Kraken’s 10 Year Plan | Arjun Sethi

Transcript

Hey, that's crazy. You're either working for free or that I'm crazy enough to believe that like we can hit those milestones over the next 10 years. Um, so I have a 10-year period to be able to hit that. And so as I explain that to folks and they're like, "Okay, um, you basically don't get anything if we don't hit these milestones." So you're basically here to try to hit those milestones. And so if you're if you're here over, you know, 10 years to try to hit like these extreme goals, then you get rewarded for it. And that means I'm trying to put people in place to be able to hit those goals and and sort of thinking bigger and bigger as we start executing it. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the

views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Block Works team may hold positions in the companies, funds, or projects discussed. All right, everyone. Welcome back to Empire. I've been waiting for this episode for a long time. We had um Dave Ripley, uh the co-CEO Kraken on the podcast a long time ago. We now have the other co-CEO, Arjun, on the pod. So, Arjun welcome man. >> Thanks for having me. >> Yeah. Um dude, I know nothing about you, so I wanted to start there. Um I I actually spoke with some of your co-founders at Tribe years ago. Um, what I know about you is you were an executive Yahoo. You started Tribecap. I think you're a partner with Chimoth over

at Social Capital. That's right. And now you are co-CEO of of Kraken. Um, but I know other than that, I really know nothing about you. So, I'd love to tell me about yourself, man. >> Um, I guess where do you want me to start? >> I would like to understand uh maybe we can actually just fast forward through your career into why you decided to take this role at Kraken. >> Sure. Um, let's see. So I think I think um so actually I'll tell you the the tribe story is pretty synonymous with Kraken as a whole. And so at tribe when we started the firm we were when you think about venture capital it's a very um who you know versus what you know ecosystem.

>> Yeah. And um and I'm sure you've been through it as well where there's just like you there's just there's just a lot of folks that um like think venture capital and capital raising information is is in a very specific way. And when you work at a company and you work on any product and you're making it better, you're thinking about um you know testing an iteration. You have a hypothesis and you can just keep you know incrementally making it better and better. And so I think there's never been a time to build better companies, but you just never and all the innovation that continue to happen. We know all all the great companies like you know Facebook or Airbnb, Square, you know, um etc etc. But when you think about financial services, there hasn't

really been much movement at all. Um you know the the greatest innovation is like Excel, um which is which pretty much sucks. Yeah. >> And so when you take a look at like early stage, seed stage, mid-stage, late stage, um it's kind of the same. Everyone goes through the same process. They might be looking at other heristics, but it's a very manual process. And uh and I think that whole process is frankly quite broken. So when we started tribe it was literally can we get access to u raw data for us to be able to interpret that and then through an interpretation of ingesting it cleansing it and we can come up with our own heristics not just for one company but many companies

then could we be better partners could we deploy more capital in like a more efficient way and can we get capital to folks that actually needed the capital versus someone who was like in a FOMO category so the world's still >> really data I remember the pitch years ago when I was on the call I think it Was one of your co-founders Jonathan? >> Jonathan's one of our co-ounders. >> Yeah, I think it was a data science driven or AIdriven or data science driven venture firm. >> Yeah. So, I think those are those are terms that people use to uh make it less >> it's a nice marketing.

>> Yeah. It's uh it's it's just like saying like yeah we use AI and machine learning. Okay. Well, like you can use chat does doesn't mean you use AI at your firm. It was more that when we got data from a company, we could um we could ingest it and then if you had N plus a thousand companies, could you benchmark it the same way you think about public markets? And so what is the data that you wanted? So you start off with everything. Then you figure out how to ingest it, label it, um and then think about ways in which you can interpret it >> and then you can come up with a criteria for decision-m. One of those criterias are helping a company, investing in a company or just helping to alleviate some of those insights.

>> Nice. Um so that that core thesis for us hasn't changed which is like how do we continue to empower sort of founders and people that are building companies versus you know versus the other way around where the most vulnerable you'll ever be is when you're pitching to an investor which is like I need money. Yeah. >> Um that's not it's not always a fun place to be, right? Because you're you're trying to get people to understand who you are, what you do, and why the company you're building is important. And the more um and and more importantly, a lot of folks will make a decision off of the heristic of like, do I like the founder? Do I think they have what it takes? I just I just think

that's it's kind of in my opinion because like who do you know that has the capacity to do something? and and the best performance indicators are just how they've continued to perform over the last year, two, three or four or five years. Um, and so that was the thesis and it's worked out really well for us in terms of the types of companies that we've invested in all Kraken as well. Um and so if you think so if you think if you take that nugget which is how do you get to a place where you can empower the customer more than anyone else then when you think about crypto or at least what was really important for me. It was it was the same thing which was um I I grew up in the United States thinking about

you know or when my dad got here he like he kept thinking about um I get to come to the United States I get to build whatever I want I'm free to be able to build whatever I want and then I can use the tools and services that are out there to be successful >> and no one can get get in my way. Um, and so there's this whole concept of like a merit-based system, right? So, um, now when when you're growing up, at least for my generation, um, um, I guess I'm on the older side of the sort of the millennial range, um, at least for me it was the same thing, which is that there are there are um there's like a path that if you work hard enough or if you work harder than the other folks are around you, um, work smarter, not just

necessarily harder, like all of those things combined that you should be able to have a path to be able to also build whatever you want. And so that kind of led me to build multiple companies, test and iterate some stuff, experiment. Um, but I think like what led me into crypto more and more as I continued to dive deeper or get more obsessed with it, um, was just the pure nature of putting control back into the hands of the individual. >> Yeah. Um, so forget like Kraken or anything like any of these, you know, centralized exchanges just for for just bear with me for a second.

>> Um, is that why do I need the permission to innovate? Why do I need permission to control what is already mine? Um, and when you think about the financialization of your assets or your time or your data in some cases, um, I should be able to have full control over it. So that's that's why I sort of got on boarded with a with a mission of like you know with Jesse and Ton and created a Kraken for a long time and then when they asked me to kind of step in and help out it was a it was an easy yes over a long period of time.

>> Yeah. Yeah. Yeah. So so um I this is when did when did you join Kraken as co-CEO? A year ago >> officially. Yeah. Last year. This time last year. >> Okay. So it must have been early last summer maybe end of spring. Um I was talking to one of the venture firms who has a very large stake in Kraken has been like a early supporter since day one of their early days and um >> there's a lot there's a lot of firms that have always proclaimed that they've got a large >> Yeah. Of course. Yeah. Yeah. Of course. Um >> and I think that's actually an important thing. Um Kraken in its history um has only raised you know between 25 or 27 million like ever really in their series A. Yeah.

>> Wait in their series A. >> That's right. And so from that moment on, the company never raised any more capital. There was there was >> You guys have not raised money since the series A. >> That's correct. Yeah. >> Interesting. I didn't know that. >> I'm forgetting the exact >> Why is that? >> Well, the company's always been profitable and very disciplined about how >> Coinbase is profitable. Binance profitable, but OKX profitable. These guys are >> That's right. Um, I think it was more just the ethos of how uh Jesse and Ton started the company. And so all of the capital allocators that came to the company came in through secondary transactions. They either bought it from ex employees or early shareholders.

