[00:00:00] Ray Salmond: Crypto is for everyone, not just rocket scientists, venture capitalists, and high-IQ developers. Welcome to The Agenda, a Cointelegraph podcast that explores the promises of crypto, blockchain and Web3 and how regular-ass people level up with technology.
[00:00:24] Ray Salmond: People are encouraged to have life insurance so that they have the peace of mind that after they die, their loved ones and dependents will be protected and able to remain financially stable. There’s all different types of plans, like term life and whole life, and policyholders can secure policy sizes from $100,000 to millions of bucks. Generally, most policies are paid monthly, quarterly or annually in US dollars. But at Meanwhile, a Bitcoin-only life insurance company, policies are paid and distributed in Bitcoin, which is quite interesting.
[00:00:58] Jonathan DeYoung: Now, it’s likely that the average person might have some questions about this, and possibly even some objections to this concept, because Bitcoin is applauded and criticized for its high volatility. So, for example, two years ago, it was somewhere around $16,000 per coin. At the time of our recording, it’s near $64,000 per coin. Maybe a year from now, it’ll be $150,000, or maybe it will have dropped down to $15,000.
[00:01:27] Ray Salmond: So, the question of what happens to my life insurance policy arises in such a situation. To learn more about this unique life insurance business, we asked Danny Baer, the director of wealth and asset management at Meanwhile, to come on and enlighten us. Danny, welcome to the show.
[00:01:45] Danny Baer: Ray and Jonathan, thanks for having me on.
[00:01:47] Ray Salmond: Yeah, we’re looking forward to digging into this topic today. It’s pretty interesting. I guess, to just jump straight into it, how is Bitcoin life insurance similar to and different from traditional life insurance?
[00:02:00] Danny Baer: Yeah, for sure. Happy to jump right in. I think that when you boil it all down, what we’ve tried to do is take an asset that we view as a very low time preference asset in Bitcoin, meaning that people should own it for a long time, and marry that with one of the lowest time preference savings or investment or planning vehicles, which is whole life insurance. So, how is Bitcoin life insurance different than traditional life insurance? It’s not. Our policy is literally a whole life insurance policy under the IRS code. So, it is in the chassis of whole life insurance. It just happens that the functional currency of our product is Bitcoin.
So, rather than paying your premiums in dollars or having your life insurance policy grow in terms of dollars or borrowing against your life insurance policy in dollars or when you die, your life insurance policy paying out to your beneficiaries in dollars, all of that happens in Bitcoin. And tax jurisdictions all around the world hate the widows-and-orphans story. They like to encourage their citizens to buy life insurance by applying certain tax advantages to life insurance products. So, our product, because it is whole life insurance, is subject to the same tax advantages as a traditional whole life insurance policy, but because the base currency is Bitcoin rather than dollars, you also get the upside price appreciation potential of Bitcoin tax-free as well.
[00:03:44] Ray Salmond: Okay. For my life insurance, I pay like $100 per quarter. I think after two years, 40% of the plan is guaranteed or locked in, right? What is the payment and distribution process like for a Bitcoin-based life insurance policy?
[00:03:58] Danny Baer: Yeah. So, everything that we do is in Bitcoin. We have what is called a whole life limited pay policy. Whole life is appropriately named because it lasts your whole life, no matter how long you live. Contrast that against term life insurance, where you buy coverage for a certain term or period of time, but if you outlive that term, then you don’t get any benefit when you pass. So, ours is whole life. And then the other part of the title of the product is limited pay. So, limited pay means even though the coverage lasts your whole life, we don’t want you to have to pay every month or every year for the rest of your life. So, ours is structured as what is called a 10 pay, meaning that you pay, or the policyholder pays, over 10 years in 10 equal annual installments. So, if they wanted to, as an example, buy a policy where they owed 10 Bitcoins of total premium, they would pay 1 Bitcoin per year for 10 years. If they bought a policy for 1 Bitcoin of total premium, they would pay one-tenth of a Bitcoin per year for 10 years.
[00:05:16] Ray Salmond: Right. Is there an option to just pay it all upfront?
[00:05:19] Danny Baer: It’s a great question, Ray. It’s like you did your homework. There is. We have what we call a premium pre-funding rider. And what that allows people to do is send all ten or... Basically, you can get ahead of schedule to any extent that you want. So, you don’t have to pay all 10 upfront. You could pay 5 upfront or 2 upfront or 7 upfront, but you can pay in advance. What happens there is the excess payments don’t get paid into the policy, you are just transferring the payments to us early, and then we hold the Bitcoin on your behalf, and then we make your payments for you on the same 10-year cycle or schedule that you otherwise would be paying.
The reason that most people are opting in for that option, if you think about it, is they want to lock in today’s price for all 10 payments. So, if Bitcoin today is $63,000 or $64,000 per coin, but if you believe that a year from now, it could be $100,000, or five years from now, it could be $250,000, or 10 years from now, it could be $1 million per coin, then on a dollar basis, your payments over the 10-year schedule are getting more and more and more expensive because your payments are in Bitcoin. So, by transferring it all to us upfront, you’re essentially locking in today’s price for all 10 future payments.
[00:06:43] Ray Salmond: Okay, that makes sense. Before I turn it over to Jonathan, I’d be curious to hear what is the origin story for Meanwhile? Was it just like you saw an absence and a market where you perceived that there would be demand? Or is it because Bitcoin has this kind of like illiquid characteristic where people buy it and hold it and watch it appreciate, but they don’t want to part ways with it or spend it or take the tax hit or the capital gains hit? So, they just hold on to it, and, you know, it’s like concretized liquidity. I’m curious to hear what is the reason to be for Meanwhile.
