I believe in Bitcoin mainly because of its fixed supply. Bitcoin is the only asset in the world that has a perfectly inelastic supply. No matter what happens to Bitcoin's price, it goes up to 200,000, goes down to 50,000, there's always going to be 450 Bitcoin released every day at the moment.
Building that infrastructure in our region is today's guest. Talal is the CEO of CoinMENA, a cryptocurrency exchange serving users across the Middle East and beyond.
What percent of global money laundering happens through Bitcoin? It's minuscule because Bitcoin is fully transparent. It's actually one of the worst ways you can launder money.
How do you trust something? You don't even know who's behind it.
I think it's very arrogant to assume that you know what you're doing and you need to do something so that you get data and let that data tell you what you need to be doing next.
Why do we need Bitcoin to deliver what may seem to be the same function that gold or digital gold can deliver?
Again, I worry about what I can control and don't worry about what I can't control. I'm not going to know who Satoshi is, but I know Bitcoin works.
As-salamu alaykum and welcome to the Mal Show. Today we're talking about one of the most talked about industries in the world, cryptocurrency. Some people see it as the future of finance. Others see it as speculation and hype. But behind the headlines and price charts, there is a real financial infrastructure being built: exchanges, platforms, and systems that allow millions of people to buy, sell, and store digital assets. One of the people building that infrastructure in our region is today's guest. Talal is the CEO of CoinMENA, a cryptocurrency exchange serving users across the Middle East and beyond, giving people access to digital assets in a regulated environment. In this episode, we explore Talal's personal journey and how he entered the crypto industry, as well as what it takes to build a company in such a fast-moving and often controversial space. Along the way, we break down cryptocurrency itself, why it exists, and what problems this technology is trying to solve. Before moving into the market side of things, discussing how crypto trading works, how exchanges operate, and what people should understand before entering this world. Don't forget to subscribe to the channel to get the latest episodes of the Mal Show. Let's begin. Thank you so much for being with us today.
Habibi, thank you so much. Pleasure is all mine.
Honor is all mine. And thank you for being with us while everything that's going on. Hopefully staying safe, operations are normal.
Yes. Alhamdulillah. I mean, tough times never last. Tough people last. So, I think in tough times like this, you got to be tough and you got to push through. Obviously it's a stressful time for everyone, but I'm trying to worry about what I can control and not worry about what I cannot control. So that's the framework that I'm thinking whether it's at home, whether it's at work, whether it's in life. Alhamdulillah, so far so good.
Great to hear. I want to start with you with how do you start the building journey? Now the common convention is I'm an employee at a company, I want to start something new, I quit my job, I go all in. You've been advocating that that doesn't need to be the case and you may always have time to build while you're on the job. How do you approach that? How do you approach the ethical side of doing two things at a time? How do you approach the mental capacity and bandwidth to do both etc?
Okay, so the ethical question is a very important one because I think that is a guilt that humans should not have. If you are employed by a company, you have a duty to give everything you have for that company. But that job does not define you. Meaning in an age like this, you can do many things at the same time. I actually like team members that are involved in multiple things. Maybe they're involved somewhat in a family business. They have a side hustle that improves their quality as human beings and subsequently as team members. So, I don't think if you're not doing your job, obviously it becomes a big issue and then you would have an issue keeping that job to begin with. But look, the way that I think of it is building while you still have a job, I think is something that has been completely normalized in the US and will be normalized and in my opinion is already normal in the Middle East as well. Brian Armstrong, the CEO of Coinbase, used to be an Airbnb engineer and he used to build Coinbase on the weekends and then once Coinbase became big enough and crypto got better traction, he was able to quit his job at Airbnb and then do Coinbase. So the ethical question, where does it come in? Airbnb and Coinbase have zero competition. They don't compete with one another. So in my opinion, that's where ethics come in. If you're doing a business that has nothing to do with your existing job or existing business and you're not getting clients from it and you're not cutting any of the red lines that in my opinion should never be cut, then it's fine. For example, at CoinMENA or even the company before it, I built the company while still working another job. But I guess there's something that I have to also be very transparent about is I didn't start CoinMENA. I'm the CEO of CoinMENA, but I actually didn't start it initially. I just put in some money as an investor. My partner Yazan actually, he's the one that came up with the name of CoinMENA, bought the domain coinmena.com. And the first time I ever heard the word coinmena.com was actually when Yazan bought the domain. At CoinMENA, there's Dina and Yazan. We're three founders. And you don't have to do everything yourself. Even in a football team as good as Argentina, if everyone was Messi, you wouldn't have a goalkeeper in defense. So, I guess the reason why I make that analogy is you need a team that has complementary skill sets. You need someone that comes up with crazy ideas, someone that sense checks them, someone that's good at execution. So I actually don't know, being a startup CEO or being even a founder or co-founder, you don't need to necessarily come up with the idea. Even Travis, the Uber founder, Elon, Tesla's founder, they didn't come up with Uber's idea or Tesla's idea. They're given a lot of credit for scaling it. But then again, what CoinMENA and life taught me is ideas are cheap and execution is what matters. Now we'll see how that changes in the world of AI as execution becomes easier. And I guess I answered your question with a million and one tangents, but yeah, hopefully I partially addressed it.
