← The Wolf Of All Streets
The Wolf Of All Streets
"Bitcoin Is Being Weaponized & Nobody Understands What Happens Next" | Zac Prince
00:53:56
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- [00:00]
A
Bitcoin didn't just survive the last crypto cycle, it was reshaped by it in 2022 platforms collapsed, regulators cracked down, and trust evaporated overnight. Today, Bitcoin ETFs dominate flows yield is back on the table and Wall street is quietly rebuilding crypto the right way. My guest today lived through the eye of that storm. Zach Prince, the former CEO of BlockFi and now CEO of Galaxy One, joins me to talk about what actually broke last cycle.
- [00:29]
B
The market is completely driven by ETF and options and futures as opposed to the spot market. It's just night and day in so many ways now versus, you know, the last time I was on your show.
- [00:40]
A
What regulators got wrong.
- [00:41]
B
I worry about at a macro level, just crypto being overly partisan. The pendulum seems like politically it's swinging wider and wider every time we go back and forth, and I don't like that at all. I would like the pendulum to swing less, but it kind of feels like that's the world we live in and.
- [00:59]
A
Why crypto in 2025 looks absolutely nothing like crypto in 2021.
- [01:04]
B
There's a lot more money that wants to get a yield on their bitcoin than there are compelling risk adjusted opportunities to actually generate a yield on bitcoin.
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A
So we dig into why bitcoin yield keeps failing, how safe yield is really being generated now, why most bitcoin treasury companies don't work, and how institutions are rebuilding financial infrastructure using crypto, not hype. If you want to understand where crypto is actually headed. Not Twitter narratives, not memes. This is the conversation you don't skip. Let's get into it. That's dope. But Zach, I was making a joke before that. You've probably had the least eventful few years here in the crypto market. Very boring for you.
- [02:00]
B
Super uneventful, man. I. No action. Nothing happened. It's. Yeah, it feels, it feels a little bit surreal at times to be where we're at now with the crypto market. I mean, the, the level of like 180 degree shift from the, you know, Biden administration, specifically the regulatory stance. And now I was watching a show of yours earlier and the talks of how the market is completely driven by ETFs and options and futures as opposed to the spot market. It's just night and day in so many ways now. Versus the last time I was on your show, which I didn't go back and look it up, but it was probably 2021 or 2022.
- [02:43]
A
You were leading BlockFi at the time I was hook, line and sinker customer of all the CEFI platforms. And obviously that ended poorly for both of us.
- [02:53]
B
Yeah, yeah, it was a really unfortunate. I mean, in some cases, you know, like Celsius specifically, there was just blatant fraud, but in. In the cases of Voyager and BlockFi, there were, you know, other things going on that. You know, what really troubles me? I don't know if troubles is the right word, but as I had time to think about it, it's just wild thinking about how if, you know, one or two out of. Out of a short list of things would have been slightly different, you know, in BlockFi's case, that business would still be around. That's probably true for some other businesses that went down during the 2022 cycle. But, yeah, wild times, man. And now you have, you know, this fight going on, which I've been reading a lot about, where Coinbase and others, as part of the market structure Bill, are advocating for the ability for stablecoin issuers or platforms with stablecoins to be able to pay interest. Very analogous to some of the regulatory items that we were jostling with at BlockFi, but just completely different stance in terms of the regulatory environment and openness to innovation on those fronts. We'll see if something actually gets done. But, you know, very, very, very different times now.
- [04:13]
A
If we were in a different regulatory or legislative environment back then, do you think that any of this could have been avoided? I mean, there's a lot of people who say, you know, every collapse was Gary Gensler's fault. I mean, I think that's kind of hyperbolic. But we do know that the SEC have basically made it almost impossible to operate onshore. Right. So it caused, I think, a lot of fraud and crime to happen offshore that maybe they would have caught here in the United States. Obviously not in the case of BlockFi. So. But some people say FTX wouldn't have collapsed if they had been legally operating in the United States because they would have caught it. So do you think that, like, in this environment we would have had less contagion than we did in 2022?
- [04:52]
B
I think so. I mean, look, I kind of put anything that falls into the fraud bucket to the side, and I don't think there's a regulatory environment that you can create that will, you know, fully stamp out, like, you know, just. Just bad actors. Right. If you're doing something completely different than what you say you're going to do, or if you're just lying about your financials or if you're, you know, misleading, intentionally misleading customers by saying something that isn't true, that you know not to be true, that's kind of a different bucket. But you know, in the case of some platforms like BlockFi specifically, the regulatory posture really hurt the business from a capitalization perspective in two ways. One, it hampered our ability and blew up a very large fundraising round that we were in the midst of when some of the action started. But then two, the size of the settlement that we ultimately reached with the SEC was unprecedented in looking at parallels in the fintech industry like PayPal or Lending Club, who jostled with similar issues when they were building those businesses. PayPal, it's like what's the regulatory environment for people to send peer to peer payments in a mobile app? And they before and after ipoing had issues with certain states and money transmission license regimes. But in all cases a kind of reasonable solution was reached and that just wasn't how things were dealt with with crypto companies like BlockFi in the 2122 kind of timeframe.
- [06:37]
A
Yeah, it is almost surreal looking back at the entire thing, as you said, to look at where we are now and to see that there's a fight over yield because it was a four letter word for the last few years and now it seems to be almost commonplace. Whether it's been legislated on or not, it's offered everywhere and the yields are relatively high.
