Making Crypto Tax Efficient | Dan Gold | Stratiphy [EP. 313]

0:00 People are seeing it more as a viable way to diversify their portfolios and we're seeing more and more interest from audiences that would traditionally not be looking at crypto. We're not a crypto first company. Our approach is all around automation, risk management, AI. We see a disproportionate interest in the crypto aspects. So there is a huge movement of people looking to get into tech sufficient way to access crypto. Welcome to MONEY Never Sleeps. Sharp riffs, big ideas and real insights from smart people. I'm Pete Townsend. Let's go Money. Never sleeps well. So my guest this week was introduced to me by my friend and long time listener Dave Henderson. We originally planned a joint episode on crypto exchange traded products or Etps with Alex Pollock from 21 shares, who you'll know from episode 3 O 8, but we decided that two solo conversations would do better justice to what each of them bring to the table.

1:00 Dan Gold is founder and CEO of Stratify. Dan, welcome to Money Never Sleeps. Thank you for having me. So listen Dan, walk me through the sequence here. Now, from what I know, the UKFCA, they lifted the ban on retail crypto Etps or exchange traded products and then the HMRC closed the stock and shares ISA or individual savings account, which is a tax efficient account for UK residents and they closed that route at the start of this tax year. Did that catch the market off guard and why do you think that no mainstream platform is moved to offer this special innovative finance ISA alongside crypto ETP access?

1:49 Yeah, it's a great question. I think to cut to the chase, I think it did catch the market off guard. So in terms of the timeline, the FCA had the restricted retail access to crypto Atns in October last year. And then HMRC said that people can invest into those crypto Atns in ISA until the end of the tax year. And that is one of the main benefits of investing into a crypto ATN rather than buying crypto directly. There was a lot of uncertainty about what would happen after the end of the tax year, if they'd be allowed at all in the side ISIS. Eventually the HMRC said that these could be bought inside in it to finance ISIS if ISIS, lesser known type of ISIS is less popular.

2:33 It's mainly used for peer-to-peer lending platforms, crowdfunding to the best of our knowledge, it's not used by any investment platforms. You know, there was a big question mark about whether anyone was going to even offer this inside Nisa. And so the route to tax efficient investing into crypto was uncertain. We were looking into offering it. We, like everyone else had to assess whether we could do this We whether we could take on board the kind of the the regulatory complexity, the operational complexity. It is something we were comfortable with and we now have introduced that, but to the best of our knowledge and no one else in the market has offered this and that puts us in a pretty unique position in the market being able to offer crypto Etns in a tax efficient way. Do you think there is some more education that needs to be done here with the independent financial advisors? There's more education needed across the board. I mean, I think people are only now getting to grips with what the product is now.

3:29 The fact that it's been given its blessing by the FCA, people are only now starting to take it seriously in that sort of sphere and they just need time to come around to the new reality that it's a viable alternative for them. But it's not just IFA LED. This is also client LED. You know, there's clients looking for this exposure in their portfolios. So the IFA will get on board whether they like it or not. It is going to become more and more part of the mainstream. And your model covers both self-directed investors and also discretionary managed strategies. People design their own approach and stratify executed automatically. So that tool kit framing suggests that this is portfolio construction thinking, not a punt.

4:14 Is that who's showing up? I mean, that's exactly how we're trying to pitch the product. We're trying to bring sophisticated investment techniques that we've learned from in, you know, years of expertise and in the industry and trying to make that accessible, low cost and kind of enjoyable to use for the mainstream market. So trying to introduce proper portfolio construction, proper risk management into people's portfolios. And we're trying to make a flexible tool kit that people invest however they want, whether that's stocks, ETFSETNS, everything. So we're trying, you know, trying to appeal to that broad segment of the market and offering crypto inside those portfolios is a natural progression for us because it's a very exciting and uncorrelated asset class, a very interesting way to get diversification in your portfolio. There's two aspects to this.

5:08 We're bringing these assets to our traditional investor base, but we're also attracting A newer investor base now who are crypto focused. So I'd say our our base is diversifying, but across the board if we can focus on embedding those sophisticated risk management techniques across all portfolios, I think we'd be doing our clients of service. Speaking of last week, I was in London last week speaking with someone who's been building tokenized fund infrastructure for five years. Tokenized fund infrastructure uses crypto rails, right? And this individual still thinks that Bitcoin is worthless.