You definitely did and let me pick on one of these million one. How do you reach that level of humility and transparency of being able to be very comfortably say it wasn't my idea and how does Yazan reach this level of selflessness to be able to say okay I came up with the idea but maybe in this specific case Talal is positioned well to come and be a CEO as Yazan is positioned well to do something else? The two other partners also, how did you reach that situation?
Very direct. There can be only one of us working at the company. Very directly, there's only one way to have uncomfortable conversations and it is to have them. If you avoid them, they fester and they create issues and eventually they blow up in your face. Just like any relationship, one of the most important things is being able to overcome problems. If you have a relationship that you've never fought, or by the way, this applies to every type of relationship. You know, if you've been with a partner for 5 years, you've never fought, probably a red flag because the first time you fight, it's going to be unfamiliar territory. You want to be able to fight and resolve and fight and resolve so that you're able to reach your final goal. I guess with CoinMENA, it was when we even wanted to go out and raise, even before we raised capital, we had these issues like guys you have three founders but only two are active. Dina and I have a very good working relationship, we have very complementary skill sets, and we've done several companies before. So that's from that experience we realized that he's good at things and I'm good at things and we need to play to our strengths basically. One of the, actually Yazan has a very good quote. I don't know who said it. Yazan said it on behalf of someone and I need to figure out who that someone is. Maybe the audience can help us. But it's basically you can achieve amazing things if you don't care who takes the credit. And I probably butchered the quote, but the meaning of it is as a team you can achieve insane things. And it was maybe Truman, the president that said it, but I don't know. We'll see who fact checks me. But the concept is if you think of credit as a collective effort, you can achieve insane things.
But then what's in it for me?
For who? If I don't take the credit.
If it's the collective credit.
Okay. So I guess each person has things that can come out of it. Right? Some people are doing it for monetary gains. Some people are doing it for legacy. Some people have different reasons for doing it. And what's in it for them has to reflect what their goals are. If someone has purely economic interests, they don't care to be running the business day-to-day. They care about an exit, which alhamdulillah in our case happened. They care about dividends, which wouldn't happen if I'm running the business. So what's in it for me is highly contingent on the goals that that person or investor or even employee came into the business with.
I'll definitely come to this exit later because that's obviously where I spend a lot of time on. Just on what you said, what do you think of the counterargument that time heals a lot of things? So you don't necessarily need to have very direct conversations early on because maybe things change, time heals, etc. So why kind of maybe jump too early into something? Let's cross that bridge when we reach it later.
I guess the reality is this is not scientific, meaning human relationships are complex and you can't brush them all in one stroke or with one brush. But I'm of that school because to me life is too short to rely on time. I want to act on the things I can act on and then those actions will have results and that results will have data and that data will feed and drive my future results. It's different schools of thought. Some people like to give it time and let it die out or maybe that's in business. I don't think that's necessarily a good idea because in business you want to be able to, you know, I think it's very arrogant to assume that you know what you're doing and you need to do something so that you get data and let that data tell you what you need to be doing next. And this is something that again Brian Armstrong the Coinbase CEO says it in a very direct blunt way, like if you don't know what to do, do something and that something will give you data and that data will tell you where you need to be going. I think that makes it easier to run your business if you acknowledge that you don't necessarily know or can't control everything that's in your environment.
