Public Key Podcast

Bridging the Gap Between Wealth Advisors and Digital Assets: Podcast Ep. 75

September 26, 2023 | by Chainalysis Team

Episode 75 of the Public Key podcast is here! It’s no secret the biggest institutional investors are jumping into digital assets and tokenization of real-world assets, but how do Wealth Management Advisors keep up? In this episode, we speak to Sarah Morton (Chief Strategy Officer) and Hashim Mitha (Chief Executive Officer) of MeetAmi, who are educating and creating a platform for the next generation of digital asset advisors.  

You can listen or subscribe now on Spotify, Apple, or Audible. Keep reading for a full preview of episode 75.

Public Key Episode 75: Wealth Advisors have to be educated on crypto before advising clients

It’s no secret the biggest institutional investors are jumping into digital assets and tokenization of real world assets, but how do Wealth Management Advisors keep up?

In this episode, Ian Andrews speaks to Sarah Morton (Chief Strategy Officer) and Hashim Mitha (Chief Executive Officer) of MeetAmi, who started their cryptocurrency journey in the bitcoin mining industry before providing education, tools, and services to enable wealth managers and advisors to invest in digital assets. 

They emphasize the importance of education for advisors, in order to make recommendations to their clients and the need for regulatory clarity in the industry. 

The conversation goes deep into real world asset tokenization and decentralized finance while highlighting the importance of due diligence when dealing with investors and what the future of wealth management in the digital asset space will look like. 

Quote of the episode

“Advisors have to get to a qualified yes or a qualified no, but to be qualified requires education. So, crypto doesn’t make sense for a lot of portfolios, depending on the risk profile of the client. And that’s fine, but being able to explain why it doesn’t make sense within a portfolio is critical for the advisor to build that trust with the client.” – Hashim Mitha (Chief Executive Officer, MeetAmi)

Minute-by-minute episode breakdown

  • (2:23) – How the MeetAMI founders were introduced to digital assets via mining
  • (5:18) – Overview of MeetAmi’s platform and digital services to wealth advisors
  • (10:20) – The future of real world asset tokenization and blockchain technology
  • (15:06) – Challenges with lack of regulatory clarity in the US crypto market and comparison to Canada
  • (17:25) – Morningstar partnership and AmiLearn educational platform
  • (22:02) – Importance of education and understanding risk for advisors entering into digital assets
  • (29:25) – Experience building in a crypto down market and advice for founders
  • (34:18) – The hybrid future of tokenization and DeFi in the wealth management ecosystem

Related resources

Check out more resources provided by Chainalysis that perfectly complement this episode of the Public Key.

Speakers on today’s episode

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Transcript

Ian:

Hey, everyone. Welcome back to another episode of Public Key. This is your host, Ian Andrews. Today, I’m joined from the team, from MeetAmi, Sarah Morton, chief strategy officer, and Hashim Mitha, chief executive officer. Nice to meet you both.

Hashim:

Thanks, it’s great to be here.

Sarah:

Thanks for having us.

Ian:

Now, looking at your bios online, I think this might be the second company that you’ve started together, and potentially worked together more times than that. I’d love to maybe start folks out with a little bit of a story of how you ended up in this world of digital assets.

Sarah:

Sure. Do you…

Hashim:

I’ll start. Actually, it started back at a telecommunications company that Sarah and I worked at. And it was odd, one day, we used to have a data center there, and these two guys came in and asked, “Can we put miners in your data center?” And I had no idea what they were talking about, and that was where it all started, and we got absolutely fascinated with the concept of mining. And in British Columbia, we have excess capacity of power at the time, and we had the opportunity to leave that company and start a mining business, and that was the first company that we started together, securing power and looking at setting up mining operations. But it was through that journey that we saw the opportunity for wealth management to engage in the industry of digital assets, and what were all of the tools that they were going to need in order to facilitate investing in crypto and other digital assets on behalf of their clients?

