{ "episodeId": "SLP545", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "zac_townsend": { "name": "Zac Townsend", "role": "guest", "tag": "ZAC" } }, "segments": [ { "speaker": "stephan", "time": "00:00", "start": 0.46, "text": "Hi everyone, you're watching Stephan Livera podcast brought to you by Swann dot com, a leading Bitcoin financial services brand. Now, today we're talking about Bitcoin life insurance. So you might, you might have seen my recent episode with Tour de Meister where this came up, and there, turns, it turns out there is a company doing something like this, and so we speak to the CEO and co-founder of Meanwhile, his name is Zac Townsend, and we're talking about this idea of Bitcoin life insurance, what does it look like when it's all priced in and done in Bitcoin? Terms. Now we talk about the model, term or whole life. Is this the next Celsius or BlockFi? What are some of the risks there? Does it work under a deflationary environment as well as the private credit fund that the team are doing? So here's my chart with Zac Townsend." }, { "speaker": "stephan", "time": "00:59", "start": 58.53, "text": "Zac, welcome to the show." }, { "speaker": "zac_townsend", "time": "01:01", "start": 60.65, "text": "Happy to be here." }, { "speaker": "stephan", "time": "01:02", "start": 62.47, "text": "So Zach, I know you're building out, this interesting idea of Bitcoin life insurance. so, interested to get into this and hear a little bit more about the model, how it's gonna work, and of course, get into what I think some of the criticisms will be, but I think it'll be interesting to hear from your perspective, you know, how you got into this and how you, you know, you got this idea to set up a Bitcoin life insurance company." }, { "speaker": "zac_townsend", "time": "01:29", "start": 88.84, "text": "Oh, amazing. Yeah, so I've been, I'm not like an OG Bitcoiner, but, I actually had this first company called Standard Treasury, backed by like Anderson Horowitz and Index Ventures, that I sold, in 2015. And during that sale process, we actually had an offer, they were all like Acquire, Acquire Plus offers, and one of those offers was from Coinbase. So I like interviewed at Coinbase and I actually got my first Bitcoin like from Brian Armstrong, him showing me how Coinbase worked. So, that's when I got interested in Bitcoin. And then I did a bunch of like other things, but in the background, I was like, you know, had a weekly buy on Bitcoin, I really believed in Bitcoin, and for us, we- Really think that it's going to be, the heart of a long-term global financial system. So we look out ten, twenty, thirty, forty years, and we think there's gonna be a robust Bitcoin economy. and that economy has all sorts of special features, which I'm gonna tell you about, which is that like, there's no government behind it, and it's decentralized, and you always have the option of self-governance and self-sovereignty. But we, sat down at the beginning of, running this business, and we actually just made a list All the financial institutions we think are gonna need to exist in that economy. So like they're gonna need to be an exchange, there's gonna need to be an asset manager, there's gonna need to be a bank, there's gonna need to be an insurance company. And, we, we're sort of thinking about all those, and we just got really fascinated by life insurance, both, what it does for users and why it's important for, people to have life insurance. And then the other hand, we think that life insurance like plays These are really critical role in economies. Like many of the mortgages in the country are owned by life insurance companies, many of the buildings, the infrastructure. 'cause what's special about life insurance companies is that you make very, very long promises, but that also means that you can make really, really long investments, and we think that's something different and new in Bitcoin, you know, instead of worrying about the price of Bitcoin today or this month or this year, you know, we should be thinking a few halvings ahead actually, and, You know, that's kind of thinking you can do, if you're a life insurance company." }, { "speaker": "stephan", "time": "03:51", "start": 231.22, "text": "Yeah, fascinating. And I think there are some, commentators in the industry, people like Tor DimiĊĦa, who I, I understand you know him also, that, he's been talking about this idea of Bitcoin-based life insurance for years. And so I thought it was interesting that I sort of came across your profile and came across what you're doing, because this is like some-- in some ways, it's an actualization of that idea. and so I guess Insurance model. Like just at a very basic level, could you explain a little bit about this? And, you know, are you doing term life insurance or, whole or permanent life insurance? And just a little bit around the model, if you could explain that for us." }, { "speaker": "zac_townsend", "time": "04:29", "start": 268.84, "text": "Yeah, and what are those things? yeah, so, there's actually a lot to unpack there. So let's start with, what life insurance is about, right? So on one level, you can think, we are all going to eventually die. I hope I'm not the bearer of bad news for anyone, but we don't actually know when we're gonna die. so at heart, life insurance is about, like all insurance really is, like a bunch of people get together and they, they say, \"Well, maybe we should all pay, you know, a thousand of us should pay a dollar a month, and if, the one poor person who die-- the one, unlucky person who dies, they'll get a thousand dollars.\" Right. So the, the core notion of, all insurance And life insurance is about protection, and in, in the case of life insurance, protection, in case you die. so actually, I just wanna start there and say like, these are like relatively core, like financial needs. Life insurance, particularly burial insurance, is like one of the oldest financial products in the world. Like, Venetian sailors had life insurance, you know, it's hundreds and hundreds of years old. and it's pretty, it's pretty fundamental, right? Like, life insurance is about like, what happens to my family or Like just the money I have if I, die before I'm supposed to. And an annuity, which is like the flip side of life insurance, is actually like what happens to me if I live longer than I'm supposed to. I don't have the savings, like how do I, you know, there's sort of like, you have your own, what's called longevity risk. so on one hand, that's like what it's all about for users. How life insurance companies actually work, is you, you sort of are like helping facilitate that, that shared risk pool. What's special about our company actually is we have a, subsidiary in Bermuda. Bermuda, not the Bahamas, I just wanna be clear, sometimes these places are confused with each other. Bermuda is like the insurance capital of the world. You go to Bermuda, seventy percent of their economy is financial services, it's all about insurance. you walk around, everyone you meet's an actuary, a lawyer, an accountant. it doesn't actually have that big a tourist business, like this is what they do, is they do insurance. And there's a fun whole story of why that is, but, but anyway, that's what Bermuda's about. It" }, { "speaker": "zac_townsend", "time": "06:49", "start": 409.13, "text": "So we have a actual insurance company there, so we are like regulated by the Bermuda Monetary Authority. I, I joke that I have all the problems of an insurance company and all the problems of a Bitcoin company, you know? I'm, I have to deal with KYC and AML and enterprise risk management, and I have an independent board and, all this stuff. But we have a, a real insurance company in Bermuda, and what's unique about that insurance company Is it is entirely denominated in Bitcoin. So it takes all its premiums in Bitcoin, it pays all its claims in Bitcoin, and then it does like all the insurance mumbo jumbo in between in Bitcoin. So we like calculate our reserves, we do our regulatory filings, our capital insolvency, our financials, those are all in Bitcoin. And what's nice about that is that, and this is like a, a thing that lots of people talk about when they talk about Bitcoin life insurance, is we're, we do everything we can to- To avoid like currency risk or exchange risk, and by having all of our a-insurance assets and all of our insurance liabilities entirely in Bitcoin, we don't have to worry about the price of Bitcoin. So in the two years I've run this company, you know, the price of Bitcoin's been at Or I'll actually like to say the exchange rate of Bitcoin has been at sixty thousand, sixteen thousand, you know, now it's, you know, approximately forty, and that doesn't matter, like our, the promises we've made to our customers and the balance sheet that we have has just stayed the same so that's what the company is, is it's a normal, well regulated, risk managed insurance company, just denominated Bitcoin. Let me answer your The last question, which is like, \"What is our product?