What separates Bitcoin mining projects that attract serious capital from those that struggle or fail? In this episode, John Paul Baric, CEO of MiningStore, sits down with Denis Rusinovich, a mining veteran who’s helped shape mining policy, infrastructure, and finance since 2017. Denis reveals what investors are really looking for, why grid integration and regulatory planning are no longer optional, and how Bitcoin mining is evolving into a critical part of the global energy and financial systems. Whether you're building a mine, investing in one, or planning your next move, this episode gives you a rare inside look into how to structure mining projects that survive and thrive over the next decade. Enjoyed the episode? If this conversation brought you new insights, we’d love for you to leave a review, it helps more Bitcoin enthusiasts and professionals discover the show. Have a guest you'd like to hear from or a topic you want us to explore? Drop your suggestions in the comments. We’re building this podcast with and for the mining community.
What separates Bitcoin mining projects that attract serious capital from those that struggle or fail?
In this episode, John Paul Baric, CEO of MiningStore, sits down with Denis Rusinovich, a mining veteran who’s helped shape mining policy, infrastructure, and finance since 2017. Denis reveals what investors are really looking for, why grid integration and regulatory planning are no longer optional, and how Bitcoin mining is evolving into a critical part of the global energy and financial systems.
Whether you're building a mine, investing in one, or planning your next move, this episode gives you a rare inside look into how to structure mining projects that survive and thrive over the next decade.
Enjoyed the episode?
If this conversation brought you new insights, we’d love for you to leave a review, it helps more Bitcoin enthusiasts and professionals discover the show.
Have a guest you'd like to hear from or a topic you want us to explore? Drop your suggestions in the comments. We’re building this podcast with and for the mining community.
0:50 Introduction: JP welcomes Denis Rusinovich, highlighting his transition from project finance into Bitcoin mining and his focus on making mining projects bankable.
2:43 Early Lessons: Denis shares how he applied traditional infrastructure finance models to mining operations from day one.
6:35 Making Mining Bankable: Discussion on what changed since 2017, from hostile regulators to growing government acceptance and the importance of regulation.
8:23 Energy and Community Integration: How miners can create value for local grids and communities beyond energy consumption, becoming essential partners.
11:33 Noise, Heat, and Reuse: Real-world challenges with sound, and how heat reuse offers a new advantage for mining sustainability.
20:27 Reframing Mining for Institutions: Denis explains how he separates Bitcoin mining from "crypto" by positioning it as energy infrastructure
28:47 Where to Invest Now: Denis’s views on the best emerging regions for mining, and why midterm diversification is key.
42:28 Regulatory Pitfalls: Live examples from Kazakhstan and Russia showing how governments are tightening Bitcoin revenue controls.
47:30 Tariffs, Synthetic Hashrate, and Future Models: Why host-and-sell models, synthetic hashrate products, and localized manufacturing could reshape the mining landscape.
01:02:14 Banking Mining Projects: How Denis advises clients to structure cashflows and minimize crypto exposure to meet bank compliance standards.
01:05:33 Final Lessons: Avoid single-location risk, embrace the evolving Bitcoin mining model, and stay rational in an emotionally volatile market.
Jp: [00:00:00] Welcome back to season two of the Digital Gold Podcast. Today we're joined by Dennis Russinovich, co-founder of CMG Cryptocurrency Mining Group, a leading advisory firm transforming the Bitcoin mining landscape with over a decade experience in project finance at the European Bank for reconstruction development.
Dennis made the leap into crypto in 2017, combining his deep expertise in infrastructure, capital markets, and energy strategy. Now he's at the forefront of sustainable and institutional grade mining solutions, helping shape the future of the industry. From navigating geopolitical challenges to optimizing energy use, Dennis offers invaluable insights into Bitcoin, mining's evolution in its role in a decentralized, sustainable economy.
Dennis, welcome to Digital Gold. I'm happy to have you. Thank you. Thank you for having it. So let's talk about your. 2017 journey, you're working for the EU and you learn about Bitcoin. Does everyone think you're crazy or kind of what do you see that makes Bitcoin sound like it can really change [00:01:00] the development of the EU and the world and what draws you to mining particularly?
Dennis: Yeah, it was interesting start of the journey because I'll be honest like everyone else at the time, my knowledge, let's say, was limited about the Bitcoin itself and purely from driven by articles like ft. And you can imagine what was the narrative there those days? So when I was asked uh uh, to come and join and assist a project in Kazakhstan, I mean that was, for me, that was a challenge, a decision making process originally because I felt okay, what it is.
But when I dive deeper into that, I obviously saw there is opportunity and there is a massive, let's say. A convergence with, uh, the traditional sectors, even though the crypto at the time was not very friendly, perceived by, especially by central banks. So my journey started the project, which originated in Kazakhstan.
It was a joint venture between originally founders of genetics, mining, and, uh, [00:02:00] kassar partners projects. Started with one megawatt in September 17 in Kastan and grew to 152 megawatts over the course of, uh, oh two and a half, three years. And the journey, I'll tell you the lesson learned that was that interesting alignment because I come from traditional project finance and banking from day one.
I was trying to match it how I would perceive in traditional sectors, you know, that was my approach to trying to find some resemblance and similarities. And this is where I think Bitcoin mining has a unique. Characteristics because it consists of two parts. If you put a crypto pot slightly aside, which, uh, freaks out quite a few, let's say regular regulators and, and players, you purely look at infrastructure and this is pure infrastructure play where you have a, a large scale, very intense sort of energy consumer like in remote regions where usually this energy either has to be, uh, transported, [00:03:00] exported, or made available for some foreign direct investment, some production industries trying to settle down there.
And this is basically where I saw my discovery was, you know, I saw was like death. This is a, the data center alike structure, which can be capitalized as a sort of, more or less within the data center segment. And at the same time, it's a great value added for the energy sector. Specific region.
Jp: And when you're kind of shifting from to Kazakhstan, you're working at the European Bank for reconstruction and development, and their motto is, we invest changing, or were you, or were you working somewhere else?
Dennis: Yeah, it was 12 years at TBRD. This is, uh, and then I stepped, actually I worked, uh, three years in traditional metals and mining gold, copper and rare earth metals, you know, and private equity.
And so let's say my journey was, uh, slightly after the bank, but still the whole view and the setup, basically my scorecard. Originally an assessment was actually driven by [00:04:00] the, let's say, the approach, uh, that was, uh, from a bank. And the bank. You're absolutely right. And still, I keep it inside as a sort of, because it's a fundamental assessment tool for me because this is how I grew up professionally.
It's exactly, the bank focus was always in transition. This is where the mandate of a bank was saying, okay, this is remote regions to the new region, emerging regions to emergent sectors, and you are transitioning from, let's say, entrepreneurial. Business model tool, the corporate sort of bankable corporate structure.
And this is also how I came to, uh, project in Kastan because we originally were looking at, um. Transition to the capital market. And if you remember back in 17, 18, uh, let's say I think 17 because 18 where crypto winter started, this is where it was the first wave, of reverse takeovers taking place.
