Silicon Valley Startup Lets Users Move Money Without Government Interference By Turning Their Phones Into Stand-Alone Banks [Reason Podcast]

The world's immigrants sent more than half a trillion dollars back to their home countries in 2016. This flow of capital—the largest and most effective foreign aid program by a long shot—is encumbered by high fees and other obstructions that are a result of government policies. In the U.S., the remittance industry has been cartelized by heavy regulation; other nations prevent the free movement of money through fixed (and extremely disadvantageous) exchange rates, taxes, and arbitrary caps on the amount an individual can send in a given year.Bill Barhydt ||| Abra

Enter Bill Barhydt, the founder and CEO of the Mountain View, California-based startup Abra, which offers a simple way to send money anywhere in the world using a smart phone. The best part is that governments have no power to interfere with Abra's payment network.

In contrast to apps like Venmo or PayPal, Abra parks digital cash on the phone itself so there's no need for a third party to clear transactions. It's also completely peer-to-peer, kind of like handing someone cash—but unlike cash, it's all digital and doesn't require a face-to-face hand-off.

Abra's secret is that it's built on top of bitcoin, which is what lends it these amazing properties. What sets Abra apart from other bitcoin wallets is that its users don't need to know what bitcoin is. The complexity is packed under the hood.

I sat down with Barhydt at the Consensus conference in New York City last week to discuss why he launched Abra, bitcoin as "regulatory arbitrage," and whether rising transaction fees on the bitcoin blockchain could undermine the company's mission.

For more on Barhydt's vision, read my 2015 article on the company.

Produced by Ian Keyser.

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Photo Credit: Abra.

This is a rush transcript—check all quotes against the audio for accuracy.

Jim Epstein: Let me actually start by just asking you what is Abra and what problem are you solving?

Bill Barhydt: Abra is a money transfer service that allows people to use their own smartphone to send money between any two phone numbers in the world in real time. So you can hold for the first time dollars on a smartphone in the U.S. and send Renminbi to a smartphone in China and the money magically shows up on the phone. Think of it like Venmo but cross-border.

Jim Epstein: With Venmo, you're ... I've never used Venmo, but you are hooking Venmo into a bank account, right?

Bill Barhydt: Correct.

Jim Epstein: Dilate on that for a moment. How is Abra different?

Bill Barhydt: Sure. What is happening at Abra is very different than the way these traditional kind of mobile money services work. Usually, with a mobile money service like a Venmo, the money's held at a bank. Like in the case of Venmo, it's held at Wells Fargo. In the case of an M-pesa in Kenya, there's a Kenyan bank that holds the money. With Abra, there is no bank. We actually turn your phone into its own bank using bitcoin blockchain technology in the background in a way that's transparent to the consumer. So the user experience is very Venmo-like or very PayPal-like, but what's happening behind the scenes is totally different. This is really important because it's what enables Abra to work legally at global scale.

Jim Epstein: The money is actually on the phone?

Bill Barhydt: It is on the phone. The first time you-

Jim Epstein: Explain that to me a little bit.

Bill Barhydt: Sure. Let me just make this point. The first time you get money to the app, it asks you to create a backup of your wallet. If you don't do that backup and you lose your phone, you've actually lost your money. That's very important to us that we obviously don't want people to lose their money.

When I say you get your own bank on the phone, the bitcoin blockchain technology uses this sophisticated what we call public private key cryptography to create entries on the bitcoin blockchain. With Abra, you're getting your own key, private key, directly on the phone and that is effectively, that's called a digital piggy bank.

Jim Epstein: A key being like a string of numbers and letters?

Bill Barhydt: Exactly.

Jim Epstein: Which represent actual money, you could print them on a piece of paper and they would still be money.

Bill Barhydt: That's right. They represent a series of transactions on this bitcoin blockchain that amounts to a balance of bitcoin that you own.

Jim Epstein: But do you have to understand this to use the app?

Bill Barhydt: That's the beauty here is that we completely hide the complexity of all of this tech mumbo jumbo to the average consumer so that they're just seeing a really slick, clean interface that looks just like they're sending dollars or euros or pesos or yen without having to understand all the tech.

Jim Epstein: Probably more than Venmo, I think of M-pesa, which is a type of mobile money used primarily in Kenya, and you're not hooking into a bank, it's cell phone minutes almost turned into currency. That's really allowed, in Kenya, to make a lot of digital payments with your phone. How is Abra different from that?