\" so we have started with whole life, actually limited pay whole life, and, you asked about term and whole life. So the thing about whole life is it, it's very well named. It lasts your whole life. So because, Back to what I said, you will eventually die. There will eventually be a payout. So, it's much more, we frame it as, it's a, it's a product to huddle. You know, it's about intergenerational wealth transfer, it's about protect, intergenerational protection. you pay the premiums, there will eventually be a payout no matter what, because eventually you will die or one will die. And the way our product works is, it's limited pay, so either for US tax reasons, you pay in ten equal installments. So imagine a ten Bitcoin policy, you'd pay one Bitcoin a year for ten years and then we make a, a guaranteed promise of what the payout, so that would look like, it depends how old you are and what your sex is and whether you smoke or not and how healthy you are, but like It might be ten into twenty or ten into fifteen. So you put ten in, we promise you fifteen. And then for, some people don't want to pay overtime, they wanna pay upfront. We have an option to do that, where you sort of- Can pay us upfront and then we pay your ten premiums, but to comply with the US tax rules, you have to, you can't, you have to like spread out the payments." }, { "speaker": "stephan", "time": "10:06", "start": 605.69, "text": "I see. Okay. So yeah, just in summary, we are a" }, { "speaker": "zac_townsend", "time": "10:08", "start": 608.03, "text": "life insurance company, we're denominated in Bitcoin, we're in whole life." }, { "speaker": "stephan", "time": "10:12", "start": 611.79, "text": "Yeah, gotcha. And so just for people who, you know, maybe they're not as familiar, there's kind of the, the, as you mentioned, there's these two types or two main types. There's term, term, and that, They are assigned a certain amount of premium that they are paying, and the company is then obviously collecting premiums from the customers and then investing some of the, you know, in this case, you know, the, that money, and at the, you know, if you die in that period, they're paying you out. But in this case, it's a whole life period, and so there's more of this concept of cash value or reserves, where, you know, the person is Contributing into this thing for their whole lives, and they now have a-- there's like a cash value to the insurance policy" }, { "speaker": "zac_townsend", "time": "10:57", "start": 657.33, "text": "in my case, limited right? Yeah." }, { "speaker": "stephan", "time": "10:59", "start": 659.09, "text": "Yeah. And so could you ex-explain a little bit about the cash value part? Yeah." }, { "speaker": "zac_townsend", "time": "11:03", "start": 662.91, "text": "Yeah. So you're completely right on term life. Eventually, we'll probably do a term life product, but, what term life is about is it's about protection over a certain term, so ten years, twenty years, fifteen years, and, you know, the ratio tends to be very high, right, unlikely to die in the next ten years. In whole life, yes, it lasts your entire whole, your whole life, and there is, we don't call it a cash value because, Although we think of Bitcoin as cash, you know, various regulatory authorities don't, so we, we just call it the surrender value. but you could think of that as like a savings account inside the policy. So you pay one- Bitcoin, your first year, there's a certain, account value. Your, in your second year, you paid, two Bitcoin, your-- there's an account value, and then that account value is accumulating over time. So after your ten years, you know, it's going above the ten you paid, and then eventually it, it sort of amortizes up to, to the amount Of your, the face amount, so like the, the death benefit, the payout. and I guess this gets to like, what are the benefits of whole life? And this, I'll, I'll tell you the three things you get from whole life, and this is true of all whole life, it's just our whole life is nominated Bitcoin. So the first thing is, you get protection. So from the moment you set, you buy, you buy and you sign the contract, you pay your first premium, if you died the next day, you get the full death benefit, right? So" }, { "speaker": "zac_townsend", "time": "12:40", "start": 759.54, "text": "but over that time for the rest of your life, whenever you die, when if you were to die, your beneficiaries would, would get that death benefit of, I'll just call it fifteen, so I have something to say. The second is, you're absolutely right, the, your insurance company, and we can talk about this, 'cause this is exactly the most uncomfortable part of it, the insur- your insurance company is making investments with the money you give them to, like, make that promise, right? To churn ten into fifteen. We make investments, like our investment isn't Bitcoin, everything's in Bitcoin, and then we make investments with that. and even if you thought you could get the exact same returns we could in getting Bitcoin yield, we would-- the promise we're making you is higher because we're compounding tax-free. Normally you would owe interest income if you like get yield on your Bitcoin, every year, so that's like, you know, short-term capital gains income, that's what in-interest income is, is, It's like income tax, but, you know, we're-- that ten into fifteen is, is more than you get on your own because, you know, every year we're not having to pay the, the yearly taxes. And then the third thing, and again, this is just true of all whole life policies. Is you can take a, a policy loan, a tax-free policy loan against your surrender value. So what does that mean in practice for, our Bitcoin-denominated policy? What it means is, let's imagine you're in year five, ten, fifteen, the exchange rate of Bitcoin has gone from forty thousand to four hundred thousand, or to four million. I mean, I think, I think many people listen to this podcast, and us included, like we think the price of Bitcoin over the long term, not, was gonna go up. So, then And if you needed liquidity, you could, let's again, say you have a ten Bitcoin policy where in year ten, you know, your surrender value is some amount, I'll just say it's approximately ten, 'cause it's like near the premiums that you paid. So you could borrow a Bitcoin back from us, and it would be like you were getting a new basis Bitcoin. So, you wouldn't owe any capital gains if you wanted to liquidate that Bitcoin between forty thousand and four million. So in that way, we talk about the product, most importantly as again, like a huddle product, it's not a product for your whole stack, it's a product for like a portion of your stack, again, 'cause there's, we'll talk about custody, hypothecation, investment, so there are all these things that make Bitcoiners uncomfortable, but you get these, these, these intergenerational huddle benefits, so you get the protection Protection, you get the huddle, and then if you needed liquidity, you ever had to sell a Bitcoin 'cause you wanna buy a house or whatever, it's a great vehicle to have done that in, because you wouldn't pay capital gains from whenever you, you put into the policy to whenever you get out." }, { "speaker": "stephan", "time": "15:41", "start": 941.18, "text": "Right. And so because you would be not borrowing at the, okay, let's say today, just to use those numbers you said as an example, it's a ten Bitcoin policy and the price now today, let's just for easy numbers, let's say it's four hundred, And let's say in a few years' time it's four hundred thousand, you now get to borrow at the value, at four hundred thousand, not at forty thousand, and you're not paying a capital gain on that Three hundred and sixty thousand worth of appreciation in this example, right? Let's say in the future you're borrowing one Bitcoin worth to buy a house, and it's a four hundred thousand dollar house, just to make the numbers easy, right? So that's kind of, that's roughly the example we're, we're working with in this example, right? Yeah, you will have" }, { "speaker": "zac_townsend", "time": "16:20", "start": 980.38, "text": "been able to liquidate one of your bitcoins without paying any capital gains. Thanks." }, { "speaker": "stephan", "time": "16:26", "start": 985.61, "text": "Gotcha. And so that's one aspect where-- so I guess the trade-off for a listener thinking about term life versus whole or permanent life is you're paying more, but you're getting this- Long-standing asset in a sense, you know, at the, at the end of it, right? Whereas I think historically, you might have heard different financial advisors and planners and people talking about this is terminology, they say, \"Uh, buy term and in re- and invest the rest, because term is cheaper,\" right? That's like a typical thing you might have heard in the life insurance world people might say. yeah, I will say there's this whole countervailing" }, { "speaker": "zac_townsend", "time": "17:00", "start": 1020.37, "text": "narrative of, of be your own bank, which is what you can do with whole life. we, we don I, I think fundamentally what made us uncomfortable about starting with term life is, you're basically telling people, \"I, I, look, I own some term life, you know, 'cause, like, I'm married, I have two kids, if I drop dead, I have a term life policy equal to my mortgage, so then my wife wouldn't, would just like get our house, right? That, that would be, I guess, the, the benefit of me dying.