Guilhem Chaumont: Following the Flow Into Crypto’s Next Growth Phase

Transcript

You're now plugged in to the Deli podcast. Hey everyone, welcome back. It's Kevin from Deli Digital and today I'm very excited to be joined by Gilm Shaman, the co-founder and CEO of Flowesk. Uh Gilm, really appreciate you doing this. How you doing today? I'm doing good. Thank you very much for having me. It's nice that we're doing this on a on a green candle day, which we'll get into the state of the market and all that good stuff soon. Um the marketing copy would describe you guys in Flowesk as a fullervice digital asset trading and technology firm but as we'll get into there's a whole lot to unpack there. How would you your elevator pitch how would

you describe yourselves? Yeah so I I think you know the way you described it is is actually the perfect way to to to to describe the company. We come from a marketmaking background. We were notably known with a product that our clients love which is called marketmaking as a service which is a slightly different approach to regular proprietary market making. So we we've been quite popular with that with that but very quickly we evolved into a full-ervice digital asset trading firm which means that basically we talk to a wide range of counterparties some of the biggest projects out there some of the small project talk to institutionals ETF providers uh that be banks you know everything basically that touches crypto and we try to offer those guys all the range of services you could expect in crypto. Indeed that we go from marketmaking we do custody we do

brokerage on spot derivatives now we're launching credit as well. So you know we have this we're building you know this really like all service financial services firm and at the same time at heart we are a hardcore technology firm because obviously in the back end is all the connectivity that we that we had to build and all the algorithmic um and and all the software. Yeah. What I what I really like about your founding story is you initially were focused on the simple goal of providing institutional grade services but for crypton native teams right I'm I'm really curious maybe we can start there what went into that decision-m and what was a kind of key insight or thesis you had for wanting to start there yeah so I think uh so it was

back in 2020 so you know we came with the following assessment so I think you know at this time it was quite interesting because everybody was expecting you know an institution wave and they were all you know building in that regards you know those prime brokers it's going to be regulated etc etc and and our deep conviction was that it would not happen for a wide number of reasons we thought the market was not ready we thought no it's going to be maybe for five years for for 10 years this is going to be remaining like a crypto thing and crypton native thing with some various projects infra you know I mean at that time obviously we didn't have a lot of the building blocks that we have today so we thought okay we're gonna focus on crypto firm and where where where can the edge be the

edge can be a bit of a contrarian bet which is to offer this in institutional grade level of service but to cryptonative counterparties and I think at this time the market was missing a lot of that you know a lot of things were were shady mostly proprietary market makers obviously we we didn't have at this time some of the market makers that we have today in the landscape regulation obviously was different so we're like okay look let's try to take a contrarian approach institutional grade level of service but to the smaller projects out there and and that's probably why we we became so successful and and we anticipated and and I think we we were right about that but it's probably only the tip of the iceberg today that this wave of token issuers will only increase and they will get more and more institutionalized more security token

RWA obviously those topics in five years have gone in the right direction and we are very happy about it but but we thought you know the building of this is is to talk to the people who are in crypto right now and at this time it was only crypton native counterparties what were some of the the challenges is in those early days but also I'm sure that you still face today in terms of again that focus on cryptonative teams. If you go to any big company or especially you know traditional financial players the concept of market making a lot of the services you guys provide is kind of table stakes right or it's or it's or or it's something that's very common whereas when it comes to cryptonative teams a lot of them might be very technology forward but don't have the internal expertise to assess

why they would need a market maker things of that nature. I'm curious how those conversations went especially in the early days of just trying to convince the market that what you were doing actually was value add and was something that eventually they were going to need. So first of all I'm going to state the obvious you know when you have the ambition to do everything with a wide range of counterparties wide range of of product you inherit from the complexity of wanting wanting to do everything. So the best is to have a single approach on a single product a single type of client. So I think we we haven't made our our life a lot easier by by by having this conviction day one in the company. And if you think about it particularly when you think that the spectrum of token issuers you are

talking to already back you know four years ago can be a billion dollar market cap protocol heavily backed but on the other side of the spectrum you may have a $2 billion market cap a very small cap. And how do you address this range? It's extremely complex because obviously the cost of running market making in a fragmented market like crypto when you talk about hundreds of exchanges DeFi CFI I mean all the things that we that that we know very well it's hard and that's kind of how we coined also this market making as a service approach which is how can we address those thousands of token issuer who cannot afford to give 10% of their supply who cannot afford to pay thousands of thousands of dollars per month for a market maker when we have like you know tiny liquidity we need to find something

that is just very efficient and very transparent and that's that's how the marketing as a service approach very cheap very affordable high coverage you are your own market maker about transparency you do have to provide your own capital you indeed take more risk because you take market risk counterparty risk etc so you know it was kind of like we tried to to to engineer the only thing that could fit for this market and that's that's that's really how we came to it and today we we are very happy to see that we still work with that side of the spectrum and our clients are very happy and we very happy to work with them and we can also work with the other side of the spectrum which is also looking for some of the features of those products including the transparency and control over over their

