[00:01:59] Max Kei: I think it’s the oldest running so far running Bitcoin conference in the world, maybe one of the few, I don’t know the others, definitely one of the recognized.

[00:02:10] Once we started this in 2017, it was actually in November. So you’re lucky that you got it in August because that part of November in Riga is like freezing. It is what it is. 2017, three in a row, then two years of like MJ. He had a baseball. We had a COVID. So we had like two years. In a row, a break eventually from conference organizing and then 2022 we kick started back So it was the sixth edition We don’t know whether there will be a seventh one.

[00:02:45] We’ll see But so far i’m pretty much satisfied and we also haven’t had nostriga. So it was kind of cool I know that the topic of this episode is actually institutional adoption, but just wanted to say that I was a bit skeptical about Noster before last week, before Nostriga, and then I actually missed a lot of the talks from Nostriga, but most of the people who went to the Nostriga, they went also to Baltic Honey Badger.

[00:03:11] And then the magic happened at the Baltic Honey Badger, especially intersection Bitcoin, social media, especially for me as a former journalist, it’s kind of very much based social media protocol, which is Nostr and I like it. So I’ve kind of become very much bullish about Nostr in general. And yeah, it was just general great week.

[00:03:34] We had Bitcoin week, we got lucky with the weather. Many high quality speakers like you, Jack Mallers, Jack Dorsey, a lot of interesting topics being brought up. And it was just great week overall. I’m tired, but I’m happy.

[00:03:50] Preston Pysh: I’m tired as well. You guys, part of the branding or the marketing for the conference was it’s the most OG Bitcoin conference that there is, and when it kicked off, it was.

[00:04:01] I was just kind of like smirking because there’s Adam Back, Peter Todd, like all these OG programmers from like the very beginning on the very first panel. I was like, all right, I get it. Like, this is pretty amazing. And the conversations were very tech heavy compared to some of the other conferences that I’ve gone where I don’t know, I I’m not going to call out which conference, but it was very tech heavy.

[00:04:21] And you could tell that the people there are truly the builders in the space. And the highlight for me, it’s interesting that you bring up the Nostra piece, because I agree. That was kind of the buzz the whole week that I was there was how important Nostra is in order to basically be this like skeleton ID protocol in order to allow free flowing conversation.

[00:04:42] And Money exchange to whatever else was being, there’s people that are presenting on a decentralized version of GitHub, which, if we’re thinking about making everything more robust and we’re thinking adversarially from the state trying to, to attack, whether it’s free speech or money itself. If you can go into GitHub and prevent people from downloading the code depositories that are all out there, it’s just a, yet another, attack vector.

[00:05:08] And it was fascinating to sit there through the Nostrega portion of this. And this person goes on stage. I think his name was Colby. He goes on stage and he presents this solution to decentralized GitHub. And so there’s just people building things that for me, it was kind of mind blowing to sit there and watch some of these talks and these conversations.

[00:05:27] I want to throw it over to you, Pascal, your takeaway. You had a banger of a presentation when we were there. I just want to say the name of this, of this presentation. Pitching Bitcoin to boomers, but what was your takeaway from the conference?

[00:05:44] Pascal Hugli: Well, yeah, my takeaway is, is I, I didn’t get to attend like the entire conference.

[00:05:49] I only flew in on Sunday, but still from what I got, that was cause really flabbergasted. It was really nice, because I haven’t been to that many like Bitcoin conferences. At least not in a while, like back in the days, there were a few conferences that I attended. So it was really refreshing to be at one of these conferences.

[00:06:04] And then I was just getting to meet you. Preston was really nice and getting to know Max as well, a little closer and just talking to all the people. So yeah. And in the end it was the same for me, the nostril thing, I kind of got nostril pill at that point in time. I would say, I mean, I, I dabbled in nostril for a few like days already in the past, but then I just left it aside.

[00:06:24] And now it really kind of struck a chord with me again, that this is so nice, and that there’s like, when you get the Nostra and now that I come back from Riga, I was like, the last three or four days I spent on Nostra and it was really, yeah, the vibes that you get, it’s really nice. So yeah, it really just fired me up and happy to maybe go to more conferences in the future again.

[00:06:44] Preston Pysh: So I want to give the audience a little bit of background on you, Pascal. So you’re from a Swiss bank. Marski Bauman is the name of the bank. You work in the division called RCHIP, which is this Bitcoin crypto focused portion of the bank. Tell the audience a little bit about your role and kind of what the bank’s trying to accomplish with this particular arm.

[00:07:05] Pascal Hugli: Yeah. Well, I actually, I joined about a year ago, maybe to give a little context. I was really like self employed, like 100 percent in the Bitcoin and crypto sector, but mostly focusing on Bitcoin. And then obviously I was even like a digital nomad traveling the world, like total, total sovereign individual stuff, so to say.

[00:07:24] And then a year ago, I got approached by this bank. Like they were, we were looking for someone who could help us on the private client side to scale things up. And I was like, dude, I haven’t worked at a corporate in ages. Why would I ever go back to a bank like this? And then it’s like a, you, it’s like a real traditional bank, 90 years old, quite established, quite trusted by many folks.

[00:07:47] So I was like, okay, let’s give it a try. And then I got to meet all these people. Very nice crowd over there at the bank. They have also been in Bitcoin for the past five years already. So it was mostly on the corporate client side where they have been big and sort of like banking, like different foundations, different companies, like some of the names probably would sound familiar.