\" but so I do think that term life has a role, but I think as Things that it's just uncomfortable about term life is you pay for ten years and if you live, then you've paid and you haven't gotten any protection. And we're primarily, like, our customers are mostly Bitcoiners, right? So they're mostly like folks in their thirties, they're, they like bought Bitcoin in their twenties, they're now in their thirties. A lot of them are getting married, a lot of them are having kids. That's like our core demographic, it's like a thirty-five year old male Bitcoiner. You know, engaged to, has one or two kids, and I think to sit that person down and say like, \"Um, hey, you have a lot of Bitcoin, so you're, you're, y-you probably are in a decent financial position. The most important thing for you is to buy this policy that you'll probably won't use.\" And I think that's just a weird customer value prop. Whereas I think what's nice about Whole Life is you will absolutely get a payout, it like absolutely does have these tax benefits, so you- You're, you're, you're still getting the protection, but you're also, you know, getting this compounding and it's more like a savings product and all of that. So that, that's why we started there. Eventually we'll, our, like our, our long-term ambition Is a due term life and accidental death and fixed deferred annuities and, and, you know, I talk about there are fifty-seven countries in the world with inflation rates over ten percent. we feel that if you're in Argentina, and you're middle class or above, you should one hundred percent buy a life insurance policy in Bitcoin, not Argentinian pesos. So, although right now what we are is a Bermuda-based life insurer that does whole life primarily for- Crypto wit, like people who have like pretty big sacks, you know, our long-term ambition is to be the world's largest life insurance company, and we think that Bitcoin is, the basis on which to do that, for- People all over the world of policies of all different sizes and, and all different types of products. But start--" }, { "speaker": "stephan", "time": "19:42", "start": 1182.0, "text": "but for now, starting with the product in America only, right?" }, { "speaker": "zac_townsend", "time": "19:46", "start": 1186.35, "text": "yeah, our-- most of our customers right now are Americans, but we, we are slowly expanding our ability to sell to other-- to people who are resident or citizens of other countries. It's basically like, back to running a full financial institution, I have to do know your customer and anti-money laundering, and I have to underwrite people So our barrier to selling to a Portuguese Bitcoiner or a Cyprus Bitcoiner or a Hong Kong Bitcoiner is, actually us having the operational infrastructure to underwrite those people and do KYC/AML. But right, yeah, right now most of our customers are Americans." }, { "speaker": "stephan", "time": "20:25", "start": 1224.95, "text": "Back to the show in a moment. Now, as I record this, the price of Bitcoin is around forty-three thousand dollars, which might mean for you, if you're in a high tax Western country, you might not be getting much for your money. As many of you know, I left Australia, I felt locked in and just enduring unfairly high taxes, and so I was looking for a way out. Now, I'm obviously, I'm here in Dubai in the UAE, but Dubai may not be the right choice for you. It, Finding the right case-by-case scenario for what works for you and for your family, the team at nomadcapitalist dot com can help you because they have so much experience. Over ten years of experience, they've helped people get thirty-one different passports, they've helped people get forty-plus different, bank accounts across forty-plus countries, and they are in touch with close to one hundred countries in terms of information and contacts, so they can help you put these different puzzle pieces together, which means you can come up with them, together with them, a A stra-holistic strategy and plan, and they can then also help you execute on that plan. And for us as Bitcoiners, maybe you need a place that you can actually take Bitcoin out into cash. So Nomad Capitalist can help you strategize where you live, where your fiat lives, and just help you do it in a way that is holistic. you also have to consider doing it in the right way, because for example, you might need to find the right way to become a tax non-resident of the country that you're currently in. Nomad Cap- List can help you in terms of giving you access to the right experts to help walk you through that process. Now, this, solution is generally available for people with a net worth over one million dollars, liquid and Nomad Capitalist can take you through that planning process and optionally help you with the execution aspects of this also. So if you're interested in this, go to nomadcapitalist dot com slash apply to apply for the services of Nomad Capitalist. The lead sponsor of this show is Swan Bitcoin. Swan is a leading Bitcoin only financial services company. With Swan, you can buy Bitcoin, you can learn about Bitcoin, you can do this over at swan dot com or using the Swan Bitcoin applications. available on iPhone or Android, so you can use ACH or Wire to send your dirty fiat in to Swan, and Swan can help you turn that into beautiful Bitcoin. Now, you can do that with a smash buy, an instant buy, or you can set up an automated recurring savings plan or Bitcoin purchase plan. This is a great way for people who wanna get started. A common way people do this is they might start with a lump sum and then set up an automatic DCA, or dollar cost average, Bitcoin savings plan, whatever you wanna call it. Wallet. This is a great way to help accumulate Bitcoin over the long term, and this helps you deal with the volatility of Bitcoin, because as we all know, Bitcoin can be quite volatile. Swan offers a range of services, whether you are an individual, a high net worth individual, a business entity, whether you are, an institution, there's all kinds of different service lines available with Swan, so I encourage you to check out the website and see what, what's going on there, whether that's educational content and- And free books and podcasts like Swan Signal or various other shows that the Swan team are putting on or information about Bitcoin and of course ways to buy Bitcoin over at swan dot com. And now back to the show with Zach. Okay, understood. And so yeah, as you, as you mentioned, it's probably, it's funny that, the demographic you mentioned is probably a lot of those are sort of similar to me or listeners of my show are sort of in that sort of millennial to Gen X demographic, so- that's probably aligning there, but I think so to getting to some of the more hairier questions, I think, I think for a lot of people they might have the question of, hey, you know, this is a relatively new Bitcoin startup, what happens if meanwhile the company isn't around in thirty or forty years when I die?" }, { "speaker": "zac_townsend", "time": "24:25", "start": 1464.61, "text": "Fundamentally, I think the important thing to know is, that we have to-- there's this insurance company that we own and we operate, and the Bitcoin goes in And then there is a really strict separation. I, I sometimes I feel like, you have to say these things that should be true of everyone, but just like haven't been true of a lot of people. There's a really strict separation of like our capital versus the capital, that like we're holding for our policyholders. And, If in the hopefully unlikely scenario where we, we don't persist, what would happen in practice is, again, we-- there's a regulator, there's a bunch of service providers in Bermuda, there's an independent board, we would, pay everyone back their premium, and like go on our merry way, because the way it works is that every time we write a policy, we have to put up our, like, own capital, so that- That's how insurance companies work, so like for every policy we write, we have to put up our own Bitcoin, and you could think of that as a buffer, if we did do stupid things or didn't work out, and that buffer, it's like first loss capital or whatever, and if we got even to losing