Ian:

That’s an amazing entry point. When that group walked in and said, “Hey, we’d like to put some miners in your data center,” in my head, I immediately started thinking about people carrying pickaxes-

Sarah:

Yeah.

It was fascinating, because at that time, that’s when there was a big scramble for power going on-

Hashim:

Yeah.

Sarah:

… and talking to different power authorities, getting hundreds of calls a week. It was a crazy time where shipments were arriving with miners from Asia to the port, and people were calling the hydro authorities asking where they had power. Of course, it’s a massive infrastructure bill to support that, so it was really interesting, from an infrastructure point of view, what is going on? Why are people buying $30 million of these machines to mine a coin? And of course, you start then having to look at the different coins, different tokens, GPUs, Ethereum, and that was the entry point, I think, to both of our rabbit holes in this space-

Hashim:

Yeah.

Sarah:

… was, there’s something going on here, and it was just fascinating.

Ian:

And so, you started your own mining company, left the data center business. Were you mining Bitcoin or others? Where was the focus?

Sarah:

Well, our intent was to primarily mine Bitcoin, but we’re also looking at a hybrid GPU environment, because obviously there’s more flexibility on the GPU side and you can also sell those resources. Being in Vancouver, Hollywood North, we did see a really big opportunity, maybe create a hybrid multipurpose data center. After traveling to China and looking at everything that was going on, and the uncertainty, and the changes that were going on in China, and how you had to prepay everything, and the risk, we ultimately didn’t proceed with building any data centers, but we were well down the path of the concept of MeetAmi and just recognized there was so much to build in that space, and mining was risky at the time, so that’s where we shifted our focus to MeetAmi.

Ian:

Well, that’s a great transition, thank you, Sarah. Tell the audience about what MeetAmi is today. It’s a pretty comprehensive platform, but I’m guessing a lot of our audience maybe hasn’t encountered it yet, so maybe talk us through the high level of what MeetAmi does.

Sarah:

Yeah, at the core, MeetAmi is a company that provides education, tools and services to enable wealth managers, advisors, people who manage other people’s money, to connect and invest in the emerging world of digital assets. And we have built AmiPro, which is a technology platform, but really then recognized that learning was where everybody was starting, the journey starts with learning, and so we built out our AmiLearn platform, and again, it’s focused on that audience of people that manage other people’s money and carry a fiduciary duty. And then, we spend a chunk of our time on services where we’re helping companies navigate where they are at the beginning of their journey, how does it tie into their roadmap? So it’s really about helping advisory firms of any size connect to and invest in this space.

Ian:

I think this is really exciting, because my experience since joining Chainalysis two and a half years ago is so much of the world is still at the very beginning of their learning journey when it comes to digital assets. My own experience when I first heard about Chainalysis was, “I don’t know if I really want to be in crypto.”

Hashim:

Right.

Ian:

Because all I knew about it at that point was price volatility and people going to jail for fraud, that was my perspective on the market. And so, I have to imagine you must get a wide range of interest and knowledge and experience from the world of wealth advisors. Typically, I think, that profile of person is probably fairly conservative, if they’re someone that other people trust with their savings and investment activity. Talk about some of the experiences you’ve had as you’ve been building out the product and starting to engage with early customers.

Hashim:

Well, it’s actually been across the board. We have a portfolio manager that’s on our platform in Quebec that is leading the charge. He is all about digital assets, all about crypto, he absolutely loves it, and he’s been in the industry for probably seven or eight years now, he really understands it. And on the flip side, you have very conservative advisors who are fundamentally against crypto as an investment asset. Our belief though is that advisors have to get to a qualified yes or a qualified no, but to be qualified requires education. So crypto doesn’t make sense for a lot of portfolios, depending on the risk profile of the client, and that’s fine, but being able to explain why it doesn’t make sense within a portfolio is critical for the advisor to build that trust with the client.

