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BTC246: The Future of Insurance using Bitcoin w/ Becca Rubenfeld & Rob Hamilton (Bitcoin Podcast)
01:08:41
Explore how Becca Rubenfeld and Rob Hamilton of AnchorWatch are transforming Bitcoin custody, insurance, and institutional access to crypto with cutting-edge security solutions.
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- [00:01]
Preston Pysh
You are listening to tip. Hey, everyone. Welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On this week's show, I have Ms. Becca Rubenfeld and Mr. Rob Hamilton to talk to us about the business of insurance and how it might be ripe for disruption using Bitcoin. At the start of the show, we have a discussion around institutional custody, why it's so important with all these Bitcoin treasury companies now coming on the scene and where that might all go from a key management standpoint. Then in the latter part of the conversation, we get into this really fascinating idea around insurance and how it might be a competitor to the borrowing and lending space for the free market yields one might receive. This is an idea I've never explored on the show before and it's really a fascinating concept. So with all of that, I hope you guys enjoy this interesting conversation with Becca and Rob celebrating 10 years.
- [00:55]
Becca Rubenfeld
You are listening to Bitcoin Fundamentals by the Investors Podcast Network. Now. Now for your host, Preston Pysh.
- [01:11]
Preston Pysh
Hey everyone. Welcome to Bitcoin Fundamentals. I have two good friends, Massive Builders in the Space with Becca Rubenfeld and Rob Hamilton. Guys, welcome to the show.
- [01:23]
Rob Hamilton
Thanks for having us. Yeah, longtime listener, first time caller.
- [01:26]
Preston Pysh
Yeah, we need to fix that.
- [01:27]
Becca Rubenfeld
Long time coming.
- [01:28]
Preston Pysh
Yeah, yeah, we need to have you guys back. I already know it's going to be fire, so here's where I want to start off. So I was invited over to the Plan B school over in Lugano to give a talk to some of the students there. The only thing I understand or the only thing that I'm like doing in this space is very finance heavy. And so for me, I'm like a pig in mud talking about these Bitcoin treasury companies, right? Because it's like mixing security analysis with bitcoin and I'm just loving it, right? But when I went over there, I, what I realized is I'm talking to the students in the room. There's a lot of people there that are very tech heavy be and I'm there briefing them on like micro strategy and Michael Sailor and how these bitcoin treasury companies are going to be like really big thing moving forward. And it was funny because in the audience, everybody who's listening to this is looking at me and they're like, yeah, but don't you think it's a problem, like all this paper bitcoin and like, we're kind of really getting away from like the roots of everything we've talked about for the last decade? I didn't hear it from one person, I basically heard it from everybody. And for me I was a little just like, I don't know because I was so excited about the bitcoin treasury stuff, but where a lot of this went and my immediate thoughts as I was like responding to some of these really valid points with bitcoin, paper bitcoin and all of the bitcoin being held by institutions, it quickly moved to this idea of institutional custody and which is so different than like how an individual custody is their bitcoin. And as I'm like having these conversations, Lugana, I'm thinking I need to get Rob and Becca on the show because you guys are doing this in a way that in my opinion is like the best in the business. So first give people. Why would I be saying this type of thing? Tell people the vision of anchor watch, like what it is you guys are doing and why. You're kind of the masters at this idea of institutional custody.
- [03:18]
Becca Rubenfeld
Well, if we're going to talk about paper bitcoin, Summer definitely Rob needs to leave that part of the conversation. I do want to, before we jump in and do the vision, I think it's really interesting and maybe worth conversing about that you say bitcoin treasury comes automatic paper bitcoin, Right? So are they. Is that a direct correlation? Is every treasury know a paper bitcoin situation?
- [03:42]
Preston Pysh
No, I think people are just looking at it and they're saying, I don't know whether, I mean the big beef with microstrategy is Michael's really kind of keeping it close hold where he has the bitcoin custodied, how he's doing it, all of that is kind of like a black box. And then you're basically securitizing it by issuing all this traditional preferred stock on top of it to give yield to people that are owning the preferred stock. And I think in the minds of your hardcore bitcoiner that's been in the space for years, they're looking at this and they're saying like, what in the world is that? It doesn't look like bitcoin. It looks like a bunch of paper receipts on top of bitcoin. And so if the underlying is being custody by these institutions, how do we know they're doing it correctly? Is it one person holding the key or is it, you know, multiple people holding the key? And you guys have such an elegant design and how you're assisting institutions or people that are really wanting to have a robust custody situation of like, how is that custody being Managed like you guys are the masters at that.
- [04:43]
Rob Hamilton
So yeah, yeah, maybe just a level set at a high level. Who are we? I'm Rob Hamilton, that's my co founder Becca Rubenfeld and we're the co founders of Anchor Watch. Anchor Watch is an old nautical term referring to the crew of sailors who watch the ship at night when you're at port or you're at dock or at anchor in the middle of the sea and just kind of watching over the ship, making sure everything's okay. And that's how we do our role, right. When it comes to bitcoin in custody. Now the thesis that we've had since we started the company was around this idea of tying in risk markets to the underlying Bitcoin itself. Right. Bitcoin is a 15 plus year journey up into this point. All of the security practices people talk about with multi sig seed phrases, hardware, wallets, all of these things came from a place of there was no insurance market. You're doing what's in insurance is called self insuring. You're owning the risk, it's your money, you mismanagement, it's your problem, no one else's problem. Right. And the long vision when we started the company back in early 22 was ultimately as bitcoin continues to mature as a financial asset, the risk markets like insurance are going to develop. It is an inevitability when you think about it as everyone likes to most compare bitcoin to as like a bar of gold. You can pay to have your gold custody somewhere and part of your custody fee is insurance in the event that something goes wrong. Right. And how this extends into the actual custody and management of it is Bitcoin often, sometimes gets called to like a digital bar of gold. And there are trade offs for something being physical versus digital physical. You just physically watch the thing. You put it in a vault, you put arm guards in front of it. You have to physically access it. Bitcoin though, since it doesn't have that same physical nature, you're able to leverage it as programmable money and things like a multi signature, right. You can don't have to have all, you can't two of three or bar of gold. You can't split it up like that, but you can with bitcoin. And what we did was we kind of extended the principles of bitcoin as programmable money to enable greater fidelity and control and redundancy to make sure you can access the bitcoin at the end of the day no matter what happens. Right. And the Other part of that is we have this custody tech. We can go into more that I would say is like very advanced and kind of leveraging the feature set of what bitcoin can do today without a fork or without any changes and then additionally tying that with a traditional financial contract of insurance. And so for on the insurance piece, we are a Lloyd's of London cover holder, meaning we are direct agents of Lloyd's of London. We do the underwriting, we do the distribution, we oversee the product. And with that we're able to take the best of both worlds of having making the most of Bitcoin as the asset itself and with the best quality insurance market that exists out there and bringing those two together to provide comprehensive coverage. Understanding that you are able to at the end of the day have safety in knowing that your bitcoin will be there. And if something were to go wrong, you directly are named as a beneficiary of a policy that's going to directly remunerate you.
- [07:36]
Preston Pysh
This is going to sound very random and I'm sorry to the list.
- [07:39]
Rob Hamilton
Go for it.
- [07:39]
Preston Pysh
But I never knew that about the name the anchor watch. And I was, I was in the military and. But I was army. I wasn't Navy.
- [07:47]
Rob Hamilton
Yeah, Navy.
- [07:48]
Preston Pysh
And I have pulled my fair share of the guard duty, which was what we called it. We called it guard duty.
- [07:55]
Becca Rubenfeld
Yeah.
