WBD274 Audio Transcription

Fintech and Bitcoin with Kevin Lehtiniitty

Interview date: Friday 30th October

Note: the following is a transcription of my interview with Kevin Lehtiniitty. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

Prime Trust is one of the companies behind that help these fintech businesses operate, and in this interview, I talk to Kevin Lehtiniitty, their Chief Product Officer. We discuss financial censorship, the outdated legacy infrastructure in the US, neobanking and the role of bitcoin in the future of financial applications.

“It’s not even about the financial gain; sure maybe it’ll 10x, maybe it’ll 100x, maybe it’ll 2x. I don’t really care. It’s about the freedom.”

— Kevin Lehtiniitty

Interview Transcription

Peter McCormack: Kevin, how are you, man?

Kevin Lehtiniitty: Hey, Peter, I'm doing great.  How are you?

Peter McCormack: Yes, I'm doing well.  It's late here because it's evening for me; about lunchtime for you, right?

Kevin Lehtiniitty: About lunchtime, yeah, exactly.

Peter McCormack: Nice.  How are things over in California right now, because it's a very weird world right now?

Kevin Lehtiniitty: It is a weird world.  You know, for us here in the US, a lot of it is really state by state.  I don't think there's a lot of unified federal legislation; so, in California specifically, things are pretty locked down.  We have an office in Nevada, things are a little bit more open there, but month by month, it changes quite a bit.

Peter McCormack: Right.  Whereabouts in California are you; can you say; do you have to be secret?

Kevin Lehtiniitty: Oh, no, we are a pretty distributed team.  So, Prime Trust is a Nevada state chartered financial institution, so all of Prime Trust's employees are in the state of Nevada.  But then, we have a technology company as well, which houses our engineering and technical teams, and we've got folks in the Bay area, folks in other places.

Peter McCormack: Is it still pretty locked down in California?

Kevin Lehtiniitty: California is, yeah.  They're allowing some outdoor dining now and things like that in the Bay area, which is nice.  It helps with the claustrophobia a little bit, but it's still pretty locked up.

Peter McCormack: What about the kids; are the kids back at school?

Kevin Lehtiniitty: The kids, I know it a little bit more in our Nevada office; that's where I'm sitting right now.  Kids here are doing a part-time programme for the public schools.  So the private schools are all back in school and the public schools are doing a two days a week kind of a thing, I guess to keep the class sizes down and let people distance.

Peter McCormack: Right.  What's it like in Nevada, because I just keep thinking about Vegas, right; Vegas must be suffering?

Kevin Lehtiniitty: It is.  We're out in Summerlin, Nevada, but we're close enough to Vegas to keep a pulse on what's going on and a lot of the hotels have started reopening.  There's actually a large flood of tourism, almost all from LA.  Everyone's arriving in because California's so locked down.

Peter McCormack: They need a fucking break!

Kevin Lehtiniitty: Yeah, exactly.

Peter McCormack: Give me some gambling and some strippers; I need a break; let me get out of this shit!  Yeah, we're just going back into lockdowns here.  They've come up with this new tiered system, it's like a three-tier system.  They're grading different areas and I think tier 3 is like total lockdown; tier 2 is like, you're not allowed to mix in other households. 

They're trying not to lock down the whole country, but there are rumours they're thinking of doing this kind of circuit breaker thing, where they lock everyone down for four weeks and then try and close it down.  Because, we have this big issue that we have this, like, I don't know if it's the same in the US; we have this big winter flu problem, a massive winter flu problem?

Kevin Lehtiniitty: We do.

Peter McCormack: Yeah, all right, okay.  Well, the hospitals always fill up, they're always at capacity.  And, what they're worried about is that they're going to have a capacity issue, both with a mix of flu and coronavirus.  But, it's a really tricky situation, because I get what all the people shouting about freedom are saying; they're like, you can't allow these businesses to keep closing and people have got to earn money.  But at the same time, they're worried about the NHS.  I see both sides of the argument and I can never see a clear answer to it.

I know you're libertarian-minded, we've spoken about this.  How do you feel about it all?

Kevin Lehtiniitty: The world's definitely gone to shit, Peter.

Peter McCormack: Well, fuck, yeah!

Kevin Lehtiniitty: That's been a long time coming though; that's definitely been pre-COVID.  The world's gone to shit a long time ago.  You know, I'm big on personal choice, personal liberties, things of that nature, but COVID is actually a difficult issue for me, because of how impactful it is to other people. 

So, I think you can take the position that, look, even the mask drama and things like that, of look, I don't want to wear a mask; that's my choice; I don't want to do it.  But on the other hand, if you then go and infect five people who die, you know, fuck you; that's not good either.  So, I'm really torn on this one personally and I don't really have a good answer for you.

Peter McCormack: Yeah, I don't think you're the only one.  I did an interview with Scott Horton and you know what, even he, I think, was feeling challenged by it, and he's a libertarian and he's all about maximum freedom and liberty.  And, even he was finding it challenging, because in terms of NAP, it's like, you can be aggressive by breathing without realising it; you can cause problems.  And, I know a lot of people have really been challenged with it, but at the same time don't want to then turn round and say, "Well, I think we should have lockdowns", and I guess that's where you are as well, right?

Kevin Lehtiniitty: Yeah.  Well, you know, you can't let the economy go to shit, right.  No matter what the pandemic is, if you come out of this and you say, "Great, well nobody's sick but, by the way, we have 90% unemployment across the country", that's going to impact people's health and livelihood just as much as a viral or medical infection.  So I think finding that point where, what can we do that's reasonable; great.  So, open restaurants, but put the tables six feet apart; okay.  That is something that I'm in favour of, right?  We can be a little bit preventative while still allowing the world to keep moving forward.

I travel a decent amount.  I know that's taboo now.  I've travelled internationally a couple of times; I'm heading to Ukraine in a couple of weeks.  There's a lot of stress around international travel right now, but I don't want to live my life in a bubble, you know, in my home, 24/7 in some sort of crazy hazmat suit.  Just waiting for the world to end isn't a lot of fun, so we've got to build the business and so does everybody else; you have to keep moving.  This is the new normal now for however long it takes.

