#1041 Ben Sebley On Banking For Crypto Companies

Ben Sebley is the Chief Growth Officer at BCB Group In this conversation, we discuss why a Crypto company would need traditional banking, the current market status, recent failures of various yield products, and how regulation could help the Crypto industry. ======================= FTX. US is the safe, regulated way to buy and sell Bitcoin and other digital assets. Trade crypto with up to 85% lower fees than top competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. FTX. US is also the only leading exchange that supports both Ethereum and Solana NFTs. Download the FTX App today and use referral code “Pomp” to earn free crypto on every trade over $10. The more you trade, the more you earn. ======================== Valour (formerly DeFi Technologies) represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U. S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at valour.com ======================= The number one name in NFT domains and the world’s most powerful wallet are teaming up to bring something new to the crypto and Web3 world: That’s right, Unstoppable Domains and Blockchain.com partnered to create NFT domain names ending in . Blockchain. It’s the perfect ending to show that you’re a believer in a decentralized future. The Blockchain.com community can get one, for free by signing up for the waitlist here. Free NFT domains provide all the benefits of premium Unstoppable Domains, including fee-free, lifelong ownership. Don’t have a Blockchain.com wallet? No worries, these new domains are available to everyone for as low as $5. Either sign up for a free blockchain.wallet or visit Unstoppabledomains.com to buy your domain today. =======================

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Ben Sebelis, the Chief Growth Officer at BCB Group. In this conversation, we talk about banking for crypto companies, emerging yield markets, the current market status, and also what's going on with the Staff Accounting Bulletin and the SEC. I really enjoyed this conversation with Ben, and I hope you guys enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by FTX US. FTX.us is the safe, regulated way to buy and sell Bitcoin and other digital assets. You can trade crypto with up to 85% lower

• 0:44Anthony Pompliano?

  fees than top competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees either. FTX.us is also the only leading exchange that supports both Ethereum and Solana NFTs. Download the FTX app today and use referral code Pomp to earn these free crypto on every trade over $10. The more you trade, the more you earn. Go download the FTX app today and use referral code Pomp. This episode is brought to you by Valor. Valor represents what's next in the digital economy. They provide simplified trusted access to crypto, decentralized finance, and Web3 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity

• 1:28Anthony Pompliano?

  products and protocols through a single stock purchase on a regulated exchange. They're currently listed on the OTC at DEFTF and on the Canadian NEO exchange at DEFI. For more information or to subscribe to receive company updates and financial information, you can visit their website at valour.com. That's V-A-L-O-U-R dot com. valour.com. Go check them out today. This episode is brought to you by Unstoppable Domains. They recently launched an awesome feature to level up your unstoppable domains profile. It's called Badges. They translate wallet activity into achievements, so celebrating, reliving, and sharing your crypto story has never been easier. Before, these stories were buried in transaction logs. Hard to read, making them difficult to find and understand as well.

• 2:13Anthony Pompliano?

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• 2:41Speaker 01

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

• 3:05Anthony Pompliano?

  Ben, how are you doing?

• 3:06Speaker 02

  Very well, very well. How are you?

• 3:08Anthony Pompliano?

  I'm super excited to talk to you, man. Let's just get right into it. Banking for crypto companies. The second somebody hears that they go, whoa, is that an oxymoron? Banks, crypto companies. Help folks understand that why do crypto companies still need banking?

• 3:24Speaker 02

  Mate, well, it may be a new industry, but it's a story as long as time it feels like. So I'm sure most of your listeners are going to be very intimately aware of the pain surrounding this. But for those that aren't, basically the cryptocurrency industry is bucketed as ultra high risk. And so traditional financial services firms, they look at crypto alongside the likes of the adult entertainment industry, gambling, medicinal marijuana, et cetera. So what it means in practice is that, well, guess what? Crypto companies, whether you're a brand new crypto startup or a multi billion dollar exchange, you can't get banking. And that's a pretty fundamental service to not have for a fintech. You know, whether it's as simple as kind of operational accounts, just to pay your staff,