The other part of this is that there’s a massive transfer of wealth that we’re going through. The boomers are moving their assets to younger generations who are looking for alternatives. And it’s not just crypto, it’s understanding that, over time, all investment products will be in digital form. They will be ledgered on the blockchain, there will be better and faster transactions and settlements. How all of that works is actually really important for advisors to understand, just so that they can see the evolution of their business and support the next generation of clients coming through.

Ian:

I think that’s a great point, because I think I encounter people regularly who are like, “I’m a fan of blockchain technology, but I don’t really like crypto.”

Hashim:

Right.

Ian:

And that’s always struck me as an unusual fence sitting position to be in. I don’t know that it’s easy to cut the two apart today, but I think you were illustrating there that there is a point in the future where the technology becomes underpinning for large parts of the financial ecosystem. On your website, there’s a blog about this coming wave of tokenization, I think is the title.

Hashim:

Yep.

Ian:

Talk a little bit about this vision, as you expect this to unfurl, and how you’re educating wealth advisors on what’s coming at them in the next few years.

Sarah:

Well, yeah, this is a multilayered answer, because you’re dealing with… Web3, for example, is not a thing, it’s the next iteration and evolution of the internet, and part of that encompasses blockchains and AI and smart contracts and the digital money that is going to power a lot of this. And as I’ve joked to a few people, you can’t buy tokenized real estate and walk into a data center and shove a $20 bill inside an Ethereum miner, you’ve got to have the currency of where you’re going. And the language of Web3 and the language of computers, they need money over IP, and they need digital money. There’s also a lot of talk, on the flip side, around bulk and legacy systems in traditional finance that blockchain smart contract and the tokenization of real world assets is going to enable, and as Hash was saying, there’s… Oh my god, I’m fading. I just faded, sorry.

Ian:

Take a minute.

Sarah:

Yeah.

Ian:

We’ll take it out in the edit.

Sarah:

Yeah.

Ian:

You can just restart when you’re ready.

Sarah:

You were talking about the alternative trading systems, I’ll ping that one over to you. So if we go back to the bulk of traditional finance and manual execution of agreements and paperwork, a lot of that can be automated with smart contracts and digital tokens, and so there’s the money and the currency and the investment that people want to make in the asset, but then there’s the efficiency and the move to tokenized investments, and tokenized investments on their own or representations of real world assets. I think that’s where the complexity is going to come, but also, it gets really interesting.

Hashim:

Absolutely. From our perspective, it’s about starting with the foundations, so basic understanding of what blockchain is, understanding what Bitcoin and Ethereum are as networks, understanding the applications that are being built on those networks. I find it absolutely fascinating that, on average, Ethereum generates somewhere around $80 million a month of revenue and it doesn’t have a CEO.

Ian:

Yeah.

Hashim:

It’s hit peaks of close to $150 million a month of revenue, that’s amazing. But it goes back to the ethos of the crypto industry of building technology for the betterment of humanity. There’s a lot of things that are really positive from a technology layer. It’s important for advisors to start down that journey so that they can at least have that conversation of what is blockchain? Why is Ethereum a valid coin? How do you value that? Is the price of Ethereum justifiable? Well, if you understand the underlying technologies and the applications being built on it, you can get to that point of having the conversation with your client as to why Ethereum makes sense or not. There’s hundreds of thousands of coins, a lot of them are questionable, but at least the advisor would be able to look at a coin going, “That makes zero sense, I can’t understand it, we’re going to keep that off to the side. But I can understand how Bitcoin and Ether work, let’s go down that path.”

Hashim:

Exactly.

Ian:

Okay.

Sarah:

But it does tie… The advisor has to know your product and a know your customer, KYP, KYC. These are big requirements as an advisor, as a fiduciary, as somebody who helps manage somebody’s financial future. So understanding the risk factors of the client is the other side of the coin of knowing the product, because how can you assess if that product has a suitable risk profile without knowing the product? So we spend a lot of our time trying to help bridge that gap.

Hashim:

And it doesn’t have to be direct ownership of the coin, it could be the ETF. If you’re selling the Bitcoin ETF, you need to understand what Bitcoin is.

