Partner at Blockchain Coinvestors (1,500+ Startup Portfolio) with Mitch Mechigian - Ep- 578

What blockchains can do is they can unlock secure, fast, instantaneous, programmable finance, essentially. And so, yes, there's a lot of speculation in the space. There's a lot of experimentation, right? So we run a venture capital firm. So many of the ideas in which you invest ultimately will not pan out. That's essentially the model, right? You're experimenting.

In a world shaped by shifting regulations, global uncertainty, and rapid innovation, where should sophisticated investors be looking next? Well, the answer may surprise you. So stay tuned and we'll explore the innovative solutions with today's guest. Welcome to Streams to Impact, brought to you by Steve Tucker Capital. I'm your host, Dr. Allen. There comes a time when success starts to feel like a gilded cage where your time fuels income, but not necessarily freedom. But there's another way, a path where your money works for you, not the other way around. And that's exactly what we explore here on Streams to Impact. If today's conversation resonates, I'd like to extend a more personal invitation. Join me for a path to prosperity discovery call, 15 minutes of focused enlightenment where we clarify what genuine prosperity looks like for you and identify the first deliberate steps towards securing it. It's a one-on-one, never a sales pitch. So reverse— reserve your time at www. Just a brief disclosure. All information shared on Streams to Impact is for educational purposes only. It is not to be construed as investment, financial, legal, or tax advice. All investments occur at risk. You should not invest if you're not prepared to lose 100% of your investment, and you're always encouraged to consult your legal, accounting, and tax advisors before Making an investment. Today's guest, Mitch Michiganean, operates at the intersection of digital innovation, venture capital, and global economic transformation. He has helped build one of the most expansive early-stage investment ecosystems in emerging digital infrastructure, contributing to a portfolio of over 1,500 companies, including more than 80 unicorns through partnerships with top venture capital firms worldwide. He also serves in executive financial roles within public entities, guiding innovative companies into broader capital markets. His perspective offers a rare lens into where technology and capital are shaping the future. So welcome, Mitch. Glad that you are with us today. Many investors still view blockchain as speculative just a niche. From your vantage point, what fundamentally qualifies it as a legitimate seat at the investment table, not just for short-term but for long-term portfolios?

Yeah, great. Well, thanks for having me on. Very happy to be here. So, you know, our thesis is that blockchain technology is really quite a boring technology. And what we really see it is upgrading the world's financial infrastructure. So, if you go back and you look at how money, payments, assets are all transacted today, they're built on old analog systems. And we experience this when we send a payment, send a wire internationally, right? I think if you've ever done international payments, it's very apparent. But also, if you live in the developing world, if you are not in Europe or the United States, where you're used to very fast, efficient payments, Payment transaction costs can be exorbitant, 3%, 4%, 5%, 10%, 15%, right? And if you're sending money quite often, that's actually a huge tax.

Hmm.

But what blockchains can do is they can unlock secure, fast, you know, instantaneous, programmable finance, essentially. And so, yes, there's a lot of speculation in the space. There's a lot of experimentation. Right. So, we run a venture capital firm. So, many of the ideas in which you invest ultimately will not pan out. That's essentially the model, right? You're experimenting.

Mm-hmm.

But we've seen, you know, since the firm was, you know, started about a decade ago, you know, many use cases that are, you know, very real, not speculative, and are being embraced, you know, in the United States, in the developing world, by major financial institutions like BlackRock and Morgan Stanley and, you know, and on and on and on. So where we stand today is, you know, certain use cases for blockchains like stablecoins are not a tomorrow story, right? We're talking about— and for your viewers, a stablecoin is essentially a cryptocurrency that is pegged to a traditional currency like the dollar. But instead of being built on the old payment financial system, it is transacted across blockchain rails. And so stablecoins sort of very quietly, but for those of us in the industry, not very quietly, have grown to be a $300 billion industry in terms of issuance out there. Last year settled something like $10 trillion in transactions, more than Mastercard, PayPal, on par with Visa. And are really becoming a pretty integral part of the financial system, and even being very much accepted into the US framework with the passage of a major regulatory bill called the Genius Act in this last summer. So, long story short, yes, there's been a lot of speculation. Yes, there's been a lot of ideas tried. As with any innovation trend, it's what you would expect, a Cambrian explosion of of use cases tried and a bit of euphoria and capital flowing in to try to figure out certain ideas. But many use cases are real today and are not based on speculation and are producing real revenue, real businesses in both American and European and developing markets.

