Welcome to Future of Finance, where Fortune asks prominent people at major companies about their jobs, how their firm fits into the crypto ecosystem, and what it all means for how we use money.
Before venturing into crypto, BitGo CEO Mike Belshe helped revolutionize technology with his work at Netscape and later at Bitcoin in Argentina is the highest it's ever been. There's so much demand for it because their main currency is imploding—it’s not the first time that Argentina has seen this movie. It's happened three times over now. Maybe one last thing, just to really frame the importance of finance: It's been one of the last industries to really be breached by software. But it’s clearly the most important. You're working right now, I'm working right now, and we are spending our days in the pursuit of money. It's important to us, for our families, for our housing, for our food. When you have bad money, which most of the world has, you can lose your life savings due to nothing, no fault of your own. So software is coming to change all of that. I've been doing this for 10 years now. I think it's going to take a little bit longer. But, hopefully, when you ask me at the end of my career, maybe in another 10 years or so, we'll be able to say "Yeah, that was worth spending time on."
Could you talk about BitGo’s recent $100 million raise? How will you use the money, and what does it say about the business that you're still able to raise significant capital in this current market?
We're pretty excited about it. It's a difficult time to raise, in all of the markets, there's just not a lot of liquidity available right now. I think it speaks huge volumes to the status of BitGo as a brand, as a key foundational part of the digital asset landscape today, and then, hopefully, also to the fact that there's so much potential out there for the future. Investors are excited about not just where we are, but of course, where we're going to go.
We recently launched the BitGo Go Network, which is really the first big attempt by anyone in the market to try to solve market structure. You can try to mandate it, I suppose, and have regulators come in and say it has to exist, but so far, none of those have been able to work. But this is really the first true attempt to start to separate a way. You've got trading and you've got custody—very different skill sets, very different risk profiles—it’s very important to have checks and balances between these two different parties so we can have strong markets and that everybody else can invest without having to worry about someone taking their money.
What do you think has changed the most about crypto in the decade you’ve been in the industry?
We're seeing innovation happen, and we're seeing some of the unsolved problems of legislators and regulators be unearthed. So back in 2012, 2013, when we were building the first multi-sig capabilities for safely securing Bitcoin, this idea that money can be held not by a single person but by multiple people was brand new. You never had this idea to deposit at both Wells Fargo and Bank of America, but with multi-sig you can do that. Our laws didn't address some of those basic things. Since then, there's been a ton of innovation. We went through 2017, which is this ICO boom. Suddenly, people are like, “Is this a new way to raise money?” No, it's not. We had to go through some sorting out there. But the idea that we can create subtokens that can be used for all different purposes and start to set the rules for those inside of smart contracts, that's an innovation and an evolution that's happened. Obviously, there's a ton of use cases that are being pursued, as we go on—blockchain scalability, just fundamentals of the technology, how do we scale this up to billions of humans, trillions of transactions, there's been a lot of progress there. You can see across the different competing blockchains, a number of different approaches. The advent of stablecoins has come along, the idea that, “Hey, maybe we can have a digital representation of just our regular currency, our dollars, and use that programmatically in ways that you've never been able to use money before.”
The industry is changing tremendously. I think, in terms of reconciling that with what I said about legislators and regulators, the legislators and regulators have new problems surfacing that they've known about for a long time but never had to tackle before. Specifically, we are now in a global economy, with a global financial system, whether we like it or not, and yet we've been regulated in very regional ways. The U.S. has got its rules. In Europe, you've got each country having its rules, but then, of course, its overlying E.U. rules. You've got China's rules. All of these have been kind of local fiefdoms, and all of a sudden digital money breaks through all of the borders between our countries, and riding on top of the internet which connects all people. These are challenges that are yet unsolved.
Generally, how are you feeling about regulations for crypto in the U.S.?
Wall Street has been the economic powerhouse around the globe for decades. Part of that is because we have good, safe markets that you can invest in. Not only can Americans invest in them, but foreigners can also participate. Thanks to the fact that we have a democracy, there's a level of trust. That's the good news.
