Crypto Wealth Management, Institutional Adoption & Digital Assets (Ep. 143)

Speaker A: Transferring wealth successfully starts with asking yourself questions that will give your family a better life now and for generations to come. In this podcast, financial experts John and Michael Paris from Copper Beach Financial Group guide you through eye opening questions to help you discover the truth about your wealth. Now onto the show.

Speaker B: Hello and welcome to the Truth about wealth podcast with Copper Beach Financial Financial Group. I am Michael Paris. I'm here with my father John.

Speaker C: Hello everybody.

Speaker B: Doing good, dad?

Speaker C: Yeah, I'm doing great.

Speaker B: We have a very special guest with us, uh, today on the podcast. I'd like to introduce Mr. M. Jake Claver, the principal and founder of Digital Ascension Group. Jake, welcome to the podcast. Thank you so much for being a part of it.

Speaker D: Absolutely. Thank you for having me.

Speaker C: Hey Jay, great to see you again.

Speaker B: So we're going to cover, I think, a wide variety of topics today, mostly probably in the digital currency realm. But before we really dig into it, I'd love, Jake, for you to give our audience a little bit of who you are, your background, what you guys do as a firm. I think that would be wonderful.

Speaker D: Yeah, for sure. Yeah. So always a good place to start. I went to school for finance, um, at the University of North Texas. And then I never used it really. Uh, all the stuff that I learned in school, you know, sharp ratio, buffet indicator, PE ratios. I looked at the market and everything seemed overvalued for where I would have liked to invest. You look at Ben Graham and Warren Buffett and value invest. You want to pay fair under market for where things were. So I stayed out of the market the majority of my 20s. I took advantage in 2020 was uh, really when I deployed, uh, the large amount of capital that I had. So I'd saved some money for my wife and I to buy a home, which we still haven't done. And she gives me hell about. And I took that money along with uh, the 401k from a previous employer, moved it to a self directed IRA and when the market didn't get the bottom in 20, but I got Facebook, uh, Amazon, Google, Tesla.

Speaker C: Now you did good.

Speaker D: I thought if the world shut down, I think these are blue chips, they're going to rebound. And they did, and that rebounded quickly. And so by mid 2020 I started to look de risk because we got back to some of the same levels that where I thought things were overvalued before. And I, uh, was doing a lot of research on hard assets, real estate, gold and silver, which have done exceptional here at the end of 25. And in that research I found A debate between Peter Schiff, who many of you may know as a gold bug, who still despises bitcoin, uh, and Andy Schectman.

Speaker C: He's one of our favorite guys.

Speaker D: Yeah, Andy on the silver side. So, uh, watching a lot of them, and he debates this bitcoin guy. And I don't even remember who the bitcoin gentleman was, but that's when I really understood what this technology was. It's how the Internet of value will move forward, where people are able to transfer money between each other for a lot less cost and a lot less latency than what we currently have in the banking system today. And bitcoin at the time was like five or six thousand bucks. And I thought, oh, uh, bitcoin's too far gone. I missed the boat.

Speaker C: Everybody did the same.

Speaker D: And so I dug into the rest of the industry, and I found 13 other positions aside from bitcoin that I thought, okay, the partnerships, the problem that they're trying to solve, the total addressable market that they're competing in with this technology makes sense. And crypto's still speculative today. Uh, there's really not a problem for these networks. But I took 13 positions. I took all the money I made in stocks and rolled it in crypto, trying to de risk. And you would say that that was even more risky, but I did enough research to feel competent, and that did really well for me. I made a lot of money in 20 and 21. And so when we got to the top of the market, I had way more money than my family has ever had. I didn't come for money. I really didn't have the professionals around me like somebody would that had built a business over 5, 10, 20 years. When they exit, you know, they have professionals around that they can make sure that they're going to structure their estate the right way and mitigate taxes or defer the taxes. And I'd sold some. I should have sold more. You know, everybody in crypto says that, you know, if they've been through a couple of cycles, they're like, I should have filled more at the top. But I called around. I've worked in sales for the majority of my life, and I, uh, was just smiling. Dial. I called over a hundred different professionals across the US that said they dealt with crypto on their website. A lot of them were just, you know, I had a bitcoin client one time, and we helped them sell it and do this with it. They didn't really want to keep the asset, which is kind of core to what we do, uh, in our business is how do you maintain exposure, mitigate taxes and use it to generate income? So I tried to figure that out and I couldn't find any wealth managers that would do it the way that I wanted it done. And so over the past three years here. Well, I'll take a step back. So I did all that. I structured my estate, mitigated taxes, and worked with five professionals to do it the right way that I kind of hand selected. And I got on social media in 22 and started talking about what I had done. And I was met with, what do you mean you can do this for crypto? There's no regulation around it. We're still kind of like hoping for that here in 26. But some people were nice enough to make some introductions to some family offices after they heard me speak and talk about what I had done, started consulting for them. And over the past three years, we've built out a full end to end MFO for people that have a significant portion of their portfolio in digital assets. So CPA services, we have estate planners, we have tax attorneys, and then we have the full wealth management. We were the fastest growing RA in the world last year. We went from zero to $1 billion. SEC registered. We have our custody accounts there at Anchorage, which is an institutional custodian. Same place BlackRock keeps all of their assets for their ETFs. It's just been a whirlwind, uh, over the past six years here to get to this point. You know, that's kind of my background and expertise and how we got to where we are.