Bill Barhydt: Right. So, there's a couple of very key differences. With the M-pesa model, there's an e-money float that it issues. This e-money float is stored at a bank and it's centrally managed. They're using third-party agents, mostly wireless airtime dealers, to buy and sell the float to and from consumers. That model is still regulated because somebody else is managing your money. With Abra, there is no centralized float of currency. It is the bitcoin blockchain itself in the background that processes the transactions. When you buy and sell money to get it on and off your phone, you're doing it directly from someone else who's acting of their own accord, we call them "Abra tellers", to buy and sell digital currency to you to get it on and off your phone.

Jim Epstein: This is sort of an Uber-like network.

Bill Barhydt: Exactly. As an Abra customer, you also have the opportunity to sign up to become an Abra teller. Think of an Abra teller as a human ATM machine. This human ATM machine can process a deposit and a withdrawal for you into or out of your Abra app anywhere in the world for any currency. But these people are not acting on behalf of Abra, they're acting on behalf of themselves. They're actually buying and selling the money on and off their own phone directly to you.

Jim Epstein: Then how do the foreign exchange transactions happen?

Bill Barhydt: The foreign exchange transactions actually happen directly on the phone itself. This is super cool. So when you send money from a dollar phone, like a phone holding dollars on their Abra app, to a phone holding euros on their Abra app, the second you send the money, it's actually converted in the background back to pure bitcoin. Then when it lands on the phone of the consumer holding euros, it's re-converted to euros transparently to that consumer using this digital blockchain technology that we created. The whole process is completely transparent but there are no banks involved in the process. There's a whole ton of magic involved in the background making this work.

Jim Epstein: Yeah, and what's nice about the Abra app is, unlike with most bitcoin use cases, you need to be a kind of a tech expert or a hacker. It's very complex. The goal is to make it simple, right?

Bill Barhydt: Absolutely. The litmus test is, can my mother use it? And my mother can use Abra. My mother cannot use an off the shelf pure bitcoin wallet app. But she can use Abra with no problem.

Jim Epstein: Okay. How long has the company been around, how much money have you raised, how big is your footprint right now?

Bill Barhydt: Sure. Abra is two years old. We've raised about 20 million dollars, we're 40 employees, headquartered in Mountain View, California, near Google headquarters. We've got employees in several countries now, but primarily in Mountain View. We launched our service globally a couple of months ago. We spent a ton of time building out the network, testing, signing up tellers. We did a test launch in the U.S. and the Philippines last year, which allowed us to improve the user experience, get a lot of feedback, get the bugs out of the system. I'm happy to say we launched the service globally in mid-March and it's been going fantastic ever since.

Jim Epstein: How are people using it? What are you seeing?

Bill Barhydt: We're seeing a few different use cases. People have figured out that if I'm using bitcoin and I have a lot of bitcoin, and there's probably 10 million pretty active bitcoin users now, and of course those numbers have been going up lately, they can only traditionally send bitcoin to somebody who also uses bitcoin. But with Abra, bitcoin is just another currency. So I can send money from my bitcoin wallet through Abra to somebody who receives dollars or euros or yen or pesos, and they don't even know that I sent them bitcoin. I do demos all the time where people are asking me about how bitcoin works, and I say, "You want to receive some bitcoin?" They say, "Well, I wouldn't know how to do that." I say, "Well, just download Abra. I'm going to send you bitcoin and you're going to see it as dollars on your phone." They're amazed at how easy now it is to do that. So we have a lot of people doing that.

We have people who buy gaming credits online using Abra at checkout. We have people doing transfers between U.S. and Philippines, U.S. and India, India and the U.S. ... There's a lot of countries now that are generating transaction volume in the system.

Jim Epstein: To reiterate again, this is all peer to peer. Abra is not in between these.

Bill Barhydt: Correct.

Jim Epstein: It's non-custodial.

Bill Barhydt: That is correct.

Jim Epstein: And by non-custodial, what do you mean exactly?

Bill Barhydt: Yeah. We use the phrase "non-custodial wallets" in technical and legal terms to describe Abra. Non-custodial is the opposite of what a traditional bank does. A bank takes custody of your money, meaning they are a custodial service from a money management perspective. With Abra, the phone becomes its own bank so there is no third party custodian. You don't lose possession of your money at any point in the Abra experiences, and that's what makes Abra non-custodial.

