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It all comes down to computers communicating. The information superhighway can be a confusing mix of on ramps and off ramps. Bitcoin is worthless artificial gold. Is it still rat poison? Probably rat poison squared. We need to get into the world of OK, this is actually foundational technology. What the Internet of Money does is it creates a single network which can do a microtransaction to a giga transaction. The Internet is going to be one of the major forces for reducing. The role of gun. The one thing that's missing that that will soon be developed is a reliable E cash. All righty everyone, welcome back to another episode of Final settlement. Today is Monday, March 9th, 11:36 AM Eastern Standard Time and we've got a big show today. Great show. I'm joined as always by Liam Nelson and we've got a very special guest Mauricio de Bartholomew. Hopefully I'm not uttering your last name knows as best as I could do, but Co founder and CSO of leaden going to be a really interesting conversation. Really excited for this one for a number of reasons, but let in, you know, has been around for a while, which not many Bitcoin lenders can say effectively. You know, the the firm was founded in 2018, I believe, and you were there from the beginning as Co founder. And so you guys have seen multiple cycles and you know, frankly, one of the only lenders to survive sort of the last biggest blow up in 2022. And so that really speaks to to, you know, the firm that you guys have built and we'll get into all of that. We'll get into some of the latest developments on your side in the ABS market, an investment from Tether and we'll get more into your background specifically. But maybe Mauricio, a good place to start. It's sort of just a high level like state of the market. As I mentioned, you know, Bitcoin is gone through multiple cycles where leverage has been a component of that cyclical behavior, to be honest. And so I would like to get your view of kind of where we are in terms of leverage. Are we over leveraged, under leveraged? Was October of last year a major washout moment? Are we still seeing some of that right now? Curious your thoughts on sort of the state of the lending market as as we sit here today? Yeah, thanks for having me. Thank you, Brian. Thank you, Liam and happy to channel things letting all things Bitcoin and all things credit. So to start, I guess to answer your first question on where we're at in the, you know, what's what stage of the evolution are we in for Bitcoin back loans? I would say that when when Bitcoin back loans first started, when we first offered Bitcoin back loans back in 2018, it was Bitcoin back loans for, you know, we're kind of at on par with crypto back loans, right? They were all looked at as these very sort of speculative instruments. But from the very big, from the very beginning, we had let it took a view that Bitcoin was the digital collateral. Everything else was just a gambling token. Frankly that hadn't really proven itself for as collateral. We believe that Bitcoin was different and that's what let it from day one has been a Bitcoin company, right? And a lot of the success that Lenin is having today is having some of those early views that we held back in 2018 validated by the market. Lenin has never pivoted that we've always been Bitcoin back lenders. It's just that right now the world has really sort of woken up to this idea that Bitcoin back lending is a loan and an instrument that you can use to buy a house, to start a business, to fund expenses, grow your family. This isn't this, this isn't the case for most other assets. And I think what you saw from, you know, really in 20/20/25 was a complete bifurcation between Bitcoin back loans and everything else, right? Like, and, and so today what I'm seeing in the market is that Bitcoin back loans are being used very responsibly, right? What I'm what do I mean by that? These products came out to the market in 2018. In the early days, a lot of people had never used a collateralized loan before. They didn't know about margin calls or liquidations or how to protect yourself against a loan, right? They didn't know how to assess risk. They didn't know how to ask for proof of reserves. They didn't know how to look for a for a try to assess where a lender's funding was coming from and understanding how the model works, right. And I think that's come a long way today. If you look at the firms that are offering Bitcoin by globes today, many of them are much more responsible versions of the previous iterations, right? Like if you look at the block price of the world and the Celsius of the world, these are companies that had their own tokens. They were supporting all sorts of things as collateral. They were offering yield on Bitcoin, they were offering yield on all sorts of assets, and that's really where the problems came from, from rehypothecation from taking collateral that had no depth. Why would you want to borrow against basic attention token? Like where's the bid on that? When when the market goes S, but there is no bid. That's what we learned, right. And so what's happening today is just I think what you're what I'm seeing at least is Bitcoin backed loans are understood. OK, when people come into it. No longer there are people asking what is an LTV, right? Like people are saying, OK, I'm starting on my loan. I see that if I take that loan now, I'll have to add more Bitcoin at these levels. What's the speed? What are the timelines to add more big? So the questions are a lot more sophisticated. People understand the product. This is why you're seeing a lot less liquidations and a relative level on down moves like what we're having so far in February, right? I'll give you a very interesting point that was highlighted through the Galaxy Q4 report that came out last week. Since October of last year, the like there was a narrative being built last year. I don't want to say built or pushed. It was just sort of a narrative that was bubbling, which was this idea that D5 worked and C5 didn't and therefore D5 is going to take over the world and C5 is done. And we're seeing now in the Q4 report that is absolutely far from the case, right? Like the October 10th collapses and D5 like basically dismantled the D5 book to the tune of 27%, right? They had never recovered. And now all of a sudden C5 is as big as D5, right? Like back on in the Galaxy report, like again, just this, this is not a, it's probably one of the best reports out there from an industry perspective, but it's still incomplete in that there's people that don't participate in it, right? But what this is showing to me at least, is that D5, as I understand it, has a lot more other stuff in it. Bitcoiners don't use D5 because there's no native way for Bitcoin to use D5. For you to wrap Bitcoin and throw it into one of these protocols, you have to take wrapping risk. You have to take basically custody risk, wrapping risk, smart contrite risk, a myriad of other risks that are not really there if you're doing centralized lending with Bitcoin. So what I would say just, you know, kind of bringing, bringing it back full circle is that I think Bitcoin Back Loans has demonstrated its validity as a product that can be used responsibly both from a user perspective as in people that have using our products since 2018 have done well financially. This is why Leaden is here today because of Bitcoin Back Loans have worked. If our product wasn't helping our clients build wealth or make money, we wouldn't be growing, we would be here, right? And we just had the best year in the history of our business last year. We're off to probably a better one this year so far. The others, and that's on the user side. Now what about the capital side? How's the capital side feeling about this? Well, Lenin just completed the