March 29, 2022
Podcast: Where will the crypto dam break?
In this episode of Fintech Thought Leaders by QED Investors, QED Managing Partner Nigel Morris is joined by Bitso CEO Daniel Vogel, Tribal Credit CEO Amr Shady, Shakepay CEO Jean Amiouny and QED Investors Partner Matt Burton.
Tune in to learn:
- [10:01] Why Bitso CEO Daniel Vogel thinks increased mind share is leading to a plethora of ideas, a ton of collaboration and a magnitude of innovation.
- [14:50] Why crypto and web3 is past the point of no return.
- [16:32] How web3 is going to remove inefficiencies and friction in the current financial systems.
- [23:16] How El Salvador banked the majority of its population with an app that runs on a payment system that is built on open source standards.
- [29:51] Why Shakepay CEO Jean Amiouny believes the crypto dam will break when people stop or start trusting less the institutions around them that support money
- [33:33] Why QED Partner Matt Burton thinks web3 will impact the art, music, fashion and virtual worlds sooner rather than later.
- [37:15} How Tribal Credit is viewing the opportunities in this space.
Nigel Morris is the co-founder and managing partner of QED Investors, a fintech venture capital platform focused on disruptive, high-growth financial services companies. QED has made numerous unicorn investments, including Credit Karma, Nubank, Avant, SoFi, Klarna, GreenSky and AvidXchange.
Nigel is the Chairman of ClearScore and Mission Lane and serves on the boards of Red Ventures, AvidXchange and Zopa. He also serves on the board of ideas42, and Scotia’s Digital Advisory Council, and he works in an advisory capacity with General Atlantic and Oliver Wyman.
Prior to QED, Nigel co-founded Capital One Financial Services in 1994. Under Nigel’s leadership as President and Chief Operating Officer, Capital One pioneered an information-based strategy that transformed the consumer lending industry.
Nigel grew up mostly in England and takes immense pride in the fact that he is at least half Welsh. He has an MBA with distinction from London Business School, where he is also a Fellow. He is an avid cyclist, but is happiest when he is at home in Virginia with his wife, four children, and three grandchildren.
I can't tell you how incredibly excited I am to be here hosting the Thought Leaders Series today. I'm Nigel Morris and I'm the managing partner of QED Investors. As many of you might know, a global venture firm really focused on investing in breakthrough fintech companies all the way from pre-seed to seed to A, all the way up to IPO.
We have these Thought Leaders sessions to be joined with some of the best and brightest minds in financial services to discuss the topics that most important. Certainly, in my mind, the topic today is right up there as one of the most important. It seems to be on everybody's lips, so to speak.
The big question here is, "Is crypto a true revolution in the making? Or is it just the storm in a teacup? Is it noise?" There are candidly zealots on both sides of that spectrum, both sides of that fence.
But there's clearly a rising drum beat that says something much more palpable is beginning to happen ... That could really upturn, upend, traditional finance. Or TradFi, as apparently it's called.
Crypto has been called a Ponzi scheme. It's been called BS. It's been called, "No-value add to anybody out there." It's been said not to have industrial strength. It's been said to have hyperbole. But $30 billion was invested in crypto companies last year and Ibet that number is a lot bigger as we go into 2022. Coinbase has a market cap of $60-odd billion.
There are many other examples of unicorns in this space, so there's something there. But what does the future really hold? Now, QED, we've invested in several really terrific crypto companies over the last couple of years.
We're joined today by three founder CEOs from the QED portfolio. I'm really excited that the five boxes here represent five people from different countries. We've got Daniel Vogel, proudly sporting his Sao Paulo football shirt. There was an announcement just recently that Bitso ... Turn and show us your Bitso shirt. Your sleeve there, Daniel.
There we are. Bitso there, proud covers, both sides. Amr is Egyptian. Welcome, sir. Jean is French-Canadian. Matt is our token American, Matt Burton. As you might guess from my rapidly diluting accent, I come originally from Wales and from England.
Today, we have Daniel Vogel from Bitso. We have Amr from Tribal Credit and Shakepay's founder and CEO, Jean Amiouny. If I said that correctly, Jean? Thank you. We're going to ask them to truly try and shed light on this huge issue that we're wrestling with about, "What is the future of crypto?"
On a personal note, QED's made 170 investments over 14 years. We have $4 billion under management. QED's been doing fintech before fintech was really a thing.
Very often, when people would come and pitch ideas. It was pretty easy to find a metaphor, an analogy, a parallel from other things that we'd seen over many years across many geographies.
But what was really clear is that, although I had taken the red pill and was beginning to go down the rabbit hole, as you start to think about many of these crypto innovations or blockchains, you find yourself very quickly in a space where you can't draw from traditional finance parallels.
I think that's what makes this whole space so challenging, so scary, so beguiling as you try to get your arms around it. And I've had innumerable conversations in the last year or so with people saying, "Look, I just don't even know where to start. I don't even understand what the frameworks are."
Hopefully, we can shed a bit of light on that today with our three CEO co-founders. And then, Matt Burton, a partner at QED for three or four years ... He has taken the red pill and he's got beyond the top soil. He's gone a lot deeper. His perspective will be invaluable there.
I'm going to play the role of being an MC here and try to extract the thoughts from our panel today. Hopefully, I don't have to be too much of an umpire, because I think you're all going to be shoutingly telling us how the world is about to change in a geometric way.