Twenty-five percent of that buffer or something. We, yeah, the regulator would either make us put more Bitcoin in or they would make us shut down, and if we shut down, we would just like give everyone their money back" }, { "speaker": "stephan", "time": "26:02", "start": 1562.3, "text": "Right, yeah. and then I think the other aspect of this is, I think people are gonna have a lot of questions about the Bitcoin-denominated returns aspect, right? So we need to, we need to cover this point, because obviously, well, so first of all, actually, you're touching, there's," }, { "speaker": "zac_townsend", "time": "26:21", "start": 1580.72, "text": "I, I like to say that we do the three things that Bitcoiners hate. Right? So the first thing is that you have to send us Bitcoin, right? So we're custing your Bitcoin. Now, what we usually like, we use Anchorage, just to be clear, we, we, which we think is the most secure centralized custodian, and like, you'd have to kidnap a large number of people and have access to their phones, like, it's very, we feel very strongly that like we have a pretty good custody setup, but, you, you are trusting us With custody. So that is again why we talk a lot about, like this isn't a thing, we're not trying to pitch you on, like, custing all your Bitcoin, we're not trying to say that you should, give us your whole stack. and in fact, the reason that some people like really like that it's a ten-pay, that is you pay every year for ten years, is because you, you get to see that we're still here in three years, and four years, and five years, and they, and then people, I think The first thing is that we custody Bitcoin and you send it to us. The second is, back to the risk sharing, like everyone who is one of our customers, they send us Bitcoin And we put it all together, in what insurance land is called our general ledger. but you could think of that as like our policyholder funds. So it's, in that sense, it's hypothecated, right? There isn't-- You have a surrender value, like we talked about, you have an account value. You can go on our website and you can see that account value whenever you want, but, there isn't a literal wallet. That you can go look at on chain that has e-equal to your exact amount, right? So we're hypothecating all the Bitcoin. And then, yes, the third thing is we get yield on Bitcoin. How we do that is we basically- And I understand this can make people uncomfortable, we are running a like private credit operation in Bitcoin. So we lend Bitcoin to Institutional counterparties, we've never lent to a human being. And then we are doing a lot of like tradfi off-chain stuff. So we negotiate hundred-page master lending agreements. Where are we in your bankruptcy stack? what is all your collateral? Like, what's the parental guarantee? Like, what are the covenants? All this stuff. And, and the distinction between us and other people, well, the first distinction is we've been doing this for two years and we've had no credit losses. We've never lost any. Bitcoin. But the second thing is, we're incredibly conservative. Like, i- the ten to fifteen thing, basically those promises, and those guarantees look like- Approximately two percent returns, and our target yields are three percent, and we have gotten three percent yields. We're not trying to get seven percent yields, we're not trying to get fifteen percent yields. And in fact, we think those things are dangerous. And if I-- I'm actually getting like three point one, three point two percent returns now, and my board is breathing down my neck, they're like, \"You're getting too-- like, are you taking on excess risk?\" You know, so we have like a board and an investment policy and an investment committee and all this stuff to really target that particular return In particular, risk profile. And again, we've had no credit losses in our two years. But these three things, like, I'm just very can't, like, I talk to every single policyholder, potential policyholder, and I've, I've spoken to every single person who, who, Who signed up, and we, we're very honest that like, we ourselves, like, I have a hardware wallet, like, that's an ethos we have, but, it, the tax benefits of insurance, the protection and tax benefits of insurance require under the, like, IRS code that things work a certain way, and, and we have built the company we, we want to exist, and we hope in time to move that to, Being more trustless. Right now, we don't think that's possible, and, so that's why it's all set up this way. And, the way I often talk to people is like, you know, you should have a certain amount of your Bitcoin should probably be self custody, a certain amount of it should be at Swan or Casa or Unchained. And like, this is for a small percentage of your, your Bitcoin, we hope that you would entrust us, you would learn more about our company and what we're doing, but like, we completely understand that in Love of self-custody on the one hand, I don't know, and a, a love of not paying taxes on the other, and like you have to, find where you are on that spectrum and, Yeah, I mean, look, y-you know all these people too. I talk to some people and they're like, \"Well, I don't think there's gonna be an American government in 50 years, so I'm not gonna worry about paying taxes in 50 years.\" So thus, you know, perhaps our product isn't for you. But if you, you think that, as we do, that there's gonna be this robust, globally important, globally used Bitcoin economy, and it's gonna like overlay on the existing economic systems in the world, and that that's super special and it's important, and like what partially makes it special is that you can always self-custody, and you do always have that ability to have self-sovereignty, and you aren't relying on the government But for that world to exist, then there has to be, like, Bitcoin has to be money. It can't just be gold in the ground, which the analogy is your hardware wallet. It has to, like, be useful. It has to be able to pay for things. There has to be capital markets. There has to be debt capital markets. There has to be insurance, there has to be these sorts of things, and that's what animates me about Satoshi's white paper is that the combination of trustlessness And like money and use and currency, and we're trying to build the defining financial institution of like that future Bitcoin economy, But, you know, different people have different visions, and I like also completely understand. I talked to a ton of bitcoiners, people who are like, \"This isn't for me right now.\" It just has to be, right? The right, it's the right answer for some people and the wrong answer for others. Yeah," }, { "speaker": "stephan", "time": "32:46", "start": 1966.41, "text": "because the way I'm seeing it is On a long time horizon, something like Bitcoin life insurance, I think it, it should exist. But the question is, for a lot of people, it'll be like, \"Is it, is it right now? And is it the right model?\" Because for a lot of people, obi-- the obvious comparison, and I know you're trying to address that in your recent answer, but the obvious comparison for a lot of people will be BlockFi, Celsius Terra Luna, you know, all these things that kind of recently blew up. And so I guess the, I guess the main for now what people can sort of try to understand is if there's a distinction in the way you're running, you know, this business as opposed to the way, you know, the Celsius's and Blockfys of the world, where maybe they sort of had this- Veneer of, oh, look how regulated, look how compliant we are, we have such good risk management, blah, blah, blah, blah, blah, whatever. And then actually in the background, it was sort of-- Well, in the case of Celsius, it was known that they were, you know, lending out to these random, you know, shitcoins and things, and in the case of, I think in BlockFi's case- Correct me if I'm wrong, but my understanding is that there was, there was a lot of lending out to certain actors who might have been going short Bitcoin or maybe in certain cases they were doing the whole grayscale arbitrage, you know, discount and premium trade. And so- I guess that's probably the one area where-- Yeah," }, { "speaker": "zac_townsend", "time": "34:08", "start": 2048.37, "text": "yeah. And I should-- Yeah," }, { "speaker": "stephan", "time": "34:10", "start": 2049.95, "text": "big on." }, { "speaker": "zac_townsend", "time": "34:11", "start": 2050.63, "text": "It completely makes sense. And, I feel like this is the wonderful challenge of building in Bitcoin and, I guess, crypto more generally is like, yeah, there's been a lot of Ponzi schemes and scammers and people who have lied and, I'm like another new person that's shown up and said, \"Uh, no, we're not lying, we're doing things in these, in these certain ways.