first ABS Bitcoin bond ever 2 times oversubscribed, rated investment grade by S&P. And again, I reemphasize this two times oversubscribed in a down market. OK, So investors love it, consumers love it. And I think that's kind of where we're at for Bitcoin back lows. I think This is why so many people are so excited about this product. Yeah, No, thanks for thanks for walking through that. I think it's a fantastic overview of where we're at. And I love the distinction of, you know, Bitcoin versus everything else. I mean that's something that we talk a lot about on this show. And just in general with clients and prospects. You know, I think it's it, it's slow and it takes time, but I think there is that continued recognition that Bitcoin is just fundamentally different than all these other tokens in crypto assets. And that becomes very apparent in wash out moments like this where you mentioned these low float tokens have absolutely zero bid when things go South. And so I think that's a very important distinction that obviously as a firm you guys have recognized for a long time. So kudos on that. Liam, was there anything else you wanted to pull out from this Galaxy report that we that we pulled up here and that Mauricio mentioned anything worth calling out here? The other thing I did want to talk about that we mentioned was just block fills and the incident there. And if you had any thoughts on the perception of that sort of maybe the realities of what's going on there, is that an isolated incident or are there is that a sign of of more things to come perhaps? Yeah. So great question. And I think that the way I like to think about using collateralized loans in Bitcoin is that there's two major bucket like risks. A bucket number one is counterparty risk and the second one is liquidation risk, right? Those are broadly the two things that can go wrong if you're using a, a, a, a product like this, right? For a while, if you know, in in in the early days, 2018 to 2021, because the industry was basically just being born, people have very little sense of this concept of platform risk. Every platform look really safe. They look great. They had great logos. They were shaking the hands of all these great investors, right. And all of a sudden you realize, you know, in in March 14th or not that was that was the COVID crash. But back when, when Terra Luna collapsed and FDX collapse, collapse thereafter, you had basically Celsius go under block fight, go under Genesis, Voyager, Babel, so on, so forth. And it became very evident that platform risk, if you, if you're working with a platform that is not doing things right, you can lose your Bitcoin, right. And from 2022 to 2025, I would say this was a huge point. And then many people ask letting how did you survive? What did you do differently? And we answered the question in the same way we would today. We don't rehypothecate your Bitcoin. We keep your Bitcoin in custody. That's why it's always there when you repay the loan. And that's what anybody can repay their loans and get their Bitcoin back at any time, right? We don't offer Bitcoin yield, right? There's no risk of loss because we're not lending that Bitcoin unsecured, right? We were the first company to do proof of reserves. None of the firms that went under had proof of reserves, right? So this idea of how to assess counterparty risk was a very big topic of discussion for anybody wanting to take a loan in 2023 and 2024 and part of 2025, right? What happened in 2025 was the market reached a new all time high and when people start looking up, all of a sudden all those short memory, like basically you start getting this short memory effect where all of a sudden nobody cares about platform risk anymore. Everybody just wants the best rate. And because companies like Lennon are thriving and growing, you have other companies throw like literally build Bitcoin back loan products overnight and throw them into the market to try to capture market share. And they will try to force feed that product into the market by offering off market rates and terms and an effort to beat out companies like Lenin that have an 8 year track record, proof of reserves, the most competitive rates in the market. The, the, you know, the, the, the, it's really hard really to put out a product that is more compelling than Lenin. But the way they try to do so is by creating artificially low interest rates and building things that are completely, I would argue in many cases misrepresented and say things like auto protection from liquidation. These loans don't get liquidated at these loans have this magic fairy dust that allows us not to have to liquidate you and guess what the paid you don't have to pay us anything for that hedge. It's also included in the price. Those these are ridiculous ideas. And lo and behold, if the terms are too good to be true, they will fail, right. And so we just had a recent example of a firm block fails that did offer some Bitcoin back loans. And I believe they had also a feature where you wouldn't get liquidated because of some hedging that clearly turned out too good to be true. So what I would say is I don't think this will be the last firm. I'm not trying to suggest that there's like massive contagion and that the next firm is, you know, pending lead to go down. I think these are the natural consequences of irresponsible actors competing in a competitive space, right? And that's just why it's so important and so many people choose let in because we've been around for eight years doing right by our clients every single time. And what you're coming to let in, what you see is what you get. We're transparent about our rates. We're transparent about how we like, how we source our funding. We're transparent about where your Bitcoin sits. Lenin is as transparent as you possibly can be in this industry. And I would be very, very skeptical of any offering that seems too good to be true because 99 times out of 100, they have turned out too good to be true. And you're trying to save a penny, but you're losing your Bitcoin. At Lenin, we optimize for you keeping your Bitcoin. That is it. Are there cheaper ways for us to source capital that we could source if we were willing to work with groups that don't share financial statements? Yes, of course we could find cheaper money. But we don't because the groups that we have standards when we interact with anybody and if you cannot meet those standards, we will not work with you. And if that means our rate has to be a little higher than someone else's, that's fine because we're here to give you back your Bitcoin and to ensure that your kids and their kids can hopefully continue using big comeback low as we let it. Yeah, that's a great point. And on the block fills point too. It's worth highlighting too that even if you don't necessarily have a loan out with a platform like this that could be rehypothecating their clients, Bitcoins who actually have loans out, you're even if you're just using them to trade like your Bitcoin could still theoretically be at risk because they have gated withdrawals for all clients at this point. So it's, it's definitely important to highlight that a lot of these businesses and there's short memory in the, you know, Bitcoin and, and broader digital assets industry where there are always net new entrants who are coming into this space, right? If you have a growing industry, you know, that's, that's what you expect and would hope for. And block fills is, is one that I think they were backed by like Susquehanna and and a bunch of other very big players who are grafting on some of their due diligence and processes that apply just to, you know, legacy financial assets, not necessarily Bitcoin itself till which is, you know, global 365 digital bearer asset and just requires a little bit of difference in the way that you both, you