Ian:

Right.

Hashim:

You also need to understand what custody means, and you have to understand how liquidity works.

Ian:

Those are all incredible points, and I think there’s also an additional complexity here, because you’re operating not just in the Canadian market, where you’re both based, but you’re also operating in the US, and right now, we’ll call it, as a euphemism, lack of regulatory clarity happening in the American market, which I think must add an extra layer of challenge to a lot of these conversations. But maybe starting in Canada, it seems like there’s almost an embracing of digital assets. We recently had Dean Skurka, the CEO of WonderFi, biggest domestic exchange in Canada, on the program, and he was talking a lot about how they’re not only a registered broker, but they’ve actually gotten their staking product approved by the Canadian regulator-

Hashim:

Yep.

Ian:

… which is great. I’m curious, are you seeing that flow through into your business, where there is, as that acceptance is happening at the regulatory level, it’s encouraging demand on the wealth management side, as their clients are maybe more eager to be in the asset class?

Sarah:

It’s definitely encouraging the conversation, and yeah, I would agree that it is easier than in the US right now because there is a regulatory framework. We did intentionally launch in Canada first, and at the time, the first ETF in the world was going through regulatory approval and got approved, and so we recognized that there was a framework, Bitcoin first, then Ether, then the next coins. Our regulators have created clear language around crypto trading platforms and how client assets are to be held. And then, we are seeing, obviously, talking about Dean, WonderFi, there was a big merger, so several of the crypto trading platforms have joined forces. So that is creating awareness and drive in the market. I wouldn’t say FOMO, but there’s definitely some comfort for the traditional players to start looking at it. So I can definitely tell you the conversations are picking up.

Where it is different in the US, because a lot of the RIAs we talk to that really want to get into the space don’t feel there’s a path forward. And of course, nobody wants to get into a tangle with the regulators. So as soon as there is a path forward and that’s defined, there are people ready, there are advisors ready. So absolutely, regulatory clarity is a huge driver.

Ian:

Yeah. But that hasn’t slowed you down, you had a big announcement recently with Morningstar. Talk a little bit about that partnership and what you’re doing with them.

Hashim:

Sure. Yeah, the opportunity with Morningstar is absolutely amazing for us. So we have launched our AmiLearn platform, so our educational platform, it is embedded or integrated within Advisor Workstation to the desktop of almost half of all advisors in Canada and the US at the enterprise level. We’re launching with their office product next week, which is amazing, that’s being used by about 2300 RIAs. But the focus goes back to the overall mission of Morningstar, which is to empower the investor, and education is a core component to enable that to happen. So for us, it extends beyond crypto, into the world of tokenization, but it provides a single source for advisors to go to within the Morningstar suite of products, who are a incredibly trusted brand, that this is real, and this is an opportunity for you as an advisor to learn about the asset class and learn how you are going to support your clients going forward.

Ian:

Yeah, I have to imagine that creates quite a bit of demand for some of the other products in your portfolio. I’m curious about AmiPro. So you mentioned this a second ago, Sarah, it sounds like it’s a trading platform, but I am going to guess that maybe it integrates with other trading and custody platforms. Can you talk a little bit about what it actually is? If I’m a wealth manager and I’ve got clients who are interested in holding some of these assets, how do I actually use that, and what’s happening in the backend?

Sarah:

Yeah, that’s a great guess, Ian. It is a technology stack, it’s a technology tool. And you’re absolutely we are not a qualified custodian, we are not a money service business, what we are is a number of features and functions for firms and advisors to be able to invest and manage digital assets, starting with cryptocurrencies, on behalf of their clients. And it really started early in our journey where we looked at how many custody solutions were being created both for self custody and qualified custody trade execution on chain analytics, and we went to a number of advisors in the US and Canada and asked how they were going to look at this, how their firms were going to manage this with a lot of their legacy tools, and recognized that a lot of the plumbing had to be built to connect traditional finance to this new world of digital assets.