[00:08:09] They’re really an OG bank, so to say when it comes to Bitcoin, and that really convinced me. And then also. Just the way they approach Bitcoin, also from a sea level, like they are quite open and they do understand Bitcoin. They do understand what it’s about. So I was like, okay, it’s time probably for me to go back to this corporate world once again, also kind of help get them.

[00:08:32] To understand how Bitcoiners think and what their preferences are, because I’ve been in the sector for eight years as well. So I have some experience I would say, and that’s how I got to work with the bank. And I’m now more on the private client side, just helping in the investment team with portfolio analysis and just try to get convince people to invest in Bitcoin.

[00:08:53] Preston Pysh: So Max and I have had conversations about the future of borrowing and lending. I would highly encourage people to go back and reference those conversations. We’ll have links in the show notes to those conversations. But if I was going to summarize some of this very quickly, so people can kind of understand why we’re going in the direction that we’re going with the conversation for the rest of the show.

[00:09:13] Max ran the HODL HODL exchange. This exchange is a peer to peer borrowing and lending platform. And in the conversation that we’ve had in the past, we’ve talked about this idea that peer to peer seems to be the lowest risk way in order to conduct borrowing and lending because instead of tranching assets, like you typically see in these fractional reserve banking systems, and then like distributing the risk across all of these different vendors or participants, you know exactly who the other side of the trade is.

[00:09:47] So as an example, let’s say Max and I did a borrowing and lending agreement with each other. Let’s say I was borrowing dollars and they would be dollar stable coins and I would have to post some collateral. I would be posting that collateral in an over collateralized way. So let’s say I’m borrowing 100, 000.

[00:10:04] I would have to post 150, 000 in a joint collective escrow account between the two of us. If the price of that underlying 150, 000 worth of Bitcoin is dropping below the amount that I borrowed, a hundred thousand, it would immediately get liquidated. And then the lender would be paid back their a hundred thousand dollars of the amount that they lent out.

[00:10:26] And because this is a 24 seven market and it’s happening all day long, this reference rate of the collateral that’s being posted is always there and always being referenced and always being checked. And as long as it’s over collateralized. Both sides of the exchange are being protected in a pretty riskless, riskless way.

[00:10:45] Where it gets convoluted and there’s more risk is let’s say that there was two people on one side of it and the one person was really, and it’s not over collateralized and the one person’s underlying assets are dropping and it’s not something that’s super liquid. This is where a ton of risk really enters.

[00:11:01] So if you want to learn a lot more about like what I just said, if that sounded like it was just a bunch of terminology that didn’t make any sense, go back and listen to the conversation with Max and I, because we go into a lot more detail on these ideas of a much more riskless way in order to conduct borrowing and lending.

[00:11:18] Where I want to go with this, I’m sorry I’m talking so much, but where I want to go with this conversation is taking this idea and talking to a person who literally works at a Swiss bank And try to piece together like their ability to start wrapping their head around what, in my opinion, and I know Max’s opinion is that this is the direction that borrowing and lending needs to go in order to reduce risk to all the participants in the system because Bitcoin works very differently than legacy fractional reserve banking.

[00:11:45] What did I miss? What if let’s start there? What did I miss? Or what would you say is additive to what I just described? And did I get any of that wrong, Max? Cause I’m not the expert.

[00:11:54] Max Kei: No, no, it was good. The only thing that the HODL HODL is not exchange is actually trading and lending platform. Another thing is that HODL HODL is actually micro lending, and specifically last time we discussed Debifi, which I think would be a good reference why also one of the reasons why Pascal is here, not only because he’s a banker who’s into Bitcoin.

[00:12:16] But also because Debifi is actually a product that we’re building for banks, in particular, for banks that are already in the space, for those banks who want to enter the space, it’s kind of institutional peer to peer. And another important part, which you missed, when the liquidation happens, A lender not only gets 100, 000 that he lend out, or she lend out, he actually gets 100, 000 plus the interest that the borrower owns him.

[00:12:42] So, it works like this. So it’s, it’s basically I don’t like the word increase free, obviously, because it’s it’s a meme already in the Bitcoin space, but I think it’s pretty much the way to do it again, because it’s all . Because it’s Bitcoin, it works 24 7, and you have as a trade fight people, you have now tools such as Debifi, where you don’t need to use a middle man.

[00:13:06] And the good thing that we actually bring you borrowers and we bring you customers, so that’s. I think that’s the direction that we’re going. However, of course, from my experience, we had this conversation with you specifically for institutional peer to peer lending five months ago. Then we launched Debifi or right at the time.

[00:13:26] So we launched Debifi. It’s actually still in beta, although it’s operational and we already see volumes, but from this five months, I can tell you like two things. First of all. Switzerland is really, really amazing in terms of attitude towards Bitcoin, corporate attitude I mean, and I’m not telling this because Debifi is in Switzerland, I’m telling this because that’s actually a market where banks understand Bitcoin, and they do provide you loans.

[00:13:56] They do open your accounts. If you go out and look at the train station, there will be a huge banner from one of the cantonal banks saying literally, like, you have a Bitcoin, come to us, open an account. They don’t make big ads. And the second thing is that actually, I’m surprised how many trade fi people actually gets the institutional peer to peer lending, judging by the amount of requests we have to be onboarded on DebitFi.

[00:14:22] I wasn’t skeptical, but I thought it would take A lot more effort and work in order to explain to them why it’s a great opportunity and why it’s a future. Like for example, at this Baltic returning to Riga, the Baltic honey bedroom event, we have representatives on the sea level from three Swiss banks.

[00:14:44] That actually came to read not only because of Baltic honey measure, but because they wanted to know a bit more about identify. And these people are actually hard for bit corners. They’re less into crypto. They’re more into Bitcoin. And I’m surprised about that. And they do understand the value proposition of institutional peer lending.