But we'll see. With that introduction, let me ask each of you if you would just do a very brief intro. And if I might ask Daniel, proudly wearing his football shirt to start.
Thank you so much. We're excited to be here. My name is Daniel Vogel, I'm CEO and co-founder at Bitso. Bitso is the largest crypto platform in LatAm.
Currently, we operate in Brazil, Mexico, Argentina, Colombia. We are the official technology provider for the government of El Salvador, who just made crypto legal tender in their country.
We serve close to four million customers directly and indirectly. Through El Salvador, another five million customers. Very excited to be here with incredible people also working on the crypto space. Thank you for having us.
That's a pleasure, Daniel ... You unfortunately got the booby prize of having me on your board. Thank you for helping me down the red pill rabbit hole, at least to some extent. Let's go to Jean next from Shakepay in ... Are you in Montreal, Jean?
I'm actually in south of America. We call it, "South Canadia," down here. I'm a co-founder and CEO of Shakepay. We allow Canadians to buy and earn Bitcoin. We're a mobile app that very much allows Canadian interest to buy Bitcoin.
We just launched this Shakepay Card, which is a Visa debit card that allows Canadians to swipe and pay for their day to day transactions. Instead of earning air miles or reward miles, they're earning Bitcoin on their transactions. We offer this to about 900,000 Canadians all over Canada.
Jean, what's so interesting is that ... For the longest time, I remember having conversations with Canadian banking executives. When I would say, "Look, the U.S. and the U.K. are going through this digital revolution," they'd say, "But Canada's different. We're a walled garden. We're different to our Anglo-Saxon brethren."
It's not going to change in the same way as it has changed in other places. Your Shakepay is a perfect example of how young, digitally-enabled Canadians are looking for more frictionless and transparent solutions.
Lovely to have you here, Jean. Amr, actor at Tribal. What do you do? I've never quite figured out what you actually do. And so, maybe you can explain it to me again?
Well, we'll start with the basic non-crypto stuff. We're starting with our mission. Really, it's to help SMEs in emerging markets grow and compete in a global economy. We do so by driving efficiency into their financial operations, providing them with a very rich digital experience.
That one-stop shop that gives them treasury services, expense management, payment trails. Payment trails on the cards, on the Visa network. Non-card rails, so they can make wire payments to anywhere in the world, 180-plus countries. Access to local payment networks in many of these markets, giving 15 plus local payment networks.
The interesting thing is also layering financing on top of all of this. Providing short-term credit for anywhere between 30 to 120 days. Because the question is, "Why am I on this panel? How are we leveraging crypto?" We're really leveraging crypto to drive even more efficiency to payments, to financing, to the incentives and rewards that we're building for the community and ecosystem around Tribal.
Amr, in my language, you have a relatively traditional digital business model that's attacking the old analog structures in payments and in short-term revenue-based lending.
What you've done is overlaid on top of that a crypto token oriented model, which is turbocharging the whole infrastructure. If you think, there's three stages. There's old analog, there's digital, and there's crypto. You are digital with crypto overlay?
Very good. Very good. Matt, would you introduce yourself and tell us a little bit about you?
Matt Burton. As Nigel said earlier, I've been with QED for a little under four years. I've been really focused on new areas, and crypto falls squarely in that. Have been a big believer in the fact that, this is going to be a space that is going to change how fintechs are built in the future.
And that everyone will have a crypto strategy as part of their overall go-to market. And so, happy to be here and talk about when that's going to happen. Because I think that's the question everybody has.
I think, Matt, you would get the prizes for helping drag kicking and screaming lot like me to 2022. In terms of embracing the concepts that we're going to talk about today.
I am much in your debt. Let me start with you, Dan. Is the dam about to break? Are we on the threshold of something incredibly non-linear about to happen?
One of the interesting things about the question that you ask, Matthew, is that it's very difficult. If you look at a graph of time and let's call it crypto progress ... It's obvious that there's been progress in the crypto space. It's hard to know what the line looks from here on.
My intuition is that we're standing at a bridge where it's about to go, as you call it, hyperbolic. The reason why I think that is because ... One of the best ways that I've learned to come up with ways to think about the world is mental models. What are things that I believe to be fundamentally true that can help me navigate the uncertainty of the future?
Because of my upbringing, I saw the birth of the internet. You saw it as well, judging by how you and I both look. Basically, one of the things that the internet did really well is this idea of open innovation. You allow people from around the world to contribute to ideas in an open manner.
When that happens, you basically get a ton of mind share that goes into building these new paradigms and protocols. That is exactly what we're seeing today in crypto. For the first time in the history of humanity, you're getting the chance to build open source financial services.
Previously, you had to go work at Capital One or at PayPal or whatever, if you wanted to build functionality for the world. Now, you don't need to do that. We're seeing people from all over the world that are going into crypto with the intent of basically building on top of these open financial standards.
That is, I believe, a fundamental change in the way which the world have functioned. It's opening up for a number of new ideas, a ton of collaboration, and a magnitude of innovation. Where people are learning from each other, borrowing from each other, and building on top of each other.
That's something that we've never seen in financial services, because of the nature in which financial services were built. And I think that is the one thing that is very different, that is enabling just a new way of thinking around the world. And so, it's obvious when you're in the crypto space.