- [07:55]
Preston Pysh
And at the end of the show when we're done talking, I'm going to tell you, I think it's a hilarious story of one of my guard duties. I will tell you at the end. So stay tuned to the. If you want to hear that, wait till the very end of the episode. I'll tell you the story.
- [08:08]
Rob Hamilton
As a small shout out that was American. Hodl came up with the name. He was our first investor in America. We were like trying to figure out like a good name and the domain was available and I just pounced on it immediately.
- [08:19]
Becca Rubenfeld
They called and we did a three way call. So it was Rob and Hodl and me. And they were like, okay, we think we have a name and the domain is available. And they described it and it's like insurance is. We want people to feel safe. You know, there's a long history in insurance. Insurance started as ship maritime. Yeah, it was a maritime.
- [08:40]
Preston Pysh
That makes sense.
- [08:40]
Becca Rubenfeld
In 1600s. Here. Yeah, in the 1700s. So that's the history of it. So nautical stuff. You see a lot of nautical and insurance kind of old dodgy. That was okay. Like we want people just feel secure and safe and then just the way that like while at Anchor, that was just like, that's cold storage. That's like, we got to protect the bitcoin wallets. Safe and sound. It's there, it's locked up. We're going to look out for it.
- [09:04]
Preston Pysh
I'm impressed, Becca. I'm impressed. Because this is before the AI thing was really hot and heavy. So he came.
- [09:11]
Becca Rubenfeld
Yeah, it's a huge American from the brain of American.
- [09:15]
Rob Hamilton
Yeah, yeah, yeah. And so there's like a lot of pieces here, right? On the insurance side and the tech side, the very compressed version. Just for how it technically works, we leverage a tech stack called miniscript, which originally came out of Blockstream as free open Source software in 2018 and 2019. And then without getting too much in the mechanical details, it allows you to express more of the feature set of Bitcoin. And the main things we're leveraging it for are a multi sig of multisigs. Right. So for the start of the policy, you as the Customer have a 2 of 3. We have a 2 of 3. We both have to sign. Right. And instantly you can think about that from a security mindset. Anchor Watch cannot unilaterally move the funds. And which means that you have to kind of like at start be able to authorize it. And then inevitably the questions would come, would be like, what happens if I lose more keys? We then leverage another property of miniscript, which is time locks. But this is just a fascinating trivia fact of how Bitcoin actually works. Bitcoin is an entirely endogenous system. It's self referential. Preston, if I send you Bitcoin, it's only because someone previously sent me Bitcoin or I mined a block, right? Everything is like, this is the whole blockchain concept of that. You have this entire canonical history that's all within the system. The one thing that exists outside of Bitcoin that enters the Bitcoin protocol is the timestamp the miners put in the block header when they find a new block. And think about this. This is how the difficulty adjustment works. How does the Bitcoin network know that two weeks passed or more than two weeks? Right. And for those at home to understand the difficulty adjustment, every two weeks, and you have 144 blocks a day on average, because it's every 10 minutes, every 2016 blocks. The Bitcoin network says, okay, we've mined what should have been two weeks of work. How long did it take? Did it take three weeks? Okay, it's too difficult. Let's decrease the Difficulty adjustment. Did it happen in 10 days? Okay, we're finding blocks too quickly. Let's increase the difficulty adjustment. So what we are able to do is we're able to leverage that timestamp that the miners put into the block as a means for the time locks. So some people may be familiar that you can time lock based on what the current block height is. We do time locks based on the calendar date. And because this is one of the interesting innovations when we were designing the product, realizing is if you have an insurance contract and it's dated for a year, you need to know a year from now that the conditions will change in how you can spend the money. Right. And so we leverage those bitcoin native time locks in the security of the vault itself, leveraging the same exact mechanics that the bitcoin network uses for the difficulty adjustment. And the really interesting part of our tech is after your insurance contract expires, you don't have a relationship with us anymore. You unilaterally can take the money yourself and walk away. So unlike any other custodian, you're getting on the phone, be like, hey, I'd like my money back, please. Are you going in the UI and sending in a bitcoin address on chain? It natively settles just to you at the end of the day.
- [12:02]
Preston Pysh
The way I describe this, when I'm talking to, like, family and friends with the time lock, I tell them, imagine you have a safe in front of you and there's two keys. And I'm going to give you one key. You go to your house, you put it, wherever I have the other key. And as we come there, we both, if we're going to open the lock while there's two keyholes, both of those keys have to be there. But after, let's say a year, the safe, through magic, will change to just the one key, which would be mine. And it helps the person kind of wrap their head around how conceptually.
- [12:34]
Becca Rubenfeld
Yeah, yeah, yeah. Sometimes even kind of experienced bitcoiners, just because time locks haven't been used a lot in kind of general custody. It's been used in lightning. But sometimes there's confusion that a time lock means that your money, your bitcoin is locked until X. And you certainly can use time locks that way. But I think it's better to think of it as a unlock.
- [12:58]
Preston Pysh
Yeah.
- [12:58]
Becca Rubenfeld
Because really what happens, it's a time unlock, and it says when X amount of time has passed, a new way to spend bitcoin becomes available. And so then what we can do is we can stack these conditions and have more or less multiple spending rules that it's all checking against. So first it's checking did the keys turn? Right. So in your safe example, did the keys turn? Yes or no. If they didn't turn, it's not going to unlock.
- [13:24]
Preston Pysh
Yeah.
- [13:25]
Becca Rubenfeld
It's also been checking the time did one year pass? The keys may have turned, but if one year passed, you didn't meet the rule. Right. So at the same time we can, for example, have two layers. At the same time we can say, okay, the first one is did the key sign and no time pass. Cool. Then we're using a time lock to say, look effective immediately you can sign. And then at the same time we have a different rule that says it behaves differently after a year. So after a year it unlocks an additional way. Because once a time lock is available, based on the way it works, how Rob was describing it, it's once it's available, it's always available. Right. So you're not locked out. Actually, it's like another way is becoming available. The original way was still there.
- [14:10]
Rob Hamilton
Let's take a quick break and hear from today's sponsors.
- [14:12]
Preston Pysh
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- [18:14]
Rob Hamilton
All right, back to the show.
- [18:16]
Preston Pysh
So for me, the first time I saw this demoed by Rob was up at Bitcoin Park. And, you know, I was walking around and Rob, you know, tapped me on the shoulder. He's like, hey, I want to show you something. This is really neat. And I was like, oh, okay. So we, I think we were upstairs or wherever, and he pulled out his laptop. He's like, check this out. And he's showing me this graphical user interface. And he's showing me, like, the if and then statements of, like, an institution. He'd be like, what if you wanted your CFO to be one of the signatures, but for him to sign, he also needed the CEO or whoever. This was the moment where I'd heard countless times, bitcoin's not programmable. You can't do any, like, what we're describing here. You can't do that on Bitcoin. And Rob was like, you know, I forget who you said the source was, Rob that was talking about miniscript. And then you were like, oh, well, let me play around with this mini script thing. And then you go in there and you're building, like, all of these things. So what I want to do is, Rob, can you pull it up on your. I'll make sure I'm sharing. For people that are listening to this and not seeing it on YouTube, I would highly encourage you go pull up the YouTube video of this discussion for me. Like, really, really important for this idea of institutional custody moving forward.
