Mike Townsend: Thanks for tuning intoanother episode of Around The Coin. Today's guest is Hany Rashwan. Hany is theco-founder and CEO of 21Shares and Amun 21Shares is the world's largestcryptocurrency ETF issuer. They have, is ETFs available or ETPs available in differentmarkets throughout the world?

Mike Townsend: Notably, not in NewYork or not in the us. We talked about why that is. We discussed a, Amun, theconcept behind Amun, which is similar to 21Shares, but it is crypto first. Soit's not in stock market. We covered a lot of ground. We discussed how theystarted the company, what the concept is, how accessing.

Mike Townsend: Bitcoin and othercryptocurrencies through public markets is so important how they were able todo that before pretty much anyone else. And he threw out a few greatrecommendations. Ben Thompson, Noah Smith, the Bitcoin standard and others. Ihope you enjoy this dynamic conversation with a good friend of mine.

Mike Townsend: Here is Hany Rashwan.

Mike Townsend: Hany. I'm excited tochat with you, man. It's been a while since you and I have talked, but yeah,long time and we were talking a few minutes. Pre-show about the different, thestructure of the organization. I'd love to just start there and then we can buildthe house on that foundation, but yeah, walk me through just the generalbusiness entities and what they focus on.

Hany Rashwan: Sure. So the mostimportant thing to note is all we see ourselves doing is building bridges intothe crypto world. Now, depending on who the end customer is there may be adifferent package, a different rapper that is most appropriate for theircustomers. So let me give you an example. We don't think anyone wakes up in themorning and wants to buy a Bitcoin ETF or a DeFi index ETF.

Hany Rashwan: They wake up and theywant to buy Bitcoin or a DeFi index and get some exposure to that space. Maybethat index is best. In a token format, say if you're crypto or tech native, orif you live somewhere in the world where accessing a meta Ethereum wallet or aPhantom Solana wallet is easier for you than European stock exchanges, maybeyou're a professional investor or want a security or don't wanna manage thecustody, certain age brackets, certain regulatory requirements, depending onwhat you're doing.

Hany Rashwan: You really want anETP, an exchange rated product, whether that be an ETF or ATC or ETN does notmatter to us. And so the way we think about it is it is our job to provide thatunderlying product in every single rapper in every single format possible.Think about WhatsApp or Dropbox having, not just a Mac and a windows app, butall of the other operating systems as well.

Hany Rashwan: So the, the maincompany is 21 dot. That's where we all work and all of our mission can be justsimplified as building bridges into the crypto world. The way we do that isprimarily today through 21Shares, which is the world's largest issuer of cryptoexchange rated products listed on stock exchanges around the world, as well asAmun, which does very similar things, but on the token side.

Hany Rashwan: And so it's tokenizedproduct. And then underneath, we also have a third brand called Onyx, but thatis the infrastructure that powers all of this, that issues, the ETPs andmanagers, them, that issues the tokens and managers, them both for us as wellas a few other firms that, that also these products.

Mike Townsend: And did the, did thethird business roll out of, or spin out of the existing first two? I mean, youbasically similar to other companies, right? When you build a product, you kindof create a foundation on which you then build the end consumer facing. Did yourecognize that through that foundational building process, you could spin thatout and that's what gave rise to...  

Hany Rashwan: So no, not at all,actually.

Hany Rashwan: It's a bit of a funnystory. Onyx was there from day zero. We're primarily known for listing theworld's first crypto ETP. There had been a few random trusts or exchange tradedproducts that didn't, that weren't necessarily collateralized by anythingunderneath where you had to depend on the credit worthiness of someone you'venever heard of what we did first is.

Hany Rashwan: in Switzerland, whichwas the first place to allow this built a physically backed crypto exchangerated product. And if you remember, in 2011, I think 2012 were thereabouts.There were a bunch of people that there are big FinTech and crypto, the Winkle,Voss twins Barry silver and, and DCG that had tried and had been by the timewe, we, we started thinking about this in 2018, tried and failed for six, sevenyears to bring about a Bitcoin ETF anywhere.

Hany Rashwan: And we managed tospeak to 27 different jurisdictions really thought about where could we dothis? That would be best. We correctly identified Switzerland as the, the mostfertile ground there and we're able to list it first. But the funny thing is inFebruary of 2018, we listed in November of that year, but in February of 2018,we got approval.

Hany Rashwan: We got regulatoryapproval to list this thing. And we were terrified because we thought someonewould beat us to it. It's so obvious. And, and we're just a two person startupwith, with no resources. And that's when it came to the next step of, well, howdo we actually bring this to market? And basically none of the traditionalfinancial players that would normally be the ones that do this issuance andadministration platform either wanted to work with us or were capable ofworking with us.

Hany Rashwan: And through thatmixture of both we had to create Onyx in order to bring about the world's firstcrypto ETP in the first place. And then I think a few months later, we startedspeaking to other asset managers and banks and, and other customers, includingan American company called Bitwise a Swiss bank called Cigna Bitcoin Swiss,which is large and, and a bunch of others that, that we can't publicly name.

Hany Rashwan: And then we startedopening it up to third parties because from our perspective, great tide liftsall boats. And we're just looking to get as many people introduced to crypto aspossible. It's primarily through our products, but if, if we get people in theecosystem that have their own strategies that have their own ideas, we wouldlove to bring them to market as, as fast as possible as well.

Hany Rashwan: And so that's thestory of how we in the end ended up building this full stack end to end issueron tokens on securities with all the underlying infrastructure.  

Mike Townsend: I'm surprised thatthere wasn't more capital requirements or just general bureaucratic overheadthat goes into getting approval in the first place.

Mike Townsend: So with two people, Iimagine you had some small seed seed round. I mean, nothing compared to like alarge institutional yeah. Or large FinTech company. Was it just a matter ofTiming to some degree of being in the right place, saying the right things likewas the approval part, not the hard part.

Mike Townsend: And then it was amatter of going out and building this Onyx tool.

Hany Rashwan: I think they were allthe hard part. there was a very different kinds of of challenges. So we raiseda normal seed round. I think it was somewhere between two and 3 million in, intotal. And we you've done early stay startups before legal fees can pile up.

