Ep. 353 - Behind the Scenes of a Company Holding BILLIONS of $$$ in Bitcoin, w/ Prime Trust

December 3, 2020 #CRYPTO101

CRYPTO 101 · Ep. 353 - Behind the Scenes of a Company Holding BILLIONS of $$$ in Bitcoin, w/ Prime Trust

In this episode of CRYPTO 101, brought to you by the crypto game “God’s Unchained”, we catch up with Kinsey Cronin, the Senior VP of sales at PrimeTrust. She gives us her insights on institutional crypto adoption in the face of the coming recession. PrimeTrust is a custodian that is one of the very select few to be entrusted with actually holding billions of dollars worth of Bitcoin. She talks about some of their various partnerships and what goes on inside a crypto custodian company!

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Episode Transcript

Bryce: All right, what is up crypt nation. Welcome back to another episode of the Crypto 101 podcast. In today’s show is sponsored by Gods Unchained, the digital card game that offers true ownership to players. So gamers listen up here, cards are minted on Ethereum, meaning users can trade, sell and program their assets however they like.

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All right, all you good, wonderful citizens of crypt nation. I hope everyone a delightful morning, noon or night, as we say here, Crypto 101 podcast wherever you are in the world. Right now you’re in the right place, because you’re tuning in, to get some crypto education to learn a lot. And you know, a lot of you guys are probably listening to this, you guys are locked down, quarantined, you know, 20 something states or quarantine. And we got a lot of international listeners here.

So we just want to send out a lot of good vibes a lot of love. And let you know that we’re all in this together, we’re all going to make it through. And we’re going to bring you guys, you know, every day just some great content. So Aaron, you know, haven’t seen you in a little bit, man, since we’re trying to, you know, self quarantine ourselves, how are you holding up?

Aaron: You know, I’m doing the best I can, given all the, you know, everything that’s going on lots of anxiety and uncertainty. But I think there’s going to be a lot of silver linings to this, you know, we’re really having a chance to do some introspection, and reflection on our lives, that normally wouldn’t happen, because we’re so busy doing everything. And I think one of the things that I’m predicting is going to come out of this is we’re going to feel a lot closer together. We’re going to appreciate the times we have together more, when we do get to be around people and our friends and our families, and we’re going to have to rely on each other.

It’s just a fact, you know, we’re going to have more, we’re going to have to rely on each other. And speaking of people you can rely on that brings us to our guest today, because we can’t just do it all by ourselves. And that’s where custodian in crypto comes into the picture. So we have with us today, Kinsey Cronin, the head of Business Development over at Prime Trust. Kinsey, thank you so much for being with us today.

Kinsey: Thanks for having me, guys.

Aaron: What were you doing before you got into crypto and what brought you into this industry?

Kinsey: Well, before I was in crypto, I was working in equity crowdfunding. So I worked for a company called StartEngine that was formed because of the JOBS Act basically, in reaction to the JOBS Act, which is similar to Prime Trust and prime press was providing all the expert services for search engine. And what we were doing was helping companies raise capital for their businesses on the internet. So not terribly different from what your listeners might know, as an ITO, except completely different, because it was entirely sort of invented in and regulated by the government.

Aaron: Interesting

Bryce: And the JOBS Act was one of those acts, you know, for those of you guys that are listening might not have heard of it, it was introduced by the Obama administration, in order to kind of get unaccredited investors, you know, equal, or at least semi equal investment opportunities as those of you know, the upper class. So I’m a big fan of the JOBS Act. And you know, I’ve actually, I’ve definitely heard a StartEngine, really a big fan of all this stuff that you guys did over there, too.

Kinsey: Yeah, it’s interesting, because both the JOBS Act, and Bitcoin were sort of born out of the last recession that we were in. And so in 2008, is when the JOBS Act sort of started being discussed. And obviously, when Bitcoin was born, as well, it took a lot longer for the JOBS Act to actually be signed and put into effect. But similarly, it took some time for Bitcoin to take off too.

So at one point, you know, I remember being at a table at a conference that we were hosting with some of the people who had helped write the legislation on the JOBS Act and some of the earliest investors in Bitcoin and it was really, really interesting to watch them interacting and realize that they’ve kind of been working towards the same goals and had no idea about the other. And, you know, it’s, for me kind of the moment that I bought into cryptos. We were very specific I went to I was invited to a rooftop gathering an event that was hosted by a company that had a very successful ICO a few three years ago. And so they, they were basically pitching. And they said, goodness is true that they had raised over $40 million in under a minute. And they had to shut off the acceptance of funding at that point, because they didn’t want to take too much.