The two which was available at the time, let's say the, the investment, now we have obviously institutional funding available, you know, quite widely, uh, for Bitcoin minus, but back then, or you fund yourself through, let's say whatever stakeholder where basically you do have some access to the capital markets [00:05:00] and the platforms which were available at the time it was, you have a Toronto, basically Frankfurt, and I think it was in Sydney because this is where, where original mining juniors, where traditional mining juniors were, you know, and this is, was used as a rapper.
So this is where, let's say the logic I followed, you know, when I was stepping into a sector. That's why for me, from day one, I was trying to see how to marry two parts which are completely contrasting to each other, but at the same time to bring it more into the bankable sort of a wrapper.
And this is where basically why I mentioned about a division between, you know, infrastructure sort of, and a digital assets sort of play within a Bitcoin mining.
Jp: What was missing from being bankable, you know, 2017? What shifted in the industry and you mentioned a few things, but what were the key things that shifted between 2017 and today that made the industry much more bankable?
If
Dennis: I would say one of the major development was the overall narrative for crypto. [00:06:00] I would not say it's, I. Prove substantially. We obviously have much more positive development, but at least it's not perceived as a, so much with aggression by the central bank regulators as it was back then. This was one of the things actually when we step up and stop engagement in the project in Kazakhstan, one of the first things, uh, which was done is establishing the platform for the policy dialogue, and this is where, where association was born, which basically became.
Sort of the window for discussion with the government on the local level and trying to, , harmonize their understanding and education, which eventually led to the regulation for the Bitcoin mining. So because, uh, as a result of that, you are officially have a sector of economy with their own tax codes inside the country, basically, who are becoming a part of a sort of overall economic system.
And I think this is where the transformation, which I see now, it's not only there, but uh, I already see it, uh, resembling of the largest tier. For example, Russia copied part of this, uh, framework obviously with some alterations. [00:07:00] And they implemented the 1st of January. That is our regions, which are also or following.
And I think this is a main transformation, which I see for the sector. This is actually the, in many regions, the governments understand. Maybe they're not happy with, uh, digital assets themselves, but they understand this is a, a large consumer and large sort of, uh, valuable player for the economy, especially if it's, uh, regions where we have a energy generation and they need to somehow, let's say we create an additional value added to each kilowatt hour
Jp: we produce.
When you're talking through with the city and the local kind of municipality and states or provinces, you're talking about the benefits of Bitcoin mining. Are you seeing what type of political and regulatory questions come up or how are you interfacing with these electric grids? You know, I'm very familiar with the United States electric grids, but what things are you seeing in these developing nations or other nations outside of the US where mining is being integrated and how do, how does mining and [00:08:00] miners like yourself?
Really make a win-win partnership with the local community.
Dennis: There is a lot of similarities here with us. At the moment, with the whole growth, you know, that and the energy demand, the biggest bottleneck is actually the power grids everywhere. You know, and it's gonna be the case going forward. The difference to the, let's say, to the former sort of Soviet Union block and all these emerging countries, and regardless, even not the Soviet Union, but just in emerging communists, a big challenge that they have is, uh, outdated infrastructure with power grid.
So basically, even if they have a generation in one place, and it was a case for Kazakhstan, there was a, a massive, uh, surplus of energy on an off of, of Kazakhstan. And there is a continuous deficit in the South where the large sort of, uh, production and residentials are located. The benefit for specific region where what's an alternative they have, but alternative is only to export energy.
And this is what Kazakhstan was doing to, were exporting at the time access to Russia. , because, there's no one. Could consume it, uh, locally, and this is [00:09:00] where the value added was brought. And, uh, and I'm always trying to apply this, uh, IFI template because this is how they judge you bring the value, let's say with value creation locally and also the social factor.
And I mean, many people sort of missing out, but it is also the important because I think many of those location, and not talking about Pakistan. If you look at, uh, let's say Sweden, Norway with Scandinavian and sort of, uh, the Nordi block is the same. We have access capacity up north. It's the same situation there where the downturn, for example, is another example.
The downturn in, uh, 2007, the crisis sort of, uh, shut down many metals in mining capacities is up north in Nordi. And this has became, uh, sort of a, a trigger per sort of a pressure point for the government. Okay. What we we're gonna do with utilizing this energy, and this is where the data center sort of segment was coming in, and the mining as well, you know, and I think this is an important aspect for the local, for the regional, the state government sort of authorities to, to have bitcoin mining as a client.
Who can be replace some of the sectors [00:10:00] or become, temporary solution or nowadays over grid balancing is actually can become sort of ultimate solution. You know, that could be in place in, uh, supporting, uh, energy grid developments. But other important aspect, whether I want to say it's a social.
This is hiring the personnel regardless of what people say. You know, they may say, oh, Bitcoin mining hires, uh, not many people. I'll tell you, in a remote region, you know, when you have a village of, you know, two, 2000, 3000 people, if you hire 10 people, it's still a big value added.
Jp: And to your point, it's a value add across the ecosystem, not only for labor locally in these rural communities that are usually farther away from population centers, but also to the grid when it comes to noise.
How are communities that you're working with reacting to the sound, even if it's air cooled or water cooled or immersion, and how do you bridge that gap with the local officials or with local community members of where you're looking to build a mining facility?
Dennis: , is becomes a tricky because, uh, as there is a, let's say the certain [00:11:00] proximity to residential areas and you have to be careful because I mean, uh, and now why I'm saying you have to be careful because, uh, with tables turn you're coming in, you know, you're a new investor, you know, you bring in, let's say the value added or you're building a capacity and then two years down the line there is a sort of maybe some local political election and they pick up on this agenda of Bitcoin minus making noise and making this as a pa part of their agenda.
Political. And I think this's probably the danger that I see there is a genuine cases where size of, uh, sight. Especially on airflow. Cool, cool. You know, and if you have an open area, if it's not protected by the forest in between, obviously when noise can travel, and I saw the cases where basically residentials were located another hill, you know, like.
Two, three miles away. But because of this sort of, let's say remoteness of proximity, how, uh, the sound travel and this has become an issue, an additional CapEx for, for the mining site from immersion. I think. I don't see that it is an issue, but uh, on airflow, [00:12:00] yes. And I think especially on mega sites, you know, like, uh, , I think will always be an issue, I guess, and a tool to try and to pinpoint, you know, bitcoin minus saying, okay, you are being, uh,
Jp: and to your point, maybe there's more that we bring to the community than just the sound and the value add.
Outside of the grid stability, what are some of those other value adds that you're exploring with Bitcoin
Dennis: if we build it actually from macro level, because I think that this is not only the community itself. You need to understand that if government takes it seriously and follows certain steps, it's a value creation on each step.
Because from an importion of hardware, as you know, basically this is becomes a part of a servicing industry because obviously there is some minus needs to be serviced. I mean, this is already developed in this branch. Then when you have a companies, then there's obviously the company, if it's registered in a sort of remote location and becomes sort of a, it's paying to the local budget in terms of taxes, which is additional sort of revenue flow for the local, plus the hiring of personnel and developing of ecosystem in [00:13:00] general.
Because, I mean, obviously this is bringing an attractiveness. , if you look at Kastan. Let's say prior 2017, I mean, now I was hurt, maybe something, but it's managed to put itself on a map, even though it was not like US Russia, you know, like one of its top, uh, sort of three locations. , it still promoted the ecosystem and attractiveness for investments to come in.
