George Harrap, Co-Founder & CEO of Bitspark: The Revolution of Money Transfer

George Harrap is the Co-Founder & CEO of Bitspark. In this conversation, George and Anthony Pompliano discuss money transfer solutions, stablecoins, and how the current money transfer ecosystem has become bloated and slow. ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

• 0:01Speaker 00

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off.

• 0:13Speaker 00

  George Hera is the co-founder and CEO of BitSpark. In this conversation, we discussed money transfer solutions, stablecoins, and how the current money transfer ecosystem has become bloated and slow. I really enjoyed this conversation, and I hope you do as well.

• 0:30Speaker 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.

• 0:57Speaker 00

  Bang, bang. Alright guys, I am here with George. He is calling in from Hong Kong. So, thank you very much sir for taking the time to do this.

• 1:07Speaker 02

  No worries, it's great to be here. Thanks for having me.

• 1:09Speaker 00

  For sure. So, let's start with your background, George. You've been in crypto for quite a while, but what was kind of your background before you got into digital currencies?

• 1:21Speaker 02

  Before digital currencies? Well, it was probably quite a while ago now. I've been in Bitcoin since 2011, so it's been pretty much every day of my life for the last eight years, nine years I guess maybe. And yeah, I think before then, I was just a student, sort of halfway through a degree, and in electronics engineering at the time back in Australia. And I sort of heard about this crypto thing and sort of got into mining, and there's probably a little bit to say about that. But I think before that, I was just some guy who was interested in computers, you know, and I came across crypto in the early days when it was Bitcoin is I don't know, $1.70 or something like that. And I thought that this was a really cool way to make use of GPU mining hardware, which I had quite a few sort of lying around

• 2:06Speaker 02

  at the time. And yeah, I was interested in fixing computers and so on. So, the background was, I guess, came at it from an electronics perspective, like this is a cool thing to do. Didn't know anything about economics or anything about finance, and sort of just learned on the fly from there.

• 2:22Speaker 00

  That's awesome. And so when you first saw Bitcoin, did you buy any? Did you kind of see it and say, ah, you know, we'll see how this goes? What was kind of your first reaction?

• 2:34Speaker 02

  Well, I think, you know, back then it was a different world, right? So back then we had about two exchanges in the entire world. There was MTGox, about 80% of the volume. There was Trade Hill with the other 20% of the volume. And there was a couple of other sort of disparate things around the world. There was every, every discussion took place on, on the Bitcoin forums. So that was sort of the only key source of information. And I think I really got into it for, I, I did buy some sort of when I first got in, but into it, but I really sort of started mining first. So, you know, I sort of got started on my home computer. I actually used to buy stuff off eBay to, to, to mine Bitcoin with. And ultimately I was living in a cold city in the time in Australia.

• 3:18Speaker 02

  So it was kind of like, hey, cool. I can make a heater which makes money. That's probably the best kind of heater to have, right? So I used to sort of buy stuff off eBay, you know, build a computer, make some money. Okay, cool. Now I can, can expand it. And I sort of got quite stuck into it and sort of decided that, you know what, I should probably focus more on this rather than pursuing the, the degree and all of that that entails. So I sort of went down the rabbit hole a bit early and sort of taught myself about finance through, through Bitcoin. But I, you know, it started off in the GPU days. That's sort of early 2011. And then I was actually in the first batch of FPGAs when they first came out. And I think I was almost 1% of the network at some, at some stage.

• 4:04Speaker 02

  There was a company based in, in America called Butterfly Labs, which used to produce some of those machines. So maybe your listeners are familiar with them, but they, they got into some controversy in, in the sort of later days, but certainly in the early days, they were literally the only option if you wanted to, to, to get into mining and that sort of thing. So I took a risk and sort of got into it via the mining route. And then I was in the first batch of Basics as well. And yeah, a couple of other things along the way. But yeah, I mean, I think buying and selling, you know, crypto along the way sort of.

• 4:31Speaker 02

  Taught a lot about what are the companies involved in the space and to be honest, they didn't really change from about 2011 to 2014. There wasn't too much moving in the market, you know, altcoins weren't a thing, nothing to do with ICOs. There was still only a couple of exchanges in the world and sort of that's the problem that I guess, you know, I saw and my co-founder saw. Before we started BitSpark was surely there's an opportunity here in the market to make things better. You know, surely you don't have to wire money to a random Japanese bank account for a company called MTGox, which hardly answers support to actually go and buy Bitcoin. And even sometimes I used to conduct sort of arbitrage myself back in Australia between the markets there and elsewhere.