Peter McCormack: Yeah, what is that international travel like because, dude, I used to travel so much?  Last year, I did 92 flights.  Every month I was away, flight after flight.  I just got used to it.  I haven't flown since March.  The last time I got on a plane, I was out in Istanbul, I came back through Heathrow.  I kind of thought I had COVID, because I was so sick; the sickest I've ever been.  I just can't even remember.  My son was as well.  And my bones ached, and I haven't flown since.  I want to.  I'd like a holiday, I'd like to get out and do some shit.

But, my first place would always be to the US, but we can't travel to the US at the moment.  The US won't let us in.

Kevin Lehtiniitty: The hardest part is trying to figure out where you can go.  So, Americans, same way; we're not welcome most places.  We can't really enter the EU; there are a lot of places where we can't.  Thankfully for us in particular, Ukraine, while a European country, is not an EU member country, so they're allowing some more tourism and some folks to fly in.  But, it's strange.

I was flying the other day, coming back, and you're used to a certain level of, I guess, luxury or amenities when you're travelling on a transcontinental business class flight; you're used to getting little meals and food and things like that.  And, the flight attendant walks by wearing this big mask and face shield and all that stuff and just drops this little wrapped up sandwich on my tray table.  And it's like, "Oh, great, I guess that's lunch".  Gone are the days of the cocktails and the drinks, and they're trying to really minimise the contact.

You get from point A to point B, but there's not much in the way of amenities when you're doing that, at the airports or on the planes, or anything else.

Peter McCormack: Really?  I mean, what's the plane like; is it full, half full?

Kevin Lehtiniitty: Flight over, probably about half full.  So, at least here in the US, they did a thing for a while where domestically, they wouldn't allow anybody to sit in the middle seat.  So, you had the aisle seat, the window seat, and you had a little bit of space.  They stopped that policy a few months ago, and now they're cramming the planes full again.  But, on the international flight, it was about half full, or half empty, depending on how you look at it.

Peter McCormack: I don't know how these airlines are going to survive, because they were on razor‑thing margins before; I just don't know how.

Kevin Lehtiniitty: Yeah, there's no way.

Peter McCormack: I mean, I look at someone like British Airways, right.  They've got some flights going, but they're closing down a lot of the destinations again.  I think they're only going to be able to survive with these big bailouts.  But, all this stuff brings me back to the Bitcoin.

Actually, let's go back full circuit.  Give me your Bitcoin story, Kevin, and then we'll talk about it?

Kevin Lehtiniitty: Sure.  My Bitcoin story, I think, is a little different from most people's, probably because I imagine I was later to the party than most people you interview.

For me, it really started around 2014 or so.  That was my first time trying to buy Bitcoin and I want to say that it was also probably one of the most formative of experiences of my life, given where I've decided to kind of dedicate the rest of my career after that particular moment.  But, I was on Coinbase, you know, user-friendly.  That was 2014; that was the easiest place to get something if you were new to it like me.  And, I remember trying to make a bank transfer to Coinbase and my bank saying no.  It was like, "No, you can't transfer money to Coinbase".

I had this really strange frustration, almost a lightbulb moment going, "Who the fuck are you to tell me what I can do with my money?  That doesn't make any sense; this is my money.  Why are you kind of", what we're now calling financial censorship, "Why are you censoring the transactions that I can make with my own money that I've earned?"  It was crazy and that was one of those, the system is really, really broken, moments.  It was kind of what set us down on the path of everything that I've at least personally done since then, whether it's been Prime Trust or Banq, or something things. 

I was kind of, look, I want to go and work in fintech, I want to go work with crypto, I want to work with more decentralised things, I want to better flush out what do I think financial censorship is and what can I do to pick up arms and join the fight against that, and do it both from the regulated and non-regulated sides, where maybe we can get back to infrastructure where it's about enablement and not about censorship.

Peter McCormack: But, were you drawn to Bitcoin because you were libertarian-minded already, or was it the other way round?

Kevin Lehtiniitty: Honestly, I think that Bitcoin has probably drawn out a lot more libertarian in me than anything else.  So, I was certainly headed down that path at that time, but I always had somebody tell me there's the two things that people care about: their physical health and their financial health.  Other than those two things, no one cares.  So, I was already kind of heading down the path, but not really into it.

And, when I had that experience right there, where you're fucking with what I can do with what I'm slaving away all day in the office to earn, that was just like none other for me and that was kind of, fuck this shit, I'm going to fix this, or at least do my part to do what I can to fix some of this stuff.  And since then, I hold a lot more Bitcoin than I normally do, hold a lot more than Fidelity's 5% recommendation, that's for sure.  I think it's a big part of the solution, honestly.

Peter McCormack: Yeah.  It's one of those ones that if you're right, you're going to be really right; but if you're wrong, it's like, "Oh shit" moment.  But, it's kind of ironic --

Kevin Lehtiniitty: It's not even about the financial gain.  Sure, maybe it will 10X, maybe it will 100X, maybe it will 200X, I don't really care.  It's about the freedom, as a libertarian.  For me, it's about not -- well, you can kind of trace things back on chain of what went where; that's fine.  But, it's about not having that party that can sit there and go, "No, you know what …".

Take Adult, for example.  Adult is often, at least in the US, very aggressively controlled.  Okay, you have this thing that's completely federally legal, but you have these puritanical standards from the financial institutions who are looking at it and saying, "No, we think pornography's evil".  Look at Square, look at anybody's terms of use restricted business activities; Adult's in every single one of them.

For me, Bitcoin's less about the financial gain and more about, "If I want to buy some porn, I'm going to buy some porn.  Who the fuck are you to tell me no?"

Peter McCormack: Yeah, but look, the more important question, I'd be like, why are you buying porn, dude; it's pretty much free everywhere?!  There's a lot of free porn out there; what the fuck are you paying for?!

No, but I'm with you, man.  Listen, I don't know if you know, but I've interviewed a few porn stars in the industry.  I've interviewed a lady called Allie Eve Knox, I interviewed Stoya and also, Holly Randall, I've interviewed a couple of times.  And they talk about it, and it's a fully legal industry, but the moral code of the banks, and even some exchanges, are like, "We're not going to do business with you.  And probably the same people who are at home, jerking off, watching these films are making the decision.

It's like, I always feel sorry for the porn industry sometimes, because it probably has more time watched than Hollywood, but the treatment of the actresses and the -- more so, the actresses in the industry, is really fucking terrible.  But fundamentally, actually, they're just making their lives more dangerous.  It's like, if you ban it; prohibition in the -- do you call it prohibition if it's also the sex industry?  I guess you do, and prohibition just makes it more dangerous.  All these laws make it more dangerous.

