Conversation with US compliance agency Custodia Bank: How to promote BTC to traditional companies

Interviewee: Lisa Hough, Vice President of Strategic Relations, Custodia Bank

Interviewer: May Pang, Head of Legal Affairs at Oort

I first met Lisa at a local Bitcoin-themed party in Houston. As we all know, Houston is a famous energy city in the United States. Participants at this event were mainly practitioners in the energy industry and investors who are keen on Bitcoin. 90% of the people on site were basically men, with only a few women. That’s why I noticed Lisa right away. She stood out among the crowd, looking very confident, beautiful and elegant. After chatting with her, I learned that she had a background in large-scale transactions in the traditional energy industry and was a very successful business woman. This was a bit surprising to me. I myself graduated from one of the top 20 business schools in the United States and once interned at a top investment bank. Traditional traders on Wall Street usually give people the impression of being superior. But her attitude was so kind and humble that it completely shattered my stereotype of the traditional trader as arrogant and mean. As I got to know her better, I learned that she was named one of Forbes magazine’s “4 Women Leaders in Bitcoin in 2023.” I also watched an interview with her on Youtube called “Life, Liberty and Property with Lisa Hough”. She mentioned something at the beginning of the interview: Before I learned about Bitcoin, I was always worried about ending up on the streets and living under a bridge. This aroused my great interest. I am very eager to know why a very successful business woman in a traditional industry has such thoughts, and why she switched to the field of Bitcoin. So I reached out to her for a personal interview to learn more about her background and experience, as well as get her insights and vision for the future of Bitcoin.

Here are some excerpts from our interview:

May: I know youre actively communicating with a lot of people in the traditional energy industry right now. Recommending Bitcoin to them, Im curious, from what angle do you convince them?

Lisa：“Yes, I’m lucky to live in Houston, the energy capital of the world, and have many people in my network who work in the energy sector. But unfortunately, most people don’t view Bitcoin mining as An effective tool.

A few months ago, I had a conversation with a publicly traded oil production company in the Permian Basin. The Permian Basin is one of the richest oil and gas regions in the United States, with drilling activity targeting oil and gas reservoirs in underground rock formations. Flaring natural gas is a common practice in oil-producing regions, including the Permian Basin. This is because during the oil exploration process, it is feasible to transport the oil back to the mainland through infrastructure facilities, but it is not cost-effective to transport the natural gas generated during the oil mining and extraction process back to the mainland in terms of cost and other factors. Therefore, most Oil companies choose to burn the gas directly on site rather than spend a lot of money to build the infrastructure to transport it. Oil companies burn for safety reasons, to prevent the release of unburned methane, a potent greenhouse gas, into the atmosphere. However, this is also a waste of energy. The World Bank estimates that enough natural gas is burned each year during oil exploration to power all of sub-Saharan Africa.

As a veteran in the energy industry, I have recommended to many large energy companies that one way to solve this problem is to combine Bitcoin mining with drilling operations. Not only does this reduce methane emissions, it also allows oil companies to make money from burning natural gas that they would otherwise go to waste. This ingenious approach turns a wasteful practice into a useful tool. Moreover, for most energy companies, they do not need to know Bitcoin extremely well to become experts on Bitcoin, nor do they need to expect Bitcoin to become a global currency in the future. They simply need to focus on improving return on investment and the direct benefits of reducing emissions in their current operations.

Another application of Bitcoin in the energy industry is the power industry. A few years ago, I met with a team from one of the three largest electric generation companies in the United States. In day-to-day operations, they occasionally produce excess power beyond grid demand. In this case, they would not shut down the production line because the cost would be higher. So they have to pay grid operators, directly or indirectly, to help deal with this excess power. This operation is the same as Apple paying customers to buy iPhones.

This unique situation highlights the challenges faced by power companies and they are actively exploring innovative solutions. Bitcoin mining has become one of their viable options. Through Bitcoin mining, these power companies can, for the first time, optimize every megawatt of power they generate. This isnt just a trend; its a strategic initiative to increase utility efficiency and improve business economics. For company executives, the financial responsibility they have to investors drives them to explore every available tool to improve financial returns, making Bitcoin mining an effective tool for the sustainable development and growth of power companies. way.