>> So you guys, Tribe invested in the series A. >> We didn't. We invested in you bought secondary. >> We bought secondary. Interesting. interesting. >> When I got introduced to the company, it was first through uh the folks at DCG when they introduced me to u uh to Jesse and it was more of an acquaintance and over time kind of built a relationship and then tribe officially invested into the company through a secondary transaction that the company facilitated in 2020 and 2021. So, here's my um Okay, so I was talking to this venture firm who now I don't know if they actually did series A or if they just bought secondary, but anyways, someone with the stake in in Kraken and um like how's it going? How are things Kraken? Like IPOs are start people are starting to talk about IPOs. Is Kraken going to do that? And they said, look,

we're we're you know, it's been peace time. We're going wartime. Yeah. And I was like, what what does that mean? They're like, oh, we're thinking about bringing this guy Arjun. >> Sure. >> Um he I was like, tell me about tell me about Arjun. Never met you, never heard of you. and um and they said, "Luck, he's a he's a killer and he's a he's an amazing product leader >> and he's going to shape Kraken into more of a product driven organization." Um tell me about why you think they picked you to be the co-CEO. >> Um well, the only person that um made the decision was Jesse and Ton. Those are two folks. Um they own most of the company today. Um they're on the board and they're the co-founders. And so my relationship has been with them and

obviously I was sitting on the board as an investor and a shareholder um sorry as an independent board member and investor and shareholder. And so um I'm flattered that other folks were a part of the process but I I think the look I I think I'm not sure um I can say that I'm a product visionary in any capacity um or that I'm good at product. It's just that I've been building products my whole life. Yeah. >> And so I have a a very specific way in which I look at the world and that has been always determined by uh I don't really know anything. So just assume nothing and who are the customers, who are the clients, they come first and so

what are the products and services that you can build for them. And so if you look at the mission of Kraken, I mean we have our literally our culture dock or our mission dock there which is around how do we get crypto into the hands of more people? How do we empower them be to own their own data in some cases, but they own their own capital? Um, and so that's that's um, you know, what does it mean to um, actually build products in that direction? >> Yeah, >> that's that's all I'm you know, continuing to build against, which is what that ethos is and was and and making sure that's like front and center. Yeah.

>> So, in terms of, you know, do do we have a faster product velocity? Yes. because we're just put, you know, we're going back to basics, which is what is a product, what are we trying to get done, uh what do we want to be able to provide value versus extract value, which is what typically companies do. >> Um and then and then and more importantly, the the premise of what crypto was in the first place. So kind of give you an example when you look at a traditional u financial services company that comes in um um you know like a bank or a neo bank they're they're trying to find out all the ways in which they can acquire as many customers as possible um but there's only a few areas where they can actually make money right the margin profile and that's usually rehypothecating users uh

customers funds in some cases which is fine you know it's regulated you're allowed to do that you have a partner bank etc etc and So um when a customer deposits funds and a bank again first principles is rehypothecating it. Um in the past you used to get uh a certain amount of yield back right your checking or your savings account had more yield than it has today. Um and so as rates have gone up and down they haven't really gone up and down for the customer. It's not like you get um a yield. And so if you if you look at crypto assets and what it allows you to do and why I think Kraken has been in my opinion more at the center of like what it what does it mean for the client and the customer is how do you get rewards or yield or um the power back in terms

of decision-m back to the customer. How do you educate them that this is happening? And and I think it's more and more important to think in that way for all of the new traditional assets that are also converging into what's happening in the into the crypto ecosystem. It's not something that's talked about. Most people just talk about, hey, we're going to bring these real world real world assets or these tokenized equities or assets into the crypto ecosystem. Um, but they're still trying to figure out ways in which to make that spread or that money the same way they made it before. Um, and and I think what the beauty of crypto is like when you think about earn, staking, yield, etc., it's like again in the hands of like what you guys want. You should be able to do the same thing with, you know, tokenized equities.

Tokenized equities. most of the financial companies, broker dealers, etc. that make money off of it, they make money off of securities lending, right? >> Um there's no if if that's going to happen, then you should be able to pass that back to the customer, not the other way around. >> Yeah. Yeah. I agree with that. Um okay, so I wanted to ask you about culture and how you've kind of impacted change across the organization so quickly. So I I use I use many different products in crypto. I've been a user of Kraken for several years. Also been a user of other things like Coinbase and other exchanges for many years. Uh it it's extremely clear to me that the product velocity has gone up about 10x since you've joined. Um >> and uh I guess on sitting in the founder of Block Works' shoes here, this is

something that Mike and I talk about all the time like how do you increase product velocity? How do you structure organizations and how um how flat should the or be your hierarchy and things like that? How have you actually done this so quickly? Is this did you fire half the company so it moves quicker? Did you ch like did you increase the road map time? Like how how did you actually do this? >> Yeah. So you know um the there's this term going back to basics but then the question is like what does that actually mean >> right >> and um I've actually written about this and so like my my whole road map how I think what what I execute against um what are the things that I measure is actually just it's available open source um if you really think about >> what do you google how do you find

>> um so if you just type in like my name or tribe capital like all of the essays and the way in which we think how I've operated how we've built out organizations >> I I do I remember reading a post you guys had called um which I'd recommend called I think it was how to how to find product market fit quantitatively or something something >> that's right yeah and then we have something called scale and variance but before that I uh I talked about how to build a people platform >> and it it actually just comes down to um I know it sounds funny like how do you just clearly articulate and transparently talk about like what is it that matters to you um and then how do you incentivize people to actually hit those goals >> um So let's talk about the basics. So

the first thing that most people think about is hey this organization is bloated. Let's just fire 50% of the folks. Um and now I think for some types of organizations that that is important. Um I don't think that's important for for example at Kraken. So the first thing was um who are the folks that have already been executing certain initiatives for a while and so you go spend time with them. What you want to be able to do is continue to build trust more than anything else, which is um the first question I got was Arjun, are you only here to take us public and then you're out, >> right? That was I think that was the general idea of the public like, oh, they're putting this PL guy in in place to to get them public.

>> Um and the first thing I wanted to be able to to show and that doesn't happen overnight was that um here's my comp, here's how it's structured, um here's what I actually um get paid for, which >> you laid this out to the whole company. >> That's right. Yeah. What is it? Is that public? Will you What is your incentive? >> I think we'll I mean obviously we'll disclose it over a period of time. Um but like >> or will you share how you're incentivized? >> Yeah. So the the way I'm incentivized is I have a pretty um sort of uh market rate um um CEO salary um which is like which is lower than most of my execs that are there. Um and then my compensation um outside of me already owning a bunch of shares with McCracken is at certain milestones for enterprise

value. um then I get a certain amount of unlock. Probably not too dissimilar to how like Elon hit it. And so some of these uh enterprise value unlocks are like way out there. Um so you can say, "Hey, that's crazy. You're either working for free or that I'm crazy enough to believe that like we can hit those milestones over the next 10 years." >> Um so I have a 10-year period to be able to hit that. >> And so as I explain that to folks and they're like, "Okay, um you basically don't get anything if we don't hit these milestones." And so we're basically here to try to hit those milestones. And so if you're if you're here over, you know, 10 years to try to hit like these extreme goals, then you get rewarded for it. And that means I'm trying to put people in place to be able to hit those

goals and and sort of thinking bigger and bigger as we start executing it. >> So which by the I love that. That is clearly like how I think the future of Exact Comp should be. I saw the Revolute founders doing something similar. >> Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR, Katana is launching with notable ecosystem of primitives, assets, and partners like Morpho, Chain Link, and more. Katana's 1 billion CAT campaign is live. Bridge and deposit directly into vaults in one simple click and start

earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain technology involve risk terms and conditions apply. >> So, okay. So, you get into Kraken. What do you do in like the first month? Do you just like have you, you know, whiteboarded out your whole product roadmap? You laid it out to the team. You're like, "This is what we're doing over the next 12 months. Go." >> No, I think uh what was interesting about Kraken was that um I was already in love with the product road map. I just wanted us to get there faster.