• 4:07Speaker 02

  all the way up to treasury management and even fear landing on off ramps from large exchanges. People have struggled. Now, I mean, I came into the industry sort of early 2018 and Really, from then to now, it's actually got harder, not easier. There's less places you can go, those places are better. And but there's less places actually offering crypto companies the right to bank. And so really, kind of, we jump back to twenty seventeen, all that happened was, um, we had this pop in the market, everyone then then knew what Bitcoin was, which was great. But then the banks actually went, oh, hold on, we've got a bunch of companies on the book

• 4:46Speaker 02

  doing something that we absolutely don't understand. So the rug got pulled on the industry and a lot of people lost their accounts. And and really, at the time, there was kind of only one big bank globally, offering, um, you know, accounts to crypto companies, and that was Silvergate. And it was only offering in one currency, which is US dollars. Now, that's even read through today, because what we see in the market is that we see pretty much all crypto companies and all crypto assets being pegged to the dollar. And it's not just because the US is the largest market in the world with the, you know, deepest tech talent pool, it's because they simply couldn't get bank accounts. And so we saw that kind of change happen and the evolution happen over the next couple of years of that first

• 5:29Speaker 02

  sort of major institutional crypto winter. And we saw some development in Europe, but actually, what what happened was the large players that were banking crypto companies before they stepped away. And and there was a vacuum, and the vacuum wasn't particularly filled. You had the odd Eastern European payments company or a very sleepy private bank and come in and try and service those companies, but almost as quick as they came, they disappeared. And they disappeared simply because they didn't understand crypto compliance. They didn't understand what crypto companies needed. And when you look at the average profile of a crypto company, it's a pretty fast-paced fintech and with quite demanding needs and normally quite a high customer base. So they're quite hard clients. To service and service well.

• 6:13Speaker 02

  Now, what that what that's led to effectively is it's led to like massive challenges in the industry. So firstly, those companies, the bank crypto companies, aren't necessarily always fit for purpose. You know, a lot of crypto companies just basically take what they can get. And and that's a shame, really, because it actually hampers growth and development in the industry. And the second thing is that it's expensive. And we all know that if we've started a crypto company, you know, going to get bank accounts, it's not only expensive. And it takes an incredibly long time to do because as the industry is cyclical and as investment comes in waves.

• 6:53Speaker 02

  And that capital all tends to get deployed at the same time. And one of the first things everyone needs to do is set up a crypto bank account. Or if they're expanding into a new area, they need to set up a new account in that currency. So what we see is we see these massive backlogs of very few companies being able to service the industry. And and it just hampers net growth and development and within crypto. Now, there are some small benefits of it. And, you know, mostly if everyone's banking at the same place, well, guess what? Philosophical capital at least should be quicker because we're all in the same place. So at least I can shift some money from my market making company on to an exchange on Sunday evening. And but, you know, that that has that has limited viability.

• 7:37Speaker 02

  And and ability to sort of scale outside of those currencies that aren't service. And and I guess the kind of final small advantage is that, you know, there is economies of living with with these very with these very few companies that are providing kind of crypto companies, the banking services. They do get to kind of know what these companies want. And but I think we can all appreciate, you know, a healthy and competitive marketplace would be better net net for everyone. And and certainly get more access to crypto companies with. With what they actually need so they can grow.

• 8:10Anthony Pompliano?

  How much of this is a regulation problem versus a technology problem, right? If we got clearer regulations around this industry, would that solve majority of the problems? Or is there a tech component to it as well?

• 8:22Speaker 02

  Yeah, it's a good question. So it very much used to be a regulation problem. And I think especially in the times sort of post 2017, we lacked two things. We lacked basic infrastructure that was suitable for sort of major institutions. And we lack regulatory clarity. And that's 2017. Now pass forward on to 2022. And for instance, you've only got the European Commission going firm on what might be seen as a new regulatory framework for crypto, which may or may not come in in about 24 months. So where we have seen improvements in regulation and regulatory clarity, and we've seen further growth and a bit more acceptance of especially non-crypto corporates to come into the space and expand.

• 9:07Speaker 02

  And however, it's it's it's not giving it a blanket oversight for people to come in and operate comfortably. And I think we're still maybe a couple of years off yet. And I think that's probably evidenced by, if you look at the US, sort of the major crypto companies that are only just starting to lobby properly in DC. It's a great development and it helps sort of add to add an industry view to regulation. And but really, that that hasn't even started properly in Europe yet. And it's only just the green shoots. So, once we get further regulatory clarity, it will help. I mean, we've got some, but really it's a technology issue as well.