So AmiPro was our first product, and it’s under development and will continue, but essentially, the clients have accounts, or the advisors have accounts, with qualified regulated entities for receiving fiat, buying and selling cryptocurrencies, and storing those in custody, we provide that window to the advisor to be able to manage multiple accounts, so traditional SMA interface. But the engine behind it is where the magic happens, because cryptocurrency transactions and order fills don’t happen like a single…

So a single Apple stock, you’re familiar with, you pay a set fee, you buy an Apple stock, it arrives in your wealth management platform. Crypto’s different. A bitcoin order can fill over two orders or 20 orders, and if it’s a low price, it can fill over multiple days, and there’s micro fees attached to each trade. But at the end of the day, the advisor needs to log in and say, “Ian’s got a Bitcoin, and this is what he bought it at, and this is what its market value is.” So a lot of the engine manages that. And then, there’s a RegTech component, so that if compliance or the team needs to look at history, or needs to set limits and rules and anything on the regulatory side, the system can handle that.

So we really think that’s the future, to integrate, and the advisor have access to multiple trading platforms and multiple custody, and it will evolve as different asset classes emerge. So it’s really the tool for advisors.

Hashim:

Just to extend on that, the other side of this is that we then integrate all of that reporting and data into existing wealth platforms. So in Canada, we integrated with Ndex Systems, which is used quite broadly across the country by portfolio managers, because the reality is, digital assets represents a small component of an overall portfolio, and having a single view of the household’s assets, both in traditional finance products as well as digital assets, was critical. So AmiPro is that bridge from TradFi to digital assets, and supports all of the data flow that’s required to make that happen.

Ian:

Yeah, that makes a ton of sense, because obviously, as a customer, I want to be able to see my cash, my equities, my bonds, and my digital assets, all on the same balance report, every month.

Hashim:

Exactly.

Ian:

I don’t want to have to then… I do it today, I don’t like doing it, I scramble around at different accounts on different platforms to try to assemble this picture of my current financial standing. I’m curious, can you share a order of magnitude adoption around AmiPro today? How many companies or people are actively using the product? Has it gotten significant adoption and traction in the market?

Sarah:

It hasn’t been as fast as we expected it to be, I will be honest with you. The fallout and massacre in the market of 2022 did not help, but it actually fuels our belief that advisors need to be supporting their clients so that clients aren’t exposed to what happened last year continually.

Hashim:

Yeah.

Sarah:

But what really emerged was learning is the entry point where most of our clients are coming in, and starting with learning and then it’s a natural evolution to transacting. And so, it is a journey they’re on, and I think a lot of our clients like the fact that they learn from us and then can start transacting within the same ecosystem. And I think we’ve seen that with, there’s a couple of other SMA interfaces in the US, I think everybody would agree adoption has been slower, but learning’s critical and regulatory certainty is critical.

Hashim:

Yeah.

Sarah:

But I’m very optimistic for the next two years.

Hashim:

Through 2021, we demoed to and spoke with well over 500 advisors who recognized that this is something that they needed. 2022 was painful, but what it did highlight as well was the importance of education. As much as they loved the platform and what it is we were doing, they didn’t understand the underlying technology or the cryptocurrencies to the point where they would meet their fiduciary requirements or their proficiency requirements. So we took a step back and said, “Okay, well, let’s actually look at the journey that an advisor needs to go through in order to transact.” And it starts with the leadership team within the firm understanding how blockchain and crypto work, building the strategy with them, that leads to a rollout of education to the advisors, to meet the proficiency requirements, engaging with compliance and risk, and then finally, you get to the point where you actually transact. And then, what are the additional tools around transacting that you need, like portfolio design and analytics. So everything from back testing to rebalancing needs to be part of the platform.

So we continue to evolve the AmiPro platform, but right now, we’re really heavily focused on let’s get the advisors educated, let’s get the executive teams within the financial institutions understanding what their strategy looks like, how they’re going to incorporate this, whether it’s for wealth teams or it’s direct to consumer platforms, it’s across the board. And the outcome of 2022 was firms are now starting to build those strategies, and they’ve recognized 2024 is going to be crazy, and it’s not just crypto, it is the world of tokenization.