>> Nice. >> That's it. It's not it's not >> accelerate the product. >> I wasn't trying to reinvent the wheel. It's more that you know we have you know spot you know margin um we have our futures and our per etc today but it's more about how do you bring this in cohesively on behalf of who our customers are. So most of our customers I actually think one of the big biggest misnomers about Kraken because we didn't raise um which is a good thing too is that we stayed under the radar um we didn't talk about who our customers were who do we cater to. So at at the highest level is that we're an exchange. We've got a you know um we've got a transparent way in which we have built out the exchange so that um our professional traders that come day in

and day out. So this isn't a proumer, this isn't a retail customer. This isn't an institutional, you know, large customer. It's like what I call like the meaty middle is like folks that are day trading and professional trading. Um like that's their livelihood. And and this phenomenon started you know basically 25 years ago you know with um you know the the folks that sort of think about you know trading view um type products and so people have always thought about these set of folks as fragmented but they're not like think interactive brokers plus more and so that's the set of products that we build. So we're we're a customer of our own exchange which is we have our Kraken Pro now we've got Ninja Trader and and a set of new products that we're creating

but it's all on behalf of our professional traders. Those professional traders continue to bring us liquidity all over the world. So mostly um you know North America, Australia, Western style countries, Europe, that's where we've been predominantly strong and and we're continuing to grow in other areas as well where a professional trader wherever they're located in the world think, act, look, and feel the same. They want to be able to trade. So a commodities traders or a equities trader, options trader, whatever it is, they they want to be able to have a certain amount of, you know, multiple assets to be able to trade off of.

What's great about like how we've built our platform and our exchange is that the road map is to be able to continue to cater towards what they want um uniolateral uh uniform uh way in which to think about where it sits and then you can think about how you want to trade and so then the tools that you provide them um I I I use this insight internally is that look before we're we've been regulated we're secure um and we help our traders you know trade any asset and the more assets that we have um the more they're going to continue to trade with us, but at the same time, the more products and offerings that we can have on behalf of that, >> um, and the tools that we have, then they're going to, you know, continue to stay with us. And so, some of them are

going to stay within what I'd call like the cruise liner, which is like it's safe, you know, it's not going to tip over. Um, but some folks might want to do a deep sea exploration, right, into DeFi, etc. So, how do we bridge the gap or hybridize in some cases all the things that we need to do on behalf of that professional trader? Um, I think it's one of the one of the toughest roles is running an exchange in a bull market because there's so many ways you can make money and so many things you can do. And um, I mean >> that's actually when you need to be the most disciplined.

>> The most disciplined. Exactly. And like one of the I think Coinbase has done many great things, but one clear like venture off into a land that didn't make sense and they spent a lot of resources on was for example like their NFT platform that turned you know I think they had 500 people working on that and that was like a pico top type of thing. Hire a bunch of people from Instagram etc. But I'm not trying to pick on Coinbase every exchange has done many things like that. >> Um how do you think like when I when I look at Kraken's business you've got Inc. You've you've got to be thinking about pers, right? Because they're such a dominant amount of the I think it's 70 80% of the volume in crypto. You've got um >> what's the payment crack that you just rolled out, right?

>> Uh I think you're one of the biggest staking platforms in in the industry. How do you think about what >> how to prioritize what to go build? >> Well, so I mean part of uh the problem of the opportunity set here is that um it's a fast growing ecosystem, right? If you think about all the chains, all the ways in which you can provide yield, lending capacity, you know, staking, rewards, etc. is um there's just not a lot of products and services that are out there that cater to the needs of your customer. So, think of it this way. Um one, you you need to be trusted. So, they think about security, um the custody of their assets, the borrowing against it, and trading against it. That's one. But if you want to do like savings and yield,

that's a different type of customer as well. Um, so like let's let's use um, uh, stable coins for instance as an example. Okay, why is stable coin on top of crypto rails really important? Again, it might seem obvious, but if you're in Nigeria, if you're in any of the Latin American countries, if you're in any of the Southeast Asia corridors, you care about assets that are safe and you care about assets that are hedged against your own currency inflation risk in some cases, right? So Latin America is a great example. And so why do people price their own, you know, groceries or things within their store in USDT? Well, they do it because they don't trust their local currency. Um, so this isn't me saying that one country or its

economic system is good or bad. It's just that this is the demand bottoms up. So you have to be able to build products for that too. So um, the the privilege that we have is that we have our professional traders trading on our exchange. we've got like pretty large um amount of depth and liquidity. Um and that gives us the ability to be able to build other products on top of it, right? So there's another counterparty that's willing to take the risk of money movement regardless if that's B2B for the average consumer, whatever it might be. Mhm.

>> Um, so the way I think about it is again we're in a we're in a privileged position to what I had said earlier where how do we bring uh customer and user value back to them and uh reduce the amount of cost that they have for things that they want to do on their everyday life. So if I want to send you a payment across borders, how do you reduce the amount um of spread that there's there down to zero if we can? If um I want to send it to a friend, if I want to send to any asset, if it is a fartcoin, if it is dogecoin, if it is dog, um if it is um, you know, BNB, doesn't matter. The list goes on. If I want to send that, I should be able to do that in a way that's fragmented and

easy and and and I don't have to, you know, charge a spread. >> You can do that when you are vertically integrated as an exchange and you have custody and you have the ability to lend and you have the ability to let people move money back and forth. And so instead of relying on traditional brickandmortar middleman in between that take a spread along the way, if we already have a centralized um exchange of liquidity, we can just move that capital back and forth um for whatever the for whatever the reason may be. It's one of the reasons probably why we already have like what is it I think 65 to 70% of all um onboarding and offboarding of uh um you know from fiat to stable coins you know worldwide.