• 9:46Speaker 02

  And in that, you know, crypto is going to be playing catch up just to get a very vanilla offering of financial services that, you know, a very normal corporate would have access to in, say, Europe.

• 9:57Anthony Pompliano?

  When you think about traditional banks, obviously, yield is a huge component of what they offer. We've seen all sorts of kind of chaos in the yield markets, both centralized and decentralized, over the last couple of weeks. What's your general read right now on yield in crypto?

• 10:12Speaker 02

  Yeah, this is so this is the place that I've certainly been most excited with the developments they're in for. And it's also been fed back by our clients, whether they're crypto natives or whether they're more traditional finance types. That's actually the area of crypto that I think is going to add most value and we're going to see most institutional. Crossover. And as we know, we're kind of going through a period of instability. But actually, what's happening is we're seeing this great stress test happening early. And for fairly large kind of C5 and DeFi lenders. And it is painful. Obviously, some companies are failing. But it's really accelerated, I think, people's idea on how to

• 10:54Speaker 02

  and handle corporate governance in the lending space. Now, if we look at what our clients are saying, and you know, even though they might want bank accounts, they might want the ability to trade, they might want the ability to store and custody. Actually, where we're seeing the most demand and the most interest, especially from non-crypto companies, is the ability to generate yield. And I think that's no surprise, obviously, with real inflation smashing into double digits. And but we've had fintechs sort of bite our arm off and CFOs want to come in and get an education piece around it. Now, that was right up until Terra Luna happened. Once we had that happen, we were actually surprised that people were still very, very interested to learn

• 11:36Speaker 02

  and how they could get safe exposure to sort of C5 and DeFi. And and really sort of the developments there have been quite interesting. The main thing we're hearing from clients is we're still happy with C5 and DeFi. However, we want the ability to recall quicker. And they also want a lot clearer view on the DD process, also sort of collateral management, margin calling management. And they do want the ability and to know what's behind and if you're back to backing, where you're back to backing to. And what what has been very interesting has been and how agnostic, I think, most even traditional finance types

• 12:18Speaker 02

  have been to where you're generating that yield. So whether it's money market lending in C5, or whether it's the slightly more punchy, high-risk DeFi is. As some would say, and actually, most of those have been fairly agnostic, which we've been surprised about. And they just want to know the real rates and roughly how it works. And and actually, I think what could come out of this is obviously some consolidation like we're seeing, which is which is kind of great. And but also you will just see rapid economies of learning in in how to kind of govern lending companies. Uh, in a way that matches actually more what traditional finance wants. And so, yeah, I think if you're a yield aggregator, especially where you sort of maximize exposure to say, you know,

• 13:04Speaker 02

  three percent of a particular protocol, I think I think they're going to come out of this well. And but definitely sentiment has been relatively positive. And interest has taken a small dip in it, but but not anywhere near the level we we expected.

• 13:19Anthony Pompliano?

  There was recently an S E C bulletin, this staff accounting bulletin one twenty one, which makes me sound like a genius that I can recite that. Uh, explain to everyone, what was this saying? And why do you guys think that maybe it was uh mistimed or misplaced?

• 13:34Speaker 02

  Well, this is this is something, unfortunately, we've we've stepped back a bit from. And so we've been focused more largely on sort of the Mika developments here in Europe. And but as we all know, you know, even in crypto, when the U S coughs, the rest of the world catches the cold. So everyone has been definitely kind of watching fairly avidly to all the developments in D C. And how a lot of the major kind of U S crypto companies have handled and and lobbied as well. And we're starting to, like I said earlier, we're starting to see that kind of translate through even to the U K. And other companies, sorry, and other countries here here in Europe and elsewhere. Where crypto is being recognized politically as having way more of a sway.

• 14:17Speaker 02

  Certainly with the public opinion, it's seen as slightly bipartisan, which obviously is helpful now. And but we've still got a lot of work to do. And the S E C is sort of almost being pipped at the post at the minute by by Europe. Like Mika is seen as, you know, a very broad framework that has gone down really, really well. And and potentially might even make Europe slightly more investable from, you know, a crypto sphere.