Jim Epstein: I want to get into the implications of that from a regulatory standpoint, but first, let me just ask you one sort of technical question about the system that comes to mind, which is that every transaction, as I understand it, through Abra, is happening on the bitcoin blockchain.

Bill Barhydt: Correct.

Jim Epstein: Which is this decentralized ledger database which is shared, and that's what allows this direct peer-to-peer trade. Now, as people that follow this space closely know, the bitcoin blockchain has been having serious technical issues where the blocks are filled up, so it can take days for a transaction to be confirmed or you can pay very high fees. Thinking about the peer-to-peer transactions for small amounts of money, doesn't this present an issue?

Bill Barhydt: It does. It presents an enormous issue and I'll tell you what I think is going to happen in this regard. Just to clarify, bitcoin basically accepts new transactions every 10 minutes, approximately. The number of transactions is dependent upon this so-called blocksize on the bitcoin blockchain. That blocksize is limited and is now basically generating what we call full blocks, which means that it's reached its capacity or is very close to capacity. As a result, people are competing to get their transactions accepted within the current 10-minute window.

Jim Epstein: And it's a megabyte of data every 10 minutes, about.

Bill Barhydt: Correct. Correct.

Jim Epstein: Which is tiny if you compare it to a banking network or Visa, yeah.

Bill Barhydt: Oh, compared to Wells Fargo or Visa it's close to zero. In terms of transaction throughput, for sure. But the original creator of bitcoin meant for the blocksize to be variable and even dynamic to the point where if the miners, meaning the people who accept new transactions, all agree, they can change the blocksize any time they want, and that's called a hard fork. Now, there's several people in the community who are against that and there's a whole to-do about why that has transpired. An agreement was actually announced today to actually increase the blocksize to enable more transactions through the system.

So what's been happening ... First of all, Abra pays the mining fees on behalf of our consumers today. Whether you're sending money using bitcoin or just holding digital dollars with Abra, we don't expose the mining fee to our customers. As a result, Abra's been paying very high mining fees, to your point, to guarantee that the transactions get accepted very quickly, so that our consumers have a good experience. Now, our belief, and I'm quite certain this is the case, as soon as this blocksize increase is accepted and turned on, the mining fees will plummet, because there will be significantly less competition as the capacity increase that we're contemplating will no longer be generating full blocks.

Jim Epstein: But for a long-term solution, I mean, for Abra to really scale to match the size of these credit card, banking networks, we're talking about enormous blocksizes.

Bill Barhydt: We are.

Jim Epstein: Which would really jeopardize the decentralization aspect of bitcoin, right?

Bill Barhydt: Potentially. There are new technologies, we call them Layer 2 technologies in bitcoin nomenclature, or blockchain nomenclature, that effectively take lots of transactions off chain, which means they don't get published to the bitcoin blockchain as individual transactions. Think of it almost as like batch processing. You basically poke holes in the blockchain at various points to basically settle the transactions on. The way it works is very complex, but the net throughput of that, or the net net of that, is that you can now publish very high volume transactions. The downside, of course, is that the consumer has to trust that the transaction is being settled to the blockchain.

Jim Epstein: Well, I would say the Layer 2 solution that people are most excited about is called the Lighting network.

Bill Barhydt: Correct.

Jim Epstein: Which is in effect, to use an analogy, it's sort of like a bar tab. People can trade money and then only at the end when you're ready to settle up at the end of the night do you have to publish to the blockchain.

Bill Barhydt: Correct.

Jim Epstein: It's a more efficient way. Will Abra potentially work on Lightning? Is there-

Bill Barhydt: I believe that we will have no choice, to be honest. That's what I mean when I said you're kind of trusting that the transaction will ultimately be settled. Right now, it's a very trustless system we've created, and the price we pay, of course, is the mining fees, because we publish every individual transaction. Now if you use a custodial bitcoin wallet, like Zappo or Coinbase, when you move money between their users, the bitcoin never leaves Coinbase.

Jim Epstein: It's like the bar tab, in a sense.

Bill Barhydt: Yeah, exactly. But the downside of that, of course, is that you're trusting CoinBase.

Jim Epstein: Did you foresee this when you were conceiving of Abra, that this blocksize issue, yeah.