>> Yeah. Um, right now the sextock ratio dex to sex ratio is like let's call roughly 30%. Yeah. 25% 30%. Um, >> uh, which is an all-time high. Do you have, if you're thinking about, you've got this 10-year road map. If you're thinking about the 10-year road map, how much of this trading eventually moves on chain? >> Um, I think >> the way I think about it is that over a 5 to 10 or 20 year horizon, it probably be almost all >> almost all trading. I mean it's a it's a it's um it's not a I don't think it's something to get scared about. It's just something that will happen. So the the question you have to sort of ask is okay, how do you think about uh building out your exchange to be able to move

onchain and offchain depending on the products and services that are out there. There's always going to be a certain amount of stuff that um stays centralized, but it's how do you bridge the gap and how do you hybridize for what people really want to be able to do. Um, and so there's always a different cohort of customers that go there first, right? Which is like we call them dens. Um, but you can think of them as like, you know, the first to be able to, you know, jump off the ledge to try something and then it works. Then there's a next set that say, okay, you know what? I'm I'm willing to do deep sea exploration. And then there's a next set that say like, look, I I want it to be safe and you do it on my behalf. And so there's a set of tools that you build

and then there's a set of what I'd call hybridized, you know, products and services that you're going to build. Uh, but I don't I don't see a world where it's only centralized liquidity. I think it's going to be a combination of, you know, off-chain and onchain. >> Yeah. I've heard you talk uh talk about working with Chimoth and how like one of the things that you learned there was how to bet on inevitability before it happens. Actually, I thought >> that was a the first time I used that sentence actually was last week. >> That was a good line. It's a good line. And then actually tribe, you had a good line as well, which is how do you build systems to find the inevitability faster? What else going back to the tribe thing of how do you how do you bet on uh inevitability before it happens?

What uh what else feels okay? So, the world moves on chain. That's one inevitability. Does anything else seem pretty inevitable to you that maybe you think others aren't haven't fully caught up to yet? >> Yeah. I mean the I think the the beauty of um maybe the way in which I've been trained and the folks that I work with that I've you know also brought into Kraken is actually not too dissimilar in we can say a lot of things about Facebook but the but the way in which um the cohort of people that grew up on Facebook or built on top of their platform and leveraged um using data science to see we used to use this term how do you see the world as clear um as possible. And the more you can see that, then you can

see what the what I call gross demand trends are of human behavior. And so the more you see that pick up, then that's what we consider inevitabilities, right? Then you'll be like, okay, what's an example of that? Well, obviously stable coin has been an inevitability. Um it's obvious that um people are going to use more and more, you know, blockchain. I do think it's obvious that people will want to have control over their own data and over um their own assets. Now the way in which it manifests that's going to be different and so you have to separate the behavior and the demand of what people want versus the products and services that are going to cater towards them. And so you already see this in the you know you can call it web one and web two world or

data 1.0 or 2.0 world. Um but if you think about what's been happening in fintech um that's exactly what customers have been demanding not just in the United States but worldwide and so that that's a trend that's happening. The question you have to ask is okay while that's happening are they going to care more and more about control their own assets control their own destiny. Um my sense is uh yes because of what's happening across the world and what I call the volatility of global order. Um, and um, I don't see that trend changing anytime soon yet. However, it's always possible that it could change. Um, but like I think the early versions of what you'd see again gross demand of people's behavior and demand for the products

that they want, I think crypto is like a very large subset of that. So, so um, let's use other examples. people from Russia that left Russia that went into Dubai, India, Southeast Asia corridor, um they don't have access to bank accounts. So what do they do? They use wallets and those wallets allow them to be able to proliferate, you know, regular everyday payments. And that's why card services are important. So it's kind of like this um interesting mix of, you know, things that we're used to here in the United States we just don't really think about are like things that just do not exist for folks that are worldwide. And so when you think about what does that demand look like? Well, that's a billion, two billion, three billion people, maybe four to five over a period of time. And their demand will create more products and hopefully those

types of products then proliferate back here in the United States. >> Yeah. You're basically talking about So you uh you have a global liquidity engine and you just want to build products on the back of that things that benefit from a global liquidity engine. >> Absolutely. And and the more we can do that on behalf of clients or customers depending on the products that you're building um I think the more you can just continue to drive down cost. I think everyone kind of forgets about that which is every friction point that we have for these products especially in financial services is a cost to the customer.

>> Will you guys launch your own stable coin? >> We um so we had a lot of debates about should we do it? Should we own it? should be vertically integrated. We've got distribution, etc., etc. I think we went back to what do our clients want. >> So far, if the majority of our clients come to us and say we don't trust anyone but Kraken have a stable coin, sure, we'll go in that direction. I think we're very far away from that because there's USDC, um, there's USDT, we've already gone through waves of different stable coins. There's a lot of other folks in the ecosystem that are are trying to get into it as well. And and it may not be a network effect proliferation. It might be just for, you know, B2B interpretation of, you know, moving assets back and forth. What we

want to be able to do is continue to stay agnostic and then continue to be able to build a system so that you can move whatever stable coin there there may be for whatever use case, you know, through our ecosystem, regardless if that's centralized or onchain moving forward. Um, so we'll continue to build the tools around that. So we're agnostic to um the way in which the clients want to be able to have access to it. there are some regulatory concerns for some you know areas and constituents. So we'll adhere to that. Um but I think what's more important is that um does it give access to our customers? Do they get liquidity? Are they able to move their uh collateral the way they the way in which they want to regardless of the stable coin, Bitcoin, tokenized equities, RWAS in the future? Um is that

like if if it's a welloiled machine then we'll we'll provide it. >> Do you think launching Inc. your guys' L2 was a good use of resources? I I think the the way we look at any organization is where do you drive your profits um and how do you spend it, right? And so uh research and development is like always important which is what are the types of goals that you have um and what are the multiple shots on goal that you want. I think in order for us to make hybridization of what um onchain liquidity is going to look like with our centralized um uh exchange, we have to take multiple shots on goal in that area. And so the answer is yes because we've learned a lot. We've made it better. We're going to continue to make

it better. And then we've got, you know, over the next 45 to 90 days, you know, a set of new three to four products that we're going to have out there that are, you know, quite integrated to our exchange, which we've made announcements around that already. >> Yeah. Um do you think that so so crypto is this unique for people in traditional capital markets, they're a little shocked by how crypto market structure works in the sense that um you have this combination of the broker and the exchange, right? you've you've combined New York Stock Exchange with TDM air trade essentially and that's what Kraken is. Do you think that market structure exists forever? >> Well, I don't think you can say never say never. Um but to go back and reflect the we think of ourselves as um an exchange first, right? Which is like it's secure,

it's fast, we'll continue to have uptime, we'll continue to build what our clients want. Um so that means investing into that infrastructure similar to how you think about NASDAQ. But if you think about our suite of products um and services or the family of products and services that we have, that's more akin to what I call interactive brokers and then more akin to like some of the products that you see with CME. >> Um so there's a certain set of folks that are professional traders. So CME plus um interactive brokers, but then there's a certain set that we're starting to build that are like, you know, traditional financial services. So um you could actually say like a lot of what we're doing is like, you know, onchain for Vanguard with like what we did with XOXOs. Um and so it's it's hard for me to tell what's going to actually

happen in terms of you know bifurcation between the market but if you take a look at the Genius Act um stable coin bill and what's going to happen with market structure I think people are seeing that the fragmentation that you had in the past is actually more costly to the customer because of the regulations that you have in between. Um and and and I would argue because there's not as much transparency, there's more systemic risk to the ecosystem or the market, whereas crypto solves a lot of this because of this transparency. >> Yeah, I agree with that. Um >> I was I was thinking before we recorded this just about the competition that you must like if if you're sitting down and you're talking with the leadership team about competition or whatever, like there's there's so many points of competition. You've got the >> um you've got like the the classic

competitions, the crypto exchanges like Coinbase and Binance and stuff like that. probably Coinbase because US etc. Then you've got um the like up and cominging brokerages which could be anyone from Robin Hood to Interactive Brokers. >> Then you've got the kind of more onchain players like uh >> Deck Screener and Pump Fund and folks like that. And then you've got Pers which dominates the market and that's like Hyperlid. >> How do you maybe going one by one through that list like if you think about the Coinbases of the world or let's use Coinbase as an example. What are you impressed by with Coinbase and what do you think is maybe their weakness or what do they struggle with?

