The White House Is Building a Strategic Bitcoin Reserve—w/ Arch Lending

What you're telling me is that music is about to stop and we're going to be left holding the biggest bag of odorous extrem ever assembled in the history of dump. 1974, 1987, '92, 97, 2000, whatever we want to call this. It's all just the same thing over and over. We can't help ourselves. >> I say when we sell. Hey, okay. I say when we sell. >> All right. This week we sat down with Drew and Hamanchu from Arch Lending. Drew is the CEO and co-founder and Hamanchu is the CTO and co-founder. Great conversation. Uh we talked quite a bit about their backgrounds and expertise in the second half of the episode as it relates to founding Arch doing Bitcoin back loans the right way. really important uh to take into consideration counterparty risk uh collateral management, who the lenders are, non-rehypothecation, all these things. We talked about the business in the second half of the show and why we partnered with them at on-ramp. First half of the show, we talked about the report that came out this Wednesday from the White House on the digital asset side. Had some good and bad takes there. Uh, we also talked about PNC, JP Morgan Chase stepping into the Bitcoin and crypto space announcing partnerships with Coinbase and I want to say we also talked about some things that happened at FOMC if I recall correctly. So, we uh had a wide ranging conversation. I will say for anyone who's interested in Bitcoin back loans, certainly check out our website onrampbitcoin.com. We have information on Bitcoin back loans and you could always speak with myself or someone else on the team if you want to learn more about how we manage that in a very conservative way. Um and also I would certainly encourage you to check out the second half of this episode where we talked in detail about how ARCH manages Bitcoin back loans. It's in it's incredibly important um especially we've seen over past cycles so much counterparty risk for a number of reasons. And so Arch has a I would say a low time preference approach to building their business and they've really been a great partner, have a lot of clients that are satisfied with the experience working with them. So stay tuned. Hope you enjoyed the episode and check out our website if you want to learn more about Bitcoin backloans, custody, inheritance, etc. All right, we're recording. It's the last trade. We have five people on today's podcast. >> Five heads. two or three months ago, this was a common occurrence, but we've had four people on the podcast for the past several weeks. So, this will be a special episode. We're joined by uh two of Arch Lending's co-founders, Hamanchu Sah and Droo Patel. Uh Droo is the CEO and Hamanchu is the CTO. On-ramp has partnered with Arch. We're going to talk about that later in the episode. And then we are also joined by co-hosts Brian Cabllis and Michael Tanguma. So gentlemen, it's nice to see all of you today. Arch fellas, how uh how's life in New York? You guys are dialing in from the office today. >> Yeah, it's it's a bit of a song, but it's good. >> There's kind of a a running joke internally where um Jackson is going to take on some conservative leverage. And so I'm convinced part of having you guys on was to discuss if now is the time or if he missed the boat at the 79K draw down and and he just has to sit back on the sidelines. It's been killing him week after week. >> If loan volumes were anything to speak of, then you've not lost the vote for sure. >> All right, then. Well, yeah, this episode is actually just for for me to convince myself that I need to take some leverage out. So excited for this one. Uh, a good place for us to start would be the report that came out from the working group in the White House. We have some mixed opinions. We have some good and some bad to talk about. So, the best place to start would be just pulling up an interview. Just a quick clip here of Bo Hines, who is involved in the the uh digital working group for the White House tasked with this report that dropped last or just yesterday actually. So, want to pull this up. >> What's the update on a potential Bitcoin strategic reserve? >> Well, look, we we have it uh it's been it's been established through executive order and the SPR. We also have the strategic national stockpile. Um, you know, I or sorry, the digital assets national stockpile. I think that one we wanted to recognize Bitcoin for being unique and we talked about, you know, what that looks like and kind of the threshold uh that that Bitcoin has created. um you know it's it's in a class of its own and everyone recognizes that but we also wanted to give credence to the work and the development that's happening across other ecosystems and that's why we have this national stockpile alongside you know this this actually requires some labor to get this set up properly you have to build the infrastructure um you have to make sure that uh you're you're crossing your tees and dotting your eyes to get this done the right way uh and have long long-term success with it but I've said at nauseium you know we do believe in accumulation obviously in budget neutral ways as the president's outlined but there are countless ways that we can engage in that. We'll act on those that um can be most expeditiously implemented and I think that you know people will be very pleased with the direction that we go in and we'll start moving on that in short order. But obviously in this report if you read the first digital assets EO we're tasked with creating a clear and robust regulatory framework and so that's what we focus on here. We understand the importance of the strategic Bitcoin reserve. Uh we're you know enormous fans of of Bitcoin and the Bitcoin community and we want to deliver for them as well and I'm certain that we will. How much Bitcoin does the federal government have? >> I can't discuss that right now. >> Give us a ballpark. >> I can't. Um, is it gonna be made public? >> There are there are several reasons uh in which we're we're not disclosing that at this time. There might be a time in which we do. Um, but what I will say is, you know, we want as much as we can possibly get and that's what I continue to say and we're going to continue to work on that. >> Was there never more uh cryptic >> cryptic uh conversation or explanation of anything that's going on? He said a lot without saying much. So, I did want to hear Brian, we'll hand it over to you first. Are we going to be pleased? Bohe said we were going to be pleased, but are you pleased right now? And what are your thoughts? >> He keeps saying that. He keeps saying we're going to be pleased. I think um there's there's a lot to unpack here within the report, that sound bite. Um but you know my initial reaction to the report and I think a lot of people in the Bitcoin community was like you know this wasn't really what the um initial plans when they talked about the working group they talked about this report that would come months later. I think there was a line of thinking that you know we would get an update on specifically the SB um the US government's current holdings and plans for accumulation. I think as he sort of stated there, that was never really the intent of this report necessarily. Um, and so there's a little, you know, piece at the end of the report that speaks specifically to the SPR, but it's basically just lifted from the executive order, and it's the same commentary and language around we're going to try to find budget neutral ways to accumulate more Bitcoin. Um, and so I think like, you know, like with anything, there's nuance to this, right? Like I think there's it's natural for people in the Bitcoin world to be disappointed or say, you know, where is the audit? That's something that I've jokingly said. Like I'm once again asking how much Bitcoin does the United States own? Um but if you just if you zoom out and just like look at the report in its totality and like the actual ramifications of of what this represents, I think it's um extremely constructive in the sense that you know, Bitcoin is mentioned hundreds of times in the report. Satoshi is quoted at like the beginning of every section basically um and there's real reverence for Bitcoin, its strategic implications, um and it's and its uh distinction from the broader crypto space. And so the report, you know, a lot of the meat of it is is centered around stable coins and the classification of of other assets, X Bitcoin. And so I think there's a natural um you know desire for for people focused specifically on Bitcoin to be like well you know what about Bitcoin? What are you doing with Bitcoin? Um but the broader takeaway to me is like you know Bitcoin doesn't really need all of the uh the meat around its regulatory status right because it it is has been viewed for many years as a commodity. So it doesn't need as much work from this working group on classifying what Bitcoin is. they give it the reverence it deserves and they talk about the other things that are less clear basically. Um and so that was you know after my initial sort of response to it as I like sort of stepped back I was like you know this is pretty incredible that a governmentisssued report is quoting Satoshi several times. Um, and if you just, you know, think about 1 2 3 years ago, like that would be kind of insane to to think that the US government is quoting Satoshi in an official report. Um, so all of that is to say I think it's um constructive and bullish and and part of the cryptic nature of Bose's response in that interview post the release of the report is like yeah the other way of looking at this is like you know it doesn't it wouldn't really make a ton of sense for them to announce an accumulation plan uh ahead of actually starting to accumulate. just from a game theoretic standpoint like you would probably want to be accumulating quietly and then announce what you have and go forward plans. And the other sort of um uh wrinkle in all of this is like the number of bitcoin that people think the US government has is like 200k and it