know, consider risk as a as a platform as a whole. So while while we've seen a ton of improvements and you know, a lot of this industry growing up, I think that, you know, at the same time, I wish I wasn't as cynical. But it seems like we're going to continue to see a lot of net new players who are backed by existing large financial institution players that are just going to try to graft on their existing risk frameworks and think that, you know, other players who have been in the Bitcoin space for a longer time are being too conservative and they're missing out on extra revenue till. So it was, it was kind of just curious like your thoughts in general of, you know, why Bitcoin is different than some other legacy assets and and why it deserves to be treated differently too. Yeah. And listen, I think we'll get into this when we talk about the ABS. But a big part of what allowed us to do the ABS is the idea that Lenin has uniform collateral. Our book has all the same collateral and and it has size and scale with that uniformity, right? What you have with other players is at times they'll have a part of their book that's backed by ETH and another part that's backed by Sluna and another part that's backed by Doge. And so when you're trying to put a smorks board of undesired assets into a pool, it creates a lot more questions than what hey, do you just take Bitcoin and the to the point you just made Liam, about other products and services offered by these platforms. That is in fact the big point that not everybody got, you know, not everybody I think fully fully distills about the previous collapses of block fight and Celsius and others. So I'd like if these companies have been taking Bitcoin or even ETH and keeping it safely in custody and lending you dollars by back by it and then giving you back that E for that Bitcoin when you repaid those dollars. You could do that pretty responsibly, right? Like that. There's a path and a way of doing So what what what starts messing things up is you do that, but then somebody else comes to you and says, Hey, I want to earn yield on my Bitcoin. Oh, but to generate the yield, not Bitcoin, you have to lend that Bitcoin unsecured to a third party. Well, if those two products are offered by the same legal entity and you wonder wrote the loan and the person you lend the Bitcoin to this went under, then the loan guy is also under and the yield guy is under and the trade guy is under and everyone in the in the boat is under, right. And even back then, companies, banks today don't operate this way. Banks today, if you're dealing with their trading arm, you'll see that the legal agreements say so and so trading comma Inc, you know, legal entity, right. If you're doing the custody, they'll give you your services are being provided by so and so and so and so and so and so that ring fencing, even that ring fencing didn't exist back of Bitcoin. So that's why it was like, if you think about a boat, an analogy of a boat, you can be a massive boat, but if the boat doesn't have compartments underneath, you can just perforate the top of the boat and everyone in the back of the boat is going to sink just as deep as everyone else, right. And so in traditional finance, and again, you know, letting operates in, in a, in a, in a sort of letting operates in a bridge between Bitcoin and traditional finance because we need to source capital from traditional finance and we need to deploy like capital to Bitcoiners. So we need to be able to speak to both, right? And so how do we ensure we're speaking to traditional finance? Well, we're we offer proof of reserves before nobody else did. We actually pioneer prefer reserves for lending business, right? We are stock 2 type 2 compliant. We are a regulated, we have a regulated entity and came out, we have a regulated entity in Spain. We're going through a lending license in the US We have a full compliance team. Everything's KYC. So we've built the business in this way trying to deliver all of the sort of assurances and procedural guarantees that have been learned through hundreds of years in lending and, and and Tratify. This is why we were able to get rated by S&P, right? Where I figure we're, I think we're one of the few companies that could ever even try to do this. But to your point, Liam, it's like so many lessons around risk management have been learned in traditional finance that shouldn't just be discarded and forgotten just because we're trying to build something in the digital world, right? Like our job is to bring those learnings at our transparency and efficiency and make them better. But we're not going to, we're not going to do ourselves any favors if we're just forcing ourselves to relearn the same lessons not everybody learned back in the heyday, right? Yeah, absolutely. I love all of that. And and one thing you noted in there that I think is, is worth calling out is like there is almost this, there's a perverse incentive for other players to come in and basically try to undercut you with a worse product in terms of the rate, right? Because that's very attractive to the average retail participant who's not thinking super critically about, well, what is counterparty risk actually mean? Are they rehypothecating it? You know, they probably haven't even gone down that path of thinking through those those levels of risks. And we see very similar things on the custody side. You know, our our business at on ramp is focused on Bitcoin custody. We do something called multi institution custody, which leverages multi sig and distributes keys across multiple independent institutions. And you know, it's very similar in the sense that, you know, if someone is holding coins on Coinbase, they think they're paying nothing for custody, right? But it's like you're actually paying for that tail risk that something catastrophic goes wrong and you have a single entity failure and your allocation maybe goes to 0. So maybe you're actually paying 100% of your pick coin. And it's very similar dynamic in lending markets where, you know, sort of being too focused on a one or two, one to 3% difference in an interest rate. It's like, well, what's behind that? Why is it a little bit higher? What is the pool of capital that's supporting it? What is the custody setup look like? All those things are super critical to the actual risk of the underlying going to 0, not just the, the, the interest rate you're paying. So I think that that's super important and glad you, you called that out as, as something that I think that's what takes us to a more mature place is people recognizing those things. And, and how we get there is, is folks like yourselves being super transparent about those risks and, and explaining in very clear terms why you're doing the things the way you're doing them, why your rates are what they are, all those types of things. Appreciate it man. It's a no, no. I mean, this is, this is a, you know, it's funny because when we first started this business, taking this approach was perceived by some to be incredibly boring, incredibly conservative, not exciting enough. And it's, it's, it's been fascinating to see that, you know, after a period of time of that view was getting challenged and challenged and challenged. Now all of a sudden it is the view that seems to be able to scale, right, because who's coming in today in size and deploying all these new investments, ironically, not ironically, I think a lot of us expected this, but they are institutions, right? Like you know which, who are the names that we got we got excited about now so and so is the BlackRock CTF and Wisdom Tree CTF and so and so is ETF and Michael's buying a few me a billion more like these are the names and numbers that make this market move now. And the kind of things that these investors value is precisely what we've been building for eight years while