But, it's kind of ironic that your Bitcoin awakening was being censored from buying censorship-resistant money?

Kevin Lehtiniitty: Yes.  There is something definitely interesting to that interaction.

Peter McCormack: Did you finally get through and buy some then?

Kevin Lehtiniitty: I did, I finally got through.  I interestingly ended up changing banks.  After I tried to do that transaction, not only was it blocked, the bank decided they didn't want to do business with anymore, which was great; I had a 30-day notice, "Your accounts are being closed".

Peter McCormack: Really?  They closed your account just because you wanted to put money in Coinbase?

Kevin Lehtiniitty: Yeah, exactly.

Peter McCormack: Mother fuck -- that's terrible.

Kevin Lehtiniitty: At least here, this happens to a lot of folks, it's not just me.  And what they'll do, and it's less so now because it's a little bit more accepted, but definitely in 2014 to 2017/2018, if you were running some sort of crypto-related business, they would shut down your business account, they would shut down your personal account, they would shut down any personal accounts of any of your employees. 

It was kind of this massive purge of this banking system saying, no, we're not going to accept crypto, we're not going to accept censorship-resistant money.  I was like, "You're going to be on the wrong side of this one in the history books!

Peter McCormack: Dude, especially now Kraken's becoming a bank.

Kevin Lehtiniitty: Yeah.

Peter McCormack: You're looking at this and you start to wonder, you start to think, because I did it with Kraken; I started to think, where is this in ten years; what kind of banking services will I have; probably not a branch?  And, I can certainly see a scenario where I would like to move between Bitcoin and cash a lot easier in the accounts, especially if I had a business account because, you know, some people pay me in Bitcoin, some people pay me in pounds, some people pay me in dollars. 

The ability to own or hold an account which allows you to move between those, but also -- look, I know I can do that with a combination of other services, but also be able to pay bills.  That's something I want and yes, there's a custody issue there, but it is something I want.  I feel like these issues, we have them in the UK, I feel like the US is worse?

Kevin Lehtiniitty: The US is definitely worse.  There's a lot of broken infrastructure, so part of what we're always challenged by is just the way that our fiat transfers work here in the US.  Everything's very archaic; you have this wire window; it doesn't operate during banking holidays, things like that.  And, that just doesn't work anymore.  We live in 24/7 global markets.

So, what we're seeing come out, and Signature Bank has one of these, Silvergate Bank does, we do as well here as Prime, is just this concept of internal transfers.  And those are great, but they are closed ecosystems.  What we really want to do is foster more of an open ecosystem for transfers; that's a whole shit-shovelling of itself in the US.

One thing that has been positive though is the OCC's come out recently here with a couple of announcements and they've said the banks can hold crypto, which is great, because that's encouraging more adoption, right.  And anything that's encouraging more adoption, they can get more retail user-friendly; I'm all about those things.

And one of the challenges that the people don't anticipate is there are great tech platforms out there, whatever side you're on of MPC, multisig.  You've got Fireblocks, you've got Curv, you've got Ledger, you've got a lot of these kind of institutional software platforms that these banks can leverage.  But, the thing that no one thinks about is they're all running on core accounting systems, and those are all old, legacy core accounting systems from like FIS, Fireserve, Jack Henry, those sorts of folks.

What screws all this up is actually the precision of crypto, you know, the 8 decimal points of precision on Bitcoin, the 18 decimal points of precision on Ethereum-based tokens for most; that's really hard, because the accounting systems the banks are using can't actually express that full precision.  They can't statement it, they can't report on it, things of that nature.  So, what you end up with is a ridiculous amount of drift that just builds up slowly over time and causes massive operational nightmares.

So, while you have the technology platforms from the Curv, Fireblocks, Ledger and you have the regulatory framework now, you still can't actually do this business.  And, the question that we get quite a lot is, "Well, then how does Prime Trust do this; don't you have the same issues?" 

And, I think the best decision we ever made is we built our own accounting system two years ago; we built our own core system, so we don't run off any of these legacy players, and it's all about, we call it the Universal Asset Platform; we call it PrimeCore.  What we do is, we built it in-house and it supports whatever we want; real estate, securities, public or private, which as a libertarian, private securities are much more interesting for me than publicly traded ones.

Crypto, whether it's Bitcoin or Ethereum, or whatever asset people want in the line of financial censorship, I don't think that I should get to decide what asset someone holds.  I don't care if you want to buy Bitcoin, I don't care if you want to buy Ethereum; I don't want to decide for you what's good for you.  I want to have this platform that can support whatever you decide that you want to buy, and be an enabler, not a censor.

Peter McCormack: Right, so tell me about Prime Trust, because I don't know a lot about -- you know, I only discovered you recently obviously; we're not going to get into that.  But, tell me a little bit, or really, better off, anyone who's listening, tell people what Prime Trust does?

Kevin Lehtiniitty: Sure.  So, we started the company off in crowdfunding, interestingly.  So, it was a lot of companies here in the US that want to raise capital.  When equity crowdfunding was a thing, we figured that's a really interesting way to democratise capital formation, instead of it being locked up in accredited high net worth individuals, venture funds, things like that; let's bring that to the people; let's decentralise some of that funding.

And it eventually evolved into what's now Prime Trust, which is a Nevada state chartered trust company.  We are a financial institution here in the US.  And, what we view ourselves as, or what we try to build, is financial infrastructure.  So, our core product is API-based.  It does payments; it does custody; it does liquidity; it does custody of multiple currencies, you can go between them; it does custody of crypto, real estate, all these different assets.  And, it's all this infrastructure layer that's designed for other people to build their applications on top of.

So, especially for US-based exchanges, if you're sending a wire or an ACH payment, or something like that to Bittrex, to OKCoin, to Binance.US, to TrueUSD, you're actually using Prime Trust; you just don't know it.  That's how we like it.  We're not consumer people at all, whatsoever.  Twitter will tell you that much.  So, we like to stay behind the scenes, out of the limelight and just build stuff that enables people.  Zap has got some good traction lately for their stuff on Lightning.

Peter McCormack: Jack Mallers, right?