You're also of the school of thought of always having a backup plan. We've learned through history that maybe some of the most successful commanders were of the view of burn the ships, don't have a backup plan. How do you think of these schools of thoughts?
Yeah. So it's ideal if you can achieve both. Meaning when we started CoinMENA, there was only one outcome. We will monetize this business. We will either go public on DFM, we will either raise crazy money and acquire the other businesses in the Middle East or we will sell the business. Those are the only three options. Failure is not an option. So if by that you mean burn all the boats, sure. But by that does it mean that I spent all my savings to and we had to put in a million dollars to start CoinMENA, about a million dollars for paid up capital we split it between the founders. We could have taken loans to do that but we didn't, we split it in a way that we don't have to take loans. Maybe burning all the bridges means I extend all on your credit. So I guess the word burning all the boats can give extra push for risk that might not be warranted. So if people around me or people in my life know that I like to take risks, if you like to take risks, you need to make sure that you have a backup plan. So yeah, I guess I'm of the other school of thought where the reason why I have a backup plan is I want to be able to make another bet and another bet and another bet. So if I put all my, I'm not going to use eggs in all basket because from an investment standpoint, I do have that. I don't have a backup plan. Bitcoin is my backup plan and if Bitcoin fails I will have to spend my time to make money again and today I don't. If CoinMENA does not pay me, I bought Bitcoin and Bitcoin is enough for me to be financially stable. I don't need to change my time for money. Everyone that is working on salaries, they're exchanging their time for money. If you are investing successfully then you can make your money work for you essentially. But yeah, from that standpoint, I don't really have a backup plan. But in business, you should.
I want to come back to how come you trust Bitcoin that much. But before I get to that and the fact that you're putting everything into it, I want to stay with you on that point of a lot of people like to come on shows and say we started from absolutely nothing. We started from zero. You're coming here just being much more honest and transparent and saying look there was a million dollar initial capital to come in. What do you think of the idea of starting from zero on one hand?
Why is it like so dramatized? And I will be very honest with you Anna, I have zero experience about starting from zero. My dad paid tuition to send me to Purdue University in the US that was maybe hundreds of thousands of dollars. So in my mind I cannot compare myself to anyone and everyone because I was given a golden spoon. So I have no option of losing because I was sent to the best school. My dad made sure that he worked very hard so that he's able to afford to send me, my brother, my sister to university. So it is my duty to repay the trust that he put in me. So I guess when people say start from zero, it's insanely impressive for people that have started from zero and made it to absolute success, it's a rags to riches story. It is something that in human nature you like to do that. When you see people break social and economic boundaries, it is something that there's a wow effect with it. But Anna from my side I wouldn't be able to relate to that because I was literally given the best opportunities by my parents and I feel like I have a duty to both do well in the world of business and not only give back to my parents and family but to give back to the wider community because I was given a chance that maybe if someone else was given that chance they would even do better. Yeah I guess and that is about a personal level. On CoinMENA, CoinMENA is my fifth company. Some of them failed, some of them worked. So in the first company, I wouldn't have been able to put in a million dollars to start. But if you take on risks early in your career, in my opinion, you will be rewarded because I guess the first real big risk that I took was leaving PwC to go work for a family office in Saudi. And I was on the fast track with PwC, getting promoted to suits and everything. And I quit to a job that didn't have a formal job offer. And that was a big risk I took at the age of 23. And what would happen if I again I had a backup which is my family and I wouldn't go hungry and maybe someone else wouldn't be able to say that. And I quit my PwC job which was nice pay, stable, and I took a leap of faith into a job that I didn't know how it would work out but in my mind if that job didn't go well I would go back to PwC. I'm not going to go hungry. I guess there's an interview from Travis the Uber CEO a few days ago and when they say that pain is actually something that you should aim for in business because if you endure pain that means your results will be more defensible in the future.
Now golden spoon is a word that usually is used in a very negative connotation. Now you're wearing it to the badge of honor and actually turning it into a duty and responsibility to deliver even more. How did you go through this thought process?