- [06:59]
B
Yeah, absolutely. I mean part of that is just the interest rate environment. Right. Like 2021 we were in kind of the post Covid ZIRP mindset of the risk free rate and the fed rate being zero or close to it. And today the 10 year is at 4% or a little over 4%. So that's just kind of different. And you can get a risk free yield in the 4% range, which is a fundamental difference. But you also have platforms like at Galaxy one we've issued a regulated security structure where folks can get 8% on their cash. We've done that in a different way than how the C5 platforms were operating in that kind of prior era. But there's all kinds of, there's always interesting yield opportunities. Right. There's the private credit market, there's real estate, there's all kinds of different things. And I think that fundamentally there's still this story with crypto where accessing financing for certain parts of the, of the crypto industry or the spot market of crypto is more challenging and more expensive than it is in the traditional market. And that creates an opportunity for, you know, credit or income oriented investors to, you know, evaluate.
- [08:15]
A
So let's talk about the idea of State Field in 2025. Right. Because as it becomes institutionalized and legitimized and we're talking about legislation, obviously it's going to become a part of the industry, I think, whether a few senators or the banking lobby likes it or not. Right. So how does a platform now earn the yield that they're passing on to customers? And how is that different, I guess from how it was being done before?
- [08:41]
B
Yeah, well, speaking about our platform specifically, we have, we have two ways that folks can earn yield. We have a checking account that's powered by a bank. It's a traditional checking account, FDIC insured. And there we offer an interest rate that's 10 basis points lower than the overnight rate that the bank gets. So currently that's 3.5%. So you can earn three and a half percent in our checking account at, at Galaxy One with FDIC insurance, just like you were opening a checking account at a bank that had a high yield, you know, offering. We have a separate product called Galaxy Premium Yield, which is a Reg D506C securities offering. It's only available to accredited investors. You can earn 8% on cash in that product if you're an accredited investor. The yield for that product is generated from Galaxy's institutional lending desk, which is one of the largest institutional lending desks in crypto. A little over 1.8 billion in principal outstanding in that lending book as of the last earnings report. And we've capped that product at 250 million. So we're just kind of providing access for accredited investors to a small slice of Galaxy's institutional lending. But importantly, from a risk management perspective, if you're considering this, definitely read the PPM and all the documents associated with the offering. But Galaxy put a guarantee on the product. So the risk that you're taking is to, you know, Galaxy as a corporate entity. So it's kind of like a, a corporate debt offering structurally. And as a result, you can, you know, look at the audited financials that Galaxy puts out there as a publicly traded company. I don't know when the last time you had Novo on was, but, you know, the big news for Galaxy last year was that they moved from the Toronto Stock Exchange over to the NASDAQ. So they're publicly traded on the NASDAQ. The ticker's GLXY market cap is north of $10 billion. And there's audited financials every quarter and all the things that come along with being a publicly traded company. And so that offering, the Galaxy Premium yield offering is like night and day compared to what was happening on BlockFi and other C5 platforms in a few key ways. So first off, we're not offering a yield on Bitcoin, which is a very, very challenging thing to do. From a risk perspective, there's a lot more money that wants to get a yield on their bitcoin than there are compelling risk adjusted opportunities to actually generate a yield on Bitcoin. So our product is for cash only. There's a cap on the size of the product of 250 million, whereas on the CEFI platforms it was completely open, including BlockFi. You know, however much money showed up, that's what we were on the hook to generate a yield for. So from a risk management perspective, it's a lot different. And then also from a duration perspective, so blockfi and other CEFI platforms in the kind of call it the previous yield era, we're offering very short term liquidity, right? You could withdraw in a day or two. We have a 60 day duration on our Galaxy Premium Yield product. So when you decide you want to exit the vehicle, it's 60 days until the funds become available to use on the platform or withdraw off the platform. So risk management and regulatory and assets that you're able to get the yield on are the big categories, I would say, that are different at least with Galaxy Premium yield versus what used to happen.
- [12:14]
A
I want to talk about bitcoin yield because treasury companies, man. Well, I want to talk about them. Okay, so I was probably the first vocal and aggressively hated skeptic of the bitcoin treasury company idea post strategy. So I'm totally fine. I think there's room for one and I think Michael Saylor has proved that he can do this relatively responsibly. But when we saw the big wave in April and May and I was being pitched 9 Bitcoin treasury companies a day, I kept just scratching my head saying this feels like we've played this record before. Like, are we really talking about yield on bitcoin? How are you going to do that? Bitcoin doesn't have a native yield and it means taking on risk to beat bitcoin. So why don't I just buy bitcoin? Of course we had a massive bubble and obviously it popped relatively quickly. How the hell are bitcoin treasury companies like writ large as an entire industry supposed to earn yield on Bitcoin and beat Bitcoin and justify a premium Well.
- [13:17]
B
I think the market's telling us they're, they're not supposed to.
- [13:20]
A
I mean.
