to partner with them to get something tangible out. They have deadlines, they have goals, and so it really is becoming part of the business machine, and the business money making operation machine, which is amazing, because these banks really only move if there's an actual business behind it, and now there's a business behind it.

• 23:57Anthony Pompliano?

  It's incredible to kind of watch this happen so quickly. Talk a little bit about how price impacts the interest level coming from them. I'm assuming as they see price go up, they are saying, wait, maybe we should be doing this on a faster timeline, or, you know, this was going to be a second half next year exercise, maybe we need to kind of move it up in our priority list. What are you seeing there related to price?

• 24:23Speaker 02

  Yeah, that's it. It's a hard one. Two years ago, and the last or three years ago, when we had the last run up of Bitcoin and Bitcoin was over seventeen thousand or eighteen thousand the last time around, what we saw was exactly that. It was FOMO of missing out on crypto and missing out on the price action, and this is a thing. But it felt like they were interested without having done the homework and understanding really what it was. This time is actually fundamentally different. It might be that it's accelerating their roadmap, but they already had a roadmap. They already had the goal of doing this in maybe late 2020, maybe early 2021, maybe late 2021, and they're just trying to compress the roadmaps a little bit. So it's actually funny, because I don't see a lot of people just jumping into it because of FOMO this time around. I just see them, hey, this proves

• 25:05Speaker 02

  our point. Like, it just increases the priority of the project internally at our institution more than now this is a thing that we need to do that we weren't doing before. So I think that's actually fundamentally different from three years ago.

• 25:15Anthony Pompliano?

  Yeah, that's really interesting. And then I guess the other big difference is COVID, which is probably impacting you guys internally and also externally. How has that played out?

• 25:26Speaker 02

  I think the biggest impact is the one that has happened to everyone, which is closing down offices, especially for Anchorage. We have one of the things that I'm the most proud of is really the company culture, and the culture is just amazing. And that company culture was built primarily in person, right, in office. And so I think that we have an amazing culture right now, and the question now becomes, can we keep that up? Can we keep that up in a world where offices are not as important and are not going to have as much of a focus? So that's definitely been the hardest thing for us. But otherwise, I will actually point out that the pandemic has been very beneficial to crypto, and specifically very beneficial to Anchorage. And I'll give you a couple of reasons as to why. The first

• 26:09Speaker 02

  one is the competition in the space in terms of technology for safekeeping of assets and for asset platform is still primarily cold storage. That's what other people are offering. And cold storage relies on humans. And if humans can go to offices into banks, how do they actually transact crypto? And the answer is, they don't. And so there were a lot of issues with a lot of clients that came to Anchorage because we have something safer. But accessible. So, once everybody went remote, our transaction times and our actual customer, customer times, transactions, assets entering and leaving the platform actually reduced. The withdrawals were faster overall. And so, really being in an office did not impact at all because we don't have human operations when it comes to securely and

• 26:51Speaker 02

  safely dealing with crypto assets. We have built something that is better. And so, that was actually an advantage to us, not as an advantage. Covid shutting down everybody else's offices and banks and needs to bring humans, making it harder to bring humans together to do key signing, etc., etc., all those parties, all ceremonies that you need to do for cold storage, that actually improved Anchorage's service comparatively with everybody else. It brought to light, oh, wow, this is really a way better way of doing the platform. And why were we doing pirate custody in the first place, like bearing these keys in islands and putting them in treasure chests in the first place? This makes no sense that we have digital assets and then we're doing the same that they did in the 1700s. So, that was something that was very beneficial for Anchorage there. And the other side is

• 27:35Speaker 02

  obviously, I think, the capital preservation, capital preservation narrative that we're seeing in publicly traded companies like MicroStrategy and Square, so on and so forth, has also benefited us quite significantly because it expanded the addressable market. The addressable market is larger. It was not, like publicly traded companies and treasuries were not part of our addressable market a year and a half ago or a year ago, and now they very much are.

• 27:58Anthony Pompliano?

  Have you seen corporations coming to you guys? Or is that more like now it's an opportunity, but not yet there's the interest?