Because I worry about what I can control and I don't worry about what I can't control. I can't control that my parents did well and were able to send me to school or am I going to feel bad about it and victimize myself? So what can I control? I can control my emotions, my thinking process where alhamdulillah I was given great opportunities and now I have no option to fail because it would be, yeah, it comes with its own pressure and you can take that pressure in multiple ways. You can relax and say, you know what, I don't care. I have backup. I'm not going to go hungry, whatever. Or you can use it as fuel and motivation. And honestly, that's something that I think about a lot for my son because obviously Dubai gives you very pampered and nice living. And I look at the toy cars of my son. There are things that I did not see until I was much older. But that's something I also think of in how am I going to motivate him? Because I guess Anna in my mind the way that my dad motivated me was similar to our conditions and the conditions were good. So he can't motivate me by telling me you need to go out and make money or you need to, yeah, different levers are needed for different types of motivations. Purely financial motives would not have done it for me because I didn't have that concern. I didn't have paycheck to paycheck. So, I have different goals in mind and you need different ways to motivate different people.
Yeah, I know that that was a bit of a long tangent, but it's spot on because I think a lot of people actually like that fear of hunger in the founders because they're like that's why they're all in. They have no option to fail. If they fail, they're on the street. That's why we back them. But here you are saying not necessarily. What you're looking for is a motive and that motive doesn't always need to be hunger.
Yeah. It can be. And you know what the first time I really felt motivated was when I decided to study engineering and they did like an intervention and I was a very bad kid. My mom, God bless her but I feel bad for her because I was not a very easy, I was a very difficult kid at school, it was not and I wasn't necessarily very good at school either because I would miss classes. When I decided I wanted to study engineering, they came to my house, family, uncle, actually my uncle was supportive but family member said Talal should not study engineering he will not make it. Even my school counselor, my high school counselor who I love to go back and tell her see I told you, like Talal go to Purdue, I don't think so, you know only 20% of people graduate. I'm like yeah I will be part of that 20%. So to me the motivation was my high school counselor was saying Purdue, Purdue it's very easy to get in but you will never graduate from there. So that became, and how can she say that? And they referenced other relatives or how you know what that distant uncle he started engineering but he ended up moving to economics or business because he couldn't do it so I really don't think you should do it. That was my motivation. How could they doubt my ability to do that? And that became the fuel that allowed me to go to, do well in university and different types of ways to motivate people. Yeah.
Now I want to go back to your point you made about Bitcoin. Now you're saying you're all in. It's where your money is, where effectively the company that you've built is and the exit is. How do you build so much confidence and concentration in Bitcoin and why?
Okay. So I will give you a very clear and direct answer is because I bought earlier. Meaning if I was going to start from today, I would not put all of my wealth in Bitcoin. The risk and return is very different from when Bitcoin is $3,400 versus now. And then when I first bought Bitcoin, I used to live in a studio with zero responsibilities in life. There was zero dependence on. Now I have a wife, I have a son, I have other obligations, I have team members. Each period investors need to invest based on the risk of return. And your risk appetite is much easier when you're young. When I was younger, I used to like to invest in Bitcoin. And the reason why I used to like invest in Bitcoin is probably the same reason why I still like it today. As part of my job at PwC, we did a lot of work for banks, central banks, and financial institutions. And I realized that financial institutions are not going to be early adopters of technology. And that they're kind of faced with the innovator's dilemma. And the innovator's dilemma means if you basically have a profitable high margin business and there's an innovation that is going to disrupt that, you're not going to want to take it on. For that reason, the New York cab company did not come up with Uber. That's why the New York Times didn't come up with Instagram. That's why Marriott Group didn't come up with Airbnb. And similarly, banks aren't gonna come up with Bitcoin because it cannibalizes the inefficiency that they use to make margins. So, I guess long story short, I got into Bitcoin because I realized that the financial industry is extremely behind and they're not going to adopt it from within. It has to be an independent system. And then I guess I had seen the friction with sending money in and out of countries. I have seen the, I guess Anna to from a personal standpoint this is not investing advice or anything of that sort but I don't think money should be public. In the same way that, yeah so I guess gold was money for a very long time in human history and you could trust gold because in order to get more gold you need to spend time you need to send miners people to dig it and mine it from under the ground. As a kid, I used to like to save in gold because I did not, the game of monopoly is the best example of why it's hard to trust the US Federal Reserve because anytime they go bankrupt, they can