[00:07:17] Danny Baer: Yeah, so our two founders are, Zac Townsend is our CEO, and Max Gasner is our CTO. They’re actually close personal friends who have been entrepreneurs in their background, or by background, but they had never actually worked together before. Zac, our CEO, went through Y Combinator. He sold the company that he built in Y Combinator to Silicon Valley Bank, back when it was cool to sell your company to Silicon Valley Bank, in like 2015. He then did some stints in the public sector. And then he most recently, before they founded Meanwhile, led North American fintech for McKinsey. So, his background is in fintech. He’s dealt with a lot of regulatory and compliance issues as they relate to fintech startups and companies. And then Max Gasner is also a serial entrepreneur by background. I believe Meanwhile is like the fourth founding team that he’s been on. He had an exit of one of his earlier companies that he was on the founding team on. They sold to Salesforce. He worked for Salesforce for a year as part of that acquire.
But they finally got to a point in both of their careers and lives where it made sense for them to do something together. And so, they sat down and made a list of all of the companies that would need to exist if a global, robust, successful, decentralized Bitcoin economy were to exist. And so, on that list, there were things like exchanges and banks and payments companies, all of which had been founded or started already. And Zac claims, I don’t know how accurate this story is, but Zac claims that he woke up in the middle of the night one night and thought, life insurance. There is no life insurance company in the Bitcoin economy yet. And he started to do some research on the topic. It turns out that for global developed economies, life insurance premiums account for 2% to 3% of GDP. So, it’s a pretty big pie to get a slice of. And they just kind of went down the rabbit hole.
And they ended up, the first external hire that they brought on is our head of insurance, Jim Cristallo. He had spent 21 years at New York Life, most recently there led their entire individual life P&L business, to bring in kind of that deeper insurance expertise. But what I think gave Max and Zac the edge to create this company is there are lots of regulatory hoops and hurdles to jump through and over when it comes to starting a life insurance company, and their backgrounds in fintech provided them kind of that high tolerance for regulatory pain. And so, it took a full year just to get the license to be a life insurance carrier before they could even really start working on product or systems or infrastructure or things like that. So, they luckily have a high tolerance for that sort of unique pain, and they were able to bring in that deep insurance expertise in Jim.
[00:10:17] Jonathan DeYoung: Are there any other ideas on that list, without, I guess, giving away your next multimillion-dollar business idea, but any other untapped products or industries that you can think of or that they may have mentioned that you think an aspiring young entrepreneur would be able to take on and revolutionize the industry?
[00:10:36] Danny Baer: I’m a better poker player than that, Jonathan. I’m not going to show all the cards right away, but I think the important thing to note is that there is an almost endless list of products on the life insurance menu that a licensed and regulated life insurance carrier can bring to market. So, we started with a dead simple whole life insurance product because, frankly, we believe that whole life aligns itself with the hodl mantra of Bitcoiners the best, meaning it is a low time preference vehicle. People who buy Bitcoin, for the most part, want to hold it for the rest of their lives, use it to pass on intergenerationally. And that’s exactly what whole life insurance is. Whole life insurance is that with additional tax advantages layered on top. So, we basically just created the most tax-advantaged hodl vehicle that exists on the market today.
But then from there, you can then look to the long list of additional life insurance products. There’s term life insurance, as Ray mentioned earlier. There’s key man insurance for corporate or institutional ownership. And then, on the flip side, if you think about life insurance as being, what happens to my loved ones if I die too young? An annuity is a life insurance product that protects against what happens to my loved ones if I live too long. It’s an income-producing vehicle. So, there’s kind of two sides to the coin. There are the life insurance products that you think about as traditional life insurance, and then there are the annuity products as well. And so, we’re working to bring kind of that full suite of product offering to market.
[00:12:14] Jonathan DeYoung: I just want to clarify something so that we’re on the same page, and our listeners are as well. When you say that everything is denominated in Bitcoin, so you mean that I put in, that I pay 1 Bitcoin into my life insurance policy. It’s worth 10 Bitcoin, I pay 1 Bitcoin each year for 10 years. It’s not calculating my payments based on the USD value, it’s solely based on 1 BTC equals 1 BTC, correct?
[00:12:40] Danny Baer: Correct, yeah. It might be helpful even to just take a step back. So, Meanwhile, the insurance company, so we have a fully licensed commercial life insurer in Bermuda. This is where I make the important caveat that Bermuda is not the Bahamas. Bermuda is like the insurance and reinsurance capital of the world. It’s where Chubb International is. AIG is there. Apollo’s Life insurance company, Athene, is there. And then like Swiss Re and Munich Re, which are two of the biggest international reinsurance companies, are in Bermuda as well. So, we have this life insurance carrier in Bermuda. Its functional currency is Bitcoin. We actually do not let that company touch anything but Bitcoin. So, its balance sheet is exclusively Bitcoin. We think we’re the only company in the world to state our audited financials in satoshis. So, you can imagine how ridiculous our financials look. They’re stated to the ninth decimal point. And then we do all of the math that an insurance company does, like reserving and solvency calculations, is all done in terms of Bitcoin.
So, what that allows us to do is bring to market life insurance products whose base currency is Bitcoin. And so, you get the tax advantages of the life insurance vehicle or structure, but you also get kind of the volatility or upside price appreciation potential of Bitcoin, tax-free. And we can go into specifics if you’re interested about the whole life product that we have at market today. There are several distinct kind of benefits that aren’t necessarily different than traditional whole life insurance. As we talked through it, I think it becomes more and more evident, really, the added benefit of it being denominated in Bitcoin as opposed to dollars or euros or yen or something else.