And my job was pretty much on the floor. And that was, for two reasons. One is that I’ve been working with all these really worthy company, and she’s been trying to raise capital online, through night from non accredited investors from regular people. And it has just been really challenging. We ran into a lot of struggles there. And there are certainly plenty of success stories, but wasn’t easy to do. And certainly that much money and not short of time, just with Matt, I’d never met him Never heard of it. But the other thing that was also kind of clear about this particular company was that I knew they had to be breaking the law. I was really familiar with the law. That was one of the reasons that we were that it was hard was we had to make sure that we did things in a specific way and followed specific regulations. And so there is this combination and feeling of like, wow, they’re doing something right. And also, they’re doing something wrong. How do we find a way of moving those two things together?

And I think that’s definitely the kind of goal that Prime Trust occupies right now in this space, which is trying to take the sort of usability and functionality of all these new opportunities, and make them fit into our existing sort of regulatory understanding or expectations that we have in our government.

Bryce: That’s really wonderful. And I love that, that throwback to the 2017. ICO craze, I remember those days, very fondly. And I had the same impression of like, Oh, my God, this company, like, how is this legal? And, you know, some people, you know, did it legally. And some people, you know, threaded the needle or operated in that gray area. But it is really interesting. I mean, in at a high level, like, what is the draw? Or what is the pole really for raising money in like that, that fashion as opposed like a non equity fashion, as opposed to, you know, your standard equity? And do you think that we’re going to see another, you know, proliferation of these ICOs?

Kinsey: Well, I mean, I would guess that the term ICO is probably going to be kind of done. I don’t know, there’s a lot of takes on this. And I certainly think we’re going to see new iteration. And we see that all the time, we talked to lots of companies that are looking to find ways to make the most of the opportunity there to essentially crowdsource and then and also return make returns available for the crowd, which is, again, the spirit of the job, Zach was to do the same thing. But the crypto world just did it a lot better as far as being able to get more people involved and excited, and to participate. There are so many people from the traditional side that have jumped in from the legal side, that are working to try and make sure that this is regulated in a way where people don’t get burned, because that’s obviously the important thing, right.

And that’s where everybody is trying to thread the needle. And some people have more appetite for risk than others. We all sort of fall somewhere on that spectrum. Because I think ultimately, nobody does this with the hope that they’re going to end up in jail, right? And maybe some people do it with the hope that they’re going to just get away with something, because they think that they can. But I think at least all the people that I work with working at a regulated financial institution, they’re really just trying to do it in the best way that is safe for them and safe for anybody that are investing.

Aaron: One of the questions that I’ve really been wanting to ask you most of all, is you know, a lot of us out here we only have like price and market cap as gauges to judge industry growth. But what are you able to see from your vantage point over there? Is crypto healthy and safe or are you getting any request to withdraw big capital as people are getting ready to panic sell in this collapsing economy?

Kinsey: Well, you know, we’re not getting mad for not seeing any kind of behavior that suggesting panic selling right now. I mean, obviously, we’ve seen you know, the crypto world doing better than the traditional side of the market. What we are seeing right now, especially in this kind of really, really strange time with COVID-19. And the markets as they are is a huge acceleration and investment in our space.

So I’ve been extremely busy, because we’ve got companies that maybe had a number of focuses, including work they’re doing on the traditional markets or maybe building in real estate and construction, things like that. And they’re saying, Okay, now is definitely the time to be investing in what we’re doing with blockchain. Because the use case for blockchain and finance is so clear, and there have been has been so much growth by leaps and bounds that what we’re seeing really a more investment in infrastructure right now, which is something we love to see.

Aaron: Yeah. 100% Ray Dalio, you know, one of the biggest hedge fund managers in the world for Bridgewater, just the other day on CNBC said that, you know, his excuse for their his fund going down is there was nothing really to sell off into, there are no more assets that he felt comfortable, you know, moving his stocks and bonds away from and he quotes unquote, said cash is trash. Think about that.
Bryce: Oh, my God, I didn’t see that one. You’re going to have to send me that link.

