It’s a little less than two weeks since Crypto Bahamas began, but we’re still bringing out content from the conference, because, seriously, there was so much good alpha we couldn’t not share it.
During the conference, I sat down with Kevin O’Leary from “Shark Tank”, who was dressed in a pink blazer and flip flops, to discuss the current regulatory situation surrounding the crypto ecosystem, institutional firms entering the space and the kind of crypto-focused company he would create if he decided to do so, among other things.
Read on for the full interview.
Editor’s note: This interview has been edited for length and clarity.
TechCrunch: What are your thoughts on policy in crypto right now. What are we going to see in the coming months with regard to regulation?
O’Leary: There’s a lot of excitement about the bipartisan bills that are going through the Hill right now.
Let’s just take inventory — we’ve got the [Senator] Cynthia Lummis bill that’s the granddaddy bill, it’s over 600 pages and contemplates all aspects of crypto.
Then we have [Senator Pat] Toomey and [Senator Bill] Haggerty’s bill that just focused on stablecoins, and so they’re much shorter bills more likely to pass first, which is why there’s so much excitement at this conference, because stablecoins represent a payment system that could make the U.S. dollar the digital currency globally.
People would probably do that before they took on any other currency; the problem is, there’s no policy, and although there are so many institutions showing up here, none of them own any bitcoin. None of them own any stablecoins. They own no crypto whatsoever, because it’s not a regulated security yet.
So think about this: At the end of the day, if policy comes through, there is going to be a huge number of index products within institutions, and that [could] get bitcoin moving again. That would get a lot of different aspects of the blockchain incorporated into sovereign pension plans. That’s the buzz of this conference right now.
Fidelity recently said it was going to start allowing Bitcoin into retirement plans. How do you think that plays into the growth of what we’re going to see with digital assets in this space?
I was extremely skeptical about crypto, but became a big advocate when I started to see policy change in the Canadian market.
Well, there’s no question the “granddaddy” asset is Bitcoin. I mean, that is, you know, 40% of the market capitalization of all the tokens. So they’re choosing that first, for obvious reasons.
However, [Fidelity] also invested $200 million beside Blackrock in Circle, the company that issues USDC — that was unprecedented. So a $400 million [total investment], at a $9 billion valuation from the most conservative money managers on earth.
I think that gives you an indication of where we’re going with crypto. So Fidelity offering it at the consumer level and investing in the issuer is a big deal. More of that buzz, you know, it’s just a matter of when one of these bills becomes law. We’re close, but we’re not there yet.
Do you talk to people who make laws, whether it’s in Congress or in the White House or anywhere about this? What are their views?
They realize that 80 million Americans have started investing in crypto. The genie is out of the bottle, so to speak, so what’s missing is policy. And yet, the reason I think you’re starting to see some motivation to get something done in Congress is, they’re seeing countries like Canada, United Arab Emirates, Switzerland, Germany, France, England, advancing policy way ahead of the U.S.
So do they want to get a hold of this or not? Because if you think about what Bitcoin really is, it’s not a coin; it’s software. It’s software development, and the developers are not in the U.S. because the regulator doesn’t want them here yet. It seems that’s the feeling they have.
If they make [a nationwide] policy, they’ll start to get this talent back in the country. So I think, you know, Toomey, Lummis, all of these senators and congressmen and women realize we’ve got to be part of this industry. I actually think that crypto, in 10 years, will be the 12th sector of the S&P, and so we need to prepare for that. We want to own it and set policy for it. And we’re nowhere, so we’ve got to catch up, and that’s basically why there’s some kind of urgency to this now.
You were on a panel called “The Boomers Are Coming: How Crypto is Transforming Wall Street.” What has the migration of talent, products and services from Wall Street into the digital asset sector been like?
If you take, you know, a graduating cohort of MBAs at Harvard right now, and you ask them what is the number one asset class they want to work in, it’s cryptocurrencies.
So if you’re 25 years old and coming into the workforce, the fastest growing sector is crypto. So as a society, we have to start training people about this, because most people don’t understand how blockchain works; they don’t understand how a stablecoin works; they have no idea how Bitcoin is mined or how it’s awarded.
And all of this stuff, it has to find its way into our educational institutions. I mean, it took me two years to get up to speed on this stuff and hire enough people to be able to do this for me. It was very hard finding crypto-savvy people.
