Kraken: The Crypto Native's Powerhouse Exchange | Dave Ripley

Transcript

hey everyone if you have been listening to Empire you know that Santi and I are fed up with unaffordable fees and frustrating transaction speeds that make the onchain experience basically unusable so the arbitrum team reached out and they showed us the platform they showed us what you can do on arbitrum whatever you're doing you can experience frictionless transactions at lightning speed on arbitrum so head over to portal. arbitrum doio and check it out scary stat for you the odds of falling victim to online crimes are one in for AA provides digital security protection to keep your personal information passwords online activity and Technology safe from online threats for Empire listeners Aura is offering 14 days free

plus up to 55% off an Ora subscription when you visit Aura a.com blockworks terms and conditions apply see site for details you'll hear more about Aura later in the show hey everyone Santi and I have been talking about salana a lot recently and we're excited to have a salana sponsor of Empire marinade marinade is a staking protocol on salana and the only stake pool that delivers Auto rebalancing M Rewards and automatic downside protection with their new protected staking rewards optimize your sole stake with marinade by hitting the link in the show notes big thanks to marinade we'll talk more about them later in the show are you tired of high gas fees I'm

excited to let you know about scale a zero gas fee modular blockchain that's become a perfect fit for gaming and AI apps because of their instant finality and lack of me explore the scale ecosystem today at scale dospace ecosystem and stay up to date with the gasless blockchain on X at scale Network that's at scale Network big thanks to scale for sponsoring Empire all right everyone welcome back to another episode of Empire we have uh Dave Ripley uh CEO of Kraken for uh I think 12 12 months anniversary we just had so Dave welcome to uh welcome to Empire and congrats on the one year at Kraken man thanks yo yeah yeah so people

think Kraken they think of Jesse I feel like because he was just like a you know big Pioneer when I think of the early people in crypto it's like you know the the early Founders it's what Mike belelli it's um maybe maybe Eric Vorhees Charlie Shem you could throw in there and you got to put Jesse in there uh Brian obviously Armstrong and so I think when a lot of people think of Kraken they think of Jesse you were put into this CEO role April 2023 what is the um best part about the last 12 months and what is the worst part of the last 12 months yeah well gosh a lot to a lot to cover I I mean you pick any 12mon in in in crypto I don't care what it is bare BW you just Into the Heart

Like a horrendous it's yeah we've all you know as the saying goes you know we're we we we all age you know F five t five times as quickly um you know given all the excitement in crypto um but yeah first on Jesse I mean I I'm glad you hit that I mean I mean he is I mean he's you know that one of the just the top few Pioneers in crypto top few um entrepreneurs frankly he's an incredible entrepreneur generally founded previous business before uh Kraken really only ever been an entrepreneur in his his life and so he's just you know really um uh you know really incredible from that standpoint then also like you said you know one of the the top few Pioneers in crypto and he's um he's you know poured

his poured his heart life you know so much into the industry generally I mean of course Kraken but you know honestly it's it's the industry generally which is um you know in line with our mission which is to grow cryptocurrency adoption and frankly you know one of the things that I think is important about um how we view that mission is we we view ourselves as having a role and not um you know not kraken's not going to do it alone that's like the antithesis of what Bitcoin and crypto are it's a it's a community it's a decentralized network you know so it takes all kinds of participants um but yeah I guess get into the meat of it like what what's the the past year year been like well um so first off I you know I've been in crypto

and uh you know I've been at Kraken for a really long time and then even in crypto for even longer than that so I um I started back in 2013 um and I founded a company gladera that was acquired by kreen in 2016 and so that you know puts me at what like seven and a half years or so at you know today as of today and um at Kraken so I've been with the company for a long time certainly know the the business well know the industry incredibly well do you remember what what employee number you were you know that's a good question um I don't know it was I me there were probably not more than 5050 people when I when I joined I mean there was only a handful of Engineers there was a decent you know there was a you know maybe a couple dozen people on

our our client engagement team and at least and you know then all the other functions kind of probably added up from there so um yeah so it wasn't you know I wasn't the you know the first first dozen or so but yeah it's fairly early and of course there was probably a bun you know a handful of people that had you know join Kraken and then left and so if you add those up maybe I'm maybe I'm getting closer to 100 by that point as far as what's the what's the uh what's been the maybe I'll rephrase the question like the toughest part about being CEO of I mean the big exch like there's probably a handful of big exchanges right there's binance okx coinbase Kracken I'm sure I'm GNA upset

someone because I'm missing someone but like you guys you guys are in the select few and then in the US it's really I think of like coinbase and Kraken um like what is the toughest part about running a large ex crypto exchange yeah yeah just on that like I mean you you pretty much summed it up correctly you know we're we're we have really significant business in US Canada Europe UK Australia those are major markets you know make up huge huge portion of majority of the business um really Europe and UK first that's where we launched umh initially for you know first place you could kind of like buy Bitcoin with Euros domestically and then with British pounds as well so um but yeah I think um you know look I mean I

think the this this past year um you know was really marked I mean so one it was it was you know it was it was Bare market right um and you know each bare Market has been um has has been unique in different ways um and you know this is my third bare market and coming into this one I I kind of came in with like a little bit more optimism and uh you know chip on my shoulder saying like hey we've done this a couple times before we got this and so forth but lo and behold no this one brought like real meaningful and unique challenges and you know what what really were those well um it you know on the heels of the FTX and other

failures um you kind of had this huge ramp up in uh you know I don't know push back certainly on the regulatory side that was a big piece um a bit of like the choke point to chokepoint 2.0 in the for the the banking um banking of crypto companies and uh and then you know of course just the you know the public perception right um of like hey there are these failures um I mean I think a number of people in in various different places some in US Government like looking to kind of like pin this on bitcoin and cryptocurrency itself as opposed to failed trust specific failed trusted third parties which by the way is is is the incredibly

ironic piece of this which is you know the whole premise of Bitcoin and crypto currency is to move away from trusted third parties and here are these you know failed trusted third parties um you know kind of give them Bitcoin and crypto a black eye which is is truly ironic because you know the whole premise is to is to someday move away from those I mean of course going to take take time and so forth but anyway so these are you know these are the various different you know pressures that arose and of course I mean here in the US there's the you know the is really Ground Zero for for where there's the most pressure chaos whatever um and kind of simultaneously with this period many of the other geographies like