[00:14:26] Jonathan DeYoung: Yeah, I think we have a couple of questions about that. I know Ray has one about that. Do you face any greater regulatory issues or hurdles being denominated in Bitcoin? Like I’m in the state of New York, and to operate in New York a crypto exchange... I don’t know the exact terminology, so I don’t want to mess up the exact laws. But basically, to operate with cryptocurrency in New York, you need a BitLicense, which is quite an arduous process to get. So, like as a New York resident, is this a product that I’m able to use, or is it limited in its jurisdictions in the US?
[00:14:58] Danny Baer: Great question. So, we are a Bermuda-based life insurance carrier. We are regulated by the Bermuda Monetary Authority, and we are licensed in Bermuda. There was a Supreme Court ruling a long, long time ago, and I won’t guess at the year because I’ll get it wrong. But a long time ago, there was a Supreme Court ruling that stated that US citizens can buy life insurance anywhere in the world that they want. Life insurance companies cannot actively solicit to US citizens unless they have state-by-state licensing. So, because we are a Bermuda-based company with our licenses in Bermuda, we are an offshore life insurance product. So, US citizens and residents can come to us. Everything we do is digital, online, but they can go to our website, they can come to us, and they can buy a life insurance policy, and it will be considered an offshore life insurance policy, which is totally within their right under all US regulations and laws.
So, we’re in accordance with all of that. It just will be an offshore policy, which, for some folks, actually is an added benefit, because there are certain creditor protections that come with getting your assets into an offshore structure. So, most people actually view it as a positive as opposed to a negative. But so, it doesn’t matter what state you’re in or what your occupation is or anything like that, you have the right as an American citizen to buy life insurance anywhere in the world that you want.
[00:16:32] Jonathan DeYoung: Interesting, okay. Ray is our resident financial expert, so I’m still learning all this stuff. And so, yeah, I didn’t know that. I learned something new today.
[00:16:43] Ray Salmond: Okay. We have so many questions. So, Danny, what do y’all do with the Bitcoin that you receive from policyholders?
[00:16:50] Danny Baer: Yeah, that’s the question that I think every Bitcoiner wants the answer to. Because a life insurance company, if you just zoom out, the way a life insurance company works is it receives money upfront, it makes very long-dated promises, and then it has to kind of grow that pile of money to satisfy its long-term promises. So, a traditional life insurance company will go out, they’ll take in the premiums, and they’ll buy like 30-year long-dated bonds, or they’ll invest it kind of across an asset allocation approach to meet their long-term guarantees. We’re no different than that. We are a life insurance carrier. We receive the premiums paid in Bitcoin, and we have to do the dirty work in Bitcoin that makes all Bitcoiners uncomfortable, and that is we have to get yield on the Bitcoin.
So, how do we get yield on Bitcoin? First thing is because we don’t take on any exchange or currency risk, we never take Bitcoin, sell it to dollars and invest it in something else. Everything we do operationally remains in Bitcoin. So, how do we get the yield? We take the Bitcoin in, and we lend it out to big institutional borrowers. Now we’re hyper, hyper-conservative in our lending. We target between 3% and 3.5% returns in the insurance company. We’ve operated this investment approach for over two and a half years now. We’ve annualized at something like 3.2% over that period of time. We have zero credit losses to date. And I’d remind you that that same time period includes Celsius, Voyager, BlockFi, Genesis, FTX all blowing up. And the reason we’ve been able to execute our strategy without any credit losses to date is we are just hyper, hyper-conservative with the lending.
So, every loan that we make and again, to keep it all in Bitcoin, what this really means is if we lent a borrower 100 Bitcoins, and we were getting 3%, that just means after a year they have to give us 103 Bitcoin back, no matter what the price of Bitcoin is. So, we only lend to big institutional borrowers who either have legitimate future cash flows in Bitcoin, so they can service the debt no matter what the price of Bitcoin is, or who are otherwise good credit qualities or otherwise rich. So, what we won’t do is lend to speculative borrowers who are just borrowing because they think that Bitcoin will become more or worth more in the future than it is today. They either have to be generating more Bitcoin so that they can repay the loan, or they just have to be a really good credit that we feel comfortable with, with good, pristine collateral. Maybe there are parental guarantees or different covenants put into the loan document to make us feel better. But the last thing I would say is because we’re only targeting 3% to 3.5%, which is very conservative for the space, from a lender perspective, we get to negotiate like being senior in their bankruptcy stack. So, if something does go wrong, we’re first in line to get our Bitcoin back.
[00:19:56] Ray Salmond: Okay. Maybe on your socials, y’all should jump into the conversation that everyone’s having about Bitcoin yield. Michael Saylor said that MicroStrategy, they put it on their like finance report that they’re projecting like it was like 3% or 5%. Bitcoin yield is revenue. And there’s like a lot of people that are kind of like, that’s a good strategy, that’s a bad strategy. It sounds like you guys are following the same sort of strategy, lending out Bitcoin to then derive yield off of it, so your thoughts seem aligned with his. My question, then, is, how do you hedge your risks? So, you’ve said your entire balance sheet. Everything’s in Bitcoin. You’re not putting anything in USD or stablecoins. Beyond lending out Bitcoin, are you, is Meanwhile looking into or using options? And then another question, if you’re not using options, because beyond having a life insurance policy, I don’t really know a lot about the industry, so are life insurance companies also insured against losses?