Bill Barhydt: Absolutely. We had this discussion with our early investors as one of our disclosures. We said, look, we're paying pennies for mining fees right now and if the blocks fill up, we could be paying dollars. We think that the right way to solve this problem is this kind of Lightning network-oriented solution and it's coming, and the good news is that it looks like, based upon today's agreement, that will be activated, which is this new technology that's required to make Lightning really secure.

Jim Epstein: But currently, with every transaction now, through Abra, you're losing money, because you're paying those fees.

Bill Barhydt: Well, remember, we also make money on foreign exchange. So while we do lose the mining fee, that is offset by other revenue sources that we're generating.

Jim Epstein: What do you mean when you say you're making money on foreign exchange?

Bill Barhydt: When you send money from an Abra app holding dollars to an Abra app holding euros, Abra sets the exchange rate and that's part of our business model for how we make money, is that while the consumer is usually getting a rate that's significantly better than using Swift or Western Union, for example, on the foreign exchange, we're still able to generate good income on that exchange rate.

Jim Epstein: Okay, great. Let me, I want to talk a little bit about, talk about this idea of non-custodial and another problem that you're solving which is regulatory. Let's actually not start in the U.S. I mean, in many countries where I'm sure you're bringing tellers online, there are so-called capital controls, essentially meaning the government sometimes sets a fictitious exchange rate. Sometimes it sets arbitrary limits on the amount of money that can move in between these countries.

Bill Barhydt: That's right.

Jim Epstein: That happens through the traditional banking system.

Bill Barhydt: That's right.

Jim Epstein: Tell me about how Abra relates to this problem.

Bill Barhydt: Sure. Take a step back and think about just bitcoin itself, right? I mean, bitcoin, some people will say that independent of the technology behind it, that it's biggest advantage is regulatory arbitrage. I don't know if that's true, but there are many people who certainly believe that. The problem with that perspective is the average consumer can't understand it. All right? My mother, like I said, would never use a bitcoin wallet. It's just not going to happen. She doesn't know what a private key is, she doesn't know what cryptography is, she doesn't know what encryption is, et cetera, et cetera.

What Abra has done is that it's masked the complexity of that in a way that still preserves the core tenets of this regulatory arbitrage that you're getting, which means that you're holding your own money. There is no middle man in any digital currency transaction that uses this model. Right? So unlike those third-party services that hold your bitcoin, Abra's not holding your bitcoin. In theory, it doesn't really matter where you are when you start the Abra app. The Abra app works the same for you as a consumer whether you're in Turkey or Germany or Russia or New Jersey or Toronto, Canada. It's the same. You can hold any currency on your phone regardless of where in the world you are.

Technically, what's happening behind the scenes isn't really a foreign exchange. It's just a movement of bitcoin in the background between a bunch of keys, where you're re-hedging the value to be euros, dollars, pesos when it lands on the recipient's phone. So from a legal perspective, there's no financial intermediary. There's nobody ever holding anybody else's funds that doesn't belong to them. There's really no physical cross-border movement of assets in the system. This is a model that governments have never contemplated.

Jim Epstein: It's taking this approach to money that geographical borders actually don't matter. In a sense, the denomination in local currency is a fiction for your users to make it easy for them to use, yeah.

Bill Barhydt: Sure. Easy for them to understand. I mean, if you want to get kind of metaphorical and philosophical about it, you could almost say that this transcends time and space because it really doesn't matter where you are. The system always works the same way. Now, we can put arbitrary controls in place. For example, if we see when you use the app that your IP address is in Iran, we're not allowed to let you use the app because, you know, the U.S. Treasury Department says you can't run your app in Iran, so we block it. But that's an arbitrary feature that we've added on top of the app which has nothing to do with the way bitcoin works, itself.

Jim Epstein: Yeah, and again, it's because you're going through bitcoin instead of the banking system, and the banking system is where government gets involved.

Bill Barhydt: Absolutely. Because they can control the inputs and outputs and they provide the licensure to these banks in the first place. They set out rules that they all sign themselves up to agree to before they even get their license to operate. Whereas here, there's no licensing because I'm not in the middle of any of these transactions. You're doing the transaction peer to peer, directly with other consumers.

Jim Epstein: Now, talk about your background a bit. You came out of the traditional banking industry, right? You sort of saw regulation, I guess in the United States, primarily, up close.