• 5:15Speaker 02

  Sort of got on a plane here and there to open a council over the world to see if I could do that better. That worked out for a period of time, but I don't think I made too much money on that. But essentially it was a good introduction to sort of how money works and how money moves around the world. And I think doing that really helped me see how how remittances can also work. Because essentially if you're moving money, you're doing bank transfers all the time, trying to get money into and out of exchanges. You sort of learn a little bit about how banks work and how the system actually functions and how decrepit at times it is. So yeah, I mean, that's a little bit of backstory about how I got into it.

• 5:51Speaker 00

  Got it. And so why start a company in the space, right? There was so little infrastructure at the time. Did you just kind of say, hey, I want to solve that problem? Or was it something where, you know, customers were kind of pulling you into it? Or what was kind of the original genesis of wanting to start the company?

• 6:09Speaker 02

  I think the the premise was that everything sucked and surely we can build a better thing.

• 6:15Speaker 02

  And that was literally it because, you know, there still wasn't that many options. If you wanted to, you know, trade crypto or do anything useful with it, or there wasn't really that many wallets yet to to run the the old, you know, Bitcoin core node and sync it and so on, it kind of was pretty bad. So I think the initial thesis was, why don't we just give it a go? And yeah, initially it was kind of like, okay, if we're going to give it a go, then where are we going to do that from? What's the optimal jurisdiction? And it wasn't going to be Australia. So essentially, we I got on a plane to Hong Kong. It was going to be the Hong Kong or Singapore because the the idea was it's going to be Asia. That's going to be the focal point of a lot of a lot of the crypto trading activities.

• 7:00Speaker 02

  It was gonna have to be there, didn't know anyone, got on a plane and essentially started the company with the idea that why don't we start an exchange and from that, you know, everything else will kind of flow. And I mean, back then exchanges, now they're a dime a dozen, right? There's like a million of them. But back then, there was, you could probably count them on your hand. So it was quite an undertaking to do. But I just sort of think that that was a gap in the market that from my own experience, just using it so often, yeah, everything was pretty bad. I mean, I was in Bitfinex's beta and that was kind of a bit clunky with how everything worked. And people thought that the code came from Bitcoinaker at the time, maybe it did, maybe it didn't. But, you know, there

• 7:44Speaker 02

  was just sort of projects like that, which you're like, wow, cool, this can really go somewhere. Can we, can we build something like this? And yeah, I think we, we achieved a lot of what we, what we initially set out to do, but we learned a lot afterwards as well. And some of the realities of actually operating one of these companies like this is pretty hard. You don't just like turn up and make an exchange.

• 8:07Speaker 00

  For sure. And so when you originally started, it was purely an exchange or you, you saw the opportunity with remittances as well?

• 8:16Speaker 02

  Yeah, well, okay. So the initial thesis was you need an exchange first in order to do remittances and merchant payments. Because, you know, Bitpay was around at the time, Bitpay liquidated their Bitcoin at some of the larger exchanges. But then there was like a timeline between you being able to actually liquidate your Bitcoin on something like Bitpay. And then internally, they would have to go and do a wire transfer somewhere else that might take like three days or something like that. So I guess, you know, more liquidity pools, you know, were better. And I think sort of, we decided that the exchange has to happen first, because you need to have a liquidity pool if you want to do remittances or merchant payments. And, you know, to be fair, we actually did, we built the exchange, launched in 2014, it had 20 different currencies. That was, I think, this.

• 9:01Speaker 02

  I don't know, this was before ICOs and stuff had come out, so not really many people really cared. I think we were one of the first with multi-sig as well. So the exchange worked quite well for what it was doing. But I think we actually saw the opportunity in remittances more and more in our part of the world. Because we saw a lot of people talking about remittances, but nobody was actually doing it. So sort of one day we decided, why don't we just give it a go? And Hong Kong is a place where every Sunday, there's 10,000 people that go to the center of the city to send money back home to the Philippines and Indonesia. And they will go to these physical cash agents. And throughout the world, these physical cash agents is kind of how money moves.

• 9:46Speaker 02

  And it's sort of quite an old antiquated system. Could you apply the concepts of crypto to those companies and to solve that particular problem? Because we saw it quite prevalently. So I guess when there was just a lot of discussion about it at the time, we thought this is something that we should definitely pursue. And I think we initially, if you look online, you'll see that we had a physical little stall that we set up back in the day. And that literally took cash from people, converted it to Bitcoin locally, BTC, HKD, and then sent it to the Philippines with one of our partners there who converted the Bitcoin to the Philippines peso.

• 10:29Speaker 02

  So essentially, we just sort of got set up with a very manual process to really test the thesis. If it really worked, that was sort of direct to the customer. So it was a lot of convincing people like, are you going to take my money? Are you going to be here tomorrow? What is this system that you're doing? And there was quite a bit of learning to come out of that. And essentially, yeah, going direct to the customer is hard. And I guess for a small company at the time, we sort of learned that.