And this has became an interesting opportunity for locals. I give you an example actually, as a part of development in Kazakhstan, we had a session, we've taken some of these officials to Sweden to show them as a showcase of, uh, what was done up north in Sweden in that region, where basically were attracted to, at the time of Facebook data center and was building the whole sort of crypto friendly infrastructure developments there.
And this is was a, a direct example which resembles even Stan, obviously it's very different locations, but characteristics of, uh, what was happening, it was the same. It was, uh, access energy. In remote regions, we've sort of, uh, challenging to [00:14:00] even create large operations because many people saying, okay, we're gonna build a big factory.
No, you're not gonna build a big factory because you need to relocate 500 people there. We finally, it would be like two, 3000. You have to build schools, hospitals, and everything else. No one will do it. And this is where it becomes, you know, you just, the whole thing's breaking down and they saying, guys, listen, this is energy.
There we are building the infrastructure. This is very clean. Comparing to other industries, this is very clean because, I mean, what do you do? You just, you do a set shelling coal sort of data center setup, connecting to energy. You're not polluting air, you're not polluting water, you're not polluting soil, and you're hiring some people.
And I think this is where it becomes interesting for them and understand. And the mine now is also the emerging. If you look, obviously now there is a, a hybrid models emerging will go and stepping in into HPC ai, this is where it becomes let's say expanding towards even a traditional sort of IT sector development.
And for example, in Sweden where they developed, there are more clusters, , like, uh, a certain lab, sort of a gaming development, you know, because they were building besides the Bitcoin mine [00:15:00] also with data data center segments. And I think now probably it's also a good opportunity to that because there is a convergence also with traditional data centers and traditional solutions.
And we see it, especially in us, you know, the, on the business models, how people try and, you know, companies try to nurture or converge
Jp: into that. And that's, I think you bring up, um, some amazing points, which is what other industries are gonna consume as much power as we are. And the pollutant is gonna only be sound and heat, right?
And that's it. And the impact is huge to the local grid, the whole community, and really can make a difference without needing to support. Tens of thousands or thousands of jobs for a factory when it comes to the heat. What cool reuses or what, uh, new applications and how is this new kind of phase of using Bitcoin mining's heat changing your perspective or any real world applications where you are using it?
Dennis: I think for heat reuse, I see there is a big opportunity and also the challenge because of, I see the challenge is that at least let's say, uh, projected from European landscape, , because [00:16:00] in Europe this is a region which, uh, has a deeply rooted, uh, sustainable development initiatives, , over two decades.
So you understand this is, uh, not as a relaxed as in us in a sense, even because of just the whole society, how it's built up. That's why, for example, heat reuse application. Has a great benefit because this is where it brings an efficiency to local communities. Because you have a compact solution.
Let's put it in a range, two to five megawatt. It'll have much more opportunities addressing the needs. Either a district, city or you have a residential, you have industrial complex, and I think this is where it becomes another solution, which is, I love, let's say the sector conversion part because this is where I see there's a future for bitcoin mining where it lies, you know, where Bitcoin mining can come in and saying, okay guys, we can take an immersion cooling solution and like carry it at a.
Inside the city because it doesn't make noise. It's very compact. And from this two, two megawatts, regenerate a heat which can be used or fully [00:17:00] cow, , certain needs or at least partly compensate for on a cost basis is definitely would be beneficial for any community and a government or state.
And the other interesting application is that I see is, uh, would be for, it's very slow in process because of regulation, maybe for some industries, but I think it's also can be picking up, it's actually deployment on the back of, uh, existing sectors, let's say, which allows the integration for the heat.
For example, you have a multiple industries, which, uh, as a part of a production process will require heat, let's say from 40 to 150 degrees. This is where the Bitcoin mining can come in and saying, guys, we are actually plugging in and this is how gonna be value added here. Because I mean, you have need to boil, use a boiler and heat it up, or we actually come in and doing a sort of a, a good combination, you know, a good collaboration here.
So I think this is where ways becomes interesting in this sense. Other points, which I see also, again, I'm projecting from European, is, uh, on the waste [00:18:00] management, the whole sort of, uh, segment because you have, let's say a landfill, which is basically you have a biogas or as a sort of additional byproducts where you can generate and basically use the energy.
And this energy can be used for Bitcoin mining and maybe to some, uh, uh, a local community needs. Because in most locations, if it's a remote region, you know, and you have, let's say. 2, 3, 5 megawatt of, uh, power generated, you know, a Bitcoin mining can consume part and part can be given image through basic, uh, needs of work community receive a lighting or, you know, some state or a government building in a small villages or cities here.
Jp: And so these governments, when you're telling them these additional benefits about Bitcoin mining these communities, what is, what's their initial reaction? Are they like, I didn't know this could happen. I didn't know Bitcoin could do this. Or are they saying it's supportive? Can you. Talk through one of those conversations,
Dennis: I think then we can break it up.
You know, the initial reaction mostly because of lack of knowledge and because many of [00:19:00] them actually they fed information which comes from main media sources, which are filtered through the benefits, filtered more through actual negative part, you know, over bitcoin mining. So I always perceive it as a crypto.
And my discussion, this is where usually trying to step back and go with my sort of former sort of, uh, IFI, uh, bank hat on saying, guys, listen, let's put the crypto aside. Let's just remove completely this digital assets, crypto, whatever it is, it's a byproduct of what's happening on the backend. This is infrastructure and this is what's interesting.
I had a recent conversation here on Balkins about the energy flows and I was speaking to energy group and uh, I said, listen, crypto, I said, oh, Bitcoin mining. And uh, I said, let's put Bitcoin on site and look at the basic. We are very complex solution. Which can be sort of put in place within very short timeframe and become a very sort of valuable consumer for the energy of peak.
Because I said at the end of the day, you do generate the energy during the day. [00:20:00] Obviously there is a massive issue. I understand that I as a consumer of energy will be your competitor. You know, you don't want me to consume it at the time when you as a trader, energy trader, you know, need to have a much better uh, client.
But I do know at night an off hours, I mean you have nothing to do. You don't know where to, to where to push this energy to. And this is where it becomes an interesting, and this is where it breaks up, you know, the approach. Because then they actually understand, okay, in which bucket you are follow, I dunno how they see it, which over buckets, but I saw that there is a certain bucket, they allocate the Bitcoin miner as a consumer.
And this is the case for the most, actually governments in the regional governments as well. And let's say people who are not sort of native to digital assets. It's lack of knowledge. So you need to educate when you speak about saying, guys, listen, but if you have allocation inside the city and this requires a heat, it can also regenerate a solution.
And this is also for them, quite unusual input that, uh, [00:21:00] makes them sort of trigger and thinking. So I see that's the educational part is a big issue and delivering the message, and especially delivering in the message in such a way that they, it fits in their template of thinking, you know, because all of them working with banks, you know, working with sort of a traditional corporate sectors, they need to fit into that sort of performer.