Canada specifically um Europe as well had already been like marching forward with various different regulatory structures right uh Canada kind of had their you know their their their FTX moment um several years ago with quadrio failure and that kind of pushed them to put in the um their licensing structure of course in Europe they have the the vasp uh registrations and now followed by by MAA and so there's a there's already a lot of advancement which is in some ways I mean look there's there's of course you know trade-offs in some ways um you know the additional Clarity is hugely beneficial particularly as we look at it visa the United States um but

um you know of course there's you know overhead and work and you know all these things needed to do to kind of like go through licensing process proces and so forth but the reality is all of these things kind of combined um led to really a significant um amount of you know like lift on the business whether it was navigating choke choke point 2.0 you know basically working with bank or Bank existing Bank relationships establishing new ones or whatever it is working towards um you know obtaining licenses where there's you know new license and then and then un in the US basically dealing with litigation um and uh of course you

know the the SEC and everything they're up to here so it's really been a meaningful you know is it's just presented a meaningful set of uh you know things uh that you know the the business has had to do again the us being Ground Zero with like the activity here but I guess the the upside is you know for the most part Kraken has navigated all of these challenges quite well and and frankly better than than many of our peers out there right and so we've kept all of our you know Fiat rails up in custody and we've you know actually went for licenses and so like take for example Canada we went for the license there a number of other companies exited our market share position went from like you know mid single digits up to like nearly 50% um

and you know so we we just like have seen really significant success um over this period in terms of market share over the the 2023 period um you know despite that the overall Market uh you know was down significantly so I want to zoom into a couple different uh I I did happen to uh talk to a couple Kraken employees and some some investors as well to prep for to prep for the podcast and one um one interesting thought so seeing kind of Kraken and coinbase grow up these past several years one thing I've always thought is so it feels very clear to me that coinbase kind of owns the retail or coinbase I think does better than Kraken in my humble opinion on the retail side

but kraken's Pro experience is incredible I was mentioning before this a lot of a lot of blockworks employees actually use the the Kraken Pro are like very power users of Kraken I would say and you know I was asking a kraken employee uh why doesn't why don't you guys just copy what coinbase has done on the retail side they say look you don't get it we we don't want to do that um if you look at our our uh user if you look at our users we actually have kind of different sty different types of users we have more like prosumer users whereas coinbase has the 23-year-old who just graduated college and just bought 100 bucks of Bitcoin so yeah this was from a random Kraken employee I'd be curious to get to get your take on this on this coinbase first Kraken Dynamic yeah I'd

say that's partly right I mean yeah for for what it's worth um the the piece that's absolutely partly right yes we we have focused um you know meaningfully on uh Kraken uh Kraken on on those more professional uh Advanced Traders and investors historically you mentioned the pro experience but we were one of the first to like if you dial it back one of the first to go multi- token one of the first to offer margin um we um of course moved into derivatives a while ago with our our futures product and so we've we have in fact you know invested meaningfully in that that that area and and we'll continue to do so we have you

know more tricks up Our Sleeve for that particular group of of clients we think that is um you know a really strong part of the business and uh you know what it means is that yeah if you compare you know Kraken a coinbase or some of these other companies are um you know how you know the stickiness of our our clients the retention of our clients is actually much stronger you know so when we we see kind of these you know various different bull bear Cycles we don't see as much you know pullback from our clients uh over those time periods and then furthermore um you know there's just given the increased level of activity there's of course a you know a stronger relationship higher arpo all those types of things for for our clients um but

going forward I mean I guess maybe I actually pick on one thing what is the arpo do like what is the arpu comparison of Kraken versus a coinbase user do you know that yeah I mean there's a few different ways to look at it like do you like strip out institutions or do you keep them in and you know number these different things and you know we don't really disclose like the specifics but you could think about it as like sever multiples um you know like yeah three three to five x and it's and it's for this reason though I mean I think probably like you know the the strong investors out there probably would almost guess this you know if you just described our our type of you know client where we're where we're the strongest and so forth um but um but the

reality is is that we have uh you know since uh a handful of years ago launched a a product and experience that much more catered towards uh you know consumer ret s in individuals and you know the way we're thinking about that product and its approach is um you know look coinbase of course has been in in that uh that segment really deeply for a long period of time and you know they they of course have their their reputation but I think there's a great opportunity for a lot of the things that we built in Pro to like consumer ify them and make them really simplistic whether it's um you know uh you know things like uh margin trading or any of these types of things and find a way to

make it really simplistic and understandable and bring the right education and service and all these other pieces for for consumers and we think that um you know that's an opportunity out there just given you know that we've we've done all of these things for successfully for an advanced Trader and we you know there should be an opportunity to do that more for consumers so I do think um you know going forward we have been growing that that you know segment which is you know kind of like the non-advanced trader more the uh you know individual you know consumer retail investor what have you and I think we're we're already seeing really good success really good growth there and I think there's you know a lot more that we'll continue to do to expand in expand in that way and we'll probably