• 10:59Speaker 02

  It is quite difficult, but there's also a bigger problem to solve with all of the existing infrastructure which is already there. So all of these physical money transfer shops are already there. What are they using? How do they actually send money? And it's this crypto system that you can build and make use of, could it benefit them? So I think a later learning was, instead of going direct to the customer, it's probably better to do a sort of business to business kind of approach. And that's where we went down.

• 11:29Speaker 00

  Got it. And so let's talk a little bit as to why people in specific countries in Asia, why is the remittance problem so bad? What are those obstacles that they go through on a daily basis to send money back home?

• 11:46Speaker 02

  Yeah, I mean, so we'll take a step back. What is a remittance? A remittance is often it's a, it is a name for sending money overseas, often to your country of origin. So often, if you're a foreign worker in another country, you're making money in that country, maybe you have a bank account, maybe you don't. In many countries around the world, often the remittance ecosystem is held up by people who don't have bank accounts. So they receive physical cash and they need to get that physical cash back home to their family because that's the whole point of them moving to another country, right? It's, I'm going to go to another country and make some more money over there so I can send it back to my family in another country. And that's sort of how that sort of system works. So the demographic

• 12:29Speaker 02

  is often from twenties to, I guess, forty five immigrant worker in various different, I guess you could say, richer countries around the world, more developed jurisdictions. So your Hong Kong and Singapore is sort of the sender countries. So they're countries where people are sending money from. And then you've got the recipient countries, let's say Philippines and Indonesia, and they're a net recipient. So there's always more money going there than is coming out. And it's certainly the case in, say, the US as well, where you've got a lot of remittances going to Mexico. It's one of the third largest corridors there. And often that is migrant workers in the country sending money back to their

• 13:09Speaker 02

  family. And it's a huge, it's a huge market. So it's about $700 billion, growing at about six percent a year. That's the official numbers from the World Bank because there's literally no data on it. Like, nobody has data on this. The World Bank's actually the only data source for this entire industry. And the underground gray market is expected to be about the same, about another $700 billion. And what a gray market just means like, oh, you want to send money back to your family? Okay, go and call some dude, give him cash on the corner and he will, you know, send some money to another guy, who'll send some money to another guy. And eventually the money will get back to, back to your family. That's sort of the unofficial channel, but it's just as large as the, as the official channel.

• 13:51Speaker 02

  So often, you know, when we're talking about remittances, it's physical cash money transfer shops, you know, sending money through official channels, using agent networks like, say, a Western Union MoneyGram and all of these different sort of regional versions, like every country has their own, right? And they all operate on the very similar premise. It's just that sort of Western Union is so much bigger than everybody else. They're often the target when people are talking about remittances. But there's good reasons why they are as big as they are and, and why they may or may not be interested in crypto. But, but ultimately the problem is solved, to solve is can you move money cheaper, faster, quicker to countries and currencies which are hard to access?

• 14:32Speaker 02

  You know, that's another key thing is, yeah, if you're sending money to Indonesia, how are you going to get money to the, the physical island in the middle of nowhere that only has a post office? You know, so you have to be integrated with a post office network. Okay, cool. How do you do that? Okay, you have to physically go to Indonesia, make a company, sign up. That takes months, years, or you just have to connect to some other bigger network. And often that's what people do, unfortunately. And that's why a lot of these sort of larger agent sort of monopolies have such a monopoly is that it's just very hard to access these currencies and geographies as well. And, and that's sort of one of the key things in how money's sent is it's all very well to have a cool system and to have a cool technology, but if you don't have the physical

• 15:15Speaker 02

  geographical coverage to disperse money at the other end, it's not really going to solve any problems.

• 15:22Speaker 00

  Absolutely. And so let's talk about how crypto can solve that.

• 15:29Speaker 02

  Yeah, so I mean, if you if you look at how a transaction works currently, you have money in one end, let's say, you know, a country like the United States, you've got people earning their money there, and they need to send it to a country like Mexico, a net recipient country.

• 15:47Speaker 02

  They have to get the cash, deposit it at some location. Now, that location needs to already have a balance in USD on the sender's side, as well as a balance in Mexico on the recipient's side, because people expect instant transfers, right? So you can't physically send pieces of paper around the world very quickly unless you, well, you can't. So you've got to have a lot of money already sitting there that's sort of already on their books in a number of different currencies. So the traditional world works whereby you have, say, a remittance company which collects a bunch of cash on one end, disperses a bunch of cash on the other end.