I work on this thing 24/7. I read, eat, sleep and drink crypto. And I can't keep up with what's happening. It's fascinating, but it's sometimes hard to see from the outside. Because those bridges which the three companies here are working on, building better bridges to this crypto economy, still need to improve.
But the innovation and the core mindset change that has already happened, the amount of money you already alluded to that's going into the space ... But to me, in hand with money is developer mind share. I think that is the one thing that in 10 years, when I look back and say, "That was the indicator."
Just look at all these incredible engineers, products, people. All the people who just jumped into crypto, because they saw that there was something interesting and a one-time opportunity happening. They built out this incredible new world. And so, I believe that we are on the brink of a completely non-linear revolution, as you called it.
One of the things that we've found over the years, is that any CEO founder that's going to build out the ground has to have a massive amount of passion and energy. If you didn't pick up on Daniel's passion and energy there, you were too distracted.
I hear you. Yes, there's lots of money going in. Yes, there's incredible talent into this space. As you said, these Lego blocks are emerging now, that are available in open source.
If I ask Jean this question to bridge from that ... If Daniel is right and this building is in place, why didn't it happen a year ago? Why won't it happen a year from now? Why is now the moment, Jean?
Well, I certainly think that these things come in cycles. For Bitcoin, specifically, you're seeing these ups and downs of interest in the space happen over these four-year cycles that somewhat correspond to ... If you're familiar with the Bitcoin subsidy.
The ability for Bitcoin to get minted over time somewhat decreases over time. I'm generally seeing that ... Obviously, over the long term, the interest has gone up in the last decade or so. I don't know why.
Over one year or another, I guess the sentiment changes. But to me, I think we are human. We're social humans. When people around us get excited about something, it gets us excited too. And so, it just naturally follows these cycles. Maybe we're in the middle of one right now.
Jean, do you believe that we're on this threshold of something going hyperbolic?
Well, I certainly think that we're beyond the point of no return. I think Bitcoin ... It is part of our culture today. If you ask anyone on the street, how are they saving their money? They're no longer saving it in a savings account.
You have to learn to invest. You have to learn to trade. That's become a cultural norm today. Maybe beyond that, people are looking at Bitcoin as an alternative way to save your money further and further out into the future.
And so, I think we're way past the point of no return. Bitcoin's already part of the culture, of the psyche. It is considered, in some way, a better or harder currency. A better store of value than gold. You've already seen it. You've seen it on Wall Street. You've also seen it certainly ... People on the ground. Customers at Shakepay, for example.
Look, I think the argument that says, "We're past the point of no return and this is things not going away." We're talking about nearly $3 trillion in crypto overall. While that will go through certain vicissitudes, it's increasingly embedded into the DNA of an often younger, mobile generation.
I think that's well said. And so many of the things that Matt and myself and Frank Rotman at QED and others have worked on is ... How do we wrap banking products, if you like? Margin lending, stable coin, moving money across border, deposits.
More traditional business models around this unique and very special growing asset, as you mentioned, Jean. Amr, what do you think? You're a very grounded fellow. Part of your business in is in TradFi and part of your business is in DeFi. Are these guys being too hyperbolic themselves?
Not really. I've been seeing, to what's been discussed so far, how we are able to actually attract talent from traditional finance. From some of the top companies with this crypto component. That's really exciting for a lot of the talent out there.
Whether it's ... It's not just developers. That's the building blocks of what's to come. But I think there's also other types of talent that we've been attracting, more on the business side as well, that are very keen on touching crypto. We're a very good venue for that. But I do think that there are multiple inroads to that same conclusion.
The first one is ... When you look at crypto and what it's been doing, it's been bringing these market expansive and market creative opportunities when you look at TAM. You look at these market expansive opportunities, which increase the TAM, a TAM that's kind of big.
But you're really driving efficiency. You're driving lower cost, making things cheaper, faster, better UX. You're taking this TAM and just blowing it up. But there are also these immense creative opportunities, market creative opportunities that exist.
When you look at things like the ushering of this whole new world of NFTs and GameFi. The cross between gaming and DeFi and what that means to this world. There's this rise of these market creative opportunities. As an investor, I would always keep an eye out on these things that, if you were going to think about them or size them five years ago or ten years ago, they did not exist.
The second inroad, I would say, to that same conclusion is just ... Look at you, Nigel, with Capital One. Reflecting back, how long did it take for you to get to $15, $20 billion dollars in assets under management at Capital One? How much did it cost to actually get to that? In terms of marketing and operations and all of this.
When you look at these DeFi platforms that exist today and total value locked being around a $100 billion . Some of the top makers close to $17, $18 billion. Aave is around $12 billion. These are projects that launched in 2017. It's just phenomenal and it is hyperbolic.
I think the last point I'll make there that makes me even more bullish, more excited ... It's not actually looking at the opportunities. It's actually looking at the problems that exist in the current systems. Thinking about, "When," not if. It's a question of when these frictions and inefficiencies are going to be removed.
Some of the things we're talking about here are UX challenges. Things like impermanent loss, where participants in liquidity pools will potentially lose money if the price of the assets they committed to changes. Capital inefficiencies, over -collateralization, low utilization rates. All of these things.
