This is a transcript of the Podcast – Empowering International Money Transfers with Bill Barhydt – You can listen the audio here
Nye : What is going on, everybody? What is going on? Welcome to another episode of Evolvement, the podcast where we talk about bitcoin, cryptocurrency and the future of our financial systems.
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Nye : Today, I have a very special guest on the line. I have my man, Bill, here. Bill is the CEO and founder of Abra. If you guys don’t know, Abra is one of the largest, most successful cryptocurrency wallet/exchanges available today. They’ve got a lot of really cool stuff going on and they’re doing things a little bit different.
Nye : Before we get into all of the things that you guys have going on in Abra, Bill, welcome. How are you doing?
Bill : I’m doing great. Thank you so much for having me on. I’m super excited about this conversation.
Nye : I am glad to have you on as well. We connected recently when you have released some pretty cool new features of Abra. I’m excited to get into all of that. But before we do, can you just give the audience a little bit of a background about who you are, what were you doing before cryptocurrency and what got you into cryptocurrency?
Bill : Sure. I guess, by most people’s standards, I’m a serial entrepreneur. I’ve been at this for more than a couple of decades. I’ve worked on everything from internet in my Netscape days where were worked on SSL and kind of securing ecommerce and certificate authority design to spend some time at Goldman in structured products and fixed income. And then last 15 years, I’ve been very heavily focused on financial inclusion and payments, money transfer, really helping people in under certain markets get access to myriad financial services which led to a lot of the ideas for Abra as a very early proponent of cryptocurrency technology and bitcoin, very early involved in the tech in general, gave the first Ted Talk actually on bitcoin. I think it was in 2011 or 2012 which is out there now for people to watch.
Bill : Yeah, I’ve got a strong tech background but I’m really interested in how to make this work for the average consumer particularly people who are in underserved areas of financial services.
Nye : That’s awesome, man. That’s awesome. I heard you were part of the FBI. Is that correct, before or-
Bill : No.
Nye : Or NASA? It was something.
Bill : I actually worked for NASA and the CIA early in my career about almost 30 years ago. I was doing secure messaging cryptography work at the CIA. And then this is literally like late ’80s, like around early ’90s and then I transferred out here to California with NASA Ames and I did a brief stint at Stanford while I was working at Ames although I never finished. Actually, I just left and went to go work at Goldman. But I really enjoyed my time out here at NASA. It was a lot of fun, a fun time in my life.
Nye : That’s super interesting, man. That’s super interesting. Someone had mentioned that to me. They said you’re part of the FBI or the CIA and they couldn’t remember. So I had to bring that up. That’s a super interesting little background thing that you have going on there.
Nye : I watching your pitch the other day, kind of like the introductory pitch of Abra. And it seems like the very, very introductory goal of Abra, and correct me if I’m wrong, but it was even before you started to implement bitcoin and cryptocurrencies into the platform, was you have a goal of simplifying cross-border payments and remittance services. People in other countries have a simpler and easier time of transferring money to their loved ones that maybe international or may lived in a different financial spectrum or geographic spectrum. Am I correct on all of that before we continue?
Bill : Partially, yeah, we developed this idea of the synthetic assets or the synthetic dollar really to solve a whole bunch of problems around banking. The synthetic dollar was always based on bitcoin, so Abra has never had kind of a plan B. The synthetic assets in our system are bitcoin multi-sig contracts and they’ve been bitcoin multi-sig contracts from day one.
Bill : What’s evolved is the myriad applications that we found how to use them to help consumers. We started out very focused on how to facilitate cross-border payments and that was the original design for the synthetic currency. And then once with had it built, we realized that we had built something that could actually allow us to create a synthetic version of any liquid asset in the world, whether it was dollars, euros, pesos or even stocks, potentially bonds or even funds.