And the second part I see, which is issue when you come into the execution of a project. The issue is actually the ecosystem that they interact with. Because if ecosystem is not friendly to digital assets, this is where you're gonna experience a lot of sort of issues. For example, if you work with certain ifis and they have a clear on agenda and mandate saying, we don't deal with, uh, this type of clients.
And I think an example of, uh, a larger scale we see in El Salvador, when IMF basically was pushing, and this is exactly the case, and unfortunately it's not gonna go away because this is where [00:22:00] I have, is my own concept of saying that you need to always look Bitcoin mining. Are you ally or competitor for energy and capital?
And this is where basically it becomes an issue when you're stepping into a sort of a playground. For afis, they don't like it. The
Jp: viewing of Bitcoin as a competitor for capital. It is not a new concept, but it's something that the Nordic countries, at least from my, from my perspective, the EU has been pushing back on.
So are you seeing that hurt the conversations of mining in the eu or is the EU really accepting mining because of the benefits we've already talked about?
Dennis: I actually see the situation on, uh, Bitcoin mining, let's say opportunities is diminished substantially in Europe. And it obviously, it did change because of the whole energy crisis where developments has taken place to some degree.
It was natural that, uh, it's true in certain regions. For example, the large consumers of energy, but also in many cases, [00:23:00] unfortunately it's played on political level. As I mentioned before, a political local elections. , especially in remote region.
If you are. A large consumer of energy. So obviously you are a good client and this is, uh, for a position, you know, if we wanna challenge, uh, the local government, you know, we're trying to hit where it's most painful. I mean, and this is if you understand, okay, if you have a Bitcoin minus, you're trying to remove them.
And obviously this is shaking up the local situation. Unfortunately it does work like this at times, but. In general, the mining in Europe, it did diminish because, uh, Norway and Sweden, obviously they push the regulation where they removed the exemptions, which were for data centers. And there's additional tax implication.
There is a discussion about sort of trying to sort of narrow down the potential use of, uh, bitcoin mining facilities because, and making a priority, let's say, for traditional data centers. And I think this is where. Uh, the pressure will intensify because especially with the whole AI sort of, uh, [00:24:00] agenda as we see it, you know, is definitely becomes, uh, Bitcoin mining will be more and more perceived as a competitor for the energy resources, you know, and I'll assume like, uh, on any sort of, uh, process, uh, of evaluating the options, the preference will be given to, uh, traditional data sensor route coin minus.
The other thing I see, the very important thing that at least for Europe has taken place, the narrative, which was sometimes was used by Bitcoin miners, and we are balancing the grid is fade in weight very fast as we see very sort of holistic development on the best battery energy storage systems. You know, this is because, uh, this is an ultimate solution and I was monitoring the radio like for the last two years because I saw it originally picking up in California and, and then Texas, you know, because this was main regions for that.
But I saw the speed of which. It's actually scaling up now in Europe, including the regulatory changes and policy changes . So I, see that [00:25:00] this is becomes also, you know, a big challenge. So for Bitcoin mining it'll be tough. That's why, let's say coming up with some additional solutions like hit reuse is probably would be a defense
Jp: strategy to perceive, we mentioned battery storage and timing of market and demand response.
In Europe, are you seeing Bitcoin miners enter the frequency market frequency control market using machines to play in the European market for frequency control, which to my understanding is across almost all of Europe and is very competitive, is a very attractive opportunity. I.
Dennis: Yes it is, but it's primarily, it's in Sweden and I think it's, uh, in Sweden.
It is there because of, uh, history of Bitcoin mining there, because after a whole shake up in the sector, the facilities were sort of already in place there. Quite a sizeable ones. Not a sizeable as you have in Texas, I mean, but still like 30, 50 megawatt. This is for, that region is good size and they already were integrated on FCR [00:26:00] programs, you know, and I think this is where it is remaining.
There is obviously much more positive developments in Finland taking place because they sort of started, uh, the nuclear power plant, 1.4 F1 0.2, and 0.5 gigawatt, uh, gigawatt. So obviously it's creates a good environment. And then obviously the solutions there also, like, uh, looking at FCR, but generally in Europe, across Europe, it's a tough because, I mean, and it's tough because of a base.
There over the last, let's say three, four years, were on a higher level, which were not sort of feasible for minus to establish themselves. So, yeah, and I think this is where it's, uh, becomes a, a challenge as well, you know, even now, because for, I'll give you an example. I think the starts for Germany on the grid balancing for last year, I think was 2.5 or 2.7 billion euro were, were paid, you know, so you understand it's a huge market potential for these solutions to come in.
But I think this is where actually again, the competition comes in because you [00:27:00] obviously have a, a large funds and institutions look at to fund the best, you know, sort of model or solution, you know, and deploy them. And I think we see what we see, you know, so
Jp: if you wanted to choose, if, let's say you had a $50 million to put capital to work anywhere in the world where.
Is the most friendly mining environment that your, you think that capital should go for the next 10 years? Per se of Bitcoin mining
Dennis: next 10 years. 10 years is very, you know, as I always say that, uh, every four years of having a reset, this is where we have a major reset. And if you look at the regions, none of the regions maintained more than two.
I. Having cycles, you know, of the leadership in a way or some transformation took place. So 10 years probably a big, uh, sort of horizon, but this is where it becomes, let's say, if we're talking about 50 million, uh, setup, I would say the sort of midterm opportunities are [00:28:00] definitely seen in GC market. Sort of, uh, you have a Middle East, this is where basically the large developments taking place and uh, in terms of energy, it's a good, you know, and then let's say in terms of friendliness, it's definitely a good place to be in terms of the whole divers diversification point approach.
The other one I would say, I would probably think about it's not very orthodox solution for Bitcoin mining is actually, I'm looking at small, let's say in Europe where you'll be, again, more in defensive part, it's actually gemo, you know, because there is a solution that possible that you establish yourself with a generation.
Uh, so power generation capacity, and this is where your reference to 10 years can play well still, because this is where basically on the back of it, you still can mine, you can scale down. Obviously agreeing with the government saying, guys, listen, I'll build that much. I'll utilize it initially, and then I'll phase out part of it.
Or it could be available, let's say for emergency response that when you need it. Because I mean, at the end of the day, you know, any sort of capacity, even 10 20 megawatt capacity, it's beneficial [00:29:00] if you're looking on a microgrid management, you know, this is a, or maybe on a a state level, maybe a drop in ocean.
But actually for some local community it could be a massive input. So this is where I see a potential, at least let's say, on,
Jp: uh, European space. So you keep on highlighting the fact that as Bitcoin mining gets harder and as the havings continue to occur. The integration into the local community, into the local energy resources, into ancillary services, heat reuse, waste management.
It's only going to have to be, become more entrenched in order to stay competitive and to have government approval or kind of to be a win-win versus just a mine on its own. Kind of like maybe back in Genesis days where you were doing something new and unique and doing it very well, but it was not really maybe impacting the community in as visible as a way and the conversation wasn't in the forefront back then.
Is that a, a kind of a fair assessment?
Dennis: I'll make some alterations because I [00:30:00] think you need to look, because I think Gene mining probably was a pioneers because, I mean, this is the first guys we saw in Bloomberg average, uh, going into Iceland, and I think they, they created this flagship solution, you know, reference point, and I think this is where you need to look at the whole, let's say this is a part of natural evolutional phase for bitcoin mining.