\" So, again, I think that's partially why I get on every single customer call and we talk, and I think that the people who bought policies in the end are making a, a trust decision with us. And I, I think what-- I have so many things to say about what you said. One thing is like, we are trying, we look at the space and we say, we wanna be the boring, conservative, long-term people. So, I think that's why I like go out of our way, my way to say like, we're not trying to achieve seven percent or seventeen percent returns. We're not trying to, make a bunch of bets on altcoins or shitcoins or whatever. Like, we are, right now, bit-- we're just like Bitcoin through and through. We keep everything in Bitcoin, we think that is the, the only token that we feel certain is gonna- Going to exist in twenty, thirty, forty, fifty years, we denominate our loans in Bitcoin to get back Bitcoin yield, all of that, and we're, we think that this is the cycle, where Being boring and low risk and low yield, hopefully will resonate with people and, and I think we're, we're seeing that so far. What did BlockFi do? you know, I've now interviewed tons and tons of people who worked at BlockFi and Genesis I think fundamentally, what happened is there actually were some like great credit folks at BlockFi and even, and good, and some good credit folks at Genesis. And what would happen is they'd be like, \"Okay, here's an investment memo, we should do a thirty percent LTV loan, again, to this miner or to this trading counterparty.\" I, I know a guy who was like chief credit officer for BlockFi, he, Voyager came in, he said, \"We're not lending...\" Many of these folks, and he was devoted, because fundamentally their incentives, I think, were to increase loan size so they could increase interest payments, so that they could increase revenues, so that they could go public. And, again, i-it's just words, like people should come and like, I'm happy to share documents and like have people meet board members or like see that we're regulated on, on, that we have a license and all this stuff, but fundamentally, like, we're trying to- I was the first policyholder, my co-founder was the second policyholder, we're trying to build something that persists and is super conservative, and that structurally is easier, I think, what is weirder, like BlockFi was basically running a bank, right? Like you could withdraw your money at any time, and they were doing all these loans. We're actually like the complete opposite, like we make really long promises to our customers, which I, I get can be uncomfortable, but we make really long promises to our customers, and then we're out there Being super careful, but we don't have to worry about like everyone withdrawing their money at once. We don't have to worry about these like risks that, that blew up some of these institutions. and that also allows us to- I guess rewind all the way, like we think that one of the most important things that we're doing is helping to build an economy in Bitcoin that is, that is at duration. So we are, we're, we've had- Actually, billions and billions of dollars of, or tens and tens of thousands of Bitcoin of borrower interest come to us. We sift through, we do due diligence on these people, and almost all of them we, we say no to. Like, we just need enough good credits to get the yield we need for our customers and to make sure we're getting that Year over year, and that's our focus. Like, we wanna be here again to build one of the world's largest com- like, largest insurance companies, and that is, that is all about thinking in the long term." }, { "speaker": "stephan", "time": "38:41", "start": 2321.47, "text": "Back to the show in a moment. When it comes to holding our Bitcoin, it's important to consider hardware security. So CoinKite dot com are the, are my favorite makers of Bitcoin hardware security devices, most notably the Coldcard. The Coldcard is a really reliable device. It has multiple secure elements, it has PSBT support, and it has microSD card support for those people who wanna be able to move transactions back and forth without having your Coldcard touch the computer directly. So that's- That's a really cool feature. Of course, if you are a beginner, you can just directly plug the Coldcard in to your computer and use it easily with desktop wallets such as Sparrow Wallet or Specter Desktop or Electrum. Or on the mobile, you can look for applications such as Nunchuck. The Coldcard is a great device. I use it as part of various setups of my own. You can use it really in just a, a combination of setups. So whether you wanna have it as just a single signature, plain Jane setup Or you wanna use a passphrase, or whether you wanna use seed x or, or maybe you're more advanced and you wanna use multi-signature, the Coldcard works great in all of those scenarios, and I, I use it regularly. I, I really find it a great device. I like that there are a range of other features such as dice rolling or other, BrickMe and Duress pins that you can use as part of your security setup. So go and get your Coldcards, either for yourself or for your family, over at CoinKite dot Using code LIVERA. And finally, mempool dot space, the leading Bitcoin and blockchain visualizer. If you have a transaction ID that you've either sent or somebody is sending that transaction to you, you can go and search that in mempool dot space. If you have a transaction that you're about to send, you go to mempool dot space. On the front page, you can see the fee estimate. I use that all the time whenever I'm about to send an on-chain transaction or just when I wanna keep an eye on what's going on in the mempool with all those inscriptions and This other stuff out there, sometimes you just wanna, you wanna keep an eye on where the mempool is at. The mempool dot space also continually innovate and put out new features, such as the mempool goggles, which you can use to keep an eye on what's going on, what transactions are going into the mempool. The mempool, mempool dot space are also coming out with an accelerator, so if you wanna sign up for that accelerator program and get on the waitlist, that's over at mempool dot space slash accelerator. And now back to the show with Zac. Yeah. So one other thing that is perhaps an open question out there is, right, as you and all the listeners know, there'll never be more than twenty-one million Bitcoin, and that means, you know, long term, on the, in the far-flung future We're gonna be operating in this kind of deflationary environment, and so I guess having positive Bitcoin-denominated returns Is just gonna be a really hard thing to achieve long term, and I think maybe that's where one area where, like for me personally, I'd be kind of scared about maybe not like, okay, in this, you know, in the next, let's say, five to ten years, but, you know, the longer term, if you're, if you're, if you're sort of giving people this, I guess, this promise that, oh, hey, we're gonna, you know, or our business model is reliant on us getting two percent Bitcoin-denominated returns, I guess Makes me a bit uneasy. What, what do you think? What do you think about that?" }, { "speaker": "zac_townsend", "time": "42:11", "start": 2531.36, "text": "Well, I will say, as you know, we, we're not gonna get to twenty-one million until, like twenty-one forty, whatever, yeah. Yeah, so it is a little ways off. I guess that Bitcoin, I think, will be naturally deflation-- let's like take post twenty-one forty, which is a long time away, but, I think it'll be nationally, naturally deflationary, because obviously like economic activity will probably grow, but also, for better or worse, because of like money laundering rules, you see like parts of the chain essentially get pruned, or keys get lost. So like it, it will be naturally, naturally deflationary in the really long term. I think what, I would say is two sort of slightly contradictory things. One is, We, again, I think there will be a persistent economy built on Bitcoin, and that will mean that there is like motion and velocity to, to Bitcoin and money. So that doesn't, there is some limit to the size our insurance company can get in Bitcoin terms, but I don't think that means that Like if we held one percent of all Bitcoin and we were promising one point zero two percent of all Bitcoin, I don't think that actually means we would need to Like we just need at the right time to have that amount of Bitcoin, if that makes sense, right? Like we're, yeah, I got it. So you, I guess you're sort of" }, { "speaker": "stephan", "time": "43:49", "start": 2628.59, "text": "arguing that there's gonna be a certain level of velocity, like people die every year." }, { "speaker": "zac_townsend", "time": "43:54", "start": 2633.93, "text": "Yeah." }, { "speaker": "stephan", "time": "43:55", "start": 2634.89, "text": "Right. There's gonna be some velocity of action through the economy going on." }, { "speaker": "zac_townsend", "time": "44:01", "start": 2641.28, "text": "Yeah, I think the