- [19:30]
Rob Hamilton
So I have it live here. This is our dashboard of Trident Vault. Right. I just put in now for those at home, this is running on Bitcoin's test network. I'm not casually moving around 2, 3 bitcoin at a time, just on a hot wallet in my house. And the only difference is, is one, it's on the test network, and two, for the sake of expediating demos, we have hotkeys. Just to show conceptually how it works, rather than making everyone pull out their. Either their cold card or their ledger and try and get all of these things. And just at the start, you know, at the high level, 1, 1/2 step back, you actually can have multiple vaults for different, maybe different levels of control or just your own accounting. You want to have segmentations of funds, but within the dashboard itself, just a cumulative view of, like, what your holdings are, your transaction history, pretty straightforward. Your address book of previously used addresses where your money is currently sitting on chain with your labels. And then we would have, like, policy details for, like, your insurance Policy payments you've made. But this right here is actually where I would want to take the attention to. This is how our vault works out of the box today. And quickly looking through this, when the policy gets bound, it's a 2 of 3 from the customer key set and then there's an Anchor Watch key set which operates as a two of three as well. So at first, if you want to move your money day one of the policy, that two of three from you as the customer and the two or three from us at Anchor Watch. This enables several just security things of one. Hypothetically, if someone broke into your house and your places where you're storing your keys and started making you forcefully sign things, the money can't move because we haven't signed yet, right? That allows us to have an opportunity to step in and make sure everything is above board. It's kind of within your policy expectations. There are certain things that we enable already as security features of one, whitelisted addresses and two, your velocity control. So a majority of our customers actually opt into something we call the HODL discount, where after you set up your vault, you do a test transaction. We disable the send button. People are like, this is my long term cold storage. I just wanted to be able to look at it. Maybe at renewal I'll update something, right? But I don't have to worry about it. This is the then the next use of what it actually looks like to leverage time locks. 180 days, six months into the policy, we go from a customer two of three to a customer one of three, which gives you extended flexibility in the event two of your keys have gone missing, we're able to with one of your keys and two of our keys be able to step in. Right. The next layer is like in the last month of the policy day 335. This is an interesting has several properties. We call this our recovery layer. It is a two of three from Anchor Watch and it's one key from our recovery partner. And today we have Coincorner based out of the High LA man. They've been a Bitcoin exchange in business for 10 years. They have a long track record of keeping customer funds safe. It is us plus them who are able to move the funds. And then finally day 380, after your policy is expired and the tail has expired and your policy is over, it goes to your sole control. Now to take a half step back up to layer three. Just to explain how this actually operates under the hood. When Becca and I initially designed this, we were Thinking about, okay, if someone breaks into your house and stole all of your keys, this is a new concept in Bitcoin where your keys can be lost, but the Bitcoin isn't lost yet. Right. You could lose all of your keys and then we can have contingency availability for our ability to recover your funds for you. And this is a really powerful concept. As we were building out the product is understanding that the distribution of keys as distribution of risk. To be able to unlock traditional insurance players like Lloyd's of London to feel comfortable underwriting this risk, we're able to underwrite a policy up to $100 million per customer out of the box today. Wow. That's for each individual that we have the writing line capacity to go up to, and we can even go higher. It's just more of a manual process. Right. So I could throw it over to Becca shortly, talk about the insurance. But technically, what we have here, this also turns into a really great inheritance protocol. We can actually have your funds be recoverable where if you have a beneficiary, you have a spouse, or you have children, in the event you were to pass and your keys are now gone. Right. Because effectively, like, no one knows where they are, you can actually enable inheritance protocols where your heir doesn't need to know anything about how Bitcoin works to be able to recover those funds for you. Right. And this is on the technical side, how it all gets executed.
- [23:40]
Preston Pysh
There's a lot of people that just paused the tape.
- [23:45]
Becca Rubenfeld
I want to pause more about that.
- [23:48]
Preston Pysh
I know my family has no clue how to do this, and that would be really important.
- [23:53]
Becca Rubenfeld
Yeah, that's super important.
- [23:55]
Rob Hamilton
The one last thing I'll show is it just trust settles on Chain. I'll save the audience for this call, but this is actually what a bitcoin native smart contract looks like on Chain. For those that are listening, audio wise, I'm pulling up the transaction on mental space and these are all of the different spending conditions tested. And it's all natively settled on Bitcoin. Right. This is not, trust me, like, you can independently verify the execution of how this all runs and manages in a way where you don't have to worry about that. Right. So it's just an interesting concept of taking a traditional financial contract and also just extending the programmability of Bitcoin to offer new kinds of financial services.
- [24:28]
Becca Rubenfeld
Preston, will you scroll back down? Or rob, I guess it's your brain, will you scroll back down to the bottom of the vault configuration? Because the one thing that I Just want to make sure is crystal clear is at the very, very end when your insurance policy ends, if you don't renew with us for any reason, it becomes pure self custody. So the final time lock says right after your insurance policy ends, Anchor Watch and Lloyds of London no longer have liability. It becomes and it acts like a pure self custody multisig. And you're able to control that even without us. So if you tried to log in one day, the website is gone, Your like Anchor Watch is gone. As long as you still have your signing devices on the output descriptor, which we make sure you do, you would be able to use either Bitcoin Core or Rob has built a recovery wallet that he can speak to. But that long and short, short of it, it becomes self custody. It is self custody. And so you need to hold those private keys, that recovery layer and just to then go back to the inheritance thing, that recovery layer, that multi institutional recovery layer one I want to call out that is while you are in charge, because a lot of bitcoiners rightfully question any custody model where they are not in control. And transparently here in this layer you can see that the recovery layer is multi institutional. So it's Anchor Watch and our recovery partner. And it's there for a reason. Right. It's there to enable inheritance, it's there to protect you if you got your keys stolen or lost for any reason. But it is also insured. So very specifically in our insurance contract it says that if Anchor Watch misuses that layer, if we use that layer to effectively abscond with the customer funds that's covered by insurance. And so you're either protected by the tech or you're protected by the insurance, where the tech kind of itself can't protect you. And what we think we've put together is this holistic solution where you're really protected not just from like one point of failure, but from many points of failure. On the inheritance thing, like let's go back to it because I think like the way you reacted, it's the way we hear everybody react too, which is like, wait, so the treasure map that my wife is supposed to follow and like the scavenger hunt that I put her on that I'm just. Sweetie, I hope, hope this makes sense. Right? Like that's gone. That's gone.
- [26:47]
Preston Pysh
Yeah.
- [26:48]
Becca Rubenfeld
What I say is the only thing that I hope that I would really prefer is that she knows that you're a customer because then she would know to reach out to us.
- [26:56]
Preston Pysh
Yeah.
- [26:56]
Becca Rubenfeld
Even if she doesn't know you're a customer, we would still be able to recover the assets because we will collect from you. Let's just use you as an example. We would collect your primary beneficiary and contact information and the secondary beneficiary. And when we're getting to the end of the year where we're like, hey, Preston, it's time to renew your insurance contract, we want to turn over the time locks, let's get together. We don't hear from you, right? So then we start emailing more. We're trying to get in touch with you. We're not hearing back from you. Your policy then lapses, it goes to self custody, which is okay, Right? And we'd be sending out notes being like, preston, it's okay if you don't want to continue with Anchor watch, but just keep in mind next week your vault is going to be pure self custody. We want to make sure you have your keys in a safe location. Best of luck. But like, just one last warning, right? That you're going into self custody. 3 months and 90 days after your policy has ended. If we didn't ever hear from you, we will actually start looking for your beneficiaries. So we will be reaching out to her. We never take ownership. Like, we never claim that because we haven't found her yet, that it's ours.
- [28:02]
Preston Pysh
Yeah, it's.
- [28:03]
Rob Hamilton
Yes.