being perceived as potentially boring, right. When you took a view back then that no, most of the stuff is speculation. I think this all comes back to Bitcoin eventually, but you're going to lose so much money on the way. How come you're not going to list all these other hundreds of thousands of tokens and you're missing out on all these trading fees? It's like, no, because if you get distracted by those things, you may lose sight of the actual prize, right? Which is exactly what happened to all these other lenders. Like Lenin was under the shadows of these dodgy giants, OK? Like, you know, block fire was 10 times bigger than that. And Celsius was five times bigger than Lenin back when they were existed when they existed. Today we're the biggest lending company in the market, right? In the Bitcoin back loans and consumer Bitcoin back loans, that is because we never veered, we never strayed from our path. So many people came asking us, oh, block Fi is Celsius is doing 1% loan guys. Why can't let him do 1% Bitcoin back loans And we said we because our cost of capital is 9. Like there's there's no way we can keep your Bitcoin safe and give you this dollar. It's one ask them how they're doing it, but many people didn't ask the question They just no, we could have we could have said Oh no, we have to get into the business of 1% Bitcoin back close. We're going to start rehypothecating and let's re lend the living lights out of the Bitcoin find a cheaper provider. Let's make this happen guys. No, no, that that is not the mission, OK? The mission is to keep your Bitcoin safe and to lend you and to tell you what the money cost and to charge you a small spread on it so that it makes sense for let and I can keep my lights on organically and then the business will scale right? Because if I don't do that if I do anything except for that even if I win, I lost. Does that make sense? Because at best I have a book of speculative loans that nobody wants and they're priced completely bonkers. Like there's, there's no market for these loans. Or I, I had to liquidate a token that didn't have a bid and the business went under. And so to, to us, it was always about, no, there's no, there's no shortcuts to this. We have to basically prove the model is the model and why it is this way and wait to people don't to realize that this is it. Now we, we we don't, we don't have a crystal ball. We didn't know all these guys were going to disintegrate in a sort of nuclear catastrophe one day because Sam, but that's what happened. And we were there to pick up the pieces and we've been there to rebuild the the the sort of market on the foundation that you should use preferred reserves. You should not be re lending collateral. You should be telling people where you get your funding from and how much it costs so that they know that the model is organic. Those things I know you know, are exciting today, but back then everybody was like, Glenn, what are you doing? And today we're very proud to say we're still the same people we were back in 2018. We just have a whole lot more experience under our belt, a lot more now capital and and and the size to start doing a lot more exciting things like going into the ABS market. Yeah, that's awesome. And and we'll get to the ABS stuff, but maybe this is a good spot to zoom out a little bit and go back to 2018 and maybe even before that. In terms of your your specific background. Mauricio, I'm curious how you interested got interested in Bitcoin initially and then maybe it would be good to hear some just early, you know, how the how the firm was created in 2018, what the mission was then. And to your point, like how it's evolved, but sort of, you know, stayed on the same mission, but those learnings over the past eight years, how that's developed and then we'll get to the the ABS stuff and some other news and developments. For sure. So I'm, I was born and raised in Venezuela. And so my family, you know, we all grew up in Venezuela. And I, as Venezuela started falling apart when Chavismo came in. You know, I was 15 when Chavez took office for the first time and saw the country basically fall apart gradually. Then suddenly and I, I witnessed basically expropriations of private property on TV, my dad shutting down his factory, my friends closing down their factories and leaving. I was there at the protests after Chavez died and they stole the election through the Maduro regime. I was, I was throwing rocks at the protests and I know I was there with everyone else. And that day was the first time that I remember hearing real, real shots, real bullets shot at the protesters, which who I was with. And some people, one guy I knew in particular got shot and killed that day. And I went home that night because a lot of us wanted to keep protesting me and my brother. But my mom basically said, my mom and my wife sat me down that night and they said, there's you have nothing to gain and everything to lose by staying here. You've the only, you're the only member of our family that has a semblance of a life outside of this country. You know, we believe it would be a much better use of your skills and time if you went back out and continue building a life out there so that you can pull us out from this mess if this thing falls apart. And I, I went back and that was 2014. And that, that election is what started the sort of mass migration you see in Venezuela today in hyperinflation, because it basically it, it was sort of a done deal that the country had been taken over by these cronies. And hyperinflation, that's where hyperinflation starts. And I'll do a little sidebar to highlight the difference between inflation and hyperinflation, because I think a lot of people consider those two things to be an extension of another. They're completely different phenomenons in my opinion. And an inflation is just a rational response to an increase in the money supply, right? In a, in a fixed state of assets, so you have 10 buildings and $10 million, you print another $10 million, the same 10 buildings, each building goes up 2X. That's, that's inflation, right? It's rational hyperinflation. There's no math. It's I have to leave. I don't believe anyone's going to, I don't believe these assets are worth anything. I am willing to take anything. I will do a market sell order without looking at the book, right? And I will get filled and whatever I get filled. That is hyperinflation. So you're basically fire selling your currency, you're fire selling your assets, you're fire selling your business. And it, it, it basically all sort of rational goes out the window. You know, you'll be, you'll be offered a cent, two cents on the dollar for something and you'll say, fine, I'll take it. That's hyperinflation. It's it's fear of not ever getting anything back for those assets. And so it's emotional. It's not rational. You're not thinking about price or percentages. You're just, you're getting out. So that's the environment that Venezuela's in, right? And my friends are all fire selling their stuff to get out of the country. In the middle of that, my youngest brother was graduating, my youngest brother Mario, and he didn't want to leave the country. So he pitches my dad on all these entrepreneurial ideas. And my dad says, no, no, no, you got to go. You got to go like your brother. You got to go so you can take us out. And my brother, my, my younger brother's more rebellious than me. And he basically reaches, goes to my dad with an ultimatum. And he says, Dad, I'm going to do this whether you want to or not, you can choose to support me. If you don't support me, I'm leaving the house. My dad sends me the e-mail. He's, he basically says, your brother's serious. What do you think? You went to school for finance? It's the Bitcoin white paper. My brother wanted to start mining Bitcoin in Venezuela with subsidized