>> So, I think um so I won't go into each individual competitor. I think it's more about um what's the admiration that you have for people moving into crypto and and and pushing the education of what it means for everyone coming into crypto ecosystem in in the first place. So, let's take a step back. financial services, financial services uh of what we're used to are pretty fragmented, bifrocated um um uh pretty much closed ecosystems versus what I'd say is in the open source world. And so I I I categorize all of the companies in are they focused more on building products and services in a um open source style fashion or are they building products

and services where they leverage some of that open source and they create closed ecosystems? Um and I and I think you can categorize all of these companies in that direction. Now now the reason you have closed ecosystems is that you want to be able to um make more money passively on your customers. Same way in which like you know again a bank sort of >> just milking >> holds you down. Um >> and and our goal has been the other direction which is how do we become more open? How do we become more hybridized? How we how do we come closer towards the goals of creating a best-in-class products leveraging all of the open source and open ecosystems that you have in crypto. I think what you're seeing for other folks is that they are just reinventing the um unfortunately and I

don't think it's a bad business model. They're reinventing the wheel of what you've seen in traditional you know fintex or financial services. Um, and I and I think like we've just squarely been against that because it actually in our opinion it's it's a detriment of it's it's a it's in detriment to the folks that you want to be able to get um you know equated or educated with like why crypto is so important. So if you want to empower the customer um if you want to be able to move uh ownership and sovereignty that we talk about to the customer I think you have to embrace the open ecosystem and open source world or multi-chain whatever it may be.

>> Yeah. um so the best products can win and the best services can proliferate out there. And so the I think like everyone's done a great job of getting into crypto and and I don't think that changes um anytime soon. I think what's really important is to make sure that the ethos of why we got into this, you know, space in the first place. like that, you know, foundational cultural set isn't lost when people talk about how much money is being made or how much, you know, the assets are going into uh crypto or here are all the ways in which you can save cost and like that's all great. Um but it should be in service to >> you know um like the customers like you know everyday folks like you know you and me in some cases at a certain point.

Um then the other aspect I think people are kind of losing is that like because you've got liquidity and because crypto is coming um what does that mean for the average everyday um entrepreneur? What does it mean for a protocol listing? What does it mean for capital formation? What does it mean for um like more and more innovation to happen because like crypto can power it? So I I think about a lot of these things and they may seem crazy, they may seem existential, but just take a look at the private to public world. That in itself is fragmented.

>> Um a lot of people talk about liquidity, a lot of people talk about long duration, but it doesn't mean that you can't um add u more ways in which what I call >> you know forward mobility um for whoever that may be. And and we talk about like the average everyday individual or the pro traders, but like if you're a company that's at the um you know early stage or mid-stage, sometimes you get stuck because you don't have access to capital and this is something that the public markets were supposed to solve. And so when I think about tokenized um equities or tokenized assets or real world real world assets, I'm also thinking about like the heartbeat of any economy or the heartbeat of any small to medium business or the heartbeat of you know entrepreneurship and innovation.

the more you can unlock there for in terms of, you know, faster cycle of capital, I think the more you can do and it's like it's it's a it's a better service. Yeah. For what they actually need. >> Yeah, I agree with that. I want to get into tokenization and stuff in a second, but um what what about Hyperlid specifically? Do you get concerned about like Hyperlid eating into global perfs market share? Just Yeah, curious your general thoughts on Hyperlid. >> No, I I think like one they have a great product, right? Like so like you should >> we should all be again in admiration for what they've done. Um but every couple years you have uh a new set of folks that are in DeFi which is great because it's you know it's open. Um and you have like a lot of folks that are trying to

build best-in-class products. So a year from now or two years from now or three years from now you're we're going to talk about the next one right? It's going to be you know hype three or hype four whatever it may be. It'll be a different name and we may or may not remember hyperloop. my my hope is that they continue to become successful and they've done a lot of great things in order to innovate again on behalf of the community. It's it's a great standard for um us to be able to look at and say like look at what they've done again on behalf of the customer. And so the the onus is going to be on them to figure out how they continue to do that versus do they move in a different direction.

>> And so um are they going to eat into the market? Um yes, but that's only if you assume the market is zero sum and it's not continuing to grow. Um, and so the question you got to ask is like how fast is market growing and how much more of the market is going to continue to change over the next five or 10 years. >> Yeah. >> Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR, Katana is launching with notable ecosystem of primitives, assets, and partners like Morpho, Chain Link, and more. Katana's 1 billion CAT campaign is

live. Bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain technology involve risk terms and conditions apply. Let's talk uh let's talk onchain stocks. So you guys there's maybe two two interesting things here. There's X stocks. So you guys launched X stocks which is like 60 70 onchain stocks and then you guys also acquired Ninja Trader. uh maybe we can start with uh just the vision before getting into those two specific things just like your overall vision for uh equities moving on chain and kind of like I guess we could

broadly call it the convergence here. >> Yeah. So the the way to think about it is if you believe in a world where um traditional financial products and assets, structure products, you know, the list goes on, right? We use the word real world assets, but um any of these, you know, tokenized rappers on top of an asset is going to move on chain um over a period of time. I think that's inevitable and I think that's like probably the greatest innovation that we're going to have on behalf of anybody.

um in terms of like how you think about you know financial assets and collateral what are what are what is the fastest way to be able to do that is to be able to own that chain or vertically integrated right so you know Ninja Trader is based off of the same concept that you've had um for Kraken professional traders is that you've got a large cohort of professional traders a little bit older that have been doing you know um commodities and futures trading and that's the way in which they've been trained and so how do you get them to um access crypto. How do you think about um getting them access to collateral that is going to be in crypto? And again, educating them on their ability to move um assets back and forth from each other. So, when we use the word convergence, it's more about

how do we bring more of these assets on chain? How do we bring more of centralized liquidity for these assets and how are ways in which we can educate the customer that normally hasn't had access to crypto or didn't know that they could get access to crypto? And professional traders, there's not that many of them. if you really think about it worldwide, right? And so for us it was more about getting access again to that education of another two million customers that use these products every single day. Yeah. >> Um and that was really important while everyone else was trying to figure out what the world could look like um in onchain which I think which I think is also great and you need to be able to have you know a certain amount of bets um in that direction. we wanted to move in the other direction which is okay

great well how do we get in order for us to be able to move and proliferate traditional assets into a tokenized world or into the crypto ecosystem we got to go get them and if you think you know first principles Elon Musk style is that like you got to be vertically integrated in certain areas in order to move the puck forward that's how we thought about the new trader acquisition >> um I think it was the largest crypto trad acquisition of all time >> at the time yeah >> 1.5 billion >> that's right roughly yeah that's what we announced based on uncertainty. >> Um, >> can you tell me about the acquisition like how this came to be? Like did they did they go outbound to you? Did you go outbound to them? Did this like was this like a big investment banker like process? Like I just from a the founder