[00:15:04] But again, Switzerland is very conservative, banks in Switzerland are very conservative, and it’s not only about Bitcoiners being in these banks and getting, getting basically sh ed up, I mean, making a decision. There’s like a bunch of people who need to coordinate to make a decision, but I think, again, we’re getting there.

[00:15:23] So I would say the future is pretty much bright in terms of institutional peer to peer lending. And I heard multiple times from not only Swiss trade five people, but also from other regions that they believe that institutional peer to peer lending, multisign, overcollateralized loan is actually the future of Bitcoin lending. We’re not there yet, but we’re getting there.

[00:15:45] Preston Pysh: Just a little proof in the pudding from my point of view for people when they’re thinking about this and hearing this. So Max, you’ve been doing the peer to peer borrowing and lending for two cycles now, two pretty much 80 percent downturn cycles of What people are posting as collateral and has never like the HODL HODL.

[00:16:05] And now Debifi has never blown up. And I think when you look at all the competition, especially in that last cycle, you had the, you had FTX, you had the Gemini Lend program, you had BlockFi, BlockFi, BlockFi, Celsius, all of them, right? They were tranching collateral, they were taking collateral from institutions, and then they were taking collateral from retail, and they were mixing them together, which gets to this idea that we were saying earlier, that peer to peer really seems like it’s the only way to do this in a responsible kind of way, that platforms and individuals don’t blow up.

[00:16:40] You’ve experienced two full cycles and have never had an issue to date. Do institutions, this is questions for you, Pascal, do institutions understand how insanely powerful that idea is and that a person like Max, Max, you’re the only person that I know in this space for two full cycles that have done what you’ve done without blowing up.

[00:16:59] So do the institutions recognize this for what it is from a risk appetite standpoint and for how to do this responsibly?

[00:17:08] Pascal Hugli: Well, good question. I mean, I can’t speak for each and every bank, obviously. And also maybe there’s different like opinions and knowledge, like a distribution in the bank as well, where I work, but I would say generally, maybe we’re not quite there.

[00:17:24] I mean, there’s a few people, obviously within the bank who are passionate again, who have been in the Bitcoin space for quite some time. I And they might be getting it because they’re talking to peers like you and others, and they really understand this. But then within the broader sector, within the broader, like also then these people, I’m not sure if it has really clicked for them already, because what I’ve always heard when I talk to bankers, it’s like, okay, you have this big coin, it’s quite volatile.

[00:17:50] And I mean, lending and borrowing is usually in a fiat world done on collateralized. Because the question I often get is like, Dude, why would I take up a loan? Why would I borrow if I have the money in the first place? It doesn’t make sense. And then the people are like against crypto or Bitcoin. You don’t want to land on collateralized, because that would make it even worse, so to say, and that’s really where I think we still have to kind of work on the understanding also, as I said, maybe how big corners think if you then kind of understand, okay, these big corners.

[00:18:21] They now have the Bitcoin, they’re a fully orange pill. They believe in its future. They also have a clear understanding of where it’s going. Then they’re like, okay, I don’t want to sell. But at the same time, I kind of want to realize the value of this Bitcoin already today. So that’s why I want to do the over collateralized borrowing.

[00:18:38] So I can kind of actualize some of the value already today, and then maybe. I keep it as a generational wealth and hand it down to my kids and then their kids and stuff. So that’s really where I think we still have to do some teaching and get that across that idea. So people really understand that, as you said, a lot different.

[00:18:58] And then also with the risk. Yeah. I think they would learn along the way, because again, it’s not something that maybe fiat banks are used to because there you don’t work with collateral that much at least. Or I mean, sometimes it’s not fully reserved. Maybe with a Swiss private traditional bank, it’s a little different.

[00:19:14] It’s not one of these systemically important banks. Again, maybe there it could click further because yeah, there might be more use to this. So that’s where I have my hope as well. But yeah, we’re working on it, but I don’t think we’re just there.

[00:19:28] Preston Pysh: This is such a salient point because for people that haven’t held Bitcoin for I would argue a whole cycle, and I’m calling that four years, they don’t appreciate the Bitcoiners lens or how they’re viewing this.

[00:19:41] And let me define this for people. As a person who’s gone through a full cycle and a Bitcoiner, they’re saying the last thing I ever want to do is sell these Bitcoin, right? That’s the last thing you want to do because you’ve literally watched them go up by 50 percent annualized through that cycle. And so you’re saying the last thing I ever want to do is sell this thing because it might keep moving at this pace.

[00:20:00] And if I’m not the one that owns it through that period, my buying power is getting debased by half as much through that holding period. And so if I’m at a bank or I’m at an institution and I’m saying, well, if you have 150, 000 worth of Bitcoin, why do you need to borrow 100, 000 against it in this over collateralized way, which was exactly what Pascal just said, and the answer for that institution or for that executive, that’s maybe listening to this over in Switzerland or wherever that works at a bank.

[00:20:28] The reason why is because this thing’s moving out so freaking fast, the last thing I ever want to do is sell my Bitcoin. I want to borrow against it, but I want to do it in the most risk free way possible. By somebody not tranching my Bitcoin with somebody else’s garbage collateral, right? That’s the Bitcoiners lens.

[00:20:45] That’s the Bitcoiners perspective. And there’s going to be more and more of us that are kind of looking at the world through this lens moving forward. And I think let’s pivot this to where I think the biggest use case is. Lots of Bitcoiners with Substantial amounts of net worth in Bitcoin want to go buy a house, but really struggle to basically borrow against their Bitcoin in order to go do it.