- [13:23]
B
It reminded me, you know, it reminded me of bitcoin yield stuff. And, you know, there's also been, I've heard some companies, I haven't dug too much into it, but you'll, you'll hear companies from time to time talk about Bitcoin, bitcoin staking or, you know, generating a yield on Bitcoin from a protocol. And inevitably they do that by creating some token of their own and then selling the token that they've created, which creates value from somewhere and then converting it back into Bitcoin. But for the treasury companies, you know, it's like they're, they're accumulate. I think the pitch is they're accumulating more Bitcoin per share. So the denominator is the number of shares and how much Bitcoin you get per share. And like, yeah, sure, Scott, if you, if you give me, you know, $150 for, you know, one unit of something that's a hundred dollars, I can steadily increase how much exposure to that you might have over, over time by spending your $150 to buy more of it for a hundred and then telling you that I'm closing the gap between the 150 that you paid and the hundred that the actual underlying thing, you know, it also reminded me a lot of gbtc. You know, I mean, you know, gbtc.
- [14:37]
A
You may, you may know something about that.
- [14:39]
B
Yeah, I mean, we, we had a, had a, a number of things that we did with GBTC back in the day on both sides of it to try and close that spread. But that was a bit more structural in the sense that there weren't ETFs, there was money in brokerage accounts. And so you could make, I thought, a clear argument that there should be a premium for a period of time or shouldn't be. But in any case, Jim Chanos looks really smart. You know, he came out and kind of nailed it with that long bitcoin short Bitcoin treasury companies trade that, that he put on. I don't see a world where these things get back above. Now look, I'm not an active trader. You're much more of an informed active trader and other people are much more informed active traders than I am. So I haven't done anything personally with, with treasury companies, but I could see a world where maybe some of them are able to create business lines of some sort. And so, you know, yes, this proposition that they're managing their corporate treasury in Bitcoin or Solana or ETH depending on the vehicle is attractive in terms of building an audience. But then they, they've got to do something else. Whether it's staking or you know, crypto backed lending or just some type of business activity that creates a cash flow if they want to justify a premium to their net asset value of the holdings.
- [16:09]
A
So it's funny, when it started being announced I was hypercritical of the Bitcoin treasury companies and then I was double hypercritical of digital asset treasury companies on altcoins. But actually as I thought more deeply about it, those intellectually make a lot more sense to me. So not because a random altcoin is a good treasury asset, not that part. But if you're being honest and saying I am going to use financial engineering to beat an asset that I'm using as a benchmark, that's actually very easy with an Altcoin. Yes, I'm trying that altcoin to retain value. I don't think that it's a hedge against your cash which is why you would hold Bitcoin in general as a human being. But yeah, if you have an edge on staking and can get OTC discounts with unlocks, it's really actually easy to beat Salana or Ethereum.
- [16:58]
B
Yeah, and we do these things with cash.
- [16:59]
A
Right.
- [16:59]
B
I mean there's all sorts of you know, yield, yield, max strategies, there's I mean business development companies which is a tax advantaged like lending business that you know, high income investors like sometimes look at as a, as an attractive sector to allocate to. But even the BDCs, a lot of them, they trade under NAV. So there's a proof point there that even if you are doing some type of actual business or revenue generating activities it can still really be really hard to justify a significant premium to nav.
- [17:40]
A
Yeah, I'm a huge fan of cash flowing businesses using some of their profit to buy Bitcoin on their balance sheet as a hedge against inflation. Inflation and the dollar. I think that's great. That's what individuals should do. That's what we all want to do. We want to own some Bitcoin long term. So your point about they're going to have to find something else to do. Yeah, I think that's correct. I'm just more interested in a company that wants to buy Bitcoin, not financial engineering to move numbers on a balance sheet.
- [18:09]
B
Yeah, build the business first and then have owning the Bitcoin as part of your treasury management strategy for the business.
- [18:17]
A
I mean, even Bit mine just went ahead and put 200 million in. Mr. Beast.
- [18:21]
B
Yeah, yeah. And this is, I mean, not, you know, not to tout our own horn at Galaxy too much, but you know, that I think Galaxy's crypto treasury is. Is somewhat done in that vein. Right. Galaxy has a large kind of institutional crypto business, asset management, lending, trading, where they service institutional clients in a. In a variety of. They expanded into AI data centers by way of crypto, like a lot of the bitcoin mining firms did. So they have an AI data center business that's large now, but then if you look at their balance sheet, a significant portion of it, not a crazy portion of it, but a significant portion of it is in, you know, primarily bitcoin holdings. And so it's a. It's kind of a Treasury management strategy, but not a. This is our entire business strategy.
- [19:16]
A
Actually, it's pretty funny as you talk about that, that we never hear about Galaxy, which is publicly traded on the NASDAQ as one of the digital asset treasury companies, because anyone else who owns even a sliver of any sort of crypto and has another balance sheet sort of gets lumped in there. Good job.
- [19:34]
B
Well, I think, you know, I think DAT has come to refer to companies that are, like, only doing, you know, 100% or as close as you can get to 100% of your kind of balance sheet is in the underlying crypto, whereas Galaxy, I don't know the exact stat, but I would imagine it's in the 20 to 40% range. So higher than a traditional business that just allocated a small percentage, but lower than a digital asset treasury.
- [20:01]
A
So let's talk about Galaxy One. Obviously, Galaxy One would not have been able to launch in the previous regime. Right. So I'm imagining that the thawing environment for crypto, crypto and sort of the mainstreaming of the asset class and the institutionalization more specifically led to the launch of Galaxy One. Maybe you can give us the TLDR on what Galaxy One is. Obviously, you're running the whole ship. Yeah, sure, yeah.