might be less than that and that could be the other reason that they don't want to say it basically. Um so there's a lot a lot there but that was my my broad takeaway or overview. I think um one progression we can see from the report and just from him speaking today is when the executive order came out earlier in the year it was all the assets together it was like a couple lines that was it um and you know it mentioned XRP it mentioned a few other assets now there's a clear distinction between Bitcoin and the other assets and I think that I see as progress and they've called the Bitcoin reserve versus the digitalized stockpile initially it was the strategic crypto reserve So I do see some deviation um towards Bitcoin was and other assets and I think what this might end up with is there's quicker progress on the Bitcoin side and then the stockpile like whatever the incentives to to do that might be um will be on its own path separately. Yeah, I agree with all that and and I would also say just to reiterate some of Brian's points really quickly and then there's another thing I want to pull up is this is still remarkable, right, to have this amount of progress within the first 7 months or so of the administration. Um these are things that were unprecedented that in some ways this administration has followed through with a lot of the promises on the campaign trail and other ways they haven't. Um, but that point aside, it is nice to know that what was once headwinds just a year ago really are now massive tailwinds. And this ties into something that we wanted to pull up on bitcoin treasuries.net. Listen, everyone I'm always going to say this because it's it's really fundamental and it's true in every case. Like people look out for their own interests. And if you look at the top holders, public companies of Bitcoin, you have Trump Media and Technology Group here, number six. They just had done another purchase in the past week or so. But then if you also look at other companies here in the top five, uh, namely, let's see here, 21 Capital with Jack Mers, Cancer Fitzgerald, you have people that are very close to the Trump administration as well that have massive positions of Bitcoin. And these are not stupid people. These are financially motivated people. They would not be taking out massive bets on Bitcoin and MSTR. I think I remember back at the start of this year, Caner's holdings were were published for Q4 of 2024 and they had like a 20% position in strategy alone. So, I don't know what this tells you guys, but at the end of the day, I think there are some things that are happening behind the scenes. There are likely strategic reasons as to why the audit has not yet been made public. There's strategic reasons why the US government hasn't disclosed exact purchasing plans. But if you kind of look just next layer of the onion here, there's plenty of data to look at to show that the people, you know, in the Trump family and in the administration have uh some big plans for the rest of this year and into next. Yeah, I'd be >> I was gonna say I'd be curious from Yuanchi and Drew like your guys' take from where you were sitting a few years ago. Um because I don't think we've ever talked about this. Would love to hear, you know, how involved in like 21 you were in the industry. Um I think that was roughly around when Arch was founded, maybe a little later. And like what your perception of like this I mean I pulled up on the the page for listeners this is whitehouse.gov/crypto. I mean, it's pretty insane to Jackson's point, like how far and how fast we've come. But just curious like what your guys's feel has been from a couple years ago um to now and what all this means and how you're seeing it like impact your side of the market. >> Yeah, definitely. I think there's, you know, I'll narrate the story and then I think that it touches on a few different things that we're going to discuss later on anyways. But, um, if you go back to like end of 21, early 22, um, you know, we were in a sort of hot cycle, but even during those moments, it was mostly um, like retail and crypto participants and Bitcoiners, if you will, right? Like there there wasn't many companies having Bitcoin on their balance sheet. Certainly you didn't have any of the large financial like magnets Ray Dalio uh Jamie Diamond etc talking in a positive way about Bitcoin and if you fast forward now yeah we had um a lot of companies sort of exit the space uh via bankruptcies and just things that they were doing that were a little too riskon um and and immature from a financial sort of security and management but overall the space has sort of continued to grow in a positive way and now I The conversations you see around Bitcoin are not, oh, should this be part of a portfolio? It's, yes, it should, and what percentage are we talking about? And people are sort of like updating their priors there. And I think you see it from companies now holding it across. I mean, we have the pleasure of seeing all sorts of businesses that have Bitcoin on their balance sheets and are borrowing with Arch. It's not just your publicly listed companies that I think get the bulk of the attention, but we see like toy businesses, energy companies, um, all sorts of small and medium businesses throughout America that have Bitcoin on their balance sheet and it's sort of been a good way for them to expand their businesses um, and continue to grow there. So, I think at a high level, the conversation has changed from okay, like should we own Bitcoin to now how much should we and what's like an appropriate allocation. I think one um one story that maybe uh and actually I want to hear you guys' opinion on this. So we're seeing every week there's three to five new Bitcoin treasuries that are raising money, IPOing in a few weeks or spacking or whatever. Um we're going to see this happen across a number of public companies and these companies are going at building a company from a very different perspective than what we've done in the past. What they're doing is they're building a floor price for what the stock will be by accumulating as much Bitcoin as they can and they'll build the company after that. So whatever happens now the floor is the bitcoin price and the amount of bitcoin they have. And this is a very different way of uh building a business then was done in the past right now your floor is how much bitcoin you own and everything else is beyond that. If you look at fold for example f went public recently fold had about a,000 bitcoin for the last several years. uh their revenues are not that much to justify the stock price, but the Bitcoin they have is a significant portion of uh of their market cap. >> Yeah, I think it's a it's a great point to call out and it's something I've thought a lot about and I think it's to your you know, as you described it does sort of flip the the mental model of like how you how you go about building a business in terms of the order of operations, right? And I I would contend though that like the floor isn't necessarily one times MNAV. Like if they really screw up the business building, there's no reason the company and its equity can't trade lower than um its Bitcoin holdings. >> If you go down the list of Bitcoin treasuries, you see that a lot actually on that lower half. >> It's already it's already happening. And so I think that would be the one caveat to that is like we don't know that that uh model of business building necessarily works. Like I think strategy is is certainly an outlier and very unique in that they had a core business. It didn't really matter at the end, you know, once they really got started with their Bitcoin accumulation strategy, but then their business turned into like productizing the stock itself, right? all the different minate uh different uh instruments that they've created. So that became their business and they've been very successful at doing that. Not everyone's going to be able to replicate that. And so now you hear the 21 Capitals and others talking about future plans for Bitcoin native financial services. Um and that sounds nice, but it's like you actually have to go build something and it has it has to, you know, gain traction, market share, have product market fit, all these things. And I think it's, you know, uh, we may just still be in the early innings of this and and it may get crazier and crazier in terms of, uh, more and more companies trying to go this route of accumulating first, building a business second, but I just I don't think we've seen outside of strategy like a real um, legitimate, you know, uh, example of this working out like typically, you know, for all of uh, you know, history up to this point in terms of business building like you build a business first uh and then figure out how to store your value, store your cash flows in a better way, adopt Bitcoin, etc. Um so I just I I think it's an interesting call out, but I would say like the one 1x uh MNAV is not necessarily the floor for these things. >> I think these as they don't necessarily have to build their own business. They're going to be acquis. Now they have the leverage to go acquire bigger businesses than they would have just on their own or build a business themselves. So now they have access to very high tier capital markets, super low interest rates, access to a lot of capital um and they can now use that as leverage to go acquire other businesses. >> Yeah. I think um from the overarching angle, I think what's fascinating about all this is there's a natural um valve that crypto in general and Bitcoin will help. There's a strategic reason where the ETFs were approved and to your point, business owners are accessing liquidity. They're getting uh increased purchasing power in an asset. So, it's allowing for like uh GDP and growth. Um, so there's some strategic like it's not even have to be ideological why they're putting, you know, Bitcoin on the balance sheet and and or um from the from the administration side and the 401k is a great example of this with like loosening those requirements. Uh, but like the wild