[00:20:57] Danny Baer: Yeah, great questions. So, I’ll take them maybe in order, I think, and I might get the order wrong. So, the first is the commentary on the Saylor discussion around yield. That really popped up just in the last few weeks here. At its core, the conversation that we’re having, and this goes back to the Bitcoin white paper... The Bitcoin white paper was written, and it was referred to as a digital peer-to-peer cash system, not a digital gold that’s buried in your backyard system. So, for Bitcoin to be cash or a currency, it is our belief, and even larger than that, for there to be a Bitcoin economy to exist, there needs to be velocity of the currency. There need to be financial products. There needs to be debt and equity capital markets. There needs to be actual real-world financial activity using the currency. And if that doesn’t develop, then we’re wrong in our hypothesis, but then Bitcoin just is limited to not its full potential. It’s limited to being, you know, some sort of hard asset that’s just a store of value but is not used as a medium of exchange or unit of account. So, we do believe that there will be a future robust, decentralized global economy denominated in Bitcoin.
The beauty of how we’ve structured our company and that we operate exclusively in Bitcoin, on the Bitcoin standard, we don’t have to hedge any currency risk because we’re not taking any currency risk. So, you pay your premiums in Bitcoin. Let’s say there’s an example of a policy where a policyholder pays 10 Bitcoins of premium. We promised them when they die to pay out 15 Bitcoins to their beneficiaries. We’re getting that 3% to 3.5% yield in terms of Bitcoin over their lifetime. What that really equates out to be, and the math isn’t going to be exactly right here, but we’re going to turn their 10 Bitcoins — an actuarial table perspective — we’re going to turn their 10 into 16. And so, when they die, we pay 15 out to their family, and we make 1 Bitcoin in profit. And that’s like an oversimplification of how the life insurance company works. We take in money upfront, we invest it, and on an actuarial basis, we think that we will outearn what our liability is over that projected life. And when you get enough people into a mortality pool, you can really accurately project out when every individual is going to die. You know, it’s like a law of large numbers. So, we don’t use that.
And then the last question was on reinsurance. So, when an insurance company has insurance on their losses, that’s called reinsurance. We have relationships with Swiss Re and Munich Re because they are both also in Bermuda. We do not have reinsurance yet. We actually are overly conservative in the reserve capital, our own capital that we hold on our balance sheet, relative to the liabilities that we have in our balance sheet. So, we don’t need to offload any of that risk yet. But as we get bigger and, on a percentage basis, our reserve capital comes down relative to the liabilities, then it will make sense to offload some of that risk from our balance sheet to a reinsurer.
[00:24:24] Ray Salmond: Right. I learned a new term today: mortality pool. It sounds like a DeFi term.
[00:24:31] Danny Baer: People love to talk about, you know, the two guarantees in life are death and taxes. And that is what whole life insurance is, right? You’re going to die, and you’re going to pay taxes. So, how do you protect your families when you do die? And how do you plan for those taxes to be most tax-efficient as possible? That’s really what whole life insurance was created to do.
[00:24:51] Jonathan DeYoung: I feel like mortality pool sounds like a horror movie, like a swimming pool that comes alive and sucks you down the drain or whatever. So, what happens if Meanwhile shuts down? And obviously, God willing, everything goes great. Thirty years down the line, I pass away. Someone gets my life insurance policy, my beneficiary. But what happens if the company shuts down? So, like typically, the traditional life insurance policy, another company can then take over that policy. But if you’re the only one that’s doing everything in Bitcoin, I’m assuming that complicates things a bit.
[00:25:26] Danny Baer: Yes. So, the first thing that I would point to here is, this is why going to the right regulator makes a big difference. Now, the company was founded in January of 2022, so before FTX went under and when the Bahamas were like an emerging hub for digital asset innovation. Turns out they were an emerging hub because they were letting the companies do literally whatever they wanted with no actual regulatory oversight. But even back then, I think a big credit to our co-founders, Zac and Max, is they had the foresight to not take the easy path from a regulatory perspective. So, if you Google Bermuda, Bermuda is insurance capital of the world. 70% of the island’s GDP comes from insurance and reinsurance. What they do is insurance and reinsurance. And so, we are held to the same regulatory standards as all of the other insurance companies that are on the island, and we are subject to the same requirements from a process perspective, from an enterprise risk management framework perspective, from an investment committee perspective. And so, we have all this framework in place to mitigate risk.
Now, when you operate an insurance company, the core focus of our regulator... We also have an independent board in Bermuda, and the core focus of theirs is the protection of our customer funds. Because the irony is that back in like the 1700s and 1800s, life insurance as an industry was viewed like crypto is viewed today, and that it was filled with like scammers and fraudsters because people would give them money, and then they’d just run away with it. Does that sound familiar? It’s like, what we’ve seen in the last 15 years in crypto. And now it’s thought of as like the sleepiest, most regulated, safest industry in the world. And that’s what we think that crypto will become that as well.
But when you run a life insurance company, you have to hold your own capital as reserve for every policy that you bind. So, Jonathan buys a life insurance policy. He sends his premiums. We have to post our own Bitcoin alongside of it in reserve. You can think of the reserve capital or the reserve Bitcoin, in our case, as first lien capital or first loss capital. You can think of it as a buffer. So, if we start to lose money, if we have bad investments or operational losses or we have a bunch of people die prematurely, we start losing money, we lose our capital before we lose any of our customers’ capital. And we have, at a minimum, quarterly meetings with the regulator and with our independent board, and the number one thing they’re looking at is the strength and health of that buffer. And if it gets to a point where we’re starting to eat into it, they would step in, shut our business down and repay out our customers their Bitcoin back.
So, going to an actual regulator who knows what they’re doing and will enforce it was probably short-term much more painful for us. We could probably be a lot farther along if we’d gone to a different island that starts with a B, maybe. Not to cast shade. But it was short-term, more painful. It took us a full year to get our license, but we think when you build a life insurance company, you have to be thinking decades and centuries ahead, not months or years ahead. And this is the same reason why we don’t really speculate on the price of Bitcoin tomorrow, or next week, or next quarter or next year. We think about what will Bitcoin look like 50 years from now, 100 years from now, because that’s kind of the time frame that we’re planning on.
