Decision Vision Episode 170: Should I Integrate Cryptocurrency into My Business? – An Interview with Daren Hebold, LUX Companies

Intro: [00:00:02] Welcome to Decision Vision, a podcast series focusing on critical business decisions. Brought to you by Brady Ware & Company. Brady Ware is a regional, full-service accounting and advisory firm that helps businesses and entrepreneurs make visions a reality.

Mike Blake: [00:00:21] Welcome to Decision Vision, a podcast giving you, the listener, a clear vision to make great decisions. In each episode, we discuss the process of decision making on a different topic from the business owners or executives perspective. We aren’t necessarily telling you what to do, but we can put you in a position to make an informed decision on your own and understand when you might need help along the way.

Mike Blake: [00:00:43] My name is Mike Blake, and I’m your host for today’s program. I’m the Managing Partner of Brady Ware Arpeggio, a data-driven management consultancy which brings clarity to owners and managers of unique businesses facing unique strategic decisions. Our parent, Brady Ware & Company, is sponsoring this podcast. Brady Ware is a public accounting firm with offices in Dayton, Ohio; Alpharetta, Georgia; Columbus, Ohio; and Richmond, Indiana.

Mike Blake: [00:01:07] If you would like to engage with me on my social media with my Chart of the Day and other content, I’m on LinkedIn as myself and @unblakeable on Facebook, Twitter, Clubhouse, and Instagram. I also host a LinkedIn group called Unblakeable’s Group That Doesn’t Suck, so please join that as well if you would like to engage. Today’s topic is, should I integrate cryptocurrency into my business? And this is a topic I’ve wanted to do for a while.

Mike Blake: [00:01:35] Haven’t really been able to sync up with the right guest who, I just thought, would give us a great and in-depth perspective on it, and we can sort of make schedules sync up. And I feel almost apologetic about that, because this is a topic that’s long overdue, but that having been said, I think the timing is actually propitious. Cryptocurrency has always, of course, been a little bit of a roller coaster ride, and right now, as of late, cryptocurrencies, I think in a way that’s surprising to me anyway, have been retrenching quite a bit over the last several weeks, which frankly I find surprising, which probably reflects my own ignorance of the dynamics of cryptocurrency.

Mike Blake: [00:02:24] I would have bet a couple of months’ mortgage that cryptocurrencies would have become stronger after the Russian attack on Ukraine and suing financial sanctions that I think would have motivated a lot more activity to circumvent conventional and national banking systems. And maybe that is happening, but not enough to overcome other forces that are at play here. So, because of what’s going on in the crypto markets, I think this really, really as well timed a topic as any to talk about this, and I hope that you’ll agree.

Mike Blake: [00:03:00] I think it’s also important because I think everybody by now has heard the word or term, cryptocurrency, they have heard of Bitcoin, but it really is remarkable how few people actually know what it is. As it happens, I happen to do a lot of work in the cryptocurrency e-wallet exchange space, some work with crypto miners and valuing or appraising their businesses.

Mike Blake: [00:03:27] But many of my peers really still don’t have any idea how cryptocurrency works, what the value proposition is, et cetera. And I think that—I don’t think they’re an outlier. I think there are a lot of people that still need to be educated. And if you’re one of those people, I think you’re going to find this a very good use of your next 45 minutes or so.

Mike Blake: [00:03:49] And so, joining us today to help us out with this topic, who is an expert, because I’m not, is Daren Hebold, who is Founder and CEO of the LUX companies, which offer specialized asset management services for commercial real estate, together with financial asset management of cryptocurrency. He has cultivated a broad reputation of trust within the industry and community given his command of confidentiality, fiduciary duty and financial skills, and the handling of high value commercial real estate and digital assets.

Mike Blake: [00:04:20] After getting financially thrashed, his words, by the Great Recession of 2008 and ’09, and closely studying the US Central Bank and government responses, he began seriously questioning the composition, integrity, and sustainability of our financial system, which, at its core, includes a Central Bank that is privately owned, centralized and granted the right to unlimited admission of new currency at their sole discretion.

Mike Blake: [00:04:43] After critical analysis, research, and discussions with friends, he stumbled upon Bitcoin, blockchain, and cryptocurrency, seeing and participating in the extraordinary freedom-enabling benefits of this new parallel financial system together with its technological superiority. He founded LUXOLO Financial to broadly deliver cryptocurrencies and blockchain technology benefits to individuals and small businesses alike for everyday use in commerce. Daren, welcome to the Decision Vision podcast.

Daren Hebold: [00:05:12] Thank you, Mike, and great intro. I appreciate that.

Mike Blake: [00:05:16] So, as I said in my opening, a lot of people listening to this, I think, at this point ,don’t want to admit it, so what we’re going to do is we’re not going to crypto shame people and we’re going to let people address their lack of knowledge in a safe space, the privacy of their own headphones, their own car, whatever it is they’re listening to. What is cryptocurrency, and how does cryptocurrency come about?