Speaker C: That's a great story.

Speaker A: Yeah.

Speaker C: Ah, I've been listening to you for a while as we talked earlier, and I think we're both stuck in a world that cryptocurrency is still really foreign to them. It's risky. They don't understand. My best friends say, what is it? To me, it's like a scam. So there's still that acceptance out there. And I get it. And I think people like you have done a real good job or advisors like you have done a good job that educate people on what it is and the impact it's going to have. And I know you always take a long term view of this industry and I think that's a great strategy. And I think ultimately it's going to be an asset class that people are ultimately going to understand where it fits. So maybe where you could start is, let's talk about the industry itself. What is it, you know, where it's going, uh, into the future. And your thoughts about how people could take, take advantage of this asset class?

Speaker D: Yeah. So at its core, this, this technology is just a distributed ledger and accounting mechanism across multiple parties that you can all verify the information happened. Right now you have siloed ecosystems in the banking sector where information's hidden. Most banks don't trust each other right after 08. They don't necessarily want to lend money to somebody else. And if they do, it's at a higher interest rate than what it used to be. You have a lot of changes that are happening in finance right now. You've got blackrock and Ondo and many others trying to tokenize the stock market and other financial assets. So the industry's progressed a lot, but at its core, it's just an accounting mechanism. The easiest analogy I could give people is, uh, you were around for the Internet, right. Do you remember when you had to have an AOL email and I had to have an AOL email in order to talk to each other? You, uh, couldn't send one to Yahoo. Right. This is very similar to the Cash app or Venmo or PayPal.

Speaker C: Today.

Speaker D: If you use one of those payment apps, you have to have the same app as the other person in order to be able to transact with them. What these technologies are, is there are protocols that allow interoperability between different payment providers or merchant service providers or institutions or enterprises to be able to send payments back and forth without those frictions or having to be on the same rail with email. Right. Like imagine, I mean, you were around. How many letters did you send a week before email?

Speaker C: Too many?

Speaker D: Yeah, like a lot. Like we're talking like 20 a week.

Speaker C: Yeah, yeah. We send emails. I mean, uh, we send letters out.

Speaker B: I don't know about.

Speaker D: Well, I mean, I mean, that was the main form of communication for written communication back then. You didn't have text message, Right. You could call somebody, right?

Speaker C: Yeah.

Speaker D: But I mean, if you were really getting in my mind, you're probably sending personally 15 to 20 letters a week.

Speaker B: Yeah.

Speaker D: How many emails do you send a day?

Speaker C: Oh, yeah. Hundreds.

Speaker D: Hundreds. Right. So the same thing is going to happen for transactions and volume, um, as they remove these frictions and the latency there, you had to pay a little bit of money and you had to wait three to five days for your mail to get there, depending on how far across the US or the world you were. And now it's instant, for free, that you can communicate with anybody globally. That's what this does for Money is really the premise behind these networks.

Speaker C: That's a simple analogy because that makes sense. I mean, the emails, I could do a text to Michael and he gets it within a split second. Now you do that with money and

Speaker D: you really don't care how that works, right? You just care that he gets the message. And as they implement m this technology, people will use crypto and these Rails without even realizing that they're doing it. Uh, you just send some money and the other person gets it and it's final, it's in their account and it didn't take any time or cost you anything. That's the whole benefit of it and why it'll be adopted.

Speaker C: And it's a reduced cost to do that on the Rails, right? I mean, I mean if you look at Swift and you look at wiring money someplace, there's all kinds of fees that banks institutes charge that kind of gets eliminated, right? So banks become more, they're threatened by it. I know you and I could get the conversation about how banks are really pushing back a little bit on crypto, but, but it's going to, it's going to help banks utilize their capital better.

Speaker D: For sure, you'll be liquid all the time, right? So if you wanted to move that money into a money market and then move it back out immediately to be able to transfer it and do something else with it, you'll have that cap. There are assets that are already very liquid, like a money market that takes 24 hours to move your money in and out, but now it'll be ubiquitous. You could move from your tokenized deposit into a money market, have it earning money during the day, and when you need to send a payment, you move it back over and send it out. So at scale, I mean, treasury for companies is going to be huge. Many large companies sit millions of dollars in their checking account to be able to facilitate business each day because there's not enough, there's too much friction to move it in and out of that type of account or have it another investment in stocks or something else. As all this becomes tokenized, it becomes extremely liquid, even more liquid than it is today.