[00:28:59] Jonathan DeYoung: Got you. So, while there may not be another company... Well, we’ll see. Maybe in 30 years, there will be another company, another Bitcoin life insurance company. But if there is not one to buy out from Meanwhile all the existing policies, then at the very least, the customers, the policyholders, will get paid out from what they put in.
[00:29:18] Danny Baer: Correct. The counterparty risk, at the core, I think that you’re taking on is that of the Bermuda Monetary Authority or regulator, because they’re the ones that are ultimately looking over everything that we’re doing operationally and at our books, making sure that we’re in good health, and if they get spooked or concerned, they would then step in and shut our business down to save our customers those potential losses. I don’t want to speculate on the potential of someone stepping in and buying us. We have raised about a little over $20 million, and our cap table does include big legacy insurance companies like Northwestern Mutual, who’s the largest life insurance company in the United States. They call their Futures Fund. I don’t want to speculate that they would step in and buy all of our policies off of us, but we’re not like shut off from the life insurance world. We have people on our cap table that are from legacy insurance companies or insurance funds and things like that.
[00:30:18] Jonathan DeYoung: Gotcha. So, life insurance is just one of a gazillion other forms of insurance. You were saying earlier, nothing is certain but death and taxes. I would add insurance on there as well. That, you know, you have to have car insurance if you have a car, homeowner’s insurance, most people have health insurance. There’s life insurance. I’m sure there’s a gazillion other insurances. There’s business insurance, liability insurance. Do you see a role for Bitcoin in these other insurance markets, or is it right now best fit for life insurance?
[00:30:52] Danny Baer: Ironically enough, there are several players in the property and casualty space that are doing crypto or Bitcoin flavors of P&C insurance. Those exist in the world today. We believe that life insurance is the most natural fit because life insurance is multi-decades long, and we think that Bitcoin should be invested in and held and not traded. We think that it’s a long-duration asset that people should use to plan for things like intergenerational wealth transfer. So, we think that it’s the most natural fit in life insurance, but that doesn’t mean that it doesn’t exist in other places.
I think the challenge that you’ll find, and if you’re like in the Bitcoin Twitter world, like I’m sure you guys are, and I am, you’ll come across questions like, it seems so obvious, why can’t you get a mortgage in Bitcoin or pay my car insurance in Bitcoin or things like that? Well, when it’s such a highly volatile asset and it can appreciate so quickly, you don’t want to be on the other side of that insurance. Because if Bitcoin explodes and goes to a million, like every mortgage would just be, people would turn their house over and just keep Bitcoin, right? Or their car, or whatever else. So, it doesn’t make a ton of sense to be on the other side of that if you think Bitcoin has the potential that I think most of us think that it has. So, that’s why we’re in life insurance. We don’t have to worry about that. If Bitcoin goes up, we win. Our customers win. And there’s a real alignment of interest there.
[00:32:22] Jonathan DeYoung: Yeah, interesting point. Are you aware of any employers that have contracted with your company to offer Bitcoin life insurance to their employees?
[00:32:32] Danny Baer: It’s another product in the suite that we’re working to bring to market, and we’ve actually done preliminary work here. If you think about a MicroStrategy or a Bitcoin miner or another Bitcoin-focused company, when you go through like the onboarding, employee onboarding, where you’re like selecting your benefits, there’s a product called group life insurance, which is where it’s like your employer is sponsoring like a $200,000 life insurance policy on you or something like that. So, that’s group life insurance. And we have done preliminary work to start to bring that product to market in the event that a MicroStrategy or someone like that wants to offer that, you know. It’s a corporate-sponsored 1 Bitcoin life insurance policy on your life or something like that. That’s just another thing that in the life insurance bucket is a product that we can bring to market, that we’ve actually started the work on to bring down the pipe here.
[00:33:27] Ray Salmond: Okay. Dialing back to the kind of discussion about what happens if you guys go out of business and how you’re regulated, all that sort of thing. I wanted to do a quick follow up on that. So, do any US regulators have jurisdiction over Meanwhile, even though you’re in the Bahamas? And in the future, if the US becomes way more crypto-friendly with a clear regulatory framework, would Meanwhile consider re-headquartering in the US?
[00:33:54] Danny Baer: We are a Bermuda-based insurance carrier. Thankfully, the SEC doesn’t have oversight over life insurance or things like that. I don’t think that Gary Gensler has made a lot of friends in the crypto or Bitcoin space. And so, you know, there aren’t regulators like that in the United States that have, that touch our Bermuda-based insurance company. To your question of would we relocate? I think that there is wisdom in diversification of like regulatory jurisdiction. So, would we open up offices and have other entities in other pro-Bitcoin jurisdictions? Yes, I think the simple answer is we would do that, and then it would make our jobs easier from a sales perspective to have like insurance carriers in the United States that are licensed state by state so that we can more actively sell and solicit in the States as well. So, that’s all... If we got to a point where that were an option, I think we would complement our existing insurance company in Bermuda with the diversification of regulatory jurisdictions.
The one thing I would say on the topic of Bermuda, and I’ve said this a number of times now, but not only are they insurance and reinsurance capital of the world, they have also been expanding their expertise in digital assets. So, Coinbase’s offshore entity is in Bermuda. Jack Dorsey’s The Block is in Bermuda. So, for us, they were just the perfect marriage of deep historical insurance expertise with this willingness to be innovative and regulate a digital asset company. So, thank you to Coinbase and to The Block for kind of paving the way. We’ve certainly enjoyed some of their trailblazing efforts with the Bermuda Monetary Authority or regulator. So, it’s been great for us.