you know hopefully do it in a slight you know somewhat of a different way right where we you know we leverage some of what we built on the pro side and and these various different things to really have a nice uh nice experience for for clients nice one thing that I've noticed you guys doing differently is um Jesse was very anti-marketing as someone who tried to sell him sponsorships and ads for many years and was never successful uh and you brought on this uh like I'd call I'd call it a fancy CMO from uh I think Spotify mayor I think is his name um who seems incredible um and you guys have done these big outdoor like out of home campaigns I think in the in in the tube uh like sports thing like you've done you've done Williams you guys brought your Williams C to permission

list last year and is you know got this like Booth like you you're doing the bank list sponsorship like how has marketing been this is really the first like I'd say 12 to 18 months that I've ever seen you guys Market how has that how has that been well you know that I'm glad you asked because it's it's the part that I like left out maybe not intentionally so kind of like just you know when I was talking about the the most recent 12 months in the the market share gains and so forth um so yes we were navigating a number of these challenges with you know banks in in in regulators and going for licenses and staying in markets while you know peers were pulling back but the other thing is is that you hit the nail on the head we started marketing for the first time

ever and okay we had done some marketing before but you know really not significant um and uh I'm glad you you you mentioned Meer um Kraken Chief marketing officer who's been here roughly a couple years now and really that first year was a lot of um you know really you know foundational team structure starting to um you know move move the ball forward and a few different areas of marketing but then in the past 12 months we did actually ramp up and so we I mean it wasn't a huge amount of spend that we brought during this bare period but we actually increased our marketing set meaningfully into the bare market in terms of

absolute not just in terms of percent of the total but even in terms of absolute dollars and so that was like um and we were doing it you know with the right team and and we did we did continue to do it fairly um I don't know what the right term is but you know methodically or we look to really build uh build in the right way here um as opposed to just you know kind of jumping out a couple Stadium you Stadium naming rights deals or what have you but it's really all the different components and so that was also likely one of the big drivers of why we saw you know positive Market sh over that period it was like we were in the opposite direction of marketing as everybody else and so we really saw it

with a you know strong new new client acquisition and a number of really good things over that period yeah what's what's the uh old saying about marketing it's like 50% of your marketing works the problem with marketing is you just can't tell which 50% of that is well it is challenging right I mean there I mean that's there's an es and flows there on the the marketing side we kind of went from you know world I think back in the day before I was even like deal where there was like no clue on you know you do these ad campaigns and tv ads and radio or whatever it was and then we went to a world where there's like really tight um Performance Marketing paid advertising direct uh to client and I think that's being like somewhat

challenged now just given like how much data is you know shared by the various different you know companies out there that you do paid advertising with but um nonetheless yeah really um really you know that that certainly is a challenge I mean that that's almost the whole game of like you know testing and trying a number of different um approaches areas to you know advertise I mean I guess it's a little bit more on the growth side and product side and um and then you make some of the bigger bets on the the brand marketing side yeah I want to talk about some of the products in a sec you guys had a uh you had a tweet about uh I want to talk about Kraken bank I want to talk about the wallet that you guys just rolled out but before I do that um if I were you guys just the last

thing on coinbase is like coinbase is public and you guys aren't and I'd be looking at the success of coinbase so I've got their what you know their stock bottom out at like I don't know 50 bucks 60 bucks it's now trading at 225 they've got earnings I think this week market cap of 54 55 billion like if I were the board of Kraken and I were if I were Dave I'd be like all right like this is kind of our you know we you know we've been private company for 11 years like this is our time to shine um how are you thinking about just like a event either an IPO or like an exit this cycle yeah I mean it's it's of course out there you know so one is you I don't know you've probably heard this song and dance from many

others that you can only get so specific on you know these types of plans so can't really can't really share but certainly he out there I mean from a financial profile standpoint Kraken is you know big and profitable and certainly the you know larger than many other public companies out there so you know that exists you know of course um uh you know there's there's more to it than just that um you know to to go public and there also implications of it um but you know I mean it's it's one of the many things out there um you know with regard to investing the private or public side that is absolutely on you know on our list as you know something in the future do you think it's a higher likelihood that you guys sell or I guess

that's the range of buyers is actually pretty small because you you guys have such a high valuation but like is it a higher likelihood that you sell or that you IPO you know I mean well I mean just taking the the the topic directly on you know a sale or an acquisition I mean there there are a huge number of things to get get right on on such a thing and you're right the valuation is higher and so that leaves your your uh leaves it leaves us at a place where it's like maybe a lot of traditional Finance uh companies that would have that level of you know pocketbook to to go on buy of course you know they're not ready to come into crypto anyways I mean you think about like a big Bank or whatever and then there's you know all kinds of

different questions on whether C Kraken would be a great fit for those those types of companies or not and you know there's reasons why you might might question that as well um so so yeah I mean I think it's you know I mean I think while while you know obviously if there was some like you know big m&a offer you know inbound it's it's not like we would just like you know I I presume ignore it out of hand but there's you know this isn't this isn't the goal for the the business we think like driving Kraken as a uh you know as a successful business it can grow to be incredibly successful um already has and will will continue to grow to be incredibly successful all on its own

without necessarily going down uh you know the m&a route we think we just have like huge number of you know opportunities to to really make it you know an enduring incredibly successful business certainly irrespective of um you know being acquired by somebody else and then even irrespective of you know IPO as well and that's like you know number one what we're focused on and we we know it to be you know possible and and the the outcome that's gonna happen so that's where we're really really driving nice um well that's exciting man uh how do you describe Kraken to I'm gonna I'm I I know you did not just tell me anything about an IPO but like let's let's I'm going to make up that you guys