Speaker B: Jake, one of the pushbacks that we pretty routinely hear as it relates to cryptocurrency in general is its real world applicability. Now I think you just went through the real world applicability of it. Is that how you respond to someone that puts up that objection? I mean, one of the common things I hear is specifically to Bitcoin is, well, I can't go out and Spend Bitcoin or uh, I can't. You, uh, know when I buy my coffee at Starbucks, they don't necessarily accept bitcoin. At least I don't think so. I don't use Starbucks, I don't go to Starbucks. Maybe they do accept Bitcoin. But in general, how do you respond to that sort of objection when people are trying to figure uh, this out in the crypto world about how to use it?

Speaker D: So Bitcoin wasn't initially made for a peer to peer payment service that was neutral and decentralized and could disintermediate banks. In 2014 they didn't expand the block size and so it became a higher latency and higher cost to be able to perform transactions on the network. So really Bitcoin's kind of been relegated to digital gold at this point. There's a finite supply and that's the value proposition is it's coded in hard coded that they'll never be more than 21 million. But I agree with most people, none of this actually happens today. This is all speculative. People are betting on different things and there's some blue chips out there that people make some allocations to because they want some exposure to the space. But a lot of time they really don't even understand what those protocols do. Ethereum is kind of the number two market cap for digital assets on the other side of Bitcoin. And the smart contract capability is why that network and that tokens aggregated so much value. There's more utility there. So you can imagine you do a real estate transaction, right? And you have all of these parties that are involved with that transaction. You have the person with the deed and title, you have the uh, escrow agent, you've got both buyer and seller, you got a broker. Then there's certain things that have to happen in a certain order for underwriting and everything for that transaction to go through, right? If you could streamline all of that and create a smart contract and move it on chain with an oracle like Chainlink, that allows you to significantly reduce the time for that transaction to take place and all of that information to be passed between those parties for them to okay it. So I think over the next three or five years you'll see real estate transactions go from 30 to 90 days today, all the way down to maybe even just a couple of days in order to be able to close.

Speaker C: That's fascinating.

Speaker D: Uh, so that's, that's again a real world application for this stuff. Borrow lending, like when you go to the bank You've got to give them multiple years worth of tax returns. They've got to look at your cash flow and your balance sheet, your transactions out of your account, underwrite the risk on that. And then, you know, 30 days later they might issue a line of credit with crypto. I mean you can get that done in two days or less if you have the collateral to be able to post it. I mean we've got a lending partner right now that'll fund you in 45 minutes. Uh, the collateral, the post. So as this stuff becomes tokenized and it moves direct on change, smart contracts are a big piece of that. And again, that's why Ethereum has been an early mover in this. I kind of view Bitcoin and Ethereum more like the Napster or the AltaVista of digital assets. So you can imagine Google being a search engine and having so much market share that they do today. Early on there was Ask Jeeves and Yahoo and a bunch of people competing in that space that have now they make up maybe 20% of the market share where Google is to 80%. I think you're going to see certain networks of protocols or digital assets take the lion's share of these different applications. And if you're able to pick those winners, then you're going to see substantial upside. Just like Amazon and Google and Facebook and some of the other fang stocks

Speaker C: that are out there.

Speaker D: The space is still nascent. I mean the total market cap is under $3 trillion. Gold is 10 times larger than that. Now you got the total global stock market is at 600 trillion. The crazy part about this is as they tokenize real world assets on these chains, this technology will literally eat everything else. So all of that value then moves into these networks and the market caps of these tokens encompass total global gdp. And that's where the opportunity lies and also to be able to mitigate risk. So a lot of families that come to us and have a conversation, it'll be second or third gen that see the opportunity. And the matriarch or patriarch that founded the family office or made the wealth is still very skeptical, like you said.

Speaker C: Exactly.

Speaker D: They see it as, you know, this intangible thing that they can't really wrap their head around. Nobody's explained it to them in a simple way where it actually makes sense. They're like, okay, um, I'm buying this digital representation of money that I don't really know where it sits or who owns it or how it's custody or any of that stuff. So they stay Away from Citi ran a poll in 24 and it was like 62% of family offices have no intention of getting into crypto. About 20% were crypto. Curious. And then the other 20% were. Had a small allocation, less than 5% of their total.

Speaker C: It's still in its infancy. It's been around since 2000, what, 12, 11, uh, even earlier than that. Right.

Speaker D: Block of Bitcoin was 2009.

Speaker C: Nine. Right. So it's been around a while and it's still a very small part of the population of asset classes.

Speaker D: Uh, yeah.

