BitGold disrupts financial services

This from Roy Sebag, a 29-year-old former hedge fund manager and the CEO of BitGold Inc ($XAU.V), a web-based payments and savings platform for gold that has taken the Canadian capital markets by storm in the past week.

BitGold was structured less than a year ago after years of planning, investments and conceptual debates by its co-founders. The company hit the Venture 7 days ago and is already worth about C $240 million, based on a $6.68 share price Tuesday. Bitgold is roughly 51% owned by Mr. Sebag, and was financed most recently at 90 cents.

BitGold’s public launch and stock market debut have exceeded all expectations, according to Mr. Sebag. Mr. Sebag and co-founder Josh Crumb, a former metals strategist with Goldman Sachs, founded the company not to get rich, they say, but to make gold useful again.

“We don’t need every goldbug to adopt BitGold,” Mr. Crumb tells CEO.CA by phone. Instead, he says, “it’s about lowering transaction costs and maintaining purchasing power in the face of negative real interest rates policy everywhere”.

“We need every person that gold could help their life. That’s every income class; gold is relevant to rich and poor, in every country. We need a new narrative focused on that, not on pulling out of society or fearing the government. I don’t think anyone else has figured out that yet, and I think that’s why we’re resonating well in the capital markets. Its an inclusive narrative and business, not the same old fear and greed.”

Mr. Sebag believes 30-40% of BitGold’s customers are buying gold for the first time. Over 10,000 users joined the service in its first week, according to reports. “I wanted 50,000 users by the end of the year and we may have that by the end of summer,” Mr. Sebag said.

I want to find out whether any of BitGold’s new users are making large deposits with the firm. Personally I deposited $1,000 for a little over 20.6459 grams of gold but BitGold’s not getting rich charging a standard 1% fee on my transaction. Sebag explains that it’s more about getting a small cut of frequent transactions — a strategy that helps Paypal rake in billions a quarter.

The co-founders see significant potential for further disruption in the payments and savings space, and have established a clear first-mover advantage with the platform development and launch.

If you break down a bank’s business, Sebag says, “a bank is savings, payments, lending, wealth management, pensions, and insurance. How is a bank able to get into all these horizontals? It was only because they paid interest on deposits. Banks have become vulnerable because they stopped paying interest. For us, we built a payments and savings platform, that’s done now. Now our job is to get users to adopt it, and grow. There’s a lot of opportunities, and hopefully we’ll see more Fintech businesses trying to improve services and help people prosper.”

Despite hailing itself as a global platform, BitGold is still unavailable in the United States, and I ask whether BitGold has any plans to launch there.

Mr. Sebag responded, “The biggest tail-risk would have been operating in the U.S., even though there’s no law that precludes us in the U.S. We want to see federal laws be legislated around a business like this. We don’t like the state-by-state approach. So long as we manage our Know Your Client and Anti-Money Laundering policies within guidelines approved by FINTRAC, and as long as we promote tax compliance, I think there’s no reason the banks, processors, or regulators wouldn’t want this.”

BitGold’s share price soared Tuesday following the appointment of two well-respected technical advisors. Lots of good press for Bitgold and not much free trading stock, just 7.8 million of 37 million shares, has helped Bitgold stock (symbol $XAU.V) to soar in its first week of launch. Going forward, the market will focus on Bitgold’s monthly KPI (Key Performance Indicator) Reports, which Mr. Sebag hopes to begin publishing in mid June.

Regarding BitGold’s strong debut as a public company, Sebag says the firm benefits from a unique story.

“There’s been so many of the same types of companies listed on the TSX-V, where the only thing that allows you to discern them is their name, XYZ Metals or ZYX Metals… Look at a company like UrtheCast, that’s a great story. Look at the stock. That’s a very asymmetric option. Either they really will succeed in their unique satellite imagery, in which case this could be a multi-billion business, or they will fail. But that’s the type of equity that I would want to own, that’s how I have made money. Same with us, the plan is very ambitious.”

BitGold has captured the zeitgeist of the stock market, which seems to be pricing a lot of success into the story. Based on my years of web development experience, there may be some operational kinks to be ironed out. Long term customer experience will ultimately decide the company’s fate. That said, I am excited to accept and use gold for the first time in my small business with Bitgold.

Also on the fintech and payments front, sources tell us Mogo Finance Technology Inc., a Vancouver-based online lender, may go public in Canada as early as next month. Canaccord founder Peter Brown recently joined as Mogo’s chairman.

There’s a lot more disruption coming in fintech. Get a free BitGold account for a glimpse at what’s next.

Discuss Bitgold with the CEO.CA community at chat.ceo.ca/XAU. There you can also subscribe for email updates, including free SEDI insider filing reports on the company. 

Important disclaimer: This is not a recommendation to buy or sell any security. Consult a licensed investment advisor and do your own due diligence, including independently verifying all information contained in this article, prior to making any investment decision; you are responsible for your own trades. At the time of writing, the author is long Bitgold stock as a speculation which makes him biased. The author reserves the right to change his position without notice to readers. Also note Bitgold provided CEO.CA partner site EnergyandGold.com with an affiliate link, which is used in this article.