Bill : And so that opened up a whole new world of access to investing as well as payment services for our customers. And that drives everything that we do today. Our goal is to develop lots of financial services that take advantage of this technology stack we’ve built which is all based on bitcoin in the background to allow people to do financial services in a way that’s as decentralized as you can get and still be based upon kind of these real world physical assets. But it’s all based on the bitcoin platform.
Bill : Using Abra, you can hold the synthetic dollar and send that to somebody else’s Abra app and they receive euros. And in the background, it’s 100% based on bitcoin contracts. You can use Abra very soon in international markets to get exposure to Apple or S&P 500 ETF or some other type of tracking stock. And now for the first time, people in like China or Southeast Asia or Mexico can get very simple almost Robinhood-like access to US equities. This is all based upon the same bitcoin contract model that we created four years ago.
Nye : Very interesting, very interesting. Now, I feel like there’s some sort of story here. This is a major issue that you want to solve, this cross-border payments, this remittance services, it’s a major thing. But where did you first experience this to be a major issue and where was that like aha moment where you said, “Oh, wow, like I see it now and I have to solve this.”
Bill : So I did a lot of work in the MSB world, money service business, which is kind of a catch-all phrase for things like remittance services which is usually the word that we use for migrant workers sending money back home, like Mexicans working in the fields or Filipinos in the healthcare industry. Sorry to kind of pigeonhole and stereotype but that is a lot of the money transfer, not just in the US. A lot of it is originated in the US but it’s one of the biggest markets for remittances is Indians who moved to the Middle East and toil in the oil fields for pennies a day and then end up remitting that money home to support their families. That’s a huge market.
Bill : And so there’s lots of these so called remittance corridors where people tend to migrate to find work and then send money home to support their families. I was exposed to this probably to the largest extent after the earthquake a few years ago. I was already working in money transfer but then I was invited by the state department and military who was trying to support people on the ground after the earthquake and there was no facilities to go and help.
Bill : And when I arrived, my first reaction was, “Oh, my God, this is a disaster beyond belief. I have nothing to offer.” I mean, it’s so epically bad I don’t even know where to start. There’s just rubble and literally bodies everywhere. They were literally helicoptering money into the country because the money transfer outlets that would hand out remittances … I should also add that remittances are 30% depending upon the exchange rate, they could be up to 30% of Haiti’s GDP, meaning taxi drivers in Miami, Boston, and New York sending money home to their families is literally 30% of Haiti’s GDP.
Bill : And all of a sudden, that money is all gone because there’s no way to hand it out. All the Western Union outlets and all the other places were literally under rubble. They had helicopters that were coming in and handing out money. And they said, “Can you help? Can you try to take some of these new mobile technology?” This is pre-bitcoin. “This new mobile technology that you’re working on and find a way to help us to get this money in people’s hands.”
Bill : And we did. We actually created a new banking service that used feature phones. And this was kind of the very beginnings of a smartphone world and most people in Haiti had feature phones where you could usually use text messaging in that kind of T9 text input we used to use to send text messages, to be able to open up bank accounts so that your family members in Miami could send you very quick and free money transfers back to Haiti, almost like the way we used Venmo here in the US or like a WePay in China but now specific to that cross-border community.
Bill : And I think my last company, Boom Financial was the first company out of the US to cross-border money transfers 100% via feature phones using text messaging. And so we managed to get that to work but it was very difficult. We had a lot of headwinds from the banking system. How do we get cash in and out of the system? And it was just completely unscalable model.
Bill : And I realized that if I wanted to scale banking services in that world, I needed to do it in a way that would ultimately bypass the traditional banking system. And that led to the idea of the synthetic currency. The synthetic currency model was all about, can we turn the smartphone into its own bank? So that I don’t have to understand the mechanics of crypto. I don’t have to understand how public/private key cryptography works, but I can still store a dollar on a phone in the US and a peso on a phone in Mexico and somehow have them interoperate with no banks involved.