Speaker B: Why do you think? Is it, is it professional laziness? Is it just. It's such a foreign concept that they, that some of these larger institutions can't figure it out? I mean, I think trying to, because it has been around for, since 2009 in that sense. So even if you maybe make the decision as a firm to not allocate, uh, you know, maybe it's clients funds to those, you know, to that asset class, but you should still have, I guess, an understanding of it. So m. I'm interested to hear your take in terms of when you approach maybe larger firms, what are they saying and why?

Speaker D: Well, they're starting to lean in. I was just at the Ondo Summit here in New York last week, and Fidelity, Citi, bny, Goldman, uh, that was loaded. They're coming to the table because they see that this transition is happening. But over the last decade or longer, like you mentioned, it's really been ambiguous. There hasn't been any regulation around it unless you were in certain jurisdictions. You know, MICA in the EU has been a little progressive. Wyoming as a state here in the United States has been progressive. You've had Singapore and the UAE be a little more progressive with the regulation and put things around it. But people's apprehension comes from not knowing. Right. There's uncertainty around how's it going to be taxed. How does this fit with your total portfolio? Is it like early stage venture? Is that the, uh, risk that you're playing in here? That's what most families I talk to kind of correlate it with is kind of a gamble. And that's why it's such a small portion of, of their allocation. But it can be an asymmetric bet, just like early stage venture. Right. If you hit one, if it does good, it's 100x return. But again, you have to have the competency and the understanding of what the assets are to be able to vet them and do the right due diligence. The Same way you would on that side. And I think it just hasn't become a large enough asset class yet or taken enough market share that many people would want to pay attention to it.

Speaker C: But as generational thinkers as we are here at Copper beach, uh, nau as well. When you build a portfolio you always have to anticipate asset classes. Like right now alternatives is off the charts. But 10 years ago, alternatives like stay away from it. So when you look at shifting in the market, I think cryptocurrency or the blockchain technology is an asset class that I think has to be part of a portfolio. But it's gotta be a long term focus. And uh, you always talk about that on your podcast. It's not let me hype it up and make a profit in the next six months. It's a long term hold position as a family office. That's the conversation that I think we should all have with our families that have that focus. And it's just how much do they allocate to that risk asset class as a strategy? Now before you go into answering that, I know you're an XRP person, so I want to bridge into what makes XRP different than the bitcoins and the ethereums. So I think people get real confused on these altcoins and how they fit and what makes them different.

Speaker D: Yeah, I mean there's over 50,000 different cryptocurrencies at this point. Anybody can launch one at any time. It's open source code. You could redo bitcoin and relaunch it as your own thing. Right. So what's the differentiator, what's the moat? What's the benefit of a certain asset? So just like bitcoin, XRP has a finite supply. The origin account where it was created has been black holed. So what that means is nobody has control over it, nobody can freeze it, nobody can claw it back, nobody can issue more of it. That is going to be the total supply is 100 billion. And if you wanted to create a financial infrastructure that could disseminate globally that everybody could use to be able to transfer value, you need a large supply, 21 million. I mean bitcoin is going to look like it would have to be hundreds of millions of dollars per bitcoin in order to be able to be a, uh, global decentralized currency, you'd be trading. You can go all the way down to a millionth of a bitcoin, seven decimal places. That's called a satoshi. And people pay for their coffee. Now with the satoshi. But uh, at scale, if it continues to aggregate value, it becomes the last. The smallest form of value that you could send might be $100 or $1,000. That's not going to be able to facilitate global payments. So you need a larger supply than that. And that's why they did 100 billion. I am of the belief that the same people that made Bitcoin also created xrp. There's a lot of things that back that up and they tried to fix all the flaws with Bitcoin when they created this one. And it does a much higher transaction volume. So Bitcoin can process somewhere between three and ten transactions a second depending on how much volume is on the network. Just as a reference point, Mastercard and Visa process 30,000 transactions per second. It's a lot for consumer based product. I think Hyperledger is probably the network that'll be used in that capacity. XLM XRP is more for institutional flows back in settlement of markets, high value payments. And that's why the Token I believe will aggregate a substantial amount of value through those payment flows. Now all those things being said, the other reason that it would be adopted over some of the other assets out there is again there's no counterparty risk. The origin account's been black holed so nobody can sanction you. They can't claw it back from you if you're holding it. They can blacklist your wallet so you can't send to them, but it doesn't keep you from interacting with other people on the network. Uh, and as we move to a world that's multipolar and away from a dollar denominated global financial system, there needs to be a neutral playing field for everybody to adopt. Otherwise we're going to end up with the same situation we've had with the dollar where Russia or China or one of these other countries becomes the global reserve currency. And then you'll go through Triffin's Dilemma where they outsource all of their manufacturing and export, their inflation, and then we're back in the same position in another 80 or 100 years like we have been over the last 500 years. So that's why the value proposition for this network, and this token in particular, struck my interest. And then the team and the people behind it that launched it. So it was originally Open coin that created XNs is what they called the Token at the time. They gifted 80% of that supply to Ripple, which is a large enterprise company that you can invest in privately. It's the most Liquid traded private equity stock that's out there worth about $50 billion today. Citadel and Fortress just invested in that corporation in their last round of about a half a billion dollars that they raised $250 per share. They have fostered the adoption of this network in particular with banks and intermediaries and other enterprises to be able to issue tokenized assets, do treasury management. They've got a prime broker that they'll now lend against that as collateral. They've got their own stablecoin that they're minting on the xrpl and you're starting to see other large countries and banks do the same and kind of follow their path. They've done that up as the highest level or standard for a stable coin. Here in the US they were compliant with the Genius act before it was passed and they helped draft a lot of that legislation where you have to hold US Treasuries in order to back the stable coins. USDC is also compliant. Paxos stablecoins also compliant. Tether is not. USDT is the liquidity source for pretty much all of the exchanges. You've uh, got about $180 billion in total market cap for that stablecoin. It's the largest by far and it's the most used globally. But they back the asset with other assets aside from US Treasuries on their gold.