• 16:29Speaker 02

  And at the end of the day, they have a bunch of cash on one side, no cash on the other side, and they need to get that cash to the other side again to like refill their balances on the recipient's side. So the question is, how do you get the money there? Like, if you have physical cash in the United States, how do you get that to Mexico? Well, often you have to take that cash to a bank. And with that, you know, that bank, A, you need to have a bank in the first place. Banks don't really want to bank, you know, remittance companies. There's a whole phenomenon of de-risking where they're sort of exiting the industry and a lot of remittance companies can't get bank accounts. So if you do have a bank, great, cool. Now, now you have your money in USD in a US bank, and you need to often do a wire

• 17:13Speaker 02

  transfer to your partner in Mexico, who is distributing the cash. And that can take a couple of days sometimes. And especially if it's for a weekend, you might have to send a little bit more. So you have to come up with some capital on the US side to send a bit more money to Mexico to cover what they're paying out over the weekend. And this all takes time and, you know, a lot of effort and... You know, a lot of potential risks as well. What happens if the exchange rate moves? You know, exchange rates can move a lot in a couple of days. And if you do a remittance on day one and the rate is 6.5, by the time that actual money gets to Mexico, maybe it's, you know, 6.6 or 6.2 or some other rate, right?

• 17:56Speaker 02

  So, you know, actually managing all of that takes a lot. So where does crypto come in? Well, crypto, especially using something like Bitcoin, is that unlike, say, a bank settlement, a bank settlement is you're not actually moving value. You're sending a message. You're saying, hey, Bank A, can you credit Bank B over there? And they send a message to each other. That's what a SWIFT wire transaction is. And eventually, the other bank at the other end will distribute the physical cash. With crypto, you're actually sending the value itself. So it's as if I had a, you know, something that had some value. Let's say a piece of gold. And if I give you a piece of gold, I'm standing right in front of you. The settlement is done, right?

• 18:41Speaker 02

  I don't owe you any money. We don't need to send a message to each other. You take the gold, finish, done. But the problem is that sending gold around the world is really hard. And you can't do that very quickly. So, you know, having crypto is this sort of unit of value of which you can move around the world very quickly. Means that you don't have to do this net settlement. You don't have to do this pre-funding of accounts all over the world. Because I can literally buy two bucks of Bitcoin here. And I can send you two bucks of Bitcoin over there. And now you have $2 of Bitcoin. So you can, you know, give somebody $2 if you want to. And that happens very quickly. So I think the big difference of what crypto can do is not so much sort of tracking stuff and keeping track of who owns who what.

• 19:26Speaker 02

  It's like actually having a unit of value which you can move around is tremendously important for settling payments between people at both ends.

• 19:37Speaker 00

  Got it. And so as you look at this, let's talk about deeper about the difference between using Bitcoin versus maybe stable coins, right? Kind of, I think of the narrative publicly is that most of the remittances are happening with Bitcoin. Obviously, you've got the volatility issue and a number of other things, but it sounds like a lot of the countries that you are operating in or supporting, it's different than the developed Western world, right? And so maybe just give us an understanding as to how the people who are engaging with these crypto assets for remittances, what's the big difference between that Western world and kind of the Eastern, even Southeast Asian world?

• 20:23Speaker 02

  Yeah, you know, I think the first thing is that you've got to be able to solve for cash. If you don't solve for cash, you don't have a product. So if you're in Vietnam and 20% of the population has a bank account, 80% of people who don't have a bank account, let's say you've got some cool new system, crazy technology, mobile app, whatever, it doesn't matter because 80% of the people in that country can't use it. You know, it's the same for pretty much every country around the world except about 20. You know, there is this massive gap in banking. So I think that the first problem to solve is if you're creating a crypto product in some of these different geographies around the world, can you be able to solve for the realities on

• 21:04Speaker 02

  the ground? And, you know, when you're sitting in the United States or where I'm from in Australia, you kind of take banking for granted. You know, I can do an instant payment between anybody very quickly. Like I was doing that on Facebook like eight years ago with my bank. And that's, that's, that's pretty easy to send people money. But if you don't have access to that, then what are you going to do? And often in countries that don't have the, the physical geography, you know, to have bank branches everywhere, everyone just sort of has cash. But, you know, what they do have is that they have these physical cash agents. And this is what you've seen a lot in Africa as well, is that Africa is kind of like M-Pace, everyone

• 21:46Speaker 02

  talks about M-Pace here in Kenya, right? There's another, a number of different other countries around the world which do it, but they sort of pioneered it. Whereby everyone has a mobile phone. So can you use a mobile phone to send money? And the problem is, the problem to solve is, how do you get your money into the mobile phone in the first place? It's very cool to have a mobile phone app or whatever. But if you don't solve for the physical realities of in Kenya, you know, nobody has a bank. Therefore, cool, you know, good for you having a mobile phone app. But how do you get the money in? So what they did is they had the physical money transfer agents and they were the portals into and out of the network. So you get money into your mobile phone via a physical cash shop. And these physical cash shops, it's like a dude by the side of the road with a little