token. So I think at the end of the day we are doing crypto but we are not reinventing the wheel. It's a set of financial services there is a decentralization sort of flavor but we are finding exactly the same problem. It's about regulation. It's about balance sheets. It's about coverage because we're in a 247 365 business. So, so when you think about it, that's about having operations globally, trading, sales, monitoring of funds on chain, you know, like all those sort of things which would just create an entry barrier that is getting higher and higher. And honestly, it's it's not the the beginning of the end. So, the the game we're trying to play is be everywhere, do everything, be compliant in every jurisdiction we operate. It's a very long journey. That's why we we think our journey is is still quite

early and and and we keep building heavily and investing heavily, but it's it's going to be a very long journey. and and the market will evolve a lot. Yeah. To that point, if we if we fast forward to today, obviously we're living through very interesting times. There's a ton of uncertainty right now. The market looks quite different than it did three months ago, let alone six months ago. What's your current read on this market right now? I mean, so to to to to talk about, you know, the fundamentals and the numbers, the volumes right now are kind of anemic. To be very clear, we're down 60% 70%. Slightly slightly above one trillion, you know, volume per month. We we almost hit three trillion at some point. So, so the the Bitcoin price, Bitcoin face value is kind of,

you know, hiding a forest of not much is happening and obviously the the altcoins and some of the altcoins have have lost significant um amount of value. So, that's the current picture. The current picture is the market is basically as slow as it was before the whole US election and the whole activity that we saw last year. That's the reality. On the other hand, we have tons of reasons to be bullish on the long term, I think. And that's that's why on our side, we're still heavily investing and you know, we we have haven't we have never really looked at, you know, the spot picture of crypto, which is why we're always focused on on on keeping on building and and why we had so so good results even in the worst conditions. and and I think the fundamentals are very good. You know the the the regulatory clarity is

happening particularly in the US of course and we can do a lot of things the instit institutionals are coming in and this time I believe I believe it fundamentally I don't think that they are coming in the way that people may think and we can we can talk a bit a bit about that later on but that's where the flow is and that means the market is is radically changing its structure. I fundamentally believe that we are not in a four-year bare bull cycle sort of structure. I don't think the the the flow is is mostly is mostly retail anymore. You know, all of this those things we are we are witnessing. So the market structure is changing. So what it means? It means simply that the market is maybe going to be more boring to some extent. Why? Because we are much more linked to to the economic activity. We

see it every day. Everybody is witnessing you know what what the US is going to do in terms of in terms of tariffs and and what Trump may announce. But that's not really crypto linked person. So we can see a strong correlation here. We we we think obviously if you look at venture activity most of it is is priced now. So you know those good old days of doing 1000x because you invested in an early stage project it's over because all those rounds are preempted preempted at higher valuation and again also the the venture escape is going to drastically change in the next few years. So I think it's it's becoming a bit more boring. Some would say on our side we are we are very excited because the thesis around institutional and tokenization we see it arriving and and we are at the forefront

of it to be frank given the projects we work with but but that's essentially it so what we could expect this year in my opinion I don't think we are going to have the biggest bull run of all time and the and the highest multiples at some people expect but on the other hand I definitely see think that whether or not we are in the bare market we won't see those 80% retracements on bitcoins those sort of things that's my that's my that's my deep conviction and uh and uh and and I think that's quite bullish for the space because at the end volatility due what whatever the reasons including lack of liquidity which bring which bring back to topic of market making is is not good is not good for the long term and and why is that you talk about how don't expect to see these large

extremely large in some cases draw downs that we've historically seen throughout let's say the last you know three really four crypto cycles of paying off far back you want to go. You're saying you don't see necessarily that that those times might be over in terms of those types of drastic draw downs. I'm why is that? Is that because the way in which you're seeing institutions come into this space? It's the the there are multiple reason but the the number one reason that we are seeing is the flow are changing and the view on the maturity is al also changing. So to summarize, it's not the exact picture, but I think it would be a good proxy.

Until today, it was I'm trying to get in in the bare market and I plan to sell in the bull run. I have this like 18 months, two year sort of view, 80%, you know, retail driven. Now, the people who invest most of the flow in particularly in Bitcoin do not have an 18 months horizon anymore. I think and and I think when you look at the flow of the ETFs recently, you clearly see it's a it's it's a multi-deade tap and money is just flowing in and is and is holding it in a similar fashion that people have been holding gold for instance. So so that so that's why I think essentially you know the people who've been accumulating Bitcoin will not sell with the same horizon that the previous cycles were happening. That's I think that's the key fundamental fundamental reasons for what

we are seeing and obviously we are seeing it on Bitcoin first as a first order of magnitude but obviously it trickles down to all all the other coins to to a lesser extent Josh and and that wave of institutional capital which a lot of people have been looking for for a number of years now right to your earlier point was never going to be a giant wave that came in all at once it's more of a slow progressive process but when institutions do come in they're stick your capital or longerterm holders once they're making that decision. Once they're in, they're in in a sense. And it's not so much the retail more kind of cryptogen, if you want to call it, type of trading mentality where it's very short-term focused. The new players that are coming in have a longer time horizon