Kevin Lehtiniitty: Yeah.  Jack, on the fiat rail, Zap, uses Prime Trust.  So, that's good examples of how we enable other people to build businesses.  We like to call ourselves the AWS of fintech companies, but that's a little ambitious, but maybe we'll get there one day.

Peter McCormack: So, what are the challenges that you face then, as a business?

Kevin Lehtiniitty: There are a lot of them.  What we constantly find ourselves stuck between is the legacy infrastructure that we can leverage.  So, there's nothing that we can do about the wire window in the US, for example.  We can't go petition the Fed and say, "We need to extend these --".  We could, but nothing's going to happen.

Peter McCormack: What is that window; is that business hours?

Kevin Lehtiniitty: Basically.  It's business hours, it's only during week days.  So, if it's a weekend, if it's in the evening, you can't send a wire in the US; you have to wait until the next business day to send it, and that doesn't work.

Peter McCormack: Why; they need someone to like turn the handle then?!

Kevin Lehtiniitty: It's archaic, right?  The reason why is because that's how it's always been, and that's personally my least favourite answer to any question.  Whenever somebody looks at something, they say, "Well, we do this because that's how we always do it".  Okay, great; remind me to go fucking fix that when I have some free time.

So, we're constantly pinned between this archaic banking system that we have to use, and the demands of our customers.  What we try to do is basically abstract a lot of that stuff away and say, "Hey, if you want to operate Bitcoin; great, we can do that.  If you want to do these different payment methods, you can do that.

We have 12 or 15 different banks now on the back end; we have dozens of different processors for all these different payment rails and I can tell you, that is a pain to build and maintain, especially when you have people coming in and somebody wakes up on the wrong side of the bed and says, "You know what, we don't like Bitcoin anymore.  Goodbye, you're shut off".  And it's like, okay, great.  You need to have redundancy, you need to be able to cut over things of that nature.

A lot of what we do, a lot of the hard part is trying to black-box and abstract that so people can use Prime Trust without having to worry about all those downstream things.  And it's great, but that means that we worry about those things.  So, that's definitely the big challenges.  And, you always have regulatory, right?

Peter McCormack: I'm on your website.  You have a compliance section?

Kevin Lehtiniitty: Yes.  We actually do a lot of compliance, risk management, things like that.  Our head of regulatory affairs, you mentioned Kraken, was the former Deputy Banking Commissioner of Wyoming, so very crypto-friendly, you know, understands a lot of that legislation really well.  Our CCO is the former CCO of Green Dot.  They did the prepaid card programme for Walmart, Apple Pay, all that stuff. 

So, we've tried to put together a really good team because honestly, these problems aren't easy; they are hard, and we want to take that hardship on.  I'm personally a big believer that you can never reduce the total complexity of a problem, but what you can do is you can shift the burden of that complexity.  So, that's what our entire business is predicated off of.  This is a hard problem; you can't make it easier; so, we'll take on as much of the hard things as we can.

Peter McCormack: But, did you start out doing crypto, or were you doing traditional payments before this?

Kevin Lehtiniitty: Traditional payments first.  So, it's funny, because that scenario I went through with the crypto and the banks not liking that transaction was the exact same way that equity crowdfunding started, and now no one cares.  It's the most vanilla business in the world.  So, we've always been in what they call "high-risk payments", which makes absolutely no sense. 

It's not a high-risk payment; it's crypto; it's things like private security.  Now, the more we get into it, it's great, well, what else is being censored?  It's Adult; okay, how can we tackle some of that stuff.  Maybe we want to do some stuff around cannabis where it's legal.  There a lot of things that are still being censored and we're just trying to tackle them one after the other.

Peter McCormack: So, let's talk about the weed one because ironically, that's Giacomelli's mum's business; they're involved in the weed business, right?  I was with them out in Colorado and they were saying that the big issue is that it's state-by-state legislation, but still illegal federally. 

Kevin Lehtiniitty: It is.

Peter McCormack: So, getting banking services is a difficulty.  So, why is it that banks are saying no but, say, someone like you can help out?

Kevin Lehtiniitty: So, everything is always a risk-based decision and I want to make it clear that we're looking at cannabis, just for any regulators that happen to listen to your show; we'll say that Prime Trust is looking at cannabis.  But really, what it is for us is, while many state chartered financial institutions like us operate in states where it's legal state-wide, a lot of banks are federally chartered; and banks that aren't federally chartered still have to rely on the Federal Reserve and other more federal agencies, and it's not okay there.

So, what I expect that we'll see is something similar to what we saw with crypto, where the early banks that were in crypto were the banks that were going out of business.  It was these little places that were already going out of business.  You know what, they're going to roll the dice, they're going to start banking crypto; and, worst case scenario, they get shut down.  Well, great, they were going out of business anyway.

I expect to see the same thing in cannabis where we're going to have banks that are going out of business and they say, "You know what, our Hail Mary is we're going to bank cannabis".  And, just like crypto, those banks are going to be massively rewarded for that if they can survive it.

Peter McCormack: That federal versus state level legislation issue is really kind of complicated and for someone like myself to understand, it's just complex because we don't have this in the UK.  We have a set of laws and it's the UK.  And, look, we have devolved governments in Northern Ireland, Scotland, right, but that's a different scenario.  But, these different state-by-state laws, you kind of look at it and you go, I understand and it kind of makes sense. 

But, when you have these federal laws which contradict them, that kind of makes things a little bit difficult for people on the ground.  Where does it -- like, you'll know even the best language for asking this question, but where does it stand legally or constitutionally that, if someone was to offer banking services, say, to a cannabis company, where would they be at risk federally?

Kevin Lehtiniitty: The states' rights issue in general is one of the long-contested political issues in the US for sure, and I think that most people haven't really understood it very well.  But, a lot of what is happening now in the cannabis space is bringing this to light for more everyday people, and bringing states' rights, as an issue, to the attention of the broader population. 

Really, a lot of it's about enforceability, right, so you kind of have these two different layers.  And, depending on which layer you operate in, if that layer says it's okay and you operate exclusively in that layer, then you're fine.  If you operate in multiple layers, then you're not okay if one of your layers says that it's not okay.

For banks, there's this really weird hybrid of state and federal regulation where, even if you're just a state chartered bank, so you could be a bank chartered in the state of Nevada; cannabis is fully recreationally and medicinally legal in the state of Nevada; so, there is nothing that any Nevada regulator or person would do to say, "Hey, you can't do this".  But, as a bank, you're automatically regulated by the OCC; you have some sort of a connection to the Federal Reserve and these are all federal level layers and they might come down on you.