May:: What challenges have you encountered in promoting Bitcoin to traditional large companies, and what obstacles do you foresee in the future?

Lisa：In my opinion, there are two key challenges in the current Bitcoin application field.

First, there is the need to address negative views of Bitcoin by mainstream media companies. They failed to truthfully provide the public with real and objective information and evaluations about Bitcoin. On the contrary, they only focused on clicks and failed to fulfill their obligations as a mainstream demonstration effect organization.

Second, there is a difference between Bitcoin mining and simply having Bitcoin on a companys balance sheet. The U.S. Financial Accounting Standards Board (FASB) has recently been developing new accounting standards specifically for cryptocurrencies. The code will enable companies to use “fair value” accounting, meaning companies holding Bitcoin can assess the value of a digital asset based on what the market for the digital asset is doing at that time.

This is a huge improvement. In the past, Bitcoin was viewed as an intangible asset, accounting for it similar to real estate. For example, if a company records Bitcoin on its balance sheet as $26,000, and if the price of Bitcoin subsequently falls to $10,000, then the company would have to adjust the price of Bitcoin downward to $10, under accounting rules at the time. , 000 to reflect current market prices. However, if the price of Bitcoin rises to $30,000, the company cannot increase its value. It can only be adjusted down but not up. Therefore, many large companies are unwilling to hold Bitcoin assets because this will make their statements less attractive.

Now, new accounting standards change that. The new guidelines allow companies to adjust their book value based on the market price of Bitcoin, adopting a “mark-to-market” approach, which is a clear improvement and shift from the past. The change is expected to take effect in the financial year after December 15, 2024. Once final approval is received later this year, this change in accounting method has the potential to revolutionize how traditional companies develop treasury management strategies and increase their holdings. Has the strength of Bitcoin assets.

May: In addition to the energy industry, what other industries do you think can use Bitcoin in some real-world application scenarios?

Lisa：“I believe Bitcoin will have a profound impact in various industries. One application is its ability to reduce energy waste, such as slowing down methane emissions from landfills. This provides a way to turn waste into treasure and use energy efficiently. .

May: When do you think Bitcoin will be widely accepted in society?

Lisa：“I have mentioned in interviews before that before I learned about Bitcoin, I was always worried about ending up on the streets and living under a bridge. I was deeply concerned about the devaluation of traditional currencies and the decoupling of the value of currencies and the challenges that posed. I am deeply worried, which triggered me to rethink the current economic system of the world. In response to the continuous depreciation of currency value, people are looking for innovative solutions to restore financial stability and rebuild trust in the monetary system. For some people The emergence of Bitcoin represents a compelling alternative.

May: Do you have any advice for the younger generation?

Lisa：“It is because of the younger generation that I am optimistic about the future. There are many organizations in the United States, such as Generation Bitcoin, that are helping teenagers learn and understand Bitcoin, which is a positive trend.”

Bitcoin represents a revolutionary leap in innovation. It is property that can be owned by everyone on earth, independent of property rights. Unlike any previous asset in monetary history, Bitcoin’s pure nature is immune to corruption by humans or external factors. This technology marks an irreversible moment; we are moving forward, not backward.

In the United States, the approval of a Bitcoin ETF opens the way for funds to flow into Bitcoin. Currently, regulations regarding asset custody are strict within large listed companies. There are high and complex requirements regarding who can act as a custodian, hosting licensing requirements, and hosting structures. Some states are leading the way in this regard. States like Wyoming, for example, have enacted innovative regulations designed to protect asset owners when hosting Bitcoin for customers.

If a Bitcoin ETF is approved in the United States, it would open up avenues for traditional funds to invest in Bitcoin, with large funds such as endowments, pension funds and public companies investing in Bitcoin without the need for approval measures such as special board approval. This development will create significant opportunities for wider participation in the Bitcoin market by traditional industries.