Why, let's say the model, which we still perceive for people who've been long enough in Bitcoin mining, they're still saying, okay, what's bitcoin mining? This is a pure energy arbitrage. You're saying, okay guys, this is a region. This is a cheap energy below CapEx entry point. Okay, we understand the risk we're gonna deal with and we jump in.
And then basically over the course of some timeframe, you recover, you grow your business, and then you see if it's scalable further or not, you know? So this will model will continue because I mean, if you look at the world, you know, we have a, a major other sort of smaller regions which are emerging, we never heard before.
And I think it'll continue because especially if you're looking on, let's say, global south, I [00:31:00] mean this is an untapped territory, you know, I mean, you go, obviously Laham, you know, the region was already sort of discovered by some of the groups in Paraguay, you know, and, uh, other regions. But you have Africa.
This is a massive, the geopolitical reshape is definitely, will be another area, you know, that, uh, we will see, and especially let's say the issues they have on the actual grid developments, you know, this is where it becomes very interesting, you know, pocket for example, Ethiopia, you know, Ethiopia is, uh, it's only, I see it taking places because, uh, the, there is infrastructure development of ed with, uh, uh, Bitcoin mining, naturally serving.
As a anchor client has basically scaled up continuously. We're able to absorb this energy because there is no connecting point to a wider grid network to transport this as soon as we'll be available, if this becomes a challenge as well. And I think like in Asia Pacific, this is where I see that, let's say, um, where I see you need to view the Bitcoin mining, it's evolving very fast.
Comparing to our any other industries. I [00:32:00] think we are living, you know, each four year cycle is like 10 years in traditional sectors. And I think this is a part of evolutionary process. That's why I'm always saying, guys, there's defense story. You know, we're drying wood, you know, heating with the airflow greenhouses.
I mean it's, it's only leaves so long
Jp: and then you have to move on. And I think to your point, it seems like Bitcoin mining ch changes where it's at every four years. And it also, it only can grow so large in these communities 'cause there are physical constraints. And at some point in Ethiopia that power will be directed to , another buyer who was willing to pay more.
And so those miners will, will have to at some point, maybe start to shrink their operation because they did their job in the Ethiopian's government at eyes, which is, they stabilized the development of a large hydro facility, which benefited all of society. And there was a glut of cheap energy for six to 10 years.
That's an amazing way to look at Bitcoin.
Dennis: . This is exactly the point and why I always see that you need to understand [00:33:00] there's gonna be the end to the cycle. You know, you might remain in, but not to the same level because naturally the government, and I think if Ethiopia for me, uh, I'm looking at the wider picture because actually there is also a challenge.
You should not yet. The hydro energy use by bitcoin mining. This is you are actually competing for energy, which is, uh, in the national security because it's actually a big support for agri sector, not only the energy, and actually if you look in the Ethiopia, if you look at the Nile, there is actually the issue of Egypt.
This is a water resources, which actually is supply in the Egypt agri agribusiness. And this is if you, there is more behind the scene. And that's why I understand that sooner or later there's going to be some mediation process saying, okay, about the energy. And obviously miners will need to step out and release part of the energy for the government because maybe we'll say, okay, we're gonna be building new factories and we'll need the 200 megawatt.
So sorry guys, you know, but uh, you have to
Jp: leave and it's great while it lasts. But to your point, energy resources are so complex. [00:34:00] They impact, the damning of the Nile is impacting Egyptian farmers, but it's giving cheap energy to Ethiopian miners. Like these industries are very complex and as you dig into them for your clients, kind of what expertise, you've already talked a lot, but what expertise do you bring and, and who are the clientele?
You step through developing and building a mining process and kind of, can you talk more about that at your advisory services?
Dennis: Yes, sure. So I see it, uh, sort of it's tailored solution. And again, I'm trying to align it with a traditional, let's say, due diligence sort of assessment pro. Project finance assessment process that they had, you know, with a bank, you know, with a, any sort of a traditional sector, I pay quite a substantial attention to potential country risk and uh, local risk, which could exist.
And again, you know, like it's maybe it's been too conservative and sometimes, you know, like if you come more the entrepreneur, you saying, okay, you know, this input is actually, will limit my possibility for [00:35:00] potential upside because you are trying to cut out the opportunities. You know, maybe I'll go all in and then, uh, I'll be lucky and I win.
But I see, for example, again, I'm reference point, I'm trying to integrate in the overall assessment. A client is coming and saying, okay, I want to place the capital. In most cases, they are not actually crypto natives, IE from Bitcoin mining natives. But because we're saying, okay, I don't wanna have be involved in any operations, I want just let's say the clear sort of cut assessment, the site.
The project team, what's the potential risk of the government? And then basically the assistance maybe with, uh, infrastructure set up, a legal structure because in many cases, uh, this is where I also put it highlighted as a risk. Especially if you doing a large commitment of capital, you can go to a region, you set it up, you import the hardware, you station it.
But then you have an issue of, uh, fiat, uh, crypto on off ramps. You're not able to pay properly. And then some of 'em saying, okay, we are looking at rails of USDT [00:36:00] additional back channels, but this is not sustainable. Especially if situation changes, a local regulation changes and it reinvent you. You know, I mean, this is becomes a massive issue.
And okay, if you are having like 10 machines, so you can find the method, but if you have like five megawatts, it's become a real issue. Especially like if you are more transparent entity. So I, I mean, I see that it's important to package all and then to see, uh, and make an assessment what, let's say risk appetite
Jp: is.
So that's an interesting point that, you know, I think I take for granted as a US based miner. You know, Bitcoin comes in, you sell it on Coinbase, Kraken, you pay your bill and your a CH account. Have you experienced issues with miners paying large electricity bills? And it, talk to me more about. What that looks like, why they come about those issues.
And capital controls are probably a, you know, a huge constraint to that. And to your point, miners create this digital [00:37:00] internet, money, Bitcoin, but it's outside the system. And I do have to bring it back into the local area to effectively deliver the cash legally to the person and say, Hey, here's the cash of course that be done in the US as like a wire.
But talk to more about that because I don't think most people think about that in the mining space.
Dennis: I'll give you a one. Probably this is the first sort of discovery and, uh, use case. It was actually with Kazakhstan because I mean, uh, as a operation was growing on a large scale operation. We eventually sort of was, uh, the setup was done in Switzerland because at the time I remember because Kazakhstan.
Back in 2017, 1819, obviously it was no means of actually legally liquidate Bitcoin and getting, uh, local or US dollars, you know, to pay for the energy. You need to legally structure yourself that, uh, you actually able to take hash rate to jurisdiction, which has a legal basis allowing you to do the OTC trade, uh, let's say A [00:38:00] BTC.
You traded for USD or Euro, and then you're able to sort of send money back and pay for your energy and operational costs. And this is where we, we looked at the time. I remember it was interesting because it was 2018 with Big four. We looked at jurisdiction and I remember asked for me was on a list and recommendation.
