In an Age Where AI Can Even Hack Banks, Are Your Assets Safe? Why the BitGo CEO Is Putting Up 100...

Well, look, the Korean market has actually been a leader for a long time. Broadband of the early 2000s — Korea was there first, right? If you're talking about deployment of cell phones, 5G networks, Korea was there first. I think Korea actually could be an amazing leader in terms of digital.

Everything is going to be, and so you're going to be able to have tokenized equities. You're going to see them on chain. You're going to get your stock splits, your dividends, your voting rights all on chain. They move 24 hours a day, seven days a week, all around the globe.

Well, thank you very much. I came from Netscape and spent years working on web browsers, Google early on. I started a couple of companies, sold one to Microsoft. And so one of the things I saw about web technologies is that we weren't able to go and do payments directly in browsers and servers. Instead, we had to overlay the World Wide Web with credit card payments. And by the way, very deep inside of the HTTP protocol is this thing called 402, which is 'error, payment required.' It had never really been used before. When I first learned about Bitcoin — well, when I first learned about it, I thought it was probably a scam, like everybody. But then I read into it and I was like, 'Wait, this actually works.' And then you realize this is money inside your computer. And when you do your first payment where you've got money inside your computer and I can send it to you and you receive it, and there was no bank and there was no magic out there. It was just a transfer. It's really an eye-opening moment. So, seeing that, that was when I got excited about it. You know, where digital assets would go, I didn't necessarily know. I'm not a forecaster, I guess. But that was huge power. And when you see something that's got that kind of power, you realize, wait a minute, this could really change the way everything works. And I was probably incredibly naive. I didn't know nearly what I needed to know about the financial system and how long it would take for this to take root. But I think where it's gone absolutely fulfills that expectation that it would have a massive change. We're not just talking about digital assets and DeFi anymore. We're talking about tokenized equities. And it's not just our industry. It's Larry Fink, the CEO of BlackRock, the world's largest asset manager. It's Fidelity. It's Morgan Stanley. It's Citibank. Down the line, all of these guys are there as well. So tokenized equities are happening, and stablecoins — the banking system is going to change as well, all because we couldn't move money between two points and couldn't do that before.

From an end user's perspective, they might not notice very much. But if you look at markets around the globe, typically there's a market structure which separates certain duties from other duties. At the heart of markets is usually an exchange. And then there's often broker-dealers that provide access to that exchange, but exchanges don't usually hold custody on their own. Now, the way digital assets have evolved — in the early days, there were no custodians. There were no banks that could hold the digital assets. So many exchanges took on that duty where they host it on their own. And of course, there's been a lot of treacherous pitfalls over the last 10 years where certain exchanges have not done that as well. So an exchange, their focus is on trading. What they want to do is lots of different coins, lots of different clients, lots of different assets, and facilitate tons of trading. BitGo's focus is different. We're focused at the lower levels. We're focused on security. So we start with a wallet platform, which is the most secure way that you can store digital assets. We take care of multisig. That's what we pioneered on Bitcoin. Today it's multisig, also MPC, which is another technology protocol that we use in order to secure the funds. We hold all the assets in deep cold storage, and then we do all kinds of audits and access controls.

The number one thing goes back to basic security principles: there are no single points of failure. That means typically people have like a single private key that protects their funds. We don't do that. We use three different private keys, and so if a single machine is breached, then you don't have access to the funds. You have to go and breach multiple machines. Now, security is a security-in-depth type of offering. So in addition to doing the proactive, offensive types of security, we also do defensive security, which is, you know, making sure that we're constantly watching our perimeter. We know if anybody were to intrude, etc. You know, we go and do audits. We have third parties come in that try to break in. We then go get SOC audits, which is measuring our operational controls. A lot of times people are worried about cryptography, but remember, humans are kind of the weakest link. Humans make mistakes. And so the operating controls make sure that we have a rigor and a discipline around everything we do.

So we have to charge fees. We have services here. The basic license we have is for custody and transfer services, so that we're going to have to charge fees for. But what we do is we continue to build plumbing into other parts of finance. So, you know, you go to your bank, you go to your custodian, and you're expecting to be able to store securely, but you also want to be able to put it to work. So in the crypto world, you want to be able to do staking. That's a simple way. So if you have Ethereum, you can stake it. We take a small piece of the Ethereum staking reward that comes back. When we continue to build out services, we make connectivity to exchanges and trading, and we provide, you know, borrow and lend types of services. Those can all be done on top of the overall custody. So anyway, here in Korea, I want to be clear that the initial license we get — and this is how we've evolved in every jurisdiction — we always start out with like, let's build the foundation. You can't build a financial system unless you've got the foundation right. So we build that really strong foundation, and then from there we can build the connectivity. And yes, fees are what pay the bills.