Well, yeah, I can— even you mentioned wire transfers, which that's fast compared to ACH transfers, which can take up to 2 weeks to 10 days. So it amazes me with everything we have at our fingertips today that it can take 10 days to get a payment processed. But when you look at global dynamics from US regulatory shifts, which you just mentioned, to international adoption trends, What are the most significant forces shaping how this space evolves over really the next decade?

I mean, the single biggest shift, um, has occurred over the last year with respect to U.S. policy. So if you wind back to the Biden administration, they took a very hawkish stance whereby, um, you know, essentially no major piece of legislation was passed. Every major agency was effectively stonewalling the industry, not passing rules, suing companies. And basically since the last administration, whatever you think about that administration, let's say in general, with respect to this narrow industry has been much more on the front foot. And so that has resulted in the SEC, for instance, Paul Atkins, the new chair, coming out with guidance for rules. With the CFTC and SEC working very well together, where before they were having a turf war in the previous administration, with a major legislation passing, which I already mentioned, called the Genius Act, which created a regulatory framework for stablecoins. And right now working through Congress is a bill called the Clarity Act, which has already passed the House, which has bipartisan support. And which, if passed, will sort of solidify a lot of those rule changes into law. And what that has done is essentially unleashed the world's most powerful capital market, which was to date, basically, or until last November, not very much really participating in a major way in terms of actually large capital flows, large enterprises, large institutions. Because if you're you know, the BlackRocks of the world, you can't invest into an industry that has a sort of regulatory gray area. So this shift has sort of massively opened the floodgates in terms of major financial institutions, major corporations coming in and starting to embrace the technology. And we've seen that with, you know, most famously BlackRock launching an ETF, also investing in companies like one of our portfolio companies, Securitize, for tokenizing and bringing assets on chain. But you've also seen Stripe fintech launch its own stablecoin initiative. Visa and Mastercard get into stablecoins. You're seeing JP Morgan, which was very anti-crypto on the pre— now come in and say they want to do tokenized deposits and offering crypto to their clients. So I think the single biggest shift driven by regulation has been that. Now, if you look at the rest of the world, they were sort of more on the front foot, and particularly Europe, you know, led with this regulatory bill called MiCA, Market in Crypto-Assets Regulation, which, you know, has pros and cons to it, but they at least created clear rules of the road. And so now the US is getting close to kind of coming into somewhat of congruence with the position that there are clear rules. Because really what the industry was asking for was simply just rules of the road because we have a new asset class that doesn't fit into existing categories perfectly. So there was this gray area. And so you actually had the funny position. And a lot of people think crypto, unregulated, they want to be unregulated. If you look at the facts, it was actually the opposite. So you had Coinbase, the largest public operating business in the US in the space, was actually suing the SEC to have them make rules about securities laws as it pertains to crypto assets. So that situation now has sort of been flipped on its head to where the doors were effectively closed, or at least they were open, but only for those willing to kind of proceed in a sort of a gray area, to a situation where now pretty much every financial institution is operating in the space. And even some of the more conservative ones, Charles Schwab, for instance, which was very slow to act, has come out, I think, in the last 2 weeks and said, we're offering this now to our clients. Again, I mentioned JP Morgan, Jamie Dimon, kind of notoriously anti-Bitcoin and crypto. I think now JP Morgan has a 200-person digital asset division and is talking about tokenized deposits and things like this. So I think the US, obviously, with respect to financial markets, is still the juggernaut world leader. And this shift is definitely the largest driver from a regulatory standpoint.

Well, you mentioned stablecoins. Is that a brand name like Bitcoin, or is it just a general term for all crypto? Yeah.

So stablecoins, it's a general term. And so, yeah, if you back up and you think of what's the original blockchain, that's Bitcoin, right? And what is Bitcoin? Bitcoin is sort of a native internet money. The original Bitcoin whitepaper is titled Peer-to-Peer Version of Electronic Cash.

Right.