- [28:03]
Becca Rubenfeld
And we're looking for your beneficiary, your secondary beneficiary, and eventually your estate with probate. And we're looking for the rightful honor. And when we find that rightful owner, the bitcoin will be returned and we would help them. If she wanted to continue hodling and wanted to be our customer, we would educate her, we'd get her set up on a brand new vault. We would take that on. No additional fees for that, no additional recovery fee. If we do end up helping somebody after passing away, it's all just a service for being our customers. If she needs to liquidate it to deal with family things, we would just assist. And so what we like to say is that you're protected from the range tax, you've got the insurance from all these different failures. But man, inheritance is scary and that treasure map is scary. And we have just removed that fear, that confusion, that trust. I give the story of before our platform was built, doing my own treasure map, right? And I, I tell this story that I, I think I did a good job. It was clear and I went through with my son and other family members and said, okay, all you have to do is start in this one location. If you start here, you'll be fine. It's all written out. It's very clear. It's got helpers. Just. Can you start in this one location? Yes, absolutely. About four to six months later, I checked in with all the different people, three different sets of family. None of them knew what I was talking about. I'm not surprised I was able to like, yeah. Get them there. But it was very troubling. And so I think I. That was always top of mind when we were designing the inheritance protocol.
- [29:40]
Preston Pysh
I think everybody has the same family dynamic for a bitcoiner. Yeah, scary.
- [29:47]
Becca Rubenfeld
Rob has been helping. Like, people have reached out to Rob and I mean Rob, if you want to. Briefly. Yeah.
- [29:52]
Rob Hamilton
I mean, people get to this place in bitcoin where you're the bitcoin guy. And so I've had to deal with grieving widows, parents of kids, and it's not a place you really want to be in. Right. And so independent of, you know, what we're talking about with our product, just like make sure you have an understanding and you've actually tested your backups and your recovery process. You could have it just be like, pretend you don't exist and tell your loved ones to make sure that they can access your bitcoin. Right. Like, these are just things that are just part of your ongoing hygiene. I like what we've built as a way to kind of clean that up and make it very. Have a trusted person who's able to step in and help you out. But independent of however you choose to hold your bitcoin, I think it's an important factor. Something that is also. Yeah, yeah.
- [30:32]
Preston Pysh
Something that I think is really important for a listener of this, especially somebody who isn't self custodying their coins. And maybe they're just having IBIT in their stock ticker.
- [30:43]
Rob Hamilton
Sure.
- [30:43]
Preston Pysh
They're listening to us talk about all of this and I imagine what they're thinking in their head. And this is probably a lot of the people in our audience, they're thinking, why would I go through all this? Why wouldn't I just own ibit? Like, And I guess my answer for the person is there, I suspect, and I think you guys both agree that there's tremendous value, especially in the coming 10 years for people that actually have control and custody of their coin. As an example, we have the director of Fannie Mae Freddie Mac that just came out recently and is saying that your credit worthiness for a loan can be actually tied to your bitcoin. Holdings. And so if you actually have control of the bitcoin and you're willing to put it on deposit at an institution, you can now use this as collateral to go out and get a loan for going and buying a house. If you've got $100,000 of an IBIT ETF or whatever, that may not be the same setup or same scenario. The fact that you actually hold the keys comes with. I mean, it's just, this is just human nature, folks. Like if there's something hard to do, usually there's a reward associated with that hard thing that you're doing, which is custody own coins. So for you guys, as you're looking at this, help people wrap their head around some of the. Maybe get into this story that just happened with the family Freddie Mae and just kind of like how you see a lot of this kind of transpiring in the future and why self custody is so important.
- [32:12]
Becca Rubenfeld
Well, I think what we're seeing a lot of this year in particular in 2025 in particular, is actually bringing bitcoin up to match. So before there were actually some pretty. Not from a bitcoiner's perspective, but as like a tradfi normie perspective, there were some downsides to self custody. You couldn't borrow against it. It wasn't to what you're talking about. It wasn't considered part of your assets when you were trying to buy property. There were all these kind of limitations to self custody. There were positives too, right? Like that we'll talk about. But all those limitations this year are being removed. There's plenty of ways you can borrow against your bitcoin, right? There's lots of providers coming on. And then most recently this FHFA guidance from Fannie and Freddie. What it's saying is that now if you own bitcoin, unlike a month ago, the bank is allowed to take your ownership of Bitcoin into account when they determine if you are eligible for a mortgage. So it's not going so far as saying they will accept Bitcoin as collateral for a mortgage. I think there are providers, there's a couple of providers in the bitcoin space starting to, starting to look into that. But the guidance is saying, look, bank officer guy assessing this particular risk, right? You are allowed to look at that. And I think that is a huge, huge bullish indicator. I think it's huge. Like bitcoiners have a really hard time getting mortgages if their net worth is in bitcoin. And so just to say, look, you can at least like take my income into account and then yeah take my bitcoin holdings into account and give me credit for that on the limitation side or why I think it's like a great first step but we got to, we got to keep really educating the regulators and I think Anchor Watch is, is in the right direction. Here is the current guidance from that was in Pulte's letter to bank officers. It specifically words the guidance as you can use the Bitcoin in your assessment if it's held at a regulated exchange. So that was the specific words used and I tend to think that that is more just a particular wording and we as an industry have the opportunity to educate them because why would they do that? They would say like what the spirits of what we're trying to get at for the banks purposes is. What we're trying to get at is assuring the bank that if they claim to have this bitcoin, it's real, it's somewhere it can be verified. And so I would just say like okay, that's, that's a start.
- [34:47]
Preston Pysh
Yeah, it's a start.
- [34:49]
Becca Rubenfeld
The banks, the bank should be healthy. Right?
- [34:52]
Preston Pysh
Well Rob, let me, let me just say this. From a risk standpoint your model is way less riskier because it's not funds on the exchange.
- [35:00]
Rob Hamilton
This was actually what I was exactly on that point. The risk hold us back to the insurance because we've been going into the tech side of this. The reason I've been self custody in Bitcoin for over a decade, the reason why I do is this understanding of managing my own risk right. And that the reason why I wouldn't want to hold an I bet versus spot Bitcoin. Personally it has like for me it ultimately comes down to understanding and in control of my own assets and risk management around that. To tie this into the insurance and the risk piece. The ETFs largely use Coinbase. A lot of the treasury companies use Coinbase. There's maybe three, four players out there of where these funds are currently sitting today. And for me I view this as an aggregation of risk and the insurance coverage that exists at these players is fractions of a penny on the dollar. I think it's public that Coinbase has somewhere like 3 to 350 million dollars of COVID for their assets. One they have like tens of billion, hundreds of billions. I think it's in assets. I think was the number back at like 300 billion between Bitcoin sounds like and all of the crypto assets. $400 billion. So you're talking like a fraction of a percent of coverage. You don't know as an individual retail customer if people have seniority in the debt claims. Typically larger account holders get seniority and debt claims in the event that you're an unsecured creditor and something goes wrong. So you're at the back of the line, you're not named in the insurance policy directly. What we did was the bundling of this tech of securing your coins and tying them to your insurance policy gives you that full risk transfer. Risk transfer and buying and selling insurance is a whole segment of risk management that has been entirely non existent when it comes into the market for Bitcoin today. What we've had is risk distribution. Like you could have a multi sig, all of your eggs aren't in one basket. But actual the financial contract of risk transferring has been non existent. And so on that insurance side, and even taking it, we've been talking about like the individual, like inheritance. I view this as just like corporate governance and control. Why would you not want to have your money secured somewhere where maybe you have a trusted person who's able to step in, kind of in a role that we're sitting in, but also know that baseline, that money can't move unless you explicitly authorize it cryptographically. Right. And I think that's like kind of the big leap of what we've built out here. We can have multiple users. Right. You can have your CFO and your CLO and your CEO all have different accounts, each holding keys, being able to abstract this out. And if your business is managing Bitcoin, I think fundamentally the biggest risk of these treasury companies in aggregate is something were to happen to the coins being customized.