Bill : And so that’s what this crypto collateralized contract technology does that Abra has invented. It basically allows you to lock the value of bitcoin to any real world liquid assets whether it’s dollars or other fiat currencies or stocks, now in bonds for investing. So I can literally take a dollar tied to bitcoin on my phone, send it to another phone number that has an Abra app and they can simply receive it in whatever currency they choose or any other asset type for that matter.
Bill : And so that was the breakthrough that started from this on-the-ground work in Haiti and then almost 10 years, actually 10 years plus later, has morphed into this crypto-based banking platform.
Nye : And how does something like that work on the backend though? It’s interesting. So if I sent you a dollar and you’re, let’s say, in Mexico and I’m in the US. Am I sending you a dollar that gets transferred immediately and the bitcoin goes to your wallet and then is liquidated into pesos? Is that how it kind of works?
Bill : It actually never stopped being bitcoin. It was actually bitcoin the whole time, even when you’re holding it as dollars and pesos. Let me explain what I mean. If I have a dollar in a bank account, and I want to put that dollar in my Abra app, what I actually do, it looks like a Venmo experience where I actually ACH the money from my bank account. But what I’ve really done is I bought bitcoin with that dollar. And that bitcoin now is on my phone. I’m holding the key and Abra has taken that bitcoin and put into what we call a smart contract. That smart contract fixes the value of that bitcoin to the value of your dollar.
Bill : If the value of bitcoin goes up, you actually end up with a little bit less bitcoin and the value of bitcoin goes down, you actually end up with a little bit more bitcoin. And then Abra does some fancy hedging techniques in the background to hedge away that risk so that neither of us is taking risks on the other party financially.
Bill : Now, when I send that money from my Abra app to somebody’s Abra app in, let’s say, Mexico, all I’ve done is send the underlying bitcoin collateral to their app which then enters it into a new smart contracts to peg it to the peso. And so everything in our system is in on-chain bitcoin transaction. And by the way, buying shares works exactly the same way. There’s no difference.
Bill : If I want to buy exposure to the S&P 500 ETF or Apple shares, I simply take my dollars and I peg it via the same smart contract to those shares and the volume of bitcoin adjusts itself automatically relative to the value of the shares and then Abra hedges away the counterparty risk on those contracts on the backend. And we’ve published many articles online as to how this works, how the hedging works, what the mechanics are. I gave a talk at the MIT Bitcoin Expo a few weeks ago on the mechanics of the hedging for people that are more financially engineering inclined and are interested in how that all works.
Nye : That’s very cool. That sounds really, really interesting. It sounds like a big, big process behind all these things.
Bill : It is. By the way, the idea was to keep it super simple for the consumer. When you look at Abra, people have no idea how complex it is behind the scenes and what’s going on with how we use crypto in public/private key cryptography combined with bitcoin multi-sig scripts. It just looks like you’re holding dollars or shares or whatever, and the complexity is completely hidden and that’s the whole idea.
Nye : That’s awesome. I love it. I absolutely love it. And when I first watched your … I think it was your investor pitch on YouTube, I think it was about 2014 or 2015 for Abra, you didn’t mention a thing about bitcoin, about cryptocurrency, about exchanges. It was all about remittance services. It was all about cross-border payments. At the very beginning of Abra, was that something that crypto was still and bitcoin was still behind the scenes working or did you integrate more bitcoin and crypto later on into it?
Bill : Yeah, if you watched the original demo I did at Jason’s LAUNCH Conference, actually we won the conference. And I showed how the synthetic asset was actually being used to facilitate money transfer and how we could use cash networks to get money on and off. That was 100% bitcoin based but I never used the word bitcoin in the presentation.
Bill : And that was a conscious decision that Jason and I made when we were kind of setting up the pitch in how it would best come over because we thought that people would be shocked later when they actually found out that it was all using bitcoin and blockchain and smart contracts in the background because we were presenting such a compelling business problem that the problem stood on its own. And the solution stood on its own without people even having to know that bitcoin is what supports it behind the scenes.