It's trying to take the attributes of cash, which are you and me can have a decentralized transaction without anyone in between us. I can hand you a $5 bill. You know it's real. You know it's not a counterfeit. Reasonably sure. And we don't need a bank or anybody to validate that transaction. It's pseudo-anonymous, right? You kind of know it's me, but you don't need to take info. So Bitcoin was trying to take that concept and now make it available on the internet. How can I do a transaction with someone on the internet, know that it's not a counterfeit, avoiding what's called the double-spend problem, and also know that it's sort of a secure, real valid transaction? Now, the problem with Bitcoin, if there is a problem, and I am a big believer in Bitcoin, but one of the problems would be it has a very high volatility relative to fiat currencies. And by fiat currencies, I mean non-backed state currencies such as the dollar, euro, you know, pound, and so forth. And so, what stablecoins are and how they came about, they came about over the last 5 years, are basically The attempt to have some of those same attributes of Bitcoin in terms of its instantaneous transfer, it's online, anyone with an internet connection, it's secure, you know, it's avoiding that double-spend problem. But now how can I do that with something that is effectively pegged to the dollar? And so the big brands of stablecoins that exist right now are— the largest is Tether. So Tether USDT is the token. It has about $190 billion in Tether tokens outstanding. You know, and it's, you know, I'll get into this, but it's a very kind of integral part of the financial system. Circle is the second. It's called USDC. Both of these tokens, if you look them up, are just worth $1. And basically how they work is that it's a very sort of beautifully simple business, is that you come and I'm Tether. You give me a dollar, I give you a token. Let's call it USDT. So now I have one token, or I have $1, you have one token. So that is— and I sort of promise that this is now fully backing that token I've given you. So at any time you can come back and redeem your token for a dollar. And so that thereby maintains a peg where, you know, market makers out there, if the price were to go down, can go and buy the token and redeem it for a dollar. And so if you look at Tether or Circle, they normally trade at like, you know, $1, but not exactly $1, $0.99999 to like 6 nines to the dollar. And it's a really beautifully simple idea. But now basically you have this token that's traveling on a blockchain. So again, sort of next-gen financial infrastructure. But because it has the backing in reserve of dollars that basically get parked into treasuries, you know, you know, somewhat that it will always maintain that value to a dollar. And so this has now kind of exploded in use case. And you can obviously see, you know, why this might be a salient use case, particularly as I mentioned, in developing countries. Where, you know, if I want to do a cross-border transfer, I can send you dollars, effectively a synthetic dollar, instantaneously across the internet. You know, it will settle in seconds. You know, no bank to call you, enter in your wire details, no trans— you know, very, very low transaction fees. And, you know, so now international payments, remittances, very good use case. Another use case is just simply store of value. So again, this is something a lot of times in the West, we don't think of that much. But if you're in Argentina, that's had an average inflation rate of 200% since the '60s, or you're in Venezuela, Ukraine, Nigeria, Turkey, with very high rates where in a generation, you've had 2, 3, 5 debasements of your savings. Now, with an internet connection, I can effectively hold dollars. So again, another very large use case is sort of in other countries, people just wanting to save in dollars. So it's a long-winded way of answering the question. But essentially, again, you have stablecoin as a category with 2 major leaders as the big brands of stablecoin, one based in the United States, one based outside of the United States.

Well, in terms of a payment system, how does that differ really from, say, Payoneer or PayPal?

So the main difference is that, you know, to get a little technical, that cryptocurrencies are what are called bearer assets, meaning that when I send you a Bitcoin, when I send you a USDC, when I send you a USDT, The actual custody and movement of that asset really does happen. And so to explain it a little bit differently, let's say you're in the United States and let's just do like a bank transfer and you want to send money from JP Morgan to Wells Fargo to your friend and you send them $100. You might even see a somewhat instantaneous update on your respective banking pages. So you send $100, it might say minus $100 in your account, and then a minute later, plus $100 in their account. So you have sort of the appearance that money has moved. That's not really what's happening, right? So no money— it's not like they've instantaneously sent like a $100 bill from JP Morgan to Wells Fargo. What actually— so they've just sent a message to each other and just said, oh, update your internal ledgers. But typically at the end of the day, sometimes 2 days later, the banks will be doing lots of these little transactions and they'll be maintaining a sort of grand imbalance of payment. Or like over the course of the day, there were 20,000 transactions from JP Morgan to Wells Fargo. And the imbalance is that JP Morgan owes Wells Fargo $2.5 million.

Mm-hmm.

