19 MIN
Dec 22, 2022

Transcript: Crypto Regulations Post-FTX Collapse, Institutional Adoption, and Why Coinchange Is Winning

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Pratik: Lewis, thanks for joining us today.

Lewis: Yeah, thanks for having me. I really appreciate the opportunity and look forward to having a conversation with you today.

Pratik: Great. Before I ask you my first question, I just wanna mention a summary of your positions. So you are currently the CEO of a publicly listed company called Spirit Blockchain Capital.

You are a strategic advisor for Kinetics Trading Solutions. You're the executive chairman of our company Coinchange. You have been a board member for CoiniFy. You've been the chief International Officer for Voyager. You've been managing partners at a bunch of different capital investment management firms.

You have been the managing director for Horizon ETFs. You've worked with the Toronto Stock Exchange and you've been with Merrill Lynch at one point as well, so I have a few questions for you today.

Lewis: Yeah, no, I look forward to it. And thank you for reminding me that I'm old and that I've been around the block a few times.

I think it's an opportunity because I've had the experience of working at a traditional sell-side brokerage as my first foray and at Merrill Lynch. Working at a leading exchange at the Toronto Stock Exchange. So real price discovery and the ability from a public markets perspective.

And then obviously over my tenure, I've been in the asset management space, both on ETFs, traditional fund management, and private placements. And then the last several years as I've gotten more and more involved in an asset management business in digital assets I've had the good fortune to work with great companies like Coinchange.

And I'm excited to have the conversation with you today.

Pratik: Amazing. My first question is regarding regulations. You've been in compliance roles before. And we've had one of the biggest blowups related to compliance and regulatory issues. So what kind of regulations do you think are going to hit us post-FTX collapse?

Lewis: I don't think it's gonna hit us with just post-FTX collapse. I think regulators as a whole, and I'm not a compliance officer, I've just been involved in compliance and having the foresight or the understanding that having good compliance and good regulatory standings and having fiduciary responsibility is key to safeguarding people's assets. At the end of the day, people work hard for their earned income and earned wealth, and they want to place it in a safe and sound place. what has happened with FTX and several other iterations of versions of that CeFi experience is really not the situation of the overall market, but really people that are either ill-equipped or actually fraudulently doing activities, and that's not appropriate. That's not something that I would wish upon anyone. And even when I have known of certain situations in my life, I've stepped away at the appropriate time saying that this is not something that I want to have reputational risk on.

And I think that's an opportunity that good actors and good participants. Are always undermined by the shortsightedness of greed or wealth accumulation through other people's money. And I think it's reprehensible what has happened over the last several months because all the good work people have been doing is now being bundled up on the perceived notion that it's just crypto.

The reality is that fraud has happened throughout time and people take shortcuts to any activity if they think there's an outcome for their wealth. And what I think is important is that we still stay the course of building out good products and good services, working with accounting firms from an auditability perspective, producing proper investment and regulatory standing, proper documentation, and true transparency. I think that's why being in the public market and working with regulators is a great thing. Working with auditors and audit firms and accounting firms and doing public reports from a fiduciary responsibility perspective is a good thing.

And then at the end of the day, being truly transparent about your activities. If you don't have anything to hide or abscond with, then you shouldn't have any issues with answering questions or giving the proper reports or summary of effort. And I see that with Coinchange. And one of the things that I think Coinchange has a real opportunity for is that everything they do from sourcing rewards or interest, in the underlying products is all on-chain.

And that's a very big differential from traditional, borrowing and lending for my old days of prime services. Where you have contractual counterparty risk or in the most recent times of other firms in the digital space doing borrowing and lending and having counterparty risk. Coinchange operates its business practices and the ability to the affirmation of those on the blockchain, and that's a great thing because even auditors can find and locate where the coins may be placed on behalf of clients, and I've been a massive proponent that staking and rewards facilitation is where we should be spending a majority of our time because that effort can then be passed back to the community because they're helping the greater community with liquidity and the ability to participate.

Pratik: Got it. So given this set of regulatory needs and the dry-up of the liquidity that currently happened, Do you still see institutional interest in this space? You're at the forefront of investment. So do you still see any interest?

Lewis: I don't see any lack of interest in the space. I think everyone knows the beneficial treatment that the blockchain space can bring.

Not just only the financial industry, but a whole host of different industries and so I don't see it stopping. If anything, I see it morphing into a broader market and I also think that there is still a major ability for value creation. If you look at what has been just mostly recently announced, you have some of the largest banks consortia together to create another CeFi exchange in the United States.

You have BlackRock announcing its belief in the span of tokenization. You have other large financial institutions that are using us from an ability to break down the traditional payment rails, you have financial interest thinking about it from clearing and settlement. And I think the interoperability of the blockchain can lower costs and lower frictional siloed areas of business.

And I think there's gonna be a whole generation of opportunities. Not only for businesses but for consumers themselves. At the end of the day, this is about consumers having the ability to utilize it to their best own sovereignty, and I truly believe consumers are gonna become more and more sovereign and they're gonna become their own, I'll call it a mini banked relationship because the wallet on their phones and the carry of that wallet. And if we digitize more and more assets, traditional hard assets like real estate and other forms of hard assets, and you're able to monetize that from a fractional ownership stake perspective or credit worthiness. I think those are the things that people are gonna spend a lot of time in and utilizing growth and pushing more outwardly.