Daren Hebold: [00:05:45] Great. Yeah, and we’ll keep it real simple to begin with, and then we’ll branch out. So, a Bitcoin, what is a Bitcoin? It’s electronic money. It is a peer-to-peer payment system. It’s a store of value. It’s a new financial system. It’s many things and it ticks many boxes. And this is something that we saw come out of the ashes of the last financial collapse after ’08. I think it was January 2009, the group, Satoshi Nakamoto, officially released Bitcoin and it’s just been branching out since then. I just wonder where we start, maybe, Mike, to keep it simple. I think-

Mike Blake: [00:06:45] Well, I think what people—I mean, the question I’m asked a lot, and I probably give a barely adequate answer, is how is cryptocurrency created? Right? We know about crypto miners. Most people have never seen a crypto mining rig. They don’t understand why people are buying PC gamer hardware to create this virtual or cyber currency. So, maybe talk a little about that. How does cryptocurrency get created, and why does that translate into a fungible value?

Daren Hebold: [00:07:15] Yes. Yeah. And yes, how is that valuable, and why do people recognize that great place? Okay. So, not all cryptocurrencies are created equal. So, Bitcoin was the very first one. And since then, I think, literally, there are over 17,000 cryptos out there.

Mike Blake: [00:07:34] Wow. I didn’t know that.

Daren Hebold: [00:07:34] Yeah, it’s just insane. And frankly, it’s a little bit of a junkyard out there. And I think we, in the industry, would probably agree that you could probably count literally on maybe one hand how many of those 17,000 cryptos could be reasonably considered money. The balance of them have other uses and utilities for smart contracts, and for programming, and for other functions, but probably aren’t considered money.

Daren Hebold: [00:08:06] Bitcoin is clearly the winner as far as recognition and global adoption, where people say, Yeah, that’s money and I’m going to use it as such and treat it as such. So, it’s unique because it requires a great expenditure of electricity to print or mint or mine, I guess we would call it, a Bitcoin. So, if you or I wanted to do it, we could do it tomorrow. You pop online, and for several thousand dollars, there’s an entry-level mining machine, and you don’t need any real skills, it’s a plug-and-play device.

Daren Hebold: [00:08:45] You plug it into your electricity and it juices it. Your bill goes through the roof and you start printing or mining Bitcoin rewards right away. So, anybody can do it. It just costs a lot of money. And we can talk about it later. We’ll unpack it. But the cost to mine one Bitcoin sort of sets the floor for the price, because it’s many thousands of dollars to mine one Bitcoin. Whereas, some of these other cryptocurrencies involve what’s called pre-mining or really just pressing a button and 10 billion units of some certain token appear.

Daren Hebold: [00:09:30] And so, there’s not a lot of intrinsic value in those projects, and the market determines that. No one person points and decrees which cryptos have value. The market decides, which I love. I love Mr. Market. And the market says [making sounds] that coin was pre-mined and it’s proof of stake, and I could create another one of those tomorrow morning, and that doesn’t have much value to me. That’s why that’s trading for a penny. Whereas, a Bitcoin is trading for $30,000 these days.

Mike Blake: [00:10:05] And what is the guts of how mining happens? Is it solving equations? Is it random number generator? Is it something else? I mean, how does that—and I understand we’re limited to Bitcoin, but I think Ethereum kind of works the same way. You can still mine Ethereum, and maybe Dogecoin, and others. How does that work that it proves that there’s an algorithm that effectively proves that you have produced somehow a piece of cryptocurrency?

Daren Hebold: [00:10:39] Sure, sure. I’ll keep it simple. So, Bitcoin was the first birth of a blockchain. And a blockchain simply means that there is a public ledger that everybody can pop online and view, and it just shows that I gave today here on May 18th, I gave Mike one Bitcoin from this wallet to that wallet, and that gets codified into a ledger. And what the mining does is it proves that. The mining network of all the global miners performs calculations and proves cryptographically that, yeah, Daren’s wallet gave Mike’s wallet one bitcoin on said date and time. It’s indisputable, it’s immutable, meaning nobody can go back in time and change it. It’s auditable. And everybody agrees that it happened.

Daren Hebold: [00:11:38] So, it’s a very crucial—it sounds trivial just to prove that I gave you money, but how else does a financial system work without a ledger that everybody can agree on? And mining is the way to secure that. And so, the people that have these rigs and spend not just thousands, but I mean, there are industrial scale mining facilities where people have invested $300 million, as you probably know, and they get paid to run those machines in the form of Bitcoin rewards. So, they run these machines. And then periodically over time, every 10 minutes, actually, the Bitcoin network kicks out some Bitcoin rewards to the miner who successfully hashed that particular transaction. And there’s an even distribution. So everybody gets their fair share of the Bitcoin rewards, everybody who is mining.