5:50 My view on Bitcoin specifically, and this is not investment advice and I just wanted to tag that, is that there's a real scarcity. It's a decentralized network doing real work and it has macro sensitivity. And this is an asset that is part of the global asset allocation program of institutional investors all over the world. That is the point that I made to my friends in London and but I'm not sure if you wanted to listen or not. So do you think that UK retail perception needs to shift for this product to reach its potential? And do you think it's shifting? I mean, it's a really good question. I mean, I guess the we've got to define what reaching it's potential really means in this case because a lot of people are pitching crypto, especially Bitcoin as you know the new digital gold. And so I think in that setting, it's fair to assume that it's not a product that's going to keep rising in price astronomically in perpetuity.

6:57 And I don't think that would be a digital gold that's more of a speculative punt type instrument. I think reaching it's potential means maturing, being more mainstream, being more widely adopted and all of that is certainly happening, but crucially being less volatile. And so that I think is what we need to see over time. But it has dropped significantly since the FCA introduced the products into the market. But it's also not dropped catastrophically. It's increased by 14% in the last month. So I think there is an argument that, you know, people are seeing it more as a viable way to diversify their portfolios. And we're seeing more and more interest from audiences that would traditionally not be looking at crypto. But I think that's one of the main opportunities that platforms like us can bring to the table, which is blurring those lines between crypto and traditional investing and making everything available in one place. As you mentioned, it is down since FCA lifted the ban. Now the FT article about stratify or about this specific opportunity in the market?

8:11 It frames the current context as bad timing for your launch. But I would flip it if the cycle holds and what's happened before with Bitcoin continues, that this is exactly when to build the infrastructure. What does launching into a downturn tell you about who your real customers are? I mean, it's it you can't control the market. You, you launch at the time you launch and the market does what it does. You, you roll with the punches. I don't think launching into a down market is a bad thing necessarily. I agree with you. You know, that's probably the time when you may be getting good value for money. And so there are people who are taking an opportunity in buying, but there's obviously less hype and less excitement around the product in that environment.

8:58 So it really depends on people's views around the long term opportunity of crypto. I would point out, I guess that a lot of the uncertainty around the products has been removed in the last couple of years. You know, you've got backing of many regulators across the globe. The UK is now falling into line with what the European regulators were offering. the US is behind crypto. So all of that uncertainty has been removed. So that might be an indication that volatility will reduce in the future. And we're seeing people are taking that opportunity for that reason.

9:40 OK. Where do you think Stratify goes from here? Do you think it's going to be more exchange traded notes or exchange traded products, more asset classes, partnerships with independent financial advisors? And what do you think needs to happen for UK retail volumes to close the gap with what we're seeing for ET NS or exchange rated products on something like Deutsche Borse? We've got a huge pipeline that we're working through in terms of enhancing the products and releasing more to our customers. We're really looking to build on that partnership we have with 21 shares. They are one of the most innovative providers in the market. They've just launched Bold, which is a a combination of gold and Bitcoin in the same ETF, the first hybrid commodity and crypto ETN. And so we'll be offering that product and looking to enhance that, that offering through that. But other partnerships are certainly on the table. We're talking to IFAs and embedding in that network is going to be important for our growth launching business accounts.

10:44 So I think all of these things in combination are going to help increase our volumes and close that gap with traditional ETFS&ETETCS. Driving your your wedge into a market. This is start with your ideal customer profile. It sounds like you've identified who that is and that you're building around them and then we'll build additional routes to market. I think so and I think we're in quite an interesting place to comment on this whole movement as well, because we're not a crypto first company, you know, we're we're our approaches all around automation, risk management, AI.

11:25 The fact that we can offer this across the spectrum in traditional products and crypto gives us a unique perspective and we see I'd say a disproportionate interest in the crypto aspects. So there is a huge movement of people looking to get into an effect sufficient way to access crypto. So I think that's a good sign for the future. Yeah, definitely is. Well, Dan, listen, thank you for jumping in to talk about this with me. What's the best way for people to get in touch with you and learn more about Stratify? You can get in touch with me on LinkedIn and you can learn about Stratify at our website www.stratify.io and you can download our app from the app and Play stores.

12:09 Fantastic. Thank you so much, Dan. Thank you very much. Till next time everyone, thanks for watching and listening, and don't forget to follow or subscribe wherever you get. Your podcast helps others to find the show and it means a heck of a lot to me. Till next time, see you.