- [37:32]
Preston Pysh
Absolutely.
- [37:33]
Rob Hamilton
That has to be the foundational risk. Yeah.
- [37:35]
Becca Rubenfeld
There's disclosure in the bottom of every ETF that says, by the way, this is uninsured. If the actual Bitcoin that under like that underpins the ETF is compromised. Yeah, the ETF becomes what I'll say.
- [37:51]
Rob Hamilton
Actually for those that are more interested in holding ETFs, I always throw this out as an interesting consideration. Fidelity self custody. So if you're actually thinking through a risk distribution lens and you want to hold Bitcoin, ETFs have exposure to FBTC because they're at least not correlated with this entire segment of risk. And this is like this is something in insurance and in gambling. I used to play poker. This concept of risk of ruin. You never want to be in a position where one assumption falls apart and it has this larger Cascading effect of like irreparable, like irreparable loss. That is what we're mitigating around. These different keys, these different setups. You having a named policy, being able to have this comprehensive set of coverage. I think this is just an obvious step as the ecosystem and capital formation matures. Like with all of these treasury companies I've talked about, like, it's almost like the initial capitalization of Bitcoin banks. Like, I just view it as like, you have these, like, you have these corporate entities that are accumulating massive amounts of Bitcoin and it's going to get to a place of maturation where they're going to want to do things with that Bitcoin. Eventually, as the arbitrage opportunity closes and they now have a large bitcoin position, they're going to want to do other things. You're going to want, I think foundational to all of these is the custody of the asset itself.
- [38:59]
Preston Pysh
Yes.
- [39:00]
Rob Hamilton
Your entire asset of what your company is worth is sitting somewhere else. It's like if I was Apple and all of my proprietary tech in my asset was sitting in Amazon somewhere else. Yeah, yeah, right. It's sitting somewhere else. Right. And you're at the mercy of them. And I think that's just viewing Bitcoin and this is kind of like the evolution of the ecosystem. Bitcoin has been viewed up to this point largely as a software technology play. And that's why people charge it like a SaaS model, where you walk in the door. It's a SaaS model, but we charge you based off bips of like, how much the money is worth, even though, like, at a certain scale it doesn't cost. Like, you understand Bitcoin. Yeah. To be able to send one bitcoin to it versus 10,000 bitcoin to a single address. It's the same amount of security and overhead to be able to manage that. Right. So it's a great business where you get to accrete all of this right to your bottom line as a SaaS business. But if you view Bitcoin as a capital asset, the actual fix to this is a risk transfer and insurance market of Bitcoin actually being treated as such. Yeah. Like as a capital asset. Let's take a quick break and hear from today's sponsors.
- [40:02]
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- [42:18]
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- [43:32]
Rob Hamilton
Right, back to the show.
- [43:34]
Preston Pysh
It's amazing because at the core of what banking was like, you go back 500 years ago, banking was hey, you give me a gold bar, I will give you a paper receipt. I'm not going to issue more paper receipts than what's in the vault. And then I'm going to do a really, really good job at making sure nobody can get the gold in the vault. Like that's the job of a bank. And we have under this fiat fractional reserve like monster that has existed over the last hundred years, we've just gone so far away from what it is banks do which is secure and custody and don't issue more paper on top of it. And you guys are like demonstrating what banking is, is and why it. Because at the end of the day the people, if you got a billion dollars, you don't want to just like secure that in your bedroom in a safe right like you, that's a lot of value. You need to do something that actually has real security and safety associated with it.
- [44:37]
Becca Rubenfeld
So yeah, well all these, let's say more advanced financial products that will be coming out that are built on top of Bitcoin. I think at least the first step or the required step is to ensure that whatever the supposed amount of bitcoin is that's underpinning the financial products, at least we can start by saying look, if there's paper bitcoin being created, it's clear and the amount of real bitcoin that's underpinning the paper is clear. So proof of reserves, the bitcoin is where it like this is all provable. So you actually there never need in bitcoin, there never needs to be a question about where the bitcoin is. And so I think what we built is just something that we built with that premise from the very start which is like the tech, the custody, like it enables lending and enables escrow. You can use it for so many different financial products, that's fine. But at the core of it, at the base layer of it, there's X amount of Bitcoin. It's held in these locations. It's verifiable. We can do proof of assets, we can do proof of reserves, like truth.
- [45:47]
Preston Pysh
You know what's interesting?
- [45:48]
Becca Rubenfeld
Bitcoin should be there.
- [45:49]
Preston Pysh
To, to your point here, Becca, one of the issues that a lot of the talking point that a lot of people have had with proof of reserves is there's no proof of liabilities. Okay. This is, this is a really interesting dynamic with the Bitcoin treasury companies because in order to do the, the sailor move, the strategy move, you have to have access to public markets. You can't do this in private market. You can't go out and get the liquidity in a private market to issue more common stock or to go out and issue more preferred stock on the day and raise capital and do this thing that they're doing. And what I find so fascinating about all of this, almost like it's intended to go in this direction, is with a publicly traded company now, the proof of liabilities is really kind of being solved for.
- [46:39]
Becca Rubenfeld
You could.
- [46:40]
Preston Pysh
Right.
- [46:40]
Rob Hamilton
Yeah, it's really crazy.
- [46:42]
Becca Rubenfeld
Their big four really are doing.
- [46:44]
Rob Hamilton
Yeah.
- [46:44]
Becca Rubenfeld
A solid on that. Yeah. The accountants are actually open to sell it quite a bit.
- [46:48]
Rob Hamilton
I also just love the juxtaposition to crypto where the whole critique the whole time was that you were doing unregistered fly by night securities and it turns out doing a registered security and just going through traditional disclosure processes and running an honest operation and doing that.
- [47:03]
Preston Pysh
Yeah.
- [47:03]
Rob Hamilton
Is actually the capital unlock. Like who would have thought that like doing your audits and doing your quarterly filings and doing all of these things and just running an above board business is actually the way you unlock the next tranche of institutional capital.
- [47:17]
Preston Pysh
Yeah.
- [47:17]
Rob Hamilton
It's massive.
- [47:18]
Preston Pysh
And it's just, it's not lost on anybody that's watching this very closely is you're looking at how much microstrategy is growing and how much they're able to compound by implementing this strategy. And you're comparing it to a traditional bank that for all intensive purposes is just fully engaged in the Ponzi scheme and of fractional reserve banking. And MicroStrategy's eating their lunch by being full, not just backed one to one, but like backed five to one. And you would think that that would be impossible because they're playing the game in a very fair way in which all participants in that system are winning, whereas the other one is one team is clearly winning and everybody else on the other side is los.
- [48:07]
Rob Hamilton
And really interesting the intersection of this too is the convertible debt notes, which was Saylor's first move. Yes, I'm going to take my cash, I'm going to buy Bitcoin. On the convertible debt side, the largest buyer of the convertible debt is Allianz, the insurance company.
- [48:19]
Preston Pysh
Okay.