Ian:

Yeah. It’s interesting, because I think a lot of, we’ll call them the OG crypto people, would say, “Look, part of the appeal of this ecosystem is removing all the layers of systems and people that exist in the middle of me and my investment or my asset.” But one of my takeaways from 2022 is, no, actually, there are quite a few useful middlemen that exist in the world.

Hashim:

Absolutely.

Ian:

And for some people, a wealth advisor might be one, a bank might be a useful intermediary to hold assets for you.

I’m curious if you can continue on that journey. So you engage with a registered investment advisor, an RIA, and you take them on this journey of education. They get comfortable with the technology underpinning Bitcoin or Ethereum, they understand and formulate some sort of an investment thesis, and they say, “Okay, great. We’d like to start offering this to our clients.”

And you say, “Well, terrific. We’ve got a platform we can plug into your existing infrastructure, it’s going to be really easy.”

I think there’s a big piece there around how the regulators think about allowing this, but I’m curious what kind of hurdles you’d had to help your customers past as they seek to offer these assets to their end clients?

Sarah:

A lot of it is the navigating the qualified custodian role. To your point, the US RIAs, there’s more flexibility in the US where RIAs can manage held away assets, it’s not something that’s really done outside of family offices in Canada. So in Canada, we really replicated the discretionary model, where somebody like a Schwab or a Fidelity is handling funds, and the RIA or portfolio manager’s investing on their behalf and has discretionary control. So that was our first use case, and it was very straightforward for us at the time, because Gemini was the only firm that met qualified custodian status, and so we were able to build and replicate that model.

The US, a lot of the conversation is around, I’ve heard quite a few times, “We don’t have that definition of qualified custodian.” And the other thing that’s really big in the US is being able to invest in retirement accounts, 401(k)s, there’s a big appetite there. So a lot of what we’re doing is working with the RIAs and really understanding the use case they’re dealing with with their clients, and then going and finding the tools or the partners who are building that in to support that and build for what they need. And it really does need to look and feel and work like other investments, but for digital assets. And that’s where I think some of the tools aren’t there to just turn it on, a lot of it is working with the early adopters and building it.

You’d asked about adoption, it is primarily with the independents who don’t have a compliance team right now because they have the flexibility to move, but there’s lots being built, and it takes us right back to the beginning of our journey where a RIA comes in and says, “I have to be able to put it in regular custody accounts, discretionary accounts, and I have to be able to put it in the 401(k)s.”

So then, we go back and say, “Okay, who’s doing that? How do we integrate that in?”

So we’re also in that learning journey, working with the advisors to build it to support their practice.

Hashim:

I think the core message though, in Canada, there is a path to do this. It is adjusting your policies and procedure manuals, it’s including digital assets as an asset class for your clients, it is dealing with regulated exchanges, it is dealing with regulated custodians or qualified custodians. There is a way to do that. We’re fortunate, with AmiLearn, to ensure that you meet your proficiency requirements, and because all of your learning is tracked, your compliance officer can say, “Okay, well, we’ve got Bitcoin and Ether on the product shelf, you could sell those, but we can now verify that you as an advisor have gone through the required courses to meet the proficiency necessary to sell Bitcoin or Ether.” Or whether it’s ETF. If you’re selling an ETF that’s on the product shelf, you still need to know what Bitcoin is or what custody is, what exchanges are, how that works.

So there is a very large compliance oversight through our platform, and the integration of AmiPro and AmiLearn and the rest of the products enables compliance to see what advisors know, or what education they’ve taken, what exposure to the product, how does the risk team evaluate this, and provide the reporting against all of that.

Ian:

You mentioned compliance team verifying what education an advisor has taken. Is there an industry standard emerging here for a certified digital asset wealth manager? Is that something you’re seeing demand or interest in in the industry?