energy. So that's how my brother starts mining Bitcoin. All of a sudden he found a way of getting Bitcoin in the hyperinflationary country with very cheap energy. So he found a way of basically the only way of making good money in Venezuela that couldn't be taken away from the regime. My my middle brother starts mining, my parents start mining, my uncle start mining, my cousins start mining, my friends start mining, and I start building mines with them. Well, actually, first I approved the sort of project I approved there by reading the white paper. And I said, yeah, that this seems to be like the least insane idea. And so then I fly back to Venezuela six months later and I see this guy has double the machines and he's looking for places to rent. And I asked him to show me what he was doing. He took me into his facility. He sold Bitcoin for Bolivares at the fair market rate, which we can get into. It's a long conversation between what is a fair market rated and a hyperinflationary economy. You know, sneak peek or, or you know, it's not what the government says it is. That's basically the answer. But anyway, he sold it. And when I saw what he did, what Bitcoin did for my brother and what it did for others in Venezuela, I was instantly sold on Bitcoin as a tool. And I started basic trying to figure out what I could do with it. Everybody was mining. Everybody I knew was mining. They were making money off of it. So I start building a mine and I convinced my best friend from university, Adam Reeves, to build a mine in Canada where I was living. We have the same issue in Canada that we were having in every other mine, which is we have Bitcoin revenue, but we have Fiat expenses and selling the Bitcoin to pay for those expenses was the dumbest thing we could possibly do. Every single time it happened, we could never buy back the same amount of Bitcoin. So we went out and looked for a loan. We got laughed out of the room every single time. That's it. Like one of the, one of the favorite answers we got was Bitcoin's not an asset. Bitcoin's not an asset. Who would ever do that? And so we looked at each other after like the 5th or 6th sort of laughing out of the room and and we're like, we should do it. Like we'll do the loan, we'll serve our own problem. And so we put our hats together and we put a plan for letting we raise a little bit of money in 2018 and we set out to build a Bitcoin back loan in the most transparent, quote UN quote boring way you could possibly think of. Show me it's in custody. Show me it's safe. Give me a rate and you know, just give me back my Bitcoin when I pay you the loan. And so we did Canada's first go back Bitcoin back loan November 2nd, 2018 to Francis Puglio and Bill's shout out to Francis and and then the rest is history. It kind of snowballed from there. We we continue helping miners. The beginning was Bitcoin businesses, miners, mostly developers, people that got paid in Bitcoin and and then from there on it just snowballed into today the the sort of consumer product has has become right that our clients today are not just Bitcoin natives, they come from everywhere. I love that that's really appreciate you sharing that. That's a a fantastic story and really appreciate just like how far we've come overall as as an industry and you know, especially your family too. I guess like even it would be super helpful to understand like especially given that background what the recent ABS news really means for letting what it means for the industry as a whole. And just maybe share a little bit more details on what exactly the securitization of some of these loans actually means overall for some of the listeners who may not fully understand. Yeah. So let me kind of paint the picture around why this is such a big deal and, and why I believe it's going to be so transformative for the industry going forward. So if you look at what we do for for a living, like what let and does as a business is we source capital from people that have dollars and we lend that capital to people that have Bitcoin and don't want to sell it, right? So each lending product has two clients. There's the person providing the dollars and then there's a person borrowing the dollars. So any lending product that truly scales has to have a right balance between what's in it for the lender and what's in it for the borrower and protecting both, OK? And most importantly, you have to have a scalable source of those dollars and a scalable way of deploying those dollars, right? What's historically and I think if you ask any Bitcoiner this over the last 5-6 years, most people increasingly so today will tell you I will never sell my Bitcoin. Bitcoin is like, I don't want to sell my Bitcoin. It's a great collateral asset. Bitcoin is collateral, right? So the demand side has been proven check, right, like people don't want to sell the Bitcoin, right? The supply side, if you look at who's been lending dollars to this industry, by and large, it has been up until now, crypto native firms or companies. So these would be groups that have very large balance sheets that are still in the crypto space that want to deploy cash because they understand the risk reward and because they just, you know, want to support the the industry. And I think it's a great risk return, right? So historically, who has been providing this capital is crypto native balance sheets, right? So in the era of Genesis, Genesis was a big liquidity provider today and they are of Tether and other stable coins. You have, you know, a Tether as one of a big institutional lender. You have a lot of these foundations that raise large, large amounts of stable coins, dump them right back into D5 pools. And that's really where a lot of the liquidity comes from. This release crypto native balance sheet. If you round all up those balance sheets and add them all up, you get a number that's somewhere in the billions. OK, and that's fine. That's not a small number, but Bitcoin is a roughly $2 trillion asset going on. We believe it's going to get to $5 trillion in the next two to five years, OK. I believe or we believe that the Bitcoin back loan market is going to grow into the trillions, right? So you need to have line of sight into a pool of liquidity that is that that deep that you can source from the ABS market and ABS asset backed securities. So the ABS market in the United States alone is estimated between 2.5 to $3 trillion in size. Now these are ABS bonds, securitized bonds. What these what these products do is they package a lot of credit card loans or auto loans or mortgages and they package them up and sell them to these institutions that want to earn interest, right? And what we have done now is for the first time ever is we have done the same thing that banks and others do with auto loans and credit card loans and other types of mortgages. For the first time ever, we've done this with Bitcoin, right? We've packaged up Bitcoin back loans into an ABS and we've sold that ABS into in the qualified investors in that market. Now importantly, why do investors invest in this type of product? Well, because these products historically are rated and they are rated investment grade. And what does that mean? It means that a company like S&P has gone through the offering, the management, the assumptions, the modeling, the, the operations, the, the, the sort of the, the risk management of those loans and has stress tested all those assumptions. Has gone through all their legal agreement and has basically put those models through every possible scenario they could think of to assume what the potential losses could be. And then based on the expectation of loss, if the expectation of loss is small enough, they can then assign what's called an investment grade rating to that instrument, which means that it now a pension fund or an insurance company. That most of them have mandates that they can only invest in investment grade stuff can now look at the deal and potentially invest in the deal. Why it doesn't? Why is investment grade, the investment category so important? 