[00:21:08] And they don’t want to sell their Bitcoin to do it. So they continue to live in like a pretty, what’s the word I’m looking for? They live very humbly because they don’t want to sell their Bitcoin to go buy a nice house. How do you see this evolving in a way that, and this is really important for people to also understand real estate is very low frequency turnover.

[00:21:28] It’s very illiquid and it’s not getting priced, by the second, like the speed of everything else. So how can we possibly. Incorporate this in a way that doesn’t become irresponsible because we just talked about peer to peer Bitcoin as the ultimate collateral being like, the way to do this.

[00:21:45] And now I’m talking about mixing it with real estate, which is super low frequency turnover in illiquid markets.

[00:21:51] Max Kei: I mean, mixing it with real estate, I think Sometimes we kind of overcomplicate things, why do you need to mix it? Just borrow against your Bitcoin, go buy real estate, that’s it. You don’t need to mix it up.

[00:22:03] I mean, there are Bitcoin backed mortgage products, and we’re also thinking about creating one in the future, but the problem with that is, every market, the real estate regulation in every certain region or in every certain country, is very much complicated. Starting from how, as a lender, you will liquidate the collateral that is in real estate, in case Borrower fails to repay the collateral.

[00:22:29] Ending with how you form that, how you, if, if, God forsake Borrower dies, how their, their kids, their family. So it’s very much complicated. I mean, in some regions, like Bitcoin backed mortgage products, they seem to be very rational and logical, like in particular, we have some regions. On our roadmap, I’m not going to disclose them, but they’re both Bitcoin friendly and also very much friendly in terms of real estate regulation.

[00:22:57] And also these markets are pretty much good in terms of real estate investment. I mean, like, not just buying a house, but also buying a house, living there, and then at some point, maybe five years. After you want to sell it and there will be a secondary market that you will even make money. But overall, I don’t think we need to overcomplicate things and mixing Bitcoin with real estate.

[00:23:19] I mean, if we have enough liquidity in just Bitcoin bank lending through such a product as Debifi, building a global liquidity aggregator for every Bitcoiner, then what’s the point? You can just go and borrow against your Bitcoin and buy real estate. That’s it.

[00:23:35] Preston Pysh: But Max, to that point. So I agree with you.

[00:23:38] I agree with you. But I think the person who’s listening to this that understands this market pretty well, the interest on this is very high, like double digits. And if you can lower that interest expense by half as much, because maybe the value of the property is 500, 000 or a million bucks, and then you’re posting the, a similar amount of Bitcoin in value terms.

[00:23:59] And you’re, LTV on it is, what would that be? A two LTV of two, then I can maybe get a 5 percent interest rate. I think there’s a lot of people that are going to be, and I want to hear your opinion. I think there’s a lot of people that would be interested in a product that reduces their interest expense by a ton by incorporating this in there because they’re just dealing with such a high interest expense when it’s not.

[00:24:20] So. I know that’s not what you’re interested in doing at Debifi, but I see the market may be trying to move in this way. And so really kind of a question to Pascal or Max, either, either one of you guys, how do you see that evolving? And cause I think the appetite is going to be very high.

[00:24:34] Pascal Hugli: Yeah. Maybe if I can quickly speak to this, I, the way I see the world or the way I will, I think this will unravel is really why are we offering Bitcoin to buy now for our clients?

[00:24:45] Now, why can’t they custody it with us? Why can’t we buy it? Why can’t we put it into their portfolio? It is really because like of two reasons, I would say, for one, it’s like people who are passionate about this and have like entered the bank and maybe they have worked for the bank for quite some time and they have pushed for this because they, they want to see this industry grow as well.

[00:25:03] That’s one of it or one reason. And the other one is surely like client demand, like people were actually demanding. They seeing like their peers, like right and left invest in Bitcoin. And I can’t do it. Then you’re, you’re going to pressure the bank. So either I can do it at the bank or I will probably move to a bank that makes it possible, and the same thing will probably happen here as well with the borrowing and lending, because like, as you said, there are a lot of wealthy big corners and they want to do it and they will possibly want to do it through solutions like Debifi that Max is building, that it’s also.

[00:25:33] As transparent as possible that they can remain like self custody, some sort or like collaborative custody. So they remain in the possession of the keys and just have the transparency. So I think that’s really how it’s going to go. And from the bank’s perspective, again, I mean, it makes sense to kind of also broaden the services that you have, because Now, maybe you were still in front if you offer Bitcoin as custody and just as a portfolio add on, but in maybe two years time, every bank, at least in Switzerland, that’s what I feel will have that offering.

[00:26:05] And then how do you differentiate? And that’s exactly where something like this comes in and why the bank is already looking at this. Okay. This is the way for us to differentiate. And then further down the line, maybe you dabble in it with a few. The designated clients, you go super conservative just to test things out.

[00:26:22] And the more you grow in experience, the more you familiarize yourself also with the risk management side of things. And then at some point you can start mixing up real estate, Bitcoin. So this will be a natural way. This will involve, it might take another two to three to four years until we’re there, but I can totally see this happening.

[00:26:42] Preston Pysh: One of the concerns that I’m seeing right now is just the proliferation of ETFs and the Bitcoin ETFs. And I suspect that traditional finance is going to start using that as what they’re posting as collateral. And where I get concerned is. The weekend, the price of the spot price is still moving like crazy and depending on how much of a loan to value ratio traditional finance is using, mixing that with their fractional reserve system, I think it poses concerns and issues for anybody kind of posting ETFs as collateral as opposed to underlying Bitcoin.