seat I think curious about to hear the acquisition. >> Yeah. I mean the I I think the great thing about um being counteryclical to how people think is that you have tailwinds in the crypto ecosystem. Um I I think of everything in like this supply and demand curve. Mhm. >> Um it's like a great framework to use which is if there's more money going into crypto, we're talking about it, there's more headlines, that means the price of the assets are going to go up >> and uh and it and then so you can think of um the world in terms of intrinsic value and options value. Crypto's become a world um for certain set of assets in terms in options value where um things continue to get heated up. And my my focus to the team was okay right here's our roadmap over the next three, five,

ten years. And we want to be able to move into tokenization of um commodities, equities, etc. What are all of the companies out there that look very similar to us in terms of the way in which Kraken um has continued to grow, especially on behalf of professional traders? And they gave me a list and we have these, you know, funny names out there and I said, "Okay, great. Well, like what do the Ninja Trader guys do and like can we go talk to them?" So that so your team gave you a list of like 20 companies that would that would accelerate this vision basically. >> And and then and then we were then I forced everyone to use the product and we use the product as well and it kind of gave us uh nostalgia to what um uh Kraken had built. Um, more importantly,

what was really funny is uh a lot of the insights and aspirations um and admiration um um that that Jesse and Ton had when they built the company was based off of a lot of the stuff that Ninja Trader built. So, it was like there was this nice convergence of everyone on the same page which is like this is a good product. Let's go, you know, identify and see if they're interested in the first place. Um now, now that's all well and good. You can say like hey that's FOMO or you got like the strategy. Wait, so you identified the thesis, the team gave you like 20 companies, you went and played with the products. Ninja Trader was a great product, been around for 20 plus years, 2 million users, and then you reached out to the company and said, "Would you sell?"

>> Um, not I would say like transactional order of operations, yes. Um, but the way it works is that like here's our vision. Here's what we do. by the way, like the Ninja Trader team, their board and their shareholders like had zero clue um a about crypto um and bracken or like our size and scale. So, >> you have to lay out the whole vision. Here's what we want to do. >> So, we we we pitched to Marty who was the CEO. I think he was really excited because he got it right away. Um which is that like we could bring Ninja Trader and what we want to do moving forward in crypto through his platform worldwide because they're only available in the United States. um vice versa, we could start coming in with our products that we've already innovated in outside the United States into the United States.

So, there was just a ton of synergies back and forth with each other. Um when we talked to the private equity owners of Ninja Trader, um they just straight up were like, "I don't understand crypto. Um we don't understand it. Um doesn't make any sense and um the world's going crazy most likely." Yeah. >> Um and so I think for us it was just this period of just >> So you had to sell them a little bit. Absolutely. And we had to pitch them >> the same way you would pitch any investor >> on the value of our company, the value of our equity longer term and like what we think we could do over over a long period of time. And so, um, you know, a lot of it was just making the case to, you know, the shareholders of that company around why we thought the

synergies would make sense. >> Long Ridge Equity Partners, this is the most private equity sounding name I've ever heard. Um I mean I mean to be clear I think to give them uh a lot of credit and I you know I wear um the venture capital hat on at the same time and venture capital and private I could be like you know two different worlds at the same time um is that you got to be able to talk about you know the financial metrics and the substantiation of what you can be able to achieve and like you know with the numbers I think that's where our our data science came in as well which is like we just did a lot of work to show how Kraken works in the first place and it's very synonymous and very similar to how uh Ninja Trader worked. And because they were in the

company so long, you can kind of, you know, take them along with the journey and say, "Look, if if at worst we do exactly what Ninja Trader did, you you guys are still going to be able to make a lot of money on the long term because we're going to be able to continue to provide value to our customers." >> Yeah. Um let's talk about the vision. So IPO is the big question I think on everyone's mind. Tell me tell me about the plans there. >> Well, I think uh you take a step back. um um IPO shouldn't be in in the vision in any capacity. It's like it's a it's a tool or a tactic. >> Um so the way I think about the world is just capital markets. And so the the way I think about the world in general is that what are the tools that we need um

um for where we are in in Kraken's journey today and what are the tools that we may need in the future in order to be able to execute that. I I do think at some point um you know will we will we think about going public? It will be when our customers uh want it to be and so you would ask like you know are we going to create our own stable coin? If our clients um are asking for that we're going to be agnostic to it. Once our clients think about counterparty risk and they're asking for that then we'll think about if it makes sense for us to go public or not. I >> I don't follow that. Why do customers dictate a future? Isn't it the early investors who are saying, "Hey, Arves investor in this thing for 14 years like can get some liquidity."

>> Yeah. I mean I mean the great thing about Kraken is that um the company is majority owned by its employees and it founders. That's one. Um so we've got a vision around like how we want to be able to um achieve our goals. The second is is that u because of that and because of our sort of leniency in the way in which the company was structured um is that there's actually a lot of liquidity um available for our employees and you know people to you know people to buy the shares that are out there. I'm I'm not saying you should I'm not advocating you should buy it or not. Um it's just that like when you think about liquidity, the availability for liquidity for early shareholders or investors or um other uh firms that might have invested in the secondary, they have the ability to sell if they

want to, right? Like it it it's there. Um it's pretty transparent. Um and so we're not we don't need to solve for liquidity um of shareholders. what we want to be able to solve for is um do you have do you need the do you have the tools um in your toolkit to be able to build on behalf of your customers and your clients. >> Um and so that that's the way we think and that's the way I think about it. >> Um why raise a round? I saw you guys are raising a I think 500 million val $500 million round at a 15 billion valuation. Why do that before the IPO? Well, I think one um rumors are rumors because, uh I think over the last three years, we've always had IPO rumors and we've always had um um what I call fundraising rumors in the ecosystem. And if you look

online and say like when was the last time Kraken raised around it said I don't know, we raised around like three years ago. >> Um there's a difference between um you know having secondary transactions and raising a primary. >> Um and so for us it's more about again private markets. Um what are the tools in your toolkit in order to be able to get stuff done etc etc. I mean so like transparently I mean we've looked and we've talked to folks um you know for equity plus debt raises but a lot of what we're doing is like what are the financial services that we have on behalf of our customers. So nothing confirmed yet I would say like that's all speculation rumors for now.

>> Yeah. Do you want to I don't I'm sure you actually can't get into I'll ask it anyways but do you want to run the company long term? Well, the way in which my incentives work at the company is I have to run it long term. And so, um, the, uh, >> this gets back to the incentive. >> Yeah. Which is I, I came up with it, right? Which part of it was that, um, if I'm coming in, how do you build trust with, uh, your shareholders, your employees um, and the folks that are going to be working with you? Like look, nothing that um none of our success um over the last 10 years or even over the last year any of the velocity that we've had comes without um the products uh product people, the engineering people and the

folks that are you know working on this day-to-day. Um and so my incentives should be more in line with the way in which they work as well. And so I I think like especially for someone coming in from the outside, not like a founder that's already been there. I think you need to make sure that you have skin in the game and make sure that you are incentivized the same way anyone else would be in order to be able to hit those goals and that and that's why we structured it that way. So my want was to be able to make sure that I have something to continue to aspire towards or something to go get um which is the you know milestones that we want to try to hit.