Bill : I just came back from Hong Kong. I was there for the 2049TOKEN Conference and all the people that I talked who were interested in our recent announcement about buying equities, they could care less. Some of the crypto initiated were like, “Yeah, oh, my god. This is super cool, and you figure out how to make this work using bitcoin.” But the people who were most excited are like, “Do you know how hard it is to do these transactions in China, to invest in equities especially western equities, or to use bitcoin to send money to somebody in the US who doesn’t know what bitcoin is?”
Bill : And Abra solves those problems in a very consumer friendly way. And so the original pitch was a conscious decision to not have the consumer to have to understand bitcoin to actually get that Abra was solving a big business problem.
Nye : That’s super interesting. The more I hear this from you, the more I see that Abra is much more than just a cryptocurrency exchange. Although some people who may be entering cryptocurrency may look at it as an exchange, you guys are doing a lot more. Do you view yourself as an exchange? Do you view people like coin-based or what these other Gemini as competitors to what you’re doing? Or do you view yourself in a completely different category?
Bill : We see ourselves as a completely new category of kind of like a new global banking and investing platform. The fact that we chose to develop synthetic versions of other altcoins, we simply to show people that we could create a synthetic version of any assets. And it just so happened that our timing for doing that was really good because the old coin business was taking off and people were using Abra to buy exposure to [inaudible 00:17:45] Ethereum Classic and XRP and Ripple and Zcash and they still do. And that’s our biggest business still because we haven’t launched the equity piece of the business yet.
Bill : But I suspect that over time as we have more and more asset classes for investing, have more and more money transfer and payment options, Abra is going to look more and more like a bank, and less and less like an exchange. And that’s what we want. We’re not really here to cater to the day trader. We’re here to cater to the global consumer who needs access to these financial services.
Nye : When you talk about synthetic versions of altcoins, can you explain that on the deeper level for these people who are listening right now and have never heard something that ever said before?
Bill : Yes. If you hold XRP in the Abra app today, you’re actually doing the same thing that I described earlier with the dollar. You’re actually holding bitcoin whose value is pegged to XRP or if you’re buying Zcash, you’re actually getting bitcoin whose value is pegged Zcash. And that allows us to turn on new assets very, very quickly. So the dollar assets or the fiat assets, I think there’s 50 fiat currencies. The 30 altcoins in the system plus the bit time index, the hundred or so equities were launching outside the US in a couple of weeks.
Bill : All of those are based upon the exactly the same bitcoin-based smart contracts. And that’s what makes converting between them super fast and easy in our system, meaning you can easily convert your Apple to Zcash, your Zcash to Monero, your Monero to pesos. And all of it is just moving bitcoin around on the blockchain. That’s all it is.
Nye : That’s really, really interesting. That’s really interesting. How do you educate people on something like this because I mean like for me, I’ve got like a basic decent amount of knowledge. I’m not an expert by any means but I understand what you’re saying. But I feel like beginners who maybe want to on-ramp some of their fiat into cryptocurrency may not 100% comprehend this. How are you educating people on what you’re doing here?
Bill : By and large, you don’t. I mean I think that people who are using Abra are using it because of what it does for them, not because of how it works. And that was the point I was making about what I was seeing in Asia about people who were excited about being able to invest in NASDAQ-based stocks and places where they don’t really have ready access, like whether it’s in China or Thailand or Philippines, all people I spoke to last week when I was in Asia. And some of the initiative in crypto get super excited about how Abra works behind the scenes and I love that. I love the tech. I’m a total crypto geek and I think it’s all awesome.
Bill : But Abra is not going to succeed because everybody is excited about bitcoin multi-sig scripts. That’s not going to happen. Abra is going to succeed because we’re solving real problems for consumers that they can readily explain themselves. In other words, I want to invest in Apple. I want to basically take my pesos and store them as dollars because I think my government is going in the shit again. I want to get ready access to equities. I want to be able to do cross-border money transfer. These are things that people will do with Abra without having to understand how it works.