And then later they'll settle it via the SWIFT network or ACH or whatever you're talking about. So no money is actually changing hands. So the real technical difference is that if I send you a Bitcoin right now, if I send you a stablecoin, it's literally left my possession and it has now entered your possession. And so this has really— might sound like a little thing. And again, for the average consumer in a Western country not dealing with international payments, You know, the payment system, you know, I don't really care that my $100 didn't, you know, doesn't settle immediately, right? Like, that might not matter to me. But for other use cases, you know, particularly around traditional assets like settlement with equities, bonds, or LP stakes, or, you know, you can apply this to a lot of things, that actual change of custody and kind of stripping out all that backend. can remove a lot of costs and layers and compliance and things. So obviously there are other differences, but I think that's sort of the main one, is that you are actually physically moving the asset with the Bitcoin, with the blockchain transaction. And to be fair to all sides, you could argue that that could be a negative in some certain situations, right? do a credit card— if I send the money to the wrong person, and I, you know, I can call the bank and ask them to, you know, unwind the transaction, right? So I can, I can have them undo it, you know, because nothing's really happened. But if I send you Bitcoin, it's gone, right? I can't re— you know, reclaim it. Um, so there's, you know, that— I think that has to be— you have to have a balanced view over, you know, depending on the situation.

So there's no exchange rate either, I'm taking it. So I send a A dollar to Nigeria, it's a US dollar and it hasn't gone through the exchange rate. Exactly.

So, you know, what you would do, and we invest in companies like this. So another portfolio company of ours is Yellow Card, which works in Nigeria with companies to help them do import and export in their business now with stablecoins. And a big problem you have in these countries is that there's an insatiable demand for dollars. But there just aren't that many dollars around. So I'm, you know, ex-widget producer in Nigeria. I am trying to import something from Greece.

Hmm.

Well, the way global trade works is that that's normally invoiced in dollars, and the Greece supplier is probably not going to want Nigerian lira. They're going to want, you know, dollars at the very least. So how do I get dollars to send it to them? And again, there's not very many dollars, so the exchange rate is going to be very, you know, bad, and there's gonna be a lot of payment transaction costs on you. So what a company like Yellowcard does, or an investor, is they help them do those payments with next-gen blockchain infrastructure. So now I have, you know, let's say, lira in Nigeria. You know, I can basically purchase, you know, with USDC, I get— I buy USDC, then I send it to Greece, or then they would get USDC, and then in Greece, they can convert it into euros. It works just the same way right now. I can send it, and I can convert it in my home country at that time. So the actual— basically, when you send a stablecoin, you know, you're not— there's not an actual exchange happening at all. You're just moving stablecoin from, you know, X individual to the other individual, and then they can do what they want with it. And then there's a whole source of companies, which, you know, this is what venture and investors do is back companies like this that then can work with those companies to help them, you know, get their stablecoin into local currency if they need it, or they can just keep it in stablecoin.

Keep the dollar in the dollar rather than exchanging it. So venture capital is experiencing a lot of volatility across various different sections. So what are you seeing in the current landscape that gives you conviction that this space remains a compelling long-term opportunity?

Yeah, I mean, it kind of goes back to what I was saying, is that, you know, This space is quite young, you know, relative to other innovation waves, right? So, if you take, like, let's say, the internet, right? We all know about the '90s and the 2000s, but really, you know, the internet starts in the '60s with ARPANET, and then, you know, the first emails in the '70s, and you have this kind of big development stage, 30, 40 years before you get, you know, your Netscape Navigator moment. in the '90s when that launches, and then kind of like, you know, the user numbers go up and to the right always. It's really not even until the mid to late 2000s that you actually get native internet businesses that are producing, you know, large amounts of value, right? So really the first iteration of the internet is, you know, your Pets.coms, you know, your whatever, right? It's like throw a website online, but you get native internet businesses— Amazon, you know, Google, uh, social media, then cloud, then mobile, right? All that doesn't even happen until like the mid-late 2000s. So you have this long period. Bitcoin whitepaper's in 2008. So we're getting close to 20 years. You know, it doesn't launch until 2009. We now have Bitcoin as a top 10 global asset worth more than $1 trillion. We have probably 15 publicly traded companies. We have stablecoins becoming an integral part of the payment system. We have NASDAQ and New York Stock Exchange partnering You know, with Securitize and Kraken, 2 of our portfolio companies for tokenizing stocks and equities. We have BlackRock making investments. So if you look at like, there's just tons of stuff going on, tons of, you know, adoption. So in that short amount of time, actually, a lot has happened. And by the way, we could do the same story with AI, right? You know, for people not paying attention, AI happened all of a sudden. But, you know, Alan Turing is talking about AI in the '40s, right? I mean, like, AI has been around the corner for decades. So, relative to the other innovation waves, which we don't take anything away from them, those are also, you know, AI is very exciting, the internet was very exciting, you know, blockchain is quite interesting and has produced a lot of value. And, you know, it's attacking an industry that really, you know, is sort of a difficult industry to displace, right? We're talking about— financial networks, heavily regulated, intertwined with geopolitics and governments. So I think that there is still a long way to go and there's still a lot that's highly, highly investable in the space. Because really, again, what we're looking at is bringing financial products, whether it's commodities, assets, monies, and moving those onto next-gen infrastructure. So, you know, having them basically all be secured, custodied, and transacted on blockchains. And so again, if you look at what we've done, we sort of started first with, you know, native internet money, right? So cryptocurrencies not tied to anything in the real world, Bitcoin and Ethereum and Solana, very interesting product projects, but sort of pure cryptocurrencies. The next thing that went on-chain was dollars, basically, you know, stablecoins, you know, basically, how can we make a dollar travel on-chain? Well, the next thing that we've seen are money markets, right? So BlackRock has launched BLDL, you know, it's a very successful money market on-chain. So you can actually hold the token on a blockchain that is equivalent to, you know, the unit ownership in a money market fund.