Hashim:

Tremendous demand.

Ian:

Yeah.

Hashim:

So we have what’s called the Certified Digital Asset Advisor Course, it’s about 12 or 13 hours of learning content on the foundations, and we’re the only course that actually provides a third party certification. So there are two or three other courses that provide foundational education in the space, but it’s a very small number of groups that are able to provide that level of education, and we’re fortunate to be one of them.

Ian:

Yeah, amazing. I’m curious to shift to the company building story here. So you’re a startup building in Canada, I think a product that seems entirely necessary for the times we live in right now in the current state of the digital asset ecosystem. In the news, you raised a little over $30 million Canadian last year. What’s been the experience that you’ve had building in a down market? I think I’ve talked to a lot of founders who have found this challenging in different ways, and I’d love for you to share some of your experience and advice with folks listening.

Hashim:

Yeah, so we started raising capital in the fall of 2021.

Ian:

Good time to do it.

Hashim:

Yeah. And in December of 2021, we signed our term sheet with a family office out of Europe, and it was a combination of equity and debt for close to about $36 million Canadian. We closed that financing in April of 2022, and thought, “This is fantastic, we’re set.” Unfortunately, after signing legals, subscription agreements, and the rest of it, the family office didn’t deliver any of the funds, and we’ve found subsequent to that, that they’ve actually been doing this to other companies.

Ian:

Wow.

Hashim:

So it’s not just us. Well, that was a huge challenge for us as a team, but it really goes back to the commitment of the people that we have at MeetAmi. We as a group decided that we would self-fund. The opportunity is huge, we had the chance and integration opportunity with Morningstar, so the team hunkered down, got very focused on what it was we’re doing, and continued to build. And it’s been an absolutely remarkable experience, from the founders of the company, to see the commitment from the team and the quality of what we’ve been able to produce has been phenomenal, and it’s a real testament to our team.

Sarah:

Yeah.

Ian:

That’s something I think a lot of companies would not survive through, so congratulations on still being here. When you look at your situation now, having come through that, what advice would you share with other founders as they’re going through a fundraising process? Any signs that that was going to happen as you were in the midst of the conversation with that family office?

Sarah:

There was initial delays that seemed reasonable and we were connected to people that knew the group. So absolutely, I think that founders need to be doing due diligence on the investors, just as much as the investors are doing due diligence on the founders. And I think in this digital and remote world, background checks, proof of funds, all the things… We’ve seen a lot of bad due diligence in the companies relating to crypto, which is not a reflection of the crypto, it’s relating to the business model. And I think as founders, as we go through due diligence, it’s a lot deeper, but it also needs to be a lot deeper.

So I think for our team, the passion was there and the vision was there, and it wasn’t a case of, okay, a third party’s given us money to build this, so we’re validated. We believe in the vision, we believe in the passion, it didn’t change our strategy, it’s just we were really focused on building the plumbing and the infrastructure, and obviously, when you don’t have the funding, you have to shift to sales. So I’ve started a few companies, it’s very hard to get seed and pre-seed funding in Canada, especially for a company that needs to scale. The US is much friendlier for seed rounds. So really focusing on getting the customers to pay. If you’re starting a company today, I would say ensure you have a client who’s going to pay, and there’s revenue to validate the market and fund the company as the investment world sorts itself out.

Hashim:

It requires you to be incredibly focused, the whole team truly committed to accomplishing that engagement with your client, being very clear about getting to that product market fit, as quickly as you can possibly get there.

Ian:

I think that’s a great summary, Hash. It sounds novel, revenue, but it’s a pretty important thing in terms of building a business. That’s why we’re all working so hard on these things. How is it going now? I would imagine that you’re starting to look around for new investors. Are you seeing appetite coming out of the venture capital world to be in the digital asset space?