So, I think what the industry as a whole is trying to figure out is, hey, if my primary regulatory body says it's okay, am I going to get crushed from this kind of ethereal, federal layer, or are they going to keep their nose out of it.  Unfortunately, that's a highly political issue and come a few months from now, that answer might change. 

It's really nebulous right now with the elections coming and everything else; it's, one candidate stands on it over the other, might massively impact whether it's left alone federally, or whether it's intentionally really prosecuted.

Peter McCormack: Right, that's interesting.  And, could there be a scenario where the federal layer brings charges against you, but you are defended at a state level, a state governor?  Again, I might be using all the wrong kind of language here, but do you have those scenarios?

Kevin Lehtiniitty: Honestly, I'm not an expert on the state versus federal stuff, but from the little that I do know, I could see that being a scenario.  This might be something, especially if you have states like Colorado and some others that derive massive, massive tax revenue from the cannabis industry.

If you end up with a precedence of the federal government coming in and saying, "No, we're going to punish and shut this down", for just one bank, even if it's just one of many, that sets a really dangerous precedence in a state that derives a ton of taxpayer income from that particular activity; and, I could see that state fighting back, not just the bank having to fight back, but the state taking it on their shoulders and saying, "Get out of here; this is a big part of our tax base".

Peter McCormack: Yeah.  Well, to be honest, so many states now have either legalised or decriminalised it.  I mean, how many; what is it, like 30-odd now?

Kevin Lehtiniitty: I think, my personal opinion, is that federal legalisation is inevitable.  I think the momentum that it's carrying, all the states that have decriminalised, legalising it; I think it's just a matter of time.  And, perhaps that's what makes it the most frustrating, is that everybody knows the end outcome; we're just not there yet, so it's still a massive pain to operate in the space, even though we all know where it's going.

Peter McCormack: Could it be legalised federally, but outlawed at a state level?

Kevin Lehtiniitty: It could.

Peter McCormack: It could, okay.  But, that's a better way round of having it, right?

Kevin Lehtiniitty: That's a much better way; that would make it a lot easier to operate at least.

Peter McCormack: But, look, I mean I've been out to Colorado, I've been out to Bitcoin mum's shop, I've hang out and I understand a little bit more about the business.  There are massive tax revenues for each state and the world has not collapsed.

Kevin Lehtiniitty: No.

Peter McCormack: We've got a few more people maybe going home with some better quality weed, getting toasted watching Netflix and eating pizza.  I don't see a single downside to this.  Perhaps there'll be some studies that there was an increase in some kind of mental health issues, maybe, but I don't really see a downside to it?

Kevin Lehtiniitty: No.  Alcohol is fully legal and that's not the safest thing in the world, so to speak, especially compared to something like cannabis.  I would argue that cannabis is probably safer than alcohol in many ways, right?

Peter McCormack: Yeah.

Kevin Lehtiniitty: And, you saw kind of what happened in the US with prohibition where it just turned into just a lot of underground speakeasies.  And then, the government looked at the tax revenues and realised that that kind of hurts and they brought it -- at the end of the day, people always do what's in their best economic interest, right; it's always all about the money. 

Maybe it's a little jaded, but at least working in the industry where I work, it's always all about the money; that's the only thing that ever matters.  And, there is so much money in cannabis that I don't think there is any other option but to fully legalise it.

Peter McCormack: Then it's like, what's next?  Is it mushrooms; is it something else?

Kevin Lehtiniitty: I have no idea.

Peter McCormack: Are there other -- so, you look at Adult, you looked at cannabis; are there other kind of grey markets here that are of interest to you guys?

Kevin Lehtiniitty: Adult and cannabis are definitely two.  So, we have a customer, a client here at Prime Trust called, Banq.  They flipped a letter!  And, they are really looking at Adult; they are really looking at cannabis payments as basically, where is cash and how to replace cash.  I think that's a really interesting business and that's one that we're watching pretty closely.

Peter McCormack: So, what, they do the front end, business side, and you just do, what; the processing of the payments for them?

Kevin Lehtiniitty: Basically, right.  So, same type of arrangement as we have with Jack Mallers and Zap and some of that stuff building on top of Prime Trust.  For Banq in particular, when you as a user go and you sign up; you download the app, you go and you sign up; what that actually does is that opens an account at Prime Trust in your name.  It just all happens under the hood.  And then, when you make a deposit into your account at Banq, well you can guess what happens; you're making a deposit into your account at Prime Trust.

So, it's basically like a white labelled banking, if you want to think about it in that way.  And, they're going to do a lot with crypto payments.  I feel I can talk about their roadmap a little bit, so I will.  They're going to do a lot with paying in crypto, using crypto to do some of these more private payments.  Their big thing is privacy by design.  You get on Venmo; why on earth is there a social feed of what I'm spending my money on?  I've personally never understood that.

Peter McCormack: I know, dude.  I heard that shit; like, what the fuck?

Kevin Lehtiniitty: Exactly.  So, Banq's all about privacy.  They're leaning really heavy into crypto and they're looking at all sorts of industries, just from the coffee shop down the road, but also more what's cash heavy; so it's Adult, it's cannabis.  Interestingly, real estate is really fucked up, if you want to talk about a fucked-up industry and payments.

Peter McCormack: Really?

Kevin Lehtiniitty: It's a shit show, oh yeah.

Peter McCormack: Oh, is it that thing where it's that so many people have to get paid at a certain time; did I hear about this right?  I think it's different in the US to the UK.

Kevin Lehtiniitty: It's a little bit different in the US.  A lot of it is …  For some reason, when I bought my house here, I had all my mortgage payments paid by cheque; there was no pay online.  I had to write a cheque, I had to mail it in and I'm sitting there going, at the age of -- well, PayPal's a dinosaur, but I guess they're definitely getting into crypto too, right; they had a big announcement with Paxos.  I'm anticipating a lot of M&A activity in crypto coming up and PayPal's one of the huge giants, so I imagine they're going to do something interesting.

But, you know, in the age of the PayPals and Venmo and Cash App and Stripe and everything else, why am I ever taking a cheque and going to the mailbox; it just doesn't make any sense?