[00:27:18] Is this a concern that you share with maybe the directions that institutions, particularly here in the United States are taking? And if so, help define that more so people can understand what we’re talking about here.

[00:27:30] Max Kei: Yeah, well, like I literally care less about ETF as a collateral because we don’t provide services for the ETF as a collateral in that way.

[00:27:40] We only provide services if you have. But I mean, in general, I do understand where you’re getting. I think that that’s fortunate or unfortunate. That’s just how the market works. And it reminds me to some extent, like a lot of synthetic products during the subprime crisis back in 2008. Well, some companies are just going to get burned, but that’s just a cycle.

[00:28:05] You cannot prevent, like, you cannot prevent these things. And usually, like, ETFs, they get collateralized for short term loans, I mean, trading, liquidity, that type of stuff. So me being a Bitcoiner and thinking short term is not actually on the same page. I don’t think that it works, but I think that if some companies, I don’t wish this to them, but I think if some companies are going to get burned with ETFs, Bitcoin ETFs, as a collateral or just as a Bitcoin ETF, That’s just going to speed up the educational process and then coming to actual Bitcoin standard, meaning holding your own keys, meaning using the actual Bitcoin, meaning understanding how the multi stakes cold storage is work, that’s just going to speed up the process.

[00:28:57] So far, I think the good thing about Bitcoin ETF. For us, it’s actually helps to talk almost the same language or at least say the word Bitcoin and they just aren’t gonna say, okay, we don’t understand that to, to all of us. They already know that there’s Blackrock doing this stuff. They already know that there’s a bunch of huge institutional liquidity makers, market makers doing this stuff.

[00:29:21] So for us, it’s kind of easier. It’s actually helps. Mass adoption from the trade by institutional perspective, I think that again, there’s also a very important question or a very important thing we need to distinguish mass adoption in the corporate world and mass adoption and everything outside of the corporate world.

[00:29:41] I mean, like. For Bitcoin being mass adopted, tools like Nostr, tools like Lightning, tools like Easy, Multi Stakes, Cheap Coal Storage just helps to be mass adopted across the globe, whether it’s an emerging market or it’s a like, it’s more developed market for individuals. For corporate ETF helps a lot.

[00:30:03] Pascal Hugli: Well, I mean, I have a similar hunch that what Max is saying. I mean, whenever I get asked, like, what are the biggest risk, maybe next cycle, or maybe even this cycle with Bitcoin, I usually point out that this could be one. The ETFs I mean, we all know Caitlin Long and she’s stressing this point again and again, there’s no central banks in Bitcoin.

[00:30:21] So if you mess up there, things can get nasty. And I think at some point, one institution will. Mess things up, which will then be again, a learning curve for others. When I talk about Swiss banks, and that’s the great thing again, with a private traditional Swiss bank, they are really conservative. So they also want to on the risk side, they want to keep things as conservative as possible.

[00:30:41] I mean, how they think it’s more like, okay. If we have this service and we allow Bitcoiners or other people to borrow against their Bitcoin collateral, we might not be competitive enough because we will have a very low TVL and you can’t really max out your Reddit lines, so to say. And that’s why they are more like anxious or not anxious.

[00:31:01] They’re afraid that they might not be competitive enough. And there again, You may be are not competitive enough. If you have a person who really wants to add like borrow against a Bitcoin and max it all out. But if you have like a very conservative hodler, and I would again say many of the Bitcoin holders I know they are exactly this conservative type, they would actually be fine with this and say, okay, cool.

[00:31:23] Yeah, just, just do it with Bitcoin, no ETF, obviously. And again, really low TVL. So I don’t run the risk of getting liquidated. And there, again, this is also how I try to like talk to these bankers and try to tell them how big corners think that they didn’t, ah, that’s a light bulb moment. I didn’t know that they, that there could be a business case in the first place, so again, that’s just interesting where we still have to go with that.

[00:31:47] Preston Pysh: The ultimate irony for me, if we go back two, three, 400 years, like what is the essence of a bank and the essence of a bank is being able to custody securely, collateral and deposits, whether that’s gold or whatever it was right, like at the essence of what they provide, it’s security of custody and it’s ironic to me that as all these ETFs are being rolled out that they’re leaning into you.

[00:32:13] Owning these and kind of using those as collateral. And they’re just a wrapper on underlying keys of the underlying Bitcoin, right? They’re not wanting to custody that. And what Max and Pascal are talking about here is using the real Bitcoin, the real keys and securing these real keys in custody to over collateralize, the shrewd bucks or the paper slips of Fiat.

[00:32:38] And I think it’s just, it’s so ironic to me that this is lost on the largest banking institutions on the planet that they’re playing on a wrapper and not the underlying thing and learning how to custody it and manage it and secure it at, at all costs. It’s just crazy. It’s nuts actually.

[00:32:57] Max Kei: I mean, one of the things that you mentioned that I think they went from secure custody to just custody.

[00:33:03] They just want to custody your funds, and then there’s a bingo like that type of facet is Bitcoin, which completely changes the game, provides a great self custody opportunity and provides collaborative custody opportunity. And that’s the trick, because like centuries back, Like there were like custodians of the funds, literally, they had the possession of your funds, which is not a bad thing, like for some people, that’s the way to do for a majority of people, that’s the way to do, but then there’s again, as Pascal mentioned, there’s like new type of people emerging now that like winners or people who understand that Bitcoin are actually is as a Like super asset provides a very nice self custody or collaborative custody in this case like properties and that’s where the need to, the partnership needs to be happened because like many banks, I still want to ask, can we add it to our balance?