80% of the ABS market that I just mentioned. So out of those 3 trillion dollars, 80% of it is investment grade. All this to say that the non investment grade section of the ABS market is very small. There is no bid for it because the big bits are in the investment grade category. So it is very important to have an investment grade product if you want that product to scale in the future, right? Because that's where a lot of the demand is. So we for the first time ever work with S&P for them to issue the first ever rating of any Bitcoin ABS product in history. This is the first ever Bitcoin ABS product to exist and as a first time issuer for this product let him receive an investment grade rating from S&P on the first time issuance. This deal was marketed and sold coincidentally, not by design, but coincidentally while the market was crashing from the 80s into the 60s. And the funny part about this is many of these qualified investors that were investing into this product for the first time had the question, well, how will your market hold up in a down market? What if Bitcoin dumps, you know, 40 percent, 30%, what's going to happen then? And the funny part was this was happening as we were pitching the deal and we were pulling out data in real time showing them that our system was working perfectly. So not only did the deal close, not only was there no change to the rating, but the deal was 2 times oversubscribed, more than two times oversubscribed. So we have confirmed that there is understanding, growing understanding and demand for this type of product in the institutional ABS investor market. And the other thing that I will highlight as to why I think letting is one of the few, if not the only company that would be able to offer this is because of how important the considerations are to even have even have SAP agree to review your deal right And let alone, you know, get close to an investment grade rating. You need to have three very important things to have a deal like this make be possible. Number one is you need size. Our offering was $200 million, but you need to have multiples of that in available loans to vend into the facility in case some loans get repaid or, or closed, right? And so you need to have a lot of scale because the other thing is you need to have the offering needs to be in the hundreds of millions of dollars for them to, you know, for it to be feasible, then you need to have multiples of that in order to be able to vend into the facility, right? So at Lenin we were you know, our size a nearly a nearly a billion dollars towards the end of last year that that would that allowed us to have enough of a of a ability to sell and inventory to vent back in. The second one is we have an 8 year perfect operations track record that we can show. And that is the benefit of having been doing this and only this for eight years because they can now go back eight years in our tape and see that our liquidations work perfectly as they should every time they were needed. Right. And then the third one is Lennon's regulatory posture. Lennon is a fully regulated company, has never had fines, has never had issues and never had run insurance. We've never had our tokens. We've never had any of anything like that. And so that allows them to get comfortable working with somebody like Lennon. I know that was a long rant of pause. That was awesome. That was awesome and, and huge congratulations to you guys because I totally agree this is a, a pretty large milestone because as you referenced, there's, there's historically been a mismatch in terms of we know there's a ton of client demand, you know, Bitcoin holder demand to take out loans against their Bitcoin. What's been less robust or perhaps sustainable is the dollar side, the capital side that needs to support those loans. And I think that's also, you know, frankly why rates historically have been so high to take out a loan. It's because of that mismatch. So I'm curious, given this development, which I agree is a, is a massive milestone from just a signal perspective, but also sort of a, a sign of maturation, what do you think this does going forward in terms of, again, that, you know, adjusting that mismatch? Maybe, you know, more and more capital gets interested. I think part of it too is just a greater recognition of Bitcoin as pristine collateral, you know, just sort of education around Bitcoin, what it is, how it works, why it's not super speculative, why it is this in many ways a risk off asset and really great collateral. What do you think this does going forward in terms of the lending market in general? Check out Early riders.com for all the latest in Bitcoin investment research. Now back to the show. Great question and I'll give you I'll respond with an analogy. I think this will do to Bitcoin back loans exactly what the evolution of financing with solar energy projects went right. And my business partner Adam used to work in renewable energy financing before we got into the Bitcoin. And at the beginning when you were putting out the solar panel projects, a lot of the investors didn't know how long the panels would last. Like how do we, how do I know this panel's in the last 20 years? How do I know this panel's not going to break? How do I know it's still going to be as efficient five years out? And so they had a lot of these questions. They didn't understand the asset, they didn't understand the security, the asset backing the cash flows, Right. And as time went on and they were able to demonstrate that, Oh yes, these panels do last 10 years. OK, check. Oh yeah, the efficiency on the intake does maintain as they said it. Well, OK, check for the next deal. I'm willing to take a slightly lower return because I think the risk here is lower. And so, so on the subsequent issuance, the rating was better and the rate was lower and so on, so forth until it basically got to diminishing returns to, to become basically to at the beginning there were a lot of incentives for solar and then the the incentives were taken away and then the rates kind of not just sort of landed at a sort of more, more sane place. I think the same thing will be true for financing Bitcoin back loans. Don't don't forget, yes, you, you know, Brian, Liam, myself, we've been here for a decade, right? So we know Bitcoin, we get it. We've seen the liquidations. I've I've I've had to press Bitcoin sale orders and the darkest hours of March 14th and I've seen them go through and get filled like butter. And when you see it as a risk manager, you say, wow, like this thing really does what people say it would do it. So you start this conviction just grows and grows, right? A lot of these institutions, this is the first ABS they've ever invested into the liquidations that we were showing them. What during the road show was the first time they've ever seen it happen, right? And so as they get more used to, as the dollar side of the equation gets more used to Bitcoin as collateral, that price will come down. And as that price comes down, the very fascinating dynamic with loans is that the, the amount of things I can do with a loan versus the rate. Like basically the usability of a loan versus the cost of a loan has this asymmetric relationship where if you drop the rate over a certain point, the range of things you can now do with the loan go exponentially, right? Because all of a sudden, if it clears your cost of capital, you can do a lot of things, right? Like you can, you can basically do something to start a business, to buy a house, to buy a car, to buy a phone, to go go traveling, to invest in other assets, right? And so as the cost of capital