Mike Blake: [00:12:34] Okay. Now, I have to admit, and I’m supposed to know this, but I didn’t. 17,000 different cryptocurrencies, right? And most people do well if they can name one or more than one. How do they differ? We think of currencies, of course, national currency, the euro, the dollar, the yen, et cetera, but how do 17,000 different cryptocurrencies differentiate and how do you decide which one or ones is a business you want to trade in or deal in?

Daren Hebold: [00:13:05] Yeah, it’s a great question. Okay. I would say just broadly, I would call them coins and tokens, is kind of what the industry has settled upon. Coins generally refer to if something can be identified as money. And again, I think there’s probably five, maybe 10 tops that people would agree are coins/money. All the other ones are considered tokens and they each have their own separate blockchain.

Daren Hebold: [00:13:36] Again, they’re usually all free to use. Nobody owns them. Anybody can use them for the most part, and they just have different utilities, Mike. So, for example, Ethereum is a smart contract platform. It kind of straddles the fence. It’s the one unique one where Ethereum is kind of considered money right now and it’s trading for $2,000 per coin. But then, simultaneously, it’s a smart contract platform where you can program your Ethereum or your other tokens to do things that you want them to do.

Daren Hebold: [00:14:11] So, you can mirror legal contracts with a smart contract on a blockchain. So, that’s a huge, huge use case out there for crypto, is programmable money. And so, imagine every legal contract where a tenant has to pay a landlord, a supplier gets paid by a corporation, an employee gets paid by an employer, all these can get codified into a smart contract, and really, greatly simplify accounting, bookkeeping, auditing, payroll. Any number of industries are going to be certainly disintermediated by this.

Mike Blake: [00:14:57] So. We talked a little bit about this in your intro, but I’d really like to get your in-depth take on this, because I think it’s really important. And that is, why has cryptocurrency a currency that was invented, now, less than 15 years ago? Why has cryptocurrency found the market and the traction that it has? We’ve never seen anything like this in our lifetimes, have we?

Daren Hebold: [00:15:22] It’s a great point. Yeah. We have not seen new money, God, in centuries, right? I mean, way back there were several forms of money, coffee beans, large stones, wampum, parcels of real estate. You could probably name more. But no, we have not seen new money in a while. We’ve just been kind of going along with gold and silver up until it was made illegal by governments of the world, who, that did not fit their narrative, and they wanted to introduce central bank fiat debt currencies, and they have successfully run with that for quite some time now.

Daren Hebold: [00:16:09] But look what’s happening. Maybe they didn’t do such a great job. We had a great run with fiat currencies, but if you pop on the imf.org right now, it’s nothing short of a death procession of every single fiat currency out there that are experiencing hyperinflation as we speak. So, Central Banks invented these currencies, and then they got themselves into a pickle when they started printing more, and more, and more, almost without discretion. And in the last two years alone, the US dollar has printed—40% of the dollars in circulation were printed, meaning the Central Bank in the US pressed the button, and dollars, electronic dollars came out, and that comes with consequences.

Daren Hebold: [00:17:00] So, even our beloved dollar is now eight-and-a-half-plus percent inflation. And so, circling back to your question, the reason that we need to consider new forms of money is people are getting eaten alive with the fiat currencies that are tanking in value. Turkey, 54% inflation. If you have $1,000 in your bank account, by Christmas, it’ll be half of that. I mean, that’s catastrophic. I mean, can you imagine that? So, we, citizens in different countries in the world, that have been forced to use fiat currencies are being forced to come up with alternatives, and I think Bitcoin ticks a lot of boxes there.

Mike Blake: [00:17:47] Earlier in my life, I actually did live in a hyperinflationary environment. I lived in Belarus and Ukraine shortly after the fall of the Berlin Wall, and they were struggling to launch their own currencies as their currency just died, right? The Soviet ruble was just gone overnight. And the last time that I was over there for any length of time, the exchange rate was 200,000 Belarusian rubles to the dollar. And about 80,000—the currency that was existing, where it’s used to be called the karbovanets, 80,000 of them to the dollar.

Mike Blake: [00:18:21] And I remember paying for lunch with bags of money and the server would have to come over with one of those banknote counters to make sure that I paid the correct amount. And it was just so chaotic, because the prices couldn’t even keep up. You see a Snickers bar that would be for sale in the morning for 3,000 rubles, you come down at the end of the day, be 7,000. It was crazy, and I wonder if cryptocurrency could have helped those economies achieve some stability back then.

Daren Hebold: [00:18:56] Interesting. Well, I’ll tell you, another thing that’s important is just governance. So, I think part of the reason Bitcoin has floated to the top is just that. There’s only ever going to be 21 million Bitcoins. That is huge. So, we’re controlling. We, collectively, all the miners, have signaled that we want a cap on Bitcoin, and that tends to preserve its value, whereas governments have unlimited emission. So, we’ve got to have governance in place to govern emission, use, just kind of equity and the fact that it cannot be censored, or revised, or reversed.