Nye : Agreed. Can you dive a little bit deeper into the investing in Apple and stocks and things like that via this bitcoin blockchain and how all that function works? This is something that’s brand new. This is something that nobody has ever done before and I think it’s really, really interesting.
Bill : Yes, so when we developed the original fiat based synthetic assets model for money transfer, we realized once we had it built, we could literally create a synthetic version of any liquid tradable asset in the world. Cash, I mentioned altcoins, other cryptos or stocks and bonds, mutual funds, ETFs, anything that was effectively liquid. And it has to be liquid in order to do the hedging that I talked about. I won’t bore your audience with all that detail. But basically, it has to be liquid. It can’t be real estate, for example, which is illiquid.
Bill : And so we realized that there was obviously … If you’re investing in crypto, you’re getting 5% to 10% tops of that investor’s investment dollars. Nobody, no rational person is putting 99% of their net worth into crypto. But by offering synthetic equities, we’re actually now able to go after 100% of people’s investment dollars because you can now store money in cash, equities, and crypto all in the same app, all using the same bitcoin-based contracts.
Bill : So that means that people in China who are subject to capital controls, or Venezuela where they can’t easily do anything from an investment perspective or places where the dollar is where it’s at like people in Venezuela who don’t trust their currency. They’re able to do these myriad banking services where they don’t have to go to different providers for different things, meaning I can use Abra to put some money into an ETF that tracks the market. I can put some money in cash and I can put some money in crypto, and I can very easily with a couple of button clicks exchange between all three. And that’s never been possible before Abra.
Bill : And you’re going to see some other products from us this year that take that even further and make it even easier for the global consumer to do that.
Nye : Very interesting. And what are some of your requirements for this thing either a new altcoin on your platform or listing a new asset? Is it based upon demand? Is it based upon just a choice of your team or how does all that work?
Bill : It’s complex. For fiat currencies, we basically looked at the vast majority of currencies in the world and looked at GDP and basically dug into what would work from both the hedging perspective as well as global liquidity and generate the most demand. And those at the top 50 fiat currencies that we currently have in the platform.
Bill : For these synthetic cryptocurrencies, it’s more complex. We actually track hundreds of cryptocurrencies for market cap, liquidity, daily trading volume, price spreads. It’s in a bunch of other factors in order to determine if they need our requirements for functioning correctly within the smart contracts because if we can’t hedge the counter party risk, the consumer is taking huge risks on Abra and we can’t have that in our system. We have a real-time tracking system that deals with that.
Bill : For the equities, it was very easy because everything on the NASDAQ is liquid compared to cryptocurrencies. So, all we did was basically choose what we thought would be the, for the first hundred assets, the hundred that we thought would be most interesting for our global user base, so there’s going to be ETFs that track the entire NASDAQ. There’s going to be ETFs that track international stocks. There’s going to be ETFs that track tech stocks. There’s going to be specific shares like Apple and Alphabet which is Google and Facebook and things like that. The answer is very asset specific.
Nye : Interesting, very interesting. And how does this all play in with regulation? This is a very new market in terms of people are just beginning to understand how bitcoins playing in the regulation, how Ethereum is playing in the regulation. We’ve only understood this in the last six to eight months and it seems like you’re doing something that is very, very far ahead of the curve from what most other, whether you want to call them exchanges or whatever providers are doing. How does what you’re doing in terms of traditional assets on the bitcoin network? How does that all play into regulation and things like that?
Bill : Yeah. The first thing to keep in mind is, is that when you’re holding bitcoin or Ethereum in Abra, you’re actually holding the bitcoin. It’s not being stored by Abra. We’re not a traditional exchange that’s hosting your crypto. You are managing the private keys for your bitcoin whether it’s tied up in an Apple share or in dollars or you’re just holding bitcoin, it’s all on your phone. I have no access to it. Abra is what we call a non-custodial wallet, first and foremost, meaning that you’re holding those keys.