west, right? That's how I think about, you know, digital assets and all this stuff happening is it's the wild west and there's a lot of money to be made, but there's also going to be a lot of money to be lost. Um, and so that's just the interesting dynamic. A couple of things you and Brian touched on. one is never in 15 years has like a new product come about in Bitcoin where there hasn't been a lot of heartache because ultimately like you guys touched on we'll talk about at the end of the pod about um you know what you guys are building and why we're excited but ultimately it takes digitally native people that have kind of gone through reps or have very uh are very conservative and first principles thinking or you end up blowing up in this space because there are no bailouts and so I think a lot of these net new companies coming in with new strategies like the default should be really um cynical and or just careful because of what we just talked about. The other part that it comes up a lot and I kind of like differ is imagine like on your guys' side if there was some firm that had access to arbitrage capital to go raise a big balance sheet and build a lending business. You guys as entrepreneurs probably like we can out compete them and maybe slower but we're just better operators. And so that's how I take it from that stance because there's a lot of co uh codes out there saying we're going to raise a bunch of Bitcoin, make acquisitions. It's like if you raise a bunch of dollars and make acquisitions if you know how to build the business and know how to be super like um uh agile and just all the things that naturally go into business building and that's what I think is going to happen. It may take longer and it's similar to fiat right you see companies go Adam Newman and we work a great example raise a ton of money and then they just like kind of you know drown themselves in it. Um so I think that's what's going to happen. I think what you need is a natural first principal thinker that's a good builder and that leverages Bitcoin's properties. Now, that's when you end up with like the the magic sauce. >> Yep. Yeah. I think that's why they like who's running these treasury companies that are um launching is so important. Um we like we're seeing people like Adam back get involved. P get involved. People like that I think know how to build businesses. But then there's also other opportunists that maybe will be on the long cave of not having that much success. >> Yeah. The deadly one is is the tether, right? like they pulled out their reports and like they're playing at that level and you can see it from revenue from employee the way they think about just diversifying risk across gold, land and BTC. like that's the kind of thing that ends up deadly with the the balance sheet plus they're just looking at the world in a completely different view versus um the one that's like the elephant in the room is the MSTR deal because they have all the Bitcoin but like you know they're not really familiar with the space outside of like financial engineering and how to create structure products for all the capital that's in the market but like what do they do with that Bitcoin um and how do they accrete value on the other side of it? Yeah, my my concern and then we'll shift topics is I'm generally interested and a fan of what Sailor is doing. I think it is fascinating, but the concern that I have that most of the enthusiasts of the stock do not talk enough about is well, if you're monetizing the balance sheet, why does no one talk about the risks to the balance sheet? Like there's very little discussion around what could potentially happen with how those assets are secured. And if the entire basis of your company is becoming monetization of the balance sheet and offering financial products based on the amount of Bitcoin you hold, I would at least think that there'd be more serious discourse about what could potentially be a catastrophic risk to to that um company. But shifting gears a little bit, I I want to go back into maturity within this asset class. So Drew, if it was something that you had mentioned earlier, right, just comparing to where we are today versus where we were three or four years ago when you had started the business and there were two pieces of news that I think all of us saw and we wanted to talk about was both PNC I think it was last week and then Chase this week both announcing partnerships with Coinbase. So from a high level, what is happening here, at least on the Chase side, is NPNC, you'll be able to link your bank account directly with back-end integrations to Coinbase. So you can buy, sell, store different cryptos, I guess Bitcoin, and I'm not sure exactly the menu that will be offered. Um, and then Chase, I saw, is offering some things with credit card purchases and then also Chase Ultimate Reward points, which could be redeemed for USDC, which I thought was uh interesting and odd. I don't know how big of a tam that is quite yet. But point aside, I'm curious. I'll hand it over to you guys for some initial thoughts on the banks stepping in. How do you think this all matures over the next coming months? Um, you how do you think these banks will differentiate? What kind of adoption do you think you'll see there? Um, and then we can open up the floor after that. >> Yeah, I think first like the the thing to notice is that the amount of distribution that's about to be unlocked here, right? like the clients of PNC, JP Morgan, and all these other banks are huge relative to the number of accounts on Coinbase or or any of these um you know, Bitcoin companies. And so the number of folks that will now have access and exposure will be huge. And I think that's just big for the space, number of new holders. The other piece is also with respect to these financial institutions. I know many of our high net worth clients are in executive positions across a lot of these businesses. some um have, you know, smaller banks that they own, etc. And one thing we've heard from them for over like for a few years now is they see outflows to Coinbase and other Bitcoin companies in their own client activity. And so this is now finally the time for them to participate and say, "Look, like our clients are doing it with or without us. We might as well lean in now and figure out a way for them to do this activity through us itself." And so, well, I think it's positive overall through the like ecosystem, but um I think we definitely saw the writing on the walls here just given um yeah, it was either participate or sort of get left behind here. >> I want to speak to the Chase deal cuz I think that's quite interesting. Um specifically to the fact that you can now pay with your credit card and use points. The points thing whatever I think it's going to be a very bad redemption one probably you don't use Chase points to pay for cash uses. use it for travel usually uh where you actually get a benefit to using it. Uh if you use ultimate rewards from Sapphire Reserve, you get a 1.5x bonus. Uh much more useful that way. I've been doing that for years. It's fantastic. Um paying for crypto and depending on the amounts allowed with your credit card could be a very interesting double-edged sword that could lead us deeper into the credit crunch we're in today. You know, we're seeing BNPL default rates be skyh high. Um a lot of people that use suffers or eventually other chase products tend to be younger uh maybe more risk on with credit and I just worry that uh depending on what they're buying we might see an acceleration of the current crunch that we already are seeing in in the US today. And also just just one more thing to add you're going to be paying really high interchange plus Coinbase fees to buy them. So you're paying 2 and a half% interchange for Chase plus Coinbase fee is typically 100 BIP. So another percent on top of that. >> Yeah. I don't want to do Sonu, but I will. Is uh if you're familiar with the points guy, he's been running that for the past website for the for the No, you are the points guy. You were the one behind uh that you >> but uh Jasmine person, you know. >> Um I I would imagine so. Um, I didn't realize is that for sure that you can buy crypto with your credit card. Was that part of the >> That was part of the announcement. I remember that being the case like five to seven years ago and then they changed it so that you couldn't do that. So, it is interesting to see them go back the other way. >> Really hard to buy the credit card. You typically get to use debit and even then they bought it a couple times to go through it. >> Yeah, I think there's a few topics that were interesting there. Um, one is I think the the notion of just stable coins and the proliferation, something we've been talking about a lot, is while it's a bad use of the points, there's still something really nice about you can get the points into BTC. It's one more click, but you can get to USDC to BTC. And I think that's naturally going to just help in the understanding the digitization of capital and people like tightening that, which will be positive for for downward pressure on Bitcoin or up upwards. Um, the thing that's kind of really interesting is just Jamie Diamond's like antagonistic nature to Bitcoin and then this JPMC thing coming out because stuff like this has been worked on for six to 12 months at a minimum probably post ETF and uh it just feels this is like on the backs of three weeks ago. I'm sure you guys saw with some of the lad kind of bottlenecking in the data that JPMC making a play somewhere and Coinbase sits right in the middle of so many things whether it's ETF Capital and flows JP Morgan which is one of the largest banks in the country and then this connectivity there that um with Coinbase there just something like brewing that may not be best long term because it's something that not on this list but Balcuna has caught that some of the SEC requirements around futures trading is going to be based on spot uh trading or futures trading on Coinbase. So if you the the heruristic I at least propose is if it's been