Speaker C: Right. Do you have a lot of gold?

Speaker A: Gold?

Speaker D: They've got other private debt and credit. They have some Bitcoin on their balance sheet. The US stated that US dollar denominated stablecoins have to use US Treasuries only as their one to one backing. So what that does though is it's actually a really good thing for our economy and the stability of the dollar because now that's native demand for the Treasuries whereas we've exported that for a long time. You got the European union that holds $2 trillion and US treasuries. Japan uh, is another large holder. And then the majority of the other brics nations have already de risk and sold off their Treasuries over the past five years or so.

Speaker C: Yeah, China's big time doing it now. China's selling a lot of Treasuries now.

Speaker D: Yeah. And they want to destabilize the US dollar because they want to disintermediate it and they want to become the global reserve currency. So I think the US has had their hand in this industry for a long time. Tether 2014, 2015, they used to just hold Bitcoin as the backing for their balance to be able to back the tether. So they would mint tether, buy the Bitcoin, and then hold it on their balance sheet, which seems like a Ponzi scheme a little bit, but they have fortified that. And they've been the largest net buyer of U.S. treasuries from domestic sellers for the past three to five years. And they're currently the 16th largest holder, uh, for U.S. treasuries.

Speaker C: If you go back to the, if you go back to the Genius act, and that is a Clarity act now going through Congress and talk a little bit about what these, what those two acts are trying to accomplish here in the United States, because a lot of the activity in the crypto world outside of the US and we need clarity here how to deal with it in the US because we're the biggest, we're the biggest market in the world. So talk about a little bit about the Genius act, what, what President Trump was focusing on with that structure. And let's talk a little bit about the Clarity act and where that stands. I know they were writing up yesterday and it was pushed back by banks. It's a fascinating study, if you really want to look into it, how the world is still learning how to deal with this asset class.

Speaker D: Well, to the point I made earlier, until we have clarity here, that we're not going to see the mass adoption we really would like to for the asset class, and you're not going to see the liquidity move in. So, you know, I was on Capitol Hill middle of summer last year, when we were advocating with congressmen and women as, uh, part of the digital chamber, to get them to pass the Genius act and the Clarity act, which were both up for vote. When I was speaking with them, they said, look like we think the Genius Bill is going to get through, but the Clarity act is going to get pushed out. And that did end up being the case. And we're now here early in 26, still kind of fighting that battle for what is a security, what is a commodity, which one of these assets is taxed this way or that way, or the capital assets, are they currency? A lot of it's still just, again, Wild west, and there's no clear determination on what is what. And so that's, again, why a lot of people have just stayed away from it. Xrp, going back to that for a second is really the only thing, aside from Bitcoin and Ethereum, that has clarity in the US and that's because of the lawsuit with the SEC and Ripple July 13th of 2023, the judge determined that XRP in and of itself is not a security. The contracts that Ripple had on that were securities that they sold and they were fined $50 million for not registering those with the securities and Exchange Commission. Kind of like the orange and the orange groves for the Howey test. Right. Uh, XRP is the orange, it's not the contract.

Speaker C: Right.

Speaker D: That's the security. So that gives it clear determination. And then it's also been listed on BITnomial, which is CFTC regulated exchange for commodities alongside Bitcoin and ETH as a commodity. So I think that that's probably how it's going to get addressed. If they don't make it some type of neutral bridge asset or global reserve currency, I think it'll probably trade as a commodity. But until we have the Clarity act for the rest of these assets, it's really still kind of up in the air on which one of them is going to be a good opportunity.