Individuals and retail users want this. Small businesses, large businesses. We want banks to be able to participate. The more people that are using it, the more liquidity, the better the product is. So kind of under any of these circumstances, I think BitGo's okay. A lot of times what we see right now is some of the major financial institutions come into the space. Fidelity — you've probably heard of Fidelity, second largest asset manager in the United States. They initially did all of their own custody for Bitcoin, but eventually they expanded into Ethereum, and then they wanted to do staking, but they don't know how to do staking. So they use BitGo services to do staking on their behalf. So it's an example where they're able to use their banking capabilities, their distribution channels to their clients, but BitGo is able to provide service behind the scenes for them. So BitGo's edge is probably technology and being nimble. Ultimately, what we want to see is innovation. The financial system in the US, in South Korea, globally — and I mean no offense to the existing system — it's somewhat stagnated. There's not a lot of change going on. So we've seen just in the last few years key innovations coming out of the crypto sector. Number one, 24/7 markets. The entire world is responding to this, including the New York Stock Exchange, the NASDAQ, because, you know, it's a global economy. Why is it that Koreans should have to only trade US stocks, you know, Monday through Friday, 9 to 5 New York time? Right? You're not awake in South Korea, right? So that's one innovation. Perpetual futures, another innovation. Stablecoins, another innovation. So there's going to be a line of further and further innovation. It's going to reduce the number of middlemen so that individual investors pay less to their bankers, keep more of their hard-earned money. And we're excited about that. And yes, absolutely, banks should participate and help.

So it had kind of two parts to it. Actually, all the way back to the beginning of, I think, probably 2014, 2015, I considered putting out a honeypot of bitcoins and saying, 'Hack it.' And I didn't do it in the past, but I've been watching what's going on with Anthropic and OpenAI telling the world that they've got these agents that are so out of control that they can't even contain them in their own sandboxes. I don't really agree with that narrative. I do think AI is incredibly impressive. It's a fantastic tool for us to use to help defend against attackers. And so we want to do that. Kind of in response to the claims that they needed help from the government, I wanted to say, 'Look, if you're so great, why don't you hack this? 100 bitcoins right there.' I think at the time I put it out, Bitcoin was at around 65,000. So it was about a half-million-dollar bounty. As of today, you know, Bitcoin's trading at, I think, 84,000. So it's an 8.4 million dollar bounty. So this is a bounty that will just keep going up as long as digital assets go up in value. It did get a lot of attention. The 100 bitcoins, by the way, haven't been touched. Don't have any fear. Logically.

Warren Buffett has famously said that, you know, the stock market is a great predictor in the long term, but more of a casino in the short term. I don't have that quite right, but I very much agree with that statement. Look, Bitcoin itself has proven that it is a scarce asset, and it will forever go up in price when measured against the US dollar. The reason for that is, A, there's adoption of Bitcoin that's happening globally, so that's more demand for Bitcoin. But secondarily, the value of the dollar is going down. Right since 1970, it's down 92% in terms of what you can buy. And the cause of this, of course, is, you know, government spending of money. So people are looking for alternate assets. And, you know, in the US, it's very much an asset-based world. We talk about a K-shaped economy. If you want to succeed, if you want to build wealth, you have to get your assets out of dollars. You can put it in the stock market, you can put it into property and real estate, you can put it into gold, you can put it into Bitcoin. Bitcoin, of all of those assets, is the one that is the most liquid, transportable around the planet, 24 hours a day, 7 days a week. So it's got real value that none of those other assets provide. So that's growing. But then also on institutional adoption, we've got the other use cases that are happening in digital assets. So Bitcoin is a store of value. Ethereum has created a smart contract programming platform, and this is where we see DeFi. So you've probably heard a lot about DeFi. I would say DeFi is still in that more emergent growth. But some institutions are picking up on that. They're interested in the platform that can run these cryptographically signed financial services, and they work pretty well, and you can receive assets via staking on what you're holding. So that's generally a lot of interest. And then lastly, I think the one that's most exciting is payments and stablecoins. Especially now that we live in such a connected globe, money is moving around the planet all the time, and yet our banking institutions can't really move across borders very easily.

Some are more aggressive and some are more conservative. What's happened over the last 10 years is we've been moving that bar for who's willing to invest in digital assets further and further towards the most conservative types of assets. So early days, you know, market makers, prop traders, hedge funds, they all came into the digital asset space. Every single one of those hedge funds out there, they all have some allocation in Bitcoin already. Now, the more conservative investments, when you get all the way down to retirement accounts and pension funds, they're much more heavily regulated. These are individuals' retirement money that you take under risk. Those types of parties should naturally come in later, I think, into any new type of asset class, especially when, you know, early days has a risk. So I think we've been steadily knocking down the risks and eliminating them, getting people comfortable with it. But of course, we're still on a progression, and it's also a new asset. Remember, you know, Bitcoin is 15 years old. Gold is, I'm not sure how many centuries.

So we have lots of ways to access Bitcoin. In the early days, you had to buy it yourself, hold it yourself. That's a lot of work for you, right? You've got to figure out where you store it, where you buy it, all that type of thing. Much more contained as a financial service. But the next thing is, there's still people that don't really invest and hold assets or open bank accounts. They already have brokerage accounts, traditional brokerage accounts. So the ETF comes along. So BlackRock has now got...

billion in size for their ETF for Bitcoin. And then Strategy comes along with a slightly different approach. So Strategy and BitMine from Tom Lee, you know, they're taking this digital asset treasury where they're creating companies whose goal is to accumulate more and more Bitcoin, but they will take a leveraged exposure to getting more of the asset. So if you're a believer in the asset, Bitcoin in the case of Strategy or Ethereum in the case of BitMine, you know, those are companies that are going to use their assets, use their strength, use their resources to go and help promote those coins.