goes from the double digits into the single digits, that's I think going to be the first chasm we're going to cross. It's like Bitcoin back loans are now single digits. Wow. And after you go down to the single digits, then the next one is if you look at the spectrum of of the property loan stack, so there's like first lien mortgage, HELOC, secondly mortgage, you're basically right now Bitcoin back loans are in private mortgage territory. OK, the next stage is it going to come into HELOC territory. Right from there you're going to go into first tier territory eventually. And when you go into HELOC and 1st tier territory, all of a sudden the sort of amount of things you could do with a loan, you know, is, is it's everything, right? Like I don't sell loans, I sell your new house, I sell that new car, I sell you quitting your job and starting your business. That's what Bitcoin back loans allow you to do, right? And so once those thresholds start coming into like I said, first it will be the sub single digits and then we come into, you know, more comparable to other types of secure lending. Think about it like if I can give. You the same rates of. A Bitcoin back loan than I do with a house and you don't have to get income to qualify. You can take that asset anywhere. It's no longer stuck to where you live, right? You can do any. You can basically you can you can use it in real time from anywhere in the world. It's the same rates. This is the other thing when I talk about these rates, I talk about these rates becoming available to everyone in the world right now. The only person that can access sub 10% private mortgage is America, right? Like no one else can do that and maybe parts of Europe. But I do think that these loans are going to, you're going to see a Cambrian explosion of Bitcoin back loans as these rates come down. I'll do a quick sidebar. Why I think? It's so important. If you look at the asset back underwriting model we have today, it's income based. You can have a 2 million. Dollar house paved. Outright and you have no income and you go to the bank and you say I want a HELOC for 500,000. Dollars of my house that I own. Free and clear. And they'll say, great, what's your income, Liam? And you'll say, oh, I just retired because, you know, I own this house outright. And they'll say, we're sorry, Liam, you don't qualify for a loan even though you own the house outright, you have no debt servicing capacity, Liam. And you'll say, Oh my God, this is this is outrageous, right? With Bitcoin, you can do this, right? And so all I'm trying to say is this income based underwriting model for asset backed loans is disconnected from our real world. Like most of the full time jobs that we have today either don't exist or are overtaxed. And so if you are a young person and you're trying to start your own business and you can't get financing basically anywhere in the real banks and I at Leaden, you can get 50% of the value of your Bitcoin holdings. Are you just? Are you not? Going to get financing or are? You going to get Bitcoin back loan financing. So I, what I'm trying to say is our underwriting model is much more aligned with the future of where the world is headed. And I want to touch on the difference between Bitcoin back loans versus ETFs, but I, I don't want to keep derailing the conversational pause. No, no, I think that's fantastic. I think just. One thing even before going to that there too is we we've at early riders invest in Bitcoin infrastructure as well and specifically very secure products that will essentially allow clients to maintain and not introduce outside risk and and reduce risk as much as possible for all types of clients. And obviously you've you've been in the space building Bitcoin related services and seen a lot of appreciation in bitcoins price itself. It came out, I think you published recently that you just surpassed 100 million in annual recurring revenue have an investment from Tether. Would just love to hear a little bit about how you think about working in the Bitcoin infrastructure space, providing services there and you know why that's been such a an an interesting business for for you and Leadin as a whole. Yeah, definitely so. You know, one of the, you know, as an early Bitcoiner, myself and my family, you know, just through, through life and through managing your own position, you, you kind of get a, a good sense of what you would like to do without Bitcoin or what other investors might want to do without Bitcoin. And frankly also what the sort of limitations are there as an asset. Like what can you do with your Bitcoin? So broadly speaking, you can do three main things to your Bitcoin. You can hold it, you can trade it, and you can borrow against it, right? Like hold it is not holding it. You want to hold that safely and you want to transfer that safely, right? So then you get into multi, sig and multi. Institutional. And you know what is safe, you know, and as you're, as the amount of Bitcoin you're managing change, so does your determination of what is safe and responsible, right? So for everything, right, whether you're holding it, whether you're trading it, whether you're using it as collateral, right? And so I think that Bitcoin as I see it, is a tool that is used by people to protect their wealth, right? And largely what I've realized over time is that the type of person that values the things that Lenin offers is the person that has built wealth over time. They have wealth that they want to protect. And they've also been around long enough to see that if you don't choose the right partners and if you don't have the right set up, all that hard work, all that wealth can just go away, right? And so at Lenin, we focus very much on optimizing for security and transparency and safety. And that is the promise we make to everybody that works with Leaden. And I think the person that ends up that that values this, this type of offering is happens to be a person that, you know, with a lot of sacrifice, build their wealth and they don't want to lose it. And they want to, they want to basically work with the group they think is doing the best thing or the, you know, working the hardest to keep that safe. I think that the amount of the Bitcoiners that value these things is only going to grow over time. If you look at the profile of people that have been getting into Bitcoin recently, outside of the original sort of first adopters, you're having a lot of sophisticated Wall Street investors or companies, company treasuries, governments. And so the people that are entering Bitcoin are not speculators, They are investors looking to protect wealth. And This is why I think companies that are working on services that optimize for protection, that optimize for transparency, for compliance and for security, I think are going to see a a lot of growth. Because I think there's, there's always going to be the person that wants to hold their Bitcoin in self custody with no KYC and have it sort of, you know, completely off grid and, and have it in the sort of, you know, more sovereign individual type of stance. But increasingly I think you're going to see companies and sophisticated investors that are want to going to want to have a big part of their portfolio of Bitcoin and they want to have it with the same assurances and guarantees that Triathi has built over time. And I think that what you guys are building and what Lenin's building and what other sort of qualified custodians and others are building bodes very well for this future because I think that the person that there's only going to be more and more people that value the type of stuff that we've built. And and for that reason, I think we companies that are building in this space stand to do very well 100% that that's very well said. I think it might be a nice place to to wrap because I know we're coming