But imagine what would happen when all of these are removed? I'm more bullish on these problems. Seeing these problems or roadblocks being removed and what that means to this whole space. The impact and how it competes with TradFi.
I'm really enjoying this. Many of the themes that you just talked about, I've chatted about when we talk about the transformation from analog to digital. What does that mean? It means there's going to be more transparency. You're going to take away the friction. The consumer or the end user has more control and more power. Things happen faster.
What I hear you saying is that's all well and good. And that transformation has occurred or is occurring. I think there are very few digital deniers out there anymore. Certainly, not in the boardrooms of the banks who are seeing just this massive explosion.
I think that was accelerated by our near two years in COVID land. But I think what you're saying is ... This is next stage in that evolution. You're going to see more transparency, less friction, more power, and better economics to everybody. I think that's really fascinating.
With so much money and talent pouring in, as you're saying ... The talent wants to come and be in this space. You've got to believe that there's going to be an explosion of functionality. Matt, are these guys all smoking something here? Are you going to take the other side of this?
I'm not going to take the other side. I think for my personal journey on this ... And I think it's similar. For me, it's all about talent and the problems that they can go solve. If you want to say, "How can you get the best team?" The top 1 percent of world-class developers, product managers, UI/UX, they want to work on the most important problem of that time. I think today, more often than not, that means they're going into crypto. Which means that all of the companies that are on this panel with us have a massive recruiting edge versus everyone else at the moment. From what I can see.
And so, I think that if you are able to acquire the best talent, give them the opportunity and resources to solve really important problems, where they can see their impact. You have a recipe for ... I don't know if the dam is breaking tomorrow, but I see hundreds of cracks in the dam.
And I don't know which crack is going to be the one that all the water goes through, but I'm pretty sure that it's not going to hold up for very much longer.
I love that. I love that image of the dam and the water. I've been saying for the longest time that ... In my day, when I came out of business school eons ago, the top talent would go to Goldman or would go to BCG or McKinsey.
I think that's rapidly changed, where we've seen so much talent come into digital FinTech. The entrepreneurs are seeing the companies being worth tens or hundreds of billions. They're seeing the new banks and the Credit Karmas and the Squares and the Stripes.
Assuming just how much traction those entities could get and the readily available capital to build ... What you're saying, Matt, is this is now the next generation of that. I'm seeing this evolution framing in my head.
Let's go back to the dam metaphor for a second. Back to you, Daniel. Where is the dam really cracking? Which cracks do you think are going to be the ones that are going to let the water through in short order? Where are the breakthroughs coming?
It's a great question. I'll give you some examples that I find interesting. Let's take El Salvador, for instance. You hear the El Salvador president speak.
He goes, "Look, there's five or so million people in my country. I don't have a lot of people that went to MIT, Stanford, or whatever that are computer scientists that can go in and build payment infrastructure. But now, there's this open source payment infrastructure called Bitcoin. I want to make use of it."
El Salvador had 1.5 million bank accounts opened up prior to the Bitcoin law coming in. Three months after, they had basically the whole country bankless. Close to five million bank accounts. They basically banked the entire population with an app that runs on a payment system that is built on open source standards through Bitcoin and Lightning. Fascinating.
I mentioned earlier that we've been engaging with the government of El Salvador, helping them think through this project. We have three other governments that have reached out to us. Similar situation. "Can we build this? Can we build a payment solution like what we've seen other companies build?"
Probably not. What are the alternatives? What are the alternatives here? We're starting to see people starting to think really creatively around crypto. Amr said something that I think is fundamentally important. He was talking about these hundred billion dollars of total locked value in smart contracts.
There are less than a thousand full-time developers that are responsible for those hundred billion of total value locked in smart contracts. And if you look at the number of web3 developers that came into, to Matt's point on talent, who came into the space. It's fascinating.
You look at the people who go into crypto and the number of open source contributors. Contributions to open source projects in the crypto space goes up as price goes up. But interestingly, it stays flat when prices go down.
You look at GitHub and all these places where you can track these communities of developing code. As prices started to go up in 2017, we started to get more developer mind share. But it stayed flat in '18 and '19, as prices were collapsing or declining or whatever.
And then, the last two years as prices have continued to increase, developer mind share has really increased. I think we have 18,000 monthly active developers now that are committing code to open source projects. We have 34,000 new developers who committed code in 2021.
Something like over half of developers that are contributing to web3 joined in 2021. Just over the last year. And so, what we're seeing around talent and people building ... It's all happening recently. But I would say that there's two other fundamental things that are important.
Number one is that people are finally understanding what are the capabilities that web3 and crypto bring to people. Why is this relevant? It was this thing that was poorly understood before. But builders are really understanding that, when they build on web3, they can probably monetize.
They're building in a much better way than if they were to work, let's say, at Google or at Amazon or at Facebook. They're understanding, "Holy smokes. I can basically create a set of incentives, where if I put in a little work and effort and build something that people use, I can basically capture a lot of that value."
Or if I am a user of that platform. If you're a content creator on YouTube or on Spotify ... Well, you were giving most of your revenue to the platform. Now, on web3, a lot of people are understanding. Creators are understanding, "Maybe I can capture a bunch of value, if I actually develop on top of web3 or create on top of web3."