- [20:26]
B
I mean, for context, I actually think this, you know, the Galaxy One business would have been totally fine to exist under the prior regime. There's really not. There's nothing that we're doing at Galaxy One that is in a regulatory gray area currently, and that's a function of the risk appetite of Galaxy Digital, which is a diversified, large business. We're not a tech startup that wants to take a flyer on something that may or May not be legal, but the impetus of the business was Galaxy Digital made an acquisition of a company called Fierce. And this company was acquired at least in part because Rob Cornish, who was the founder of Fierce, was previously the CTO at Gemini. And Galaxy was, you know, looking to bolster up its, its tech team in certain leadership positions. And so they bought fierce in Q4 of 2024. And then because they were buying Fierce, they thought, should we look at expanding into retail? Do we think it's an attractive business proposition to have a retail facing business line within the company? That's when I started having some conversations with Mike and Chris. I've known them for a long time. They were seed investors in BlockFi. And ultimately we all got really excited about this idea of leveraging the institutional infrastructure and the, and the brand name of Galaxy and making that available to individual investors. And so we launched in October. We have four products currently. Checking account brokerage account where you can buy and sell equities with no fees. Crypto account where you can buy and sell blue chip cryptos, and then the Galaxy Premium yield product where you can earn 8% on cash. So we're at the early stages of building out a platform that will be cross asset, that will have great customer service, that will offer unique and differentiated ways for folks to earn yield, access investment opportunities, but also over time borrow more efficiently against different types of assets and make tax smart wealth management decisions. And so that's kind of what we thought the compelling opportunity was. Galaxy already has a lot of really great products and services that they deliver to institutions. How do we package those up, deliver them to retail investors, do it across asset classes in a sophisticated way, kind of like, you know, Robinhood and Coinbase, but for people who are ready to graduate from a platform that encourages you to gamble but like more, more, more technologically, more technologically advanced than the traditional brokerage platforms and delivering a more unified experience and with a little bit of a crypto focus. Right. Like Galaxy is a, a crypto company, albeit now with a large business in AI data centers as well. But so those are the types of things that you're going to see from us, you know, over time. And we're, we're just getting started. We're four months into it. We've been really happy with the adoption that we've seen so far. It's great, you know, getting, getting to spend time with some of the early adopting clients that are on the platform. We're getting positive feedback and we've got a really aggressive and ambitious product Roadmap where, you know, hopefully I'll be coming back in the coming months and, and talking about new things that we've launched that are unique in the marketplace.
- [24:13]
A
It's going to be prediction markets, isn't it? Galaxy One, bet on the weather?
- [24:18]
B
I don't think so, man.
- [24:19]
A
I mean, come on man, how could. No, I was just laughing when you kind of made the quip about Robin Hood and Coinbase. I love them both. Well, I mean, what do you, what.
- [24:27]
B
Do you, what do you think?
- [24:28]
A
Like when you start launching, can you bet on the weather or you know, am I gonna, is that guy gonna put his left or right shoe on first tomorrow? Yes. It's gambling platform and anybody who's implying otherwise, I think it's just not being intellectually honest.
- [24:42]
B
I struggle to find, I'm curious your take on it. I struggle to find the. Maybe I don't think it exists yet. What is the long term investor who has a responsible asset allocation framework to a diversified portfolio? What is the thing they can do with prediction markets that actually adds value to their portfolio and ability to grow their wealth?
- [25:11]
A
Well, I mean, I do think maybe that there will be novel ways to hedge against certain things. I mean, I guess if you, that.
- [25:17]
B
You can't do in the options market.
- [25:20]
A
Maybe like, you know, you can kind of bet on your local real estate market, kid, as a hedge against losses of your house value or something. But like who's looking at a chart of their house value on a daily basis like they're trading? I think there will be novel ways that you can hedge using predictive markets. But once again, I don't think it's going to be a thing. As you said, that is for the responsible long term investor. And to be quite frank, I don't think your average investor who's made a ton of money over time by simply being in the market has ever looked at a chart and decided how to trade or even has ever used options. Right, right. So like, I think that's just like a question even beyond predictive markets. It's do you really have to do anything else than just invest responsibly over time and be patient?
- [26:09]
B
Yeah. And be smart about taxes and yeah, anytime you need to borrow, try and do it as efficiently as you can in terms of the cost. And yeah, I don't think it has to be more complicated than that.
- [26:25]
A
I guess the question I was going to ask, and you alluded to it already, I was going to say who do you view as your competition? You guys get in the Monday Morning meeting, you're like, damn it, Brian, damn it, Vlad. Or is it like, damn it, Charles Schwab, dammit, Morgan Stanley. Or are you creating this lane right in between? And that's the whole point because we see on one side you obviously have coinbase moving into equities, examples like that. Robinhood, I guess, has kind of been straddling both for a very long time. But then you see the Schwab's and the Morgan Stanley's all making announcements about allowing certain levels of crypto trading and integrating, you know, tokenized assets, all these things. So I think you have like both sides kind of closing in on a middle, but nobody beyond maybe you. And I can't really think of others focused on that middle from the beginning.