• 28:06Speaker 02

  We've definitely seen them come to Anchorage, yes. So, we're actively talking to many of them. And our services, again, as I mentioned, we do have the full stack, both on the infrastructure side and on the services side. So, they can come to Anchorage to not just safe keep, but buy, sell, finance, have pricing, do all sorts of different things. And one of the interesting, one of the interesting aspects here is that capital preservation is still very much focused on Bitcoin, of course, but a lot of the other businesses are not. Anybody that is interested in stable currencies, of course, is not talking about Bitcoin, is talking about other platforms like Ethereum. And anybody that is actually looking at these new assets are coming out, like Oasis that is about to come out and the privacy aspects, that is a totally different blockchain. And so, really

• 28:48Speaker 02

  having someone like Anchorage that supports hundreds of assets is something that is also a unique differentiator towards some of the other large players.

• 28:56Anthony Pompliano?

  Absolutely. Last thing I want to talk about is decentralized finance. I think that if you look at Bitcoin as kind of an application of decentralized finance or decentralized money, there's now this entirely new industry that's being built. Everything from decentralized exchanges to lending mechanisms, etc. You guys are embracing a lot of that and kind of empowering it. How do you think about the balance between centralization from the company versus the decentralized component of some of this? And do you kind of see some transitions back and forth? Or just how do you think about decentralized finance and what you guys are doing today?

• 29:35Speaker 02

  Yeah, I don't think these things are at odds at all. People point out that how can Anchorage participate in a decentralized finance if we're a centralized company that is aggregating assets of clients? So I don't actually, I think the better way of thinking about Anchorage is specialization. If you are a large company, you do not have the ability to recruit the talent. You don't have the background. You don't have the ability or really want to spend the time building an infrastructure that supports hundreds of different assets, that is qualified custodian, that has insurance, that has all of these services on top. You're not going to spend that money. And that's how companies do these things, right? They specialize or either they specialize in their own area, or they take somebody out from the market that specializes in that and can offer it more cheaply. So

• 30:20Speaker 02

  that's how I see it. It doesn't really matter that it's decentralized or centralized. These companies need help, and we're just here to provide help. And of course, help is in the form of a highly specialized company that is centralized. But that's just, you know, it is not that we're centralizing and that we're at odds with decentralization, is that we are a specialized company that does what we do, digital asset platforms for institutions, really, really, really well. And so that doesn't mean that we can't interact with DeFi. And in fact, institutions through Anchorage can interact with DeFi and do in many different ways. For example, governance decisions on Maker, governance decisions on Cello, they vote directly through Anchorage with the same safety that we have for their assets. So they're actually impacting the way and the direction of these blockchains

• 31:03Speaker 02

  because they're voting through Anchorage. We're talking about yield opportunities. So we support Compound, and people can actually go through Anchorage to try to participate in some of these yield farming or these yield generating opportunities. But at the end of the day, if you think about it, Anchorage does really care where you generate your yield. In fact, Anchorage is here to pay you. And so if the yield opportunities are in C-Fi and it is traditional lending, order book based lending that we can do and generate the most yield for your Bitcoin, that's fantastic. And if it's DeFi, then that's fantastic too. We could also generate yield. What we're seeing though is that the interest for institutions and their comfort levels and order book, old style lending is a lot higher than their comfort level

• 31:46Speaker 02

  with the current DeFi and smart contract risk and things like that. Even though there's already obviously quite a few people experimenting and especially there's crypto funds that are very much on the bleeding edge where all that they do is DeFi lending and taking advantage of these opportunities. But Anchorage really, at the end of the day, doesn't care. We are here to allow you access to crypto. And DeFi is crypto, the same way that stable assets are crypto, the same way that Bitcoin is crypto, the same way that, you know, I guess depending on who you ask, Libra is crypto. All of these different things are different ways of interacting with blockchain, interacting with technology, and Anchorage is just a platform that allows institutions to do it. At the end of the day, we do not see, we do not believe that the platform should dictate what investors want to invest or do.

• 32:30Speaker 02

  The platform should support it.

• 32:33Anthony Pompliano?

  I think that's a great way to look at it. Before we wrap up, I ask everyone the same two questions and you'll get to ask me one. The first is, what is the most important book that you've ever read?

• 32:45Speaker 02

  That's a really hard question. So I read about 50 books a year. And that means that multiplying by the last few years, there's a lot of choice. I don't think I have a good answer. I can tell you the two books that I read this year that come to mind that are the most exciting ones versus the most important book. I think the most important book has been different for me in different phases of my life. At some point, I think a book about networking was the most important book for me, which right now, no actual networks, so Ethernet networks, not really anything more than that. That was the most important book for me at that specific span of time. But this year, two books that I've really enjoyed, one of them on the fantasy side by Brendan Sanderson.