Daren Hebold: [00:19:42] All these are important things. And and if we can keep those favorable attributes in place, which they are, for Bitcoin specifically, then absolutely. It’s a great use case. You touched on Belarus and Russia. Let me just read you something here. Granted, this statement’s a couple of weeks old, but with the advent of Russia being internationally sanctioned, where people cannot bank with any Russian. Not just the prime minister of Russia or the 2,000 oligarchs who have been tagged as being criminals, but everybody in Russia is being equally penalized. Here’s a statement here from CryptoSlate magazine.

Daren Hebold: [00:20:25] “Russian citizens are justifiably fearing the seizure of their retail deposits and naturally want to protect their capital. Purchasing digital assets is an effective means by which ordinary citizens can move savings out of the financial system in order to preserve capital.” What a powerful statement. I mean, that is quite a use case if I’ve ever heard one. Another one was the Canadian truckers who did not break any law, were never convicted of a crime, but their banks froze their accounts, just politically. They just didn’t appreciate truckers driving around talking about freedom. That’s a threat.

Daren Hebold: [00:21:09] So, they froze bank accounts left and right, and citizens were left without legal recourse other than accepting donations via cryptocurrency, so another use case. I guess more and more, we’re seeing that it’s become cool for governments to become tyrannical and sort of take matters into their own hands, including their Central Bank money policies. And it’s really not funny to the average person who has worked their whole life to establish some savings and is starting to see it just melt away via inflation and such.

Mike Blake: [00:21:47] So, a key feature of cryptocurrency, I think, and correct me if I’m wrong, please, is that there is no king or queen of Bitcoin. There is no Bitcoin chairperson, There is no czar. It’s just out there, right? And it’s self-regulating, self-trading, and that’s it.

Daren Hebold: [00:22:08] That’s it. No one owns it. Everyone can use it. Exactly. And it is literally free. You can be a dirt farmer in a foreign country, and you can download a wallet, and begin using it immediately. And no one can stop you, or ask you what you’re doing or why, and that’s just fantastic. There’s no intermediaries, too, or it’s direct peer-to-peer payments.

Mike Blake: [00:22:37] Are you familiar with FATCA, the relatively new regulation about disclosing international payments? It’s an acronym for something. I forget what it’s called, but you probably would know it.

Daren Hebold: [00:22:48] Yeah.

Mike Blake: [00:22:50] Is that driving cryptocurrency, too? Because, man, what a pain. What a pain that regulation is not. Not that it costs that much, but the burden of complying with that paperwork, I’ve ridden shotgun with people that are doing it when they’re buying or selling businesses, transferring assets. It is a monster.

Daren Hebold: [00:23:10] The notion of borders literally becomes foolish when you start working in cryptocurrency. You say, why? Why do I have to stop, get frisked, hassled, taxed, chipped, and tracked, just because I want to give Mike some money, because he’s over that border over there, be it a federal state or international border? It’s silly. And there are very few instances when I think it’s a legitimate hassle, to be honest with you. So, there are people that are going to violate laws, and no matter what type of money is in use at the contemporary time, yeah, certain number of people are going to violate laws. But just the fact that I’m sending money over a border, I’m not sure how that entitles all manner of authorities to hassle me, and possibly censor and resist my transaction.

Mike Blake: [00:24:12] Yeah. And for those of you scoring at home, FATCA, F-A-T-C-A, stands for Foreign Account Tax Compliance Act. Sorry, I didn’t have that prepared. That was an off-the-cuff question I thought of. But take a look at it. It is burdensome. Whether you agree with it or not, I don’t think anybody disagrees that it’s burdensome. So, Daren, this is a business podcast, what is the killer app for a business person to start using or expand the use of cryptocurrency in their business?

Daren Hebold: [00:24:49] Great. Awesome question. Let’s get right to it. So, okay, so here we are, we’re 12 years into Bitcoin. There are two killer apps right now for business, and I’m using them both. First one is hold bitcoin specifically on your balance sheet of your business. Okay. That serves several purposes. First of all, it’s balanced on your balance sheet. It’s owner’s equity that you can carry short, medium, or long term as just additional equity within your company that tends to grow over time.

Daren Hebold: [00:25:30] I mean, if you look at the long haul, it generally is going to appreciate over time passively, without doing anything. The second thing you can do with that Bitcoin on your balance sheet is it’s lending collateral. So, we and your listeners out there can become your own bank. So, you can post—for every bitcoin you post—well, let me back up. Okay. So, you’re holding a tranche of Bitcoins on your corporate balance sheet.