print more of it. I guess going back to why I believe in Bitcoin. I believe in Bitcoin mainly because of its fixed supply. You are able to know, okay in economics they taught us that no asset in the world has a perfectly inelastic supply. Let's take, let's go back a little bit in economics classes. Inelastic supply means an asset that its supply does not change no matter what happens to the price. Let's take the example for wood. If wood's price was to shoot up 20x, what are we going to do? We're going to go to the woods, cut, chop off some more wood so that we can sell more and capitalize on this crazy price appreciation. If we start a company and the share price goes 10x, we will issue more shares and sell it to the public so that we are able to capitalize on that increase in price. Bitcoin is the only asset in the world that has a perfectly inelastic supply. No matter what happens to Bitcoin's price, it goes up to 200,000, goes down to 50,000, there's always going to be 450 Bitcoin released every day at the moment. And the monetary policy of Bitcoin cuts the amount of Bitcoin going into supply by half every four years. So I guess the deterministic nature of the monetary supply showed me that this asset is going to have limited supply and increasing demand over the coming years and I want to make money without putting too much effort. So this is the lazy way of making, or that was my thinking process. I think that was validated by Bitcoin's price. We'll see how it progresses in the coming years. And yeah, I guess my belief in Bitcoin is built on a deep understanding of the technology and some of the socioeconomic problems that we have in the world today.
Okay. But as you said, you grew up investing in gold. Gold has a finite amount of supply. It has an increasing demand especially with everything happening around the world. Now we see central banks increasing their reserves in gold. Gold has become very digital, very fractionalized, a lot of platforms. So why do we need Bitcoin to deliver what may seem to be the same function that gold or digital gold can deliver?
All right. So doomsday scenario, in a country where let's give an example in Latin America where the central bank in a specific country has completely failed and you have two tons of gold or 2,000 Bitcoin and you need to move them out. How are you going to move your gold in a country where everything is chaotic? You're not going to be able to do it. Bitcoin, you can even remember the keys in your head and you can memorize them or you can put it on a drive. There's multiple ways of transferring it. So, the argument between Bitcoin and gold is realistically speaking, if you're older, and I don't know what that threshold is, you most likely need to invest in gold. My grandfather, I finally convinced him to buy Bitcoin and then when I pushed him to invest more, he's like, why? What's in it for me? And I'm 89. He just turned 90. Alhamdulillah. So basically it's like I bought a bit of Bitcoin. I've seen it. Why do you want me to buy more? And I have gold and I'm 90. My investing goals are different than your investing goals. Gold is a $18 trillion asset. Bitcoin is a trillion dollar asset. So if you tell me why is gold more valuable than Bitcoin is because way more people trust in gold. But why do people trust in gold? Because it's been there 5,000 years. There is no way for Bitcoin to become more trustworthy than gold in its first 20 years of existence. As there's something in economics called the Lindy effect. And the Lindy effect says that the longer money is in circulation or the longer an asset is used as money, the more likely it is trusted going forward. Okay. So, Bitcoin came in and solved the problem that gold still has an element of physicality in it. Even if you don't see it buying digital gold, there's a physical risk there.
Now why do we need then the other currencies? You also said I think on the board of one of the Ethereum associations etc. If kind of Bitcoin came in said we're 100% digital why do we need yet another one?
So there is no other Bitcoins. There's only one Bitcoin in my opinion and the rest are, the way I see my investing is I save using Bitcoin. I actually save using my Bitcoins and the other is speculation. It's like investing in stocks trying to buy low sell high you end up doing the opposite. The others are more speculative in nature and I don't see them as savings per se. I do hold some Ethereum. I like this new token called Hype. These are a few tokens that I invest in, but I invest in from a speculative investment standpoint and I don't let them increase more than 1-2% of my invested portfolio.
Now, you divide investment into saving, which is clear, and speculation. Now someone may say is speculation really investing or is it more of gambling effectively?
Um I guess this, I think the stock market has become gambling since 2008. And the best way to prove that is look at a company called Beyond Meat. They have had very logical increase in revenue and EBITDA but the stock price has been like this basically. And if you're asking me speculation, gambling, in my opinion the stock market has become closer to a casino than it is investing since 2008 because the denominator we are using which is the US dollar has such a high fluctuating supply that it's impossible to use it as the frame of reference. If we wanted to know what's this distance and I give you a ruler that the unit of centimeter keeps changing then how can you figure out the distance? So if we're calculating the price of the S&P using this US dollar which has supply that is literally circulating in the trillions or fluctuating in the trillions. Then I guess GME, you have many examples where if you look at the ratios for price to earnings, yeah so the stock market is closer to gambling and so is my speculative investments. Yes, that is correct.