second- Practical reality is that, we are making promises now that will persist for, call it, fifty years, and, as I believe the Bitcoin economy will grow and grow and be a bigger part of the world in the next fifty years, between, I don't know, fifty years from now, so what is that, twenty, eighty-four and twenty-one forty," }, { "speaker": "zac_townsend", "time": "44:34", "start": 2673.5, "text": "Yeah, the way the US tax code defines life insurance, it has to have a positive rate of return. I think that we would hope, you know, around twenty-one hundred, that we would pro- we would wanna change what the definition of life insurance, so that we could include probably deflationary policies. Like, that is a, literally a thing that we talk about as a company, but, you know, it's hard to action now or make, make, promises. But I feel pretty good about where we are now relative to the promises we're making over the next, half century, and then we can worry about, a year" }, { "speaker": "zac_townsend", "time": "45:18", "start": 2717.54, "text": "twenty eighty four to twenty one forty when we do. I think this is actually like, I, I don't have a strong opinion about this, and I know it's like, it is part of what attracts me to Bitcoin, but I am really curious to see if it happens anywhere in my lifetime, as we approach that asymptote, whether, we'll stay at twenty one million or," }, { "speaker": "zac_townsend", "time": "45:41", "start": 2740.66, "text": "I don't know, we'll introduce a minor inflationary rate or something. I think that the pro-- the human psychology is very bad at thinking about deflation. and I think that that, that, we'll, we will see how that, that works. From a mathematical and actuarial perspective, it's very straightforward to think about. So, anyway, I don't mean to get philosophical, but" }, { "speaker": "stephan", "time": "46:04", "start": 2763.89, "text": "Right. Yeah. I mean, I, I think it, I think this is not happening. I think you would have to convince too many people who are already hodlers to, why would they dilute their own supply, right? Unless they get propagandized so much, you know, by the Keynesians that we need an inflating money" }, { "speaker": "stephan", "time": "46:20", "start": 2780.22, "text": "Okay, fine. Maybe, you know, you know, I'm, I'm in my mid-thirties and let's assume for argument's sake I've got 50 years left, you know, I'm gonna die in my 80, 85 or whatever, you know, in the year 2074 or whatever, The other aspect to this though is that, yeah, most of Bitcoin has already been mined into existence. It's what, nineteen, nineteen point six million or something last I checked, and I think there's an interesting stat. I think it's a-- most of the bitcoins, maybe ninety-nine percent or so, will be mined in That in the twenty-thirties. And so maybe like, you know, to that aspect, it'll kind of happen sooner than, you know?" }, { "speaker": "zac_townsend", "time": "47:01", "start": 2820.75, "text": "Yeah, yeah. I think what we- Well, let me take that in two different directions. One is that we expect that the exchange rate between Bitcoin and dollars will go up, as many people expect, and then we will expect that our policy sizes will come down. Like right now, our median policy size is about ten Bitcoin. and as in, that's how much they're paying in or that's the, that's the" }, { "speaker": "stephan", "time": "47:26", "start": 2846.06, "text": "surrender value, sorry? The ten BTC, is that the median value or that's the surrender? Okay, gotcha. Yeah," }, { "speaker": "zac_townsend", "time": "47:32", "start": 2852.41, "text": "that's like the median paying in value. If I look out ten years, I predict that that will be, that will be an astronomical sum, and our policy size will, in Bitcoin terms, will decrease over time as the value, the value relative to the dollar of Bitcoin goes up. So, that isn't ac-- So just to say that I think, Yes, much of Bitcoin has been mined. We believe that there will be a persistent Bitcoin economy. That means that the value of Bitcoin relative to the dollar will increase. That will mean our policy sizes will decrease. To your question of how do we get yields, again, I think the primary method that we do that will be, that there will be a velocity of money, 'cause like I think for- Again, different people can have different perspectives. We believe there will be an economy, there will be, and then if there's an economy, there'll be economic activity, and there's economic activity, there'll be capital markets, there'll be capital markets, there'll be capital markets, and that, thus, there'll be velocity. Again, I think what makes Bitcoin special is the ability to, like, have no government and to have self custody, if you want. But I, I think we see it, a difficult world if every single Bitcoiner holds it in a wallet and does nothing with it" }, { "speaker": "zac_townsend", "time": "49:03", "start": 2943.42, "text": "then there won't really be an economy. That doesn't mean it won't be a good store of value, there won't be an economy. And we do worry a little bit about this, and back to your question of winding down, we, we actually have an unusual clause in our contracts, which is that we can, in the first ten years Cancel the contract and give everyone their money back. Specifically, if we don't feel that there is a way to get durable two percent returns. And that is our, I guess our insurance policy, 'cause we are, we are one hundred percent focused on getting the conservative low yields that we are promising our customers, and we don't wanna take on excess risk, and we- Would rather shut the company down than blow up, like that, that is, that is just where we're at. So we have this clause in our contracts that if there aren't debt capital markets, then we'll give everyone their money back, And but a-again, I am, I am a persist- I'm a believer that Bitcoin is going to be like the settlement layer in the world. I think that you're seeing, you know, a bunch of- energy producing nations start to do mining, I think what you're gonna see is that like infrastructure projects are gonna start to be-- Like, I, I'm not gonna do it, but I, I've been, I've been telling people someone should start like an oils, oil future natural gas exchange, like a CME, but nominated in Bitcoin, with the bid ask spreads are in Bitcoin. Like, I fundamentally believe that we're gonna see much of the economy, or at least a portion of the economy, switch over to a Bitcoin standard. And if you believe- I believe that that is true, that Bitcoin will be this like global settlement layer, and there'll be a Bitcoin standard, and there'll be like infrastructure projects in Bitcoin, then like all of that will naturally lead there to being a robust economy and like yield on Bitcoin." }, { "speaker": "stephan", "time": "51:15", "start": 3074.57, "text": "Right. Yeah. I think one thing I would just add is, I believe that, you know, moving into this Bitcoin deflationary world, I think there'll be a lot less debt than we have today. There'll be some debt, but it'll be a lot less, and, just because it's a fixed, you know, it's a fixed supply, and I think that's just naturally what's going to happen. In terms of your question or your kind of point about, are people actually gonna spend the thing or is it- Is everyone just gonna huddle? I think longer term, we will have to spend because, you know, you'll need to eat and have a house over your head or have a roof over your head and so on. So that for me isn't so much an issue, like I think people will naturally have to spend once we're, you know, in the far-flung future into the Bitcoin, you know, denominated world. so for me, I'm not that concerned that, you know, everyone-- because it's literally impossible for everyone to huddle in that world because we, we gotta You know, so I think that part isn't so much a worry for me, and even, you know, and this kind of comes back to even some of the economic theory debates as well, because some people would say, \"Oh, look, what happens if there's not enough people spending? And is that, you know, the Keynesian kind of hoarding kind of argument, which I think is wrong, by the way, because really, if a lot of people are just holding and not spending their coin, they are leaving those, the real resources of the world available for some other entrepreneur to bid away" }, { "speaker": "stephan", "time": "52:38", "start": 3158.3, "text": "I completely agree with you, and, and you know," }, { "speaker": "zac_townsend", "time": "52:41", "start": 3160.81, "text": "I do think that we'll have pro-- I hope we'll have a world with less, particularly consumer debt, but I, I guess the, the question for us is, where the-- will there be like institutional- Credits in the world. And I, I, I-- Yeah. Corporate debt or, or I, I really see a future where, the next nuclear power plant or the next oil field, if you wanna