Uh, basically the discussion point was. We still unclear how us will react. Why I mentioned it is that this is where we said, okay, you know, let's look at the wall already established, and this obviously Switzerland and this is how it start working. You know, like do Swiss entity that obviously takes a head rate enabled to deal in uh, sort of, uh, interact with, uh, subsidiaries in our companies in within a group.
And this is where the important part is actually, this is an entity which able to open a bank accounts because for example, you can imagine crypto business in Kazakhstani, you're not gonna be on bankable, you know, for anyone. You know why I mentioned us? For me, I do admire the steps that us taken, uh, during this 2019 and 20 because [00:39:00] with the emergence of, uh, Seagate and Signature, you guys, you locked the whole system.
It was able. To grow much faster and be able to service the sector because I mean this is where of a conservative approach, let's say in Europe, limits it completely, you know, with development. And that's why now even with why I mentioned it, I think with a positive developments, what you had actually, I think it was two weeks ago about that banks would be allowed to deal with much more freedom with digital assets.
I think if that resurrects the times that we had, you know, back 2019, 2021, you definitely will have a much better benefits for developments. But the issue remains and issue remains in many regions. If you look globally at the moment, if you look for example, nor dish people's talk in Sweden, uh, Norway. The Bitcoins are not sold in inside the country.
They're sold, uh, outside. You only have part of Bitcoin mining processes, data centers. And this is the important component, especially for players who want to capitalize. Okay? If someone is, you have some [00:40:00] retail type of clients hosting in there is their business. But if you are corporate business, you know, you need to establish legal entities here and you need to establish flows.
You need to understand that the bank, for example, in Paraguay, is able to take money from a entity which deals in digital assets and does the Bitcoin mining to pay for your energy. And I think this is the big challenge. You obviously don't have it in US because you are like, like say self-sufficient system, but anything to do with cross-border business, uh, globally, this is a major issue.
And I think it was a issue and I think it will still remain as a issue going forward. I mean, uh, it's one of the biggest challenges, uh, I think for the sector, especially like, uh, as, as it's pushed towards transparency, you know.
Jp: Have you seen any energy companies that you can work with except stable coins?
Or has that conversation not even happened yet?
Dennis: In Europe with Amica is a regulation. I mean, we have certain restrictions the main issue is energy [00:41:00] company or any corporate is actually the banking relations that they have, you know. Where banking with traditional, , banking houses, you know, which are not crypto friendly, there's no way you'd be able to work it or say, you know, go and do it somewhere else.
And I think, uh, this is a main issue.
Jp: And so to your point, it's the regulation at the federal level that's preventing it, or the state level versus the bank or utility saying, yes, you know, I want to take this as a payment option. It's much farther than that. What other regulatory issues do you see on the horizon for Bitcoin miners, either in the EU or in other developing nations?
Dennis: I actually will give you even the live cases now. So this is, uh, I dunno if other governments will pay attention, but I think I'll give you two examples and then you'll see the impact is good. You can project the view. Kaza Stan is the one which is where the full, let's say proper regulatory environment was created.
And this is genuine, like I'll say in that sense probably Kaza Stan is the best and the [00:42:00] worst case if you look at assessment, because they did manage to formulate the proper transparent environment, but they overdone it in terms of maybe the timing because in Kazakhstan you are required to solve Bitcoins inside the country.
Yeah. So you can understand if you as an international player, non Kazak, you know, company, it becomes a major issue because you are capitalization point. You need to have a inventory of Bitcoins inside your main group structure, and this is where you're forced to sell on a local level and basically to buy back just to match it.
This is, I guess, one of the issue. That just created. But there is a logic to it, you know, because obviously the government was, had a BL appetite at the time. We were pushing it forward. The price was different. It was before even, uh, we had this spike last year . So obviously we had appetite thinking, okay, let's bring the profit center to the actual Kazakh level.
And this is logical, you know, and I think this is where it'll come eventually for more many regions as they me, [00:43:00] you know, an evolution taking place. It's very likely that the government will start bringing this, you know, let's say the point saying, okay guys, actually we need to recognize the revenue inside the country.
And you have a paid taxes. But the other problem that they had. They did not. And I remember this is an initiative we're trying to push forward even 2018, 19 in Kazakhstan. We requesting just allow one bank, at least one bank to deal with corporate clients to do the conversion. The issue was there is no proper banking support even to do it.
So technically you have a license, you have a trade. Now we already have it, some banks, but this is the, the bottleneck. Another example I give you this is, uh, the Russian government, you know, they looked at this, they replicated part of it and they implemented it from 1st of January. You know, so now officially all the miners across inside have to be registered with tax authority.
So where minus have to be registered with their equipment on the balance, which is matching to the custom office. You know, I mean, it's pretty nice. Transparency. They do not require [00:44:00] you to sell the Bitcoins physically inside the country, but. Still as soon as they leaving your wallet, it's a trigger event of uh, let's say the calculating on the tax basis.
And in that sense, for example, the issue that, uh, government, uh, let's say would be facing in sector in Russia is that, uh, any outside clients who, and there was quite many of them to supply, let's say from bricks block who are hosting there, it becomes an issue because technically now you cannot repatriate, you need to build the structures inside.
They might sort of review this position maybe this year to keep it running, but I see sooner or later we'll still lock it up because I think this is where we see the challenge. On regulatory landscape for any government who are nurturing the ecosystem. Sooner or later the taxes will be calculating how much revenue generated inside and outside and trying to sort of squeeze.
We obviously will be squeezing, trying to do, squeezing on transfer [00:45:00] pricing, but also, we'll, because they sometimes we don't understand that bitcoin mining business sometimes is done by non-residents of the country because you are, as a investor from completely different region, you are looking for opportunities and I think, let's say the hosting opportunity, because government sometimes see it as a one piece, the hosting provider and the miner.
And I think this is where the challenge will be, will be interesting to see. I mean the if us, but I think US is self-sufficient market, so it's uh, but I think some other regions might be copy that, you know, so it's something to watch out for.
Jp: And as you peel the layers back on mining, you realize just how complicated it is using a local resource energy.
And exporting to a global commodity. It's the beautiful nature of Bitcoin and that the fact that it creates, it makes every local energy market a global energy market, but it is the politicians and regulatory nightmare of capital controls and all of these [00:46:00] things that are inundated. Like, oh, if you move the Bitcoin from your wallet, that creates the taxable event.
It's like, what happens if the Bitcoin, you know, wallet is in the US or in China? In Brazil? It's insane to think about all of these different levels that you help people walk through when they're setting up outside of a, let's say, friendly jurisdiction to Bitcoin and crypto and stable coins, which there aren't too many of those out there even today.
So I definitely. Kind of admire the details that you've been able to go in and, and dig into this. What keeps you going in the Bitcoin mining space? Why do you enjoy doing this? At the end of the day?
Dennis: I think with the dynamic, you know, there is no stagnation. Let's put it this way. There is no stagnation and you're learning curve.
If you think it's flattering out there, something happens. And we saw it last week. I was thinking, okay, that's it. We are set for this year. We have a US in a dominant position for the hedge rate growth with American Bitcoin news coming out, and next day we have a tariffs. And [00:47:00] this is completely, and it's obviously tricky because you can imagine, I mean, even on the client side, I see, like I had some uh, sort of follow up saying, okay, you know, what's, how the situation shifted now?