• 14:42Anthony Pompliano?

  Yeah, talk to me about B C B group, what you guys are doing to help people with the banking services for crypto companies.

• 14:48Speaker 02

  Yeah, cool. So, and I mean, where we fit into this is is that we were sort of headquartered. Initially in Europe, unlike that sort of single US bank, we slot in and our story was we basically helped all the big US crypto companies expand. Certainly at the start into Europe, kind of basically through twenty nine, twenty twenty, twenty one. And we help, you know, the big exchange start opening their sort of GBP, their euro, their CHF rails. And how we are probably different to the other couple of banking providers that service crypto is that, you know, we're crypto natives ourselves. So we've tried to basically build our infrastructure around what clients want. So we do have a trading function, whether it's sort of facing the crypto direction or it's facing more the FX.

• 15:34Speaker 02

  And our bank counts, we now offer up to thirty currencies. And and why that's interesting is because we're starting to see where these big crypto companies are kind of looking to move next. And especially the story of the last sort of six to twelve months has been one of them expanding to non-core markets. You know, interestingly, the Middle East is getting a lot of attention. A lot of people are looking whether to set up camp in Dubai. And, you know, even even markets like Canada hadn't been serviced well. And and we're seeing a lot more sort of renewed interest, thankfully, down in Asia and a lot more connecting of the Western crypto world with with sort of the Far Eastern, which which is great. And we also have kind of very crypto-focused services like custody and more recently yield.

• 16:19Speaker 02

  And why that's interesting is because what we tend to see, you know, from an infrastructure perspective, pretty much the whole breadth of what a particular crypto company wants. And we're also very lucky enough to to sort of bank all the crypto house on those, but it's big exchanges, market makers or lenders. And and what that means is, you know, because we understand them from, you know, being crypto natives, we're able to hopefully tweak and and speed up our decision cycles on what we offer them. And so we try and not hinder industry growth. So that that's been kind of how we fit into it. And but we're we're still sort of, you know, we've only been around really since twenty nineteen. And and and there's a lot more kind of growth to do and assist with.

• 17:04Speaker 02

  And but we we definitely have seen this. Main partners in Europe by the industry.

• 17:08Anthony Pompliano?

  What types of of companies are there specific types that you guys feel like you serve best versus others?

• 17:14Speaker 02

  Yeah, so I would say, well, it was always crypto. We've started diversifying out to other sectors as well. However, especially crypto companies that have a sort of B to C type element, whether they need fiat rails and they need on off ramp type services, that's where we've sort of done our bread and butter. What we've seen is we've traditionally actually serviced more of the US type companies looking to expand into Europe. We've helped fledgling European companies grow, but especially ones that face retail are the ones that we tend to service the best. And I would say sort of the split in terms of what we do, it's mostly focused on exchanges and market makers.

• 17:56Speaker 02

  And then you sort of get the tail of sort of funds and lenders kind of following suit. And in terms of what we're seeing recently, especially in the last six to 12 months, the uptake from traditional finance has been insane and even normal corporates.

• 18:14Speaker 02

  It really kicked off obviously last April when we were in a bull market and we saw kind of Bitcoin do its thing. And there was sort of a FOMO type panic with the more traditional companies. And as that price action sort of dwindled, we saw some interest dwindle from traditional finance. However, in the last sort of six to eight months, it's completely renewed and almost price agnostically. You've had, you know, even just normal corporates come in, recognize they need to do something in crypto or they need to be enabled to crypto. And so we're now starting to see this massive uptake of people who are basically setting up to offer either crypto related services or broaden what they do and using us.

• 18:57Speaker 02

  And the good thing there is we're now seeing a proper crossover. So you're seeing traditional corporates actually look to generate yield for some of their retail users by using crypto. You're seeing traditional funds really start getting in and adding fresh lungs. And so essentially the customer base is changing. And we're seeing that crossover and it kind of mimics what we saw in the sort of 2018 to 2020 years where you saw the the green shoots of basically traditional firms looking at crypto but not jumping in completely. We're now seeing that people jumping with both feet and recognize that it's very much an industry that's here to stay.