were iping um and I'm trying to almost picture like you at a Road Show and trying to describe kraken's business I imagine it' actually be quite tough because the crypto exchange as I see it kind of sits in the center of the spectrum on the right hand side of the spectrum is like moving more and more onchain like the self custody wallet that I want to talk to you about and all that kind of good stuff and then on the left side of the spectrum there's like yeah you guys rolled out this like State chartered full Reserve Bank like yeah you're you know that is like that's a bank that's the other side of the spectrum how do you describe like someone sits down with you large Institution and they're like Dave what is what is Kraken in like five to 10 years from now

how do you well look I mean like the you know the jobs to be done for our clients you know actually involve both of those those types of things so it's really um it's really the first first piece is like what I'll describe as building the bridge um I'll come back to that you know number two is is bringing our bringing our clients more more investable tradable assets more access to ious different you know parts of the crypto ecosystems and and so forth and the third piece is just giving them an incredible uh experience incredible user experience VI products also for US service to be able to navigate it all understand it all digest it all um and

this you know Cuts as we talked about before you know for for professional Traders an incredibly uh fantastic Pro experience but then you know for the other segments we go after just the same providing them you know the same incredible user experience that you know fits their needs and so forth so those are the three jobs to be done and in these three I think it's like we we we basically get at the this Dynamic where it really ends up being both and so first the bridge so what's the bridge the bridge is from Trad fi to crypto right we're we're we're this bridge from uh you know this you know this Legacy system to this to this uh to this new Incredible you know decentralized ecosystem that is growing at an incredible rate with tons of new

Innovations and so forth but in order to be a bridge it's kind of a least common denominator um there's a ton of different pieces that are really necessary to integrate with trafi I mean in order to do that I mean red compliance banking relationships securi fundamental to all these different pieces custody actually ends up being a a meaningful piece to really pull off the um uh the bridge because that's that's what's necessary in order to um actually provide a way to get from Fiat to to crypto um and so all of th all of those foundational pieces of being a bridge are are really meaningful and yes that's where like a custody license uh you know comes in and a number of these

different pieces that we do you know we spend a huge amount of effort and resource on Regulatory Compliance um in all of our major markets right and so this this bridge that we talk about is really I guess that it almost pulls in the geographic piece which is hey for us that's Europe UK US Canada Australia and we'll we'll potentially add to those geographies over time but you know that's our model is to go deep is to support the if we go into the market support the domestic fiat currency localize provide that all these things lead towards kind of the last element they provide the foundation to have an awesome uh client experience and so um and so we're you know we're we're kind of thoughtful about when we're when we're going to expand and and add to

that because it is a lift to do so um the second piece is where you're kind of the other side of the coin on the question is is like look we want to build more and more access to more and more investable tradable Assets in crypto um and uh more access to you know all the things you you can do in in crypto which you know for us is is a lot a lot of it is I mean it's you know a value Network a financial Network a lot of this has to do with you know investing trading finding ways to earn all these types of things um and a a meaningful way to do that I'm sure we can add more uh you know tokens to our centralized exchange and provide more custodial staking and so forth but a big way to do that is to actually um move on

chain um you know this is an open ecosystem Innovation is uh happening quickly uh we think it's going to accelerate uh one of the great things about kind of like the the the two more meaningful use cases I'll say of the last cycle defi defi summer and then um really nft but you know kind of digital art and pfps really were the were the trend of where we saw the growth they were both meaningfully onchain uh which was awesome in different than you know previous cycle where it was like you know icos and centralized exchanges and that's like you know how I you know drove so I think that's we're looking forward to that you

know happening even more so going forward and so you know for us you know the wallet's a meaningful piece of this and providing access to all these I mean whether it's you know Trading and investing into the long taale of cryptocurrencies that we would never La list on the the centralized exchange just you know from a resource standpoint and you know whatever else it is um to you know a number of other things in in the crypto space and so I think both of them really are meaningful because we're you know that bridge is foundational on the first job to be done and then the second one of you know providing access to more that that definitely means going on chain nice farthest end of the spectrum is Kraken launching an L2 so I I just have to ask you about when I saw

you guys launch the self- custody wallet the first thing that came to mind was that's really cool I got to check that out the second thing that came to mind is I mean kraken's got to be thinking about launching their own L2 on the success seeing success of other of other exchanges do yeah how are you thinking about uh you know a kraken L2 yeah I think um a couple things so one yeah you know first on the wallet I mean absolutely we're totally excited about that it's like you know one of looks great by the way it looks really really good yeah the the ux is is incredible which is you know uh definitely something that we're you know really uh well really looking to hang our head on and really meaningful piece of of this company um uh you know going forward the

you know it's open source you know a good portion of this stack is open source which is different than many of the other I think maybe all of the other um kind of like similar peer type companies that have have launched wallets um that have launched a a crypto wallet um but yeah with regard to your your your more significant question there in an L2 yeah for sure I mean I would say like l2s in general are uh you know you might say that's like one of the big areas of like this cycle you know to the extent that we're kicking off a new cycle here it's one of the big areas right I mean there's a lot of investment in l2s there's always been a lot of investment in scaling whether that's base layer or um additional layer

and there's certainly a lot of activity here and I think one of the things that there's of course this trade-off when you go L1 L2 you know with respect to um security finality all these various different types of things you get more you know transaction throughput and scalability and I think that's actually meaningful for the industry to continue to like test that that Spectrum you know between the two and find the right uh right balance I mean there's no question that like the big Bitcoin Mass you know most um could say like secure decentralized whatever it is is like the core of what this value brings but like looking to think about layers on top of