trading on the futures market on Coinbase for over 6 months, it's like automatically like approved from the SEC side for futures. Uh and you can start to see like this in integration where Coinbase is effectively just starts to become insanely systemic um to the whole industry and it's just something to keep an eye on. >> It already Yeah, I mean it already is a systemic risk as well. I mean I don't think enough there's there's two thoughts I have. A I don't understand like where the point of differentiation is if all the largest banks are going to partner with the same company and then the second piece is as an industry there just needs to be I think a higher standard quite frankly because Coinbase already custodies 10% of the Bitcoin supply and more than that if you account for Bitcoin that's been permanently lost. So, I think we're already at a point of systemic risk with Coinbase in particular. And I just like think about 2022. I imagine, you know, the the fallout of FTX and all of the firms that collapsed in the contagion there. And I can just imagine how much reputational damage some sort of risk or hack or breach a material of material size would be at Coinbase for this industry. Like you remember back in 2022 with FTX, everyone who's outside of the industry sees the collapse of FTX, sees SBF and all this crazy happening and they're like, "Oh, well, I guess you know, Bitcoin is done, right?" And so it took quite a long time for people outside of this industry to understand, oh well, FTX is an exchange, an offshore exchange. It's different than what Bitcoin is, a a digital form of money, a commodity. And you can imagine if the largest custodian by far, the largest player in capital markets for Bitcoin and crypto suffered some sort of loss. I just don't know. I I think there is a recovery for the industry, but I don't know how long that would take. And that's honestly one thing that concerns me. >> Yeah. >> No, go ahead. Sorry. >> I was going to say there's two things. One, I think like definitely a systemic risk, right? Like just given that they custody for a lot of the ETFs, like there's so much uh that's actually built on top of of Coinbase there. But then going back to your first point about okay, if all the largest banks partner with the same company to offer trading, like what is their differentiation? I actually don't think they're looking for differentiation. I think they're just trying to keep their existing client base, right? Because if you don't have it, you're going to lose your existing clients going over to the next bank. So, it's not something that they're trying to win on on its own. No one's joining PNC for the crypto trading functionality, but existing clients, I think, will stay there because they're now able to just do it through them instead of having to go over to some other bank. >> And frankly, if you're trying to log in for trading, there's not that many options that have the reputation and the history of Coinbase. So it's kind of the default when you are looking into uh do alpha trading. >> Yeah. I mean this is where it goes back to the the whole wild west aspect of you reference what's the differentiation and if you said to a local bank what's the differentiation how you park your dollars they're all the same. It rolls up uh to sub custody with like BNY Melon. The mental model is just incorrect. It's the same thing when you think about lending. like not all counterparties when you lend uh Bitcoin are going to be the same how they custody their cons their ratio and the the overarching mental model is there's bailouts so everyone's not concerned with counterparty risk in the existing system because we've historically just been lulled asleep that will be made whole and the beauty you guys probably didn't hear it but we had Eric Walcun is on last week's pod and it was a fact it was probably one of my favorite because he's writing a book he studied all of this and he's worried about Coinbase and we brought it up he's like well the Fed will bail him out and I was like are they going to print more Bitcoin And he's like, "Oh, yeah, yeah, they'll figure it out." And it's like, that's the thing that nobody gets. There are no bailouts here. And um there's a reason why half of the $2 trillion market cap literally sits in self-custody and hardware devices. And it's not because everyone's just completely an ideologue and crazy. It's just that was the only way to sever the internet connection to protect your underlying assets. And so, uh it's just we're just in the early stages of all this. And so a lot of people have to get burned before like the right frameworks get built that the market will adopt going into like the next 10 to 100 years. >> Yeah, I think Drew Drew brought up a great point in that just partnering with Coinbase is certainly the the path of least resistance today. It's how you get fastest to market. It's how you stop the uh you know the the bleeding so to say of losing clients that are you know withdrawing assets from from the bank. Um but that is very that that's you know short-term thinking. I think the the longer term opportunity is to find some element of differentiation because um you know as you know while they need to make these plays just to be fastest to market like if you're actually thinking about the medium to long-term implications of uh how you're custoing the asset not having too much concentration risk with any single custodian like the real opportunity for any of these banks small medium large is to actually figure out ways to differentiate themselves. >> Yeah. I think in the future they'll end up working with everyone who's a relevant player um and have that differentiation. I just don't think like that exists today. But again, we're in year I I won't even say year one like we're in like month three of people even thinking about this and they're long ago. >> So Drew, one uh topic that you wanted to bring up was Kraken's uh IPO in 2026. I'll hand it over to you just for some initial thoughts and then you know the group can discuss before moving on to some of the lending topics. >> Yeah. Um you know I I think this was just like a good headline in general for the space. Um if you look at it prior to maybe circle the only exposure like traditional investors or or equity investors had to like Bitcoin in the space broadly was basically Coinbase. And so the more outcomes that happen in this space, one people get to participate in the upside of the industry broadly. Um second, I think these companies having liquidity is good for the space. One in terms of it, um you know, makes it easier for the next set of like builders to come and build companies because it trickles down everywhere, right? Like venture investors have now made some money. They have um liquidity to invest more. And so I think these sorts of outcomes are great. you're like you saw it with circles um reception and how that stock just like sort of ran like crazy. Um and I think what you see is real appetite from investors to have exposure to companies that are building real businesses in this space. >> Yeah, I think it's it goes beyond Kraken too. Like big go file figure is going to file. So is about to file. So there all these companies that are either directly in crypto or exposed to crypto that are now looking at this as an opportunity to go public because they think they'll have a good reception and I think that's very positive. >> Yeah. The the firm that made out like a bandit. It was incredible for foresight was uh Dan Tapiro and 10T because this is kind of like the thesis of the whole firm of institutional capital that may not feel comfortable or have a mandate to buy spot Bitcoin but directional bets into large revenue players that we're going to IPO. And you'd have to imagine behind closed doors they're like this all hinges on regulatory clarity because if it's there then we're going to you know we're going to crush it and they kind of are with uh I think they're in circle they had the derivat acquisition um there's a a few others that have gone public or are public and yeah to your point I think it's going to be interesting to see the acquisition in the public markets space because I think like BO goes public but ultimately it ends up at some point ends up like a BNY melon or some large bank product because again there's only so many firms that are digitally native that understand, you know, whether it's out of custody list, execute, lend against this asset, and we all know like anybody that's going to work for you doesn't want to work at those firms. So, it's like you have to like acquire the talent. Um, so it's going to be very interesting to see how that plays out. >> Yeah. Yeah, I mean there there's only a handful of like well-re repeated custodians and if they're going public then for a bank or a larger FI that might want to make an acquisition, they probably just have to acquire these companies as they're public. >> I did actually uh make one error here. I wanted Brian one topic that you brought to the table I wanted to discuss quickly before the lending was uh the most recent FOMC meeting and I had no idea that there's just been consensus by the Fed board of governors on interest rate policy for the past 30 years and this is I guess >> a signpost. Brian, you want to share some share some thoughts on this? Yeah, I mean nothing like no no no super deep thoughts around interest rates themselves or you know FMC in general, but I was surprised by this as well. I had not realized that consensus is usually uh that narrow. I think there's been several instances of of one uh governor dissenting in these decisions. But yeah, the last time two uh separate governors desented was, you know, 30 years ago, which is just kind of a a crazy stat. Um, and to me it signals like there is real pressure um from Trump specifically obviously um to lower rates. I mean the more I've thought about it though it's like does it does it really warrant like does the current economy really warrant lowering interest rates? Maybe if you look through uh you know various government data but