Daren Hebold: [00:26:03] Those are Bitcoins. You say, okay, great, but I need USD to operate my business, I need some working capital, I need a revolving line of credit. You usually go to the bank to get that. Now, crypto banks have emerged, where they say, Hey, Mike, post your bitcoins with us as collateral and we’ll give you up to a 50% loan in US dollars that you can use for whatever purpose you want, you don’t need underwriting, it’s just simply a balance sheet loan, and we can offer you a very competitive interest rate of about 4.95%.

Daren Hebold: [00:26:41] How’s that sound to you? Well, it sounds fantastic to me, and I use it all the time. So, we’ve taken a portion of our corporate treasury and post it as collateral in some of these trusted crypto banks who have lent us US dollars that we can use for working capital. It’s a fantastic instrument. And what happens is as time goes on, the value of my collateral goes up, and we say to ourselves, I look at my partner, and we say, alright, you know what, let’s retire that loan and go get a new 50% loan based on an increased value of our Bitcoins that we own.

Daren Hebold: [00:27:19] So, that’s the first killer use for businesses, Mike. The second one, we haven’t mentioned this phrase yet, but one cryptocurrency that we believe in is USDC. USDC is issued by Circle Financial in Boston. It is a digital version of a dollar. It’s pegged 1 to 1 with the dollar with audited reserves. And what you can do with that digital dollar is go to the same crypto banks that I was describing and earn a meaningful interest rate. So, the savings account is back. I mean, when’s the last time we were getting 4, 5, 6, 7% interest rate in a bank account, perhaps the early ’90s.

Mike Blake: [00:28:09] Ages ago.

Daren Hebold: [00:28:10] Ages ago. And now, it’s gone. Now, it’s a fraction of 1%, and with inflation, you lose. So, now, you can take your US dollars, convert them to USDC which we believe is the forerunner of stable coins, and post them on deposit with these crypto banks, and earn something in that range that I just said, 4 to 7% is kind of the prevailing rate, and you say, wow, how can they afford to pay depositors that much? That’s fantastic.

Daren Hebold: [00:28:46] I mean, how can they do that? They’re a lender. So, they turn around and lend that money out with about a 2% spread. And then, you say, well, how does that interest rate compute? Because a minute ago, you said you’re a borrower at about 5%, and then on the other hand, you’re a lender at about 6 or 7%. Well, the way they work it is small LTVs, so internal to their banks.

Daren Hebold: [00:29:15] They’re only lending out a very small percentage of their assets that they’re holding as collateral. And additionally, when you post collateral, you’re no longer earning interest. So, they’re only paying interest on a very small percentage of the assets they’re holding in custody. That’s how the math works out for them. But those are the two killer apps that I can bring to you guys today. There are going to be many more, and we can unpack those if you’d like.

Mike Blake: [00:29:49] One I’ve thought about, you tell me if I’m wrong, but I wonder if international payment settlement would also be a killer app, because moving money in between countries is still, amazingly enough, a 7 to 10-day exercise, and that’s just too long.

Daren Hebold: [00:30:08] Agreed. And I’m almost out of school in saying this, but I think this probably addresses your question. I believe BRICS, the BRICS consortium of Brazil, Russia, India, China, I believe when they conduct their international trade, they’re settling in gold, I believe, right? I don’t know if it’s physical or if it’s promissory notes of gold, but yeah, think about that. If they could settle in Bitcoin, you can send $20 billion and it cost you a mining fee of just over a dollar right now. So, it’s just a fantastic medium of exchange in that regard. And again, yes, borderless, to your point, and you don’t have to gain permission.

Daren Hebold: [00:31:02] It’s entirely up to the sender and the recipient to conduct their business as they will. So, I think that’s a great use case. You’re also going to see Bitcoin—perhaps, before you see it as an international settlement device, you’re going to see it—right now, it’s an individual settlement. You gave me a car, I gave you a Bitcoin. Then, you’re going to see it as an intercorporate settlement. I owe you $5 million, I’m going to settle in Bitcoin. Then, you’re going to see it governmental, and then international. So, it’s scaling up. It’s no longer a tool for geeks to trade on the web with and nobody else cares about it.

Mike Blake: [00:31:49] Now, I know you have a background in real estate as well, so I’m curious about your view on this question, is that, I wonder if cryptocurrency, in general, and Bitcoin, in particular, has a role to play for real estate, especially given the velocity of transactions, right? And my own personal story, we’re considering property in Portugal for retirement, but properties are going as fast, they’re just as fast as they are here, right? Telling somebody, hey, I want to buy the house, but you’ve got to wait 7 to 10 days before the money shows up, you’re going to lose real estate opportunities if you have to wait that long for the money to show up.