is what you're getting at. This is what I'm what I'm getting at. And their their perspective is is extremely different. Those guys are not going to hold, you know, top 500 of coins, do some tap, and just and just wait. In my opinion, they will either hold the top assets or what they will hold and what they will buy is the technology and they will issue their own coin. So what what I'm trying to say is what will bring, you know, crypto from a $2 trillion market cap to a 10 trillion market cap is not the increase of the market cap of the current token that we see. And maybe maybe by the way that that may be bearish from from a speculative perspective. It's going to be new assets coming into the space being being tokenized. this is starting with the with with the RWAS that we're

seeing at the moment. So it's it's very important to to understand that I think for for whoever is is is expecting and waiting for for that wave to basically pump their their bag. I don't think it's going to happen much. That doesn't mean that the casino casino use case of of crypto is over. This is going to remain a $1 trillion market cap. It will have ups and downs. There will be extremely good projects that will do, you know, whatever multiple and all of that, but this is not a relay of growth. That's uh that's the point I'm trying to make. And where do you see the most growth coming from going forward? Is it the tokenization side? Is it other new token issuers that are focused on maybe consumer? Where do you see the biggest growth areas going forward? So I think

we have three areas essentially. We have the store of value in a digital gold fashion. Most of that will be grabbed by by Bitcoin obviously. Then you have a few key network that and that will have some market capitalization derived from their revenues. Ethereum is a good example in the negative a good negative example these days. But as soon as you have a network that has you know a value of of fees of 2 billion 10 billion a year you can easily derive some market cap using whatever high multiples. So I think there will be a lot of value in the networks on the contrary to web 2.0.

Uh to be to be clear it's it's very different. And then the third is is tokenization obviously and this is a 10 15 20 year process that will start with easy things that has started by the way a long time ago with stable coins tokenized flat or to be more precise tokenized money market funds government corporate bonds to some extent with some of them. So it has already started a while ago and it has been quite successful. The only key difference today is that the yield is passed on to the to the ultimate user and that's very exciting. But I but I I I think this is where the next relay of growth is. So I think we will start with the simple use case. How do we bring the yield on chain? And if if you think about it, it's interesting because even without

crypto, this is happening more and more you know on our side in in Europe now whatever bank you have and I know it exists in the US you have this you deposit you deposit cash in your neo bank and you basically get the fed funds rate or or whatever the equivalent is. So it's happening on both sides. Obviously, the crypto brings a much better competitive environment and and and a very much more interesting flavor of it because you can tokenize it and you can move money around very easily. But I think it will start heavily with tokenizing the yield, whatever the yield is. And obviously then we're going to go down to some much more interesting words.

And do you see the the the rise of tokenization being more focused or a bigger growth area being tokenizing or bringing on chain existing assets or traditional markets or on the other hand actually creating liquidity around assets that historically haven't either been illquid themselves or haven't had liquidity at all. Uh obviously the the wild dream is to have assets which were not liquid to that they become liquid. So we are all you know extremely excited about tokenizing and that that we start from preIPO sort of firms that that but that that will go down all the ladder until tomorrow the grocery store of the corner may have a $2 million market cap

and distribute its dividend on chain. I think I think this will happen and by the way is the number one reason why we are building flesk but I think it will happen in a very long time because it's a very complex use case. So right now what we are seeing and what we are thinking is the next two to five years we'll be dedicating to bringing existing assets that are already liquid just to tokenize them and bringing them on chain and having all the positive sides of of crypto using them as collateral transfer them easily. I mean you know there is there is even a use case for crypto that I think that that that I think is is quite possible is the end of fiat money because tomorrow if I can pay if I get my salary with those tokenized money market fund and it's accepted as a

payment on a one onetoone basis who will want to hold fiat we will just hold those those tokenized those tokenized asset and I will pay you with it you will pay me with it and and boom and we have yield and just just that piece of the puzzle is is an insane use case for the world and is and is a10 trillion dollar market cap in itself but I think quickly after we will see the rise of of a new waves of assets and again it will start with liquid assets. So the Tesla the Apple all all those stocks starting with the bigger one will be brought on chain would be used as collateral with whatever LTV the companies may bring even their dividends on chain quickly. I think you know Coinbase tokenizing their stock is is probably the first stage of the rocket and ultimately it will go

down on the all down all the ladder but I think we probably talking about 10 15 years and we need to appreciate our institutionals are very careful about this and and people are often wrong about is it the technology ready is it the risk appetite no it's it's it's none of that we need to understand that tokenization banks are not going into it because the regulatory doesn't allow it if you look at the ratios in terms of RWAS. So the risk weighted assets those are insane now it's and it was interesting because um a few days ago the French public investment bank announced a crypto fund where they could invest directly in crypto and but they're getting smashed on their balance sheet for doing this. So there is also

some some regulatory some basel requirements which need to evolve at the same time but and and that's why by the way the institutionals are starting with what looks like the easy stuff. uh but but I think it's it's very exciting obviously is is part of that hesitation on the institutional side also regulatory obviously being a a very big component of this but when you dig a bit deeper and let's say the regulatory kind of curtain was lifted conversations I've had but again you've got a really good purview into this world institutions are also trying to figure out how they can capture fee revenue or capture the upside economics of tokenization in a world where this world that's cryptonative is all about permissionless