like you know we talk about it all the time on this show like we don't really believe CPI is a a good measure of inflation. So if inflation if we're assuming inflation is actually much higher than 2 to 3%. Then you know maybe there isn't really room to be lowering interest rates right now. Um so I think it's a it's a very muddled and gray discussion around what's happening with the Fed and interest rates right now. But this I I thought it was worth just bringing up because it it shows a real um distinction in like where sort of Fed independence sits today relative to to all of history. Um, so that's that's not to say I think, you know, I don't think Pal's going to get fired or resign. I think he's going to serve out his term and Trump's going to put in somebody who really um flies in the face of Fed independence probably to the strongest extent we've ever seen. Um, so I think that's coming regardless of what you think about the economy. Um, but yeah, I thought it was just it was worth mentioning because I it surprised me as well. Yeah, I also didn't realize I I haven't verified this, but I'll take it at face value that both of these people, Christopher Waller and Michelle Bowman are both hoping to be appointed as the next Fed chair. So, >> yeah, >> certainly um you know, showcase of political influence and I think directionally, you know, rates go lower, they have to given the fiscal circumstances the United States government is in. And so I ultimately think that it's important for people to follow this just because what served as a major headwind for the industry in 2021 into 22 with the rate hike cycle I think being the fastest ever uh that in history since the Federal Reserve was created over 100 years ago and has been punishing us ever since. Um, but so this is going to be a tailwind now that that something hasn't even been accounted for where you just have lower rates, more liquidity entering the system. And ultimately, I don't know, does that play into an extended cycle for this industry? Does that break or contribute to breaking the four-year cycle we've seen historically? I'm not sure. But uh there's certainly reasons to believe that it could could impact uh this cycle going forward. >> You know, I think uh it's also important to know his historically where rates have been. uh rates have never really been low until 08 until the 0809 crash. Um and that a direct reaction of that was the creation of Bitcoin. Uh but if you look at rates before that uh they were I think in the 60s and 70s they were as high as 16%. Uh we had rates at about 8 9% in the '90s. Uh and we artificially lowered them uh after the crash to help the economy recover and it did very quickly. But then we've kind of been on this almost like on a roller coaster since where they've gone up, they've come down significantly, now they're going up or uh or they're staying up. And I don't know if if if the right answer is to always be in or or to be in a lower interested environment. I think the market has other ways to adapt beyond just low interest rates. Um and I think people have to normalize uh the rates we are at today. uh not just look for like the penia uh or bring rates down. >> I I I generally agree with that. I think the the caveat that Jackson sort of alluded to is like just from a fiscal perspective and the interest expense on the debt like it's it's we can't have rates here for much longer basically like there's just a a a bakedin reality that we're spending too much on interest expense. And so basically in my mind like they're going to find some reason to lower rates and if it's just because Trump says he wants that that might be like the you know the easiest way but like they they I agree with your general sentiment that like rates can and should be around this level if not higher but it's just not palatable for the government and the fed right now. I can barely uh engage in in these conversations anymore because like the proposition is so insane. Like the just the notion of if we were going to fix like down the street you buying your your sandwich and what the eggs cost or the bread or whatever it was, we would all probably think like you can't fix the cost of any good. That's just not how free markets work. But we accept that we can fix the cost of the money. uh and that and ultimately going up or down causes reflexivity in break in things that break and so uh the market determines the rates if like we're all on gold or bitcoin or whatever it would be like in natural localized markets rates would fluctuate uh because that's just how free markets work and so like the thing that we like just to have the conversation about where the rate should be is is almost like it's not nonsensical because like there's it's worth a discussion but it's just not like nobody even talks about like the notion that we fix rates is an insane proposition in itself because we're fixing the money uh or the cost of the money and that naturally will have second third order effects that you can't actually um account for which is why you shouldn't be able to do it. >> No, they they have actually fantastic models, Michael. They're they're great at pricing everything and uh you know, we should keep the Fed. 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Uh, let's let's move on. Let's talk about something that happened in the lending world and this I think will open up a a more broader discussion about Arch and people who do things the right way. How about that? That's that's a nice thing, isn't it? Um so Michael, I'll hand it over to you. This was something you flagged to the group here. Um and then if you want to share any opening thoughts just on the partnership as well. Yeah. I mean, so this kind of ties directly into the rates issue because I'm not saying that's a product of what this um shot we just brought up, but it's effectively crypto lender Aubra pauses withdrawals as dozens of customers fear their funds are gone. Um this isn't probably won't surprise a lot of folks on this call, but like the Aubra's been a little bit of a you know unscrupulous or gray area. I think they were sued for fraud. They had a settlement in 2024. Um, but what was the most shocking or surprising to me was that it's we're sitting at in a bull market at 120K and this has happened. And so TBD on what the cause is. Um, ultimately that they've halted withdrawals. They sent out a note in July. We'll link to the the the article in the notes. Um, the CEO sent out an email saying that they're paused. Um, but the main point is that, and this is what we'll continue to drive on podcasts and as we write content and information is picking your counterparties, being super vigilant on how people do things. Um, we talked about it on there's no bailouts in Bitcoin. So, if there's a loss of funds, whether it's on a custodial side for just pure spot custody or if there's some nominal yield being offered, um you're putting all of your capital at risk for the best performing asset that's ever existed. And people just somehow forgot about 2022 and the insanity and how many people were burned and how many lives were destroyed. And sadly, we're just going to see it again because going back to the Wild West theme, we're so early in Bitcoin's adoption that people don't know a where the risk is and then which like you don't even know which crypto asset to buy, let alone then once you buy it, where do you park it? So, on that, we were just pulling up the uh the Trust Pilot. If anybody's interested in in, you know, who your counterparties are, you should probably do a little diligence. If you want to find out about Opera uh more, you can check out Trust Pilot. But curious uh Drew and Hamanchu's feedback and thoughts based on that news. Yeah. Um, like you hate to see something like this happen, especially when we went through something like this twoish years ago or in 20 at the end of 2022. I think there's a few things and Michael, you rightfully pointed out one like just the diligence on the counterparty. It's not the company itself, right? That's one piece of it. Where what are they doing and where are they holding your Bitcoin? Like that's a whole other piece that needs to be looked at as well. And so I think some of the there there's two important pieces, right? One is is there rehypothecation or not? And what this like literally means is does that lender move your Bitcoin into somebody else's name? Right? Like typically you're the borrower. You go to like a lending company like Arch, you're transferring Bitcoin. Arch is not transferring that Bitcoin to any other third party. Like it stays in an Arch account, right? Um so there's no rehypothecation. The other is now where is it held, right? Um there's a few different like custody approaches. People self custody, people use qualified custodians that are wellreuted. Um so just making sure you do your diligence on where these underlying assets are. Um and that you feel comfortable with how they're holding it because those are two additional vectors of failure here. And I think the third is also um like you know lenders can have some way of proving it like we segregate assets and we can just share their onchain bit uh you know bitcoin wallet address with with folks and they can look it up 24/7 knowing look nothing else is coming in or out. This is um me knowing that arch isn't rehypothecating. So I think those are a lot of the things I would be wary of if I was a borrower and just make sure that I truly understand what's going on under the hood. Um because yeah, I mean it's unfortunate that we're seeing this story sort of play out again in an industry that's that's had enough of these. >> I think the the Abra story is kind of frustrating in some ways because they went through the last cycle. Um I know they had a $2 million fund. Um but they kind of hopefully learned the mistakes of the other lenders and survived through it. And then to go from there to have this happen now. I know the full reason isn't out yet, but I'm sure it'll come out over the coming days. It's It's a bit frustrating just seeing that happen today