Barry Silbert, founder and CEO of the Digital Currency Group, says he's been focusing on startups in places like India, the Middle East and Africa, where he sees bitcoin taking off. DCG has backed more than 50 bitcoin startups and created the Bitcoin Investment Trust, the first publicly traded bitcoin investment vehicle. Silbert, who spoke to Bloomberg Brief contributor Steven Lord, says digital currencies, including bitcoin, will have as much impact on society as the Internet. His remarks have been edited and condensed.

Q: How and when did you first get into bitcoin?

A: Around the time of the first price bubble in mid-2011, when the price went to $10-$12, and I started getting really excited about it by late spring of 2012. That’s when I started buying. I had recently read Charles Hugh Smith’s book "An Unconventional Guide to Investing in Troubled Times," so I was really drawn to bitcoin because it has many of gold’s traits but also has practical uses. I envisioned a world where you could actually have a global digital currency.

Honestly, I didn’t understand or appreciate the technological breakthrough at the time. But I’m a former investment banker, so I’d missed plenty of wire deadlines, struggled to send money overseas, etc. It didn’t take me long to realize bitcoin was a game changer.



Q: How do you see the bitcoin ecosystem developing?

A: Fundamentally, you still have to look at this as a binary bet. But every day that goes by without bitcoin dying, the odds of the better outcome increase. Digital currencies will have at least as much impact on society as the Internet did. They revolutionize how goods and services can be purchased, and how business can be transacted, anywhere in the world.

However, none of the great things under development — payment rails, global remittances, smart contracts, etc. — are going to be feasible if we stay at a monetary base of $3-$4 billion and daily volume of $100 million. People will get excited about bitcoin when they

believe its price will rise, which will create a flywheel effect of increased adoption, velocity, trading etc. Bitcoin can live up to its promise, but it will only be possible if the price and liquidity are a lot higher than they are today.





Q: Bitcoin Investment Trust recently became the first publicly traded bitcoin fund (GBTC). How was that process?

A: We formed the Bitcoin Investment Trust (BIT) in 2013 as a private Delaware grantor trust only available to accredited investors. The process to move to the public market was unique; it took advantage of a rule that allows existing holders of a trust to sell into a secondary market after holding their specific shares for one year, as long as certain disclosure and trading requirements are met. The alternative was to pursue a full listing with the U.S. Securities and Exchange Commission, which as evidenced by the Winklevoss effort, is a bit of a black hole.

We’ve teamed up with OTC Markets, quoting GBTC shares on their top-tier marketplace, OTCQX, and Merriman Capital as the initial market maker and designated adviser for disclosure. To provide liquidity to existing BIT investors, shareholders may elect to sell into the public market, free of restriction, and those shares are eligible to be purchased by any individual or entity. The result is a way for investors to gain exposure to the price movement of bitcoin in their regular securities accounts, even their IRAs, without the challenges of buying, storing and safekeeping. At the same time, we have an ongoing private placement happening. It creates new BIT shares at net asset value (NAV), but with the attendant lockup restrictions. We think the public shares will trade at a premium to the trust’s NAV, which creates a natural arbitrage.



Q: Does GBTC give the appearance of liquidity to a pretty illiquid asset?

A: This does put a relatively liquid overlay onto a relatively illiquid asset, but we think GBTC is unlikely to be more liquid than bitcoin itself, given the size of the market. Our model for GBTC was the SPDR Gold Trust (GLD). When GLD launched in 2004, it made investing into gold by the masses possible. That's what we're trying to do here. Before you ask, the trust’s financials are audited annually by Ernst & Young LLP, to allay concerns about our holdings.



Q: What's next for GBTC and DCG?

A: Our near-term focus is on creating the aftermarket, signing up new authorized participants, working with RIAs, wirehouses, etc. so they know they can use GBTC as an instrument to gain exposure to bitcoin. We fully intend to uplist GBTC when possible, and eventually we want to get options trading on it. It will take time, though — we own about 1 percent of the outstanding bitcoin, so it’s not a very deep market yet.

DCG is making investments in the bitcoin ecosystem. I’ve been focusing a lot lately on startups in countries where I think bitcoin will really take off, like in India, Africa, and the Middle East. I’m interested in the companies building the early infrastructure that will make bitcoin adoption possible in these places.