technology and decentralization. And I I think it I I personally have a hard time sometimes imagining that some of these big especially these big trady incumbents are just going to come into this space without having a full understanding and plan for how they're going to be able to capture the upside from bringing a lot of these assets on chain. Uh I could not agree more with with what you have just said. For them, you know, it's a combination of of what are the efficiencies that these things are bringing and by definition, how much more money can we make doing the same thing combined with a risk aversion of we're not sure we understand 100% of these things. It seemed that these things they remove a lot of our value on the operational side notably so to which

extent we are letting the baby go and that's why they are and obviously all of this with on the top this thing can explode to our face because you know this is onchain there are hacks there is security risk there is protocol risk PR risk and obviously we're talking about crypto so crypto is is is a hot topic for everyone so so that that explains partially the risk aversion but everyone who has a decent understanding of what's going on in crypto on the institutional side and you know just need a 10% 20% and I I think some of the guys out there like like Black Rockck for instance or all the other guys were issuing some sort of money market fund tokenized or stable coins at the moment have well understood this see see a huge advantage and at some point I suspect of course

right now they are in in a mode where they understand the signies that is bringing they understand that they need to be careful they need to understand that this can be a winning game or losing game for them but at some point it's going to be a losing for everyone to not to just not go into crypto at some point. The risk will not be to go into crypto will be to not go into crypto again. It's it's going to take years, but as you know, the retail keep embracing this market, the investors on the buy side keep keep embracing these these products, it's going to be a loss of opportunity for them at some point. But but uh we could definitely understand why they are very careful about it. But again, you look at the numbers, you look at the TVLs of those stable coin bele token, it's it's

exploding these days. And again back to what I said you know even if we think about you know the stable coin market being 150 whatever the number is billion market cap it's ridiculous to compare it what it could be tomorrow we would be talking about 5 trillion 10 trillion those sort of numbers and when you have this type of longer term perspective and and a pretty clear thesis on where you think the space is going obviously today flowest does a lot of different things how do you think about where where are the biggest opportunities within your market that you see right now or what are the ambitions of how you want to go out and try and capture or be part of this evolution that you foresee in terms of both market structure but the different types of players coming in like what has

got your attention most right now so you know I think it's when you have a thesis that is as strong as the one we have and that we share with with most of the markets so we're not making a contrarian bet here don't don't get me wrong the question is how do we get there and how do we get there is it's a complex answer particularly if you think that you're going to get there in 10 years. So the question is what do you do now? And I think in the I mean essentially everything we've been building in the last years is centered around that vision. Building operations, building the regulatory framework and to put it in a more simple manner. We think that we will trade those tokenized security exactly the same way we trade token utility token today. And by the way,

utility token won't die. There are some very interesting utility tokad and that's probably going to be a single digit trillion market. It's not going to be two digit trillion but but we we we think it's there are some very interesting tokens out there and but my point is we will trade those security token exactly the same way we trade them today. So what I'm saying is ERC20 tokens on pool some RFQ on chains some centralized exchanges they may be centralized exchanges you know of of TR five they may be Robin Hood you know whatever whatever it can be but at the end of the day the technology is there and it's going to happen exactly the same way of course it's going to be permissioned very likely because you need to know who's buying you need to do KYB KYC KYT all of that but essentially

what we're building at food is the is the technology for that that's our deep view and we don't think that it requires any additional technical infrastructure improve improvement. We think we have that since you know the L2s came in the fees are viable enough for any transactions and we think it may change and if it does by the way we will be at the forefront of innovation so we'll be very happy but we think that part of the puzzle is is is done and now it's only a matter of time until it it happens and until then we will watch the TVL of all those assets grow every day so now what we are looking what we're looking for in the market is just working helping the current players in the market who whoever they are obviously we come from a strong background of working with

cryptonative firms and token issuers. So we try to help those guys on all fronts. We think just like I told you that when we trade with security token tomorrow or utility token stable coins we will trade the same way we trade with our clients today. They're looking for credit capabilities. We can bring them credit capabilities. They're looking for various structured products to bring an additional yield. We can we can do that. We we're doing it with the top foundations out there. So you know all all those things is just you know trying to to keep that long-term vision but build bricks that make sense for the ecosystem today and that will make sense for the ecosystem tomorrow. But it's very interesting to see that yeah now the strongest demand that we have in terms of client is stable coins. We are we we are we're incredibly excited about

the stable coins that we that we see out there. Everyone is launching stable coins. We're working with some of the biggest out there. What's happening on security token side is also is also very interesting. less and less is happening on the infrastructure layer side. Obviously, there is huge almost philosophical question about where is the value going to be? Is it is it going to be EVM? If it's if it's EVM, it's going to be on layer one on some layer twos. We see also you know those chains RWS compliant day one coming in. I think that's an interesting use case. Um but uh but yeah, the road is very long. So our job obviously and and that's where we become risk averse is to make minimum bets in terms of where we want to be because we we think our job is to be