Hany Rashwan: You have to be very,very careful. And especially if you build a seed, stay startup, you need tosurvive and show proof quickly enough, and you need to therefore survive longenough to, to do that in order to survive. And, and we, we're a historicallyprofitable company we've been profitable since December of 2019, but thatwasn't the assumption going into it a year and a half prior.

Hany Rashwan: we were very, verycareful with costs the way this actually worked and the way we were actuallyable to do it is we would, we would do all of the work ourselves as much aspossible. Now you get the advice of do things that do not scale the, the, thereason we ended up being able to do this in Switzerland is we called verycompetence, Swiss council.

Hany Rashwan: That's wonderful andcost a ton, but the call wasn't. Can we do this? Can you discover it? Can youdiscover and explore for us? The conversation was quite literally my, myco-founder saying I was looking at the regulatory framework in Switzerland forthe exchange. And I noticed an article on page 167 towards the bottom that wethink could be applied in this way for what we want to do.

Hany Rashwan: Is this a correctreading of that? And neither one of us are lawyers and neither one of us haddone this before, but we sort of just really. worked very hard on, on doing allof that. And that is when the lawyers then said, yeah, this should work. Let'striple check with, with the regulators and the exchange and the other serviceproviders.

Hany Rashwan: And that's actuallyhow it ended up happening, except not just in Switzerland, but we did this in27 different jurisdictions around the world over probably about a nine to 12month process.  

Mike Townsend: And was there initialupfront, like where, where do you think the other companies failed? Causethere's certainly a degree of research you have to go into, you have to, youknow, do diligence legally to figure out how you can carve out the space in whichyou can operate.

Mike Townsend: You have to, you know,submit the right paperwork, all that seems like kind of table stakes to, to getinto the game, especially for something as big and kind of like what you saidobvious as Bitcoin ETF.  

Hany Rashwan: I think the singlebiggest mistake that everybody did is have an over focus on primarily Americaand the United Kingdom.

Hany Rashwan: So you've got a lot ofpeople that, that wanted to list it in New York or London. And obviously we'reworking on, on both of those. One of them is obvious because it's very publicand we're doing it with, with Kathy wood and, and arc. But we didn't think thatwas going to be the first to list such a product.

Hany Rashwan: And in fact, we, wedidn't think that it needed to be the first to list such products. It's mucheasier to, you know, turn around a sailboat than an oil tanker, all of that.And so I think the biggest, the biggest thing that we really considered is we werelooking at what is the best base from which to first build and then expandrather than what is the most ideal.

Hany Rashwan: Market that we want toend up in. And you know, it's 20, 22. We still don't have an ETF in either ofthe jurisdictions that I mentioned from anybody. And I, I would say that, thatour bet was very, very, very on point and it was our competitors ignoring usand looking at this as a financial backwater, that's not of significant scale.

Hany Rashwan: That doesn't matter.It's the 10th largest stock exchange in the world, by the way, or thereabouts,Switzerland.  

Mike Townsend: And is this operateindependently as just Switzerland is part of an, if I like, I don't, I don'tknow much about the heat.

Hany Rashwan: Switzerland is, is itsown thing. So there's the European union, which you know, famously Britainwanted out of, and that you get Brexit mm-hmm Switzerland had never been in theEuropean union.

Hany Rashwan: They don't really doalliances and things like that super easily. They, they guard their neutralstatus. A as a holy matter. And so Switzerland was its own thing, but where weactually, and that was all helpful. Right. But where we actually really bondedwell with, with the Swiss was over crypto itself.

Hany Rashwan: Even at that time,Switzerland was calling itself. There was a crypto valley, there, there was acommunity that was started there and you would get politicians who would comein and say, no, no, no, it's not crypto valley. It's crypto nation. Don't just givecuz crypto valley was one Canton or state of the country.

Hany Rashwan: No, no, no, no. Thisapplies to the whole country were really into this and you got, you know,political parties of all shapes and, and, and stripes very much agreeing thatthat crypto is, is interesting enough probably here to stay. And if it is, theyneed to make Switzerland at the heart. It, and we didn't get as much politicalbuy-in from, from everywhere else.

Hany Rashwan: And it was quiteearly. Like the Swiss were very early and brave, but I think that if you lookat the history of the country, it makes a ton of sense. This is a country wherethe federal tax rate is something like half a percent. And then you payanywhere between 15 and 40% on the local level. Because states get to determinethe, the taxation.

Hany Rashwan: It's an incrediblydecentralized governance model by default. You can talk a lot about how theSwiss have had it long history of trading gold and custodying it and Bitcoinbeing digital gold, which was by the way, our argument, we initially used thestructure that's made for Swiss gold to custody, digital gold.

Hany Rashwan: That was, that was thewhole. Innovation. And obviously this, the Swiss have a very rich and longhistory of, of doing that. And then Zurich and Geneva happen to be financialcenters. They're very large, especially in the private wealth and assetmanagement, wealth management in general space, and while not being of thescale of China or America, or even Germany was of a significant enough scalewith significant enough support and with Germany and the rest of Europe nextdoor, and with everything else within very nice striking distance fromSwitzerland, we really thought that it would be the best base possible wherewe'd have support at home.

Hany Rashwan: We had no problems athome and in fact, the success of our company and actually the success of ourentire industry of crypto is a net positive in arguably for the country that weare in. And so all of these things coalesce together in a really beautiful waywhere then everything we've built today was made possible.

Mike Townsend: How many other ETFBitcoin or any crypto related ETFs are in switch in the Swiss market now?  

Hany Rashwan: So that's the funnything. We got a lot of asset managers, big guys, primarily American, whoscoffed at our listing on Switzerland. And they're basically all there now withmuch smaller asset sizes than what we have.

Hany Rashwan: And so I think at thispoint, if you want to physically back crypto products, Switzerland is typicallythe first stop. If not one of the first stops. And I would imagine there'sprobably a dozen or more today. Yeah. But, but primarily much more minorobviously as time goes on.  

Mike Townsend: And who can purchasethat?

Mike Townsend: I mean, do you have tobe. you don't have to be a Swiss citizen. I mean, who can buy into this ETF,given that it's in Switzerland?

Hany Rashwan: So essentially we haveusers from around the world. We restrict retail users in, in the United Statesfrom marketing or advertising or anything like that. Cuz the United States has,has pretty restrictive rules and we're very respectful of them.