Speaker C: Actually they want to pass the Clarity Act. Congress wants, and the President, they want to get that pass for that clarity. And that's because they believe in the crypto currency or the crypto world. And they think, and uh, Trump's been talking about it a lot. He wants to be the crypto capital on the planet. And I think they're very, very motivated. I'm happy to see that because I think once that gets clarity and it gets structured, I think you can have a flood in. Okay, now it's approved, now we support it. Okay. I should have this in my portfolio. So I think it's going to be an opportunity again, a long term perspective. And you and I, you've always talked about that. You know, five to ten years from now these asset classes are going to be like the Internet was in the, in the 80s. They're going to be where the Internet is today. Five maybe a little quicker than where it is because of the, because of the technology. Right.

Speaker D: I think we're right at the bottom of the Internet bubble pop for crypto. So fundamentals have never been stronger for this asset class. We're right on the precipice of institutional adoption because of, you know, the people leaning in and also the Clarity act potentially being passed here in early 26 and market sentiment as an uh, at an all time low. I looked at the Fear and greed index the other day and it's at 5 or 6, which is the lowest.

Speaker C: Crazy. Yeah.

Speaker D: You know what Warren, Warren Buffett says is, you know, be greedy when others are fearful and be fearful when others are greedy, if everybody else is scared to get in, it's, you know, probably a good time to start looking at it.

Speaker B: Yeah.

Speaker C: Yeah.

Speaker B: Jake, I'd love to learn more about your company and how you help families that want to maybe dip their toes into this asset class. I know that there's now a lot of movement, there's a lot of ETFs or funds that are out there that you can invest into these asset classes, maybe more indirectly. But your company set up to be a little bit more, I think, uh, hands on, if you will. So could you give us a little bit of what your company does in more detail and how you can help?

Speaker D: Yeah, absolutely. So we work with family offices or high net worth individuals to get them exposure directly to the bearer asset. Right. So you could get exposure to gold or some, some of the things through ETFs or other structured products. But if you want to hold the bearer asset itself, and many people do want to with gold because they've realized that there's been manipulation on the paper contracts and with the COMEX and all of that. Right. So we've seen a lot of people flock to physical metals over the past year. We help people do that for crypto. So if you want direct exposure to Bitcoin, xrp, xlm, Ethereum, Solana, Matic, chainlink, any of the assets that Anchorage will custody, uh, we support in our wealth management practice. And uh, we advise people on how to make those allocations, how to structure their portfolio in a diversified way to be able to mitigate risk and hedge things. We have other partners that we use to be able to get access to options, downside protection if people want that. And then we have a hedge fund that we've put together that has about $400 million worth of crypto directly in the hedge fund. So you're able to put that up as a capital asset. And we've been able to get a tax letter where that's not a taxable event. If you've had some appreciation, so you can put it up and then we reflect that off exchange on another exchange. So there's no counterparty risk. The assets sit with us. We, uh, draw a line of margin against that reflected value and then we trade that in a market neutral strategy to generate cash flow for people. Because that's one of the other oppositions. Like you just mentioned. You're like, cool, I hold Bitcoin, but like, what can I do with it? We just launched our bitcoin product with Fidelity also. So you'll have Institutional custody there at Fidelity you have all the assurances that they have insurance segregated account. That's actually an SMA structure that we've put together uh, for our partners there. And you can have as little as a half a million dollars in bitcoin. They've generated 38% returns in bitcoin over the past five years. So if you gave them 100 bitcoin in 2020, you now have 138 bitcoin here in 2026. And bitcoin's appreciated a lot since then. We also work with partners to provide lines of credit against the asset. Uh, it's volatile and the interest rates aren't fantastic right now. We normally get somewhere between 45 and 65% LTV and where interest rates are somewhere between 8 and 15% depending on the asset and the LTV with our partners. But we're bringing more and more of those products to market now. Really trying to be the standard in the industry as far as wealth management goes for the bearer assets themselves for people that want to maintain a long term hold, like we talked about investing over the next five, ten years, but still being able to derive value from that today and get access to liquidity when they need it.

Speaker C: Yeah, I love the concept that you talk about on your podcast about affluent families typically don't sell assets, they use them, they borrow against those assets. So you're building that type of a strategy, which I love because if you look at the long term position of this asset class, I think it's going to continue to grow. It's kind of a legacy play. It's like land trusts, uh, family office land trust. They buy land, 99 year lease and they get 4% a year and they're happy and it's safe and it doesn't go away and it's still an asset that grows. It's a fascinating asset class to look at and study. It is complex, it is in its infancy and it scares a lot of people away. And I think that's it's our job as advisors to at least educate our clients on listen, you need to pay attention to this asset class. Can't be afraid of it, understand it, trust us that we're doing our due diligence looking at it and it could be, and it should be maybe part of your asset structure in your legacy plan, maybe not your everyday investment account because you're living off of that or whatever might be but for long term trust structures. And we, we mentioned to you in the past, we use a lot of people Contracts, private placement, life insurance to hold these assets. It's a perfect asset class to do that with. I know you, you're a proponent of people, so there's a whole lot of different holding strategies to this asset class that makes sense long term. I'm talking about long term, like for my grandkids when they're, they're 5 or 10 years old right now, and when they're 30 or 40 or 50, this asset class could be enormous. Um, maybe I'm too bullish, but that's how, um, I agree with you. I think these assets are going to be a whole different model that people still haven't seen yet. And a very small part of the world even has a crypto asset. What is it? 99% of people don't even know what it is. So it's scary.