everywhere and to and to adapt to the future evolution of the market. When you say demand for stable coins is one of the areas you're seeing the most growth and or the most demand for per se. How exactly does that manifest or what specifically does that mean? I think we something is happening and and stable coin demand is is is really happening be driven by the retail that's one of the the interesting retail thing on on on the contrary what I said before of institutional coming to market I think there is a real adoption from the retail market to start using stable coins and obviously we know it came more from from countries with with lower GDP lower access to banks but I think it's it's happening we see now you know twodigit percentage adoption in some of the

countries used on a daily basis we've all been paid by some friends in stable coins. We see we see people in our families who are not necessarily 100% cryptos savvy. We start using stable coins with you know with and and what people don't understand is to have crypto adoption. We don't need people to fully embrace crypto in digen mode and they all have a ledger wallet. I mean having having a wallet in your in your smartphone with 1,000 bucks 2,000 bucks of of stable coin is perfectly enough to do your daily operations just like you have your credit card and you pay this and there and you don't really really think about it. So I think that's where the demand is and there is also a self-fulfilling prophecy of the offer is creating the demand. Now for a wide number of reasons a whole bunch of

people want to to create stable coins because obviously they've they've seen some some some very good returns. They've seen some exits lot lots of that. So so they want they want to get into and they also creating the narrative and the marketing to to start on boarding. Banks are distributing it. We it's it's no secret that we work with some of the larger largest banks on their on their stable coins. they are creating the demand for it. Right now it's mostly driven by retail. But the second stage of the rocket is having banks using those stable coins to settle between them to coll to that collateralize with them. Put those stable coins in in some in some credit support 10x as they as they trade derivatives. So again I think it's we're talking about three years, four years, five years, what whatever it is. But I

think this is what is driving the demand right now. Yeah. And I I've got a pretty call outlandish question which we can certainly cut if you don't want one answer or feel comfortable answering, but to put to put it bluntly, what's to stop you or what would stop you from issuing your own stable coin and then having that work within your own ecosystem and and you know the liquidity aspects and again the the additional revenue you could drive from issuing something like that. I'm curious like if what would stop you from doing that? So it it's been a question that has been asked uh very often to us and to a wider extent. Why wouldn't you issue a stable coin, a tokenized money market fund? Why would don't you issue your flowes own

coin utility token? You know, it's it seems that it's it's an easy money grab or you know whatever it is. Our answer has been always the same and it will remain always the same. We are being seen more and more as a transparent player, a trustable player, which sounds kind of ironic into a world where we're trying to to remove the trust. But I think this will this will never happen. Uh with no conflict of interest as I as I said earlier, we're not, you know, trying to bet on one pony versus the other. Like it's it's almost a philosophical approach that we have to it that that we think is very very important because once you're linked to a certain ecosystem once you start building your products and start distributing them then are you really being fair and that fairness that

trustability has a lot of importance for us has a lot of value. We think it will have even more value in the future. That's why the counterparties trade with us. ourselves. We will never see us as a company investing into into building a product that is like directly client-f facing and that we have to advertise and advocate for it because what that would mean it would go against the interest of our own clients. So we know exactly where we are in the in the food chain and we don't want to to go uh elsewhere even though you know it sounds quite appelling considering that we have obviously the technology we obviously have a good understanding we have the distribution we have the we have the regulations it could be it could be easily doable but I think when you look at the complexity of the things we are

building already in our realm we have a lot of food on our plate to to do a lot of things for the next 10 years so I'm I'm not too worried certainly and I think that point around trust is a reallyant important one. You know, before we we turned on the camera, you and I were chatting briefly before this about how I I think that a lot of people probably have or would like to think they have a rough surface level understanding of what market making is, specifically what, you know, companies such as yours provide, but digging into that a little bit, what do you think is one of the biggest misconceptions about market making? And then on the trust side, when it comes to teams that you're working with, right, token issuers, what are the critical questions or things

they need to know before engaging a market maker? Um, thank you so much for this question. It's it's a quite interesting one. So, obviously the the biggest misconception about market making is that it works potentially against your interests. If you work with the right market makers, it's EV positive for your token. So assuming you're working with the right market maker and honestly there are more and more very legit market makers even some of the you know the biggest out there who have been put wrongfully in in the in the light uh for what the market was thinking was the wrong reason. No they are legit people and they are they are just trying to do their job and at the end of the day a market maker is supposed to be delta neutral. So if you are delta neutral that means that you are not betting on the success of the

token you're just buying and you're just selling and you're just trying to monetize the spread. So you buy a bit lower, you sell a bit higher, but you don't do that over a six months period. You do that over millisecond, sometimes almost microscond sort of period. Um so so that's the first misconception is that the the the market maker is making money on your back. Of course, if your market maker is is using all their inventory to basically dump your token and enter a big short in your project, that's that's another thing and that's that's another debate. But let's let's assume that market makers are doing their job. So as a project what you should look like is is let's go back to the fundamentals. You have a token you're basically doing an IPO day one.