Hany Rashwan: One of the coretenants of the company is we're not looking for any bag door listings. We wantto go through the front door in every single jurisdiction and we want to notcompromise on the product quality, which is why we haven't enlisted some ofthese imperfect products for the American market. But essentially it's aroundthe world.

Hany Rashwan: I would say 99.999% ofour revenue comes from outside the United States and dominated by Europe.We're, we're a pretty large player. As well as a ton of traffic that we seefrom every continent with, with a concentration in the middle east and Asia aswell.  

Mike Townsend: So I, I guess justspeaking about the market retail and  

Hany Rashwan: institutions stockmarket, by the way, which is very important to us.

Hany Rashwan: Yeah, because we believein retail accessible products. So most of our shares are somewhere betweenprobably 10 and $30 per share. And we have, while the bulk of the AUM comesfrom obviously larger institutional players, family offices, bigger funds,etcetera. The bulk of the people like by count are obviously retail and, andretail from around the world.

Hany Rashwan: If you can access aEuropean market where you can buy Hanza or UBS stock, you can buy our products.

Mike Townsend: And is that availableto people outside? Are there speaking from the market, the marketplace itself,do they restrict participants in other countries? Like can people in the us goand just sign up online and start buying your ETF on the market today?

Hany Rashwan: There's nothing thatprevents anyone from around the world of getting access to any stock exchangeand, and purchasing them, you and I can sign up for our brokers that gives usaccess to say the Thai stock exchange and then purchase shares there. InAmerica, we absolutely don't do any advertising or marketing to really justabout anybody, but especially on the retail front, if you go to our Americanwebsite, it's quite different.

Hany Rashwan: Whereas in the rest ofthe world, our, our website is readily available with, with all of ourproducts. And it's not that difficult for say someone in Singapore or Malaysiato set up a bank account or a brokerage account that has access to these topEuropean exchanges. If you think about it now, we are we're on the GermanDeutsche Beza we're on the French and Dutch Euro.

Hany Rashwan: We're in Austria,we're in Sweden, we're in a few other places we're in Australia. So there's anumber of ways that you can access our products. And, and these tend to be likein, in Europe, I think we're on the first, second and third largest exchangeswithin the EU and so pretty easily accessible products.

Hany Rashwan: Most of the time. Itouched on this briefly at the beginning, but we also have token versions ofsome of these products. And the way we see them is primarily accessibility ingeographies where we're not present. And so we have users out of Ecuador in Guatemalathat want to purchase exposure to some strategy that want to have this.

Hany Rashwan: But for theforeseeable future, it will be much more difficult for them to connect to aEuropean stock exchange than it would be for them to set it up a meta mask or,or a Phantom wallet. And. From our perspective, of course we should providethose products and those formats for those users, because it, for us, it'sabout accessibility and really how do we bring about the next billion peoplein, into crypto?

Mike Townsend: Yeah. Yeah. To me itfeels like the compelling part is that I can use capital use money inside of mybrokerage account to easily purchase Bitcoin through the ETF. And if I'malready in the crypto world, well then the, the, the money is, I mean, manytimes it doesn't just take multiple days. It might take a fee.

Mike Townsend: It might take, peoplemight have different ways that they report taxes and systems that they've setup with their accountants. So the whole concept of being able to invest inBitcoin in your, in your fidelity or TD Ameritrade, whatever it is, yourbrokerage account is so compelling that I'm kind of surprised you guys spenttime.

Mike Townsend: You've spent goinginto crypto only token. Et, I guess, would you call it ETF if it's in, is therea token ETF? Is that the right terminology?

Hany Rashwan: No, it's just, it'sjust index. We call 'em basket tokens. Yeah. Yeah. Index baskets, index. Yeah,baskets. Yeah. We, we call them basket tokens, cuz that's the easiest way ofexplaining them.

Hany Rashwan: You have to thinkabout how do we, how do we enable everybody around the world to access ourproducts regardless of, of format. And I'm, I'm sure that, you know Palm is notthe biggest mobile platform, but I'll bet that bigger consumer platforms onmobile, like WhatsApp probably have a Palm app somewhere.

Hany Rashwan: Right. And, and.circling that up at the end. That's very, very important. So there there's abunch of considerations here. First and foremost, like I was saying, we, wedon't wanna miss anyone. Just because you live in a country where there may notbe as reliable financial infrastructure does not mean you shouldn't get accessto an easy way of getting, say DeFi exposure that, that goes against theirmission completely.

Hany Rashwan: And so we wanna makesure that, that, you know, everybody has the ability to do this regardless ofwhat their infrastructure looks like. But the second thing that you have torealize, especially if you're in crypto and we are, we compete against a lot ofthese traditional financial types. We are very much not every single ETF equitystock bond commodity will be tokenized at some point.

Hany Rashwan: And so you sort ofinevitably will go there that it's very important for us to. Own. And in fact,build both markets but you're right. 99 plus percent of our AUM comes from theETP side. That's not to say that I believe that will be the same mix in five,seven or 10 years. Mm-hmm and you need a mixture of addressing how the world isnow while also understanding where the puck is, is going and building for thatas well.

Hany Rashwan: And that's how weconnect everything.  

Mike Townsend: And an ETP is aEuropean or Swiss phrase for the ETF. It's the same. They say product, we say fundet C, or, you know, there's different terminology, same concept, funnelingthings together, having one ticker symbol for it.  

Hany Rashwan: The, the, the basicway of thinking about all of our products and all of our products work the sameway is you pay money to buy whatever strategy.

Hany Rashwan: And it follows eithera single asset like Bitcoin or an index. And we go out and we are requiredlegally to then go and purchase the underlying cryptos and then store themsafely so that everything you have is sort of physically backed by the actualunderlyings not every financial product is, is, is like this.

Hany Rashwan: Obviously there aresome legacy products that have incredible premiums or discounts where you're,you're paying $10,000, but the crypto that you get access to may or may not beworth 10,000, maybe it's worth 14, maybe it's worth seven. And so that is whatwe take out now in Switzerland. It just so happens that the way they call whatis an American gold ETF, they would call it a gold ETP.