[00:35:43] Ray Salmond: Okay. Thank you for giving that detail. Now, moving on beyond death and getting paid out for dying and making sure your family is well, I know that like life insurance has an investment quality or aspect to it, as does like a health savings account or an annuity, so on and so forth. I know you’re a wealth management guy. Smart money. So, I want to present you with two scenarios so that the listeners can kind of explore what are their options and what are some of the benefits of having a Bitcoin-based life insurance policy. So, let’s say I have 1 Bitcoin in situation one, and in situation two, I have 10 Bitcoin. In both situations, I already have a $500,000 life insurance policy with Mutual of Omaha, and I’m more interested in the like investment opportunities that exist by having a Bitcoin-based policy. So, what sort of opportunities exist for a person who puts in 1 Bitcoin and for a person who puts in 10? Like, what can they do?
[00:36:48] Danny Baer: I think this is just getting to the core benefits of our product. A primary driver of why people are buying our Bitcoin-denominated whole life insurance policy is, it’s not even the insurance piece of passing on Bitcoin when you die, it’s the key living benefit, which is the tax-free policy loan. So, you can borrow against the value of your policy tax-free. And because everything we do is in Bitcoin, what that means is your policy value is in Bitcoin terms. You borrow Bitcoin against it. And when you do that, it’s like you get a new Bitcoin with a new cost basis. So, Ray, let’s say, in either example, in the 1 Bitcoin or the 10 Bitcoin policy, let’s just say you paid your premiums in at $63,000 today, and it’s 10 or 20 or 30 years from now, and Bitcoin has gone to $1 million a coin. You could borrow against the value of your policy. Bitcoin out. Its cost basis would be $1 million. So, you could sell it immediately and have no capital gains on that transaction because you’re selling it at cost. Now, the bigger your policy is, just the more you can borrow against. So, that’s really like the added option here. Not only does it pay out more, obviously, but it will... more premiums equates to bigger policy value, which is more collateral to borrow against. So, you borrow against it. You sell the Bitcoin that you borrowed out. That’s a capital gains tax-free transaction because you’re selling at cost.
And then another benefit to it is because the loan itself is in Bitcoin, you’ve borrowed Bitcoin out against a Bitcoin collateral, you’re never at risk of getting margin calls. Because if the price of Bitcoin drops, you’ve borrowed 1 Bitcoin out against 10 Bitcoins, right? So, you don’t need to worry about the price volatility of Bitcoin and getting either margin called or liquidated or having to post more collateral. So, that’s nice. It’s actually better for you as the borrower if the price does drop, because then you can just buy back a cheaper Bitcoin and use that to repay your loan. So, if it goes from $1 million to $600,000, well, I would just buy a $600,000 Bitcoin, repay my loan and keep the $400,000 spread for free, for myself.
If Bitcoin does the opposite, instead of crashing, if it doubled, there’s no term on our loans, so you could just let the loan accrue, the interest accrue during your lifetime, and when you die, it just nets out against the payout that goes to your beneficiaries. So, we actually have a good portion of our existing policyholders today are single, without kids or any clear beneficiary. They don’t care about the insurance. They don’t care about passing Bitcoin on. They’re just taking out a policy, and they’re going to borrow out as much as they can every year so they can sell Bitcoin capital gains tax-free and use that to supplement their living. Buy a house or invest in something else or whatever they want to do with it. So, the example that you’ve given, which is 1 Bitcoin versus 10 Bitcoins, they have the same benefits, just a bigger policy, it gives you more collateral to borrow against or a bigger payout.
[00:40:08] Ray Salmond: Right, right. My wife just sent me a question. How long before one can get a payout? So, some life insurance companies, it’s a two-year period. So, if I open today, and I die one year from now, do I get paid? Or is it a two-year type thing? Well, not me getting paid, but my beneficiaries.
[00:40:25] Danny Baer: Yeah, I think there are two questions here. So, the first is the payout of the policy is guaranteed as soon as you make your first premium payment. And the beauty of that is, let’s say you have a policy where you agree to pay 10 Bitcoins of premium. So, 1 Bitcoin per year for 10 years. And we tell you, based on your medical underwriting, the payout’s 15 Bitcoin. Let’s say you pay your first premium in, and then the next day, you get hit by a bus. Your beneficiaries get the full 15 paid out to them. The payout is a flat, guaranteed number, no matter when you die. Doesn’t matter if you die the next day or live for 60 more years. The payout is 15 Bitcoin.
So, that’s one piece. What your wife may have been getting at is the loan feature is subject to a two-year lock. So, you can’t borrow against your policy for two years. And that is standard practice in insurance for Anti-Money Laundering reasons. I’m not a money launderer, I don’t — hopefully none of your audience is a money launderer — but a good way to launder money, if it were legal, would be to take dirty money, put it into a life insurance policy and then borrow out new money immediately right afterwards. So, we have this two-year lock-up where you can’t do that for AML reasons.
[00:41:37] Ray Salmond: Got you, okay. Thank you for that. So, the common rule of thumb for policy size is 10 to 15 times one’s annual income. So, if a person, let’s say, makes $75K or $100K per year, would a 1 Bitcoin policy be enough? I mean, mathematically, no. But 1 Bitcoin is a lot of money for most people, or even paying $6,000 per year is kind of a lot of money if you’ve got property taxes, health insurance, daycare costs, and HOA, you know how it goes. Like if you’re grown up and you have all these expenses, finding another 6,000 bucks when Bitcoin is $64K is pricey. What happens if I, like, I agree to this policy, I’m going to do it in 10 years, and give you 1 Bitcoin, but next year, 1 Bitcoin is $150,000? God, now I have to pay more. Maybe I can’t, I lapse or close it. And I’m sure there’s a cost associated with that. So, going back to this like rule-of-thumb policy size being 10 to 15 times one’s income, what is your view on a 1 Bitcoin policy?