How do your background and experience impact your choices and views on crypto when you’re investing in the sector or looking at companies to invest in?
I look at the software development teams and I simply say, “I need diversification, I have to make bets.” So what’s Polygon doing? What’s Solana doing? What’s going on in Helium? What about Avalanche or all these different protocols? So I’ve spread my bets, I own them all.
So my attitude on this thing is, you need diversification. It’s not just owning bitcoin. [If] you think about the traditional mode of sovereign wealth management, let’s say you’re running a $100 billion mandate, which is a small sovereign wealth fund. What you’re basically saying is, there’s 11 sectors of the S&P, and I’m gonna own up to 20% of any one sector and up to 5% in any one stock.
It’s the same thing with crypto. Right now I own 20% in crypto in our operating portfolio, and I’ve got 32 positions. So that’s diversification.
If you were to make a company, hypothetically or realistically, focused on crypto, would it be focused on software or something else? What do you think you would do?
I’m really interested in the new level of blockchain opportunities and around tokenization of physical assets. That’s an area of my investment, I guess I would say.
Take an industry like the watch industry. I’m a participant as a watch collector. [It’s a] multibillion dollar industry. The secondary market in watches is 12 times the size of the primary market. So in other words, when Patek Philippe issues a watch, they sell them all out. In a year, maybe they sell 3,000 watches. There’s going to be 10 times that trading in old Pateks, but the challenge is, most of them are fake. I don’t know if it’s real or not. So I have to go through authentication that costs me thousands of dollars with an expert that opens the watch up and looks at it.
If there was an NFT that was issued when it was originally minted, I would have all the data about that piece, and it would make the authentication a lot easier.
That’s the kind of industry that I think it’s gonna start adopting this digital blockchain technology that tracks the sale of that watch through the dealer, through the secondary market, and through the different owners over time. It’s very important that when I buy a watch, now I’m asking them, show me the authentication for this watch, show me its origins, show me the paper, show me the box and that’s all going to go into an NFT one day.
Going off all of that, what are you most excited about? Whether it be in policy or the creation of a new NFT use case or anything we’ve talked about. What are you looking forward to most in this coming year?
I’m trying to figure out, like every other investor, what is likely over the next 36 months. Not everything’s going to work, and so I’m trying to figure out — do we get policy [done] in the next 36 months? Which policy? So my guess, the way I’m investing is, I’m putting most of my capital into a bet that stablecoins will get licensed. And my theory is that Toomey or Haggerty, or both of those bills will pass because [they are] two pages. Any Senator can read two pages.
So my point is, if that bill gets passed, they’ll license four or five different stablecoins, and they’ll start to compete in the market, all based on the U.S. dollar. So I’m making big bets on that. That’s my largest holding, because a stablecoin is a payment system, and I think there’s a lot of use cases for a stable payment system all around the world.
So if I wanted to buy Nestle stock in the Zurich exchange, and I could use USDC, it would avoid me having to go from U.S. dollars into Swiss francs, buy the stock on the exchange and when I sell the stock back into Swiss francs and back into U.S. dollars. What a pain that is.
If I could just use a stablecoin to do it, it would be much easier, much less expensive, more transparent, and it has a full audit trail on the blockchain. So I think that that kind of momentum in value creation is very important.
What has been your biggest revelation as you’ve gone into the crypto industry? What has shocked you the most?
I was extremely skeptical about crypto, but became a big advocate when I started to see policy change in the Canadian market. I was stunned to see the issuance of a Bitcoin ETF in Canada a couple of years ago, and I said, “Wait a second.” I mean, that changes everything, because billions of dollars went into that. Then they did a second one with Ethereum. So as a Canadian now, you can invest in an ETF right in your stock portfolio and own bitcoin directly.
That revelation has not occurred yet in the U.S. market or anywhere else, frankly. So they were the first to do it. When I saw that, I completely changed my mind. I said, OK, if the Canadians are going to do it, that means they’re talking to the SEC. It’s going to happen in the U.S., it’s going to happen in other countries like the United Arab Emirates; it’s happening everywhere. And it was a game changer for me. That was the first time I started to invest a significant amount of capital into crypto.
And then I got involved with FTX. I became a shareholder in FTX. I’m a paid spokesperson for FTX. That’s why I’m here at this conference. But I’m a big believer in what Sam Bankman-Fried is doing, and he’s trying to institutionalize a platform that’s compliant. So for me, that’s important.