Hany Rashwan: There's a lot ofnuance there and it changes geography by geography, but the base still stands.a hundred dollars worth of our shares equals a hundred dollars worth of cryptothat we actually buy and store in the background and take care of them.

Mike Townsend: Who stores that, is itstored by 21 co or is it stored by another company?

Hany Rashwan: We, we purposely keeparms length away from that. We, we primarily go with you know, heavily auditedregulated, third party custodians with the right licenses and insurance and,and all of the safety and, and security that, that comes from that. We workwith most of the large custody providers out there.

Mike Townsend: Bitgo comes tomind.  

Hany Rashwan: Exactly CoinbaseCopper most of the top custody providers. And we have, we probably work withsomewhere between six and 10 different custodians depending on the assets and,and, and we spread things around for, for some diversity risk as well. It's itit's a number of, of different firms, but what we ensure are they, are theyaudited?

Hany Rashwan: Are they regulated astrust companies or custodians? Are they in reputable jurisdictions? What aretheir policies on stories? What are their security procedures, et cetera,because one of our key one of our key services that we end up giving to ourcustomers is the ability to manage custody for them so that they don't think.

Mike Townsend: What, when you thinkabout the future of markets in general today, it feels like a kind of bottom upevolution of markets that have grown out of the countries and the countriesmaintain control of these markets through effectively an extension of theirpolitical power. So the United States can either approve or not approve, likeyou're not in the United States.

Mike Townsend: Presumably there'ssome rule that some three letter organization has said that this is not yetallowed. Do you see this move to being in crypto, be lemme be more specific. Doyou see the move to the markets shifting to crypto, everything, as you said, isgonna be wrapped in tokenized? Will that create a certainly it seems like it'llhave a major effect.

Mike Townsend: Like no one countrywill be able to influence investment decisions, investment. You know, whatevergoes into it, frankly, I want to ask you kind of two parts to that. One is why,why is there still such relatively large fragmentation on these markets? Iwould think that there would have been by now kind of a, a global market wherethere's like, you know, an agreed upon set of rules and every, you know, youcan, apple can be listed there and all these tech companies can be listed.

Mike Townsend: All the companies inthe world can be listed there. People can trade. It seems like it'd be awin-win for just about every country. Is there kind of an obvious conflict ofinterest that, that structure presents in why we have these like countryspecific or geo-specific marketplaces?  

Hany Rashwan: A lot to unpack there.

Hany Rashwan: So first I wouldn'tsay that the us or these other countries that haven't yet issued a product arenecessarily anti crypto or anti Bitcoin or something like that. I do think thatit's different. Geography by geography on what the needs are and what the rulesare. But I think you sort of strike at the heart of why crypto and Bitcoinexist in the first place.

Hany Rashwan: And there are a numberof different ways that you could, you could look at this depending on frankly,where you are in the world and much your priorities are. But if you look at thehistory of the internet, when the browser was created, we thought that paymentswould be incorporated. One of the error codes, like, you know, the famous errorcodes with 4 0 4 page not loading on, on, on one side of it, 4 0 3 on theserver side, etcetera.

Hany Rashwan: Cetera, we have, if,if you look underneath your browser now error codes for payments not working,because that's actually how we thought about things from the very beginningthat that payments should be part and parcel. Here, when, when you think abouta global internet of connected. Entities and for various technological reasons,it didn't actually happen until much, much later, but you saw a lot of peopletry and fail at it, including some companies that pivoted into something muchmore profitable at the time like PayPal, but PayPal initially was about thistheme of internet money.

Hany Rashwan: You can send me atext. I think we're, we're 3000 miles away now. Right? But even if we're 30,000miles away, you could still send me a text. It would be delivered in, in acouple of microseconds versus a bunch of other barriers that, that we see thevery obvious one is actually movement. I think about visas, right?

Hany Rashwan: Each country restrictsmovement in some specific way. And border posts are, are friction points. Andthere's a ton of research on this. On, there was this economist called Michael.Who basically says that if the world had unlimited free movement across theglobe and the global economy is about a hundred trillion dollars or so, right.

Hany Rashwan: That a world ofunlimited free movement around the world would, would I think add like $90trillion to the global economy. We would roughly double it just by doing that.The same friction is, is added in any siloed system, including as we thinkabout it today, payments. And what, what you're really striking at is one ofthe core reasons why crypto should exist, because it should be easy, as easy assending a text or email is sending me $10 around, around the world.

Hany Rashwan: And actually itdoesn't work like that. Crypto makes it possible, but thi this is one of. clearadvantages that, that frankly, I think there are a lot of obvious reasons why acountry would want to restrict movement of money in some way. And, andtypically it's a bit protectionist. There are some reasons around you know,security and, and, and, and making sure that there are known as variouselements, but there are ways around that as well of, of not giving up privacywhile not giving up core features that, that, that should exist from atechnological angle.

Hany Rashwan: And so I think all ofthat comes together in, in a, in a very beautiful case for why crypto is hereand ultimately at the end of the day sort of like when Uber was very well likedby customers, but sometimes not as well liked by the taxi cab commission or thelocal political party or whatever. We're getting a very similar thing.

Hany Rashwan: Like people are veryclearly. into crypto. There are, there are payments that, that we do as acompany that are far easier to do in crypto than, than in Fiat. And the peopleare demanding something like this, that, that, by the way, has a lot of otherpositive ramifications like privacy in, in, you know, in an age where all ofour personal data is, is being stolen like privacy in countries where you maynot necessarily have physical protection and rule of law in the same way,etcetera, etc.

Mike Townsend: Mm-hmm yeah, it doesseem like the compelling case for an improved consumer experience. Yet I'mskeptical that this transition will be smooth from being a nationalisticcontrolled marketplace of economic trade to one that's completelydecentralized. How do you sort of discern the potential negative external or inthe case of the United States, for example, what, what measures do you thinkare realistically possible that the United States would take.

Mike Townsend: To prevent thistransition, this capital flight from like the New York stock exchange, theNASDAQ to crypto land, like when that starts to happen, the pretty, obviouslythe United States federal government, especially in these financial institu,these financial regulatory institutions lose their power.

Mike Townsend: And I don't think theywould be happy about that. And they would likely feel justified in takingaction for specifically the prevention of future harm for the citizens of thecountry. And also maybe, you know, they could argue it somehow better in someother way. But do, do you anticipate that being a large resistance and if so,what, what could it look like?