[00:42:39] Danny Baer: Yeah, I kind of throw that framework out the window with our product, because we don’t encourage anyone to replace all of their existing life insurance with our products. Our product is if you are a long-term believer in Bitcoin and you want to put it into a tax-advantaged vehicle, we built the product for you. Bitcoin is volatile. Your 1 Bitcoin policy, Ray, 30 years from now, 50 years from now, could be worth $1 million, or it could be worth zero. And I don’t know what it will be. I think it will be worth more than it is today, but I can’t promise you that.
So, I think that the root question that you’re asking is how should people think about sizing? And I’m not anyone’s adviser on this, but the recommendation that I typically make is don’t take out a policy with total premiums much in excess of the Bitcoin you already own. So, if the price does run up, you already own the Bitcoin. You’re not trying to accumulate more Bitcoin at higher prices to make your premium payments. We have people who bought policies who mine Bitcoin, and they’ve got a pretty direct line of sight into the idea that they’ll probably mine like a few more Bitcoin in the next four years. So, they felt comfortable taking out a policy maybe bigger than the Bitcoin they already own. But I would feel uncomfortable making that recommendation to anyone. And so, while it does depend on everyone’s individual situation, that’s the only rule of thumb that I typically lean towards when it comes to our product, not some ratio of your net income or things like that.
[00:44:18] Jonathan DeYoung: So, I’m 34 years old. I understand the selling point for someone like me. Like if you were meeting me — I’m in the US and in New York, you probably can’t actually try to sell me the product. But if I were to come to you and be like, I’m super interested in this, is this right for me? I can understand why this might be a good fit for me as somebody with a 30, 40, 50, with technology, who knows, 70, 80-year long-term prospect and vision into the future. But if I were coming to you and I wasn’t 34 but I was 84 and interested in Bitcoin, and I thought it sounded cool, and I’ve got some coins, is this a product you would recommend to me, given that it’s, the price of Bitcoin is so volatile? And 10 Bitcoin I pay upfront, and if I die next year, it theoretically could be worth half of what it is now?
[00:45:07] Danny Baer: It’s a great question, and I’m glad you asked it. We actually have a limit. We choose to only insure individuals ages 18 to 65 years old. So, we don’t insure any juveniles, and we have a cap at 65. And the very basic answer or reason why is the actuarial tables get a lot messier after 65 than they are pre-65. So, it’s harder to estimate when someone, how much time someone has left if they’re older than 65 years old, right now. Sorry to kind of debunk your question in that way, but we don’t do business for people over 65. We have people over 65 who want to buy this product because they’re into Bitcoin, like the example that you gave Jonathan. And what they end up doing is they buy a life insurance policy on a family member who’s younger than them. It’s a way for them to get involved, get the product, be able to take the loan against it, but it’s not their life that’s insured, it’s their son or grandson or granddaughter’s life that’s insured.
[00:46:12] Ray Salmond: And then if he does something bad, you kill him. It’s a terrible joke.
[00:46:18] Danny Baer: When I said, you know, 200, 300 years ago, life insurance was like the crypto of its time, where it’s filled with scammers and fraudsters, like The Mafia would, like, take out life insurance policies on people and then kill them, and then, like, they’d make money that way.
[00:46:32] Ray Salmond: That’s ridiculous.
[00:46:33] Danny Baer: So, it’s not an entirely unheard-of concept, but we’re not going to promote that, Ray. We’re not going to, you know, try to get people to do that.
[00:46:41] Jonathan DeYoung: If I came to you and I was like, hey, I just read about Bitcoin on the news today. I saw it hit a new all-time high. It seems like it could make me a lot of money. I’m really interested in this product, buying this life insurance policy. Would you recommend that somebody like that get a policy with you guys? Or is this more kind of targeted, marketed towards people who are like deep in the space and kind of technologically literate and really understand Bitcoin?
[00:47:09] Danny Baer: Yeah, I think what we’ve found, it’s much easier to educate a Bitcoiner on life insurance than it is to educate a non-Bitcoiner on Bitcoin. So, the core kind of audience that we’ve found is really excited about this product are people that already own Bitcoin, because they own it, they’ve probably made a lot of money on it, or they think that they’ll make a lot of money on it, and they want a smart way to use it to tax plan. And so, we’ve come to market with this product, like I said, that is like the most tax-advantaged hodl vehicle that exists. If you’re going to hold Bitcoin for a long time, you should do it through this policy because you get all these tax advantages.
Now, we have people who are like deep Bitcoin or digital asset experts who have been in it, this space, for 10, 15 years, and then we have other people who are just wealthy who with some of their excess money bought some Bitcoin but don’t really know what to do with it. But we’re not doing is really trying to convince people to buy Bitcoin for the first time and then put it into this policy. We would only buy this product if you believe that Bitcoin will be worth more in the future than it is today, and so, you have to kind of have that core belief before it makes sense to move forward.
[00:48:26] Ray Salmond: Can a person have two life insurance policies? Like they can have a standard one and then have one with Meanwhile?
[00:48:32] Danny Baer: Yeah, you can basically have as many life insurance policies as you’d like. So, I would say our average policyholder or customer owns traditional life insurance and then is buying this as like a bolt-on or like a hedge, like if Bitcoin does take over the world, I also want to protect my family in that scenario, too. So, I’ll take out a Bitcoin policy as well. But yeah, most people who own life insurance actually own multiple policies.