So now I grew up, person has grown up thinking building companies, investing in companies is great, is ethical, creates jobs, creates employment. Going to casinos is very bad, right? Is gambling, is speculative. And based on that I've been avoiding going to casinos and I've been investing in the stock market. Now currently I face this reality. What do I do? Where do I go from there? Like it's kind of not my mistake because I haven't decided the stock market is becoming a casino but it has become a casino. So where does this leave me?
Yeah. Yeah, I mean look, just to be clear and not to sensationalize things overly, not all of stock investing is casino just so that we're not painting extra, dramatic, cinema. Especially when you have tech stocks that have price to earnings ratios that really fluctuate heavily. But yeah, I mean the US stock market has become such a passive investment that you know if you think of the S&P and how many people around the world use it as a savings instrument, I think it's become closer to an inflation index than anything else because if it's getting all of these passive flows. Yeah, I still haven't made up my mind on that to be honest. And I will be, there are ideas that are still in progress in my mind and that's one of them. So I think that as I was younger, I used to spit out answers on the go even if I'm not 100%. Actually, I'm never 100% sure, but even if I was not sure at all. Now I'm teaching myself that if my answer or my thought process on something is not 100% clear, I'll be direct about it. But this is one of the things that I'm still thinking about.
For a follow-up episode. So you said on banks and financial institutions you don't think they're going to come up with Bitcoin. It's not in their best interest, not in their best incentives. However, Bitcoin, we don't even know who came up with it. So by definition, we don't even know what's their best interest, what's their agenda, what are they trying to drive. How do you trust something? You don't even know who's behind it.
Oh, great, great, great. Okay. So, and I guess when I answered you about people and agendas, I started thinking of those to a point where I forgot the actual answer. But the way you trust in Bitcoin is incentives. Today, there is a trillion dollar incentive to crack the Bitcoin code because what's Bitcoin market cap? It's about a trillion dollars. So, if you're able to hack it or if you're able to compromise it or if you're able to take it down, you can make crazy amounts of money. And that means if even if you are a government, if you are an individual, if you are a company, break Bitcoin and make insane amount of money. So that incentive, it's like a price tag hanging over Bitcoin's head. So there's a trillion dollar price tag that has not been cracked. And then the other thing is that in my opinion, if Satoshi's identity was known, they'd be jailed, killed, prosecuted. Yeah, of course. 100%. If you went, let's also not be idealistic. If you think Uber went to the Department of Transport, said, Hey, knock their door. Can I please come up with a technology that's going to cannibalize your taxi revenues? They tell them, Go, we're not going to allow you. If you went to the central bank and told them, Hey, I want to create this form of private money that is better than yours and will compete with you. Then, yeah. So, Satoshi's identity not being known is something that is very important because otherwise Bitcoin would have died. They would have been able to find Satoshi, take his or hers first million Bitcoin. And this is a question that I struggle a lot with explaining to bigger customers or bigger investors in who is Satoshi and I don't know, no one knows and you can speculate you can try to draw your own conclusions but the reality is Bitcoin works without Satoshi as we've seen over the past.
Did you watch the series trying to uncover who is it? Was it any good? Was there any real insights there or was it just drama?
I think there's been many different series on it. I think the one you're mentioning ends up saying it's Paul Le Roux which is a criminal that's currently in jail. I think it's more than one person to be honest. That's my opinion. It's very difficult for one person to come up with something like this. I think it's, but the also the counterargument if it's a team it would have been leaked of who did it. It's harder to keep a secret when it's multiple people. But again, I worry about what I can control and don't worry about what I can't control. I'm not going to know who Satoshi is, but I know Bitcoin works.
And the gentleman who you mentioned is in jail. Is it something related to Bitcoin or is it something else?
Something else. He's a class A criminal because I guess geniuses can go two ways. You can have people that go the extreme route of helping the world and then you have people that take the other route. This guy is super smart but he took the criminal route.