that whether it's lightning or you know certainly any of the anything else on ethereum or salana or whatever you know l2s are really meaningful where do cracken play yeah we haven't announced anything or you know any like anything specific with regard to like you know building our our own uh L2 but I'll say for sure much the same as I I mentioned before with regard to um you know jobs to be done and so forth but you know being part of this in some form or fashion is absolutely you know a goal for for Kraken right you know whether it's providing access to many l2s um you know building our own uh L2 and sequence any of these types of

things I mean are you know we hope we would like to think that you know we we approach a lot of these things thinking you know fairly broadly of the different opportunities out there all right I mentioned them in the pre-roll now I'm going to bring them up again it's arbitrum Santi and I are really fed up with these high fees and we're really excited to have teamed up with arbitrum for the next couple of months on Empire as the leading ethereum scaling solution arbitrum now Powers hundreds of decentralized apps across defi herps NFS gaming and a whole lot more the team has showed us everything in the ecosystem both now and what's to come and we're really really excited about it arbitrum allows both daily users and developers to interact with ethereum at scale with low fees and

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there there are there are a lot of fees flowing through that there are a lot of fees yeah yeah yeah we'll see the late yeah it be interesting how do you weigh the like I mean yeah like looking at the like fees it's obviously ridiculous they're making a lot of money from it but like the other side of that might be there's a like concern on the regulatory front and you guys I mean you you had a like a few run-ins with the SEC I think the first one you settled the second one you pushed back and said we're not going to settle I'm sure there's I don't know I really don't understand how the game works but like how do how do you weigh the like pros I we have an L2 we have our own chain we can either capture the me or the fees or whatever it is cons is

like makes it harder to IPO or get acquired or something like that how do you weigh those yeah I think um I mean I think when it comes out I mean just to like maybe just like take that IPO thing when more really specifically like yeah I mean look I mean for sure we're oriented towards serving our clients building the biggest business we can uh achieving the mission all those types of things and you know an IPO is more of a means it's not the endgame at all right and so that that's how that that factors in but that irrespective of that there's a meaningful Regulatory Compliance question for any of these new uh you know Innovations out there I mean we the way it works is we have an

enormous team that you know spends all their time on this right you know we have you know 60 60-ish legal team you know people on legal now yeah 250 plus is Marco sanor still running that he is yeah yeah he runs that runs that legal team you know 250 Plus on the compliance side I mean just really a meaningful investment in this area and you know when you swing to the legal side I mean there when we when we think about these new new technologies and Innovations it's not like there's there's it's not like there's any like for the most part you know think about like an L2 or whatever L2 running a sequence there there's just nothing out there um with

regard to um specific regul regulations and guidelines or what have you for a number of these different things and so you kind of have to say like okay well let's look at the let's look at the actual law here and do that you know make sure we're you know applying that law to these new Innovations is really what any innovator has to do in that area that's poking around something that's like you know somewhat regulated or or whatever and so you know that's what that that team does they do an incredible job of it and um you know they of course partner meaningfully with uh our product team business teams and so forth to you know iterate and understand what we're actually trying to

to build and might even influence it to some extent how we build it um of course it influences whether we build it or not but you know it definitely um influences how we build it also I mean also influences what like where we offer it um you know so this ends up being you know given laws are tied to governments and governments are you know countries and so it it ends up being a geographic question as well um so yeah there's a lot a lot there like we often say like much more than you know much more than you would have probably ever envisioned you know long long ago yeah yeah um by the way Marco santor still has uh there's a podcast he did in I think it was 2017 or beginning of 2018 on Laura

Shin's podcast Unchained still one of the best episodes I've I I remember that being like a very pivotal episode for me in 2017 yeah I was like oh these remember IC it was like during all all the icos Mark's like yeah a bunch of these are crap but like there is something here with these tokens I was like oh okay all right yeah it's interesting I mean that really really was the outcome right I mean most of it so those 2017 iOS were ridiculous but yeah so what I mean just zooming out from Kraken because I'm gonna stop uh annoying you with trying to unveil your top secret Kraken plans here uh like what do you think the what do you think ends up happening to centralized exchanges as more and more activity goes on chain yeah I

mean they well it depends I mean depends what type of centralized exchange you're you're operating I think um so um I think for a centralized exchange like Kraken um where we we have this business where we're a bridge and then we're also looking to provide access to as much of crypto as we can we become like you know increasingly increasingly successful and it just continues to um you know we just hit I mean it's escape velocity and we just you know grow and grow and become really successful because look look I think more and more activity on on chain Is Awesome from Kraken standpoint um we even think that's awesome for our kind

of like core centralized exchange a bridge business right um the more use cases there are the more reasons there are to you know buy invest in trade use uh crypto and in in other you know decentralized assets I mean the more and more significant the demand is for all of really all of kraken's products I mean none of them really go away with any of this in particular to the bridge because um there's you know however many you know I don't know what call it 500 million people have touched crypto so far but you know a huge n portion of those are just like I bought a very small amount of Bitcoin or

ethereum or whatever or or Dogecoin or whatever it is from the last cycle and you know bar you barely call them in in the ecosystem just yet you know just really scratching the surface and so when we think about the number of people out there I mean they're all going to be coming from trafi right yeah they're be coming with their Fiat looking to get away from Fiat we GNA move to crypto um and that's what you know that's a big part of what this this bridge means and so I think that's gonna be incredibly successful we um think you know the more activity and only expands for Kraken we will also provide direct access to a lot of that stuff on chain with great