Mm-hmm.

You know, so now we have funds coming on-chain. Then we're going to go to, you know, equities, right? So again, I already mentioned New York Stock Exchange and NASDAQ are heavily exploring this, and so is the DTC. Then we can go to bonds, right? And you get— so there's a lot to move onto blockchains, and we're sort of in the, you know, early stages of that with very low-hanging fruit. Um, and so, so still a very, very exciting, uh, you know, time to be in the space because there's just a lot happening.

Yeah.

Well, it just still remains somewhat of a mystery to me. I don't understand how it all works, but it is indeed fascinating. And yeah, I like your analogy of how it took time for the internet to develop, and this is technology in its infancy, essentially. And things are moving in that direction, I think, in a very interesting way here.

Yeah, look, it had, you know, it had— it's definitely had its speculative excesses, um, as did the internet. And, you know, we might look back in 5 years and say, you know, AI had its, you know, speculative moment, right? It doesn't mean— I mean, there's an old saying in, uh, uh, VC, and I forget exactly who said it, but technology tends to be overestimated in the short run And underestimated in the long run, right? So it's sort of like, you know, in the '90s, the internet got this crazy euphoria and people thought it was going to do all these things. And they were right. It just, you know, took a little bit longer. And I think the same is going to be true with AI. Probably in 1 year, you know, not everybody is going to be unemployed, but probably in 10 or 15 years, you know, work looks completely different for most sectors, right? So it's sort of—

Yeah.

And I think blockchain's sort of the same. You know, it very well could be in 5 or 10 years that you are, you know, have some asset somewhere that's ultimately held by a blockchain. You just have no idea. And why would you? Because you're the average consumer and you're just using your account the way you always have.

Yeah. Well, very powerful conversation on where innovation and capital are heading. So what stands out is that this isn't about chasing trends. It's really about understanding the infrastructure that is shaping our future and positioning our assets really within it. So you can connect further with Mitch at their websites and you can subscribe to their insights into various different opportunities and we'll have this information in the show notes, but their website is www.blockchain C-A-C, the number one dot com. So that's www dot B-L-O-C-K C-H-A-I-N C-A-C number one dot com. And if today's conversation sparks something for you, I invite you to take the next step and access Beyond the Paycheck. That's our free gift to you as our mini webinar, and you can find that at www. So thank you for joining us on Streams to Impact. Until we meet again, keep aligning your wealth with your purpose and be back with us next time.

Thank you for tuning into Streams to Impact, brought to you by Steed Talker Capital. A company empowering passionate professionals like you to develop multiple streams of passive income built on solid passive real estate investments. As a significant part of our endeavors to make a cosmic and meaningful impact for this world, Steed Talker Capital contributes significant portions of our profits to activities and organizations committed to better understanding the equine. These endeavors attempt to enhance the treatment of horses worldwide. Steed Talker Capital, working for a world where all creatures great and small flourish abundantly. If you are ready to learn how our passive investors have earned an average 33% annual return on their investments, schedule your complimentary Passive Income to Prideful Impact consultation. Obviously, we cannot continue indefinitely to offer these valuable consultations for free, so grab your passive income to prideful impact consultation while you still can. Go to steedtalker.com/passive.