Or I guess also it can be intertwined right because one of the also the criticisms of Bitcoin is while it does a lot of great things that you mentioned it's also a conduit for human trafficking, for money laundering, for lots of different things because of the same characteristics it offers.
Yeah I mean I would argue that analogy has same legs as us drinking in plastic straws right now. Because drinking in plastic straws means nothing if you have rockets flying over you. It really became evident that the ESG movement or a lot of the renewable stuff is only on us mere mortals. It does not apply to governments and armies and you know so what effort. So I guess the same analogy kind of in my opinion fits on that. You know today what percent of global money laundering happens through Bitcoin? It's minuscule because Bitcoin is fully transparent. It's actually one of the worst ways you can launder money. Bitcoin is really bad for money laundering because everything is public, accessible to all. If you want to launder money you use physical cash because it has no public record. It's not trackable forever in history. I actually think that Bitcoin is one of the worst ways to launder money because of its characteristics. If you go towards other things, privacy coins, sure those have characteristics that do allow that. Yeah, in my opinion, having run a centralized crypto exchange, I feel like controls in things digital are much easier than in physical. And it's a maybe an analogy that I was able to understand this better earlier on. If I send you a PowerPoint, and the argument is it's easier to control digital than it is to control physical. If I send you a PDF file, send you a PowerPoint, even though it's digital, but it's older than Google Docs or presentations, you have the file. I have zero control over it. Actually, I did this once in a presentation on stage and scan a QR code and you get a Google doc, but then I can control that Google doc. So, I guess with digital things, you can control them in a better way than physical. And the same with Bitcoin. And if you want to look at examples of Bitcoin, so the biggest hacks in Bitcoin history, there was one $3.5 billion from Bitfinex. They caught the hackers six years after because they used some of the stolen Bitcoin to buy a PlayStation gift card from Walmart. They tracked it and they caught them. With Bitcoin, it is fully traceable and it's actually not a very good, it's one of the worst ways to launder money. But to also not position it in a, when there are new technologies they are used by the best and worst in people. So some people use Bitcoin and stable coins and other for illicit purposes. But that does not define them and that is not a very good idea because it's easily trackable. Even now you have things like there's tokens that are centrally issued like USDT and USDC that can fully comply with AML regulations where they have even the right to seize and the right to freeze.
Now you mentioned CoinMENA as a centralized crypto exchange and you mentioned now centrally issued coins. Now some people would say these descriptions are inherent and ironic in their own sense because that was the whole point, decentralization, non-kind of central issuances. Are we back to square one?
Um, not necessarily. So, first of all, decentralization was not the goal. It was the goal of Bitcoin, but it was not the goal of other coins and even Satoshi in there. There's many things that Satoshi wrote about colored coins or website coins where he believes that even domains will become in the form of tokens and those would be centrally issued. Okay. Bitcoin needs to be decentralized because it is being used as money. There are other, and with money you should not trust.
Why? Why with money I should not trust?
I should rely because I'm exchanging my time for money. I spend eight hours. I get paid $10 per hour. I've made this $80. And that means I'm exchanging my money which is limited and finite. Sorry, I'm exchanging my time which is limited and finite with money. Whereas if someone has the ability to mint and create new money like the US Federal Reserve, they're basically diluting my effort by printing more money. And this has been the reason for the failure of every monetary system throughout human history. The Roman Empire fell when they started to slash a lot of the gold. They had gold coins and to basically steal money from their population. They started cutting some of the gold off and they would skim part of it until people realized, hey, this is completely unfair and completely flipped.
Very interesting. We're getting into political economy here. So we're staying away from politics but actually on political economy at least. I want to go back to so understood centralization. Now when you start running such a central exchange and effectively this is money of retail investor. This is everyday person listening to us now who's put with you $10 and $100. Obviously the responsibility here becomes quite huge. Right. And in a few months when someone who bought Bitcoin at 120 and then came down to 70 a guy who had $100 now has $50. How do you deal with that responsibility?