[00:48:58] Jonathan DeYoung: So, my last question is that if I’m to tabletop this scenario where I get an insurance policy through, Meanwhile, I die in, I don’t know, 30 years... I don’t know why I keep saying 30 years. Hopefully, I live beyond 64.
[00:49:13] Danny Baer: Yeah, let’s shoot for longer.
[00:49:14] Jonathan DeYoung: I die in 60, I die in 300 years, right? My partner is still alive then. She’s the beneficiary for my policy. I would consider myself very crypto-literate. I can set up a hardware wallet to receive a policy from someone else if they listed me and feel comfortable in receiving what, at the time, could potentially be millions of dollars’ worth of Bitcoin. But she’s not. She looks at the work I do, and she has no idea what I’m talking about. She would hear a hardware wallet and, I don’t know, think of like a Ridge wallet, like the physical regular wallet that’s made of metal or something like that. So, if I die and she’s my beneficiary, and she would have no idea what to do with this Bitcoin, do you offer those sort of services to people, the beneficiaries? Like walking them through how to set up a wallet, how to sign up for Coinbase, the implications of what it means to get 30 Bitcoin in 2300 or whatever the year is?
[00:50:15] Danny Baer: Yeah, it’s a great question, and I’m glad that you asked it, Jonathan, because I think that we’ve created what is viewed as probably the most elegant inheritance planning product for Bitcoiners. Our product does not require anyone to educate their loved ones on self-custody. You don’t need to share with them your treasure map to dig up your hardware wallet in your backyard. They don’t need to be educated on multisig. They don’t need to know anything. They could have never heard of Bitcoin, and they’d be okay because we are a life insurance company. They would submit a life insurance claim like they would to Northwestern Mutual or to New York Life or to whomever, and it is our responsibility as the life insurance carrier to make sure that the correct beneficiary or beneficiaries, plural, receive the payout. So, they could, that day, open an account on an exchange, and we could send the Bitcoin there.
So, they don’t need to be able to access your hardware wallet or your multisig or anything like that. They can open an account that day, receive the payment, sell it to dollars if they don’t want to have to deal with the headache of Bitcoin custody from that point on. But our responsibility as the life insurance carrier is to make sure that the appropriate people receive the payout, and we do that. So, I think that it’s really the easiest way... And people are buying this literally just for the inheritance planning aspect because their loved ones don’t understand Bitcoin. So, I think it’s just another added benefit.
[00:51:44] Ray Salmond: What custodian is Meanwhile using to secure client Bitcoin?
[00:51:48] Danny Baer: We use Anchorage Digital, if you guys know them. They’re a federally chartered digital asset bank. We think that they are far and away the best institutional custody provider. We basically due-diligenced every player in the space, and we maintain that we believe they’re best in class.
[00:52:03] Ray Salmond: Well, that’s pretty much it. That was quite an enlightening conversation. We got all the questions in, which rarely happens. That means that not only did you answer them in detail but succinctly.
[00:52:14] Jonathan DeYoung: Yeah, yeah, I agree, it was a great conversation. Also super interesting because I had one life insurance policy, I think, in my working career so far, and I think I paid like a dollar toward it or something, and I obviously never had to use it. So, it’s something I really don’t know that much about. But especially as I get married and want to have a family, and hopefully, the value of my crypto goes up, you know, these are certain things that I need to start thinking about more seriously. So, it was educational on that front as well. So, I appreciate it.
[00:52:45] Danny Baer: Yeah, of course. I appreciate you both having me on. This has been a blast.
[00:52:48] Ray Salmond: Yeah, thank you, Danny. So, if people want to know more about life insurance, Bitcoin life insurance, Meanwhile, where is the best place for them to go and get this information? And before you jump off, what are Meanwhile’s plans for 2025?
[00:53:03] Danny Baer: Our website is meanwhile.bm, bm as in Bermuda. There’s a big button that says get started if you want to figure out what an application looks like for you or policy looks like for you. You can also just reach out to me. My email address is danny@meanwhile.bm. I’m happy to field any questions that people have or jump on a Zoom call directly with folks who have questions.
In terms of our plans for 2025, so we, over the summer, graduated from our regulator, what’s called their innovation sandbox, which basically just means they had like additional regulatory oversight. And then, I think, as a testament to our risk management processes and just the way that we built the company, we graduated from that sandbox into a fully commercial life insurer. And the most immediate impact means that we can take our products into basically any non-sanctioned jurisdiction around the world. So, right now, we’re working on operationalizing in Canada and then the UK, and then we’ll also bring additional products like we touched on to market as well. So, 2025, I think, looks like international expansion and a second and maybe third product at market as well.
[00:54:10] Ray Salmond: Exciting.
[00:54:11] Jonathan DeYoung: Thanks again.
[00:54:12] Danny Baer: Thanks guys.
[00:54:19] Ray Salmond: The Agenda is hosted and produced by me, Ray Salmond.
[00:54:23] Jonathan DeYoung: And by me, Jonathan DeYoung. You can listen and subscribe to The Agenda at Cointelegraph.com/podcasts or on Spotify, Apple Podcasts, and wherever else podcasts are found.
[00:54:35] Ray Salmond: If you enjoyed what you heard, rate us and leave a review. You can find me on Twitter at @horushughes. H-O-R-U-S-H-U-G-H-E-S.
[00:54:45] Jonathan DeYoung: And I’m on Twitter, Instagram, and just about everywhere else at @maddopemadic. That’s M-A-D-D-O-P-E-M-A-D-I-C.
[00:54:55] Ray Salmond: Be sure to follow Cointelegraph on Twitter and Instagram at @Cointelegraph.
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