• 22:29Speaker 02

  van or something and he's selling little, you know, phone top up credits. But that's the reality and, you know, that's, that's how a lot of money moves. You know, ultimately there's sort of downstream effects from that as well. You know, well, what does that guy do with the cash? Right? He's now received cash from somebody. Where does he take it? And there's sort of a whole logistics, you know, infrastructure for moving cash around. But ultimately, the problem to solve is, how do you, how do you move this cash? And if you're, if you're interacting with crypto, do you have to get people to learn about crypto before they use your, your product and service? If the answer to that is yes, it's probably, it's never really going to be relevant for many of these markets, right? Like, there was actually some use cases where people thought, you know, here in Hong Kong,

• 23:14Speaker 02

  oh, why don't we put an ATM in, you know, one of these buildings where everyone goes to send their money and there's Western agents and all these other ones. Why don't we put an ATM there? And why don't we connect that ATM to like a backend crypto money transfer service? And people could go to the ATM and, oh, cool, they can press a few buttons and send the money. The reality was that that never took off and a lot of people tried it and a bunch of people lost money on it. But it was because, yeah, a lot of people actually like visiting the physical agents, especially when they're in a foreign country. The agent speaks their language, you know, really understands them. They meet all their friends there. It's kind of like a social activity as well. So, you know, those sort of concepts around, can we, can we digitize everything and eliminate humans?

• 23:56Speaker 02

  It didn't really work because there is actually a lot of value in this physical agent network. And people, people do, you know, want. Want to do that with their money. So that was another sort of interesting insight about, you know, what might work and whatnot. But I think the realities are is cash is still king. It's actually growing in terms of use case. A lot of people talk about digitization of money. That's not really the case. So BIS cash is growing like 3% a year. So yeah, you know, cash is growing. It's how do you actually move it? And I think if you can

• 24:29Speaker 02

  be able to move it effectively, you could buy Bitcoin with that cash. That is certainly one way. But, okay, cool. You're in some country which doesn't have a crypto exchange, doesn't have a liquidity provider. If you want to sell Bitcoin in Sri Lanka, who's going to be on the other side of that trade? Who's going to give you the rupee? Nobody's going to give you the rupee. There is no exchange. So I think one of the, you mentioned stable coins, one of the really cool things about stable coins that we've, you know, sort of seen over the last year or so is that this can really solve this problem. Because often we have companies come to us and say, hey, George, I think your system is cool. I live in country X. I'm a money transfer company. Can I connect to your network?

• 25:12Speaker 02

  And if I'm using Bitcoin, the answer is, sorry, I can't. Because I'd literally, if I send you Bitcoin, what are you going to do with it? You know, how are you going to get that to your local currency? There's literally no mechanism. So sorry, you can't use our product and service, which kind of sucks because you want to sign up as many people as possible. So the problem for us is like, we need to be able to hold that currency. And you can't like call up a bank and go, hey, can I have Sri Lankan rupee, please? Because it's not a currency that anybody has unless you're actually physically in that country. So a stable coin, where do they come in? Well, if there is a stable coin for a rupee, I can actually buy that rupee now digitally for free, without having to talk to a bank or anybody. And that guy at the other end, who's dishing

• 25:56Speaker 02

  out the physical rupee, he doesn't get Bitcoin, he doesn't get USD, he doesn't want any of these other currencies. In our system, he actually gets a thing called a rupee. So he doesn't take any FX risk. And, you know, he can, he can manage his margins. So when we're talking about why is, or why are stable coins important to the future remittances is for exactly this problem because it makes you be able to actually have a scalable product to sell in any jurisdiction of the world.

• 26:22Speaker 00

  Got it. And so what are the challenges moving forward, right? As crypto continues to kind of permeate, you know, across the globe, I think we're going to see this proliferation of stablecoins. I think we're going to see the continued mass adoption of Bitcoin. But how does that affect the remittance market? And both on the crypto side and also on what I'll call the non-crypto or fiat side? How do you see this playing out over, let's say, the next kind of three to five years?

• 26:54Speaker 02

  Well, I think one of the cool things about emerging markets is that certainly in the Bitcoin world, there's often more demand there than in, say, some of the larger liquidity pool, you know, USD, JPY, you know, HKD, Euro and so on. The reason I say that is that, let's say you're in Indonesia. The top exchange in Indonesia has 2 million people signed up.

• 27:16Speaker 02

  And often the price premium for Bitcoin in that country is often about 1%, sometimes 2%. So it means that if you send money to Indonesia, let's say you send 100 bucks, you actually get 102 dollars worth if you buy in one location and sell in another location. So you literally make money. So, you know, when you're looking at a remittance product, it's like, I could go to Western Union. I have 100 bucks, they're going to charge me, you know, five bucks. And 95 dollars is going to arrive at the other end. Or I could use crypto and I give you 100 dollars and 102 dollars arrives at the other end. Negative fees, right? Nobody has that. So that's an incredible advantage, I think, that crypto has, certainly in the remittance world, and really sort of getting that message across.