with someone who's not the new kid on the block who's like been around for a while and has a decent amount of um of assets under management. So, yeah, we'll see what happens. Um unfortunately, these bankruptcies, if there is a bankruptcy to happen, uh they take two plus years and people get paid in kind. Um not every time. Sometimes it's a dollar amount of what the price was at that time. So, we'll see what happens. Um, it's it's annoying, but also it it really should wake people up as we mentioned to verifying who your counterparties are, who their counterparties are, what risk controls do they have in place, and how can you be sure that you're assets going to be safe. >> Yeah. The last thing I'll touch on here, um, Michael, I know you you referenced it, which is like, oh, we're only at like 120 and this is happening again. You'll you'll realize like the need for borrowing against these assets actually like just continues to increase as price appreciates, right? Because people have more and more of a a wealth base in Bitcoin. Um, but they need to live like their day-to-day lives. And so, you'll see this continue to happen as Bitcoin price increases. And I think um you know lending sort of needs to mature along the way and and so that's one thing to to just understand is as price continues to run up more and more people will need this solution. So it's really important to uh get material like this out there so people can understand what to even look out for and and how you go and start diligencing these types of products. >> And I hope we're not looking at this from just a cycle perspective. the last lenders lasted one or two cycles uh but they did things that were ron that made sure that when it was a very exuberant cycle like those risk controls failed um I think the goal now when we're building financial services is to go for a lifetime and beyond not just for a cycle because I think we're going away from Bitcoin being just a secular asset that loses interest from retail and from a lot of uh people at the end of the cycle now we're seeing long-term holders very significantly buy in and they and and and as a result retail will also need long-term services here. So we shouldn't be restaurant looking for additional yield or uh just slightly lower rate just for like the year or two when you can offer that. Uh I think we should be looking at long-term approaches here and that's what we're doing. It's really well said because that's really what drew us to the partnership and what was refreshing and shouldn't be but is is a anomaly basically in the space is you guys like this is a reputation game at the end of the day. Your reputation's tied to delivering good service but also everyone building educating and explaining these things and then ultimately living like lasting. And so that's historically been the game in Bitcoin is just um live through these cycles whether it's the volatility and the layoffs or also not getting caught in the counterparty risk. Um the thing with Aubra looks like you know this whole notion of complexity is the enemy of security. They're doing a bunch of things and ultimately offering yield and other products and we saw one of the hedge funds that was a liquid fund kind of like down 90% or whatever. like a lot of altcoins haven't performed and so if they're uh participating in these other active strategies with individuals Bitcoin promising a yield that's probably part of where have got that has them in a hole and not be able to make their obligations. Um, but one thing to go a little bit in the weeds, uh, then we could zoom back out on on lending, but is on the like securization of lending versus like the the pure eyes on the underlying collateral because I think there's a lot of competitors and people in the space that we'll say there's no reapication, but there's a lot of things that happen under the hood that are above my pay grade, but you can help us in understanding where they'll, you know, have the lending books and then they'll sell it to somebody else. And if that counterparty ends up in a hole that they sold it to, you uh assets are potentially um uh at risk. And a good example or a cousin of this is in like the IRA space we saw in Bitcoin with like Prime Trust and Fortress where they had the trust company, they were qualified custodians, but because they ended up with holes on their balance sheet, a lot of these like assets that were titled um at the trust company but maybe sat in somewhere else's custody all had to be frozen because there was a hole in the balance sheet. They end up in receiverhip. And I think a lot of this is just so in the weeds, but also important for the the opposite of complexity and really just simplified versions of non-rehypothecated audible and onchain. So existing uh investors of these products that are allocating millions of dollars at risk for their loans feel comfortable um who their counterparty is. >> Yeah, I can speak to I think you should speak to to the securitization piece. So I think besides just vanilla reapocation which is lending your bitcoin out there's a number of other strategies that some lenders today adopt which I think people should look out for is one is sure they're saying they're not reapocating but they're giving the bitcoin away to someone else who is typically the capital partner and the capital comes from them but they're giving it away fully. It's not in a tri party or multi- institution. It's just completely with them. That is also in effect a publication because if something happens to the capital partner then you have no control as a lender and what happens to uh to the collateral. The other piece is if a lender takes custody and then is using that as collateral to trades uh somewhere else in like an SM account or something that also is reapication where sure you're not moving the Bitcoin out but it is being used to affect something else some other financial service. So there is a lot of risk introduced there as well. Um and I think we still haven't fully figured out how to mitigate that risk. Uh so it's best not to do it at this point. >> Can I say one thing before Drew chimes in because this is really uh felt viscerally cuz I lived through it. Um operating at Unchain competing against BlockFi all day long back in the day when interest rates were lower and BlockFi remember specifically was 7.9% uh dollar loans against BTC. Unchained were 9.9, but Unchained models merried similar to Arches and that these assets were onchain, verifiable, titled to the individual. Um, and so we would explain that uh risk adjusted uh or nominally it's a little bit more expensive. Risk adjusted, it's much cheaper because of what you're putting at risk. And a lot of people like once they heard it and understood it, they would u make the right decision. But then a lot of people lost their their money because it just gets easy or they're not educated. And so I think that's a core part of what you're describing is when you see loans that are definitely in the lower single digits, you should really raise a red flag. But there's a reason where the cost of capital may vary by a few percentage points and you're ultimately paying for that risk. It's the same thing we think about when people pay for our custody. It's like maybe it's a little more expensive nomally, but risk adjusted. your assets are secure onchain verifiable and you're not privy to your house burning down or somebody coming to take your kid for your BTC versus the traditional way um that we operate >> if you're if you're a customer if you think about it this way right everybody has access to the same capital markets these things are not like in the shadows the way you you use them is what defines the rate and I think if you're using them in a conservative manner then yeah you do have a slightly higher cost but as a result there's more security and if you're using them in a more risk manner you can get that but you have less security on what happens in it's like when you go rent a car you can get the minimum liable insurance which is like if something happens you're on the hook for a lot or you can get the good insurance and then you can scratch the car it's fine like you'll you'll still be made uh like you won't have to pay much uh if if something happens >> yeah I also think it's a mindset shift Michael like what you talked about right this is an asset like what annual tagger over 50%. So does it like you know paying the extra 1 or 2% on interest rate or paying the extra bips on custody um does it really matter in the long term of it like you should be willing to pay up for that security and that peace of mind in general because the asset is appreciating so much faster than any of these costs um that it more than makes up for it just being there and knowing that you can always access it. So that's that's like roughly the frame of mind that that I would also position that on which is look like part of that cost you can like absorb anyways just because Bitcoin's appreciating at such a um good pace. But the way like touching back on on uh building on what Himachi was talking about with okay how do like lenders finance themselves right like we talked about just pure rehypothecation moving the bitcoin into some other lenders you know control they give you the dollars you lend it out to your end clients. What we've done is is sort of different than than most others in the space is raised the CLLO. Now, um this stands for collateralized loan obligation. It's more so a fancy way of saying we've raised capital from a variety of large financial institutions um that allow us to go and then lend out. And the structure we've done, the reason we've done it in that structure is one, we do not ever need to rehypotheate. the Bitcoin stays with us at our custodian partner Anchorage Digital. Um and as a result there isn't a fail safe in the system and the the the sort of dollars that we raise are also fixed in term and so that's another thing that gets a lot of lenders into trouble which is you know people are doing one year two-year term loans but the money that they have