Bill Barhydt: I feel like Abra may be the first job I'm kind of qualified for, after 25 years. I worked in PKI, which is a lot of the background infrastructure used for encryption, in my Netscape days. I was a quant at Goldman Sachs, which served me really well when we were designing this synthetic currency technology for holding a digital dollar on a phone. I ran a company called Boom Financial, which is now part of Digicell, the wireless carrier, that basically tried to do money movements a la M-Pesa cross-border, between phones, and dealt with all the regulatory hassles that you were alluding to earlier. So all those things that I've done have, in a way, prepared me to build this end all, be all of person to person money transfer solutions.

Jim Epstein: And getting being able to do international money transfer through phones, which is, moving money through phones is clearly where we're headed, that's the future. What is involved from a regulatory standpoint in the United States, for example.

Bill Barhydt: Sure. The government can't stop you from holding ones and zeros on a phone, right? That's the basic idea of what you referred to earlier as the non-custodial wallet. Now, what the government can interfere with is the means by which you got those ones and zeros on or off the phone in the first place. Meaning, if I have cash in my pocket and I want to put that money on my phone to send it, how do I get it on the phone in the first place? Right? If I'm using my bank account, right, to get that money on the phone, how am I doing that in a way that's legal that the government will allow, right, versus something that they would consider to be an illegal money transfer, for example?

What Abra has done is we've separated the business of storing and moving the money between Abra apps and the process by which you get the money on and off the Abra app in the first place. We go very deep with partners who provide services to our customers to get that money on and off the phones.

There's effectively three ways today to get money on and off the phone with Abra. All have various means of regulation. The first is via your bank account, so if you're in the U.S., you can type in your login and password for your bank inside the app and it looks to you like you're actually just loading money from your bank account into the Abra app. You're actually not. You're actually buying bitcoin at an exchange directly from your bank account, which is then pushed to the Abra app and then the value is fixed in dollars or whatever currency your app is holding, which is pretty cool because it keeps Abra from holding the consumer's money in the transaction.

The second way you can load money is from an existing bitcoin wallet. If you're already a bitcoin user, you can just push the money into Abra like you can by sending money between two bitcoin wallets. That is a big advantage for bitcoin users because it now allows them to send that money to somebody who has no idea what bitcoin is, which is one of the big advantages of Abra.

The third way you can get money on is super interesting and that's using physical cash. We created this concept of the Abrateller, which is kind of like an Uber driver in our world. You can turn your app effectively into an ATM machine for everyone else to process deposits and withdrawals to and from their Abra app in exchange for a small fee.

Those are all the means. In some countries, our exchange partners have bank licenses or e-money licenses. In some cases, they're not regulated at all because it's too early. Most countries don't regulate the Abratellers. New York seems to be moving in the direction of regulating the teller transactions as money transfer. California, for example, has explicitly said they're not interested in regulating those transactions. There's still a bit of unknown territory that needs to be defined around how the teller transactions will be regulated over time at scale, but it's early enough where very, very few people are even thinking about regulating those kid of transactions.

Jim Epstein: But if you were, say, going to go through the traditional banking systems and say I'm going to create a competitor to the Western Unions of the world and make it possible to send even 50 bucks from here to Argentina, you would need money transmitter licenses in every state.

Bill Barhydt: Banking partnerships.

Jim Epstein: You'd need to go through FinCEN [The Financial Crimes Enforcement Network].

Bill Barhydt: Correct.

Jim Epstein: You'd need to go through the Consumer Financial Protection Bureau.

Bill Barhydt: Correct.

Jim Epstein: I mean, it would be a multi-million dollar...

Bill Barhydt: That's what I tried to do at my last company. Realized that I was fighting a multi-billion dollar, decades long battle to get this live globally, which was simply not tenable for a startup. Probably wouldn't be tenable for CitiBank. But it certainly was unrealistic for a startup, and so I realized a better approach was needed, and that's what led to the research behind what ultimately became Abra.

Jim Epstein: Of course, this system, this complex regulatory system which can take any, many years to even acquire, that creates a cartel of money transmitters, right?

Bill Barhydt: Absolutely.

Jim Epstein: Which is very anti-consumer, ultimately.

Bill Barhydt: Yeah, and keep in mind that in some cases the states generate income based upon transaction volume around the licenses from these money transmitters. So there's kind of an indirect collusion going on in some cases where the states don't want to lose that income, which creates a real problem, right? Because they shouldn't be generating fee income from money transfer services. They should be providing regulatory oversight and getting out of the way. And that's not what's happening.