Peter McCormack: You're still having to do that?

Kevin Lehtiniitty: Yeah!  I pay mortgage and HOA fees by taking a cheque down to the fucking mailbox.

Peter McCormack: Yeah, but that means that you have to remember each month?

Kevin Lehtiniitty: Yeah.  I probably pay more in late fees than I do in the fucking HOA payments, because I can't remember to save my life.  I'm travelling, I'm doing other stuff; it's so fucked up.

Peter McCormack: But, what if a cheque goes lost?  Does it affect your credit rating because here in the UK, right, I don't know anyone who still uses cheques for anything, let alone using a cheque to pay their mortgage at the end of the month, or pay their rent?  But, if you miss a mortgage payment, it can fuck with your credit rating?

Kevin Lehtiniitty: Yeah, same here, definitely same here.  What you end up with, and it's less mortgages and typically more rents where we see the issue, is there's this whole kind of middle market that's been missed where, if you're living in a large apartment property or a large high-rise, something like that, I'm sure you can pay your rent on line; that's fine; they're taking cards or doing whatever else.

But, if your landlord owns one or two houses as investment properties, they own three/four apartments, are they putting in basically a POS system to collect rent?  Fuck no, they're not.  They're just, "Mail me a cheque", because there's not really a lot of consumer-friendly ways to do that, and that's something we can all put to.  So, just outside of the high-risk base, there are still other problems to solve.

Peter McCormack: Yeah, but dude, like here, if I got a landlord, I can just set up a direct debit to them, or a standing order, or something, so every month it just pays them.

Kevin Lehtiniitty: I don't think you understand how fucked up the financial infrastructure is here, like seriously; it's really, really painful.

Peter McCormack: Yeah, but I don't understand; why?  You've given a good answer for why people need Bitcoin, but I don't understand why that exists.  So, say I'm out in the US, say I live in Nevada, right, and I'm renting a room off you and I just want to go on my online banking and just set up a direct debit to you.  Say I'm with Chase, you're with Chase, can I do that?

Kevin Lehtiniitty: From within the same bank; definitely.  So, those are those closed loops and those are mainly solved, and we can do it on payment apps too.  We can do it on PayPal, we can do it on Square, we can do it on a few different places.  But in terms of more of an open ecosystem, there really isn't.

Most retail banking products don't really offer the ability to autopay out to some arbitrary banking instruction; they just don't and I don't understand why, because the rails exist.  I'm sitting here at Prime Trust and we have access to these rails.  What someone has to do is just build a simple interface; it's not that hard.

Peter McCormack: Dude, literally, I could do it on my phone now.  I can login and, say, my brother, he gives me his bank sort code, which is essentially the bank number, and his address, his bank number, account number, and I can set an amount and I can say, "Pay that every month", and it just happens.  I just took that for granted and assumed you would have the same?

Kevin Lehtiniitty: That's why all these payment apps are so popular here.  That's why Venmo and everybody else got so big, because that fundamental service doesn't exist in an easy way.

Peter McCormack: That's so screwed up.

Kevin Lehtiniitty: And, you take something like a Venmo, which is really user-friendly, you know, I can send you $20 right now; that's easy.  But, how do I send you $20 a month?  There's no recurring option; even there, there's no recurring.  It's nuts.

Peter McCormack: Dude, dude.  So, with you guys then, if you started out payments before and then, when the Bitcoin stuff came along, what did that kind of mean to you guys; what that a big step; was that a big risk for you?

Kevin Lehtiniitty: It was.  We saw it as a big regulatory grey area; we saw it as bringing a lot more scrutiny to be operating in the space.  Our super banking, from what I went through, generally frowned upon being in the space.  And our first crypto-related customer was actually really TrueUSD.  So, we did this in a few different ways.  We really had a three-step process getting into crypto. 

The first was more around liquidity.  So, we had this business where you could buy private securities for people raising capital.  And it was really frowned upon to invest in crypto; everything had to be USD-denominated.  So, the first thing we did was we said, "Okay, let's treat Bitcoin as a payment method, not as the end source", and if we have liquidity on the back end, if you send me a Bitcoin, I can liquidate that, post it as cash and say, "Look, you invested $X; you just used Bitcoin as the payment method" like you would a wire or a cheque or anything else.  And that was kind of dipping the toe in the water.

Then we said, okay, we're still not really going to do crypto, but we'll hold assets.  So, TrueUSD, for example, holding their collateral; okay, we're holding US dollars, it's for a stablecoin, but all that Prime Trust is doing is holding on to the US dollars and then firing off our commands to mint and redeem the TrueUSD, but we're not touching the tokens really.

And then ultimately, step 3 for us was, you know what; we're going to service this industry.  We've kind of been testing it out, been getting in the water slowly; let's bank exchanges; let's bank stablecoins.  PrimeCore now has custody of digital assets in hot and cold storage; we have a liquidity component so you can buy and sell all throughout our stuff; and that powers a lot of different things.  And, we're aggressively adding on more and more to that.

Peter McCormack: And, are you getting a lot of demand for the Bitcoin side of things?

Kevin Lehtiniitty: Yeah, definitely Bitcoin.  We've actually just finished adding Tether; we haven't announced it yet, but we have Tether liquidity now and stuff like that.  But, maybe 95% of the liquidity volume that we provide is all Bitcoin.  It's funny how much that just massively dominates everything else.

Peter McCormack: Well, it isn't really that funny when you think about it!

Kevin Lehtiniitty: Well, it's not, yeah!

Peter McCormack: But, who's asking for it?  Because, I still don't fully understand, who's asking for it and how are you delivering it for them; like, what is the actual service?

Kevin Lehtiniitty: There are a lot of fintech platforms that want to include it and I'll give an example of one, probably because it's the most popular that's not a customer of ours; but, if you take a look at something like Cash App?  So, within Cash App, I can do peer-to-peer payments, I can buy fractional shares.  So, I can pick up $10 worth of Berkshire Hathaway, things of that nature.  And, I can also buy, sell, hold Bitcoin.

So, someone has to provide that infrastructure layer and those services, and we do it in the payment space, we do it in the custody space, we do it in the liquidity stuff now, we're working on fractional shares as well; and basically, the way we look at it, the end of this year, beginning of next year, you could build Cash App entirely on top of PrimeCore.