Okay, so there is my first, by the way this is not my first responsibility just so that I'm very clear my first responsibility is ensuring that the assets are safe. The value of the assets is a secondary thing we will come to. If Yousef buys one bitcoin and bitcoin goes from 120 to 70. This is as expected. But if the bitcoin was to get hacked, that is not expected. So my first job is to ensure that the company is solvent, that the custody is world class and that the cyber security infrastructure is there and is in place and is compliant to VARA and Central Bank of Bahrain. As for the drop in Bitcoin value, we address this in a different way where we place weekly buy and sell limits based on the net worth of the user so that we don't allow them to invest more than the government technically allows. And we don't offer leverage or margin. In my opinion, anyone that talks about responsible investing and then gives their user access to leverage or margin, they are not being honest. If your platform is doing leverage or CFDs or perpetuals then you are a profit oriented business and there's nothing wrong with that but you can't say that you take care of your users because if you take care of your users you would only offer spot. That's my personal opinion because again going back to the casino and gambling, leverage trading platforms have a closer business to casinos than they do to exchanges like the NASDAQ and other centralized exchanges. How do you deal with the, I again I worry about what I can control and not worry about what I can't control. So for example when we listed some tokens that, because we're a profit oriented business at the end of the day which means that I have a fiduciary responsibility to my shareholders to grow and run the business but at the same time I can't sell my customers anything under the sun. When there are coins that are low liquidity, low volume we put a big disclaimer in, you know this can go to zero. So you do your part in terms of how you make your users and investors more aware.
On leverage, what draws the line between whoever is offering leverage is being honest or not? For example, if it's real estate, I think we would all accept that offering a mortgage, it's kind of fair enough. Is it the volatility? Is it the liquidity? What drives whether leverage is an honest practice or not?
Very interesting. So, and if you take a mortgage, your probability of getting liquidated is not that high. Whereas if you are, actually I'm curious to understand what the commercials are behind it. But unless real estate completely collapses your risk of getting liquidated is reasonably accepted. Whereas if you bought Trump token at 10x or 5x leverage you are almost guaranteed to get wiped out. So I don't think there's a scientific one for it but leverage does involve interest and leverage does allow people to invest more than they can or more than they should. I mean platforms that offer 5x leverage I have no issues with. If you're offering 101x leverage on Fartcoin, then yes, obviously I have an ethical issue with it. But at the end of the day, I don't think of myself as the referee, meaning I don't judge others and to each their own, but I have my own moral compass. And that's how I manage what I'm able to do and what I'm not able to do. Because funnily enough that you mentioned real estate. Real estate was the ultimate way of making money 50 years ago because you could lever up for 30 years with crazy leverage on an asset that had low supply and very increasingly demand but they had kind of liquidation protection because houses don't get, house mortgages don't get liquidated as often.
Yeah. Very interesting. Now I want to go back. You said your first responsibility is to protect people's assets. And that you have everything from the Central Bank of Bahrain authorization to VARA in the UAE and that's your top priority. Now that's what FTX said, right? They said it's our top priority. We have all of this etc. And then FTX collapsed. If FTX at such a level can collapse, how can people trust anyone else?
Harami, FTX, SBF has stole customer funds. I guess with debt seniority or with seniority of cash the first one is customer assets but then you have your super senior debt and then you go back to equity. So with SBF they invested customer funds which should all be backed up one to one. But in my opinion, FTX was a great example of human failure and not crypto failure because if it was a decentralized exchange, that would not have been possible because everything would be out in the open. What SBF did is a classic scam that has existed since the start of human time where he has a liability which is in dollars which is very clear what his liability is in and he created some asset called FTT or his tokens and those are assets where he propped up the value of to match the liabilities and they had some Mickey Mouse type auditors and I with all due respect to Mickey Mouse but they had some auditors and then past where they showed this heavily inflated asset on the asset side which was FTT and liabilities in dollars. Another example that is more relatable in the real estate world. Let's say me and you want to start a project and I come up with, I tell you I'm going to come in with my piece of land and instead of valuing my piece of land at a million I value it at a billion. So, I'm coming in with bad intentions. In FTX, they did have bad intentions and they intended and they did actually invest customer money. The thing that shocks me the most about FTX is they invested $500 million in Anthropic, the company that produces Claude way back when in 2021, well, 2022. So technically if SBF or if FTX did not have that bank run they would have way more than their customer assets. They would be fully solvent but that shows you the importance of time and many people don't give enough importance to the time value of money and how risks.