Daren Hebold: [00:32:27] Yeah, you got it. So, boy, there’s a lot of boxes that crypto ticks as far as real estate transactions. So, where do we start? Let’s see. I guess I would start by saying, yeah, it’s very fluid and liquid. If you find a property you like, you can escrow your deposit with a title company in 30 seconds. It’s done. Boom. And in the future I think you’re going to see, associated with that deposit, Mike, you’re going to see a smart contract replace title agencies.

Daren Hebold: [00:33:08] Like here’s a transaction, you log into a web-based console, and there are 14 steps required. And step one is sign a purchase agreement. Step two is here’s the Bitcoin address for your deposit. Step three is attorneys conduct title work and upload their results, et cetera, et cetera. So, there will be essentially an algorithmic title closing agency of the future. I’d love to do it. It’s another startup I don’t have time for right now. Maybe somebody else can do that.

Mike Blake: [00:33:40] Yeah, that’s plenty of room. So, we’ve talked about all the positives about cryptocurrency. What are the pitfalls or the risks? What is somebody somebody thinking about deepening their relationship with crypto in their business? What do they need to be aware of? What are the potential gotchas if you’re not careful?

Daren Hebold: [00:34:00] Sure, sure. Yeah. Okay. First of all, I would start with just like selection of coin. There’s just all too few cryptocurrencies that will be around five or 10 years from now. So, at our exchange, when we’re advising desk clients, we say, listen, just stick with this short list of five potential coins to put into your portfolio. So, number 1 would be selection and longevity. Number 2, everybody’s very focused on the price, and right now, it’s kind of a buzz saw.

Daren Hebold: [00:34:42] The prices of all cryptos, and frankly, even Wall Street and commodity assets are just all over the map, and there’s been a big drawdown in the last six months. It’s like a 35% drawdown across like all commodities, and securities, and cryptos in the last six months. And there’s a lot of forces at play and not everybody wants to see Bitcoin succeed. There’s just a lot of vested interests who would much rather that it be uninvented and go back where it came from, because they like earning 3% transaction fees.

Daren Hebold: [00:35:15] They like having unlimited Central Bank fiat emissions. They like having total control over everybody’s movements. And there are instruments to bring cryptos down, like derivatives and shorting. And so, there’s that. And then, thirdly, I would say storage. So, the beauty of cryptocurrency, one piece we haven’t touched on, is just custody. You no longer have to place your money in custody with someone else. You can engage in 100% self-custody, meaning you hold your wallet, or you can do what we have chosen after four years of careful planning, which is collaborative custody, which is Mike holds a key, and our firm, LUXOLO Financial holds the other key, and then we send you home with a backup key.

Daren Hebold: [00:36:07] So, you hold two of three keys to your crypto wallet and we hold one. And unless there’s unanimous consent across the key holders, no money can leave the wallet. So, it’s a fantastic method of enjoying the beauty of self-custody, but also having someone holding your hand, so you don’t lose your shirt when you forget your passcode or your private key. So, not having a custodian is a very, very large advantage, particularly, today, when we’re seeing banks and governments, again, go tyrannical and just decide that we’re going to seize your assets.

Daren Hebold: [00:36:47] If I’ve got time, I’ll read you one other thing. There’s a very large online exchange that I’m sure we’ve all heard of, and they just released in their latest 10-Q SEC filing the following statement. “Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of bankruptcy, the crypto assets we hold in custody on behalf of you, our customer, could be subject to bankruptcy proceedings, and such customers could be treated as general unsecured creditors.” Wow. Think about that.

Daren Hebold: [00:37:26] That is called a bail-in, if you guys aren’t familiar with it. That’s when a bank or company becomes insolvent due to a run on withdrawals, and they say, well, we got to take 40% of your Bitcoins and you can probably have the rest. So, unbelievable, that that’s a statement made by a publicly traded cryptocurrency exchange. We might take your Bitcoins if we run into trouble. So, that’s why you don’t want custody. That is exactly why. So, consider holding your crypto in your own wallets or in a collaborative custody environment. You can set up your attorney, or your accountant, or your trustee with a key. There are many ways to mirror legal frameworks with the signatories on a wallet.

Mike Blake: [00:38:15] That custody question brings an idea that’s half-baked and maybe it’s totally stupid, so you can feel free to tell me that, it’s just the internet, and that is this, that for good or ill, I do a lot of work with partnerships that are not working out, and one partner’s going to buy the other out, and they just couldn’t agree on stuff. And one of the issues that comes up often is simple governance, right? Who has the right to sign that check? Who has the right to make a distribution? Who has the right to take out that loan or repay a loan? That sort of thing.

Mike Blake: [00:38:57] And historically, companies, just for expediency, have had to give one shareholder kind of the keys to the kingdom, and hope that obey the rules and do the right thing, because trying to put two or three signatures in the same check, and get everybody in the same room, and the technology is not there to do that in a very real way. But it occurs to me, of cryptocurrency, where, literally, all you have to do is everybody just kind of put their thumbprints on the phone to authorize a transaction or not authorize a transaction, could actually be a fantastic governance tool.

