In this episode, Sunny Ray sits down with Greg Foss, a veteran credit trader and founding shareholder of 3iQ, to trace his path from McGill engineering graduate to Bitcoin advocate. Foss recounts an early career shock at Royal Bank in 1988, discovering that mark to market losses on Latin American debt effectively rendered the bank insolvent, an experience that revealed deep fragility in the fiat banking system. He describes a thirty year trading career including stints at GMP Investment Management and TD Securities, living through the 2008 financial crisis, and repeatedly searching for a fix to what he calls the fiat conundrum. Foss explains how he found that solution in Bitcoin in 2016, calling it the greatest financial innovation of his career. The conversation covers the founding of 3iQ, the legal battle that won Canada its first Bitcoin fund, the push toward a Bitcoin ETF led by Sean Cumby, and Foss's thesis that Bitcoin functions as monetary energy that could eventually reshape global reserve currency dynamics and portfolio risk management for fixed income investors.
A veteran credit trader explains how discovering banks were secretly insolvent led him to Bitcoin as the fix for fiat.
Can you share your background before Bitcoin and how you ended up in finance?
I'm an engineer by training from McGill, though I never wanted to practice full time engineering. I got an MBA in the US and returned to Canada, where my first job was at Royal Bank's head office in 1988, pricing our lesser developed country loan portfolio, mostly Latin American debt.
What was that early experience at Royal Bank that shaped your view of the financial system?
We had four billion dollars of Latin American debt trading at 25 cents on the dollar, meaning a three billion dollar write down. When I checked the balance sheet, Royal Bank didn't even have three billion dollars of book equity to absorb that. The largest financial institution in Canada was effectively insolvent in 1988, and this reflected every major money center bank in North America.
Tell me about the restructured asset backed commercial paper trade in Canada.
At GMP Investment Management with Mike Weckerley we participated in the ABCP debacle, a 32 billion dollar mess in Canada. The Caisse de dépôt owned 10 percent of their assets in it, bought at the wrong price from US investment banks. The paper fell from near 100 cents to 20 cents on the dollar, costing Quebec pensioners billions.
How did you first discover Bitcoin?
I went to the North American Bitcoin Conference in Miami about five years ago when Bitcoin was around 800 dollars. I watched TradeBlock live, seeing the blockchain, hashes, transactions and mempool in action. As an engineer it was pure beauty, and I realized this was the solution to the fiat conundrum I'd been searching for over 25 years.
What role did you play in founding 3iQ?
Fred Pye approached me in 2016 in Montreal and showed me the first blockchain, Bitcoin, transferring value globally with no intermediary. I was hooked immediately and became a founding shareholder. Our former CIO Sean Cumby put together 5,000 pages of evidence and won our case against the Ontario Securities Commission after they initially declined our fund application.
What is the fundamental problem you see with fiat currency?
Governments maintain high credit ratings mainly because they can print money, not because their balance sheets are strong. If you compared Rogers Communications' balance sheet to the Government of Canada's without naming the borrower, people would pick Rogers. Governments don't default, but every time they double the money supply your purchasing power gets halved.
What did you think of Stephen Harper's comments suggesting Bitcoin could become a reserve currency?
I think he's right, though it won't happen quickly. I believe all energy will eventually be priced in Bitcoin since it's the purest form of monetary energy. Oil producing nations like Russia or Saudi Arabia would be better off holding Bitcoin than debasing US dollars, and over time this could challenge the dollar's reserve status.
What is Sean Cumby working on now with Arxnova?
Sean now runs a fund called Arxnova, meaning new citadel in Latin, and has filed for a Bitcoin exchange traded product with the Ontario Securities Commission. Bloomberg Intelligence reported Canada could get the first true Bitcoin ETF in the world, which would compress the premium closed end funds like 3iQ currently trade at down to zero.
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