Chad Cascarilla – The Future of Blockchain and Financial Services

**Patrick O'Shaughnessy** (0:00)
This episode of Invest Like the Best is brought to you by Paxos. I have personally interviewed Paxos' CEO Chad Cascarilla on this podcast before, and I'm excited about how they're changing the crypto landscape. Whether you're a small fintech or a large financial institution, with Paxos crypto brokerage, you can offer your customers crypto buying, selling, transferring and more, all with Paxos' easy to integrate APIs. Paxos takes care of everything in the backend, from licensing and compliance to custody and exchange.
You can start offering crypto to your customers within months. I've gotten to know Paxos over the years and have been personally impressed with their track record. With clients that include PayPal, Venmo, Revolut and Bank of America, they are the most trusted infrastructure provider for crypto and blockchain. I'm excited that more fintechs and banks are starting to offer crypto features and Paxos crypto brokerage is the best way to get to market quickly and safely. To learn more, visit paxos.com forward slash Patrick. That's paxos.com forward slash Patrick.
Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (1:23)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:47)
My guest this week is Chad Cascarilla, the CEO and co-founder of Paxos, which describes itself as a financial technology company mobilizing assets at the speed of the internet. Thanks to more than 20 years of investing in financial services experience, Chad has a unique perspective on integrating blockchain tech with traditional systems. He also has one of my favorite Bitcoin origin stories, which we explore. Before Paxos, Charles co-founded the asset management complex Cedar Hill Capital Partners in 2005 and its blockchain focused venture capital subsidiary, Liberty City Ventures. Our conversation is less about cryptocurrencies and more about the history, current state and potential future states of our financial system. Please enjoy.
Chad, we're going to go kind of all over the place. I guess maybe the theme of this conversation will be blockchains, something I haven't talked about in a while. So I've got some renewed fresh energy to talk about this topic again, which will be fun.
Since you've got such a unique origin story for coming into the Bitcoin community to begin and now the broader blockchain community, I'd love to begin with what you were doing prior to reading the white paper, discovering Bitcoin for the first time in the more traditional finance hedge fund world.

**Chad Cascarilla** (2:56)
Yeah. So I spent really my whole career as an investor. I worked briefly on the sell side doing research. Then I went to the buy side, public company investor, long short equity investing, globally and financial services. And then over time, started to add private equity vehicles, added a venture capital vehicle. And so that allowed us to invest in the whole life cycle of companies from early stage all the way to public companies and also the entire capital structure. So trading everything from debt to preferreds to equity.
And so you really got to see and understand financial services in a deep way.
And there were a number of trends that I think we did a really good job of catching and they ended up being very relevant to blockchain. The first was this big change in market structure, which was the move from exchanges as not for profit and floor based institutions to being electronic and for profit. So we are investing around the world in seats and shares in the US and elsewhere. And another really important trend that we caught was subprime and really commercial real estate as well. And how that began to unravel. We also ended up doing a good job of taking advantage in the crisis of investing in subprime too. So we were involved in both directions.
And the reason that was really important to our understanding of blockchain is one, we saw how really transformative price discovery and market structure could change on the exchange side. And then secondly, because of subprime and really the whole financial crisis, running an asset manager at that time, we were able to really understand how the plumbing of the financial system worked, or in the case the crisis didn't work, and in fact exacerbated the crisis. And so when we came across Bitcoin, and this was basically May of 2010, and Bitcoin was only at three or four cents, we were immediately intrigued by it. I have to admit, I thought probably it was going to go to zero because I looked at it and thought, oh man, this is probably a penny stock. Penny stocks go to zero, maybe it'll go to $10. I didn't know it was going to go to $8,000 and yet not be the ledger of record, which is kind of our original thesis. When we looked at it, we said, oh wow, blockchain is what makes Bitcoin interesting because you could put anything on this public record keeper. In fact, Bitcoin is probably more of a store of value than the record keeper and Ethereum is right now in the record keeper blockchain, but maybe we can save that for later. But we were intrigued because we said, wow, this is a way of how you could solve the problem in the financial system around how assets move. You had all this innovation around how to figure out price discovery and exchanges, but there's been almost no innovation in the back office and post trade. It's still running on COBOL mainframes.