build that, that you would issue a bond, in Bitcoin. Because there's this natural connection between, like, Bitcoin and energy and Bitcoin and power. so again, for me, the Bitcoin standard looks like, yeah, maybe a world with a lot less overall debt, particularly consumer debt, but I think that the-- to your point about like natural economies and nat-- and the natural velocity of money, like, I think there will still be Ventures in the world, and some of those ventures," }, { "speaker": "zac_townsend", "time": "53:44", "start": 3223.52, "text": "and some of that risk-taking will be funded by folks, and, yeah, we are definitely making a bet that," }, { "speaker": "zac_townsend", "time": "53:53", "start": 3232.61, "text": "There will be available yields, but that's partially the reason of why we are making a bet that the yields will be very low. I don't think that they're going to Be outrageously high, I think be, they're gonna be low, partially because, the, the projects that get funded will probably be relatively conservative, particularly relative to the value of the currency they're denominated in." }, { "speaker": "stephan", "time": "54:20", "start": 3260.48, "text": "Got it. one other thing I wanted to ask you about, so I saw this in some of the news articles and things, I was reading that you also have, it says you have a private credit fund that's gonna be a closed-end fund taking in USD and targeting five percent return denominated in- In Bitcoin. So is that still true, or has that changed, or is that a different thing?" }, { "speaker": "zac_townsend", "time": "54:38", "start": 3278.33, "text": "That's a different thing. yeah, I-- Sorry, we just didn't talk about it. Like, not at all hiding, very straightforward about this. Like, yeah, we have built, this- Through the insurance company, we invest Bitcoin and we are getting approximately three percent yields against two percent promises. But as part of that, we've had to build an enterprise risk management framework, we have a chief risk officer, like we have, a credit, credit people, we have an investment committee, we have all this infrastructure, and we- believe that, you know, we've had to build this skill, and again, a skill that has, outputted no credit losses in a time with Celsius, BlockFi, Voyager. FDX. so we feel that's a skill that we, we can use for other people. It's a different thing, though, right? it is a, a riskier venture with a riskier IRR. we, we aren't gonna take the insurance company, and try to get five percent yields, but we are saying like we've built this capability and we look at all the credits in the world and we think there are, enough credits to support a- fund like this. so are they-- These are segregated entities or like" }, { "speaker": "stephan", "time": "56:00", "start": 3360.33, "text": "losses in one will not impact the other? Oh, segregated," }, { "speaker": "zac_townsend", "time": "56:02", "start": 3362.39, "text": "actually, they're actually in like different countries, actually. The fund is in the United States, completely segregated, and the insurance company is in Bermuda, completely segregated. So they're completely separate things. The fund is a private credit fund. So what does that mean? But it's dominated in Bitcoin. So either you can contribute dollars and on the day of the close we'll convert all your dollars to Bitcoin Bitcoin or you can contribute Bitcoin. We take that pile of Bitcoin, let's, we say a hundred million, but like a-actually what we mean is like twenty thousand Bitcoin is, is about what we're trying to get. if I get that, yeah, twenty thousand. And then the goal is that that will produce five percent interest every year, we'll pay out that interest, but it's a, it's locked up, so it's, again, not like BlockFi. We're not making promises that it's liquid, it's not a product that's supposed to be for like random retail people to put in a tenth of a Bitcoin. This is like an institutional, like commitment that you'll lock up your Bitcoin for," }, { "speaker": "zac_townsend", "time": "57:12", "start": 3431.54, "text": "The investment period is three years, there are possible, extensions. So it, you know, I think what we look out in the space and say, there's a lot of people who are offering, like, high risk liquid, like that is what the space is about. And, and I think that if you wanna get high risk, high returns with a lot of liquidity, you end up, naturally gravitating toward, Altcoins and like trying to make money on tokens and pump and dumps and Ponzi schemes and all this stuff. and we're trying to just be a different part of the ecosystem, which is we're trying to be the like long duration, boring, conservative guys. That is how, like how we're building our company, it's how we're building our culture, it's who we're hiring, and, and that, and- Private credit, we feel, is like part of that. we, because it is a like, it is not about you handing us Bitcoin and us turning into a big pile of Bitcoin very fast, it's about like a, a longer term institutional cross-cycle investment." }, { "speaker": "stephan", "time": "58:25", "start": 3504.62, "text": "I see, yeah. and I just ran the number just quickly just for people interested. so let me just check that. I, I believe so about a hundred million USD is about two thousand three hundred and eighty-five Bitcoin, just at today's prices. but yeah, so two thousand twenty-- Sorry, I, I was off" }, { "speaker": "zac_townsend", "time": "58:40", "start": 3520.22, "text": "by one moment." }, { "speaker": "stephan", "time": "58:42", "start": 3521.64, "text": "Yeah, that's, not a big deal. and then so then, I guess yeah, twenty thousand will be a lot. Yeah, that'll be, yeah, that's like a billion. but, so I guess then the question could also just be How do, you know, how can people get comfortable? Are there audits? Are there other things that people outside of the company can see to make sure that you're not, you know, doing a Celsius or a BlockFi or something like this?" }, { "speaker": "zac_townsend", "time": "59:11", "start": 3551.41, "text": "we have an internal auditor that is, a big four firm. We have an external auditor. Currently, the external audit-er doesn't gonna do an audit on us until we make our regulatory filings, so there isn't one right now. I think, again, the way people get comfortable is if you're interested, you could- Come sign up on our website or you can email me, I'm zack at meanwhile dot pm. And, yeah, we have a bunch of material we share. you know, I, I think one of the things that, you know, we're not a non, here I am, I can tell you all the people who work on, for the company, I can tell you all the independent directors in Bermuda, I can tell people the names of the service providers, and then we, we're happy to share, materials on an individual basis, Yeah, and again, I think we," }, { "speaker": "zac_townsend", "time": "01:00:08", "start": 3608.0, "text": "we, we, we're trying to do the right thing. I know a lot of people have said that, and we, we're very fortunate that a lot of- Or, you know, some number of, you know, Bitcoiners, OG Bitcoiners included, have gotten on board, and I think that that, it is partially because there's a temp pay, you pay over time, and it is partially because we're, we share materials, But yeah, we also understand that, we have to prove ourselves, and, we, we prove ourselves by doing every day what we say we're gonna do, and, that for some people, it'll make-- like, if we're still here in three years, they're gonna be a lot more comfortable than they are now, and, you know, that's, that's fine. I, I, I may-- I might do the same thing if I didn't found the company myself." }, { "speaker": "stephan", "time": "01:01:04", "start": 3664.82, "text": "Well, I think that's, yeah, I think that's probably, it, it just takes time to, bu- this is a new thing, and obviously what's happened in the last few years has got a lot of people scared about the same kinds of mistakes happening again. So obviously it's gonna, it's gonna take some time, for people to get comfortable. and I think the other aspect of it is, you know, going through a bull cycle, what happens in Bitcoin world is people start- Betting over their heads, they start gambling or they start, you know what I mean, they start just doing things that are crazy and irresponsible. And so then I guess the challenge will be people will need to look at, you know, because there'll be, you know, other companies like you who have to sort of prove that they are conservative even during a bull cycle. So I think that's probably gonna be, an interesting, marker for people. Well," }, { "speaker": "zac_townsend", "time": "01:01:55", "start": 3715.42, "text": "look, I'm actually, I mean, I don't wanna say I was happy that there was a, a bear First round of funding in January 2022, and that was like Sam Altman and, a bunch of, a range of like crypto insurance fintech