- [48:20]
Rob Hamilton
And the reason why is that because if you are familiar, remember with the FASB accounting rules, there was a certain statutory standard on how you would do all of this gap accounting for Bitcoin and it would be very, you would have to mark to market at the lowest price in insurance at a very high level. The health and strength of your insurance company is how big your surplus is. And that gives you leverage to write more and more policies the more you have in reserve. Today in the United States, insurance is a state by state regulated industry. And there is a self directed, like a self regulatory body called the national association of Insurance Commissioners. So every state and territory sends their own insurance commissioner and there's this loose governing body. Bitcoin is an unadmitted asset, meaning if you have a billion dollars of Bitcoin on your balance sheet for your insurance company accounting, you get zero dollars and zero cents credit on it. But these convertible bonds don't fall under that registered bond of a publicly traded company. And so now you can get the Bitcoin call option in the upside and not blow up your balance sheet in the process. Wow.
- [49:20]
Becca Rubenfeld
Yeah.
- [49:20]
Rob Hamilton
Yeah. So this is a massive piece of like the understanding of like there's so much capital sitting out there that is looking to get Bitcoin exposure and they are statutorily blocked from doing it. So you walk in and they're like, yeah, I'll take a 0% coupon to get the call option on Bitcoin all day with a portion of my balance sheet. And it's a perfect thing too when you think about it. Insurance companies have a massive duration problem where they have liabilities that extend really far out. It's just structurally a better way to get that exposure. And the nature of how our product works is also a nice yin and yang because let's say, Preston, if you're a customer and you had an issue that doesn't impact the rest of our book. Whereas if I'm just insuring Coinbase, the likelihood that an incident for a file claim happens just at Coinbase and it's only going to be for $20 million and not like all of the money is like you have a high concentration in a couple of key players. Whereas for us, we're enabling that risk distribution. So you have more than just the big four or five custodians to help managing stuff.
- [50:15]
Preston Pysh
So this would be like.
- [50:15]
Rob Hamilton
To get exposure on both ends on the capital side and the buying and.
- [50:19]
Preston Pysh
The selling of insurance in the physical space. This would almost be like you're a bank. You're custodying customer deposits, Right. But you've put a thousand different lockboxes in a thousand different places all over the world that if you go to. If you go to the front door and knock on the door to. To rob the bank, it's not there. Right. It's all spread out because you're in cyberspace.
- [50:42]
Rob Hamilton
Exactly right. And this is the asymmetry and what we're able to offer and why we were able to get the underwriting authority. We did. At $100 million. Yeah. Because if it was just. Let's just say it was just anchor watch and it was just us managing keys for other people, we'd be the same exact position as all of the incumbents. All the risk is sitting in one spot.
- [50:59]
Becca Rubenfeld
And to be clear, like companies like Allianz and others, they will use this market and these treasury codes to get exposure to Bitcoin. Okay? So remember, insurance companies, big ones, make money two ways. They sell insurance, right? So they make money off premiums, and hopefully their stats were good, are enough to cover their losses. And then with that pile of reserve capital, they invest it for a secondary revenue stream, which is investment returns. And so what Allianz and others are saying is like, hey, okay, I'm allowed to invest a portion of my giant pile of bajillions of dollars. I'd like some exposure to bitcoin. I can't have it because I'm impaired if I have it. But now there are these bonds, and so do I have bitcoin? I don't. And that's too bad. But what I do have is some exposure now. And so that I'm allowed to do. And so smart insurers, Allianz leading the way, are saying, that's a really good way to juice my investment right now. And remember, the investment, sorry, the insurance industry, there's $7 trillion. That's how much money is sitting there. And Allianz has made a little. A little sprinkle, right? Yeah, it's huge. And that is just in today. So that's something that can start happening today. And then the future, the flywheel that gets turned on is where then those Insurance commissioners that Rob mentioned and the NAIC say, you know what, just like the FHA FHFA letter that we talked about a few minutes ago, just like that, we are advocating to those insurance commissioners to say, you know what, at this point in bitcoin's maturity in this asset class, we're not going to say that it is an unadmitted asset and you get zero credit. We'll give you 50% credit. We'll give you 75% credit. Maybe we'll just give you credit. Right. Maybe we'll make it an admitted asset and we'll just treat it like it should be treated in its dollar value and it's mark to market. When that happens, then we start denominating bitcoin in or, sorry, denominating insurance in bitcoin. Right.
- [53:11]
Rob Hamilton
Watch out.
- [53:12]
Becca Rubenfeld
There's pros and cons. Actually, in today's world, we're not on a bitcoin standard. Companies are not on a bitcoin standard for the most part. So they have to do their books in dollars. So there's reasons that the dollar denominated makes sense. It makes their insurance expenses predictable in dollars. Right. It gives them access to the current market, the A rated, A plus rated current market. They want that. They need it. Sometimes it's required. So there's reasons to do denominated in dollar policies. But bitcoin denominated is where we're headed. We certainly believe as an industry. And what that looks like is something a little different. That's where Allianz and the other insurers out there, they actually have bitcoin in that pool of capital. That's what the transition is. So now they have.
- [53:56]
Preston Pysh
This is such a big deal. This, what you're talking about is such a big deal.
- [54:00]
Becca Rubenfeld
This is a big deal.
- [54:01]
Rob Hamilton
This is the original idea. Beck and I got really excited about building Anchor Watch. We realized we had to sequentially build out steps to get there.
- [54:08]
Preston Pysh
Yeah.
- [54:08]
Becca Rubenfeld
And. And so now they have this pool of capital. A lot of it is still fiat, but now there's bitcoin in it too. And the bitcoin can underwrite bitcoin denominated insurance. So instead of always having to be like, okay, well my bitcoin is currently worth a million and I bought a million dollars insurance, but then the price is fluctuating and I'm always having to do that when we go to bitcoin denominated, first of all, that's abstracted away. So now there's. Now you also don't necessarily know how much your insurance bill is going to cost in fiat. So there's trade offs, but you certainly know what your coverage is. You are maximally protected on the Bitcoin side. And now that Bitcoin and those reserve pools, that is a yield generation machine, that is a new way, an additional way to take what historically has been a relatively unproductive asset in terms of generation. Right. The value went up excellently. But in terms of using as a productive asset, now we can do that with insurance. And so now an investor can say, you know what, I actually want to put my Bitcoin in that pool of capital because I understand it's not risk free yield because I'm literally underwriting insurance risk. So it's not risk free, but it is very predictable risk. There's a prospectus, there's historical lost information because Anchor Watch has been running this policy on fiat side for a while. So we now have safe. Their custody platform is.
- [55:32]
Preston Pysh
And that's going to be a huge part for you guys long term of people wanting to make deposits on your platform as you have the history and that's right. Yeah.
- [55:41]
Becca Rubenfeld
And so now, wow, we are raising that. We and others like this is where the whole industry will head, I believe. Yeah, we raise Bitcoin. We say, okay, investors, whether you're a Treasury company or yeah, a whale or a bank or whomever, okay, you've got Bitcoin that you want to deploy. We will take that Bitcoin, it's going to sit safe and sound in cold storage, it's going to serve to underwrite insurance risk and we will deliver you a annualized return on that capital of X percent. It can be debt based or equity based and ultimately it allows them to put their Bitcoin in a productive place where we're paying them yield, but it's still relatively safe, meaning that the losses are predictable. And you're doing so not only gets you that yield, but it actually encourages continued ongoing investment into Bitcoin because it lowers the cost of lending, it lowers the cost of capital, it makes capital allocators in tradfi feel comfortable, feel safe. Okay, there's price volatility, risk, but now I don't have losing the.