Speaker D: Like 1 in 5 people in the US that own some crypto. At this point, it's becoming a bit more adopted. Bitcoin has the largest number of wallets. So you have to create a wallet in order to be able to hold it. They have over 60 million wallets on the network at this point. XRP only has 7.5 million wallets total. So to your point, crazy. There's 8 billion people on the planet. 101.6 trillion of those people don't have access to financial. 1.6 billion. 1.6 billion people don't have access to financial services. But, uh, that's going to change with this too. They'll have, it'll be able to democratize access to financial services with anybody with a cell phone instead of going to go to a bank or all the other stuff that comes along with traditional wealth management.

Speaker C: By the way, one of the things that I heard you speak on and other, other folks as well, that the concern that the retail investor going to be faced with is because institutional now adopting, with the ETFs holding onto these cryptocurrencies that the retail investor might not be able to get the asset itself. They'd have to go through an institution. You see that pretty prevalent, uh, you see that happening, right?

Speaker D: Well, I think that's been the play the whole time. So we're the only people that do what we do and allow people to hold the bearer asset. Everybody else either wants you to sell it and then take your gains and be able to mitigate taxes and do something else with the money, or you're investing in it through financial products that have been structured by these large institutions. I think that they'll probably end up gobbling up the exchanges, extracting the tokens and then structuring those in products where they're able to make money. Once we do see the adoption of this asset class, and it's going to be very difficult for people to obtain the underlying asset itself, uh, and hold that direct. And they haven't built out an SMA structure for this type of stuff because I think they planned on doing large omnibus accounts where they hold it and they issue securities against it. The infrastructure, like we had to work really hard to get them to do it the way that we wanted it done, where everybody has their own segregated account and we could eventually run SMAs on it, holding the underlying asset versus structuring a securities offering, which we still had to do for the hedge fund.

Speaker B: Yeah, um, it's pretty fascinating what you all are building over there. And I'd love to maybe circle back to. As we talked about again, our focus a lot with our families is more generational, looking long term with not just maybe this asset class, but, but all asset classes. And I would imagine that if you wanted to have an exposure to the cryptocurrency world and maybe you didn't want to use some of those instruments that ETFs and funds, the challenges of transferring ownership or maybe gifting those assets into a trust probably just gets complicated a lot more with, with digital wallets and having control and ownership. So I'd love to hear what you're seeing in your world about how families are addressing that and how maybe you're also able to help with that too.

Speaker D: So there are other family offices that do not work with us that we've had conversations with. Many families are very private. They still run things on spreadsheets so that they maintain their own data and they don't want to give it to somebody else. I understand all those things. With crypto, if you don't understand how to be able to safeguard this stuff and custody it yourself, it is very cumbersome. So most people buy an asset on an exchange just like you would through a brokerage or an exchange account with New York Stock Exchange, or call it nasdaq. The corollary I can make here is before there was electronic trading, people actually had the physical stock certificates, go buy it. You would take it back to your house, you put it in your safe, and when you want to go sell it, you take it back to your broker. That's what people are doing with crypto now. They're buying the asset, the stock certificate on an exchange, and they're taking it out of that exchange and putting it on a hard drive that they're holding in their home. And if you wanted to move it into an irrevocable trust or have a distribution trustee and other parties for a multisig, there's a few options out there for that, but that's very limited and it's cumbersome. What I've seen people do, which I'm not a big fan of, is they write the keys down. They have their financial committee that meets every quarter. They tear the keys into four different pieces and they hand the financial committee each one of the pieces and they have to reconstitute the wallet every single time they want to make a transaction with it where no one party has full control. We can do that inside institutional custody just like you can with a stock account. We can add multiple signers on the account. We can have thresholds. There's governance built into it. You have your spouse on the account, you have beneficiaries on the account. And nobody has to know anything about how to actually like send or transfer wallet addresses or keys or security. And you're not holding it in your home where somebody could come steal it from you. Right. So, you know, a lot of the, I'm more of a have your cake and eat it to type person. A lot of people want to be self sovereign and hold these assets themselves. But that comes with radical responsibility and no assurances or insurance. What we do is we try to blend both. Right. So these are FBO accounts. It's in the person's name. You can add your, you know, put it inside your trust. You can structure it within your estate and make it super simple and easy for the reporting, but you still have full control over it. Unless, you know, there's other counterparties that you've involved with your estate planning to mitigate, you know, credit or risk.

Speaker C: And that's also insured right up to. Yeah, because that's always comes up because there's a lot of stories that people getting ripped off with their wallets. So that. That's all protected in your structure, correct?