uh raised on their side is maybe retail deposits which are um you know instant liquidity and you see a lot of companies with these earn products and that's sort of what they're doing right they're they're allowing individuals to put up dollars to fund a loan book. The problem is you have loans that you've given out for a year and your retail dollars can be redeemed, call it, you know, in a week or two week and it creates that everything is fine in a bull market, but really the second like things start to move downwards a little bit, that's when you get these um massive companies that go upside down. And so that's really like how we've thought about it. There's a lot more that we don't need to go into the weeds of that Arch has done behind the scenes. things like backup servicesers, you know, really mimicking traditional finance to make sure our clients are always protected in all sorts of scenarios. U but that's sort of how we think about it. >> Yeah. Do you all think um yeah, the duration thing is is a huge deal in matching that duration. How do you guys think about um like the compression of cost of capital? Because I think this is an important thing to talk about that we're in a different era, but we're still not fully there yet. So all of this capital has been private capital and a lot of our clients or clients I'm sure you guys see a lot of has the traditional heristic of the inorganic cost of capital which is like fed funds rate and they're looking at a heliloc or their home or home loan uh or for their car versus what a private company's offering from Bitcoin back loans and they think they're getting scammed. In reality is it's the opposite. It's that private capital still thinks this asset class is super risky. Um, I'm just curious like if you guys can speak to that and then also where do you see that if any coming down as more banking institutions come into where where banks obviously have access to the Fed fund you the Fed window and can get lower cost. Um, is that like on the shorter or middle term horizon? >> Yeah. So I think two things. One is I I don't know Brian or or Jackson if you have the ability to put this in the the call the the notes here but Arch and HR put out a good piece about like why rates are where they are a while ago and I'd encourage people to read through that but essentially yeah Michael you you you put it right right like these are dollar denominated low. So the base rate you could ever have is the Fed funds rate right because otherwise people can just go and give it to the government and get that return. So now everyone else is a spread on top. And so right now the call it it's between four and a quarter and 4 1/2%. Mortgages run you maybe like between 7 to eight depending on the type of property, who you are, etc. Um and you would think like naturally everyone in this call is like look bit Bitcoin is pristine collateral, right? It's better than real estate. It trades 24/7. You have like custody of it. You don't have to go evict someone from their home to take over, etc. So it should be like somewhere more in that line or maybe even less. But why is it slightly above? I think it's for that exact reason. One, the that like arbitrage still exists of people perceiving Bitcoin's volatility and risk higher than what it truly is. And second, the lowest pockets of capital, like everyone lending in this space to date is a non-bank lender. The lowest pockets of capital are banks, right? that can access directly federal funds cost or your insurance pockets of money, your pension funds, things of that sort. And u I think it's a matter of time before they start to understand these products and try to participate. And the way that we envision them participating because we're having these conversations on our side is actually they just come to Arch and say, "Look, here is a pool of money for you guys to go lend out because these banks and institutions don't want to be in the business of managing, you know, a couple thousand loans, 247 management. You know, it's a different world and a ball game doing client services for all of these folks." And so that's at least how we've been seeing it. Um and the conversations so far have been very receptive. Uh and as that happens, costs will start to come down more in line to where we all expect it to be. >> And that's kind of why we raised our structure um our Seattle structure where it's trunched. So there's different seniorities just like you would in a traditional uh debt structure and the banks come in typically at a higher seniority and they're providing outside capital there where as a result the whole book is now at a cheaper rate. We'll see at least for us and we're seeing with other lenders too rates come down over the course of the year and we'll definitely get to some in the neighborhood of call it um where mortgages are today I want to say by next year. >> Could you guys speak to a little bit more just in terms of you know how you think about so you talked about rehypothecation and why investors need to be wary of that and how to think about it from a riskmanagement perspective. Could you also talk about bankruptcy remote and and what that means from a custodial perspective? Um anecdotally because I'm speaking with clients frequently a lot of people appreciate the fact that a non-rehypothecated collateral b onchain segregated wallet which you can view 24/7 even external the arch platform and then the third would be bankruptcy remote and insured. So could you speak to that last component as well as it relates to just managing collateral? Yeah. So I think like on the bankruptcy remoteness, right, and and Johnson, correct me if I'm wrong, there's two pieces here, but one is like where the actual assets are custodied. Um, so there's a variety of different custodians out there, but one class of them is what's known as a qualified custodian, and that's that's the class Arch uses as well, specifically Anchorage. Now, they're a federally chartered bank, uh, the first one to be able to to do this in custody crypto, and yeah, as just said, the only one. Um all of these assets are held bankruptcy remote from Anchorage. So what that means is should anything happen to Anchorage Digital the parent company these assets Bitcoin custody there everything is held separately and can be accessed as as like business as normal. Um, and so that that's one that's really important because if you use another class of custodian or maybe you know you sell you you're holding it just as yourself like you're you as a business are self-custodying these that is like a risk that gets exposed and and and is one that should be looked out for. The second is okay then what happens if the underlying lender themselves goes bankrupt right um here you have a few different protections one is like non-rehypothecation ensures like those assets will be there um but then second like arch goes above and beyond and I I don't know if there's another lender in the space to my knowledge that does this but we actually have contracted backup serer firms and so these are firms that will step in and continue to absorb your monthly loan payments and will process process the return of Bitcoin for you. And so that's like traditional to if your mortgage lender goes under or someone else, someone, you know, another company just steps in and says, "Look, like you just keep making the payments to me, everything will be fine." And so I think that is something that uh you know, we we've sort of innovated in this space. >> Yeah, they're all critical components. um without putting you guys on the spot, you're happy to speak to it, but you know, we've had like ETF providers uh on the podcast and afterwards they say multi-institution is bulletproof, but it melts brains. And so there's a notion of what you guys are describing, but like a peak behind the scenes for anybody who's listening because we hear the interest in uh Arch Loans on multi-institution. There's a lot of complexity and work that has to be done to get capital partners for vi u uh comfortable all the way down to bankruptcy remote and the processes around it. But um that's just a core component that goes into it. You can't just like roll out a lending product and just you kind of willy-nill it to do it the way that Arch has done it. But it's definitely on the radar and something that we hear a lot of folks ask for and that we're working on. >> For sure. >> Yeah, absolutely. Something that we've been having conversations with, you know, ever since we first partnered and it's something that I think we've made good progress till date and have uh some more work to do before uh we're able to really present this out there. >> Yeah. I think um that that key that you guys launched that was really makes a lot of sense after this discussion it made previous but maybe for listeners is the vertical integration is really important uh around the comfortability with capital partners and everything's public that you guys referenced in Galaxy and the liquidity partnership in Anchorage that makes everyone comfortable up and down the stack on where the Bitcoin sits and where the dollars are coming in. So when you start to segregate that and have different custodial relationships, now you have to get the capital partner comfortable or we have to get the capital partner comfortable. You have to get the client there's and then the mechanics of title and where the Bitcoin sits and who owns it. Um so there's a lot of work to do it the right way. But it's um it'll be interesting to see to Himachi's point earlier about um there's kind of like an equil equilibrium in the private market that doesn't get talked about on once somebody destit loans. it to a certain point this the logical thing is just to buy the Bitcoin. So it can only hit a certain part or they're just like I'll just go buy the Bitcoin and hold it. So that's um a component that I think will if we can execute on the on-ramp side and the vision of like the security and segregation of those assets theoretically that should also help in reducing the cost of capital because there