Once we can accomplish that in our minds, we now have this really interesting agnostic infrastructure where it's liquidity for FX, it's liquidity for crypto, it's liquidity for public and private securities, it's custody of all these things, it's all these various payment transactions in whatever currencies you want, so from ACH, cards, wires, to SEPA payments, to BACS, to everything else. 

In addition to USD, we custody GBP, we custody Euro; we're trying to really build this kind of global infrastructure that whatever type of fintech business you want to build on top of us, you can.  And, that's what's driving our liquidity need; it's the Revolut access announcement, Revolut saying, "We, in our online banking app, want people to be able to buy and hold Bitcoin".  Great, someone's providing that service; in their case, Paxos; in the case of our customers, us.

Peter McCormack: Right.  Because I assumed that something like Cash App, right up until this very moment now when you've explained it, they just did it all themselves; I just assumed they built the infrastructure; they custody it?

Kevin Lehtiniitty: No.

Peter McCormack: So, they've just got an interface into your products and services?

Kevin Lehtiniitty: Yeah.  Cash App is not one of our customers, but looking at how other people --

Peter McCormack: Okay; if it was?

Kevin Lehtiniitty: If it was, exactly; they'd just tie into our infrastructure.  So, if you look at Chime; when you open an account on Chime, which is your multi-billion dollar neobanking app here in the US, you're opening an account at Bancorp.  Chime doesn't have a routing number; it's Bancorp's routing number.

What's happening is Cash App, Chime, Revolut, all these fintech companies, they're not financial institutions; they're apps, they're technology layers that are basically interfaces into these financial infrastructure companies, and there's not that many of us out there.  There's Prime Trust, there's Cross River Bank, there's a few folks; and what we're just trying to do is be the one-stop shop.

So, right now, if you want to build Cash App, what you're really going to do is you're going to partner with someone like Prime Trust on the crypto side or Paxos, you're going to partner with -- or BitGo; you're going to partner with someone like a Cross River, or us, or a Synapse or something like that, to do your payments; and then you're going to partner with someone like DriveWealth to do your fractional shares.

That's horribly fragmented, so what we're trying to do is do those partnerships for us, like, we'll do for you.

Peter McCormack: And, what, are you setting the price and then they're marking it up their end?

Kevin Lehtiniitty: Yeah.  Basically, everybody middlemans, right.  At least in the US, that's finance.

Peter McCormack: Right.  And, if they custody it with the app, they're really custodying with you?

Kevin Lehtiniitty: Yeah, exactly.

Peter McCormack: So, what would happen in that scenario though, I'm not saying you would be, but in a scenario, say -- again, let's say I've got my own Pete's App, right; that's my own financial business.  If there was a security issue with Prime Trust, they would assume the security issue was with myself?

Kevin Lehtiniitty: Yes.

Peter McCormack: Yeah.  So, you have had to develop a whole different security backbone for this crypto stuff, which is very different from your fiat rails, right?

Kevin Lehtiniitty: So, we try to use partners wherever possible, because we can't do everything ourselves.  And I think anybody who tries to take on that mountain is just destined for failure.  So, we look at the MPC technology vendors out there, whether it be Fireblocks, Curv, those guys, and we tie into them.  So, they're not financial institutions, but they provide the technology layers.

So, we're leveraging a lot of those sorts of partnerships and putting it all together on aggregate, wrapping it around our regulatory licensing, and using that for insurance and other things like that.

Peter McCormack: Right, so the stack is actually multiple companies then?

Kevin Lehtiniitty: Oh, yeah.

Peter McCormack: Pulling it all together?

Kevin Lehtiniitty: Even on the fiat rails, it's a whole network of banks.  And, on FDIC insurance, you get into bank syndicates and there are 12,000 participating banks in the bank syndicate on the FDIC insurance.  It's just this massive iceberg where you see, and not just us, but anybody that's serving the Revoluts, Chimes, Cash Apps of the world, you see this little layer sitting there above the water of, "Oh, I can do a payment [or] I can create a wallet address; great". 

And then, what you don't see is everything that's happening below that water line, and that's where 95% of the business actually is, is kind of sitting behind the curtain, making all of this happen and making it happen with redundancy, with reliability, with security, with the ability to cut over.  The bank that holds the process of the transactions for USD is not the same bank that does our SEPA transactions for Euro, right?  It's one API and you just change the currency in the API.  What's actually happening in the background is a completely different set of partners.

Peter McCormack: Right.  So, you're probably also therefore having to manage all the KYC AML stuff then?

Kevin Lehtiniitty: That's why compliance is such a big deal for us.

Peter McCormack: Yeah, and that stuff you just can't get away from, right?

Kevin Lehtiniitty: No.  As a financial institution, that's part of the deal. 

Peter McCormack: Because the Bitcoin people hate it right?  They hate KYC, they hate AML.  And, how onerous is that for you guys?

Kevin Lehtiniitty: There's a lot of automation that we employ.  So, everything that we've always done, our CEO has always sat around beating frictionless into everybody's heads, whether it's securities, whether it's banking, whether it's crypto; that's always been the play.  So, we leverage a lot of automation where we can.  We try to ask the bare minimum that's legally required.  We sit around, we talk about compliance, there's a big T-chart.  What do we have to do and what do we want to do.

Basically, everything that's not a have-to-do regulatorily, then why are we doing it?  We're just making things harder.  So, we want to be the gold standard, because we want to keep up all of our regulatory relationships, we want to make sure we're minimising fraud, we have a massive data science team on the back end that's really looking at a lot of data and can do good risk scoring and things of that nature.  But, I'm not going to ask you for 12 different forms of government ID if I don't have to.

Peter McCormack: Yeah.  But, is that regulatory stuff, is it getting worse; do you see it getting worse; because, that's a thing that a lot of Bitcoin people worry about?

Kevin Lehtiniitty: I don't think that I would ever answer a question that says that government overreach is not as bad!  I think it always gets worse every year.

Peter McCormack: Yeah, fair enough.

Kevin Lehtiniitty: Just from my personal political opinions and backgrounds and things like that.  And, I think any reach is overreach.  But, to be honest, it's been fairly stable.  We don't see a lot of requirements going up, we don't see more and more collateral being required, at least for now.  It's always subject to change, but I'm optimistic.

