YOSHI NAKAMURA: Remember, this started out as a people's revolution. If you think about Satoshi's white paper in the beginning, this was about losing faith in governments and financial institutions. That said, it's moved to more of getting the attention of the institutions as well as regulators in that this could be a real future technological innovation that changes how we think about payments, and investing and moving forward and the growth of a new way of putting money to work in an asset class.

NANCY LAZAR: Hi, my name is Nancy Lazar. I'm co-founder and partner at Cornerstone Macro. We're a wall street macro research firm here in New York City. I'm today interviewing Yoshi Nakamura, who is head of sales and business development at Galaxy, and I'm really excited today to talk to him about the outlook for Bitcoin.

YOSHI NAKAMURA: Excited to be here, thank you.

NANCY LAZAR: Terrific. Again, I really appreciate your time, been exciting for me learning about this new investment class as I've increasingly been told. How do you think about digital assets in an economic, macroeconomic context?

YOSHI NAKAMURA: It's interesting, and it's a very good question because I think cryptocurrencies and digital assets just got blurred together in one big story. It's really important to define the digital asset class. You have Bitcoin almost in itself is like digital gold. Then you have stable coins or utility tokens. Then you have this internet 3.0, which will be the next gen, Facebooks and Amazons of the world at some point and this decentralized internet. Then last, you have security tokens and you think about asset backed tokens, so tokens that are backed by real estate, or other types of assets.

NANCY LAZAR: What's different today about investing in digital assets today versus just a couple of years ago, things are moving so quickly in this space?

YOSHI NAKAMURA: The biggest difference is remember this started out as people's revolution. If you think about Satoshi's white paper in the beginning, this was about losing faith in governments and financial institutions. That said, it's moved to more of getting the attention of the institutions as well as regulators in that this could be a real future technological innovation that changes how we think about payments and investing and moving forward and the growth of a new way of putting money to work in an asset class.

NANCY LAZAR: There's a lot of hype and headlines, some positive, some negatives, what developments over the last year you think are really important for the institutional community, not certainly the individual?

YOSHI NAKAMURA: Absolutely. The biggest things are the institution level custody solution. If you remember Mike Novogratz speaking about this last year, talking about getting the right institutional level custody solutions, now we have Fidelity, we have Bakkt, ICE involved. By the way, there are a lot of high quality custody solutions that are out there already. They just don't come with the same name, power or brand powers that Fidelity does. Most importantly though, there's also trading venues. If you think about CME and obviously ICE as well, you're starting to get these institution level trading venues or liquidity venues that the institutional players are very comfortable with.

Last but not least, we talked about the big stuff. More importantly, we need to talk about the little stuff. Despite the fact that we have these institutional level custody solutions and trading venues, there is also a big inherent risk in operational movement or operational risk in coin movement, I should say. Moving coin from point A to point B is where actually all the hacks had happened. There's companies like Fireblocks now. The founder of that formerly built a company, security company, sold it to Checkpoint, worked with the CEO strategy wise there but then got bitten by the crypto bug and realized that the operational risks, the biggest ones were in these little pipes that needed to connect point A to point B. We have a top to bottom solutions and now, the institutional players are much more comfortable looking at it and getting in.

NANCY LAZAR: What are those barriers? What are the biggest barriers for the institutional community today to get involved in that and how are they going to get over those hurdles?

YOSHI NAKAMURA: Well, first things first, the why? Education, they needed to understand and come up with pretty steep curve not only just in understanding the asset class and why this is an alternative investment, but what it actually is. I think the definition of that asset class, and the different categories has now highlighted that, hey, there's different lanes that I can participate in. My colleague, Steve Kurz, head of asset management, often refers to as the three lanes of investing and how to think about that.

The why is there in our mind, and when you think about cutting rates and deflationary mechanisms out there, and fiat, maybe not being as worth as much as it is, people are starting to allocate the gold, but now all of a sudden, the education is there. They're at the table saying, well, if I have a 15% gold position, I actually want to put 5% in Bitcoin because I understand its store of value element.

What you're seeing now is people coming to the table and saying, well, how do I do that? These are large macro funds. These are large private equity funds. These are pension funds. I think we're past the why and we're at the how.

NANCY LAZAR: How should investors be increasingly thinking about getting exposure to this? Is it going to be mainstream?

YOSHI NAKAMURA: There are a couple different ways to do that. Obviously, there's a retail to institutional level way to do that. On the retail side, you have places like Coinbase that you can ramp on board and get a wallet and be able to trade a number of different cryptocurrencies, Bitcoin being the predominant one. That said, on the institutional level, which is where Galaxy revolves around, there are a couple different ways to think about it.