I said, yeah, this is a new input and I think it's stressful. But I think after a while you understand, that's why I'm sure you yourself understand, like when people call you saying, oh, it's happening to the prices. I mean you say guys, you know, I mean the more you look at the price, you know, the more stressed out you get.
Jp: Zoom out. Zoom out. So yeah, I mean let's talk tariffs like the us. Are we losing as a US citizen, our competitive nature to mine profitably. I mean the tariffs on machines coming out of China and potentially this like tariff blockade. And you know, right now these bitcoin mining companies are kind of slapping a Malaysia sticker on or slapping a, you know, made in the Philippines or other Asian countries.
Is that gonna be a viable solution in six months or has it completely changed the game and us will build its own chips and [00:48:00] or it will import chips and build its own machines in the us. What are your thoughts on that? I did a
Dennis: post about this in LinkedIn. I remember after that I'll break it up, you know, into pieces.
You know, like let's say I definitely see there is an impact on the short term. There is obviously the medium, midterm, and long term set of implications. If you look at the localization of production, let's move , putting a different stickers. This is a great type of activity. You know, it might be sustainable for some players in the short term, but then eventually it will be caught up.
But localization of production in us, it's possible. And to be honest, I see if this is something already in discussion and for example, I think, uh, one of the candidates ly this, uh, American Bitcoin corp, you know, they obviously have a big bargain in power on their sort of, uh, PR side. Let's say if they agree with Bitmain and Bitmain does some even basic localization, which not gonna remove a virus, but maybe move some.
Let's say improvements on overall cost structure, but most importantly it'll start localization process because, I [00:49:00] mean, this is a way you, in the process of going forward, maybe not this year, but year after, you'll be able to source some of components on the use of the assemble by assembling the, obviously creating a local expertise.
As you know, in the sector, you know, like it's the semiconductor sector, the expertise and work, and this is very critical. I'm very skeptical about, let's say, populating own production. I mean, what you have a reference to block and some other initiatives, which is done. These guys will definitely make a good sort of for themselves because of the whole perception on the market.
They obviously might get some orders, but I, I'm very skeptical that they'll be able to have any sizable or any meaningful supply lines for the US market. Taking into account the size of it and demand, and basically the growth potential. And then for the following reasons, there is no expertise. You know, that if you look back.
When the first, uh, tariffs were implemented, you know, when Bitcoin was stepping out into Malaysia, if you remember like first batches from Malaysia, people were saying, where do you get it from? Is it China or [00:50:00] Malaysia? Because I mean, they all come, were poor quality and we're talking about this is a pain was replicated and it in new environment, it took from very quickly respondent.
But because this is a strategic, this is a, a biggest play on the market still, like 80% of our hash rate out there is all the bit main, you know, so I see that this is the main challenge because none of them, we have no expertise. We'll know way. We're gonna aggregate the, the competence, uh, level of personnel for that.
And obviously it takes a while, you know, to implement it. And let's say if we are looking realistically. The implementation process for these guys, I mean, is two, three years at the best, you know, to get to a certain level. So the only way it can be done, it's, I think it's uh, like a bit main micro bt, you know, stepping in, you know, quite actively on the summer assembly line.
So that's the part, let's say implementations for the overall hash rate. This is interesting because obviously it'll slow down some development and I think some of the futures contracts by Bitman or Micro BT will be reviewed by some of the players. Spot market will be on for hardware trading would be affected.
You know, obviously some [00:51:00] projects will fall down because they're not, they able to get the funding to because of the whole story now. But if you look at overall head rate globally. Number two position is Russia. Russia cannot scale up now. And I know from a Chinese sort of uh, speaking to Chinese hardware market players, there is a challenge because Russia has stopped buying the volumes it was buying before because of regulatory changes and the market because of it's a transition process.
So we are looking now like an interesting situation where we have two largest markets almost sort of shutting down, you know, sort of at least narrowing down the consumption very substantially. And then we have this big sort of producers, Bitmain, micro, bt, especially Bitmain. They need to sell it somewhere.
And I think this is where it would be interesting, maybe in at least I see it into the business model, which will be coming back quite more actively. Maybe it's uh, by Bitmain and Micro BT going into the own hosting model of own hardware. Because for them [00:52:00] it's synthetic sale for maybe some friendly structure.
So they have an ecosystem of that or basically going to models. Um. In some regions, you know, with a model of, uh, host to sell, you know, where basically we understand we'll do a synthetic sale maybe at a, at a cost plus basis, you know, uh, to us, you know, pay the customs and at least there'll be a way sort of host it, the hardware, and then we can sell it off.
So I think this is, might be an interesting development, but this is again, will be, do some transformation on, uh, market participants, you know,
Jp: in the regions. To your point there, it's going to maybe change the flow of capital from US participants in, I really like the host sale model because you're still following the regulation.
You're still paying the tariffs on the cost of the goods, but instead of bitmain, let's say making 50% markup on the machine, when you buy it, they make 50% markup on the machine once it's plugged in and installed. And people will, buyers be comfortable [00:53:00] with owning. Machines in facilities that are hosting, or maybe it's a short term hosting contract, maybe one month, and then they can take it to their own facility.
So that brings up a lot of, uh, unique ways to look at the situation. I do think it's is how the US industry will go and we've seen them do things with HUD eight, as you mentioned, with the Bitcoin mining there and this, and the ability to have ade buy the miners from them at a predetermined price after they've been plugged in and kind of operating.
So it's starting to, maybe this will be an explosion of host and buy in the, uh, next bull market, you know, to come. What advice do you have for someone looking at this industry and what's one underrated lesson from your journey, uh, that you would like to share with the audience?
Dennis: Single exposure think is the main risk, because, let me elaborate on that.
It could be, uh, in, uh, any past, especially like on location, you know, because as we saw the region, you know, the region, uh, that you pick, you know. [00:54:00] If it's a cheapest, an tariff, it's not always the case that it have a reasonable risk for you, especially in the midterm, because especially like if you're trying to get over recovery from your investment and basically additional upside, I think this is where our diversification point comes in.
You know, need to look at the wider, let's say, and, uh, not aligned markets. IE just completely maybe contrasting jurisdictions, you know, just to trying to be in a more diversified position from a regional perspective and also the entry point, you know, because for anyone who is trying to step up operation, obviously, uh, the hosting model is probably one of its options or even if you're looking at some sort of a hash rate products, you know, because there is already the good sort of, uh, use of developments that's taken place, I think is, let's say, at least to have a feel.
Again, it's from a life example, you know, you can have a client saying, okay, you know, I see that as I wanna be in Bitcoin. You look at the location you structuring. But then it becomes an issue that, for [00:55:00] example, their own private bank not able to deal with this because they are not capable, for example, to interacting with, uh, that type of laws or for, let's say with jurisdiction.
And this is where it becomes a bottlenecks, right? And I had this instances before where basically it's all prepackaged, it's good to go, but then the bank says, oh, actually no. And this is where I say to them, guys, maybe you should simplify it. You know, as you just go, for example, like one refresh rate product, we have a icing number.