We now have a new asset class, and, frankly, the unsolved problems that I mentioned, from a global scale, the regulators don't know how to solve them. Not only that, a lot of the people that are in power today were not around when the rules were made. They may not have a very strong grasp as to what makes good money, as to what investor protections they should be caring about, and how to prioritize the many different investor protections that they’ve put in place. A lot of things that we hear about the SEC are disclosures. I strongly believe that if you're selling an investment security that you should disclose and be open and transparent. But if I had to prioritize perfect disclosures versus somebody being able to just come in and rug-pull, take the money out from underneath everybody, I would prioritize that: Solve the rug-pull problem first. I'm not saying that the disclosures aren't important. They're very important. But you got to be able to prioritize these things, and I think our existing regulators are struggling to figure out how to build the foundation first.
Making sure you can prevent insider trading is a big deal. There are so many investor protections that the U.S. market has, it becomes pretty complex for any single person to solve. The legislators and regulators look at this from the top without having a full understanding. The net summary is it's going to take a while to untangle this and really sort it out. The risk, I think, for the U.S. is if we try to apply too quickly the rules that were built for yesterday to today's markets, that somebody else around the globe is going to build a new set of trading and market systems, which take advantage of what's now possible with the technology. So, anyway, it's going to take a while to sort out, but in the end, people want digital assets.
What would you see as being a key part of a revival in crypto markets? Is there anything that needs to be done at all?
We're still working on making it easier to use, but let's make sure we don't have the problem misstated. What we have right now is a macro downturn. It doesn't matter what industry you're in. Everybody's affected by the current financial health of the United States. We are concerned about the inflation that was caused by the money printing and the monetary policy of the Fed, which was employed during the COVID period. That affects everything. As a result, crypto assets are also down now.
In the early stages of a technology or an asset class, in this case, I would expect higher volatility in that new asset class simply because it's not big enough. It's not plumbed into enough markets. The market efficiencies that you see in other markets haven't fully been built yet. It is hard to use. Regulations are unclear. People are still trying to figure out how it's going to work. So it's going to see higher highs, and it's going to see lower lows. I think this is just a general market problem. And I think the U.S. is going to have to solve its monetary policy issues—and nobody knows how to solve those yet—in order to help make the overall markets better.
It feels like from what you’ve said there's more time needed for some of these use cases for crypto to reach its full potential. Some will point out that crypto has been around for a decade and had plenty of time to develop a killer use case. What would you say to those critics?
The traditional financial markets have been evolving for 80 years now, 90 almost, and they're still evolving. Major new regulation happens every decade or so. Dodd Frank is, what, 15, 20 years old, somewhere in that range? We're constantly tweaking the markets and the regulations in order to try to make it better. Crypto has only had a few years, but here's the main thing, the simple statement: Bitcoin, since its inception in 2009, has had the longest-standing unchanged monetary policy in all of humankind. That is, there has never been an economy, a market under human control, which has been able to keep a consistent monetary policy for as long as Bitcoin already has. I mean, that's an amazing accomplishment. I don't see how people can see it for anything else. Now, changing and upending 100 years of markets, solving the global financial problem which has never, ever been solved before, I mean, these are big deals, and so I would expect them to take a long time. I think we will be continuing to evolve forever, but I think it's absolutely unquestionable that digital assets are going to carry a huge part of all future markets.
What do you see as the future of finance?
I like to bring this back to something that most Americans don't think about, because we have a pretty stable financial system. I got lots to complain about in the U.S., but we're probably better off than most other parts of the world. But I think the future of finance is actually one which provides better human rights than anything we've seen before. And that is, people all across the planet are trying to make their lives better, make their family's lives better. They want to have an education. They want to live a reasonably healthy life. They want to have a roof over their heads, etc. When you've got monetary systems that collapse, whether it's Argentina, Turkey, Venezuela, Nigeria—go around the globe—you'll see lots of these have happened. These are really an erosion of human rights. It causes massive disruptions for the people that are affected, and we can fix this. We can fix this with a global financial system that has transparency and immutable rules at its core, and, frankly, needs to take some of the power away from some of the humans that otherwise will mismanage it. The future of finance is good. I think we're going to see a much better human quality of life if we keep going down this track.