• 27:58Speaker 02

  And the reason for that is that you're actually exchanging something which has value, rather than just sort of settling between each other. So I think that as crypto grows, that's only going to become more pronounced. And people often say, well, aren't the markets going to be, you know, more efficient? And is that margin going to come down? And it's like, well, I don't think so, because, I mean, look at a commodity like natural gas, right? Natural gas is a different price all over the world. It's very cheap in the US and it's about two times more expensive in Asia. Why is that? Well, it's because Asia has more demand for it. Why is that? Well, you know, there's a lot of people that need natural gas to get electricity. So the same thing is, you know, with Bitcoin whereby, why do you need Bitcoin in this country?

• 28:41Speaker 02

  And it's like, well, Indonesia's currency depreciated 30% last year. So if you're somebody...

• 28:46Speaker 00

  It's crazy.

• 28:47Speaker 02

  Yeah, right, exactly.

• 28:48Speaker 00

  That's crazy.

• 28:48Speaker 02

  And another thing is that... I mean, a lot of these emerging market currencies, all they have done ever is depreciate rapidly against the USD. So they're only going in one direction. They're only going down. And you know, that means that everyone in those countries and currencies is getting poorer every year. So I think where the crypto opportunity is that, wow, you know, here is this mechanism whereby I can exchange my currency, which is always going to go to zero for something else, which yeah, cool. Okay, it might be volatile. Or I could, you know, buy some Bitcoin and then convert it into my stablecoin of choice if I wanted to. So I think that as the proliferation of crypto spreads, you're going to see more of these interesting, you know, market signals and these different weird currencies around the world.

• 29:34Speaker 02

  You know, often the 180 currencies of the world and only like 30 of them are easy to get. You know, what about the other 150? It's these ones which I really see the, the growth and, and interest of, of crypto because that's where people really have a problem and crypto can, can really help out.

• 29:48Speaker 00

  Absolutely. That, that makes sense. And then how does regulation play into all this, right? Especially in, um, kind of the non-Western world. Are regulators fearful of how crypto could impact the remittances? Is it something where they're working together, right? Given that you're sending money from one jurisdiction to another? What are you seeing there?

• 30:09Speaker 02

  Yeah, I mean, I think it's a mixed bag. There's a sort of, there's some in the basket of apprehension. There's some in the basket of, we don't care. And there's some in the basket of, oh, we've got to do something. We've got to shut the door. I think a good example of how it's been handled is the case of the Philippines, right? So Philippines, big remittance country, about $28 billion a year goes in there. I think it's rising at about 5% a year. I think it's a number three remittance country, but a lot of money flows in, right? Now, in the crypto sort of remittance world, there's been about three solid crypto remittance companies that have been there for like the last five years. And they're all doing very well. In fact, one of them has five million users that have downloaded their app. And that's 5% of the population. So 5% of the population of the entire country is using a crypto app.

• 30:55Speaker 02

  That's super cool. But often, you know, what was happening over the years in the case of the Philippines is that the crypto remittance, uh, you know, ecosystem just kept growing and.

• 31:06Speaker 02

  Initially, it was, you know, who are these sort of cowboy companies that are receiving this magical internet money from wherever it is in the world? And then somehow they're able to distribute our local currency to people over here and it turns out to be cheaper. And they they sort of watched that, the regulators in the Philippines, they they watched that for a number of years, but it got to a point where they couldn't ignore it. And there was, you know, tens of millions of dollars, you know, often every day in some cases, flowing via Bitcoin into the country. And another interesting thing is, well, how does money flow as well? Like Bitcoin is going into the country. You know, pesos is not coming out, USD is not going in. There's like magical internet money which is coming into the country. So on the one hand, they didn't quite know what to do with that.

• 31:48Speaker 02

  But what they did do is they created a crypto remittance license. And in fact, they're pretty much the only country in the world which has done that. And that was because that they saw that there was such demand, such interest, that they kind of had to do something. So I think, you know, on the one hand, you've got the Philippines reaction, which is, we'll watch it for a while, then we'll make some regulation to do it. Then there's other countries, like, let's say, Hong Kong. Hong Kong, it's an interesting place and it's kind of the reason why we're here. And that's why a lot of companies here, right? It's kind of one of the epicenters of crypto stuff in Asia because there's not really many regulations on anything. And it means that you don't need to collect licenses and pieces of paper to get started with your business. You can like get started with your business and just go, you know, that's why a lot of the exchanges are here. You've got, you know, BitMEX here as well.