- [27:11]
B
Yeah, and so I think we're focused on the middle and you know, all of the core components, crypto, brokerage and banking. And we'll constantly be improving our solutions across all of those. But we're trying to target a mass, affluent consumer and we're trying to do it in a way where we're creating the type of value that a lot of folks who've reached really high levels of net worth, call it 10 million plus, they get access to things at, at private banks that aren't typically available to folks that are in the, you know, call it the $250,000 to $9 million of liquid net worth. But, you know. So what are some examples of this? Examples of this would be making it really easy to send a wire. You know, you've invested in a, you've invested in a venture capital fund, right? You put 200k into a venture capital fund, you get a capital call once every three to six months for, you know, 10 to 20% of the committed amount. And you got to go and type it into Chase. Sometimes they don't send it like, like retail. Regular banks are really bad at enabling you to send a wire, but you can't send 25k over an ACH. And so you're in this funky spot where you end up spending 45 minutes and having a lot of stress. At private banks, you literally email the PDF to your banker, they input the transaction for you, maybe give you a phone call or a push notification in your app to confirm it and then it goes out and it saves you. Yeah.
- [28:52]
A
But my producer is literally laughing his ass off right behind the camera right now because I spent the hour ish before this conversation until three minutes before dealing with trying to send a wire at Chase Bank.
- [29:06]
B
Yeah, so, so there's stuff like that Right. And we're going to do that on our platform that's going to be coming out soon. Like you will be able to send us the PDF, our system, you know, will read it, input the transaction, you'll get a pop up on your phone, the transactions there, you confirm it, you do your 2fa and then it goes out. And that's the thing that like in the private banking world it's like, yeah, obviously, but like it should exist for people that are on their way there but not quite there yet. I'll give you another example which also might apply to you. If you're someone that for whatever reason doesn't have crystal clear linear W2 income, getting a mortgage can be a nightmare. So if you show up and you're like, hey, I have a $5 million liquid net worth between bitcoin and equities and I'm trying to buy $1 million house but you know, my W2 income was up and then it was down and I run my own business so like I'm self employed and obviously I'm doing like smart tax stuff with retirement accounts and so my actual income is low, but I got more cash, whatever. Getting a mortgage can be a total pain. But like you're also, if you're in that position, you're probably smart enough to know that there's a lot of value in having a, know short position on a 30 year debt instrument at a fixed interest rate against the US dollar. And like that can be a smarter way to finance your house than just selling a million of your 5 million portfolio and buying it all cash. But how can we make that mortgage experience better at the private bank? They're like, okay, here's your pricing chart. You know, you're approved, no big deal.
- [30:51]
A
Slightly higher interest rate and, and honestly.
- [30:54]
B
You don't even pay, you don't even necessarily pay a higher interest rate, you know, know, because they price it based on how many assets you have with them. And so there's a lot of things like that that I want to kind of bring to the platform in terms of services and access. And then there'll be things in categories like Galaxy Premium yield. Right. Galaxy is uniquely positioned with its, you know, activities in the institutional crypto lending market to give investors that aren't usually able to participate in that a vehicle to do it. It's kind of a unique differentiated investment opportunity. There'll be others like that that we will bring to market over time. And so we just see a lot of, you know, kind of different opportunities in those categories. Whether it's making borrowing easier and more cost effective, making things that typically take longer than they should or are just more inefficient than they should be more efficient for our customers, and doing it on a holistic platform. That's kind of what we're focused on. We're trying to target, we're open to anybody, but we're really trying to specialize in products that resonate with mass affluent consumers in the US and so we think of that as folks that are, you know, the accredited investor definition is kind of one guardrail that's like the top 20% of U.S. households. We're trying to focus there a little bit, at least in the US Then I think there's a whole other set of things that we're interested in but not heavily focused on at this moment in time when we think about outside the US market. And I think there's some really interesting stuff you can do along a similar vein outside the US Market with stablecoins as like a dollar denominated unit of account and then wrapping services around that. For folks, I think we're still early in the, in the stablecoin adoption story globally. I think there's a whole bunch of functionalities on top of stablecoins that we take for granted as US Consumers with our financial services environment here that folks in other countries don't have access to. And so that will become a story for Galaxy One over time as well.
- [33:02]
A
So I want to talk about that in a second, but I basically blacked out twice during your conversation and one was when you gave me PTSD of my just experienced wire situation, and the second was talking about a mortgage because I went through that last year and now it's almost surreal seeing them talk about Fannie Mae and Freddie Mac accepting crypto as part of your net worth and all of these things. So I do think it's moving in the right direction. Sadly, I somewhat preempted that, but had every negative experience you could imagine. And you just described, I mean, this wire this morning, not to beat a dead horse, but I went onto my, you know, my own bank account with Chase, which I only have one of them, who I think is the Evil Empire. So I don't know why I bank with Jamie Dimon, but there's a reason. I went to send a wire. I went and did my show. I got a fraud alert call when I started to do my show, so of course I couldn't respond. My wife tried to call, they blocked her. I went in after the show to try to access the account. Your account has been blocked. I can't even get on. Then I call back the number. It hangs up on me five times. I'm not kidding. I finally get through to them, and then it's like, we're gonna send you a text now. We're gonna call you back to make sure it's you. Then a 17 questionnaire. Did somebody compel you to do this? Did JP Morgan bank call you? Did you confirm the wire information? I'm just trying to send like a charitable donation to my child's school. Like, this is not a big thing. Right. And so I. What's your account number? I don't know. I can't get into my account. You know, like, I didn't. Sorry, I don't have that in my brain right now. I'm. I finally. I never lose it on customer service people, but I was very close. And then she's like, okay, you're back in the account. Send the wire again. I'm like, can I just redo it? No, you have to enter all the things. You can't do the whole thing. Yeah.