At Galaxy Digital Trading, we focus on a couple different liquidity solutions. Spot OTC trading is what everybody's familiar with. Whether it's voice over chat services, much like Bloomberg chat, we have the ability to trade OTC, too, though we've set up an EOTC platform, you can connect directly into our liquidity through APIs and then also you have the ability to trade options with us now and then do a lending-- we have a lending and borrowing business. A little bit more bespoke as of right now but when you think about each one of those products, we've quickly realized that if we can get to a structure products business and start partnering with institutional level players, you can start to think about structuring things like hey, I want Bitcoin exposure. I don't want to own Bitcoin,

I don't want to hold, excuse me, not own. I don't want to hold Bitcoin but I want exposure. I also want to cap my downside, I want protect my downside. I'll give away a little upside. All the sudden, bank notes, structured products, things like that become very, very obvious for people and for us to create.

NANCY LAZAR: Where are you seeing the interest from the institutional community right now? On both the trading and also the asset management side.

YOSHI NAKAMURA: The focus that we get or the attention we get predominately has been around the hedge fund community. It's actually really interesting because it starts with the head of trading with the CIO saying, hey, I want to put a little bit of this in my PA, how do I do this? Can I trade it through Galaxy? Of course, you're an institutional level, a qualified participant. When you think about the funds getting involved, it actually has gone from there to the family office side of the major hedge funds saying, hey, I know I want to have 15% gold, but I'd want to put 5% Bitcoin, I do believe in it now. I understand it.

The other institutional level element is that now it's coming up to the fund level. I think there's some things that people have to be mindful of that if people want to have exposure in this in an actual fund structure, it has to be within their mandate. They're working on that, and a lot of funds are working on that. If you look at Andreessen Horowitz, the VC side, they have liquid markets exposure now. There's a component of these VC funds that they're adding exposure there.

The other interesting thing is, when I think of institutional level players, a lot of people dismiss and not think of, they don't think about corporates as being the right place. I think hedge funds when you think of investing. If you look at Libra, the Libra project, look at how many people were in the Libra project. It's a little unfortunate, I think there's some poor form going on about trying to push people out of that project. That said, I think it's really important when you see names like Uber, Lyft, all these big companies that have massive networks or social networks that are interested in participating in things like that.

To me, that validates that they've done the work on in understanding of what Bitcoin is. More importantly, I think what's interesting are the people that weren't involved in the Libra project. We've seen headlines of your projects being worked on by different companies. Amazon has been in the news, talked about in the news, Samsung has been talked about in the news, and other players as well. There are a lot of big institutional players in corporate form that have been doing work because if you look at the Bakkt investments, or people that were invested in Bakkt, who else was there, Starbucks, Microsoft, these aren't just institutional investors.

Now, they have InnovationLabs but they also know that there's something coming that's either could be a huge enhancement from a parallel standpoint, or could be a disrupter. When InnovationLabs start to make investments like that, they're not thinking about, hey, I'm just taking a flyer on Bitcoin. They are realizing that this could be a huge impact to something along the lines of payments or consumer demand or consumption in general.

NANCY LAZAR: There's a lot of negative news sometimes involved about Bitcoin but there are some really cool potential uses for it. What are some of the tailwinds that the community right now may not really be focused, be focused on say over the next couple of years?

YOSHI NAKAMURA: I just was at Money20/20 and spent some time with many of the payments companies and I'll leave the names out of it for right now, but I think publicly announced, you look at the company like Square. They built the rails to [indiscernible] and I think they have in their filings as well. They talk about revenue generated from the use of Bitcoin on their rails. When you see things like that, to me, is a very, very, very interesting thing because Square could set the fingers and everybody that uses Square could accept Bitcoin. That's a big deal. The network effect of that is huge.

NANCY LAZAR: How long do you expect to be in this space?

YOSHI NAKAMURA: Forever. I think about it like this, you work really hard and set your goals high and you try to follow certain things in life to get you to a higher level. I had a humble upbringing, but everything I've been through my life, I look at this as a chapter of the book, The Outliers. How many times can people say that they were at the cutting edge, at the-- not the beginning, but early in a technology innovation cycle like this, and really helping stand up an asset class and it's really important.

I think Mike Novogratz, his vision about what he did with Galaxy Digital, raising money, taking it public, but he wanted to create this ecosystem or this company that allowed itself to wrap, not operate in the ecosystem but wrap around the ecosystem. We're chatting earlier about my background and my martial arts background and my father was an eighth degree blackbelt and taught Judo around the world and he had this philosophy of being open minded, like you can learn from the most senior sensei around the world.

You can learn from your peers around the world, but you can also learn from the youngest person that walks through your dojo doors, because they look at the world differently. Right now, this younger generation that's massive is looking at the world differently. It brings me to one of my favorite quotes, and another martial artist and Bruce Lee, and it's about the quote of be water and he says empty your mind, pour yourself in the teacup, become the teacup, pour yourself in the tea kettle, become the tea kettle, pour yourself in the bottle, become the bottle, water can crash and flow but be water.