This is, again, a fundamental mind shift. And it's bringing a lot of community. This is the thing that's creating breaks in the dam. We have people all over the place who are starting to understand, "Do I want to be subject to the local fiat currency, which is depreciating at a very rapid pace? Or can I migrate to something else?"
It doesn't even need to be Bitcoin with its volatility. It can just be someone in Argentina that wants to get paid in US dollars. They're starting to do this, because they can leverage these crypto networks to get paid in stablecoins.
And so, people are understanding the benefits that the technology brings to them. Bringing not only themselves, but their friends on board and their families on board. These are the things that are creating all these breaks.
We've seen what has happened in El Salvador, as people engage with a better technology that they had available in their country. There weren't a lot of fintechs building in this space, but suddenly everyone leaped from banking and fintech into crypto. And then, these creators and builders that are going into this space.
Wow. Incredibly rich. A couple of comments, then I'm going to hear Jean's comments on that. One. We've seen, particularly in the music industry, where the chain can actually allow the originator of the content to actually be able to track and monetize where their product is being deployed, and shift the power base from the intermediaries to the originator.
I think that's an example of what you're talking about, Daniel. I love the idea of how, in El Salvador and Guatemala, how crypto can create enormous energy toward inclusion. Taking away the fundamental risk of the local currency versus the fiat currency.
If I remember the story correctly, I think your one millionth customer was a woman in the hinterlands of Mexico who bought a USD stable coin. Was it the millionth customer?
Exactly that. The millionth customer was a 40-year-old woman in Mexico. In a little small town in Mexico buying US dollars.
Amazing story. Maybe we'll come back to developing countries and inclusion. Because you've got a developing country like India ... And I don't know enough about Egypt, Amr. But who are, from a regulatory standpoint, much more nervous and much less leaning in than El Salvador or Guatemala.
Jean, what do you say to some of Daniel's comments? Where do you see the dam breaking?
For me, the response of Bitcoin in 2008, when it launched ... It was a response to the bailout in Britain. The bailout of the banks in Britain. And so, to me, this is just a response to losing trust in our institutions. You can see this across the world. People not wanting to trust their banks and their governments.
And so, maybe Bitcoin ... You see the rise in adoption of Bitcoin specifically in countries with hyperinflation. I'm Lebanese, so a lot of family back in Lebanon. They've seen their currency hyperinflate. It's like 95 percent over the last couple of years. And so, Bitcoin really is just the adoption of, "We don't trust our institutions anymore."
Where does the dam break? I think it's along these lines. I think it's when people stop or start trusting less the institutions around them that support money or support their security in some way. That are directly relevant to how they generate and store wealth.
And I think over the last year or so ... The US just announced 7 percent inflation. That was the official CPI numbers for 2021. Maybe those numbers are a bit higher. And so, even in Western countries, can you really trust the US dollar as a store of value anymore? I think people are asking this question.
That sounded like a rousing endorsement of Daniel's expose there. Amr, are you in the same place?
I am. I think, from my side, I see the cracks ... Or let me put it this way. I'm very excited about the existing protocols that exist. That are live today. The likes of Uniswap and Compound and others. I'm more excited about what's actually being built on top of that. The next wave of DeFi projects.
It's kind of in line with what we talked about. The challenges that exist. I think when you start solving for over-collateralization, when you start bringing under-collateralized lending, when you start removing some of these UX challenges.
I think this is where the cracks will be wider, where the dam will break. Democratizing access to these financial products in a very transparent way to users is where we're going to start seeing dams break. More and more adoption, and moving away from traditional to crypto.
I know that you don't live or build businesses in Egypt anymore. But is Egypt in the Guatemala, El Salvador camp of looking to crypto to replace fiat currency? Or in their environment they're very nervous and are looking to impose all kinds of restrictions on crypto?
I would say it's a little bit more on the other camp. A lot more centralization. I think it's more, I would say, on the camp of being more protective of the financial ecosystem.
That said, when you look at the people on the streets ... I've heard how taxi drivers roll up all of their earnings at the end of the day. They go to this crypto trader on the street, give them their earnings, and start doing savings in crypto on-foot. Because they can't access it.
I think if you have that happening in Egypt, I just can't imagine ... How much longer can governments stand in the face of that?
Daniel, I think setting up your office in Cairo is something that you should be thinking about. Okay? Given that.
Matt, you look at the broad vista of even beyond our three founder CEOs today. Where do you see the dam breaking?
The only other place that I would point out as a major fault line is the fact that ... We're basically watching every ... Whatever you want to call the cycle. One or two years where crypto just says, "Hey, this is a new space that we haven't disrupted before. We're just going to take it over."
I think NFTs is an example of this of artists. But previously, if you look back from 2017 on a go-forward basis ... It was a lot of, "How do you do ..." Basically, market-making was what was the big disruption. You looked at Citadel, who recently got a billion dollar investment from Paradigm and from Sequoia.
Really, because they're realizing that crypto is disrupting their business. And so, I think that there's a lag here a little bit. Where crypto will decide, "I want to expand into a new space and I want to take over art or music or fashion or virtual worlds." Or whatever it might be.
And then, it takes three to four to five years before all of a sudden the incumbents say, "Oh my God. You're actually disrupting me and taking serious market share." And so, I think some of these fault lines are things that we haven't even talked about, that we'll find out about later this year. I think that's why it's such an exciting space.