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more, click the link in the show notes or follow them on X. As always, investments in blockchain technology involve risk terms and conditions apply. There are two product buckets I'm curious to get your take on specifically relate. So, I know you guys have Inc. and u crack and stuff like that, but specific to trading, there's per and prediction markets. Um maybe starting with prediction markets. I'm very curious to get your take on just like a do you believe in prediction? There's one there's one idea that says we don't need prediction markets because all liquid liquid assets are the prediction in and of themselves.

>> Sure. >> Uh the other is hey this is a great new form of uh you know of a market structure poly market cali doing great things. >> Um curious to hear your plans around prediction markets. Do you like them? Do you guys want to build them? Would you build them inhouse? Would you white label someone like Koshi? How do you think about that? >> The I go back to who are your customers and what's their intent? >> You like you like the customers. >> Yeah. I I just I just think it's really important because uh you know people have a tendency to fall into this category of um of FOMO which is that um AI is hot so I got to build this. Um prediction markets are hot so I got to go compete. But but I think what's more

important is that um you know Koshi and Poly Markets are are great products. They have a certain amount of product market fit. They're growing at a certain velocity. And I don't think you necessarily want to copy and say like we need to do the exact same thing. And the reason why that's the case is that um the intent of the customers that are coming into those products um is very specific to the types of trends um or politics or you know sports etc that that are out there. Um and and I think of that as like a different category and segment. There's going to be some overlap, but the more you try to bring everything together into um one platform, my belief is the more you become like nothing. It's think of it as a

>> jack of all trades, master. >> Yeah. It's kind of a you know, Craigslist back in the day had like everything. And think about the amount of companies that have been built that are multi-billion um dollar, you know, products that like specifically focus on. Aren't you doing that with the Crack app though or is that a se that's a separate app? >> It's a separate app separate app. It's it's a it's a separate experience specifically focused for >> folks that would be able to want to move, send, and store money and get yield. And by the way, it may or may not work, but the but the point is that um we will continue to build products or partner with folks um that have a specific intent. Yeah. and that are that are powered or enabled um by our our exchange regardless of how the exchange

continues to evolve. >> Yeah. Uh what about the perp side of things? >> It's the same thing, right? It's it's more there's a certain set of um >> but per should be more native inside the platform. >> It can be. So like you know the um again I'll go back to the customers. the folks that um trade uh you know like equities and options aren't necessarily the same folks that think about commodities are not the same folks that think about um the next set of assets equities etc >> um and crypto and then um you know crypto futures and then uh per you'd be surprised that the overlap of the types of customers um are actually smaller and smaller like the the co-cententric circles are actually not that very concentric for these types of products

and so when you want to build these types of products you want make sure um that your existing customer set can get educated on it and you can cater to a new set without uh ruining your customer experience and I think everyone kind of forgets about that which is even for the professional traders there's segments to what that customer wants to be able to do and the more you kind of just munch everything together again the more you become like nothing to your customer. >> Yeah. which is by the way why Hyperliquid is so awesome is that it caters to the customer in a very specific way.

>> What um thinking about tokenization um so you I mean if you guys went public you would go public on the New York Stock Exchange or NASDAQ in like 5 to 10 years. Do you think that'll be the case? Like do you think people will do what's the right word for this? Like IPOs on chain like would you guys ever just launch a token? I mean not not now obviously because the capital markets are 10 times bigger 100 a thousand times bigger than onchain markets but do you think onchain IPOs will become more of a popular thing >> yeah you know what's really interesting is that um we're already moving in that direction right so um you saw how much money pumped do fund raised within 12 minutes right >> I think it was roughly >> it was like half a billion dollars

>> right >> and uh what's different between that structure getting access to global equity and raising that capital that was an IPO >> um for all uh for all intents and purposes like an onchain IPO >> the the first principles is you know they raise capital for what they want to do longer term and then there's a certain amount of floats and and circulation of their of their token um and so in the future if more and more assets go on chain the question you have to ask is what are the types of capital formation products that you can build like when you go public you're either giving liquidity um or you're raising capital and the reason you're raising capital is that um you want to be able to have more, you know, assets on your balance sheet to be able to do something. And then capital markets

have, you know, um, debt plus bonds, um, etc. that your company again has access to. So, what will that look like for, you know, folks that want to be able to move, um, what I'd call to the purity of onchain. And so, there are going to be steps along the way. I do think the capital markets are quite efficient in the United States in the way in which it's been structured and and so it will be inevitable in my opinion that um you'll have a convergence between what you see here in the US and what will be like global liquidity in crypto but let's take US out of this for an instant um where do you have global liquidity for companies that want to have access to capital markets in London it's been trending down sorry in England it's been trending down in Europe it's been

trending down um rest of the world doesn't really have access. So, if you're in Mexico or Brazil, um you know, any of these emerging markets, you don't really have access to the capital markets as much as you used to because liquidity is either in some cases being sucked out or you're just not large enough to be able to have access to that and then private markets or private credit have been sort of stepping in. The problem with that is that the the duration of liquidity um it takes longer and longer for your liquidity to come back. So, I actually think that people used to say that, hey, that's a feature, not a bug. I think it's an extreme uh bug because that it just means that people don't have the ability to get access to capital.

>> Which part's a bug? >> Uh where you have long duration um uh a longer time frame to be able to get liquidity >> if you're investing into these assets. >> Um and so that means these companies don't really have any choices and they don't have the ability to grow if they want to. Um and they don't have the ability for somebody to be able to underwrite it. And so I do think the world of um having um uh capital formation issuance through global liquidity in in in the crypto ecosystem for traditional um private companies that may want to go public outside the United States. I think that'll happen first. And so I mean we've already had these discussions and people are coming in every day which is like can I take my company you know public on your exchange. Um

>> people do come to you with that. >> Yeah. Yeah. We get inbounds on that every single day especially after >> crypto companies. That's I know even regular companies >> they say I want to go public on Kraken. >> Yeah. They're basically like can I just you know can I take my company public on your you know global liquidity exchange. >> I've thought about this a lot for Blockworks because our audience is crypto natives right? So would like if you know you we could go sell a story to Wall Street right data and analytics and media and all all this kind of stuff and you know we could it's kind of starting a new >> conver. I don't think you need to sell it to Wall Street because now you've got you know global street which is like >> no that's what I'm saying. We could go

the traditional way would be going to Wall Street and trying to sell this. Put on the suit and sell the vision or whatever. Or, you know, we've got 15 million people who listen to our podcasts. >> That's right. Yeah. >> That's the That's the new that Yeah. Global Street. Sure. >> Yeah. And and and I think what's um that's a good it's a good name. >> Yeah. >> Um I think what's more interesting is that people just want um similar to how we thought about customers want access to um um yielding assets. We call it safe assets or we call it demand assets. So mostly US assets today. But what does it mean for, you know, a company in Europe that might be in Spain that's got, you know, 50 million in revenue, 100 million revenue, um to be able to take their, you know, equity on chain

and to be able to have access to global liquidity and and global financial products. Um where where are where are they going to go public? There just there isn't anything that's out there. There's a lot of global liquidity that's just sucked out of the European ecosystem. But if you've got access to global liquidity that wants to be able to trade, then it's not just a Kraken thing. Yeah. It's a buy bit thing. It's a Binance thing. It's a Kraken thing. It's a Coinbase thing. Like everyone um like through these venues and have access to what I call onchain liquidity. >> Yeah. >> Um Arjun, this is great. As we think about wrapping it up, anything that you are I'm curious like what you see in the market today just from your your seat that feels very obvious to you that maybe isn't obvious to other people