- [56:49]
Rob Hamilton
What's fascinating about this too, a small half step back into time locking Bitcoin. The 5,000 or so Bitcoin on the Lightning network are time locked. Most Bitcoin isn't. You can leverage this tech and you can actually start locking up the float of supply of coins floating out there into these kind of financial contracts. And arrangements. And we could build that out where like this is your insurance pool. We have certain tranches of being able to pay out. Maybe you have a coupon clip from a share of the premiums that gets time locked and earned to you over time. And you're starting to take coins off the market again. Like literally the coins cannot move until like these certain covenants or certain restrictions are open and available.
- [57:21]
Preston Pysh
That idea of people taking their bitcoin to put in the vault to back up insurance policies, they're getting paid yield. All I can keep thinking is we're locking up massive amounts of bitcoin and what in the world does this do to the underlying price? Like holy moly.
- [57:40]
Rob Hamilton
We live in a world where no one really uses time locks except for the lightning network right now. And if you could start thinking about this like we started with insurance because it's so foundational to the custody and the safety of it. Any financial product, a bitcoin bond, if you want to do coupon clippings and locking up the the principal and like over time. It's also almost like an on chain native yield curve too. Like Saylor's doing it with all of his different preferred offerings.
- [58:01]
Preston Pysh
Yeah.
- [58:01]
Rob Hamilton
On the financialization side you can mirror that on the technical side and just start taking coins out of the circulating supply and it's very safe. Understood tech time locks have been in bitcoin for over a decade. It's how the lightning network works. This is not, I did not in my basement discover or implement time locks. This is something that's very just codified into how bitcoin operates and runs. And this is kind of like what.
- [58:22]
Preston Pysh
Do you think that that would pay? And I know this is a really far.
- [58:27]
Becca Rubenfeld
Here's what I'll just say for some context.
- [58:30]
Preston Pysh
Double digits are single digits.
- [58:32]
Becca Rubenfeld
What's that?
- [58:32]
Preston Pysh
Double digits or single digits?
- [58:34]
Becca Rubenfeld
Here's what I'll say. Okay, here's what I'll say. We know that bitcoin owners, investors were willing to hand over the keys to their bitcoin to earn yield in the blockfi and others of the world. They were willing to take on relatively, not relatively very high risk trading strategies. First for 8% and then they were willing to do it for 6%, then 4%, then 2%. So Bitcoin investors have shown an incredible risk tolerance for relatively low yield. I think this product to be a long term viable product is something where both sides will be taken into account. On one side we know what the market investors are willing to accept. And so we'll be looking to offer competitive rates, meaning attractive. Right. Like, and it's important to have long term aligned investors who understand what we're doing so. And who are going to do it for a long time. Right. Because insurance needs to be very stable. So we'll be looking to offer yields that certainly work well for us. Maybe it is more affordable than fiat insurance. Right. Because we maybe have to pay less for the capital than we would in fiat side. Yeah, but it will be attractive. It will be attractive because we are trying to attract investors to that.
- [60:01]
Rob Hamilton
There are two things, I'll say. One, it's ultimately a market force. Right. When everyone thinks of insurance, they're usually viewing it as the customer buying insurance for someone. There's a certain rate of cost to get the insurance. The other side of the desk though is I have this massive pool of capital as an insurer or a reinsurer and I need to deploy this risk into different buckets and each of those get me different kinds of returns. Property and casualty, which is kind of like one half of the insurance bucket, but the other half being life and health insurance. So property and casualty, which is kind of the world we live in. Reinsurers are earning low teens, mid teens as their average return on equity and capital for this stuff. And that's just like how that works, how it's going to work in our market. It's a new market, so who's to say, right? But it's going to be a supply and demand dynamic of what are people willing to pay for their insured custody and then balancing the supply and demand curves on both sides and finding out what that market clearing rate is. But what I find so fascinating about it is that insurance gets its leverage not through kind of lending and borrowing, but through risk distribution. And the fact that you can get for every, you know, no insurance carrier is dollar to dollar or bitcoin to bitcoin backed because then the unit economics don't scale. But if you can prove over a long enough time period with your actuarials and your provable like loss rates, how scalable and kind of like the expected rate of returns, you're able to start modeling that out. And you can offer that in different tranches too. Like this is where the entire world of insurance comes in, where you have maybe the first dollar loss has a much higher yield because you're more likely to have some loss versus no loss. And then you actually have a whole yield curve. It's called a risk tower in insurance. Right. Let's say if the losses are over a billion dollars, then my tranche of capital starts paying and that has a lower yield because it's safer because up to a billion dollars you don't have to pay out a penny. But if it's over $1 billion you have to start paying. Right. So this is like the many layers of financialization to be kind of built out and discovered and kind of like flesh through. But I also, at the end of the day I view this as like structurally this is where bitcoin custody is going to go. And that's why I talk about these treasury companies becoming the new version of bitcoin banks because they will have a pool of bitcoin be able to underwrite this risk. They'll be safely understood, it's aligned for them.
- [62:06]
Preston Pysh
They want the additional income.
- [62:08]
Becca Rubenfeld
Yeah.
- [62:08]
Rob Hamilton
And income stream. And also it's distributing the risk. So all of the treasury companies aren't using the same three players. Yeah. And the nature of like how our tech is being leveraged, you can have the best of both worlds. You can have an enterprise level security solution that has to co sign but they can't abscond with the funds without you coordinating.
- [62:25]
Preston Pysh
The thing I love about it though, Rob, at the core is you are incentivizing the person who does custody the safest.
- [62:34]
Rob Hamilton
Right.
- [62:35]
Preston Pysh
And has the best way to actually do this thing called banking and security. Right. That's where these treasury companies are going to want to stick the bitcoin. They're not going to want to go stick it on some exchange that has a black box of just trust us bro, it's safe.
- [62:50]
Rob Hamilton
Yeah.
- [62:51]
Becca Rubenfeld
We call it fiduciary flight, where when you're a fiduciary and you have responsibility for these massive, this massive amounts of wealth, where are you going to put it? Are you going to put it with the honey pot, the uninsured honey pot? Are you going to do it in the most advanced way to distribute risk backed by the additional protection layer of traditional insurance. And we think because these two options are quite comparably priced. Right. So there's not like a massive delta right now in the marketplace between uninsured and insured custody. There's a delta, but it's not massive. And so given that as fiduciaries become educated and being like way full insurance is available and it's only bips more than uninsured. Yeah. How can I do that? Or how can I go with the honeypot? So we're out here, we're building our name, we're building comfort in the commercial Space and getting them comfortable with us and the platform and love opportunities to show off the security model and everything like that. But it's going to be really big. I mean it is going to be.
- [63:57]
Preston Pysh
While you guys were talking there in this last 15 minutes, you know, I didn't usually I wait till we're done recording to write down the title of like what the show is going to be. But like it is so crystal clear. The future of insurance. This is the future of insurance. Good lord. This is crazy.
- [64:15]
Becca Rubenfeld
Yeah. And you might ask like, why not already? So why did Anchor Watch start with fiat denominated policy? So one reason is, is what we described about the regulators and not admitted assets. The other reason is that to have this future, like there just needs to be sufficient volume. Right. Because there are hundreds of. Anchor Watch already has been offered casually hundreds of thousands of bitcoin to put towards this. Every company that has bitcoin is like, yeah, that's a great story. I want to put bitcoin into that collateral pool.
- [64:51]
Rob Hamilton
Yeah.
- [64:52]
Becca Rubenfeld
In order to pay all these investors yield on their bitcoin, the insurance has to be sold. So. Right. You actually meet. The flywheel needs to be on. Right. And so we're in our first year of operations. There's other insurance players trying to figure out how to enter this space. Right. And so we need to get the volume up to just support the volume of investment.