Peter McCormack: Yeah.  All right, listen, before we finish, I do want to switch up.  Well, actually, a couple of questions first.  You obviously added Bitcoin; you see it growing.  But, just so people understand, how important is Bitcoin becoming within your business.

Kevin Lehtiniitty: For me, or within the business?

Peter McCormack: No, within your business.  Like, what kind of indication are you getting of market interest from the interest you're seeing within your business?

Kevin Lehtiniitty: The crypto-specific customers that we service and aggregate, we see payment volumes increasing total between 20% to 80% month over month.

Peter McCormack: Woah, dude, what?!

Kevin Lehtiniitty: Yeah.

Peter McCormack: Wow!

Kevin Lehtiniitty: People are really getting into it.  The liquidity that we are providing, everything's growing massively month over month.  And, part of that is new customers, always; new people switching to our infrastructure from BitGo, from Paxos, from these other folks.  Maybe I shouldn't be naming them; I don't really know.  But, you know, we definitely see a lot of that.

But then, we also see basically every customer that we have in the crypto space growing month over month, consistently as well.  So, you put those two things together and crypto's taking off.

Peter McCormack: Wow.  But you think it's primarily Bitcoin, right?

Kevin Lehtiniitty: It's primarily Bitcoin, yeah.  I think, we're definitely not stripping it down to just one token; that defeats my entire personal libertarian viewpoint of enabling whatever you want to buy and whatever you want to transact in, and not picking for you.  But if we had to, Bitcoin's by far the majority of our transaction volume, whether it's some of the custody stuff that we do, like Bitgo, some of the other things; it's Bitcoin.

Peter McCormack: All right.  Well, listen, the last subject I can't leave without talking to you about, because we're three weeks away from an election and you might not want to talk about it, but I always find it interesting to talk to libertarians about it, because I find there are a couple of types of libertarians.  There are those that just have no interest in politics at all; but, there are libertarians who feel like, no, you've got to work within the political sphere to try and change things.

So, there is a libertarian party which itself, in some ways, is like a contradiction of itself, but I understand it.  Where are you on that spectrum and how do you feel about this upcoming election, or do you not give a fuck?

Kevin Lehtiniitty: It's hard for me to give a fuck, to be honest with you, Peter.  I don't know why and the thing that I do not understand about politics, and I'm sure if you sit there and you think about it for long enough, it's something about the incentive systems or things like that, but I feel like every time we have an election, I'm choosing from who is the least moronic of two complete morons; that's what I feel like I'm always choosing between.

Peter McCormack: Yeah, even more so this time.

Kevin Lehtiniitty: Even more so this time.  And, I don't understand why the US, or really any other country that has a strong population, why are you always trying to figure out who's less of a moron; why aren't you trying to figure out who's actually positive for things?  And, speaking in the crypto space, I know Brock Pierce is running for President of the United States, which is very exciting.  I love Brock, but I don't think he has a chance in hell.  But, I'm excited that someone's at least doing something.

But, between the two main candidates, I don't really plan on voting this year.  I haven't really voted recently and I don't really plan to because honestly, I don't fucking care.  I'm going to buy my Bitcoin, find a nice island and that will be the rest of my …

Peter McCormack: That's your vote is it?

Kevin Lehtiniitty: Exactly.

Peter McCormack: Bitcoin is your vote out!  Well, a lot of people are saying, "I vote out with Bitcoin".  I didn't vote in the last UK election and I think what it is is that I'd always voted and I'd tended to vote for a party.  And traditionally, I'd voted conservative.  But this election, you know, I'm a bit older and a bit wiser, I was like, "Who are the candidates?" and it was similar.  I was like, who's the worst of the two morons?

We had an arguable Marxist and a posh toff and neither were a good option.  And I was like, do you know what, I'm just not going to fucking vote.  And I know some people will say, "Democracy is the best option we have".  I can't remember what Churchill's quote was, but what was it?  "It's a terrible system, but it's the best we have".  And other people were saying, "If you don't vote, you don't have a right to speak.  But, I just felt so disenfranchised with it, just the whole process, and I guess that's what you're feeling?

Kevin Lehtiniitty: I feel like I can't vote for one in good conscience.  I guess the reason I feel that way is because I think some people view it as voting for one means actively not voting for the other; for me, voting for one means endorsing that person.  And I can tell you, I'm not endorsing any of the two people; I can't do it!

Peter McCormack: That's fair enough, man.  Well look, Kevin, it's great to talk to you.  Really appreciate you explaining all this rail stuff to me; a lot of it I wasn't aware of.  So, just for people listening, what kind of person should be looking at your business; who do you want to get in touch; and, how do they get hold of you guys?

Kevin Lehtiniitty: For us, it's mostly people that are looking to build fintech apps and right now, the focus is mainly blockchain.  So, it's exchange that need payment rails, it's folks like Swan; they're getting some hype now in the crypto space.  They're currently using Prime Trust liquidity for their Bitcoin.

Peter McCormack: Nice.

Kevin Lehtiniitty: People building on-ramps; people building exchanges; people who want to add liquidity to their existing things, right.  So, if you've got a great wallet service or something like that, it's great for holding crypto, but why would somebody then go and buy on Binance or someplace else and go transfer to you; why can't they just buy right on your app, right?  We can enable a lot of those sorts of things.

Those are probably the most interesting folks.  We've got some case studies up on primetrust.com that give folks some idea of what they can build on top of our infrastructure.  But, we're always around.  We've got a few folks reaching out to people and there's contact info on the website, there's info@primetrust.com, or whatever it is, but we try to be pretty easy to get hold of.

Peter McCormack: All right, man.  Well listen, Kevin, it's great to meet you.  Hopefully at some point, when the planes are flying, we can go hang out in Nevada somewhere and grab a beer and maybe grab a steak and enjoy the shit show in early November.  I'm sure you'll be watching it like entertainment!

Kevin Lehtiniitty: Yeah, definitely.  Seriously though, if you're ever out here, let me know, feel free to swing by.  We're happy to host you and have some drinks, do some other activities and enjoy Nevada.

Peter McCormack: Yeah, man.  All right, well take care, buddy, and if you're ever this way, if you're ever in London, I'll go and show you all the empty shops that you can't go in at the moment.  I do know a good steak place, but listen, all the best, Kevin; you take care and you reach out to me if you ever need anything.

Kevin Lehtiniitty: Sounds good, thanks, Peter.