You're going to be listed on multiple exchanges. Your token is going to be traded against multiple currencies. Some of the those currencies are going to be fiat stable coins some other assets like like ETH and so on and so forth. What would attract demand for your your your project is two things. Is it a good project fundamentally? Does it has good fundamentals? And if you think about a security token tomorrow is does it have good financial ratios per peer those sort of things does it distribute dividends etc etc um and the second thing is how quickly can I get in get out people need to understand that and particular that's particularly going to be true for institutionals they have liquidity requirements how fast can I get in and can I get out when when the funds get regulated that's a question that is asked by the by the regulators

and they categorize the assets in in different categories so the first thing investors will look look at and that's even true for retail investor to some extent What is the depth of the order book? If I buy 1,000, $10,000, $100,000 worth of token, what is going to be my execution? If my execution cost is 5% to get in, 5% to get out, that means that if I want to get in, get out the same day for whatever reason, I lose basically 10% of my money. So the liquidity is how you attract investor and how you reduce volatility because those two things um are are positively correlated to uh to attracting investors. So that's that's the number one reason you hire a market maker. you want your your book and you want to have precise KPIs from your market maker how much liquidity I'm going to put in the

book and then we could talk more into the into the details and into numbers if that's necessary but yeah it's not you know putting liquidity very far away from the mid you want typically to have a a bid spread for legit token to 10 20 bp sort of spreads you want to make sure that you have a decent amount of liquidity you want further liquidity in the book you want to have a decent up time 95% is very reasonable so you know there are a whole bunch of metrics that project should look into. And at the end of the day, they should um compare what they pay and what they get for it. And that's, you know, just like anything in life, for the same thing, you could pay 10x the price talking to to different competitors who have, you know, different uh different acts to to to

trade your token in a certain way, different connectivity to exchanges. So, you know, at the end of the day, the way I will summarize it is look at the KPIs. What are the numbers saying? Pick what you think is the best market maker, the most transparent one, the most the one that aligns the most with your interests. Some market makers will try to extract money from your project. Some market makers will just try to provide liquidity and just extract market just from the spread and taking arbitragees. So, you know, that's that's two very different approach. Is the market maker directional in the underlying? That's what I'm talking about. uh you definitely want someone who is market neutral and uh and at the end of the day you know the market is evolving in the right direction and it takes time. This is still a a market that is in in in its

infancy. So you know the track record of market makers will will speak over over 10 years at some point. Yeah. I I think a good way to try and understand this this idea is also to kind of flip that question on its head and imagine a world in which what what do crypto markets look like if firms such as yourselves didn't exist? Yeah, it's a it's a very good point. I mean there there would be two things. So first of all, it wouldn't be a disaster as much as people could think. Why? because you would have simply proprietary trading firm operating on a full discretionary basis not having any links with projects who will be here basically to monetize. So you know it's it's we're not going to give any order of magnitude. It's completely indicative but it's not going

to be 1,000x you know worse that there will be people taking arbitrage even even retail market putting orders in the book limit orders manually and trying you know to to reduce that spread and sort of and so and so but obviously if if there were market maker we would be looking at completely different volatility. I mean if you look at the top assets like Bitcoin and ETH obviously market makers even the pure proprietary one have have limited impact. It's it's it's very clear because when you look at the liquidity of the but for all the rest of the market you would be looking at much more realized volatility. So take any asset of the top 100 coin market cap top 50 you would be looking at you know 200% realized vault instead of 80 100% whatever whatever it is and particularly when you need a market

maker is in is in the worst moment when everybody is out of out of the books in the extremely volatile in the volatile event you prefer you know to have a drop by 20% in your token instead of going to 70 or you know even evening and going through the full order book and virtually going to zero and then of course spiking up you want to avoid that. So, so I think market maker clearly play a very efficient role in the market. It's been demonstrated by the way by the literature that assets who have a higher liquidity tend tend to trade at a high at higher multiples.

There there is a premium for liquidity. So that's uh so that's that's that's essentially you know very important thing and and whether it's through relationships with token issuers directly with banks some of the brokers out there market maker will will persist in in in some sort of new fashion as crypto has has brought it it's slightly different model than it ti will it become very similar to trfy maybe I don't think so for wide reasons but yeah clearly market makers and financial services player in general play a key role in the industry Yeah. And as this market matures and we talked a lot about how institutions are coming in and the ways in which they're coming in, how do you think about moes around the business that you've created,

especially if and when we start to see big traditional finance incumbents come into this space. So there are multiple ways to look at it and obviously nobody has the answer. So the the the first thing that we should really be clear about and that's irrespective of new incumbents big firms the entry barrier is getting higher and higher as I was stated before in the world of today in the world of tomorrow you cannot operate this business without having the right regulation the right people and the balance sheet this is becoming a balance sheet game. So you know and and to be very clear and very honest we we we created foresk a few years ago and we created with limited