When you think about the many institutions that are getting in now, or the companies that came before that, there are amazing trading businesses. There are amazing custody solutions on the institutional level now, but when you think about Galaxy, think about water, and how we can fluidly flow into the asset class and help grow certain things and parts of the business, crash into a corner and clean things up with the regulators that we work closely with. Provide liquidity solutions and provide investments, provide the how. For us to be intellectually agile like that and be able to move this merchant bank model in the direction that helps grow the asset class, I think is genius.

NANCY LAZAR: You said something earlier in one of your comments that really, to me, struck a note, and that's the world's changing, changing dramatically. Part of it is this new generation, not just the millennials, but the group younger than the millennials. They are spending differently. They're investing differently, they're saving differently. Thank God, they're saving more. I'm really intrigued on what your view is of this new generation and how they're going to have a bigger impact on the crypto market.

YOSHI NAKAMURA: It's really, really a great question and really important to understand because if you think about the generations that existed, you have the baby boomer generation, and then you have this millennial and younger generation. The baby boomer generation loves to dismiss the millennial generation and the millennial and younger generation loves to dismiss the baby boomer generation for not having a clue. It's a bad, it's a weird back and forth, but there's a generation that's in the middle of that, Gen X.

I think if you look at Galaxy and you look at the leadership, many of the leaders within the firm smack dab middle in that generation and call it coincidence, call it, again, the intelligence and genius of-- the inner genius of the way Mike thought about how to bridge the gap between the institutional world and technology world. What's interesting about that is this Generation X bridges like, understands old school mentality, I forget my father's an eighth degree blackbelt, and my mom was a fourth degree blackbelt and--

NANCY LAZAR: I'm not going to disagree with this guy, okay.

YOSHI NAKAMURA: They live on, literally beat it into us on the mat. Then we also grew up-- I went to the Wharton School of Business and I also grew up with this like cutting edge technology coming in into the space and I worked as an intern in 2000 on Wall Street and I covered the banks and internet infrastructure software space. You start to realize that this generation is the bridge, but when you think about trying to explain that my younger sister, like loves to get stuff from her boyfriend over the internet, and it's like an e-card or something like that. It's like, oh, he really cares about me.

They might send an e-card to my mom and Mike talks about this as well. He's like, come on, I taught you better than that, but when you think about the difference of those two things, like they emotionally, they both feel the same, but inherently it's delivered differently. When you talk about that stuff, I think it's really interesting to get into like AR, VR. You look at some of the things happening in this space, like the Fortnite competition and some 16-year-old kid, I think he went with $3 million, or something crazy like that.

We have a very big focus at Galaxy on stuff like that. I look at my brother's friends, my brother played in the NFL and he and his buddies would always like on their days off, be able to sit there and play video games and I think about how like they're older, but yet when these younger generations like thinks about that type of aspect of their life, it's not only just gaming, but it's a connectivity to another network, communication with other people, not just in the US but around the world. Taking it a layer deeper, people are now actually buying things, virtual like skins and tools and weapons and sneakers for their avatars.

This may be one generation, it's hard for me to somewhat understand sometimes, but the baby boomer generation definitely doesn't understand the spending habits of the younger generation from that perspective. Because it doesn't make sense and like, why would you do that? That's not tangible, but to them in their mind, it is. To have cool sneakers on your avatar because you're networking with somebody from Japan. They're like, oh, my goodness, how cool is that? Is a game changer. Again, the mentality is so different.

NANCY LAZAR: From a, again, from a global economic perspective, one of my favorite sayings, I overuse it, is when the facts change, change, and if you don't change, you lose. If you don't recognize the changes that are going on with the purchasing habits or investing habits of this new generation, that's going to at some point drive the world, you definitely lose out on fantastic investment opportunities. What's next? What's next after crypto? I'm sure you guys are looking ahead down the road.

YOSHI NAKAMURA: Yeah, well, when you think about the development of and it is crypto, but there's digital assets. You think about the tokenization of assets. Let's bring it back more mainstream. If I were to come to the table and say, hey, there's this new decentralized blockchain. It's faster and the development community is really excited about the bells and whistles and tools that they have to build on the back of this network. You're going to look at me and say, that sounds interesting, good luck.

There is a portion of the VC community that's very excited about the early, early stage stuff. Might be a little bit out of your wheelhouse from a macro perspective, but from a technological VC perspective, there are people there that are moving into that space. If you look at even the hedge funds, they have private placement aspects of their funds, Tiger Global publicly announced they're invested in Coinbase. You looked in a little bit later stage, but then you saw like Cotu Capital investing in early stage stuff as well.

Let's bring it back to maybe something we might understand. Let's say I bring to the table a portfolio of leases, investment, 90% investment grade or 100% investment grade, long duration, let's call it mid to high single digit yield plus some type of capital appreciation as well, and it's tied to a major bank that's underwriting leases, that's probably something that a credit person would look at. The interesting thing is, is that there's an opportunity to start tokenizing things like that. You have this very earlier stage. You had this