>> in the crypto ecosystem or just overall >> honestly just in in the world in general. >> I don't know. I think I I think we've been just talking about it for so long. May maybe like crypto and AI and all these systems of global liquidity and access seem obvious to us because we're in it on a day-to-day basis, but I don't think it's obvious to um like the everyday person. I I I still think when you use the word crypto um for some folks it's synonymous with like nefarious activities. Um, and the and I and I still think that traditional fintexs, traditional banks, you know,

specific sovereign nations just think of this as evil. >> Um, and I'm not sure why they think that's the case. Maybe they think it's like a threat to their system. Um, but if I go back to first principles, you know, if you really want to do what's best on behalf of, you know, your constituents or your clients, um, then then I just see no reason for you not to adopt crypto. Like everything you're doing is inhibiting, you know, power and control, um, in the hands of like what I call the postw World War II brick-and-mortar ecosystem rather than in the hands of like, you know, ourselves. And the more I think about it, it's a, you know, it's a it's a uh it's like a socioeconomic issue. It's a

political issue. Um, and um, you know, and it's a zero sum issue for other folks that are out there. And I I do think like a lot of people are um, you know, a lot of people think like Peter Teal's got this thing where if everyone's looking in this direction, people are forgetting about this direction. I I do think that while we have this um tailwinds in the United States and and other areas in the world um around around crypto and and the regulation, I still think it's it's it's still just that close um or the tailwinds become headwinds very quickly if um you know there's another systemic risk or someone blames crypto again for something that might be more nefarious.

And so I I think about that and I'm pero about that every day which is like how do we continue to educate people around why this is actually better for them versus what they're used to today. >> Yeah. Maybe double clicking on that. How much how worried are you that I think the consensus idea in crypto right now is that crypto has won in DC? >> That's right. >> How worried are you that crypto has not actually won? We've made great progress but like let's say so I was looking on actually Poly Market. I think AOC is the leading candidate for the Democratic party in 2028. So, let's say AOC gets elected in 2028. Yeah. Probably not great for the industry. How how how much does that concern you?

>> It's it's concerning. So, when we don't have um uh rule of law or we don't have um we don't have this set in terms of you know um like what we call today like the Genius Act and the market structure build. if if it's not already um like common place to say hey crypto is is regulated and it's safe on behalf of the customers and we can build in that direction we have our guard rails if that doesn't happen then I think we're always going to have the uh risk of you know what had happened with um the previous administration >> and and I don't want to say like one person is good or bad like the Democrats or maybe even AOC they might you know

come to light and say like this is actually better for the customer, but I think the only way to get there is to continue to educate them on why it's better. Right now, I think we've also moved in this direction where we're not willing to educate the other side and so that they're going to take a stance that's in the opposite direction. >> So, again, I go back to if we can't educate them, they're not going to care about and this is the same about, you know, um capital formation, markets, uh banking and financial services. the the more and more you see folks saying like we want to regulate and we want to protect the more and more you're basically saying like we're just going to put the hands of the capital back into either the government or to you know JP Morgan in some cases. Um and I'd

hate to live in a world where we're just putting more of the capital back into the hands of the institutions versus putting the capital back in the hands of the individual. >> Yeah. How much what percentage of your time do you spend in DC right now? Um well there was a time where I was there like once a week. >> Um and the same thing for you know very specific states and that's the same you know like spent a lot of time in Wyoming. Um you know Senator Lumus has been like a huge advocate for what we've been doing in crypto but I think you're seeing the same thing in Florida and Texas and you're starting to see the same turn in places like California. So I am I am more optimistic that you'll hopefully see that same thing here in New York while while they might be sort

of last in transit so far. Um but but I think the reason you could say that is look while we're in tailwinds and while we can educate is hey look where Europe is they're already ahead of us look where um Asia is look where China is starting to move in that direction and so do we want to be behind our competitors um and other sovereign nations similar to how we think about AI or do we want to be ahead of the game and I think most people so far think of this as like a nonpartisan issue but it's always at the risk of it becoming a partisan issue. Yeah. Yeah. I agree with that. Um, last thing on my mind was just you've seen you've uh it's a very interesting career like try in both operating and investing. You've seen a

lot of tech cycles. Do you have thoughts on where we're at in the I guess maybe two-part question. Where we're at in the crypto cycle and does like the historical four-year cycle still exist? So the so I'd say the historical four-year cycle um all of this goes down to supply and demand, but it also goes down to um psychology and sentiment. And so what did you have before? You had a you had a bunch of um uneducated people coming into the ecosystem, not just into crypto, but like just the market. So a record amount of capital into companies, record amount of SPVS, record amount of just like

throwing money. Um and so the valuations were high. The companies didn't have um a certain amount of intrinsic value. There weren't, you know, unit economics or metrics behind it. >> Right. Government threw the money at the people with stim stimulus checks and then people threw the money at the companies. >> Exactly. And then and then the folks that had um access to capital or were raising funds, right? Like the mega funds to the emerging, you know, fund managers, etc., which is where obviously I spent a lot of my time. They were just throwing money left and right, which is like they would make an investment decision in, you know, not even 24 to 48 hours, which is fast, but they make an investment decision in like 30 minutes.

Um, when you have that type of um hubris or you have that type of money that's being deployed, you're you're bound to invest in things that are not going to work or they're going to blow up or I would call it, you know, versions of systemic risk. And so the I I think the thing that has been sort of fascinating for me is like these cyclicalities where they go up and down and these undulations these these uh supply and demand characteristics of things going up and down are actually happening in a more compressed rate um and they're happening per segment. So you can say you know crypto has had its um cycle of supply and demand um where the valuations of the products have gone up and down even this year alone like three or four times

>> um in terms of like companies that are um in that ecosystem. You can also see like the alt um um the the you know alt season has had its own sort of unulations back and forth. >> Yeah, there's kind of cycles within these >> and so these cycles are really interesting. Um and so if you go back in time um and we actually have graphs for this I'm happy to provide it after this like we look at it really closely is that um the amount of times the the time period is continuing to compress. I do think when you have more global liquidity the compression is going to happen at a faster and faster rate. I don't think that's actually a bad thing which is it means it's more transparent.

You can see these curves and you can see what these inflows and outflows look like in terms of where where hubris is. And if you can see it and it's more transparent, you should be able to pull back from it and be more disciplined. Um, but you know, humans are humans. You got the seven deadly sins and you've got these mimetic behaviors where uh people will end up sort of, you know, foregoing the data that exists out there and you have all these market ups and downs. But I think crypto people say we're in the early innings. Um, I think we're like right in the middle in terms of like how we quantify it. And so we might have another, you know, two years of continued growth. Um, and then there's a possibility of more systemic risk.

>> Yeah. >> Cool. Arjun, thanks. >> Thanks for having me. Yeah, appreciate it. [Music]