Hany Rashwan: I think there's anumber, so first of all, I reject the initial premise and I will get into it. Ithink there are a number of reasons. Why, what you're talking about is, is abit unrealistic. We've seen some of this in with the internet. So BenThompson's a very famous writer within tech circles runs this thing calledStrat Strat ERY.

Hany Rashwan: And he had aninteresting post, I think a few months ago, talking about how there's now anAmerican internet and a Chinese internet, and then possibly due to regulations,potentially a European and an Indian internet. But if you really think aboutit, China's the most restrictive internet firewall internet yeah, firewalllimiting kind of country and regulator, but the world's largest DeFi market isalso China.

Hany Rashwan: So I, I, someone thereis clearly figuring out how to get around and access this global internet thatthat was created largely in, in, in the west. And so some of these kinds ofthings, when, like, when you look at it from a technological perspective arepretty futile. The government cannot. Shut down Bitcoin tomorrow, even if itwanted to no government could.

Hany Rashwan: And I would arguethat, especially in the west where, where we're talking about, we wouldn't wantto do that to give your, your readers, you had another writer, Noah Smith whoruns this beautiful blog called no opinion. I think it's no opinion.com. Hasrecently been talking about this where a lot of the initial movement is not necessarilybad or harmful for the United States.

Hany Rashwan: In fact, it's quitethe opposite. He makes the point rightly so that the staple coin market ispredominantly us dollar based, which makes over 10% of the total crypto marketare these dollar backed stable coins where you have dollars in American bankaccounts located in America that then enable.

Hany Rashwan: People around theworld primarily, but not necessarily in places outside of America and the westto be able to transact, safeguard their assets in the us dollar, et cetera. Andas you think about a bunch of countries, especially of the more authoritarianside creating central bank dominated digital currencies, it's very likely thatthese stable coins are only going to rise in value.

Hany Rashwan: And I'm not, I'm notsure how that is a bad thing for the American dollar per se. Now we can'tpredict history, but there are very clearly a number of different ways thatthis could go. There would be a very net positive for America, for the west, for,for the, you know, ideals that, that, that people cherish and respect here thatit's not going to necessarily be the, this outcome that, that people areworried about.

Hany Rashwan: And then. the goodthings about, I think our structure is that you do have the naysayers, you havethe people that, that are, have entrenched interests that don't wanna losepower, but just, just the same. You also have a number of, and we're seeingthem to use America as an example, but, but also are very, very active inEurope.

Hany Rashwan: And this is across thecontinent, a number of political players and regulators and industry expertsand service providers that, that very clearly believe in the opposite and, andsee these consumer benefits, see the inevitability of it and want to positiontheir geography to be the kind of winner like a Dubai or Singapore, or indeedLondon, New York, San Francisco in attracting from around the world.

Hany Rashwan: When, when others maybe not as quick, not as smart and I, as, as someone that really enjoys the westand, and enjoys you know, living and being part of it. I, I really do hopethat. We don't lose sight of the massive once in a lifetime opportunity that,that we have here as well.  

Mike Townsend: Yeah, no, I, I agreewith you that it feels inevitable given a long enough time horizon.

Mike Townsend: And I only look atlike a, maybe a parallel industry that comes to mind recently because it'stopical psychedelics, psychedelics hold a lot of promise for mental health, butin the late seventies they were banned. And so for 50 years, 40 years, therewas no research, zero progress. You could argue, you know, how many peoplecommitted suicide struggle with mental health issues that could have beensolved.

Mike Townsend: Had there not beengovernment intervention in banning this completely. And now just recently, thisis starting to become more legalized and recognized, but there had been anovert like war on drugs and just like banning things across the board. And my.Concern is how do we do more than hope about making sure a similar thingdoesn't happen in crypto?

Mike Townsend: Because if you look atit, it's kind of an interesting parallel because in psychedelics, there was a,a lot of promise, a wide popularity across the late sixties, particularly inthe United States and California, it wasn't as if it was like a fringe thing.So it felt very much widely accepted. And then there was kind of a, a revoltattitude around Vietnam.

Mike Townsend: There was a catalystfor tension, and then there was a banning. And at that time there really wasnot even close to enough counter resistance to, you know, go against theeffectively, the United States military and what would've been, you know, that,of that physical conflict. But today it feels that, yes, I agree with you thatinevitably crypto will become a central, a decentralized worldwide market, butChina has recognized that this is a potential threat to our political power.

Mike Townsend: And so we're gonna.Nonstop just cold start, right? There's no, there's no trade in and out ofChina. I don't, I think you can legally hold, but you can't move crypto, buteffectively they've taken a hard stance on that. And so they, they draw, theycan see a rational threat to their power. I don't think the United States hasrecognized that threat.

Mike Townsend: But I don't see it asmore than, you know, a few influential politicians start getting together. Youmade a good point. There are some politicians that are clearly like supportiveof Bitcoin and crypto, but most of 'em them are silent and almost still thecast of vote. And that's where I'm like what clearly the, the line in the standthey could draw as no one in the United States could trade crypto crypto.

Mike Townsend: I mean, if theydecided to pass a law, they could do that and then it would be, then you'd haveto choose. And I just, I wonder about that, right? Still the dust is notsettled on this.

Hany Rashwan: Yeah, I think, I thinkthe situations are very different, right? Because, so we can talk about the ininevitability of things, right.

Hany Rashwan: China did ban cryptoacross the board, pretty pretty draconian ban across the board. How is it theworld's largest decentralized finance market, right? Like there, there is aarea.  

Mike Townsend: Wait, can you explainthat a little bit? So largest decentralized finance market, meaning...?

Hany Rashwan: So decentralizedfinance, being Ethereum wallets and being able to, to purchase throughdecentralized exchanges.

Hany Rashwan: Mm-hmm yes. You can'taccess Coinbase or bin or, or you know, decentralized exchanges from there, butnothing stops you from getting around the firewall in a number of ways that, thatwe know are possible and interacting with the outside world. And so in the sameway that there are a lot of Chinese visitors of.