Aaron: Yes, cash is trash, Ray Dalio. So I mean, if that’s not the most damning thing. Yeah, well, guess what everyone, there is somewhere to run. And it’s not hiding anymore. Bitcoin is on the tip of everyone’s tongue, you know, digital currency is now being featured in bills that are going through the Senate. If that’s not the most bullish sign in the world, I don’t know what it is.

Kinsey: Yet, we’re finding that a lot of our customers, their investors are pushing them and talking like, you know, VCs and family offices that are actually pushing them to make sure that they’re investing especially right now in blockchain technology. Because that feels like the right direction going to we’re getting that back from a lot of these companies. And again, that’s where we’re finding that. Because we have this, we have API technology that our customers can integrate. And then basically, it turns on their ability to do things like open accounts, and facilitate trading and things like that. We’re just finding that so many of so many companies that maybe were a little bit more branched out or tightening up. And this is the direction that they’re seeing as the best place for them to ride out the storm, which is really interesting.

Bryce: Wow. And so when you say they’re invested in blockchain technology, can you kind of unpack that a little? Are they directly purchasing like crypto assets holding them for the long term? Are they buying equity in companies that are maybe staking them? Are they buying equity in companies that are developing technology? Like what does that actually look like?

Kinsey: Okay, so well, I can, we’re seeing all of those things. But I guess, probably a better way to frame that is to clarify that while we’re at Trust Company, we don’t do a ton of retail custody. So most of our direct customers are other businesses that use our API’s to basically access the ability to open accounts to complete the appropriate compliance for those end users. And then end users can manage those accounts through the platform. So for example, let’s take a large exchange that wants to do business in the US crypto exchange. And they want to be able to onboard us customers and hold US dollar in account for their customers so that those customers can use it when they want to instantly buy crypto on the exchange, those users would be coming to that exchange platform entering in information to create an account. And the information is going via the API’s to our team, which is an opening the account, and then accepting direction from the customer and from the platform on how to move it around.

So what we do is we allow the platform to exchange to avoid actually touching or controlling the funds, which helps them out in a lot of regulatory areas. But we’re actually not directly interacting with those end users. If they have a customer service question they’re going to their platform. And then if that needs to be elevated to us, it’ll be done so internally. So what we’re seeing what I’m seeing directly is, you know, the investment on kind of a institutional level that’s being made in this space, and there’s a ton of it. On the customer behavior side, we’re seeing all kinds of things. Many of our exchange customers have, have recorded their highest trading volumes on record ever in the last couple of weeks.

Aaron: And I think this is really important to note how this is evolved from an exchange perspective and how it affects the end. User though, because for years, we’ve said we cannot trust crypto exchanges, do not leave your money on exchanges, we’ve got proof of keys day. But now all of a sudden, you have an actual trusted entity, like Prime Trust, that is actually doing the custodian ship and actually holding the funds to where you can say, okay, maybe I can trust this exchange, I can leave some funds on here, I can use their staking or lending features to actually grow my money, or whatever the whatever options are available like that really, really flips the game on its head, for people in a good way, because now, there’s a lot of people that aren’t comfortable holding their own keys, or they lose their phone all the time. Or they’re just, you know, a forgetful kind of person. And they say, Well, I don’t want to get into crypto, I end up losing my money, I need someone to hold it for me. Now, thanks to what you guys are doing that’s possible for pretty much the first time.

Kinsey: Exactly. So if you’re working with a company, that is that is working with us, and you put your money in an account with them, that money is actually held by us, they don’t get to take it or lose a key and suddenly it’s, you know, it’s gone. I mean, we can’t get let’s say, we had been the custodian for Mt. Gox, for example, all those funds would have been right where they were with us. And obviously, there’s still that question. Well, you know, because I know not your keys, not your crypto, are we trustworthy, right?

And I understand where there is always going to be no question of that. But what’s really important to understand is that trust companies in the United States, you can’t even have the word trust in your name, like Prime Trust, unless you’re regulated as a Trust Company, were regulated, and report to the banking authority at Nevada, we have to have this license, we have a whole bunch of things we have to do to assure the authorities that we are responsibly checking into the identities of people whose funds we hold, so that, you know, they’re not laundering money, and also that we’re protecting it appropriately. And the buck stops with us, it’s very clear if something happens with your money, we have accepted responsibility for that. And you can hold us accountable legally, because all of our information is there. So there’s this, you know, the idea of a Trust Company.