security great service all these various different things and so I think it really is a a fantastic outcome and we were encouraged by every I mean I I specifically look I mean I'm when when I go look at the the volume numbers for decentralized exchanges I'm always like cheering whenever I see those numbers move up and even if I see a move up as share of total of e centralized exchanges I'm like [ __ ] yeah this is this is good I'm like you know this is what we want to see let's go yeah yeah I mean it really is and so and and that's true of other use cases as well and so it I mean I think that's something that's you know kenites at our company really really get this and

understand this and root for this just the same yeah that's cool what do um maybe shifting gears a little bit what do you think about the NASDAQ or was it NASDAQ or n I think it was n is considering shifting to a 247 trading model here wait let me pull up this yeah I think it was n I'm not think it was the first they were the first ones to mention it I think oh yeah okay so the iconic Bell of the N has been a symbol of the financial world for the past Century every Monday through Friday 9:30 to 4 Bell Rings the NIS is now contemplating a move towards 247 365 stock trading a shift that would mean the stock Market never closes what uh

what what do you think about this yeah I mean I guess I guess two things um you know kind of surprising that you haven't seen this earlier which I don't know I maybe there were like some small mentions of this in pockets of n or NASDAQ or CME or whoever but it doesn't seem like it's been like something really stated with like um Authority or or some level of like hey yeah this is really something that should be considered yeah it's kind of surprising I mean you know 247365 let's just let's just you know for a minute also note the fact that like um 247 365 like is a very um local country way of

thinking about something right because not ever even had not everyone has the same 24 for sure right we're all on different you know time zones across this whole planet and you know this is a very Global World and um we're not even all on the same seven right some countries in the world have different uh days for weekends and and we're certainly not on the same 365 with respect to holidays and uh seasonality and all these types of things so it's like a very non-global way of you know you know thinking that um you know 247 247 365 by definition is like hey this means Global right and you know thinking in a world that is not Global is I mean it's it's very um

you know years ago decade ago mentality I think um because you know the world is is going to become more Global this is one of the reasons why you know cryptocurrency is Bitcoin cryptocurrency are such just like meaningful Innovations is because they s for This Global Dynamic and they they probably solve for they solve for the this is where I get to what does it actually mean for I they sufer it in an in incredibly elegant Way by just like creating a new system that is like actually built to be Global whereas kind of like trying to retrofit or upgrade this um an existing system to be Global 247 365 might not be that easy right so they can do it but

you know the only way to you know get funds on and off those uh on and off you know nisy might still be kind of held up in the old 9 to-5 Monday through Friday world you still got the brok they you still got the Brokers um you got the Brokers I mean you have the actual Fiat money movement that are going and trading on NASDAQ it's not like a crypto exchange yeah so I don't know I mean hey but you know maybe they can you know start unpacking that and you know incrementally moving in that direction and and so forth but I don't know we'll let them sort that out uh okay fast forward five years from now do n NASDAQ and NIS support crypto trading oh what was the time frame five

years five years yeah I mean I think pretty likely um I I would say yeah I would say I would say fairly likely I mean one of them you know well let's see wait a minute both of them I mean all three of them are are like the there's four big ones right there's NIS which is owned by Ice there's NASDAQ there's CME and then there's sibo you already have sibo um in and now exiting I think and I think they've done that a couple of times cme's kind of been in there with Futures uh for a while now NY there's ice and they kind of like funded founded back NASDAQ has you know actually been but they have

such a bad experience with backed like back they did and sibo shutting down as well right I mean as far as I understand like d list any day now yeah exactly so so it's an interesting Dynamic right like I think the answer is and I and I and we know you know just from like various different articles out there and so forth that NASDAQ has been like building and investing in this area although I guess maybe not launching or pausing and so forth so I think that but but the reality is is it really isn't due to adoption in the ecosystem we see the ETFs just came out with huge ENT you know adoption by a number of uh big trafi in the US those have been meaningfully successful you know most

would say by any measure um in terms of adoption and so forth so I think there's really a couple things at play one is um you know it's not necessarily that easy I mean it's not just that easy to like snap your fingers and uh you know launch one of these businesses um maybe you could build the products to some extent this sums it up nicely for anyone who's not watching yeah that's what I was talking about yeah is not watching on YouTube uh and just listening to the podcast NASDAQ is repurposing their crypto te to become carbon uh to become carbon technology fascinating yeah NASDAQ will repurpose cryptotech to

develop carbon markets uh exchange operator scrapped crypto custody plans this summer Tech will be redeployed co-president so yeah exactly cycle behavior and they'll come yeah it's yeah the part of it is probably a cycle they're they're looking at like okay what's what's the potential demand out there what portion of that demand are we going to get which I think is like the biggest biggest question and then you know what's all the investment required to you know to to do this and you know they kind of e and flow on their analysis there and I think they you know they move in and then they realize you know maybe how hard some of this is to build and then they probably realize also like Hey we're not just going to like magically get demand for this stuff right out of the gate um

because there's awesome companies like Kraken and in our peers and so forth that you know have already solved tough problems and they built products in a kind of like crypto first way that you know we really understand these individuals and all the various different segments out there and I mean this is cracking in in some of our peers and so forth so I think there's a a big part of it is that but I mean look I mean I I don't think it's like a complete null set on whether any of these like traditional Financial Services firms are going to be able to like enter and be successful I think they're already have intention enter Bitcoin crypto just going to continue to grow the incentive to do so is going to continue to be there we see some that are you know finding places of success I