Speaker D: Yeah. And they're not quantum proof, but they're quantum resistant. The way that they've structured this. Again, BlackRock moved all of their ETF assets over to Anchorage. So we feel very comfortable with, with their setup and their security.

Speaker C: The biggest, what a 20 trillion. Whatever. They're huge.

Speaker B: Yeah, yeah. I mean, well, that, that's, that's again pretty fascinating because I, I mean I think we've all probably read news articles or heard stories, hopefully not firsthand stories of oh my gosh, I lost the wallet, or you know, somebody, you know, a father passed away suddenly and no keys, didn't, didn't break the keys into four parts. And now the, you know, there's millions and millions of dollars in this wallet that's sort of now, ah, out ether there. Right. I mean, that's that to me. So. And I'm sure that is probably some of the reason why maybe some folks haven't really wanted to dip their toes into it. Because I, that, I mean, that is a big risk, right? I think so. It's wonderful to hear that you guys are trying to figure out a way to maybe mitigate some of that.

Speaker D: Yeah, we've got that part down and it's wild. So a lot of what we do is either the basic stuff that just doesn't exist in this industry. Like I talked about an SMA model, like it doesn't exist for crypto. We're having to build that. We had to build all the building and reporting you.

Speaker C: That's a lot of money. I remember you talked about that in one of your podcasts.

Speaker D: Yeah. And then separate of that, there's nothing in the middle. We're either doing the absolute basic stuff or we're doing the most progressive financial structuring that you've ever seen for crypto in a regulated way. It's a weird dichotomy.

Speaker C: Yeah.

Speaker B: Well, listen, uh, this has been wonderful. I think we're running out of, uh, time, unfortunately. We'll probably talk for another two hours with you, but in the next few minutes or so, what are some closing thoughts maybe that we haven't covered that our listeners should be aware of? Uh, do you think they'd get a lot of value from.

Speaker D: Yeah. So again, when I talk to matriarchal patriarch that a second gen or third gen has brought over, we talk about how this asset class is a hedge or inversely correlated to the rest of your portfolio. And the short version of that is we see the reverse carry trade playing out in the not too distant future. You started to see that unwind in August of 24 and uh, they kind of capped that. Japan didn't continue to raise interest rates. And as that plays out, I think we're going to see a spike in oil that forces the bank of Japan to rise or raise their interest rates aggressively over there. And you're going to see an unwind of US Treasuries like I talked about before we passed the Genius Act. So we have domestic demand for those which is going to be able to stabilize the bond market. Uh, but the rest of markets are going to be, they're going to take a hit. When that happens, I think we could see 30 to 50% down across the board. No matter where you have your money of repricing basically, uh, as liquidity gets sucked out and repaid for those loans in Japan. And when that happens the only way that they're going to be able to de risk in that situation because you huh, have the clearinghouses and the brokers are still T +1. You actually had Paul Atkins, who's the head of this SEC come out and talk about this moving to real time settlement on the back end of the stock market here recently and he said they're right on the cusp of that. I think that this is going to be correlated with that. They're going to need to be able to de risk from the Bitcoin ETFs if there's a large move down in Bitcoin. Bitcoin settles almost real time but stock market doesn't. So they're going to have to move to some mechanism that allows them to settle the back end of the stock market. If you want to do some research on Project Ion, that was finalized in August of 2022 R3 quarter and the DTCC put that together, it is the infrastructure that they're going to be able to use to settle the clearinghouse and the brokers real time using a digital asset. The native settlement mechanism for that is xrp if there's enough liquidity in it. So XRP in particular I think is positioned to be inversely correlated to that trade when it unwinds and would be a great way to be able to offset those losses in that situation. And so we see a lot of families allocate, you know, somewhere between half a percent and 3% of their portfolio depending on how bad they think that situation is going to be to be able to maintain their wealth. Because that's the whole point, right, like preserving your wealth over the long time and your purchasing power is what you want to do. So that's the conversation we have with most of the families that come and you know, seek us out for, for advisory.

Speaker C: Yeah. I mean my comment would be it's moving very, very fast right now and it's going to continue to pick up pace because of all the again the Clarity Act. I'm assuming that's going to pass. It's, it's going to move, it's going to, it's going to smoke everybody, everybody's gonna be left behind unless you're paying attention to this, to this concept. And my advice would be study it yourself. You know, do your own research. You know, watch Jay Claver's, uh, podcast. He's very informative, does a great job. I think it's just something people have to pay attention to. We are, I am. We're starting to talk about a lot with families and I want to learn more about it. And I think you're a perfect, uh, expert to chat with. And I really appreciate your time today.

Speaker B: Yeah, thank you so much for being

Speaker D: here, for having me.

Speaker B: Yeah, well, hopefully we'll have you on soon, but thanks again.

Speaker C: Thanks, Jake. Take care.

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