• 33:28Speaker 02

  The Stormlight Archive that he's been writing for over 10 years now. The Rhythm of War just came out yesterday, so I just started reading it. So it's top of mind. So I really love Brendan Sanderson. And then the other book that I reread this year again was The Electronic Value Exchange, which is the story of D. Hawk and Visa coming into being, which is just, you know, a fantastic story that I highly recommend everybody reading. And it's just a beautiful view of how this problem was solved and how it came to be. So I think both of those are fantastic. But by and large, what I do is I split my reading into 50% fantasy, 25% technical books and 25% Silicon Valley mumbo jumbo.

• 34:11Anthony Pompliano?

  I love that breakdown. 50% fantasy is a hefty investment there. Speaking of fantasy, second question is more fun. Aliens, are you a believer or a non-believer?

• 34:25Speaker 02

  I think I'm a believer. I have to, you know, look at the statistics and say that there must be life. Not how aliens are portrayed in the movies, but there's definitely extraterrestrial life out there. I'm sure of that.

• 34:41Anthony Pompliano?

  Do you think that we will find them in our lifetime? Like come in contact and confirm?

• 34:46Speaker 02

  No, I don't think so. I think those problems are a lot, a lot larger to address than I think people foresee them to be.

• 34:56Anthony Pompliano?

  Couldn't agree more. They're there. We just probably are not going to come in contact. You could ask me one question to wrap this up. What you got for me?

• 35:04Speaker 02

  Well, actually, I'm gonna turn this around and say, what is the most impactful book that you've read? Because that's a really hard question.

• 35:11Anthony Pompliano?

  Yeah.

• 35:13Speaker 02

  Oh, there we go.

• 35:14Anthony Pompliano?

  I said it so many times. Everyone knows, So Rich Dad, Poor Dad, Thinking Go Rich and The Richest Man in Babylon were definitely the three. I read them back to back to back when I was like 20, 21 years old. Those were definitely the most impactful of my life. I've been trying to think of like, what is something that isn't necessarily?

• 35:37Anthony Pompliano?

  A book that's a piece of content that's like been really impactful. And I gotta say, one of the things that it's a classic, but really is probably one of my favorite things on the, on the internet is Peter Thiel's talk at, I think it was Stanford or Y Combinator. I think it was at Stanford, all about kind of zero to one, the idea that, you know, competition's for losers, build a monopoly, all that kind of stuff. And I think really it's just, it's a completely different way of thinking, right? It really forced a lot of people to change their actions. And so, yeah, the books are, I talk about them all the time, but that piece of content, I think is probably one of the more impactful ones that I haven't mentioned before.

• 36:22Speaker 02

  And what percentage of your guests actually say the Bitcoin White Paper as the most important thing that they've read?

• 36:28Anthony Pompliano?

  I don't know if I've ever had anyone say it, mainly because I asked for a book. So I think like mentally they're thinking books. But I actually wonder what percentage of the guests have read the Bitcoin White Paper, right? It's definitely not 100%, it's not 0%.

• 36:47Anthony Pompliano?

  This is probably bad, but like, my guess is that most people have actually not read the Bitcoin White Paper. Like more people than we think have not, right? Which is like a little sad, but, uh, you know, it's always one of my first suggestions is like, hey, you should go read this, you should, you know, a couple of other pieces of content. But

• 37:07Speaker 02

  On the positive side, a lot of them have it framed on their walls. So, you know, that's also

• 37:12Anthony Pompliano?

  That is true. That is very true. So we'll, we'll, we'll see. But, um, all right, where can we send, uh, people to find you on the internet or find out more about Anchorage?

• 37:22Speaker 02

  Yeah. Anchorage is at anchorage.com. It's the easiest way to get in contact with us. And as far as I'm concerned, on Twitter, at Diogo Monica.

• 37:31Anthony Pompliano?

  Awesome, man. Listen, this was fantastic. You guys are building an absolute giant of a business and becoming more and more important to the ecosystem every day. So thank you so much for, uh, for all the hard work that you guys are doing and we'll have to do this again in the future.

• 37:45Speaker 02

  Let's do it. Thank you for having me.