They are way beyond what the traditional boundaries of finance are. When you start talking about some of those things, it's even beyond what has been characterized as embedded finance. I'll throw two [thoughts] out there, and see if you want to snack on them. Tell me if the dams are about to break.
One is consumer lending, where I've spent the vast majority of my working life. We're seeing now people borrowing against Bitcoin, against Ethereum. Collateralized lending occurring. We're seeing an emergence of entities that are attempting to build credit risk models in a crypto world. Which seems to me, in some ways, a bit of a collision with the anonymity that's promised in a web3 world.
That's one. The second one would be in money remit. Particularly, we see immigrants in the U.S. sending money home. In the old world, it would be done by queuing up at Western Union, which was not a great experience by and large. It led to Remitly, where QED has an investment and I'm on the board. And then, a bunch of European entities were doing that.
Do those spaces lend themselves to rapid transformation? And if you were in those spaces where you've made the Promethean leap to digital ... Would you be nervous that crypto is about to leapfrog you? Jean, how about you? Have a go at that.
I would definitely take on this last one. I think what you're comparing with the old world, the old financial world, is a little bit like the post office. If you wanted to ship a message to another country, you'd go down to the post office. They're physically transferring the message or the money across.
And then, email came along. It didn't matter where you were, you could send a message. It was all bits instead of atoms. It didn't matter where you were, you'd receive money. It's this open internet protocol. It would allow you to transact with anyone online.
I think Bitcoin or any service that allows you to transact on top of these open networks, it's the equivalent. Today, you can still ship a postcard to your loved ones, if you have some in the U.S. But it's almost a novelty at this point.
You're connecting with them on FaceTime, on Zoom and so on. And so, I think we're still in those early days. But I think if I'm in that space, I would definitely be very nervous.
You'd be looking over your shoulder.
Amr, lending and money remit?
Definitely. I would say. These are two areas where obviously we're investing quite a bit. Partnerships with the likes of Bitso and Stellar are really focused on these cross-border payments. I would say there's a lot of value, that crypto is coming and disruption that's happening there. On the cross-border payments, I would second that.
On the financing side, I think I can speak a little bit more about the value that we are bringing to SMEs, which is very much in line with that second point. I'm seeing this a little bit, but I would look at it more as ... When you look at financing today, especially for these businesses, it's in dial-up mode today.
Back in the nineties, how did we connect to the internet? You can remember how painful it is and how slow it is. We think about how we're providing this liquidity bandwidth. How can we upgrade from dial-up to broadband? How can we provide this liquidity on-demand?
Providing it with the right controls, but also less strings attached for companies that are seeking access to this ecosystem. Our work really is about that second point you bring up. Where the dam is really breaking. And it's about accelerating this and making that break bigger, faster. Chipping at that same place.
Really accelerating the bandwidth. The financial bandwidth that we can provide, both in terms of financing and making it programmatic and easy to access for the businesses. And I'll speak to businesses. I'm not really in the consumer world, but I know it's happening there as well. It's happening first in consumer and following to business.
As is often the case, more of the innovation occurs for the big end or the consumer. And then, that does tend to move into SMB. Amr, you've moved into the tokenization world. I think our investment in Tribal was my introduction to, "What is a token and how does it work?"
How about a really quick synopsis of, "What is a token and how does it work?" And then, I'm going to add-in Daniel. Where tokens are going to fit into their businesses, if at all, and how tokenization is going to be another surge of innovation.
And so, just talking a little bit more about tokenization. I think it's really about us building an ecosystem around Tribal. How are these participants being rewarded for being part of this ecosystem?
I really like how Matt said this before, in a previous discussion, which is really ... It's about the power of aligning incentives. This is what tokenization for Tribal means.
It's really how we are aligning all of these incentives for people that can potentially have different interests. Whether you're a lender or borrower or user of this ecosystem. This is how the token brings all of this together for us.
A quick word on how it's gone at Tribal? Can you give us any sense of how rapid the take-up or enthusiasm has been for the token system?
It's been great for us. We've seen how ... Where we are as Tribal, sitting in-between TradFi, bringing digital and having that crypto mullet, as we've been called by some of the crypto folks there. Having this crypto mullet.
I think the exciting thing is, who are these token purchasers? They come from some of these investors that typically have done equity. But now, there are these token purchasers bullish about this ecosystem that's happening.
But also the likes of the digital currency group. Coinbase ventures or Circle ventures. So I think how we've been able to bring together these two worlds through our ecosystem, and have these token purchasers come and participate has been very exciting for us.
You don't take any umbrage over the mullet epithet here. That doesn't bother you too much, then?
No. As long as it's in the back there and just giving us this nice look. It's fine.
Well, you've all got full heads of hair. Look at poor Nigel here. Jean, what you think about tokens?
I'm maybe a bit more of a controversial take on the panel. I think we're still somewhat early in the space. I think the first token or the first digital token was BTC. Bitcoin. They figured out a way, how to incentivize security on the network. Trading for energy spent. Energy sacrifice.
That's Proof of Work. I think what's really cool is it allows experimentation. Generally, when I look at the crypto space and things beyond Bitcoin, it seems more experimental to me.
Certainly, with Ethereum for example, there is the big pivot that's coming. The ETH 2.0. It's a complete rewrite of the foundation of the network. And so, to me, you want this. You want open experimentation. You want to be able to play with incentives and find ways to make networks work really well.