• 32:33Speaker 02

  You've got OKCoin, Wabi, everybody has offices here. And it's the regulators here is kind of under the impression that, like, our job is to regulate the Hong Kong financial banking system. We have a currency called Hong Kong dollar and that is our purview and that's what we do. If you use a thing called Bitcoin or, you know, cans of Pepsi or whatever, and you're trading these things, then that is seen as a commodity and it's not something which we regulate. So we're never going to regulate it. And, you know, often the response in in Hong Kong is, look, it's not something we regulate, we're not interested, we never will, you go and do your own thing. And that's often the sort of purview of many countries, I think, in in this region as well.

• 33:16Speaker 02

  And then there's sort of a couple of other countries which are more apprehensive, don't really understand it and the sort of knee jerk reaction is to just say no, but then that doesn't really do anything like, you know, how China's banned Bitcoin like a hundred times or whatever, hasn't really stopped anything, right? So I think that a lot of countries are probably just going to wait and see still. And okay, let's say worst case, they're just going to say this is a form of money transfer. We're going to add it to our current remittance license and they'll just be done at that. And that's pretty easy to do. It's like everyone pretty much has a remittance license already in all these different countries. So you can just add a thing called Bitcoin to it and then they don't have to think too hard about making any specific crypto reg or anything like that. It's kind of just easy to slot it in.

• 33:59Speaker 02

  So I think that's probably what's going to happen in the next couple of years is you'll see more jurisdictions that perhaps won't come out with crypto specific regulation. They'll just go, oh, it's just part of this existing license and we'll just add a few words to the legislation and here you go, because it's a lot easier to do that than it is to make a whole new crypto regulations.

• 34:20Speaker 00

  For sure. It makes a ton of sense. What's in the future for you guys? What are you thinking about right now or focused on over the next 12, 24 months?

• 34:30Speaker 02

  Yeah, I think for us, it's all about getting access to these 180 currencies, which nobody has access to. So our goal for the rest of this year is we want to create 180 different stable coins for 180 different currencies. And that's all very well and good to say, but how do you actually do it? Well, I think the best way to do that is with trustless stable coins. And that's probably the only scalable way to do it. So you have two different types of stable coins, right? So you've got the trusted, like your tethers, which is I'm a company called Tether, deposit money into my bank account and I'll give you, you deposit $1, I'll give you one tether. So it's a lot of trust. You've got a counterparty there. You've got a bank account involved. You know, maybe they have the money, maybe they don't. And that's just sort of how a trusted stable coin works.

• 35:15Speaker 02

  And you've got a couple of them, which I guess sort of came to the, came to the fore last year, predominantly in USD. But for that to work, you often need to have a company set up. In that jurisdiction, in that specific currency, with a trust account in that specific currency, you need to have the regulations in place to have oversight of that. And often that doesn't exist in many currencies around the world. So it's not a scalable thing to go, I'm going to go and do that for Tajik Samoni, or some currency like that, or Nepal Rupee or something like that, right? So you're not going to be able to do that everywhere. So what you are going to be able to do everywhere is create an algorithmic stablecoin. And I think that's certainly where we're going,

• 35:57Speaker 02

  whereby some of the oldest stablecoins have been around for about five years now. So you had BitShares originally, created a number of different ones, BitCNY, BitUSD. You had MakerDAO, which forked from that and is now the largest liquidity provider with DAI. But the same concept can work for any currency in the world. So our purview is we're going to create these currencies. And the next question is, where does the liquidity come from? And it's like, well, we are a remittance company. We are buying these currencies every day. So we have transactions going to these currencies. So we're going to be buying them. So it's much easier for you to lock up some crypto collateral to allow us to be able to buy them. We're actually going to buy them from you for a premium.

• 36:40Speaker 02

  So and that's super cool as well, because take the example of Sri Lanka before, which I gave. What I said with Bitcoin was that if you send Bitcoin to Sri Lanka, there's no fiat exchange, there's no fiat broker, like there's nothing, right? So you literally can't do remittances there via Bitcoin. Because if you did, you would have to have an exchange which exists there with local banking, access and people depositing fiat and so on. You'd have to build that up from scratch. But if you can create a crypto collateralized rupee, and you can do that sitting in New York, you can do that sitting in Hong Kong, you can do that sitting anywhere in the world. You can just create this bit rupee by locking up some crypto collateral. That solves the local fiat problem.

• 37:23Speaker 02

  You actually are not dependent on the local market in that currency and jurisdiction existing. People understanding crypto, people wanting to use the exchange. You don't need all of that because you actually open it up to the world of investors, wherever they might be in the world. And I think that's super cool as well, is that you don't have to physically exist in that jurisdiction to be able to access a currency in that jurisdiction. So yeah, I think what we're Interested as being able to grow this cash in cash out network in all these different currencies around the world and being able to help companies and people move money quicker, faster, cheaper.

• 37:57Speaker 00

  It's awesome. I think makes a ton of sense. All right. Before I wrap up, I always do a rapid fire questions. What's the most important company in crypto other than your own?