Daren Hebold: [00:39:34] Absolutely. You nailed it. So, you’re able to take what was an informal governance plan, like the two dudes have to both sign all checks over five grand, well, that’s not enforceable and it’s impossible to-

Mike Blake: [00:39:49] Hard to implement in practice, for sure.

Daren Hebold: [00:39:50] Yeah. Whereas, with cryptocurrency, you can strictly enforce all this with software. And that’s how I run my company. My partner and I require unanimous consent for all withdrawals, both fiat and crypto, and it’s just a fantastic advent. And yeah, and it applies not just to businesses, Mike, but I mean, I’m just thinking of, yeah, real estate transactions, with these lawyers, title agents, trustees, various adverse parties, just things where you need an absolutely objective and bulletproof governance, you can implement that without trouble. It’s built right in to the Bitcoin blockchain functionality. You don’t need to be a software programmer. That functionality is built in.

Mike Blake: [00:40:40] Can you think of a kind of business that shouldn’t be fooling with cryptocurrency? Is there somebody that, yeah, this isn’t for you?

Daren Hebold: [00:40:48] Yeah, it’s interesting. I mean, both individually and corporately, you probably have to have some risk tolerance. You probably have to have a longer view on your treasury assets. And you probably—yeah, I’d say those are the two major factors. And so, for a very, very conservative person or company, it might not tick the boxes. It might not work. I’d say that, and as I’m saying that, though, like mass mutual insurance, one of the most conservative companies I can think of, bought $100 million of Bitcoin to put on their balance sheet.

Daren Hebold: [00:41:31] And that news came out maybe a year-and-a-half ago, and you can see the transaction on bitcointreasuries.org. And so, I said, why would a hyper conservative insurance company do something like that? And it turns out they did it to buttress some of their negative yielding bonds, actually, so they saw it as a partial solution to bolster their profitability over time.

Mike Blake: [00:41:59] So, I’m going to ask you to put on your fortune teller costume for a minute, because I think the future of cryptocurrency is really interesting, and I would argue it’s sort of an inflection point. And one of the things I’d like you to opine on is, do you see cryptocurrency ultimately replacing conventional national currencies, or do they find a way to co-exist?

Daren Hebold: [00:42:26] Wow. That’s a fantastic question. Look no further than Central America, which is becoming the cradle of governments adopting Bitcoin as national legal tender, and look at the reasons for that. They are forced to either use the dollar, which is experiencing significant inflation, but they’re not experiencing any of the benefits of like the Joe Biden airdrop monies, the cheap debt, the COVID rent relief checks, the PPP, they don’t get any of those benefits, but they have to suffer the indignity of the high inflation of the dollar, and they say, no more.

Daren Hebold: [00:43:12] We’re adopting Bitcoin in El Salvador, and Panama, in Mexico. This is the roster of countries moving forward for that reason, and that train didn’t stop at any time soon. And I think absolutely, you’re going to see them coexist, much to the chagrin of the IMF, who comes out with heavy-handed penalizing statements each time a country decides to do this. And so, that tells you it’s good. It tells you that the country did the right thing by increasing their options for their citizens, which, that makes the IMF mad when citizens have options.

Mike Blake: [00:43:52] Well, Reggie Jackson is famous for saying, they don’t boo nobodies.

Daren Hebold: [00:43:57] Yeah, you got it. Yeah. So, crystal ball, yeah, you’re going to see it being a permissible legal tender in increasingly more countries. In so doing that, it’s no longer subject to capital gains tax in whatever country does that. You’re going to see retailers accepting cryptos. You’re going to see hybrid neobanks and financial service firms, such as mine, appearing. Legacy banks are just, in no way, going to adapt and build infrastructure for this.

Daren Hebold: [00:44:37] It’s just not happening and I don’t think it is going to happen. They will make desperate attempts to pay consultants to bolt things on, but I think you’re going to see a whole new industry of neobanks, cryptobanks, and crypto financial service providers, such as us, providing all financial services in the future, including allowing you to become your own bank, your own lender. You’ll be able to deposit your paycheck, invest in cryptos, take out a loan against those cryptos, convert back, all seamlessly within one app.

Mike Blake: [00:45:15] Some countries have said that they’re exploring launching digital currencies. The US has talked about it. I think Sweden, to my recollection, is probably the most advanced in their thinking on this. I think they’re beta-testing an e-krona at this point. I don’t know if you’re familiar with them, but if you are, are those in the cryptocurrency family, or are they kind of something different?

Daren Hebold: [00:45:44] Stay away from Central Bank digital currencies, yeah. They’re a tool of control and manipulation. They’re most popular among communist governments, namely People’s Republic of China has started the digital one program. And I can get into all of the very unfortunate attributes that the users of that currency suffer, but I will say this, it’s not a cryptocurrency. It’s a centralized database, and it is not a public ledger. It is not a consensus-based protocol, where people can democratically vote and get involved. Absolutely not. It’s an enhanced layer of control for central banks to administer their debt-based fiat currencies. So, that’s my stern warning against these, yeah.