• 19:38Speaker 02

  Recognize that it's definitely going to be a crypto strategy that needs to fit into their normal strategy. And so we're there to service that and sort of bridge that gap.

• 19:48Anthony Pompliano?

  When you think about the current market environment, if you were talking to somebody who doesn't pay attention to kind of this connectivity between the crypto companies and banking, what's the one thing that would surprise him the most as prices have fallen over the last six to eight months? Like, what are some takeaways or surprises that have occurred?

• 20:04Speaker 02

  Yeah, so I think I think people would be surprised just how many big traditional firms are coming into crypto. I think that's the thing that would really, really shock people.

• 20:14Anthony Pompliano?

  What names can you share? Can you share names that people don't know?

• 20:18Speaker 02

  And, you know, we'll try airlines, try supermarkets, try anything from sort of manufacturing, anything to normal funds, which is kind of less exciting, especially on the tier two, tier three sort of traditional brokerage side, prime brokerage side. There's a lot of names. We've even got two investment banks as clients. And it's just great to see and there's also not a particular type. What we're seeing is we're seeing traditional companies realize, hey, we can accept payments in crypto. Okay, let's do that. Or we've got two billion on the balance sheet. How do we generate some yield on that that's going to beat inflation? And so really, there's not just kind of one answer, but it's great to see because we saw this in the last bear market,

• 21:03Speaker 02

  which lasted a couple of years, we saw traditional interest still remain the same in level. Which was great. And we're now seeing that interest sort of renew and research. So that's definitely the first thing I think people will be surprised about. You know, the Bitcoin price, although it is a good indicator and proxy to sort of market health. And actually, it's sometimes not always the case. I also think people will be surprised at just how much interest there is in in yield related products. And it definitely feels like that will be the interesting thing as to where this industry will go. I don't think we're quite there in terms of what the the end state will look like that will make sort of traditional companies happy.

• 21:45Speaker 02

  And but I think actually what's happened recently in the market with, you know, the recent crash in Terra Luna has actually accelerated us getting there. And people are now sort of to the war and they they need to realize that they need to up their own corporate governance. And and they need to be a bit more clear on what they do and how they generate yield, even at the expense of rates. So I think that's probably been the two themes and that surprised people. Probably the third as well is, you know, NFTs. There's not actually been as much demand, even though that seems to have grabbed headlines and, you know, you see it all over sort of meme culture. And the NFT marketplace has sort of felt like it's been slightly transitory and it's come and gone.

• 22:26Speaker 02

  And and and a really interesting thing there is that and a lot of these marketplaces couldn't get banking. And it it was just a step too far even for crypto compliance. So and I I know that's hinted growth. And and actually, I think we're sort of the the smart money's looking is not just on sort of speculative investing in, say, Bitcoin and holding it on your balance sheets like, you know, MicroStrategy, but it's more, okay, how do these money market lending products like C5 and D5 actually have value to traditional corporates? I think that's probably, I think that would surprise people the most.

• 23:01Anthony Pompliano?

  Yeah, it's absolutely fascinating. Ben, where can we send people to find you on? Internet or find more about BCB Group? Oh, just bcpgroup.com. We're there all the time. All right. Are you on the internet? Mate, I am, but I try and keep a low profile. Oh, you're hiding now? Yeah. I know you've got me out from under my rocks, so well done.

• 23:21Anthony Pompliano?

  Awesome. Well, when you come to Miami, we'll hang out. I think that it's a it's like a weird component of the crypto industry. I think how little people understand the complexity of banking, the obstacles that have been in place. It was even worse, you know, four, five, six years ago. Now there's businesses like yours that can really help people kind of get up to speed, get the connectivity, make sure that they're going to stay operational. But even in the jurisdictions where this has been solved, there's still plenty of other jurisdictions where it feels like they're constantly under threat. And so I think that this story is one where it's like a key piece of infrastructure that people just don't realize how important it is, which always means it's probably a pretty good place to build a business. But also, too, is that the

• 24:04Anthony Pompliano?

  story is not over in terms of there's so many other jurisdictions that we got to go solve this problem. So best of luck to you guys. And hopefully you guys will will continue to to build this out. Brilliant. Thanks very much, mate. All right. Talk soon, Ben. Take care. Bye. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.