I think Bitcoin was the one that got it right from the beginning. The most powerful one and the one that has the potential to change quite a bit in our world today. I guess that's the one that I'm the most excited about.
If we go to Shakepay, I think the really early incarnation was for people to be able to use Bitcoin for transactions. You shifted toward, "No. Let's help people trade and store."
More recently, a credit card. Talk just to touch on that pivot. And then, I want to go to Daniel and figure out how he's going to use tokens.
Early days, the story of Bitcoin when we started Shakepay was very much closer to a medium of exchange. Cash on the internet. And so, the cool thing back then was the ability for you to send BTC to anyone in the world to be able to use it for payments. That was really exciting about what Bitcoin enabled back then.
I think the story and the narrative around Bitcoin and what changed from this medium of exchange to value ... I think the model where you're spending your Bitcoin to be able to spend in a visa transaction or day to day transaction ... I don't know. It's not the proper model, I think.
I think the better model is the one with the card that we launched today, where you're spending your Canadian dollars and you're earning Bitcoin as a reward for doing so. That's the new card. That's the new mechanism. Over that time, we've learned that maybe you want to accumulate your Bitcoin and you don't want to spend it.
Jean, a final word while we're on Shakepay and Canada. Do you find the traditional banks, the big five in Canada, interested in what you do?
Or are they living in their current viewpoint that they're still in a walled garden and they're serving their customers well?
Yes. Certainly, the latter. Canadian banks are known to be very conservative. I don't imagine them becoming very aggressive entering in the space. I think they've had some pilot projects. They've announced some pilot projects of using it for remittance or foreign exchange.
I'm not quite sure. But I don't expect them to be the ones aggressively pushing for mass adoption of Bitcoin in Canada. Maybe that's why Shakepay is ... Maybe that's why we're here.
Look, even if it's a relatively small market ... If you are in a defacto monopoly or oligopoly, it's always a great place to be. That's exciting. Daniel, tokenization and Bitso?
I think the fascinating thing about tokens is what Amr and Matt mentioned. It's the ability to orchestrate incentives in a way that basically people across the ecosystem that you're trying to build are benefiting from participating, engaging, and building whatever that ecosystem is.
If I were to ask you, "Would you ever invest in a company where the management team has no equity?" I would assume that you would say, "No." Because they wouldn't be incentivized to really build it out. What I see tokens is doing, is it's just taking things to a completely new, different level.
I'll give you a little example of something that we just saw this week at Bitso that we thought was fascinating. There's a token called Shiba Inu, which is by most accounts, just a meme token. It was just this thing that started as a joke, but it started to create an enormous community around the world.
They called themselves the SHIBArmy. Shiba is the dog. Right? These people were asking us to list Shiba Inu on Bitso. "List Shiba Inu on Bitso. List Shiba Inu on Bitso." We're also like doing ... We had our own thing. Our own roadmap of listings and things that we wanted to add to the platform.
But these guys put together a change.org petition. And I told the team half-jokingly, "If these guys get to X number of signatures, I think we should listen to our customers and add it." They blew past that goal that I had set by 5X.
Last week, we started to tweet the pictures of this dog and it was building a little bit of momentum. We added this token on Monday. The amount of engagement, trading volume, users trading this token. It's just crazy. People who moved tokens like Shiba Inu that they have in other exchanges. They moved it over to Bitso. We just blew past all of our records.
We've been listing new assets and new tokens, one a week over the last year. For the last quarter of the year. This thing, on its first day, basically beat the volume combined of all the other tokens that we listed for the entire year in a day.
Excuse me. It's only been 13 days. Or whatever, 12 days. But it was still ... In a few hours, it just blew past it. The engagement is incredible.
And as we were looking at the engagement on social networks like on social media ... What you really ought to understand is that, for a lot of these people, this is more than just a token. It's part of culture.
Someone talked about culture earlier today. It's been ingrained. The people that are incentivizing us to list Shiba Inu are the people who have ownership of Shiba Inu. The incentives are all in an interesting manner making the community push this forward.
And so, I think there's a lot of value there. We're very excited to be partnering with Tribal and with Amr on a number of projects this year. I'm very excited to see how, with the token that they're doing, they create this set of incentives to align everyone around the success of Tribal.
It can be very powerful. I think that is ... When I talked at the very beginning about this new realm of things that are getting enabled through this economy. I think those are the things that, previously, it wasn't easy. How does a company in the US before guarantee equity to people around the world? Impossible.
Now, you get the ability for people around the world to be holders of these tokens through the technology in a way that was never possible. The thing that this is going to enable is very powerful. It must be treated with a significant amount of responsibility.
Because unfortunately, as many amazing things that you can do with tokens, there's also quite a number of evil things that you can do with them. And so, I think the entire crypto community, investors, builders, companies alike play a very important role in understanding these things.
That was what we were struggling with. With Shiba Inu. That started as a joke. But it's turned into something that is just culture. And there's a massive amount of customer demand. And so, it's hard. These topics are new and we're all grappling through them. But I think the concept is powerful. The paradigm is changing and the dam is breaking.
Whoa. I had not internalized that version. The notion of how a token system can support ... My words, not yours, Daniel, but identity or expression or belongingness.