Hany Rashwan: and Google servicesand things like that. They will find a way to it if there's enough of aconsumer need. So I think the inevitability of it is very real. Mm-hmm likewhen you talk about no one in the United States can do this, no one in Chinacan do this. What does that mean in practice? And how many people derive abenefit from exercising it because in the case of China, I wouldn't say that'sactually a successful ban based on what we're seeing.

Hany Rashwan: If in fact part of therise of DeFi is probably attributed to that. Because it's, it's pushed a lot ofa, a lot of that out. That's one part of it. The other part of it is certainlythe people that are pro crypto in the United States happen to be influential,connected elite folks who naturally have a lot more power and, and sway.

Hany Rashwan: And especially as youstart becoming. more intellectual about it, this great knee jerk reaction ofthis will be a neck negative for the United States. I would argue all day andnight against. Right. And so I think it's, there's a huge educational elementhere, but if you're a rational, logical person, you will see the opportunity,which, which is part of why we're working on additional listings across theglobe.

Hany Rashwan: And I wouldn't saythat we have run into a single regulator around the world of many differentcultures that is just ly anti crypto for, for some random reason there'seducational issues. There are all these myths that we need to bust, but there'san incredible opportunity. The last thing I would say is that this is veryclearly a situation where someone will let this happen and build a thrivingecosystem out of it.

Hany Rashwan: And. If it's not us,it's going to be someone else much to our detriment. You see a lot of verylarge, very new, very transparent, very, not so much countries around the worldtrying to build infrastructure around crypto. Switzerland is, is a greatexample of this, but Switzerland is now competing against Dubai and Singaporeand all of these different jurisdictions on who can provide the most fertileground and given the incredible wealth of talent resources, the history that,that we in this country have, have had in building all of this, you know, boy,would it be a tragedy for us to, to miss new epoch.

Hany Rashwan: Yeah, that could be aslarge as the internet because we certainly did not miss the internet and lookat how much value we've gotten, not just from a commercial and economicstandpoint, but from a social standpoint, from a national security standpoint,it's still, you know, benefits. The west greatly that the, the internet is, isremains a Western controlled entity and while control.

Hany Rashwan: And crypto is notgoing to be possible in the same way. Certainly things like better regulations,certainly things like stable coins. The us dollar is dominant on stable coins.There are alternative currencies that that could also be stable coins. If, if thatis no longer an attractive option, but I would argue really strongly that thatis a net positive for the us dollar.

Hany Rashwan: And therefore notpositive to America and therefore not positive to Americans as well, again,just using America as an example, but I think this is one of those where if youprovide a fertil ground for crypto, it's like providing a fertile ground forstartups. And certainly while there's a Silicon valley, there's also a lot ofother ecosystems that, that benefit all of those countries tremendously.

Hany Rashwan: And I would expect tosee more of that, not less of that. And, and based on my behind the scenesconversations with, with the people that that think about and, and decide thesethings, I'm, I'm not as worried. I think we have a lot of education to do, and,and it's so early. They're very similarly to how the internet developed with alot of scams and a lot of nefarious players.

Hany Rashwan: We're seeingunfortunately, some of the same activity, but it's, it's all noise. That, thatis distracting us from a, the real product and progress we have today. And thenB the real unfathomable potential of what this.

Mike Townsend: Yeah, no, I, I, I, theonly thing I, I hung hang up on is that I think of the United States as federalgovernment, particularly as an entity in which to recognize a distinguished setof incentives from the citizens of the country and that entity carries amomentum or like residual cultural value and the recognition of the us dollarsbeing powerful.

Mike Townsend: And that is why wehave the us D C and tether as being, you know, significant parts of the cryptouniverse. I do think that will eventually change and it's, it's, it's set tochange because the United states' political influence in the world will always,every country will change. The United States seems like relative to China,Indian India is gonna decrease in relative influence around the world.

Mike Townsend: And as such, I wouldassume that the means of liquid transaction on crypto is gonna, ch is gonnahave pressure to change from S D C to tether. Like it wouldn't surprise me if.A year from now, some politicians get together in federal government and say,we're gonna, we're gonna pass a $10 trillion bill and like all give it to allthe Americans.

Mike Townsend: And now if I'm inanother country, it's just massive de disincentive to hold this. You know, why,why am I holding? It's like kind of worse to both worlds. Why am I holding acrypto stable coin? That's tied to a Fiat's ability to print money. And, and Iwould imagine, like, it seems like I wanna ask you this.

Mike Townsend: We have long termstore value in Bitcoin. Seems like, well, established Bitcoin gold is almostcliche to say, Bitcoin has replacement to gold. It, it seems like kind of the,the tectonic plates that are still shifting are what's gonna be the everydaymedium of exchange that people use equivalent to cash.

Mike Townsend: Maybe that centralizeson one kind. Currency that's fast and easy to use. Maybe it's like lightning,which is a, a branch off of Bitcoin. Maybe it's comp, maybe it's a hundreddifferent things. Do you have a take on what that replacement to USD will be incrypto?  

Hany Rashwan: I think it's it's waytoo early. Yeah. To, to really see that it's, it's quite early.

Hany Rashwan: I want give you acounterpoint though, to, to your, your main argument. Clearly after world warII, America had a disproportionate share of the global economy that, that ledto some of this reserve currency status shifting from whatever it was beforethe pound Sterling, maybe to, to the us dollar. And that has had positiveeffects on America.

Hany Rashwan: And depending on whereyou are looking at this from maybe different effects it doesn't change the factthat a lot of the buyers of, of tether a lot of the buyers of SDC happen to benon American. And they're clearly voting with their, with their feet, so tospeak. And the alternatives are not wonderful, depending again, on, on, on whatyour view of the world is.

Hany Rashwan: And, and I think thisis part of what Noah Smith was, was talking about is that there's a ton ofactual capital flight from some of these competing geographies into the usdollar, into this, this ecosystem. That's actually pretty interesting. And thecounterexample that I'm providing here is a country that's very, you know, nearand dear to my heart, especially now is Switzerland.

Hany Rashwan: Never reached thestatus of the United States as a global superpower, but the Swiss Franc isstill a very, very highly respected store of value regardless of their waninginfluence overall. And so will, will the us economy be the absolute largest inthe world in 10 or 20 or 30 years? Probably not based on what we're seeing froma few other players, does that necessarily take away from the attractiveness ofAmerica as an investment market or the dollar remains to be seen.