[00:33:59] Can we do this in a custodial way? Can we do this and that? And again, when I pitch to them, I usually say like, guys, you can actually just provide multiple like options to your customers. We have a custodial lending, which will be a bit more cheaper, but then again, every sane Bitcoiner understands what custodial lending means.

[00:34:20] Not your keys, not your coins, or we have non custodial lending, whether it’s through DebitFive or any other platform out there, where the interest rate could be higher. Because obviously banks need to compensate because they cannot re lend that money and make more on top of that. But then again, it’s just better for a customer.

[00:34:39] Preston Pysh: That, that point there, that last point that they can’t fractional reserve it. And then the money multipliers is what we’re really talking about. And the revenues for these banks are so heavily reliant on their capacity and their ability to exercise this money multiplier. And for people that aren’t intimately familiar with this idea, basically a hundred dollar deposit turns into an excuse, the math, cause this math isn’t right.

[00:35:04] Let’s say you put a hundred dollars in deposit into the bank, that then turns into a thousand dollars worth of lending because of the way the fractional reserve system works. So if you think about how much proceeds they can make off of a thousand from only a hundred dollars deposit, it’s a lot. And what we’re talking about here is collapsing this money multiplier down to what the core deposit is, which would be call it a hundred bucks, and that they can only make revenues off of the a hundred dollars deposit.

[00:35:30] That’s bad for the banks. It will collapse their multiples many times from where they’re at right now because they can’t play these fractional reserve games. Where I wanted to go next Max and Pascal is dollar stable coins. One of the core ingredients to borrowing and lending is if the underlying collateral, let’s say we put 150 worth of Bitcoin into escrow and the price fluctuates.

[00:35:54] And now the value of the Bitcoin is a hundred dollars. And you have to liquidate the borrowing lending agreement. Time is of the essence in order to execute this transition. You need 24 seven markets. You need a dollar or a euro or whatever fiat is on the other side of that to be in my opinion to be tokenized.

[00:36:14] In order for this immediate settlement to happen so that there’s no risk in, Oh, well that was over the weekend and we weren’t able to turn it into dollars for two days or whatever it was because we couldn’t access the fed wire or whatever, whatever a swift network we’re talking about. Talk to us about your point of view on this idea and the future of stable coins and how important this immediate settlement into some type of fiat is.

[00:36:40] And what do you think that the regulatory environment is going to look like moving forward as this becomes more and more popular?

[00:36:47] Pascal Hugli: Yeah, maybe from my point of view, I think that that’s exactly right. What you described here, that you don’t have this mismatch and then some sort of settlement risk.

[00:36:55] If you can’t then not settle it because it’s just the markets are not open or you don’t even have like the fiat that you need on chain, so to say. I think it’s a huge risk. And it’s also something that we have been discussing inside the bank and people who are maybe not that close to Bitcoin are asking exactly this type of question.

[00:37:11] Maybe one step back, there’s even the problem that these people don’t work on the weekends. And then they’re like, Oh, then I have to work on the weekend. And so no, but if you could then kind of automize it through on chain stuff, then it wouldn’t have to be like this, but for this Fiat needs to be represented somehow in a tokenized way.

[00:37:29] And I think in Switzerland, this has been discussed for quite some time. And we just had the regulator publish, I think, a paper on stable coins. Again, I haven’t really read it in a thoroughly because it wasn’t that well received, but I think in the end we have to go down that route and there will have been some.

[00:37:47] Approaches like with a Swiss stable coin, for sure. The S and D is testing things out like our national bank. So they have also been looking at this because they want to provide this cash lag on chain, but then again, I mean, we had this one stable coin issued by one of the institutions in Switzerland, which kind of interfered with the negative interest rate environment that we had in Switzerland.

[00:38:09] And people were flocking into this stable coin because the stable coin didn’t have negative interest rates. And then all of a sudden. I guess the Swiss National Bank didn’t like that because it was kind of destroying their business model, which again, why this stable coin was probably calmly taken down, so to say.

[00:38:25] So there are all these moving parts. I would assume at some point it needs to come just to, to count this risk that you described. And I think it’s really this knowledge as symmetry that we have to tear down and, and then people will get it and, and, and that’s one of the moving parts that will come.

[00:38:41] Max, did you have any, yeah, yeah, go

[00:38:43] Max Kei: ahead. Yeah. I mean, I would say probably a very bad thing in terms of being a bit corner, but actually like stable coins, because again, like if we say that fiat is a bad, bad form of money, then stable coins is just a better form of bad money. I mean, in the way that it’s, it’s direct settlement between two individuals or two entities.

[00:39:04] And there’s always a blockchain record, which is amazing, especially like if we do a deep dive into peer to peer lending. I mean, you don’t need to prove me that you have sent me stable coin. You just upload the transaction ID and like in HODL, HODL or in Debifi, we automatically show that. Okay, success.

[00:39:24] You have received the loan to your address or you have repaid the loan and a lot of things could be automated. But eventually, I think that stable coins also helps a lot into in terms of Bitcoin adoption. I mean, as soon as the individual has access to stable coins, automatically he has an access to Bitcoin because you can literally swap any stable coin to Bitcoin.

[00:39:51] That just helps look at Argentina, look at Latin America in Argentina, you can actually leave off with stable points and that simplifies a lot of things in terms of regulation, again, region by region, there’s always some regions that lack development. They tend to over regulate some stuff or even ban some stuff.