- [34:39]
B
So then you're typing and you're. You get adjective just from typing wire instructions, right?
- [34:44]
A
Yeah. Is this definitely going through this time? Now that we've done this 25 minute call after an hour of I don't know, maybe I get the fraud alert, call again 15 minutes later after executing it, and re answer every single question. Have you ever been affiliated with a corporation called Lone Star Mail Strippers in Texas? Like, no, I don't know what that corporation is preempting all of her questions, answering them in advance. And the wire still has. I did all that and it still hasn't gone through.
- [35:12]
B
Yeah.
- [35:13]
A
Right. Until this call started. It was the minute before. I was like, I would have been nice to eat lunch, but no, J.P. morgan. Right. So these things have to be solved. I was laughing like, isn't this why we crypto? Like, I could have sent you guys this in stablecoins in 30 seconds, no fee.
- [35:30]
B
Yeah.
- [35:31]
A
Oh, man.
- [35:32]
B
The trick with the crypto stuff, you know, there's this delicate balance. It's like you as a financial services platform, you. You have some level of responsibility to try and protect people from fraud. And, you know, the, the finality of crypto can also be scary in its own right. And you know, you're an advanced. You're like a technologically savvy entrepreneur, like, advanced person that. Who's comfortable with crypto. A lot of Americans, even as adoption increases with the ETFs like all that. A lot of people are like, still really far away from ever, and they're.
- [36:10]
A
Getting their faces scammed off. Like, it's just the scams are unbelievable. And listen, I get that that JP Morgan Chase is doing this because we live in a litigious country and if they don't ask me all these questions and something goes wrong, they get sued and it's just the nature of the beast. But my God.
- [36:25]
B
But it can be better, right? Like it. It can. You can have a better experience than. Than that for sure.
- [36:30]
A
Shouldn't have a worse experience. So it's got that code for us, which is nice, but let's go back into the stablecoin side because you started it along a path I really want to explore more deeply. So I think there's an irony that it's been proven that with blockchain technology, which came obviously from Bitcoin, created as a hedge against inflation and monetary debasement, all these things, that our killer app has been the dollarized yacht. Right?
- [36:52]
B
Yeah.
- [36:53]
A
So let's just set the table with that. But accepting that it has been the killer app and it's the one thing that we now have pretty clear legislation on almost everywhere in the world.
- [37:03]
B
And by the way, hopefully equity is next after the dollar, right?
- [37:07]
A
Yeah, let's see. But now that we have that clarity, you kind of alluded to the fact that that's the next direction Galaxy is going to go in, or at least one major direction, which is maximizing the potential of stablecoins all around the world. Right. So talk about more specifically, what kind of things. We could see now that stable coins are pretty much have the, you know, USA stamp of approval.
- [37:34]
B
I mean, it's similar things to, you know, what we're already offering on the platform to our U.S. customers. Right. So it's the ability to access yield, the ability to facilitate payments, the ability to borrow, you know, at a low cost, the ability to access unique investment opportunities. But I think what I'm really excited about is the next step after stablecoins is tokenized equities. I think in the same way, you know, people get so scared. People were very scared about stablecoins. And, you know, under the previous administration, there certainly wasn't a willingness to regulate them and, and just acknowledge that fundamentally this is a really great thing for America that we're able to have this new distribution channel for the dollar, which is. It's definitively great for us that somebody's.
- [38:27]
A
Gotta buy those Treasury.
- [38:28]
B
I mean, like, it's. It's definitively a good thing for us economically. And we should apply that to other categories. Like we should be applying that to bonds and fixed income investments, we should be applying it to stocks. And figuring out the regulatory piece is going to take a little bit of work. But you know, what a, what a powerful display of free, like why shouldn't somebody in, you know, name your country, put, put like sanctioned countries that you know that are like foes of America to the side but you know, you're run of the mill emerging market or European country. Why shouldn't they be able to you know, access all of the same investment things that you can access in a brokerage account in the US in a really low cost and efficient way. And I think that would be good for us. I think it'd be good for them just like stablecoins has been. So hopefully that will get sorted out and, and on the Galaxy One platform will be facilitating stablecoin activity and financial services around that, but also distributing tokenized equities efficiently around the world.
- [39:39]
A
Interestingly, one of the sticking points on the Clarity act that I think is now dead in the water. Unpopular opinion and I was one of the, this thing will definitely get passed guys, but I think it's dead. But one of the things that came up in some of the new language was banning tokenized securities basically which nobody saw coming. You got Paul Atkins trading firms. Wasn't that the trading talking about tokenizing everything and then all of a sudden just out of nowhere there's this language that, that won't happen. Like do you have a fear, I guess at Galaxy One with all the things you've built that we could just blow this again with some sort of stupid legislation or the, you know, we get a pendulum swing and there's different people in power and all of a sudden things you're building could become non compliant?