Hany Rashwan: And does that, isthere a way of, of doing that, such that, you know, the Swiss, Frank being onething, but Switzerland has benefited from people, safeguarding their assets,both in the Swiss, Frank, as well as in gold, which is an unrelated currency.You know, I've, I've, I've lived in Switzerland for quite some time.

Hany Rashwan: Now I've yet to see agold mine. Doesn't have that resource at all, but clearly they've benefitedfrom that as well. And so I'd imagine an mixture of crypto and us dollar stablecoins being a net positive for America and the west. I would imagine otherstable coins will, will pop up and will become popular as well.

Hany Rashwan: But I'm still notcompletely sold that this is in any way again, if we play it right. And, and,and. and not really mess up this opportunity could still be a very netpositive. And if in fact could be a detriment to other approaches, how, how doyou feel other competing approaches.

Mike Townsend: New York city, NewYork state certainly has a lopsided influence in the world's financial markets.

Mike Townsend: They clearly have a, aset of circumstances in their regulatory and policy state today that you can'toperate many other crypto companies don't operate their taxes, I think are thehighest in the country yet. It's still next impossible to find a departmentthere. It, it feels like it is a paradox of sorts where they have maybe in lieuor in spite of all of.

Mike Townsend: Seemingly reallydestructive policies. They have sort of cultivated enough momentum of economicactivity to keep the thing going. Do you think New York is shooting itself inthe foot with the policies they currently have? I would, I would presume thatyou're gonna feel the answer is yes. Right? Like you can't operate, you wouldlike to operate.

Mike Townsend: I would imagine theywould, they should change their policies. Do you feel like it's a New York islike about to drown themselves and headed the wrong direction? I mean, that'smy sense is that they're just trying to preserve an old school way of doingbusiness IE wall street, and just clinging onto that.

Mike Townsend: And then the FinTechsector in wall street becomes less and less relevant. What do you make? What doyou make of New York, their policy and their influence.  

Hany Rashwan: I think there are acouple ways of looking at this. We've we spent some time in an, in a realfailed city, San Francisco and clearly you know, and, and clearly the policiesthat that were done by that local government has contributed greatly to the GDPof Austin, Miami, and the Exodus, as we've seen it, like not in my wildestdreams.

Hany Rashwan: Did I expect for thisto happen this massively this quickly? And I think when did you,  

Mike Townsend: When did you move outSan Francisco?

Hany Rashwan: At 2017? So the heightof, I remember being good. Yeah, better. I love so high whatever's happeninghere. it was exceptional timing, honestly, but I, I sold the company and theacquire was in New York, so I actually.

Hany Rashwan: That's not me being soENT and intelligent, it just happened to work out well. And I think that's theclear danger for any geography in, in being a hotbed, some activity that youregard as particularly valuable and then doing things to antagonize it in, in avariety of ways. I think you're talking about a few laws that were probablywritten by people that are no longer in, in, in power a lot.

Hany Rashwan: And certainly some ofthe recent developments in New York are promising. I think the, the, the newmayor Eric Adams seems to be not antagonistic towards crypto, wants New York tocontinue being the, the crypto hub. We see a ton of activities in Brooklyn,especially of, of a lot of very core crypto developers.

Hany Rashwan: Crypto's much moreinternational, but a lot of the development's still happening in, in America.And a lot of the talent is, is, is still here. And I think that he's been doinga lot of the right steps moving in the, in the right direction. Obviously Iwould love for it to be even faster, but if it's, and I would love as, as, asa, as a person who's, I, I, I went to university in New York.

Hany Rashwan: I, I live here. I, Iwant them to figure it out, but clearly if they don't figure it out in time,someone else will. And I would say that's true, not just of the city, but thecountry.  

Mike Townsend: What if you're incharge of, you know, I'm not sure if the I'm not quite sure how much influencethe mayor has in the financial policy, but say you could, you know, rewrite thebook, so to speak.

Mike Townsend: Where do you, what doyou do first in New York? Speaking about New York specifically?

Hany Rashwan: I, I think thatoverall you need to lower the friction. You need to lower the bar of what ittakes to build a new startup. That's just a generally speaking good policy tohave, right? Imagine back in the day, when it cost 10 or 20 million in a seedround to raise this to, to build a startup, you were getting less interest andyou're getting less interested from diverse groups that may actually contributeto the innovations behind it.

Hany Rashwan: Right now, starting a,a, a crypto company in say, New York versus Miami, New York is harder. You, youneed more money. You need to, to, you know, pay more lawyers. You're morerestricted on, on all of that. I don't think that makes much sense for a verynew rapidly developing te. And so it's a mixture of satisfying, the very realconcerns that that regulators have around, you know, sandbox usage and thingslike that while not constraining it so much that some of the world's largestexchanges, which operate in the other 49 states restrict New York specifically.

Hany Rashwan: And, and I don't understandas, as someone who spent a lot of time in, in this city, I don't understand howthat's going to be in that positive over the long run.  

Mike Townsend: Yeah. Yeah. Well, I'mglad that there are other states that have taken, I mean, part of the beauty ofthe United States is there are different experiments.

Mike Townsend: You can run indifferent states and we can see the results of that. And we can acknowledgethat San Francisco didn't work out policy is there. You can move to a newplace. You have the ability to vote with your feet, which is. Arguably moreimportant than the ability to vote with a voting booth. Cause it's like,there's so many other things you vote on when you move with your feet than youdo by casting one vote for, for president.

Hany Rashwan: And by the way, theother thing is, do we necessarily want New York to be so dominant in thisdecentralized new future? What, what is wrong with Wyoming? Setting up a bunchof these bank charters that, that are going to be wonderful for this space andattracting investments and, and talent and people to Cheyenne?

Hany Rashwan: Well, in terms ofBitcoin mining, Texas is massive. And we hear a lot about it at west Texas andthe wind and, and all of that. But one of the largest markets, if not thelargest market for mining in the United States is actually Georgia, which isunexpected. You know, the, the, the Exodus that we have. Has been a very netpositive to Miami, certainly a city that, that is going to have a tremendousamount of challenges you know, from an environmental perspective with risingtides and issues economically, et cetera, in the future, redefining itself asthat.