Jim Epstein: So bitcoin is sort of a way to sidestep that.

Bill Barhydt: Absolutely. I mean, look, like I said at the beginning, there's clearly people who believe that its biggest value proposition is regulatory arbitrage. We see it a little bit differently. I see bitcoin as kind of like TCP/IP for money. So for the non-

Jim Epstein: And TCP/IP being ... go ahead.

Bill Barhydt: Yeah, I was going to say, for the non-technical in your audience, when you watch a Netflix movie, you're actually creating a TCP/IP socket connection from your computer to Netflix's servers. Basically that tunnel is transmitting the ones and zeros that represent your movie or your web page. You as a consumer don't have to know how that works. The web browser for the first time created a really pretty interface and this TCP connectivity that represents the underpinnings of the Internet. We see bitcoin as the same thing for money, so we want bitcoin to represent the underpinnings of new financial system where the complexity doesn't have to be understood by the average consumer but is totally there where you can dig into the software and the code itself, if you really want to.

Jim Epstein: Though, if you imagined a world with more, saner regulatory policy where it was actually feasible to get into the space where you could trade fiat currency from the U.S. to a variety of countries, there might not be much of an opportunity of dealing with the various issues. Because bitcoin also has its technical problems.

Bill Barhydt: That's a fair question. I think there's always a certain amount of protection that's going to be required. I mean, caveat emptor in banking is really hard to convince people of, right? The average consumer believes that there should be regulatory oversight of people who are managing their money. I'm guessing even your readers, who might be at the extreme of that, probably to some point would still agree with that. They just would want to see a little more freedom, but still, not free rein in terms of banks can do whatever they want with my money whenever they want. That's very different from having cash in your pocket and being able to do what you want with the cash in your pocket. The Abra model is closer to the cash in your pocket. It just so happens that-

Jim Epstein: It's cash in your phone.

Bill Barhydt: Exactly. The regulatory model has to be different if you're carrying cash in your pocket versus somebody else holding the cash for you. That's always going to be true. Even if they relaxed regulations a lot, it still wouldn't prevent me in the old model from having to have licenses all over the place. Having to have banking relationships all over the place. Having to have heavyweight AML and Know Your Customer requirements all over the place. It's just too much friction to get a global banking system to work like that.

Jim Epstein: But you're very aimed, it seems like you're targeting the individual, peer to peer, someone who maybe wants to send 50 bucks a month to their family back home in a country ... Not, plenty of remittance companies are involved in business services, making payroll abroad, that's not your focus.

Bill Barhydt: Yeah, look. Our average transaction size right now is probably one to two hundred dollars. We have people who do cross-border payroll with Abra already. They're testing that. We have merchants who accept Abra for cross-border payments. We're testing that as well. Ultimately, our core belief is that access to commerce is the only known tide that raises all boats. The ability to use the phone to get access to commerce at global scale, I believe changes everything. It may be the single biggest factor affecting the future of growing people out of poverty that the world has ever seen. Abra's all about providing that access. We have a set of core values and the company and one of them is we fundamentally believe in the individual's right to conduct all forms of transactions and all forms of business unencumbered by untenable regulation or other obstacles that shouldn't be there. We will do whatever we can to live that value forever.

Jim Epstein: When I think about the hurdles that you have to clear, I mean, building a beautiful app that simplifies everything and sort of packs all the complexity into a simple, easy to use app actually seems like something you've accomplished, based on my use of it. You know, then this issue of the blocksize issue of can the bitcoin network sort of scale to accommodate your uses. Then a third thing that occurs to me, though, is bootstrapping. You talk about sort of this Uber-style model of users, you know, where your Abratellers, to kind of bootstrap that and have enough people like Uber.

Bill Barhydt: Right, right.

Jim Epstein: You know, what makes Uber great is there's always a car five minutes away. How do you do that? How many countries are you expanding in already?

Bill Barhydt: Yeah. It's a very good point. We're live in 170 cities with Abratellers. Onboarding an Abrateller is not dissimilar to onboarding an Uber driver. We do a one on one interview, usually via Skype, with every single teller. We've spent hundreds of hours interviewing tellers one on one and there's always a continual backlog of new people that we're turning on. We have to find out, what is their current job? Do they carry cash today? Why do they carry cash today? Are they qualified to be a teller? Are they trustworthy?