mean even I would say CME Futures have been successful on this kind of trfi side I think um many of uh okay Fidelity has kind of like long been around the space and is now seeing even more success with their ETF obviously Black Rack jumped out and so you know while it may not be you know NASDAQ apparently exiting now you you don't point to them as successful but you know I think there are some companies and and it you know it seems to be like generally some that have like come with like you know different offerings I mean if you to the extent you call the fintex Trad fi companies um you know they've seen some success so block cash app revolute right uh PayPal PayPal great interesting they

they kind of came with their stable coin which I think is you know interesting that they made that move as opposed to just you know the straight up simple buy Bitcoin and crypto in the wallet you have any advice for I mean you've been in when did when did so you started glidera and then got bought 2013 yeah 2016 yeah do you have do you have advice for folks who uh maybe this is their first or or maybe their second cycle being a founder or or a CEO or an operator like how do you think about operating through Cycles um and like how how much to push the gas right now when do you actually ease off like do you ease off before others are easing off how do how do you think about just operating through Cycles yeah well this is one of the things that we've like

really been dialing in more and and really thinking about intentionally um much more so recently you know in in somewhat driven by learnings from you know previous cycles and so forth first off I think it's like really challenging to build a business uh in this space where you experience these periods yeah exactly I mean for all kinds of reasons but just on this particular one this one of many but this scalability piece of like hey we have this business that's going to do a you know 10x or even 20x within a uh 12-month period first of all meeting that demand and handling that demand that's a huge set of challenges but then on top of that's going to you

know pull back 50% plus potentially in with respect to client demand and what have you for you know a subsequent period that immediately follows that period this is really actually quite challenging um from a uh you know there's a there's the question on tech technology platform and can your can your platform just simply scale and or does it you know come to its knees and um uh you know people are unable to access log in you know see all kinds of different errors or what have you bugs different things crop up once you once you try and put 10x to load on a a platform so that's one that's one where we've invested like meaningfully in I honestly like like really

meaningfully like we went from like almost I would say like unfortunately I would say almost worst in class back in like the 2017 is time period to Best in Class like if you look at our uptime our stability our response time all of these different types of things we're like absolutely Market leading now which I I don't know if like folks really like really under understand and we've marketed it very well because we did come from a place where we we probably had more more issues in the 2017 Bowl run than than most others and that probably sticks in some people's minds and so forth but like we've invested

meaningfully here and we're like uh really top of the market um in terms of you know Tech platform performance yeah I'm convinced there's no good way to Market that by the way it's it's tough right yeah yeah I don't know the best marketing is when it just works yeah I'm not sure if you can Market that yeah yeah it's very tricky it's uh I it's really like I think probably the hardest part of my co-founder name is Mike of Mike and my job oftentimes is like I remember in the heart of the bar Market we were telling the company to we're like we're we need to hire now like we're as soon as we saw little signs of growth in like end of summer of 2023 we're like we're foot on the gas we're starting to hire now um

and we're like it's gonna see it's I know it seems insane but we need to hire now because the talent pool is like the best we're ever gonna find and then it's gonna get insane to find talent and now we're saying the opposite thing which is like well we're still hiring right now but like at some point in like let's say 12 months from now everything's gonna be ripping everything's gonna be going amazing and we're gonna have to say hey like this is the time to start slowing things down it's just it's a very weird dynamic it is I mean and there you you take us to like the next piece of this equation which is much more difficult to scale people in a team than it is to like build a technology platform you know running in data centers that you can you know scale 10x right and so we

think about this in like a few different buckets um but maybe I'll just like break it down to a couple couple ones one is we we do have a a portion of our team that is like um very much impacted by you know the an increase in 10x client demand and so these are individuals that are providing you know our client engagement team that provides Direct support to clients um uh our operational teams that uh help with you know onboarding clients fraud that's tied to like level of transaction activity you know for our operations team so a lot of these operational teams these you know we think what are all the different levers that we can have in place what's the Playbook that we can have in place both for when we start

seeing these volume increases to like increase the size of that team uh very quickly how flexible can the you know the teams be from that standpoint then of course what can we look to like push even more and more towards automation AI all these various different pieces that um well frankly again you know put you in a place where they you know scale much more quickly than being able you know than having to add a lot of people but and knowbly that's kind of like we call them you know like the volume based you know part of our our team that's really tied to then there's some others that are like not quite as much so you know I mean if you think about like product and Engineering like yes there's more demand there's more opportunity to build new products and so forth but like

frankly like you know adding team members here is is is and even it's just is just more time lag right so I mean it's it's not just you know to recruit an engineer is you know a significant amount of time to get make sure we just you know get fantastic talent in but get them in trained integrated in the team performing all these types of things I mean by the time a lot of those things happen I mean you're well into the bear or bull cycle anyways right and so you're you're almost looking at so I think it's like for those functions you or those parts of the business you I mean ideally from a culture standpoint a you know Talent standpoint retention standpoint you you

ideally find a way to be much more balanced in how you you grow there I mean even even potentially uh adding people still in a bare Market to grab opportunities that are out there um where you know other companies might you know that took a different approach might be struggling more so um and so yeah I mean I think there's uh there's a lot to be said for you know basically handling these challenges on both sides and getting the recipe right and I think I think it's one thing that we actually you know we've certainly learned a lot over the years you know having done it I think it's like frankly it's kind of in and of itself a differentiator the fact that we have this at this point I would

say much more figured out than really a lot of other companies out there yeah there was a coin the coinless CEO tweeted this I think it was this weekend or something and sparked a nice little Twitter conversation he said having talked to a number of Founders and CEOs recently uh interesting that it's universally agreed upon that the worst people to hire are crypto Natives and the best people from outside who build an active interest and respect for the space are the best people to hire um and I could not disagree more with him actually yeah this is this is I would take the exact opposite take I think and I'm just yeah well I shouldn't maybe I shouldn't have said my take because I want to get your what you think about but you car but it sounds like you your mind's made