Hany Rashwan: So I'm not necessarilysure that we should be so fixated on one particular state or city. It would besort of like us. And I think we both love San Francisco at some point in ourheart and love the network and love what we've experienced there. But, youknow, to go back and ignore everything that is happening elsewhere in New York,in Miami and Austin and concentrate on no, San Francisco has to be the centerof everything.

Hany Rashwan: I'm not sure that'sthe right approach or not. I, I hope yeah, it does, but if it doesn't.Someone's loss is another person's game. Yeah.

Mike Townsend: Yeah, no, I, I thinkit's, I think these are such important conversations I have, because clearly thereis unex excavated gold, so to speak of wisdom in the Phil philosophy ofoperating a city and the, the method of determining what policies are correct,because we elect people and they run the government and in San Francisco,there's very smart people with plenty of money.

Mike Townsend: And yet they come upwith the, they end with the worst result. So somewhere along the line, there islike a chaotic something's missing. Yeah. And it's like, okay, you got the, dowe have the wrong people in the job? Do we have, like, what are we doing? Andwithout going into detail in San Francisco, I think it represents a biggerpattern.

Mike Townsend: That is, is supersimilar.

Hany Rashwan: But it's part of whycompetition is very, very good. Yeah. Yeah. And, and that's what happened toSan Francisco.  

Mike Townsend: You mentioned NoahSmith, Ben Thompson. Are there other people that you've read or follow. Thathave influenced your thinking in the last few years or since you've gotten anycrypto?

Hany Rashwan: I, so I, I think JohnOliver has this funny quote of like crypto is everything people don'tunderstand about economics, Venn diagramed with everything they don'tunderstand about technology crypto . And so I'm a very big, I studied historyin school and I'm a very big fan of understanding the trends that got us heretoday.

Hany Rashwan: So I actually read aton of financial history. You, you see a lot of parallels to what has happenedbefore. And I would, I would push people on not just reading about crypto, butsort of understanding this in a more macro sense and understanding our place inhistory. Whether you think there's a new global superpower, new reservecurrency, whether you think there's a new technological innovation, we've seenall of these inflection points several times before.

Hany Rashwan: Go and read about themand then none of us know the future. Right. But it's important to have thatbase of knowledge when we're having these kinds of discussions, becausefrankly, I think we could at this company, and we're a very small part of thecrypto universe. I could see us working on this for decades to come you know,while it's still being built slowly, slowly.

Hany Rashwan: And so that's what Iwould recommend people to go and, and read about. Crypto's very influenced byAustrian economics. It's influenced by the failures of the past, in the 1990swith the Cypress S and a lot of those concepts. I think people sort of justknow the headline maybe just the label, but don't really dive deeper into it.

Mike Townsend: Any particular booksor people that stood out to you that you've read. Have sort of a shape?

Hany Rashwan: I would I would startwith the more macro historical guides. I think Nathaniel Popper who I believeis in, I wanna say New York times columnist wrote this very nice history of, ofcrypto's development, the Bitcoin standard by Lebanese author.

Hany Rashwan: I think his last nameIsmo describes a thesis that is agreed by agreed on by a lot of people incrypto Ludwig Von Mises. Who's the father of the Austrian school of economics.His stuff is probably a little bit too thick, but there's, there are probably abunch of very nice summaries out there.

Hany Rashwan: Ray Dalio's new bookis interesting in that it does talk about these inflection points and it putsthem in, in a good place in, in, in history. By the way, I've mentioned three.Yeah, three works there that I don't necessarily agree with a hundred percent,but it, but it influences my thinking and it's important to, to develop a, afuller picture of that.

Hany Rashwan: And, and then youstart to understand you know, EV decentralization, as it exists today, let's goback to Lehman brothers let's then go back to the concept of double entrybookkeeping, which was created by this Franciscan monk and has religiousimplications. And it actually, I just went through a thousand years of history,very casually, but it drives, I think, Bitcoin, Ethereum, the blockchain today,and that's underappreciated and, and, and people should really dig deeper intothat with those being good entry points.

Hany Rashwan: And then my favoritepart of every book is the end notes or the footnotes, depending on the bookdelve deeper, it.  

Mike Townsend: Hmm. Have you, haveyou read on or listened to any apologies recent work with the networkstate?  

Hany Rashwan: Yeah, yeah. Yeah. AndI, I think it's I think it's quite interesting. And again, it's one of thosethemes that keeps coming back in history.

Hany Rashwan: I remember watching andebate, I want to say in 2012 were thereabouts between mark and recent andPeter teal. And, and part of what they were arguing was will more countries becreated or less. And the, the crazy thing is that we have 193 countries today,maybe 1 94. I would imagine we have probably less than 50 countries at somepoint in the 19 hundreds.

Hany Rashwan: That's prettyspectacular growth. And then you, you get these, you get these interesting, youtalk about, you know, the entrenched interest, having an issue with it, thepresident of Kazakhstan, which is so ironic Kazakhstan, meaning the land of theKazakh people. has publicly stated that he's against, self-determination why,well, it would create another 600 plus countries.

Hany Rashwan: And, and so you, youstart seeing all of these things in a lens of, we've seen this before. We'veheard of this before things come and go in different ways and entrenchedinterests will, will react to them in, in specific ways. And this may or maynot have some implications on the current style or the current phase that, thatwe're going through.

Hany Rashwan: And so I, I wouldencourage a lot of people to, again, look at all of this and read it, not justfrom a Western perspective, but study, you know, how, how these have happenedin other cultures.  

Mike Townsend: Yeah. Yeah, love it. Iknow you're from Egypt too, and have lived, you know, spent time in Switzerlandand traveled all the world.

Mike Townsend: So I always find itfun to talk to people who are exposed to different cultures and, and differentways of living and different policies, et cetera. Hey, this was super fun.Congrats on everything and always a pleasure. Yeah. Are you actively writing ortweeting personally?  

Hany Rashwan: I'm @hany on Twitter.That's a good one.

Hany Rashwan: H a Y every day. Yeah.I've been there for a long time. Yeah. Yeah. So @hany the, the company's@21shares and @amun, a U N and you can find a bunch of my retweets and, andthoughts there.  

Mike Townsend: Sweet. All right,brother. Thank you so much. This is fun.

Hany Rashwan: Thank you for havingme. This is fun.

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