- [65:15]
Rob Hamilton
Yeah.
- [65:16]
Becca Rubenfeld
I would love to be like, yes, then that's all 200,000. But it's.
- [65:21]
Rob Hamilton
I think it's coming fertile yet. Yeah.
- [65:23]
Preston Pysh
I think everything that's happening from an admin policy standpoint, now that the floodgates are being turned on, this is all going to start going.
- [65:32]
Becca Rubenfeld
It's going to three to five years. Go ahead.
- [65:36]
Rob Hamilton
What I love about this whole story is not is it just a massive capital opportunity, it's an actual alignment of actors where I can custody my funds somewhere and. And it's insured. Like you're talking about consumer protection. Right. Like how it's being managed today is not it. It is a fly. We're in the wild west days of the early formation of just bitcoin as an industry and it's gone because there was no better option. And this linking of the capital markets, there's a massive financialization and opportunities to make money and put bitcoin to work as a productive asset. But it also just at the end of the day protects consumers. So it's a very virtuous like alignment of this, of this piece of insurance. And just as the one Piece like insurance started like underwriting ships, doing spice trades all over the world. It underwrote the expansion to build the United States of America, like the financialization of capital markets for risk. And like Lloyd's. One of my favorite things is when people say that insurance is fiat, is one, it predates fiat currency by hundreds of years and two, it's the ability for you to be able to take risk in the world and being able to step forward and like take chances and not be totally destroyed if one thing goes wrong. It is a massive capital for capitalism. It's just a massive entire vertical and industry that I think it's a bad rep because you have state mandated health insurance and you have state mandated car insurance and all these things. But like foundationally it's such a beautiful way for just making bitcoin a safer asset for people to hold and have all these other positive flywheel effects too.
- [67:00]
Becca Rubenfeld
On capital formation with all investment, all investment, right? It's a risk reward calculation that somebody is making. And when you de risk various aspects, their appetite for investment goes up. So lower risk, more investment. And where you can see that already happening is bitcoin backed loans. Really every loan provider is talking to us like, hey, both our liquidity providers and our borrowers, like both sides are both saying like, hey, we would feel better if the collateral is insured. Banks are saying, hey, we don't let you have a mortgage on a house unless that house is insured. We're just simply not willing to do this deal unless the collateral is insured. The same premise, what we see is that everybody wants the collateral insured on bitcoin backed loans. As it's insured, more lenders are willing to come in. Brings down the cost of capital, right? Because we have eliminated a portion of the risk that we can through technology, through cryptography, through distribution of keys, we have eliminated a portion of the risk. So banks, even though you don't, maybe you're not bitcoin experts, but you can feel confident because it's insured. You don't have to understand the bitcoin part, but you do understand insurance. And okay, all right. All that tech stuff, you just explained that I'm nodding my head like I, like I understand blockchain, but really I understood none of it. But I do understand that at the end of the day it's insured. Okay, that's interesting. And it's insured by an A plus rate. Okay, like okay, all right, we're willing to do this, right? And we're seeing that today So I just. I think we're going to see that, but on a macro level.
- [68:40]
Rob Hamilton
Yeah.
- [68:41]
Becca Rubenfeld
And I think the next three to five years is like when you say, yeah, it's the future of insurance. Yeah, yeah, let's put it. Let's put a note on our calendars for three and five years from now, and let's see how insurance has changed, because I'll bet it's going to have changed a lot to the benefit of bitcoin.
- [68:55]
Preston Pysh
All right, do you guys want to hear the stupid.
- [68:58]
Rob Hamilton
Yes.
- [68:59]
Preston Pysh
Guard duty story? I'll make this quick.
- [69:02]
Rob Hamilton
I love it.
- [69:03]
Preston Pysh
I'll make this quick. So this is my second year at West Point, and it was always the worst when we're out in the field. This is during the summer. This is obviously not during the school year. The summer you go out, they put you in the woods, and you have to pull your guard duty. And sometimes your guard duty is like, oh, Preston, you got guard duty from 3am to 4am you gotta wake up, you gotta go out there, you gotta sit there. And because we had weapons with us out in the field, you'd have to sit there in the. At the arms room and make sure the weapons didn't leave the arms room. And I was. I'm tired. You're out there slugging around in the woods, like, all day. It's miserable. You haven't had a shower. Just, like, all of it, right? I remember I'm sitting there and I'm guarding this. This guard. Quiet, not a peep. And this skunk comes up. This. This skunk just starts. He's just walking right up there like, hey, bro, how you doing? I'm sitting there, and all I can think of, my head is, if that thing sprays you, you're always going to be known as the guy that got sprayed by during the summer camp while you were on guard duty. And I have never in my life stood so still. Like, didn't move an inch for at least the thing didn't move. It came trotting up there, sniffing around. He knew I was there. He was just kind of like, yeah, I see you there. Like, are you gonna freak out and I'm gonna spray you, or are you gonna sit there and just like, let me do my thing? And he went up there. He took his sweet time just meandering around. And thank God. Thank God I did not get sprayed by this thing and be known as the skunk guy or whatever.
- [70:48]
Becca Rubenfeld
You would. Absolutely.
- [70:51]
Preston Pysh
If you could have seen my heart rate, like, it just went a million. I was like, oh my God. But anyway, that's my, that's my guard duty. That's my anchor watch.
- [71:03]
Rob Hamilton
There you go, the anchor watch. That's right. That's right.
- [71:06]
Preston Pysh
Guys, if people want to learn more about you, more importantly, if you have somebody that's listening to this from Wall street or you have somebody that's working at a large institution and they're here in this conversation, they're like, oh my God, like, like this is going to change all of insurance. Who is that? What's their call to action? How can they get in contact with you so we can start getting this thing going?
- [71:28]
Rob Hamilton
Yeah. Anchorwatch.com if you're interested in a policy, you can sign up for our newsletter. You can reach out to Agent A G e n t agentchorwatch.com if you're interested in a policy. If you're on the commercial side, didn't mention it, but everything I showed and demoed is totally white labelable. So if you want to run your own custody solution and kind of go tap it in and leverage our infrastructure so you don't have to go figure out how the bitcoin stuff works, you just want to run your own banking infrastructure. Like we're in conversations with multiple people right now around that. You can reach out to myself at rob@anchorwatch.com and then becca@anchorwatch.com and the last.
- [72:00]
Becca Rubenfeld
Thing I would add for that particular audience as well is we can also do custom policies and very large policies. Okay, we can do billion plus policies for a given entity. It's just going to be custom where we're going to go through underwriting and write a formal business plan for Lloyds and we're going to advocate on their behalf to get them a policy that size. But we can also cover unique things that are not on our platform as well. We're working with multiple commercial entities to write custom policies for bitcoin being held in different ways and we just have to assess each one of those individually. So if you're an institutional player, what we've described today, you're like, wow, the concepts are really interesting, but it doesn't exactly fit our business model. Definitely just reach out to us. Hit us at Becca or robankorwatch.com, either one of us and just let us know what you're trying to do. We'd love to chat about it and chances are we'll be able to help you out with anything bitcoin insurance related.
- [72:58]
Preston Pysh
Guys, I love it. Thank you for your time to come on the show. Today, Becca and Rob. We'll have links in the Show Notes if you guys want to reach out to them. Thank you so much.
- [73:07]
Rob Hamilton
Thanks for having us on.
- [73:08]
Becca Rubenfeld
Thank you for listening to tip. Make sure to follow Bitcoin fundamentals on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to theinvestorspodcast.com this show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.