up on this one yeah I mean my mind's made up but I'm curious for other operators like how do you think about the there's a trade-off when you hire every time you hire there's like you hire with experience they have experience but they don't know crypto or they know crypto and they don't have as much experience and sometimes you can find the third like the coveted unicorn where they have both but often they making that tradeoff and I'd be curious how you think about that tradeoff yeah you know so I mean there's so many different dimensions on how to how to break this down so first off unlik crypto expertise um this is um this is one of our operating principles one of our you know four main operating principles that we we lead with this it's one of our values even I mean it

shows up in our culture document that our culture is based on kind of uh crypto ideal so it's like it is like incredibly meaningful to us and absolutely absolutely we think that it is you know important to um you know to to be you know top of our game and in top of the industry with regard to to crypto expertise I do think it comes in both both forms I mean I I absolutely think it comes in um the form of people that have you know been in the industry for a long period of time for sure you know I guess you know you and I are you know roughly in that boat right and um we have a lot of people at Kraken

that are in that boat and I and I do think there's there's absolute piece of this but um I there's there's nothing that I enjoy more really than like seeing someone who um comes into Kraken who has a ton of uh belief in the mission interest in crypto but is you know hey their their expertise level isn't the same as someone who's been in crypto for 10 years but they're really interested in looking diving in um uh you know with everything they got to you know to build build expertise and understand the industry and they're doing it even on their free time and all these types of things I think that is you know really special as well and what what I would very much like to see um

you know you know what I very much like to see at Kraken um and so I think it's a combination of the two like yeah I mean the um you know there may be some you know other you know expertise you get you know in other indust and so forth whether it's you know someone who's you know was in trafi and saw the light and is ready you know knows that Fiat is is on its way out and crypto's on its way in I mean we see that for sure and I you know I think um you know so there there's there's a number of people I would say from like you know a number of different groups and backgrounds but like hopefully the um the one consistent pieces is that everyone is is really bought into our mission driving forward uh to to learn

and consume as much as they can about you know crypto and Industry and education and everything last uh last two questions before I let you hop here um just maybe zooming way out and just thinking about the cycle as as we know it um just curious to get your take because you've been in the industry for so long every every Cy every cycle ends with some big blow up like the last cycle I think you could say maybe the 2017 cycle was like the Ico blowup um yeah 27 or last cycle was probably I would call it like a leverage blow up with like cus and blockfi and teruna in actually some ways was like a leverage blow up um and then and then FTX was just a fraud obviously but um yeah do you have any like early signs of what

you think like could be the like things that you're paying attention to right now where you're like ah looks good when numbers going up like that seems like the scary thing well you know that's about what you can do at this point in time often um is like okay well look where things are like really going and then you know and then you get to this place where it's like oh well you know they they're potentially really going up because there is something there and it it you know it is really interesting but then you know it gets to a point where it's like okay things have gotten ahead of itself you know ahead of themselves and therefore it's you know there's leverage kind of crept in or or whatever it is to the to the system so I don't know I mean this cycle where are

we really seeing the the activity I mean I think there's like all this you know there's a lot going on with you know all l2s scaling and you know kind of new applications on that front um there's a lot going on with you know reaking um and some of these various different new mechanisms with reaking still some activity with like you know stable coins both um you know kind of onchain algo St St stable coins or whatever so look I I mean I think what probably the real answer though is we don't I don't think it's like really clear though what like the big kind of like catalac and drivers are of of growth for this ecosystem and and

probably even less clear where there's you know potential for um something to really get ahead of itself and and come crashing down um we're still frankly early I mean we just hit the having uh you know so if we do repeat this fouryear cycle we're still you know quite early so we'll you know we'll kind of see how things play out last question what is your expectation of like how long this cycle last and what the cycle looks like yeah you know it's interesting I've heard yeah I've definitely heard cases to be made on on both sides of the spectrum on this one like oh you know we're we're starting earlier now we hit the all-time high before the having you know we're gonna

um the the cycles of like increasingly kind of like front run each you know the previous one you know which somewhat makes sense that you know Traders investors lean lean into Cycles you know if they expect it to come they'll lean into it earlier so I've certainly heard that um there's also Dynamic that like each cycle is a little bit more muted than the previous one you know so the high you know the high is not quite as you know the new all-time high is nowhere near um is significant of multiple of the previous one is the cycle before and so on and so forth um and M and similarly the pullback isn't as significant and so that kind of like leads you you know that what that set of logic leads to a place where it's like H you know maybe it'll just be a bit more

muted just kind of maybe last a little bit longer but but not be quite as crazy and and so forth so look I think you know I think this this Dynamic that we um you know are leaning a little bit earlier into the cycle now um you know is probably meaningful and you know we we already have the ETF Catalyst which I think are kind of just a mini Catalyst if you will I think there's going need to be like you know something like bigger probably onchain you know some of these different things really getting meaningful to you know drive you know even more adoption going forward and so yeah I think that's probably where we'll

head nice Dave pleasure man this is this has been great yeah yeah likewise great great connecting with you here really appreciate it yeah enjoyed all right be well man talk soon thanks everyone Jason here thank you so much for watching today's episode wanted to take a quick second to thank today's title sponsor arbitrum we know you are tired of onchain experiences that have unaffordable fees and frustrating transaction speeds and that's why we partnered with arbitrum you can experience frictionless trades lightning speed and lag-free transactions all for pennies per transaction explore arbitrum expanding ecosystem at portal. arbitrum doio that's portal. arbitrum doio see you for the next episode

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