You give an order to your banker and just to book it on your brokerage account and you have a field, okay, you're participating in the sector and that's really the entry position. It depends, you know, how deep we wanna go and which risks to take. Because for example, I saw some, uh, players trying to go for the cheaper option moving into new regions, and then there's some local government changes and then something happens to the hardware and this is becomes the main issue.
And I think this is the worst scenario because this is where you have a newbie for Bitcoin mining trying to go in. And if they actually [00:56:00] experience a difficulty, this is a reputational damage for a sector because this is where we go and speak in. Okay. You know, I've been, uh,
Jp: mistreated. And so you mentioned, I like selling synthetic hash rate, and I think that's where it's this, these tariffs conversations, these geopolitical risk, the banking conversation and issue with payment, it all opens up the door for synthetic markets.
Are you seeing the ability to build synthetic products around hash rate? I mean, we've seen them develop. Are you seeing the next couple years be where those products will receive significant traction? And do you think the hedging of difficulty really will step into the synthetic products and maybe bring a more stabilized or levelized yield to some of.
To the institutional clients looking to get exposure to Bitcoin and bitcoin mining.
Dennis: I think, uh, let's say if, if you go into the, the hedging product on, uh, let's say the whole derivative of space for, um, the difficulty, this is, um, a separate niche because I mean, obviously you need to see who's gonna be, uh, the, on the other side of a, of a [00:57:00] strait, how it's, uh, basically how deep would be this market is, is definitely, it's a case.
I am more actually bullish on, uh, synthetic products where because of whole regulatory landscape changing the local player, for example, you have your host insight. As soon as you have a more and more sort of this, uh, pressure building up on risk regulation, you know, cross border interactions, fiat on off ramps, your core business is actually.
This hosting facility. So for you, you need to find an optimum way to cut off point where you're saying, guys, I say a hash rate and this is where you take it and this is where it's actually, you deal with all the BTC conversion and then all these interactions that will be on the back of it. And especially for at least what from my sort of, uh.
View on some regulatory environment, what I mentioned to you, like Russia, kastan, and I think some other regions will be, uh, sort of picking up on that. This is where it's uh, becomes an interesting that uh, eventually we might have a new sort of lay emerging, which is a purely [00:58:00] hash rate trading. I. Where basically you are interacting with a, a various multiple sort of location on a data center of hosting setups and which, uh, pushing through the hash rate, obviously you, the, the, it can be on a spot market, you know, a certain sort of a pricing mechanics will be created.
And it is there because you already have a different opportunity. You have a guys like nice hash like guys in the marketplace which are doing, and I think we're doing quite an interesting pioneering, it was, uh, to admire this as well. They created, uh, European guys is why I also focusing, you know, we did it I think, uh, a couple of blocks where basically they are fully sort of, uh, sort of um, uh, done by a nice hash, even though a nice hash by itself.
It's not a mining pool, it's not a minor, you know, it's a pure marketplace aggregation. And, and this is where I see this is a very interesting development that will have this additional layer. Maybe it's even will be transforming the mining pool. You know, because I think this is the pressure I see as well [00:59:00] because if you look, you have a foundry, basically the dominant player in us, it's definitely the representation of American hatch rate.
I think for Russia probably will push it as well. Quite substantially. They are quite slowing it down. Again, they learned from Kazakh Stan, maybe they should not push with demand creating a local mining pool because Kaan had its uh, done. You know, you actually have to go into Kaza pool, declare it to a tax authority.
Russian government still push uh, living in it. But if they create then it's gonna be another one and I think it's gonna be a transformational mining pool. So this is the hash product. It is definitely something coming, you know, and especially coming in what you mentioned before with investors, you know, because some of investors.
They don't wanna deal with the local matters. They want just a pure clean hash rate. You know, because they're interested in the hash rate and what comes out of it, you know,
Jp: the BBTC and Dennis. So financialization of hash rate. [01:00:00] You just touched on how do you pitch mining to a bank like traditional financing.
You mentioned you like to take away Bitcoin and take it out, but when your clients are talking to these banks and these banks let's say are doing a deal versus aren't doing a deal, what is the key positioning you're using? And I wanna really wrap it up with that last conversation. 'cause I think as you, with your previous background, you can provide, you know, a unique insight to all the miners out there as they have this constant conversation of education of what our space is and how it really interacts with the local markets
Dennis: on the banks.
Banks is a tough one, I think. I would say if it's a big bank, you have zero flexibility. I. If it's not crypto friendly, I mean as it's, uh, unless it's a very sizable client that can negotiate a position internally, you are in a losing position with a smaller bank, obviously. Um, and I had this interactions as well where the bank, if it's not crypto friendly, but it wants to accommodate a client, you are stepping in into some [01:01:00] discussion of, let's say, validating all the full flow chat.
Because at the end of the day, they need to take it back to where sort of compliance, risk management and to see, you know, and validate, okay, so what's the risk, potential risk sort of, because bitcoin mining still high risk sector, how based or or region as well, you know, basically what checks and balances they will want to see for you to be able sort of to fit somehow into a profile.
And I'll tell you an example. , when we, uh, uh, we did through Kazakhstan, obviously with Switzerland. At the time, I remember everyone saying, you go to exchanges, you know, finance and this, and you know, with Phoenix Kraken, you know, I explicitly went in with zero exposure to exchanges because exchanges in themself represent the risk, especially from a compliance and credit risk perspective for inside the bank.
And I actually went to, with pre-approved OTC desks, again, you know, you looked very [01:02:00] serious. So, so you validate them to see that you obviously don't have this sort of, let's say, intermediary type of structures. You mean they, because they need to do a background check on them and this is how you implement all the steps, including for what will be a custody solution.
You know how basically, which reports even I had to submit the samples of reports saying, okay guys, you know. Going forward, are you going to be comfortable on a monthly basis that actually when we do a trade or BTC tool, let's say the, the fiat conversion, we actually supported that. Basically this is how basically this BTC will populated from this market pool.
You show the full flow chat and this is, uh, times it works because they see it, they validate it, and they may internal assessment, and you stick to this sort of, uh, roadmap, which you define any alteration from that. Going forward, you need to sort of discuss and notify it. Obviously, some might happen for commercial reasons, some might happen for other reasons,
Jp: and I think, think you're highlighting.
Really to your point, the [01:03:00] complexity of the space bankers, like the counterparty risks we saw with FTX, which only scared all of the bankers. They were like, I don't know about Bitcoin and crypto anymore, 'cause of one bad actor. And it's sad to see that in the space, but I really Dennis, appreciate the conversation of today.
We've gotten in touch and highlighted tremendous amount of different topics. Is there any last words and last kind of comments you'd like to make before signing off?
Dennis: Well, I think I wish basically everyone to just to, uh, remain sort of rational. Even sometimes we get emotionally involved in the market for the developments, but I think step back and, uh, have a cult sort of calculated, look at what's happening, it's patients ,
Jp: And mining projects don't happen fast. They're the one, one of the slower things in the crypto space. But machine prices move fast, tariffs change quickly. Regulations can change locally. So it's a, a slow moving, fast moving industry. Yeah, . Exactly. Well, thank you Dennis, for the time and if you're what listening remember to mine [01:04:00] on and don't freak out.