- [40:22]
B
I don't think so. Just, just because of the types of things that we have launched and, and will launch in the way in which we're doing it. It's just a completely. It, it's the way we're operating at Galaxy One is night and day versus like a, a fintech or a crypto startup, you know, because of the enterprise value of the firm and the number of different businesses businesses that we're in. We just have a really high bar in terms of clarity that we want to see around something that we're doing. So I, I don't feel that risk here. We definitely felt it, you know, at BlockFi and I felt it at other fintech startups that I've been a part of prior to blockfi. But it, but it is fragile. Right. And, and you see how, how fragile it is and what, you know, I, I worry about at a macro level, just crypto being overly partisan. Like, I, I think I've said that for a long time. Like, I don't think crypto should be a partisan issue. Everything becomes partisan these days. But it's like I'm supportive of anything we can do as an industry to not have us be on one side or the other, Republican or Democrat, because I think in a lot of areas you just. The pendulum seems like politically it's swinging wider and wider every time we go back and forth. And I don't like that at all. I would like the pendulum to swing less, but it kind of feels like that's the world we live in. And so.
- [41:49]
A
Yeah, but I mean, Galaxy One could be operating compliantly in Greenland by next week if things go up.
- [41:56]
B
It's a big market.
- [41:59]
A
Geographically.
- [42:00]
B
Yeah.
- [42:03]
A
Maybe not for actual class. I just can't miss the opportunity to make a Greenland joke right now. Yeah, it's wild. Sorry. It's in my nature. So what does success look like, I guess, for Galaxy One in the short, medium, long term? Is it just about the products that you build? Is it about taking a certain amount of customers from JP Morgan specifically? Because I don't like them today. How are you sort of gauging success?
- [42:29]
B
I mean, short to medium term? We're, you know, we're in a, a product development execution setup right now. We have a good baseline of a platform. We, I think, offer a compelling value prop for folks to try us out. We're not at a place yet where, you know, the type of consumer, the mass affluent US Consumer that we're targeting is going to move over a, a substantial portion or, or the entirety of their net worth to our platform. We have to earn that over time. So we've got to climb this product development hill where, you know, hopefully by the end of this year, Scott, we'll have things where you would say to yourself, I would totally support somebody trying that. And I don't think you could get it somewhere else in the way that they're doing it. So that's what we're focused on. Short to medium term, we should be launching, you know, four, maybe five new Capital P products this year in addition to a bunch of, you know, features, whether it's that wire functionality or other things. So product development is really the big focus. Short to medium term. Medium to long term, we want to be driving enterprise value for Galaxy Digital. And we're going to do that in two ways. One is acting as a new distribution channel for things that Galaxy already has, whether that's staking infrastructure where Galaxy is a leader, or asset management products where Galaxy has some really interesting solutions or other capabilities that Galaxy already does in the enterprise context and delivering those to retail. And then Galaxy often by analysts gets valued as kind of a sum of the parts and the stock. Analysts will look at the AI data center business and then the crypto services business. And my kind of personal goal is that at some point, over the next, call it two to four years, we have some analysts start to break out the retail business and say, hey, just, just this retail business is contributing 10, 20, 30% to the overall enterprise value value of Galaxy. So that's really my North Star. I want to, I want to create value for the firm. We can only do that by creating value for clients of Galaxy One. And so it's a very kind of synergistic goal with just doing the right thing for our clients to have. And that's how I think about it.
- [44:49]
A
So at the end of the day, first of all, it sounds like you're right now more stealing clients from Schwab and Morgan Stanley than from Robinhood at the moment. Like in my mind, that seems like those are the people who would probably come over. But you're offering a product where somebody can go deposit their Bitcoin or Ethereum or what you call blue chips. I don't even know what we call a blue chip anymore. But they're blue chip crypto and they can buy, sell, trade stocks and crypto there. And all of that is viewed as a unified portfolio. When they ask you guys for a loan or something. I mean, I don't think even most people in the world know how rich people actually operate. You laid it out pretty easily. But most people just take a very low interest loan against their securities that.
- [45:35]
B
They kind of buy bar, buy, borrow, die. Is that.
- [45:40]
A
But you're basically allowing buy, borrow, die, but with all of your assets unified, including your spot crypto assets. I mean, is that, is that accurate?
- [45:48]
B
Yeah, yeah, absolutely.
- [45:51]
A
That's a compelling offering.
- [45:53]
B
Yeah.
- [45:54]
A
I wish you had existed when I was buying that house.
- [45:59]
B
Yeah.
- [46:00]
A
So do you think that, does the rate environment matter much for, for you guys?
- [46:05]
B
Yeah, I mean, it does. Our, our checking account will move up and down with the, you know, with the risk free rate, the, the premium yield product. You know, if risk, if the risk free Rate goes low enough, you might see changes to the interest rate on the premium yield product. It's that product is really more sensitive to like crypto, like the, the cash lending in crypto interest rates, but those move a little bit with risk free rates. And you know, I, I think, I think in, in risk on modes where the economy is booming and, and money is, and liquidity is flowing, folks are generally more willing to try a new platform or be reading the financial news versus like in a bear market or in a high interest rate, low liquidity environment. It's more like I'm battening down the hatches. I'm not changing anything. Like I don't even want to look at what's happening. So we on the margin would, I think, experience faster growth if we're in a positive economic environment for consumers and the economy. And so that's certainly what I'm hoping for. I don't want to see all the stuff that's going on turn out badly for consumers or the economy.