Bill : Second, what happens next depends upon kind of the asset types. Abra is primarily focused on making the contracts available to non-US users right now because we honestly think that’s where most the value proposition is. We’re not launching the stock product in the near-term in the US. That’s going to be focused on our international users because honestly, you probably have seven ways in the US to buy Apple shares, right? I have probably ten ways to buy Apple shares but people in Southeast Asia, China, Mexico, Russia, they probably have … If they’re not a sophisticated trader, probably zero ways.
Bill : And so that’s what we’re solving, I think, the biggest problems for our users. And so most of our direct-to-consumer work is going to be outside the US. And then on the US side, we’re also working with a lot of regulated entities to bring some of our products to market as well, which we’ll have more announcements about later this year.
Nye : That’s very interesting, man. That’s very interesting. I like what you guys are doing. I like what you guys are doing. I think it’s different. I think that’s something that’s very unique. I’m glad that you’re able to come on and share a little bit more about what you’re doing with Abra. Can you share with the audience maybe a little bit about the future vision of where you want to take Abra? I know there’s probably some things you can’t share but maybe like give us a little bit of a hint of the direction where you guys are headed.
Bill : Yeah, I want Abra to be the company that makes bitcoin useful for the average consumer. That’s kind of my personal dream. I would say our mission is to democratize access to financial services. We just figured out how to do that using bitcoin and how to solve the problems we’re trying to solve using bitcoin. I want to basically build a new type of banking system that gives agency to every consumer in the world to ultimately be in control of their own wealth, their own money in a way that they can understand.
Bill : I don’t have to understand what public/private key cryptography is in order to manage my wealth. I can still think in pesos but I can use a service that actually gives me agency over my wealth to do investing, to get access to credits, to send money back to my family if I’m a remote worker. And again have that kind of … I call it the WhatsApp of money. We don’t really have a single app globally that every consumer can use regardless of where they live to send money to anyone else, to access investment opportunities anywhere in the world and to get instant credits anywhere in the world.
Bill : There’s pockets of that. We have Venmo in the US, WePay in China, Paytm in India and Payza in Kenya and Tanzania, but we don’t have that single WhatsApp for money. That’s my real vision for Abra, is to ultimately help build that app.
Nye : I love that, the WhatsApp for money. It’s a good way to put it. It’s very, very easy explanation, paints a good picture.
Bill : Yeah. Thank you.
Nye : Awesome, Bill. Hey, man, I really appreciate you coming on the show today. I appreciate you explaining a little bit about Abra. This is actually going to be the very, very first episode in a series called crypto exchanges and crypto alliances and things like that. So I appreciate you coming on. Can you just share with the audience a little bit about where they can learn more about Abra?
Bill : Sure. There’s a few things you can do. I suggest going to Abra.com and we have a great blog site. Our content team is awesome. They’re constantly publishing new content about how to think about bitcoin, where we think it’s all going, what’s happening in Abra. We do lots of video interviews ourselves with people in the space relative to our new products. So when we launched our native Ether wallet a few weeks ago, I spent a couple of hours with Vitalik in New York and wheeled that down to a short interview. So, there’s lots of content there.
Bill : And then, of course, you can follow me on Twitter, @billbarhydt, on Twitter. I’m always pontificating on something related to crypto, so if you’re into that, you can check us out there. And sign up for our mailing list on Abra.com as well.
Nye : Awesome, Bill. Thank you so much for coming on. I really appreciate them, man. This is a good little chat. And for everybody listening, this has been another episode of Evolvement: The Financial Podcast, where we talk about bitcoin, cryptocurrency and the future of our financial systems. If you haven’t checked out Abra yet, if you haven’t downloaded the app, if you haven’t signed up, head over to Abra.com and check it out. Again, Bill, thanks for coming on, man.
Bill : My pleasure, super fun. Thanks for having me on.
Nye : All right, peace.