Trust Company has been around for a long time. They they’re in place to solve the question of trust. So if you were back in like the 1940s, trying to go to the stock market, and you wanted to make a trade, but you didn’t want to give us you had to prove that you own stock. But you didn’t want to give it to the person who you were going to trade it with until you got what you were trading, you guys would want to use a middle custodian to make sure that you had a sense of trust. And that’s kind of where this whole world came from. And I do think that there’s a place for it in the crypto space. And I know that there’s a lot of excitement about, you know, the kind of trustless nature of blockchain. But I do think there’s always going to be people, like you said, who don’t really want to take responsibility of their own keys, or who ultimately want to use a lot of different platforms and don’t want to have to trust them all.

Bryce: Love it really, really well said, I mean, there’s always going to be that trade off when you decide to go custodian or non custodian. I wanted to kind of ask like, so as it like, what really is a Trust Company? But kind of in practical terms, like, does that mean you guys have insurance like from the FDIC, like, God forbid, you guys know were hacked or something and lost the customers funds? Are the customers funds insured because of this trust?

Kinsey: Well, customer USD is insured under FDIC, the FDIC doesn’t cover crypto at the moment. Maybe at some point it will. But the way these trust companies operate as trust companies are very, they have a lot of similarities with banks, but they’re not bank. So we actually hold all of the funds that like, for example, the US dollar that we’d be holding, we hold that in our partner bank, so we’ve got a lot of them. And we hold those funds in our name. And as a licensed Trust Company, we are allowed to hold funds on behalf of other people. And that’s just how trust companies operate. So, so we’re holding the funds at a bank. And those accounts all have FDIC insurance.

When it comes to the crypto that we hold, we don’t hold that at banks. We hold it in sort of a number of proprietary ways that I can’t share the security of which on something like this podcast, but you know, that’s held differently because it’s a completely new and unique type of asset. So we hold that separately the same way that we hold other types of assets that we can hold like stocks and property. And so when it comes to crypto, we do have insurance, but it doesn’t fully cover hacking, and that’s the case for most, I mean, I think all trust companies right now have some level of insurance, but it is not 100% insured. And users can always have the option, but they need to go to insurance providers. And that tends to become pretty expensive. So I found that in most cases, the cost of insurance outweighs the desire for many users to actually have it.

Aaron: That’s really interesting. So what are the pros and cons of using a custody service like prime trust as an end user? I know you mentioned not a lot of them have it. But you know, even from a business standpoint, you know, why use Prime Trust as opposed to just a hard or a cold wallet?

Kinsey: Well, certainly, I’d say that the primary pro, I think already mentioned is having somebody who is licensed, regulated and has ultimate responsibility for those funds, you know, contractually obligated to provide security and custody of the funds. Obviously, the con is whether or not you even feel comfortable with that, you know, there, I think that the main con is, you know, that there’s the we are a middleman and many people in the crypto space are just not comfortable with that period.

Aaron: Yeah, that makes a lot of sense. But I feel like, at some point, like we need to have some people in the middle because we’ve tried these different decentralized experiments. Smart contracts have been proven to be hackable and unrecoverable and unreliable. So I think, from an ideal standpoint, it’d be great to operate in a fully trustless environment. But being realistic, we’re just not there yet. We’re just not so that’s okay. Because we got Prime Trust in the meantime.

Bryce: Exactly.

Kinsey: Yeah. And I agree with you, you know, it’s one of those things that that would be amazing. And, you know, we work with a lot of very interesting technology companies that are trying to find answers to that, and trying to allow for as much decentralization as possible. And we’re open to working together with that. Now, we’re obviously not your average Trust Company, we are very, very interested in being on the cutting edge, and finding ways to advance technology, we, I mean, I have no idea what it’s going to look like in five years is going to change and grow by leaps and bounds.

Like, I think we really haven’t even seen the tip of the iceberg of how this is going to change finance specifically. You know, and that, that being said, for most everyday people, the way that finance works, you know, the financial systems work don’t really apply so much. I mean, you know, the advent of things like credit cards and stuff like that those become daily use, but when the stock market switches to computers, you know, that doesn’t affect most people in ways that they see or recognize. But I think we’re going to see just massive shifts in the financial world, because of this new technology. But I would say that another con, actually, I thought of, for using the trust, or a qualified custodian, is if you’re trying to commit a crime, then you shouldn’t work with us, because your identity, and we’re going to check your background and check your identity off of numerous anti money laundering lists around the world. So it’s just an end in your activity will be tracked. So when you are trying to take advantage of some of the holes in a system that isn’t fully developed yet, it’s a lot harder when you involve somebody like [unintelligible].