Pratik: Got it. You did mention interoperability and I just wanted to mention that we have. Our next report, a long-form research report from the Coinchange Research Team coming out on exactly that topic, interoperability of blockchains and we did extensive research on what is the need for interoperability.

And some of the points that you mentioned have been mentioned in the report as well, that the institutions are looking for interoperability rather than their secluded blockchains within their universe. I would like to ask you this question that people have lost trust in this space after a few of these blowups since March, April, and May, and now the FTX collapse. Some people are so blinded by the negative aspects of these blow-ups, that they fail to see what's happening underneath the real development in the Ethereum ecosystem, Polygon ecosystem, and the institutional space that you guys are at the forefront of.

What would you say to these people to gain back their trust? What should they be focusing on?

Lewis: Yeah. I think fundamentally the way that we gain back trust, and I use this even in my work practice, is just by being consistent. So the good companies, if they keep the same course of actions and they're driving out business development consistently and doing what they say and say what they're doing.

Ultimately that will breed success. I think sometimes people look at the short term and miss out on the long term. So understanding the adage of not seeing the forest for the trees(meaning not seeing the full picture due to short sightedness). And my thinking is that a good company like Coinchange and other companies are gonna be consistent through this entire process, giving out their yield products, giving out their solution sets from a noding, from custody and all those kinds of things. And if they do what they're saying, even through these craziest of times they will be successful and consumers will come back because the realization is that there are cheaper costs in the blockchain space, there are better affirmations, there's better trustworthiness cuz it's on a blockchain you can validate and verify. And at the end of the day, we are trying to broaden this horizon not only to the developed nations but the underdeveloped ones. And I think there's a whole use case, whether it be from Africa, from the Middle East, from Asia, from South America.

You're looking at countries that are utilizing, Bitcoin as their own pegged dollar. You're looking at countries that are saying, we'd rather use a stablecoin from a facilitation, We're trying to get our way of fraud. You're looking at clothing companies. Getting away from fraud or manufacturing issues utilizing NFT and the NFT fungible token aspects.

I think there's a whole host of different things that are gonna be coming about over the next 10 to 15 years. That's the area that I look at. When I was in the ETF space 15, 20 years ago, there were only a few hand-held relationships that were in the space. Now it's the most dominant growth sector from an asset management perspective.

And fastest growing. When I was at the Toronto Stock Exchange, we were the very first electronic exchange, fully electronic exchange, right? Look at every single major exchange that is fully electronic and has high-velocity trading, right? Everything has an evolution, and some of those aspects are a revolution, and I think we're in this web 3.0 of a revolution where we actually can carry wealth and value through a digital mechanism, and that digital mechanism is validated and verified, not by one person or not by one centralized party, but by all parties. As true. . And I think when you add that into all the developments from an AI capacity perspective over the, just the last few weeks and you're hearing all the different AI things that we can do now from a general search perspective if you think about all the things that we can be more productive as a society the efforts that are being made in carbon neutrality, right?

These are all things that are coming. But we have to do it on a holistic basis, and we have to understand that this is on a global basis and that nothing nowadays can be just siloed into one regional area. People can move. Now. People have the ability to not work from an office space anymore.

And I think all of those things are changing the dynamics of what a governmental system is and what are your sovereign abilities. And I think we have a real opportunity as leaders and financial leaders and health and science and all of the different kinds of leaderships in the different sectors to say to ourselves, how do we grow? and how we work together and how we build back that trust and transparency because this isn't new. We've had Bernie Madoff situations before this, we've had Mt. GOX before this. We've had financial crises, we've had housing crises, we've had great depressions. These are all cyclical moments, but those are also what I think are the biggest opportunities.

And right now, as an investor, I think today is the best opportunity to buy in, not to buy out or sell out, right? You don't buy on the highs, you buy on the lows, and I think this is when you should be participating more and when you should be doubling down. Finding the good companies that are delivering outside performance during these uncertain times are the companies that are going to win.

Pratik: Great point. One final question, someone asks Lewis, hey, so you are the executive chairman for Coinchange. What does Coinchange offer? So you say they are a yield provider. You can earn a yield on your crypto, and then they go and say, oh, so you guys are the same as Celsius and Gemini Earn; what would you say?

Lewis: We're absolutely not like those and we know that for the case because of what we say and what we do. And certainly, I think it's been shown that even through these highly volatile times, we're able to deliver rewards back to our unit holders and the people that have entrusted their treasury to us.

So my thinking is we're actually at a very critical moment where our business model is truly been tested. Truly been validated and verified and has succeeded through all this turmoil every single day. We've still paid out our yielding relationships. Every single day we've been transparent as to what has been earned in the marketplace.

Every single day we have an opportunity to grow with the community and give a level of transparency that's desperately needed. That is why I think Coinchange is at the pivotal moment where it can take on global acceptance and truly the regulators, and marketers can see our business practices as true leaders in this space.

Pratik: Lewis, it's our pleasure that you were able to join us for these few minutes that we had. I know I need to let you go back to your work, so thank you so much for joining us today.

Lewis: Yeah. Thank you. And I look forward to talking more. I know the entire team at Coinchange is open to people and we're able to receive information in if there are any questions or concerns, we pride ourselves on our service abilities and our client understanding and. No question is a dumb question. All questions are accepted and I think we will be available to anyone if they have any general concerns, not only to our business, but to the marketplaces all, and I certainly would make myself available.

Pratik: Amazing. Thank you so much.

Lewis: No problem. Take care.

Pratik: Take care. Bye-bye.

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