means uh we raised funds very quickly and that was fantastic but it was a very small teams you could hardly do that today at least not with the ambition and the velocity that that we did the entry barrier is going to get bigger and bigger because it's just becoming more complex and it's just becoming more competitive we're talking about you know market making how do you find your market maker if you look at the implied price of getting a market maker it probably has shrunk by a 10x factor uh in the last uh in the last 5 years versus you know 2021 if you look at the percentage of supply that token is insurers were were doing and I'm happy that with our very little little limited means at flues we have contributed to that to some extent through our market making as a service approach which is

arguably 10x cheaper already so I think what what will happen is is very simple the theory is institutionals banks will want to embrace crypto for all the right reasons we talked about it we tked about it before. We think that it's going to be nearly impossible for them to to build it because the complexity is a higher one one order of magnitude above doing doing it in trfy and it's and it's slightly different where in trfy it's centered around you know single trading venue high frequency trading here it's a fragmented market it's you know you're you're touching assets you're touching exchanges that you that you have less uh less readability on it so the complexity is different so we think the only way

that they would want to embrace it is either working with with people buying some technology, buying the firms or buying the technology directly. That's why there are lots of bets made on the on the infrastructure side of of of trading in crypto at the moment and there are some really good firms that have emerged out there. So so so you know we we think that's the that's the only way it can happen. Some of them will try to invest they will invest a lot of money. Maybe they will be successful. Probably some will be, but most of them will realize that the complexity of crypto is so high that that it's probably better to to part to partner with with existing people. At least that's what we think and that's what we hope very very selfishly to be frank. But also there is another interesting scenario as we as we talked

about you know crypto itself being a threat to to institutionals is maybe we will witness through this reshuffleling of cards the emergence of cryptonative firms that become very big arguably you know larger than the current institutionals. This is a bet probably that has low low probability because when you look at the track record of those firms, the regulatory, the size, the balance sheets, you would be like, well, okay, no, those big banks are going to remain the big banks. But after all, why not? Why not? And that's why as an ecosystem, we should be very ambitious about just providing the best that we can for for our clients as an industry. And and if it means we can replace what is existing and we can do it in a better way, let's do it. Given

the bears entry are only getting higher and have only gotten higher over the last five years to your point. I won't ask you if you today hadn't launched if you would try to launch and build a company like Flowesk, but if you were starting from scratch, what do you think it would take capital-wise to actually be able to compete? Um, I can answer the I can answer you the question. I would still do it today because I'm very naive and and I realize the risk and I realize how much of a hard battle it is only, you know, a few years later when I when I have a few gray hair on my head. So, you know, I'm way too naive to to think about all these things when I'm building it and it's more a self-reflection, you know, having gone through this. So, I

think today there are multiple things. So first of all, yes, the entry barrier is is is higher in crypto and and and in crypto trading, but you could run a similar parallel that launching any new startup today is probably harder because there are more competitions and and you know everything, but the tooling is incredible. And when I say tooling, I mean obviously both the crypto tooling like you know it was a pain in the ass 5 years ago to do anything crypto. We talk about cyber security. I mean obviously we have we've had some really good custody provider technology provider that that arrived and and that solved those topics and they were almost non-existent 5 years ago. So the building blocks are much more solid today. The blockchains themselves are much more solid. Of course I'm not even talking about AI you know the the the

way we developed flowes still the CEO and CTO today of the firm. It was a very different way we did it five years ago. We had stack overflow. Today you have you have open AI you you have you have you have all the AI that you want. So the it's it's becoming more easy on the tooling. That's 100% sure and that's why I would still do it today. However, the entry barrier to launch a trading firm today. And again, it depends on the vision. If you want to run a similar prop shop, maybe close a few deals with token issuers, you do that from a single country, the coverage not going to be excellent. You don't necessarily have to be 100% compliant because you will be under the radar. You can do that and you can probably run a single dollar million business quite easily doing that and be

and be very profitable. I don't think that's good quality for the client. I don't think that's sustainable over the long run. But arguably you could do that if you want to launch a business that is global regulated that has similar equity story as as we had with flowes. We are already talking about a high two digits million dollar balance sheet. We are already talking about probably 40 50 people between sales trading and operations globally. And what I'm not even mentioning is an uncompressible timing which is the regulation to get regulated. It takes years now. And we we were one of the first um regul we were actually the first regulated trading desk in France. It was back in 2021 or 2022. Uh it took us three four months to to to to get it. We did some really good work and probably we were a bit lucky

and and the regulator was was very constructive at that time and very favorable. Today there is not a single legit regulation that will do this. You know like you look at the UAE for instance which has a very interesting framework. We're talking about hundreds of companies who be are waiting to be regulated there and on top of that the requirements are much higher. So you know you have all these things where basically you need more money but also you need time and money cannot necessarily buy time you know it's not one one of the other but I think you know it's good to see that there are still new incumbents into the space because those new incumbents are going to be as naive as we were a few years ago and maybe they will crack things that we haven't figured out and all in that's that's very positive for the

space because at the end of the day the clients whoever they are from token issuers to institutional they will benefit from that so I strongly encourage people to keep trying things and hope hopefully bring something positive to the space. Yeah, I think that's a a really we could we could talk for hours about all of this stuff and and unfortunately we don't have we don't have hours and hours, but as we kind of get towards the end here, I think one of the things I wanted to wrap on is as we look to the future, you know, recently you guys announced a very big financing round had some actual very reputable players involved in that. I think most notably Black Rockck um or at least debt managed by funds by Black Rockck. Where are you investing most right now? Like where are you really pouring fuel on the fire