Hashim:

It’s still a real challenge. The overall investment environment is very, very challenging. I was talking to a friend of mine the other day, who’s an advisor, and he was saying, “I can get 5.5% interest on a one year GIC. Why would I risk something?” And that’s the mindset of a lot of people right now, with interest rates at where they are, you can have incredibly low risk investments and make a pretty good return. And so, there’s a lot of money sitting on the sidelines.

In the US, the lack of regulatory clarity still makes this a real challenge. So we’re faced with VCs interested in the space in the US, but adoption is restricted by the lack of clarity and regulation. In Canada, there’s clarity of regulation, but the VC community here is very, very small and incredibly conservative. So we’re quite fortunate that we have several groups that are interested in participating in the financing that we’re doing right now, we’re identifying our lead and we’ll go forward. Considering what we’ve gone through for the last two years and what we’ve been able to accomplish, we’re not stopping.

Ian:

You’re reaching the downhill portion of the course, it sounds like, after a struggle to get to the top of the mountain. Well, I’d love to wrap up and understand, what’s coming? We’ve talked a lot about AmiLearn and AmiPro as the anchors of the product portfolio. What do you see as the next big thing that this industry’s going to need as you’re developing your offering?

Sarah:

So we announced, I think close to two years ago, the concept of what we call the Digital Asset Shelf, and this emerged from our learnings with finance and how products get put on the shelf. And we fundamentally believe in the evolution of tokenization of everything, and tokenized representations, and the impact that this technology is going to have on real world assets, like real estate, like art. I think we’re going to see some interesting moves around ESG and the ability to manage, with ledgers and tracking, and get some real metrics in investments that have been sometimes difficult to measure. And global investments. We can see tokenized investments from the globe now, and so it’s going to open up our borders, and that is part of the beauty of DeFi. And also, the fact that tokenization can take very big expensive assets and break them down for the rest of us, so the democratization of finance.

So I think where we’re really passionate about is, as companies are able to tokenize and create interesting investment vehicles and we see alternative trading systems come, we can facilitate the learning and the exposure and the transaction of that through AmiPro, in what we call the Digital Asset Shelf. So that’s, I think, where we’re most excited, and where everything we build is driving towards that tokenized world.

Ian:

That’s exciting. You mentioned DeFi in there. I’m curious, your experience, as you’ve… Starting with Bitcoin and Ethereum as the basic learning point or entry point that most of the wealth advisors have today, DeFi must seem like a far away universe from that starting point. Are you seeing interest in demand for access to DeFi via the AmiPro platform today, or are you anticipating that’s a future need?

Hashim:

The early adopters, absolutely.

Ian:

Yeah.

Hashim:

They want access to staking and all sorts of different things, but it’ll come.

Ian:

Yeah.

Hashim:

When you look at the conservative nature of wealth management, it’s on the roadmap of product that they’re going to want to have access to. It’s really early in that journey for them.

Sarah:

To have centralized controls and rules for traditional finance allows the control and the protections and keep de-risking products. DeFi is the polar opposite, and I think we’re going to see the world come together in a hybrid. So there’s fantastic technologies for sharing keys and sharding keys, where it’s not 100% risk to the client and it’s not 100% risk to the firm, and that’s where, I think, the regulatory and the technology and all these facets are going to come together, and it’s going to be the same but different. And everyone’s going to be able to define more of their control, which is, I think, very different for everyone to start participating in this ecosystem, as opposed to being given prescribed investment tools.

So I think it is fascinating to watch the technology, the regulatory, and the people. The people are the drivers of this, so I think we are going to see… We’ll have the purists, who will say, “Not your keys, not your coin. I love my USB keys under the mattress.” And you’ll have the parents of the world who want the advisor to do it, ’cause it’s scary when you do your first Bitcoin move from your exchange to your wallet, and it’s gone for 20 minutes. And then, I think we’re going to see something in between that people like. That’s my prediction.

Ian:

I like your prediction, Sarah, and I think that’s a great place to wrap up. Sarah, Hash, thanks so much for joining Public Key. Really enjoyed the conversation today.

Sarah:

Thank you for having us.

PodcastPublic KeyWealth Asset Management