[00:40:11] And there’s always regions who are more like, they’re more adopting to the current thing. And I think again, like stable points is amazing. And I would actually prefer them being used frequently, more and more frequently. I would love actually to see other types of stablecoins being used frequently. Like we have mostly, the most common stablecoins now are Tether and Circle used to see, which is backed by Dollar.

[00:40:39] I would love to see something with Euro as well and Swiss francs and other currencies because at the moment it’s basically all USD, which is good probably for US consumer user, but I would prefer like as a European Union citizen, I would actually prefer seeing more opportunities to use Euro as a stable point.

[00:41:03] Preston Pysh: Max, I agree with, with what you just said. The only thing that I would push back on, and I think that this is a really, really important point for everybody to keep in mind. The size of these stable coins, tether and circle are so huge. And I don’t know that I have no idea like what the reality is, but I would be blown away.

[00:41:21] If there’s not some type of close government connection between them and just because of the sheer amount of treasuries, like I know tether, I think they’re at 118 billion of AUM and they’re number 18 on the list. And I’ve just talked to Paulo recently on the show. So like I have the utmost respect for these guys and what they’re doing, but I would imagine that Let’s say that there are tether in somebody’s hands and the government, the U S government doesn’t like who that person is.

[00:41:49] I would imagine they could go to them, tap on their shoulder and say, we don’t like these people having 300 million worth of tether on their books. We want you to basically take that, those dollars away from them. And I think they’re in a position that they have to comply, right? The reason I bring this up as a risk is if you are that person, if you’re that bad actor, quote, I’m using air quotes here because everybody’s got an opinion of who’s bad and who’s good.

[00:42:14] If you’re that person and you’re using these dollars as collateral or whatever, it’s not like, it’s not like Bitcoin in that there is still kind of a voting member in the loop of whether you’re actually allowed to use it or not. And I just want to throw that out as a highlight in something that I think is.

[00:42:29] Just an important, side note.

[00:42:31] Max Kei: Yeah, it’s true. But then again, as, as at the beginning of my, my monologue, I said, it’s just a better form of bad money, if you are, again, if you are like in having your money in the bank. Then if you’re a bad actor, as you said, then your account is just going to be freeze same way it works with stable coins.

[00:42:53] But the essence of the stable coin is that actually, if I’m not a bad actor, I can freely transact without being relying on the bank, just, completely,

[00:43:03] Preston Pysh: yeah, and your phraseology of it being that is perfect. Pascal, I’m sorry. I interrupted you. Go ahead, sir.

[00:43:09] Pascal Hugli: I just one last point on this. I mean, exactly. That’s what also what I’ve been seeing. I’m lecturing on this topic. I’m talking to the bankers, and like maybe four or five years ago, people were always asking this question. How is a CBDC or a stable going to be different than Bitcoin? And nowadays I think sailor and all these people, they have done a great job in like really pointing out why Bitcoin is so much different and why there’s so much, it’s just, it’s just a different beast.

[00:43:33] And people have been getting this more and more. And that’s why I think I’m not worried when there’s stable coin adoption within banking. When I think it will come, because like, if we look at where stable coins have come from, they have been adopted with the crypto exchanges first place, because like all these people were speculating and they needed to have some settlement layer there.

[00:43:52] These exchanges didn’t want to have like. The fiat risk again, the one that banks will now be confronted with. And that’s why they came up with these stable coins. And that’s how they initially found adoption. And I think it’s going to be the same with banks. When they now build out these products, the borrowing and lending and potentially more products where they integrate with Bitcoin, they will have to kind of have something where they can with as least risk as possible, settle the cash lag.

[00:44:16] And that’s why I think these stable coins will inevitably make it into banking for sure.

[00:44:22] Preston Pysh: Max, we had an interesting exchange on stage, the gentleman that created a stalker, which is an exchange over in Europe that is tokenizing real equity, not some clown coin they’re taking as an example, they have a micro strategy stock that they have taken custody of.

[00:44:39] They’ve issued a token. that you can freely trade 24 seven over the weekend, whatever. And when we were on stage and we were talking, this came up as a point of discussion as why can’t basically the micro strategy tokenized micro strategy be used as collateral in borrowing and lending. Talk to the audience about this.

[00:44:57] Cause I think Well, you and I understand the risk. Why don’t you explain what the risks of this is today, at least, but where maybe some of this is going, call it five or 10 years from now.

[00:45:06] Max Kei: I mean, like gentlemen’s name is so they’re actually providing liquidity on their defy and a very much sophisticated in terms of securities and everything else.

[00:45:17] But there’s another thing that we just go liquid. And Liquid is a, is kind of layer two solution or solution on top of Bitcoin, which allows you to create a different type of basically wrapped securities on the kind of Liquid blockchain, but it’s like very much similar. And you can actually use Liquid to build a multi sig and then you can use the same approach, meaning that you can take your security suite, which is micro strategy. You can put it in a multi sig and you can borrow against that. So there’s like the security risks are similar. The only difference is that price of the underlying asset. I mean, if you do this with Bitcoin, the underlying asset is Bitcoin.

[00:45:59] If you do this with micro strategy stocks, that are wrapped into liquid, then the underlying asset is microstrategy. And the difference for me is very clear. Bitcoin is decentralized, I would say, hard manipulated form of money or assets. There’s no one single person who can go out Friday evening and say, Okay, I’m done with Bitcoin, I’m, I’m buying Doge, whatever.

[00:46:25] We have that person who’s doing this, but, Like Honey Badger doesn’t care. We already don’t care about what he’s saying. Literally. And with the company or with the entity, with stocks of the company, there’s a certain risk, as from my perspective, that there’s always one person who can decide on how this company is going to evolve and what this company is going to do.