given what you expect over the next 12 24 months? Yeah. So, so you know we we're obviously at a stage at Flesk where we are very lucky not to have you know a very healthy business from a financial standpoints where we would not need to raise any further money arguably today and we are obviously blessed to have incredible people around us you mentioned Black Rockck among others that's that's that that's really good so for us it's very simple I think I told you a bit earlier that we try to filter the noise from crypto and you know we try to be a bit bullish when everybody's bearish and a bit bearish when everybody is bullish and we have we have a road map of you know keeping on doubling down into everything that we do. So that's

where those funds will be port. So more than ever we are we are doubling down on the infrastructure side. We're trying to build the whole suite of technology products that allow us to trade any asset any token everywhere enable our clients to to do that in the most cost efficient manner. That's a lot of technology that's a lot of investments. We're very happy to pour our funding round and our profits into into that mission which will take years. We're doubling down on our own people because as as I stated arguably you could run this business with 15 50 people whatever it is based on your ambition but the firm of tomorrow that very big firm you know multi-billion dozens of billions of dollar valuation financial service firm would definitely not be a 30,000 people firm for for a wide number of reasons but we're talking about a few hundreds

at least so us we are just doubling down on trying to find the the best talents who fundamentally and deeply love crypto and and when I say it. It's it's very important and those people are rare but they exist and they are just incredible who are building on the long term who understand that building a firm and being part of such a journey is a different timing than you know just trying to speculate over the next coin and just trying to to get rich in in in a one year or two years sort of horizon. So we are building all of this together with a lot of of of naivity and obviously the the big challenge that we have is how do we scale our balance sheet because to get into that point and being that firm we arguably need to 100x our balance sheet. We're going to do

that with our profits. Maybe we can buy time you know another way. That's partially why we also did this round and why we'll do the others. So you know again trying to take all the pieces of the puzzle um at the at the same time and invest uh energy into what we think the future would look like. We talked a lot about tokenization. That's that's our big battle now. We're not forgetting all the other aspects of the ecosystem because because we love what everyone is building on the EA side, all those utility tokens. Some of them are not really useful. Some of them are very useful. But that's the market will decide eventually. That's not our call. We're not here to judge if the token is good or bad. We're just trying to provide them the best financial services in the most transparent way and we let

them do their own journey. So, you know, I think this is essentially what we are looking at and we are and we are we couldn't be more excited obviously of of where we are today. But it's it's a it's going to be another 10 years journey to get to where we think we can get. Certainly. And and you beat me to the punch on what my final question was going to be, which was you talk a lot about all the exciting things and and you're I think similar to me in terms of being almost a perma optimist, right? Um but what is the biggest challenge that you and the team face right now? Oh, that's so there there are multiple ways to answer this question. The first way to answer it is more as as an entrepreneur and CEO is the is the people side of things because you know

when you when you start a company in a very naive way and and you have more an engineering background, technology background, you build things, it's a small group of people and then you know it becomes just unmanageable. But fortunately we have we have incredible people across the firm who are who are making sure that everything holds up together. So you know it's it's a people battle. It's it's it's the biggest challenge for every firm. People say it the first time you hear it, you think it's And then when you build your own company, you're like, "Holy smoke, it's true." Because that's fundamentally everything that it is. If you have the right people or you can be lucky, you can be a good shot caller about this will go up or this will go down. But assuming you you need this anyway, then you need the people. So the

people is is is a huge challenge and how we get there. the regulatory side of things is is a big challenge for us at the moment particularly as a Europeanbased firm because uh because obviously we have Mika coming into practice exchanges are starting to delist USDT for instance non Mika compliant stable coins we even came across something in the recent days where one of the largest exchange didn't want to list in Europe a coin that didn't have onchain trustability supported by you know gen analysis and and and and others so this is where we are heading and as usual you can see the glass half full or FMT how full empty like we don't have business today and Alph we know that this is what probably will enable the next wave of the business for banks to be reassured and to prove that they are compliant in

every way. Um other challenges obviously we we are facing is keep scaling our technology with the same pace that the market is scaling cyber security more than ever we saw it in the recent months the the threats are probably at at alltime high in crypto and and arguably we are probably a prime prime target too. Uh so you know that those are the sort of challenges but fortunately we we touch wood and and we have an incredible set of people working with us. So you know for us we we just try to make it happen every day. Uh and that's that's already a lot. Yeah. No, I'll double click on that last point too. Having the right people in the right seat is the arguably the biggest unlock for growing and scaling a successful business.

Absolutely. So true. Gayen, really appreciate you hopping on. I'm already excited for our next conversation. You know, we'll do this again. and we'll we'll get some updates on where you are, where the market is. You know, I'm really curious to see how this thesis plays out. There's a lot that we unpacked here. Um, so really appreciate you joining me today and so do I and thank you very much for the opportunity. [Music]