up on an hour. But one thing I did want to reference and we sort of have alluded to this throughout the conversation around this transitional moment in a, in a sense of, you know, what Bitcoin was for the past 17 years is changing. It's becoming an institutional asset. It's becoming much more ingrained in the sort of traditional finance rails. And so one thing I did want to ask you about Mauricio, is like the JP Morgan's, the Morgan Stanley's, the Bank of America's who are now getting into not only the custody game, but probably going to start doing loans as well. I guess first question is like, you know, is that is that scary competition or is that validation for you guys? And then you know what, what does that do? Again, how does that how does that change the market in general of, of moving, you know, a little bit less, less from purely retail, you know, Bitcoiners who've been in it for a long time, they just want to get a loan out to this more institutional playing field. Have you seen that guy? Have you guys seen that shift already occurring in your sort of client mix today and and how are you preparing for the future when it comes to holding Bitcoin securely Peace of Mind? Starts with architecture on ramps multi institution custody. Distributes control across three independent regulated key holders in a two of three quorum. No single point of failure, no pooled or omnibus exposure. Segregated client titled faults. You retain full legal ownership while on ramp. Coordinates security, compliance and operational work flows behind the scenes. It's strength of many delivered through the simplicity of 1 multi institution custody is the foundation for everything. We build sound infrastructure that distributes counterparty risk and provides fault tolerant resilience with clear audits and institutional controls. And now on Ramp is piloting flat predictable pricing, making best in class Bitcoin custody and financial services more accessible now than ever. On Ramp strengthen many simplicity in one. To learn more, check out on rampbitcoin.com. Yeah, great question. So. A couple of things on that point. So the first thing I'll say is definitely banks are looking at the space and increasingly more interested in working or deploying or making moves in the space. So I'll tell you from experience, you know, four years ago we went to banks and said, hey, are you guys interested in, you know, lending institutionally for income bank loans? And they're like, get out of our room, right? Like they're, they're just, they're, they weren't there today. Those same banks are calling us and they're saying, hey guys, you know, we'd love to reconnect. It feels like every other day we get a call from a random bank that that is interested and they heard about the ABS or whatever, right? So definitely banks are interested and they are making moves to come. I do believe there are some structural limitations for banks and that's more so on the sort of capital ratios and regulatory side that. Doesn't necessarily forbid them from entering, but places quite a few restrictions for them sort of entering the space outright. I think everybody is sort of assumes that banks are going to come in with these like 0% deposits and start lending into Bitcoin. But the truth is like those deposits compete against real estate loans and student loans and other types of loans that are sort of more, I would argue have a more of a strategic angle to the United States. And so I think, I still think it's TBD on the timeline and the format in which banks come in. But they will participate, right? Like saying they won't participate is, is, is ludicrous. We've always believed they're going to come. And I think that what this will do is this will elevate the, the quality of Bitcoin back loans in the market, right? Because it'll force companies like Lenin to become always more efficient from a cost perspective, from a distribution perspective, but at the same time it'll also force the banks to wake up. Why? When is Bitcoin most volatile? The. Weekends when can you? Not operate in a bank the weekends. Yep. Right, so. OK, let's say you're taking out a Bitcoin back loan. Bitcoin tanks Saturday, 1:00 AM. That's the moment you wanted to take out that loan to buy more Bitcoin. You're going to wait till your bank opens on Monday. You're going to go to Latin, right? So. Either the bank puts. Up 24/7 service or you're probably still Aladdin, right? Like imagine for a second you took a loan with Bitcoin was at 70 Bitcoin reached 250 over the weekend and you wanted to take profits on a Saturday. What are you going to do that? Oh. With the bank was offering me 1% less. Oh OK. How much does Bitcoin move on the weekend? Let's play that game. So you're going to see 1% but be locked out after hours for that 1%. Is that worth it? Yeah, it's a good point. I think they know. They know this. Though they they're, they're all they're embracing 24/7. They know they need to get there. I think totally. Yeah. But imagine. Having to run like so how are you going to do this right as a bank? So what you're going to stand up a new Bitcoin team that's going to be available 24/7 and are those guys in the East Coast are those guys in the West Coast? How big does your book have to be to manage that service tier plethora of questions right? And so I'm not saying we won't get there or that we cannot get there. I'm saying that both companies like from the from the Bitcoin natives, we have to make sure we are the, the name of the game is we have to figure out, not figure out, but we have to remain competitive from a rates perspective and from a capital sourcing perspective, right? We got the distribution, we got the service, we built this product for the end user. We get them better than the banks, right? Like I think nobody can argue that, right? The banks may have more money, but if we play our cards right, we can tap into the right markets. We should be able to take even playing field on that. And at that point it'll become a service game. So the real bet is, is JP going to serve Bitcoiners better than me? Let's go. You know, it's, it's a market, it's a free market. Let's go. No, I totally, I totally agree because we get. We get questions as well on the custody side of like, OK, well, this makes sense. Multi institution to get it, you know, distributed risk, more fault tolerant, robust, all of that. But like, you know, why isn't JP Morgan just going to go build this? It's like, well, OK, let's, let's see them do it because there are a lot of intricacies, there's nuances. And so I would totally agree with you. There's a ton of advantages to the Bitcoin native players with all of this, whether it's the lending markets or the custody side of things. So yeah, I, I, I totally agree. Well, Mauricio, this has been a fantastic conversation. Really appreciate you spending some time with us and, and walking through everything that's happening at at Leaden and, and the lending market in general. Anything else you wanted to leave the audience with or where people can find more? Find out more about Leaden. Sure, yeah. Lenin dot. IO is our. Website we are at Hollow with Lenin on XI am at Cryptonomist with an A at the end Cryptonomist dot on X DMS are always open. Stay tuned. Don't don't you know, keep keep turn your notifications on. We got some exciting stuff coming this month and hope to do this again soon. Awesome. Well, really appreciate it, Mauricio. And yeah, we'll have to have you back on when the next awesome announcement comes out of Out of Lenin. So appreciate it. All right, take care. Thanks for listening to this. Week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that On Rat Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com/contact. Schedule a consultation with one of our private client advisors.
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