Bryce: Beautiful. Well, we’ll keep doing the Lord’s work here. A couple more questions. But or I should say, not the Lord, but Satoshis work, keep doing Satoshis work here. Yeah, a couple more questions before we let you go. You know, these are questions that we like to ask every guest that comes on the show. You know, if this is like really the first podcast that somebody’s in crypto, or somebody who’s just now getting into crypto and the first podcast they listened to what would be a word of advice that you have for them?

Kinsey: Wow. Okay, I would say for somebody just getting into this, I’d say you’re going to need to take in a lot of information, if you really want to understand this. There’s so many opinions out there. And there are a lot of people who say things as absolute fact, and they’re not. So I would say listen to as many cool podcasts as you can. But also just sort of diversify plug for you guys. You diversify the ways that you’re learning about this and try and take in a lot of different accounts and opinions and just sort of keep going with it.

And the other thing I would say, like from my perspective, this is important. Get to understand the existing traditional financial problem as well, if you’re trying to learn about crypto markets, but you don’t know anything about traditional markets, I think that you might kind of becoming at this from without some important knowledge. One thing that I found is that when I was studying for my series seven exam, which is a broker, dealer agent license, I had to learn all about puts and calls and different types of orders on the stock market. And then I went into my coin base account, and I was able to actually use that knowledge to place limit orders and things like that.

So I do think that, you know, understanding that a lot of even though we’re creating kind of a whole new world, it’s still coming from an old world. And if you don’t have any knowledge about the old world, you’re going to be coming in a little bit behind.

Bryce: Man, that’s really, really a great word of wisdom here. Definitely, if you’re trying to predict the future, and you’re trying to get with the future, you have to be a good historian. You have to understand where we’re coming from in order to, you know, prepare for where we’re going. So I second that. And then the last question I have for you. Kinsey is besides Prime Trust, and besides, you know, any other company that you might have a vested interest in, what is one company or project that’s really impressing you these days in that you are excited about for 2020?

Kinsey: An impressive company on product? I’ve got to be careful, because I don’t want to play favorites. We do. We do so much.

Bryce: Yeah, something that you think is pretty cool.

Kinsey: Well, one thing and this is sort of directly one of our customers that Prime trust, but one company, I think is doing a pretty good job in entering the US market at least is Binance. They had to move off because of some regulatory concerns. And they were able to get a custodian prime trust to open accounts on behalf of customers via the API. And that’s allowed them to operate legitimately in the US. And we’re seeing a lot of international companies do that, both in the US and in other countries. So taking the differing sure jurisdictional laws, and trying to be compliant with them. And, you know, just because something is put in place as the law doesn’t mean it needs to be, it doesn’t mean it needs to be a hamper on development, it can actually sometimes be helpful, and it can help legitimize what you’re doing and get people involved that have a lot of credibility and years of experience that could actually really help your industry grow.

Bryce: Brilliant. Brilliant. Well, thank you so much for your time. What is the URL for Prime trust?

Kinsey: Oh, it’s prime trust.com.

Bryce: Easy peasy, guys, if you want to find out more about all this stuff. If you’re an institutional trader or investor and you are just finding out about prime trust, go ahead, check them out. Feel free to reach out to us and we’ll get you in contact. Thank you so much for your time, today Kinsey. And we hope that you stay safe and healthy amidst all this crazy, crazy things that are happening in the world.

Kinsey: Thanks, guys. Thank you, wash your hands and stay at home.

Aaron: Absolutely. And for our listeners out there, I know you can be very bored as well. We have a backlog of over 300 episodes on Soundcloud and iTunes. So spend some time catching up in the archives. We’ve had so many amazing guests on over the years. And we’d love for you to reach out to us on Twitter @crypto101pod and say hello, tell us what your favorite episode your favorite guest is, and who should have on back.

Bryce: Great idea.

Aaron: Until then. We’ll see you then.

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Ep. 353 - Behind the Scenes of a Company Holding BILLIONS of $$$ in Bitcoin, w/ Prime Trust

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