Jim Epstein: Do you collect their identity information?

Bill Barhydt: We do. So we have to have some semblance that we've given our consumer comfort via a reasonable process that the person is who they say they are, that they're somebody that they should trust, et cetera, et cetera. I mean, the good news is is that most of the world's economy is cash-based. So there's plenty of people who are in trustworthy cash businesses where this is not a stretch. This is something that's a little foreign to most Americans and many Europeans. But outside of those Western markets, most of the world is still operating in cash. So this is, like I said, not a foreign concept to most people.

Jim Epstein: Are you focusing on ... I'm sorry, one more question about identity. To just use Abra, not be a teller. Do you collect identity?

Bill Barhydt: We do not. So you start the Abra app and you register your phone number, which is the only thing you have to do. You have to do that just so that somebody else can find you to send you money. If you try to load money from your bank account, then the exchange partner that processes that ACH transaction, does legally have to know who you are.

Jim Epstein: I see.

Bill Barhydt: So at that point, they'll ask you for your Social Security number or an ID.

Jim Epstein: I ask just because, privacy, not having your identity attached, is actually very important to many people in the bitcoin world, yeah.

Bill Barhydt: Yeah, absolutely. Here's an example, right, of a really cool transaction you can do. If you load bitcoin into the Abra app and send bitcoin from here in New York to somebody in Mexico in pesos, there's no ID required for that. Because you're doing a peer to peer transaction that effectively is the equivalent of taking cash out of your pocket and handing it to the person standing next to you. It's just that we use this digital magic to convert it to pesos in between. If the person on the ground in Mexico went to a teller and just converted that on the ground to pesos via a teller transaction to paper pesos, there would be no ID required. Now, if the person went to the banking system in Mexico and wanted to withdraw the cash via our exchange partner in Mexico, they would probably have to provide the appropriate ID to be compliant with the exchange's policies as a regulated entity. So you see the gamut of potential transaction types.

Jim Epstein: But you're facilitating privacy yet in the digital realm as well, yeah.

Bill Barhydt: Absolutely. It's a core tenet for us. We fundamentally believe that the whole idea of cash is around privacy rights. The war on cash is also a war on privacy. Now, cash doesn't have to be paper.

Jim Epstein: What do you mean by "the war on cash?"

Bill Barhydt: There's a concerted effort all over the world to eliminate paper cash, right? I mean, in one weekend, India outlawed the thousand rupee bill. Cash has all but been eliminated in certain European countries. Along with that goes a whole bunch of privacy issues that very few people pay attention to but are fundamental rights that I think are being thrown out the window unnecessarily.

Jim Epstein: How does that relate to Abra?

Bill Barhydt: By basically replacing the paper cash with digital cash. It's not 100 percent of the protections you get with paper cash, but it's probably as close as you can get and still interoperate with the real world.

Jim Epstein: In terms of this teller network, are there any particular countries that you're focusing on and sort of really bootstrapping this technology?

Bill Barhydt: Good question. For sure. India is super interesting to us. We get a lot of interest there. South America, we get a ton of interest there. Mexico and obviously North America, but in South America, Columbia, Brazil are really interesting markets for us.

Jim Epstein: Is it word of mouth, are marketing on the ground, or ...

Bill Barhydt: We're getting a lot of kind of word of mouth through the bitcoin community that this is a killer app that people should be paying attention to, you know, through social media, Reddit, Twitter, Facebook, Abra's becoming fairly well-known in those circles. We don't do, for example, paid advertising in any kind of meaningful scale to acquire customers. We may in the future but we don't have to right now. But word is getting out. People in this community have been clamoring for something that really proves that the average consumer can use this. I believe we've figured that out with Abra.

Jim Epstein: It sort of, when you talk about killer app, it sort of strikes me as it's like bitcoin made easy. It's kind of-

Bill Barhydt: That's a key part of what we've done. That wasn't my intent. I was really trying to solve a very specific problem. I just couldn't figure out another way to solve the problem.

Jim Epstein: The problem being ...

Bill Barhydt: Sending money between any two smartphones in the world with no bank in the middle. Yeah.

Jim Epstein: Or government.

Bill Barhydt: Or government. Same difference, in some cases. Right.

Jim Epstein: Okay. Well, thank you very much for joining me.

Bill Barhydt: My pleasure.