[00:46:48] Like imagine if at some point Elon Friday evening after markets are closed, he’s like, going out to Twitter and saying, Okay, I’m done with building Teslas. I want to build fridges or whatever, like, like iron boards, whatever. And I’m going to do that. I’m going to innovate in that market. Probably Monday, like Tesla stock will go like this.

[00:47:10] Because people will eventually figure it out or think that he went crazy. With Bitcoin, that doesn’t happen, I mean, it’s like, whatever you say, there’s no CEO of Bitcoin, there’s no person, people even don’t know, and that’s the beauty of Bitcoin, still, we don’t know who, Satoshi Nakamoto is and that’s, I would say that’s the leverage that government can use and that was like very nice strategy in sense, not disclosing who is creator of the Bitcoin.

[00:47:37] So I think that’s the difference. I mean, but the promise of liquid and the promise of wrapping all this stocks. And using them as a digital alternative, it’s kind of works similar as stablecoins and fiat, in that way. It’s kind of interesting because again, you can borrow against yourself in a non custodial way, which is interesting,

[00:47:58] Preston Pysh: pascal, what’s your thoughts real fast from an institutional standpoint and how they’re thinking about tokenizing equity.

[00:48:04] Pascal Hugli: Yeah, I mean, at Swiss bank, we’re also looking at this because again, in Switzerland, we have this unique situation that you can actually issue a digital token, a digital share token, and it comes with the exact same rights, legal rights as with the normal traditional share, because the Swiss law was changed.

[00:48:22] And now you actually have a share token, which is a The actual share. So we have been looking at this. There have been startups that have been issuing this. We have been trying to maybe custody this because at some point again, yeah, I believe maybe people want to borrow against this as well. And then again, yeah, it’s up to the person to understand that it’s different from Bitcoin.

[00:48:41] My feeling is it’s going to be either two scenarios, because the way that this all this whole tokenization thing is happening, and everyone is like jumping on this train. I think it’s also, it has to do with the underlying pressure that like our today fiat money doesn’t hold any value.

[00:48:56] That’s why the world is increasingly financialized and everyone has to become a speculator and like whiskey and shares and maybe everything that you can think of needs to be tokenized so people can speculate. And maybe this will happen in the future still, we don’t know, but maybe Bitcoin takes away this monetary premium with all these things.

[00:49:15] And then people understand, yeah, I don’t have to go speculate on the latest tokenized thing, but I can actually just buy Bitcoin. And then maybe a few shares like micro strategy that sent us a send, like the test of time will be used to borrow against, but I see really these two scenarios where this could go.

[00:49:35] Preston Pysh: All right, guys, Max, I’m assuming if there’s institutions listening, financial institutions, listening, your DMs are open at Debifi.

[00:49:42] Max Kei: I’m always like 24-7, the same way as Bitcoin. We’re always there, just send us a message.

[00:49:49] Preston Pysh: Pascal, what’s your message to the audience?

[00:49:51] Pascal Hugli: Yeah. I mean, if people are interested in taking a look at the bank, if they have Bitcoin that they want to have custody with a traditional bank, I mean, hit us up, we would be happy to talk to you.

[00:50:01] And yeah, I mean, always happy to share knowledge when it comes to investment and Bitcoin and how these two things interact.

[00:50:09] Preston Pysh: Max, did you have anything else? I was joking a little slightly joking, but serious.

[00:50:14] Max Kei: Yeah. I mean, my message would be like, don’t be the last in the line. There’s a good opportunity to be the first.

[00:50:20] And that goes to the trade fight companies where they have some funds. Large funds that are onboarding at the moment already talks with banks. So don’t be the last one in line because it’s like the pace of development, the technological pace of development is just astonishing. I mean, look at what happened with Like when my phone was first presented, now we cannot imagine like using buttons in our phone.

[00:50:45] And that’s just like literally less than 20 years, I mean, and we’re already there. And Bitcoin is amazing. Like if you’re going to look at Bitcoin technological development cycle is even more, and even more so, less than a year or around a year, and it’s already like booming at the moment and purple killing a lot of people.

[00:51:04] And on the other side, in terms of borrowers, I just want to encourage individuals, like if you’re using whatever service you’re using, whatever bank you’re using, and they don’t have any proper borrowing and lending in your Bitcoin, just, connect us. We’ve been intro to some of our existing lenders.

[00:51:22] By their customers, because they just want to borrow, they want to borrow from the institution they like, they know, they’ve been very fine with, but they just don’t want to give custody of their funds. So these are like two things that I just wanted to point out.

[00:51:35] Pascal Hugli: Yeah, maybe a real last word of encouragement to like big partners, who want to support transfer institutions and kind of like, don’t know if they’re betraying the ethos of Bitcoin.

[00:51:46] I would encourage them to do so because in the end, I think it’s going to happen anyways. This is just how the world. Like course of things is going to unravel. And that’s why I hope we as big corners, we do it correctly and do it in solutions that Max and other people are presenting that we can push the TransFi more to Bitcoin than vice versa, and that’s why I want to encourage these people to actually do this.

[00:52:09] Preston Pysh: Guys, I can’t thank you enough for making time fascinating conversation. I find this just absolutely mind blowing. Some of these ideas. And thank God for Bitcoin, right? Thank God for Bitcoin.

[00:52:19] Max Kei: Yeah.

[00:52:21] Preston Pysh: All right. We’ll have all that in the show notes for everybody. You guys. Thank you for your time. Thank you very much.

[00:52:25] Thanks. Thanks Preston.

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