Mike Blake: [00:46:47] Okay. I’m talking with Daren Hebold, and the topic is, should I integrate cryptocurrency into my business? Keeping you in your fortuneteller’s costume, what is it—and you may or may not agree with the premise, I don’t think cryptocurrency is quite mainstream yet. I think it’s close, but I’m not sure I would characterize it as mainstream yet, simply because I can’t go to Kroger yet and pay for groceries with cryptocurrency. So, that would be kind of cool. So, what do you think it’s going to take? Is it just gradual adoption? Is there a day of reckoning or an inflection point? What is it going to take when we’re going to recognize cryptocurrency as a mainstream medium of exchange and storage of wealth?

Daren Hebold: [00:47:34] Yeah, you got it. We’re not far. Money requires adoption, use, portability over time and space, durability, yeah, store of value, medium of exchange. And we are moving up that adoption curve rapidly as almost a one—I think it’s just over a $1 trillion market cap of all cryptos, the vast majority of that value being Bitcoin, specifically. More to the heart of your question, we, in the industry, believe that there could be a seminal moment coming, where as traditional assets classes continue to burn down in value, we strongly believe there’s a likelihood Bitcoin can serve as an ultimate hedge.

Daren Hebold: [00:48:30] Now, that’s yet to be proven, because everybody’s saying that’s correlated with the stock market, et cetera, but we see a seminal moment when there is the next Lehman Brothers moment of this era. We think Bitcoin is going to play a crucial role in preserving, enhancing value during said crisis, and that might not be that far away. We’ve got a lot of people out there talking about Lehman Brother-type analogies with modern day companies these days.

Mike Blake: [00:49:02] So, if someone listening to this podcast is on board, they believe the thesis that like, yeah, cryptocurrency got to start doing it, how does someone get started? How do you dip your toe? How do you open the door?

Daren Hebold: [00:49:16] You got it. Alright. Good question. So, we recommend starting small. So, anybody considering investing in Bitcoin, I would start with that coin. It’s probably the most reliable over time. Buy small amounts weekly, monthly, over time, recurring basis, you’ll be able to dollar cost average in that way. You can come to an exchange either online, but you’ll have to help yourself and figure it all out yourself in that regard, or you can come to an in-person, over-the-counter concierge exchange like my firm, for example.

Daren Hebold: [00:49:50] I’m one of just a handful in the country that does this, where you can walk or phone in LUXOLO Financial here in Portland, Maine, right on Marginal Way, or phone in, and we will walk you through the process of setting up a wallet, and funding your exchange transaction, either on a one-time or a recurring basis. And one of the wealthiest persons I know, you’re going to like this, in 2016, he started buying $21 a day of Bitcoin, and he hasn’t let up, and he’s a millionaire right now.

Daren Hebold: [00:50:28] So, I think that’s a pretty reasonable investment, and there are people who can afford to sink a lot more than that into it. So, give it a try. I think you’ll be thrilled with how it functions and how it can be used as collateral for lending, and money, for purchases. And there’s quite a lot of good people working in the industry. It’s a lot of fun.

Mike Blake: [00:50:54] Daren, it’s been a great conversation, but unfortunately, we’re running out of time. There are probably topics that our listeners would have wanted me to cover, but we didn’t or wish we would have spent more time on. If somebody wants to contact you for more information about how to integrate cryptocurrency into their business, can they contact you to follow up with questions, and if so, what’s the best way to do that?

Daren Hebold: [00:51:15] Thank you. Yes. Whether it’s me or one of my skillful team members, yeah, please do reach out to us with no obligation here at LUXOLO Financial. The website’s luxolo, L-U-X-O-L-O, .io, and you can either telephone us, email us, or chat with us on a little chat on our screen website there, and we’ll be happy to lay out some options, and see if it’s a match for you.

Mike Blake: [00:51:47] And that’s going to wrap it up for today’s program. I’d like to thank Daren Hebold so much for sharing his expertise with us. We’ll be exploring a new topic each week, so please tune in, so that when you’re faced with your next business decision, you have clear vision when making it.

Mike Blake: [00:52:00] If you enjoy these podcasts, please consider leaving a review with your favorite podcast aggregator. It helps people find us so that we can help them. If you would like to engage with me on social media with my Chart of the Day and other content, I’m on LinkedIn as myself and @unblakeable on Facebook, Twitter, Clubhouse, and Instagram. Also, check out my LinkedIn group called Unblakeable’s Group That Doesn’t Suck. Once again, this is Mike Blake, our sponsor is Brady Ware & Company, and this has been the Decision Vision podcast.