is some priced in meta of all the losses before and that like if you can have a 100% hit rate on never having a loss and eyes and these different like uh permissions and processes with different custodians. I think about insurance in a similar format where insurance I think across the industry is only like 250 million because of the omnibus way that people structure it. Yeah. But if it was segregated and then you had multiple institutions that were already underwritten by like Lloyds, you can theoretically create larger policies because there's more larger insurance um pools willing to step in. uh and there's not that like systemic risk of a subc custodian going down with billions of dollars and because gold I think runs into the same issue now where the price of gold has risen so now nobody will insure these large places where it's stored. Um and so yeah, it's just a fascinating kind of like way the market structure will have to develop around the the nominal dollar amounts that are continue to increase. Yeah, we're working on a a much more enhanced insurance product uh which should be coming out soon where everything is fully insured. But yeah, to your point, it only works uh in a segregated manner. if everything is omnibus uh then it's it's just too large to protect >> which is wild because that's like the most simple version of um I think about it as like it came out there was a study only like less than 20% of people know there's only 21 million bitcoin and I think that similarly majority of tradi has no idea about a segregated wallet or an onchain and like uh address and they think of it as insanely complex and also it's an operational burden and that's why you see even world class firms like Fidelity just literally park all the clients assets in there. Uh and so it's just kind of a wild we're that early that people don't even uh u delineate between the the two and the risk associated with public equities the way assets are held are very different right uh in Bitcoin I mean we've spent probably half of this conversation talking about this but it's because it's so important on how it's held and in traffic you don't think but it's abstracted away and worse comes to worse there's a back stop and you'll get bailed out and there's is like the government backing you here. You don't have that. So, how you store assets is extremely extremely important. >> Anything else uh that I might have missed? Was there some other topics you want to get through? >> I think we covered a lot, but I was curious, Mu and Drew, anything you guys want to share uh notable on the business, things coming out, anything worth uh any calls to actions for folks to to reach out or leverage the services? >> Um yeah, I mean uh you know, lending's been going great. We've had a good partnership. Our own books been going really well. Uh we've partnered with uh someone called Mark Moss to launch a series of more nuanced lending products. So you have like the vanilla lending option. Come get a loan. But there's a lot of people that have very specific use cases. You know, whether you're retiring or you want to depreciate taxes or you want to invest in real estate or whatever else that have more specific needs. So our goal now is to launch more specific tailored lending products for them. So, we've launched one recently uh where it's called Bitcoin perpetual income. It basically gives you taxfree income against your Bitcoin every year. Um, and under the hood, it's a it's a more complicated way of doing a series of loans, but we manage all that for you. You're say 70 75 years old, you're retired, you're just getting X amount of taxree income every year in perpetuity. Uh, and we price in the the expected appreciation of Bitcoin draw downs, etc. on that. So you don't have to worry about it. So that's one. Another one we're launching soon is so this actually is quite topical. So the big beautiful bills that just came out, it's so big that no one actually knows what's in it. But one of the points that's in it is that you can now depreciate uh you can do 100% bonus depreciation against your income. So if you buy a qualifying capital asset, you can depreciate the full amount against your income. So if you say you've made 500k, you buy something or you owe tax on 500k, you buy something that's qualifying for 500k and you can depreciate that. So we're launching a product in that realm that lets you leverage a bitcoin to do that boss appreciation. So you get immediate 40% benefit on the taxes um and then also the appreciation of the asset itself uh that's coming from there. And we'll definitely be launching more in this realm um on lending. We'll continue to innovate. I know we're talking about some stuff on MIC which we just spoke about. There's more coming um on our own uh our own insurance piece. And then there's also stuff coming down the uh pipe on like reducing liquidation risk, things like that that just make if if you're a client, the goal is to make you think about this as little as possible. If you have a loan out, you shouldn't be thinking about it all the time. You should just have that as a set it and forget it thing. and our goal is to get to that in every way possible over the coming months and years. >> One other thing I would call out as well um that we might have missed is it's incredibly easy to take a loan out with Arch. I've had a lot of clients that have done this and they've all been shocked by how easy, simple, straightforward the process is from configuring the loan to KYC to actually getting dispersement of liquidity which in many cases for several of my clients has been same day because you can do USDC, you could also do USD. So, I just think it's a, you know, really testament to a fantastic product that you guys have built. Um, had a lot of great feedback. I'll hopefully do a better job of of sharing that with you uh from from our clients. But I I would just say on behalf of the people that at least I'm working with, it's really appreciated how you two and the firm have taken a conservative approach to building a business. I forget which one of you mentioned, but you know, thinking about a lifetime in terms of reputation and and business building and not just trying to get through the next cycle. So it certainly comes through with the client experience and and the product you built. So really appreciate that. >> Yeah, we appreciate that. And you know, I think we've had a great partnership and and looking forward to the the innovation that we do together as well. >> Yeah. One thing just to to call out on Jackson's note is u being around the space for a while like the leverage can kill you, but conservative leverage can really like help you thrive because we all have a dollar denominated expenses whether somebody's getting engaged putting down payment on some property and it really if you can manage that in a conservative way um when you look at inflation coupled with traditional uh cost of capital it's actually you know that's how I think about when when people complain about the interest rates regardless of where they're at for for loans. It's like, well, when you look at Bitcoin's Kager and you look at what inflation is and then you look at the cost of just traditional loan, it's actually much cheaper um than selling your Bitcoin, especially when cap gains comes in, you just have to like be very thoughtful in how you do it and make sure you have cash flow coming in and all or a large enough stack that you can um leverage for that capital to pay pay down that. But Bitcoin's keer takes care of the rest if you can just make sure you stay alive. Not financial advice, just more of like how to think about it if you have to live in a your day-to-day while you're trying to preserve your stack into the future. >> The whole idea behind uh so virtual income product, the whole idea behind that is using Bitcoin's keer to not have to pay back the loans, use the keer to like, you know, as it grows, you can pay a little bit off, but you don't have to worry about paying off your loan at the end of the year, coming back, paying off another one. Uh, and I think um with a lot of Bitcoin loan products, they're one or two year term and then that's it, right? Like with us, people keep going much longer. So they keep rolling over their loans without paying back principle. So you really can't borrow for life. It's the same thing in the private banking world. You have this very popular notion of buy or die. When you accumulated assets, you never sell your assets. You just you buy them, you borrow against them, and then one day everybody dies. Yeah, >> hopefully not soon though. >> But we'll use this as a reminder. Somebody made it to the very end. Brian and Jackson, we should share with the guys um the dock that Glenn is putting together for some of the dynasty trust planning because we're going to be rolling out some interesting stuff around uh asset protection trust. And then there's interesting modeling into kind of similar to yours uh where you're referencing the perpetuity of being able to have those assets parked given the seven or 14 million uh gift tax exemption but then lending against them in that way and then offsetting it. It's a little bit above my pay grade, but we're putting out a piece on this in a few weeks and Arch would be the natural place to take those loans out. So, we should probably get your guys feedback on it. Um so, we'll send that over. >> Yeah, absolutely. Please do. Well, how about a like and a comment for Drew and Hamanchu. For for people who actually don't rehypothecate your collateral, please show show them some love so we can have them back on the show. Gentlemen, really appreciate the partnership. Thanks for coming on today. It was a nice conversation and um you guys are doing some great work. >> Thank you. Absolutely. Thanks for having us. >> Thanks, fellas. >> Thanks, guys. >> Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that Onra Media is forformational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com/cont to schedule a consultation with one of our private client adviserss.