- [47:24]
A
And do you think that you'll be sensitive, like many of these platforms are, to the actual crypto market? I mean, we all know being in crypto for a very long time that as you said, like if bitcoin's booming, everybody's doing great, then all of a sudden you go into a bear market, nobody cares anymore and they withdraw, nobody signs up. So absolutely a function of price. I mean sentiment.
- [47:44]
B
Absolutely. Just, just like it is for the broad economy. Right. Like if, you know, bitcoin's in a 50, 60, 70% drawdown. Like I don't even know those days might be behind us, by the way.
- [47:56]
A
Because we did like 30. We did a 30 already. Yeah, like, I mean we went from, you know, 109 to 74 to 126 to 80. Feels fair markety, you know.
- [48:07]
B
Yeah, it's bare markety, but they don't, they don't hit quite as hard as they did in like 20, you know.
- [48:13]
A
18, for example, but another 90 for drawdown after we didn't even double from the bear bull market, tops. I'll be really upset.
- [48:23]
B
Yeah, and, and I don't think that's where we're headed. You know, I'm optimistic and, and bullish on bitcoin. I think folks should have an allocation to it. But yeah, you see the same thing in crypto. Our business is more diversified than just crypto. But you know, Galaxy is most well known in the kind of crypto industry. And so a lot of our early clients are, you know, hearing about us through some type of crypto channel or another. And so, yeah, we'll be, we'll be sensitive to that as well.
- [48:56]
A
Having been through the 2022 contagion alongside the rest of us. Is there anything that has your spidey senses tingling that you don't like that you're seeing in the market right now? I don't mean specific to your platform at all, but you know, we, we kind of. I guess if you look back with the, with the benefit of hindsight, you could see that a lot of the problems that were there were hiding in plain sight. Like with you having kind of looked through that lens, is there anything that you see in this market that just gets you kind of worried?
- [49:24]
B
No, I mean, we, we talked about DATs. You know, if we were recording this, you know, nine months ago, I think that would have been an area. Honestly. I would say, I would say the thing, I would say the thing that worries me the most is I think that, I think that crypto adoption as an investment asset class, like, takes a bit of a hit. If we go through too many years of underperforming gold. Like, I, I just, I, I don't think that's a, I don't think that's a good look. And you know, so, you know, two years underperforming gold, maybe. Okay, like three, four, five years underperforming gold I think might let the air out of the room a little bit for btc. You know, there's this quantum computing chatter in the marketplace which I'm not nearly smart enough to actually have an informed opinion on. But like, I'm smart, I'm smart. I'm smart enough to know that people are reading about it and writing about it. And there's, you know, a guy that writes a newsletter for or like a Bloomberg column who runs a portfolio and said he's dumping bitcoin because of it. And so, you know, there's things that the industry is going to have to overcome. But yeah, there's nothing. Those are more kind of like longer term things I think that we're going to have to grapple with. There's nothing that's like screaming blow up risk imminent or anything like that. But, but I'm also very conservative and we are on our platform. Like we've got Bitcoin, Ethereum and Solana on Galaxy One. So that's like we, you know, so maybe you could say the, maybe you could say, maybe you could say like politician coins. Maybe could be like, like coin was going to be in there, man, but it's politics. You know, Eric Adams don't buy a coin that a politician anywhere, you know, is promoting.
- [51:29]
A
By the way, he was no longer mayor of New York when he made the NYC token. It seems like maybe there was a disconnect in what he could actually do even at the. I mean, I.
- [51:41]
B
Sure. I mean, look, surely that's going to be. I think there's been some chatter about how that might be top of the list for maybe the Democratic side or folks that were, you know, maybe like the anti crypto crowd of 2020 is now pro crypto and we've kind of, we're already past that. But they're, you know, I think the insider, insider trading or, or kind of, you know, pump and dumping type activities being done by famous, famous people, whether it's politically or otherwise.
- [52:13]
A
I would, I'd be short President of the United States.
- [52:16]
B
I'd be short. I'd be short that type of activity, I guess.
- [52:21]
A
Trump Coin, guys, we finally have a title short Melania Coin. Yeah. Yes, I agree with you and I think that that's given new wind in the sails of the anti crypto army. Totally. I think we would have been just fine if not for certain activities. And now if the pendulum does swing, we have to contend with Elizabeth Warren again.
- [52:39]
B
Right. Yeah.
- [52:41]
A
Anything else on your radar I might have missed before I let you go?
- [52:46]
B
No, I don't think so, man. Just really happy to be be back on the show, back in the market and you know, check out Galaxy app or search for Galaxy One in the App Store if you want to see what we're working on. My. As always, my Twitter DMs are open. I'm happy to chat with folks. I'm Galaxy One Zach on Twitter and it's great to see you, Scott. And I'm glad, glad to see all the progress that you've made with the show.
- [53:12]
A
People who watch this show are, I don't say this show. They really are the target audience we've found. You know, like my viewers have evolved from the crypto degen trader crowd that I think we all started with to guys like us who just want to allocate in their portfolio and be able to do it on a safe platform and not have to worry about the price every single day. Right. And you're actually. It's nice to see people are building things for that audience now.
- [53:41]
B
Yeah, absolutely. Well, hopefully I'll come back soon, man.
- [53:44]
A
Yeah, we'll do this soon again for sure. Thank you so much.
- [53:47]
B
Thanks, Scott. Great to see you.
- [53:48]
A
You.