I think you were going in that direction, Amr, when you were talking about community and people to share. I think that's really good. As we finish off the section here, and I'm watching the clock here ... Matt Burton, what would you say about tokens?
I think this is a fascinating discussion. I think that it continues to be a topic that is just growing in 10, 20 different ways every single year. And so, I agree. You could spend your entire full-time job just studying tokens today.
There's that much innovation going on across the board. And so, I think the future's bright. There will be ups and downs. But overall, I think this is why it's attracting a lot of smart people.
Because these are the opportunities to get these incentives right across a lot of different things. Across art, across a community, across high-frequency trading, across liquidity pools. The topics go on and on and on.
Okay. I'm watching the clock and I want to be respectful of your time. I'm now going to chip ... I've got several questions. We're around the horn. 10-second answers. 10 seconds.
I know it's difficult. 10 seconds. Okay. First of all, is the regulatory climate getting better or getting worse for crypto in general? Jean, first.
I would say better. Definitely.
Canada or more generally?
Maybe certainly Canada. Maybe less familiar elsewhere.
Great, tough question. And it's geospecific. But I would say, overall, it will be trending towards better. And regulation is good. Regulations is good.
Regulation is necessary in this space. One of the challenges is that regulators tend to regulate last year's problems. Rather than looking forward to white papering where the world is going, and offering some guardrails and support in that. Daniel, what do you say?
Absolutely. Couldn't agree more what you just said, Nigel. I think regulation really helps the industry. It gives people a framework to build. It allows people ... It actually brings people to the space. Some people are a little bit afraid of what this crypto thing is.
Regulatory clarity, I think, overall is very positive. But it must be done very carefully. Because if you regulate this thing incorrectly, you may keep impede innovation, et cetera. Innovation. And so, what we're seeing is a combination.
The crypto space has grown a lot. And so, regulators around the world are learning. Not only the speculative side, et cetera, but actually all the positive things that have come out of crypto.
In Bitso, we're powering a fair amount of cross-world remittances from the US to Mexico. Regulators in Mexico see that. They see the cost reduction, the time reduction, the operative improvement.
They get really bullish about these things. So the advancement of the technology allows it to get better, but it's going to be tough. I think we're going to be up against some tough stuff.
As I talked a bit earlier about my own personal journey to this space. Having grown up in the old world and being an innovator in the old world ... If I find it difficult, people who have grown up in the regulatory climate, to comprehend what we're talking about is not an easy task.
Next issue. Really quickly. The promise of digitalization was that it can promote financial inclusion. Half of America has trouble getting a reasonably priced credit card, for example.
Large portions of Latin America or Lebanon or Egypt are not banked in a way that we would understand. Can crypto allow for a Promethean leap in the volume of people that are part of the financial system? Amr, first.
Absolutely, 100 percent. I think we're going to see this and we're going to start seeing this accelerate even more. You have 300 million users today in crypto projected to hit a billion users in four years.
My personal projection is we're going to hit that sooner than that. And I do believe 100 percent that you're going to see that impact.
100 percent. I think the amount of stuff that you can do on top of crypto networks will enable a number of people around the world to innovate, and be able to provide better products and services to individuals that have been underserved.
That's part of our core mission at Bitso. I talked a little bit about what we've seen in El Salvador. And I don't expect this to stop.
All right. Jean?
I think Daniel gave a great example earlier with El Salvador. The country had ... What was it? A million and a half that were banked. After a month or so of the launch of their new wallet, it was the whole country. Something like five million.
This is the barrier to entry, essentially, to opening a bank account versus downloading an app on your phone. Maybe it made it a magnitude easier. And so, unequivocally, yes.
Well, that's three thumbs up. Three or two thumbs up from the team. Matthew. As I wind up, any final comments from you, Matthew?
Just to put an exclamation point on that. I think that's what the history books will write about this next 10 years. In the same way that I feel like the last 10 years were largely about the rise of the smartphone.
Everybody around the world getting access to a super computer in their pocket. I feel like everyone getting access to the crypto rails over the next 10 years will be what people write about.
Matt, thank you for that. Look, I'm going to let people go here. But I just want to say that I feel incredibly blessed to be able to sponsor and encourage this conversation and to go on the journey with you.
Anybody who's listening in on this video now is realizing why QED invested in Tribal, Shakepay, and Bitso. Your talent, your energy, your enthusiasm, your passion and your brilliance is clear as a bell. And I just feel really great about that.
What's clear is that something real is happening here. I think the discussion of the dam breaking was fascinating. Inclusion and tokens was really great. I think Gates said, "We tend to over predict what's going to happen in the next year or two, and under predict what's going to happen in the long run."
There's an extra ability about where this is going. And I think, one, as an investor-ex-operator ... Ignore this at your own peril. We at QED are going to continue to go down the rabbit hole. Matt Burton and Frank Rotman and others who continue to hold my hand.
I hope you will too. Because I think that we are on the cusp of something really, really exciting. Matthew, thank you for joining. Jean, I'm really excited about what you're doing with Shakepay. Bitso is going from strength to strength, in terms of geography and the functionality.
And the mullet of the old world and new world coming together with the tokens is just fantastic. Can I say thank you so much to you guys. I've really enjoyed this. I hope you enjoyed it. I hope our listeners enjoyed it and I had a blast. Thank you very, very much.