• 38:06Speaker 02

  I think the rise of Binance has been great for the industry. I think that's that's super cool. Yeah, I think that BitMEX is probably one of my favorites because they certainly have a lot of liquidity and have built out a really cool matching engine. So I would say that they're very important to the ecosystem, you know, having that liquidity and having a means to actually transact on that scale.

• 38:33Speaker 00

  Got it. What's the one regulation you would change or improve if you could?

• 38:38Speaker 02

  To not regulate anything. I think that if there was one thing I would be able to say to regulators, it would be, look at Japan, right? What did Japan do originally when they were thinking about regulating crypto? They actually set up a self-regulating group that was run by companies and the government could point to them and go, hey, look, we're the government, right? We don't actually, we're not innovative people. We're reactionary in terms of regulation. We're not the forefront of things, but what we can say is that we don't want people to get ripped off and scams and so on. You know what? These people over here in this organization, they can come up with some best practice rules and we as a government can point people to them because

• 39:23Speaker 02

  they're going to give a tick of approval. And if you're an end customer and you have a choice between two products, one has the tick of approval, one doesn't, which one are you going to go for? You're probably going to go for the one with the tick of approval. So I would say that regulators should look at creating these self-regulatory groups run by the industry of which they can point to, which can create best practice. And as far as the government, you don't need to come up with any new stuff. You can just say, look, best practice over here, we recognize that, you know, a lot of companies could should look to this and consumers should look to this. And I think that's a path which has worked pretty well in the past. So that'd be the one thing I would suggest.

• 40:01Speaker 00

  Makes sense to me. What's the most controversial thought you have in crypto? What's the one thing you believe everyone else would disagree with you on?

• 40:11Speaker 02

  I think that

• 40:13Speaker 02

  Bitcoin can't be used to scalably grow a remittance business. And that's after using Bitcoin as a remittance business for the last four years.

• 40:22Speaker 00

  That's uh, that is not what I expected you to say.

• 40:27Speaker 00

  All right. What's the most important book you've ever read?

• 40:32Speaker 02

  I'm not really a book reader, but I think Charles Darwin's Voyage of the HMS Beagle was super interesting. That's one of the few books I have read and I thought that was, that was pretty cool. So that'd be my choice.

• 40:45Speaker 00

  All right. What uh, what do you think about aliens? Think they're real, not real? Believer, non-believer?

• 40:52Speaker 02

  They're real, but they're probably already ascended to, to robot status. So they probably don't care about us. I would say they're probably already integrated with machines.

• 41:01Speaker 00

  You think they don't care about us?

• 41:03Speaker 02

  Well, it's like, do you care about a rat like walking around the street? I don't. Aliens probably see us as the same. They're like, look, I'm a cyborg. I've computed a billion trillion transactions a second. Who are you? You're just like a bowl of meat. So I would say that, yeah, they're probably out there and they probably have got to machines. Like maybe that's the way we're going. Who, who knows?

• 41:27Speaker 00

  I love it. I love it. All right. You get to ask me one question before we end, end the session. What, what do you want to ask?

• 41:35Speaker 02

  Well, who, who's going to win Game of Thrones? Maybe that's a, that's a good place to start.

• 41:39Speaker 00

  Man, this is going to be unpopular, but I actually don't watch. I've never watched a single episode of Game of Thrones.

• 41:45Speaker 02

  Wow. But it's probably for the best though, to, to be honest. Maybe, maybe.

• 41:50Speaker 00

  Here's my, here's my thought is I don't, I don't really watch any fiction stuff. So, you know, that's like the ultimate fiction. Every once in a while I'll get into some like sci-fi stuff with like a Black Mirror episode. Or I did watch Ready Player One. So things like that. But, but in terms of the ongoing kind of weekly television series, I'm just not into it. So I haven't watched any yet.

• 42:19Speaker 02

  That's fair enough. That's fair enough. Well, I mean, what would be, if you weren't doing this, what would you do? What would you be doing in crypto land?

• 42:26Speaker 00

  I wouldn't, uh, let's say that if I wasn't in crypto, um, I'd probably just be continuing to invest in early-stage companies, right? Just they wouldn't be crypto-focused, but I think that I really enjoy kind of spending time with founders as they build their companies from scratch. So we'd find some, you know, some way to do that, uh, just in different industries.

• 42:49Speaker 02

  Awesome. Sounds good.

• 42:51Speaker 00

  Yeah. Listen, I appreciate you doing this. This is a lot of fun. I think you've got some, uh, some unique insights in the world, uh, especially kind of how long you've been in the space and, uh, hopefully we can do this again in the future so that we can get an update on, uh, what's going on in the remittance world.

• 43:06Speaker 02

  Absolutely. No, it's been great to be here, Pomp, and, uh, wish you all the best.

• 43:10Speaker 00

  Hey, everyone. Pomp here. If you liked this episode of Off the Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.