people. And then, we actually raised our like second tranche of thirteen million dollars, like post FTX, and I think we've been really happy to be building, in the bear, I think it like creates a good discipline where a very like small focused team and, literally every day when-- or every time we talk about a potential investment, out of the sort of like Bitcoin corpus, we, we talk about capital preservation first, and I think that that, that- Culture, is gonna persist, actually like our first and foremost like value, I know sometimes corporate values are like corporate speak, but, is like built for the long term, and, we, we are-- I, I was gonna say, since you mentioned it, we've had a number of people who, bought policies, Like directly with the Bitcoin they got out of the BlockFi bankruptcy, and I guess that could mean that those people were, were pretty foolish, but I think what we, what we, we hope that means is like, that we're different, than those and the mistakes in the past, and that is certainly Certainly not just what we're trying to project, it's like what we're trying to live every day." }, { "speaker": "stephan", "time": "01:03:37", "start": 3817.64, "text": "Gotcha." }, { "speaker": "zac_townsend", "time": "01:03:38", "start": 3818.04, "text": "And that's why, by the way, I have so much respect for Swan, I have so much respect for, for Unchained and Casa," }, { "speaker": "zac_townsend", "time": "01:03:46", "start": 3826.83, "text": "Just, you know, we, yeah, we, we want, we feel culturally aligned with folks who, not only believe in Bitcoin, but, b-believe in this whole ecosystem is something that needs to persist and think very long term and," }, { "speaker": "zac_townsend", "time": "01:04:08", "start": 3848.75, "text": "We think that that's hopefully what's gonna distinguish this cycle from last ones, but, as you say, I think there is always exuberance, and exuberance leads to scams, and scams leads to, people being less trusting, and that all makes sense to me. It, I've lived that. Every three years too, for the last" }, { "speaker": "stephan", "time": "01:04:25", "start": 3865.96, "text": "nine. Yeah. Two, two other questions I've got, one is around reinsurers. So this is a concept I've heard from the insurance age, you know, world that there's often insurance agency or insurance companies and reinsurers who sit above them. So, do you have a re-insurer or what's the model here?" }, { "speaker": "zac_townsend", "time": "01:04:42", "start": 3882.63, "text": "We don't currently have a re-insurer. It's a big question about whether we will, There are, we have talked to some of the world's big reinsurers, there's actually like structures that make sense for them and for us." }, { "speaker": "zac_townsend", "time": "01:04:56", "start": 3896.62, "text": "I think, we, we could have spent a whole other hour on like insurance and insuretech and the economics. we, we really want, we think in the long term Lots of insurance products are needlessly complicated, and they're needlessly complicated because there's this whole like stack of people in the ecosystem and they need to be incentivized in different ways and, and all this stuff. And one of the things that we love about starting an insurance company in Bitcoin is that we've really gotten To simplify the product down, I know it sounded really complicated and we had to spend twenty minutes on it, but like relative, like you have these products that are sold that it's like, okay, you get principal protection, but it's indexed to the S&P 500 with these three riders, blah, blah, blah. And one of the nice things is, the joke is like, we get to run a life insurance company from like the eighteen fifties, and we like that, and we like the simplicity and the value props, and that comes with an element of- Control, obsessiveness and conservativeness, and so we may work with reinsurers," }, { "speaker": "zac_townsend", "time": "01:06:10", "start": 3970.2, "text": "We may not, we'll see." }, { "speaker": "stephan", "time": "01:06:11", "start": 3971.55, "text": "Yeah. Okay. And, last question I had is, do you see the rest of the fiat insurance agency coming along to actually huddle Bitcoin as part of their own portfolios, or at least in the future offering a similar kind of Bitcoin life insurance like you are?" }, { "speaker": "zac_townsend", "time": "01:06:27", "start": 3987.17, "text": "Yeah, so let me split that into two. Do I expect that incumbent like carriers and reinsurers will do what we're doing? Maybe it's really hard actually, because if you think if you have a dollar balance sheet And you wanna sell Bitcoin policies, then you either have to hold Bitcoin or hold Bitcoin derivatives or something, and because Bitcoin is volatile relative to the dollar, then you end up having to hold a ton of capital, so it'd be like super expensive and really difficult. so I actually think that, back to your last question, instead of reinsurers Reinsuring our mortality risk, although that may happen, we actually may be in the business of reinsuring other people's Bitcoin risk because we can hold Bitcoin and really no one else in life insurance land can. So yeah, we have some ideas, That if you look at the ETF, for example, the ETF is a product that every like investment advisor in America can sell to get their people like one percent exposure to Bitcoin, let's say There's not an equivalent product for insurance agents. We could build such a product because we can hold the Bitcoin. so that may be us working with a carrier who has a license in the US, and then our Bermuda entity acts as a reinsurer to take on the crypto risk. So we're like talking to some potential partners about that in the US and elsewhere, and that would be a way for the incumbent, like- Agents and salespeople to have a product that gives Bitcoin exposure to their users, I think that's actually like very likely, and we'll hopefully participate in helping that ecosystem exist. I find it less likely in the near term that New York Life or MassMutual or Northwestern Mutual, or whatever will find a way to offer the product we offer, just structurally and regulatory, from a regulatory perspective, would be very difficult." }, { "speaker": "stephan", "time": "01:08:34", "start": 4114.71, "text": "Yeah, really, really interesting. Well, Zach, it's been an interesting, chat with you, certainly, a-as, as I mentioned before, right? I think something like this should exist in the Bitcoin world. I just, I just really, I guess with the recent, all the, you know, all the failures, the blockfires, the Celsius, the three Rs capitals, and all this other stuff, I guess that's just what I'm hoping this doesn't become, but, you know, I, I would like to see this kind of thing become" }, { "speaker": "zac_townsend", "time": "01:09:02", "start": 4142.53, "text": "My closing thought is, yes, they can find-- I, again, I'm zack at meanwhile dot b m, our website is meanwhile dot b m, people can sign up for our waitlist and then we pull people off our waitlist as we can service them, serve them and help, and talk to them and help them become policyholders. I think, what you said is absolutely right and I hope that, if people are listening to this podcast or watching it, that they, if they are at all interested and they have questions, like they should reach out or we can jump on a Zoom call. and I know that some people, that'll mean we have a, a great chat and it's not for them, but for some people, I think they can, they hopefully get comfortable, like we really believe, that the world will move to a Bitcoin standard and, we're trying to build- Build a defining financial institution for that standard, and, I don't know if that means I'll make the most money of anyone. I, like, maybe I, I should do something less conservative, but I think the point is, we, we, we're Bitcoiners too, and we really believe in this, and, not only do we think something like this should exist, we're, we're building it to exist, and I hope that- resonates with, with folks out there." }, { "speaker": "stephan", "time": "01:10:27", "start": 4227.23, "text": "Fantastic. Well, thank you for joining me, Zach. Thanks so" }, { "speaker": "zac_townsend", "time": "01:10:29", "start": 4229.41, "text": "much. I really appreciate it. I had a good time." }, { "speaker": "stephan", "time": "01:10:32", "start": 4232.81, "text": "Alright, I hope you enjoyed the show. One quick reminder before we finish up, I also have a Substack newsletter. So for those of you interested, you go to stephanlivera dot substack dot com and you can find it there. It's a weekly free email newsletter just to go along with the podcast, and my goal with this is to just do a once a week update where I talk a little going on in the space and also offer some, revision and highlights of what happened in the podcast episodes for that week. So that's it from me, thanks, and I'll see you in the citadels." } ] }