Kraken Co-CEO Giving Everyone Billionaire Like Access to Finance

Sy Taylor  0:16  

Welcome to Tokenized, the show focused on stablecoins and the institutional adoption of tokenized real world assets. My name's Simon Taiyo. I'm your host for today, author at Fintech Brain Food, and head of market dev at Tempo. And joining me is Oyin Sethi, the co-CEO of Kraken and Paywood. How you doing, sir? I'm doing well. How about yourself? Really well, my friend. Why don't we stop there? Because I always see this payward thing. Most people know who Kraken is, hopefully at the splinter to listen to this podcast, but what's pay would, and how's it different? So the company's name actually is officially Paywood, as always has been, and so there's a story to that, and I'll come back around in a second, and the first products that we built were the Kraken Exchange,

Speaker 1  1:00  

where we listed Bitcoin, Ethereum, first ones to actually launch even the Euro pair, and given that we're here in Europe, and what we, what we did over time in order to build consumer experiences and professional trading experiences, is that we vertically integrated our own infrastructure with our with our applications rates, typically what a lot of companies do, but given that we built the exchange, the infrastructure, the payments rails, onboarding and offboarding, the KYC, AML, et cetera, et cetera. What we decided to do over time is that, well, okay, well, How do we build a set of microservices very similar to what Amazon did for themselves with Amazon Web Services, and then having Amazon Retail be a customer of AWS, we decided to do the thing, the same thing, about two years ago, which is okay. Well, we have been building our first-party apps and are exchanged on our own infra, and how do we build a set of services that can support us, but now also a new set of customers and partners as well, and the way to do it was that we had all, instead of saying this is, we believe that a set of customers will work with us. We already had a large set of customers that were already hooking onto the exchange, plugging into our APIs, leveraging liquidity, and sort of what I'd call jerry rigging certain products in order to make it work. So we went back to first principles and say, okay, great. Who are all these folks that are coming in using our exchange that are not market makers, takers, or a professional trader, like a trading institution, but a payroll or benefits provider, a stable coin provider, a money movement provider. And then, how can we provide them the services, regardless who they are, so that it makes their job easier to build products for whoever, whomever their customer might be, regardless of the jurisdiction.

Sy Taylor  2:45  

So, who are the kids in the family outside of Kraken? What else is Payword doing?

Speaker 1  2:49  

So, Payword today is Xdox, which I'm sure we'll talk about at some point. Kraken, NinjaTrader, and CF Benchmarks. And so, start with Xdox, like, what does it do? I actually don't know. So, what we did is we launched a one for one tokenized equity offering, it's called Xdox, so it'd be interoperable, and it would be also usable across all chains. What's more importantly, is that permissionless 24/7 trading for equities was not really out there before, there's only a few set of players that have the, I want to say, the distinction to be able to support that product. So we were the first ones to launch it in Europe, and the model is very similar to how you look at USDC or USDT, as it's backed one for one, and the end the jurisdiction, and then we custody the asset there, and then we mint a token, and then we distribute it worldwide.

Sy Taylor  3:42  

It's a really interesting

Speaker 1  3:44  

business. Then Ninja Trader, Ninja Traders is futures and derivatives for commodities, so it's TradFi, and it's specifically for professional traders. And so they were one of the first ones, actually over the last 20 years, to build this product, and we had actually gained a lot of inspiration to start our company based on what they were doing. Oh, wow, which is really funny, because we came back full circle and enabled that's right,

Sy Taylor  4:07  

as fascinating. And then I missed

Speaker 1  4:10  

CF Benchmarks, which is our price and index for, you know, ETFs and ETPs.

Sy Taylor  4:16  

So this would be like the traditional TradFi benchmarks, but traditional

Speaker 1  4:21  

traditional benchmarks, but in the crypto ecosystem. Yeah, that makes a ton of sense. And you've also been on a bit of an M and A spree. I saw, obviously, Ninja Trader, but you also bought Magno, which is Custody, I believe. And then Bit Normal as well. Do you want to talk about those two bits? That's right. So, Binomial allowed us to get the full stack in the United States for with CFTC, so DCM, a DCO, and an FCM. What it really allows us to do is to be able to open up crypto perps, but over time commodities and equities perps as well. So perpetuals is a product instead of a fixed contract derivatives is what we want to be able to offer, which are very popular.

Sy Taylor  5:00  

Are at the moment, if anybody's been following the news of Hyper Liquid, of course, where with Trade XYZ, the volumes are exploding, that is all offshore, and I've spoken to a lot of folks in Track Fi who sold the weekend volatility in oil futures, that's right, and we're not

Speaker 1  5:14  

oil, silver, different commodities,

Sy Taylor  5:16  

and you had fixed term contracts with futures, and having this pub is a meaningfully different product. I also saw the CFTC is now trying to bring those on shore, so you're positioned to potentially be a part of that market issue.

Speaker 1  5:30  

That's right. And I think what's more important is that you know the world is becoming closer and closer, and in terms of the types of financial products that they want to have access to, and so when you think about perpetuals, it's just a, it's a, it's a different product, but it's actually been around in the crypto markets for a long time, in, you know, places like Asia and Latin America, and so it is a product that's already been tried and trued, and now we know we launched it in Europe before, over the last year, and so it's not like it's a new concept outside the United States, it's not a new concept in the UK or in Europe, so it's more about, is this a better product than what you would typically get with fixed duration or options. And our belief is for institutions and consumer education, and being able to trade these products is just a better overall experience with better risk management strategies. Say more about why. Well, I think, like, the one is, you just want to be able to have access to a certain set of assets, and we want to be able to take a bet on it, where you could, you can call them binary in some cases, but I think what's more important is that you have worldwide participation that gives you the ability to understand where you want to be able to like take those bets. The other one is like fixed contract, actually there's a certain risk associated with it, given that it's fixed, whereas, like, you know, perpetual, you want to go over or above, and it's just innocent as duration around the price is just a better way to think about your product. You're doing, you can manage risk, dial it up, dial it down, as the market moves, and in theory, the duration could be in perpetuity. Yep, you can, you could just keep risk managing as the market moves. Talk to me about that versus, say, the X stocks business, and where you're seeing the demand at the moment, is it? We saw stablecoins come up, I think they have some level of product market fit, and they're still early, but the question now is, okay, what next? And so what are you seeing, given the seat you have in the industry? Look, the number one most important trend that you see in the crypto ecosystem is in crypto assets themselves, is that you had a, you had a set of circumstances where people got access to worldwide set of new assets, it was global by default, exactly, and so Bitcoin, Ethereum, all coins, meme coins, stable coins, all were on top of one set of rails, you know, we call that on chain, but the exchanges provided liquidity of more market participants, so the question you have to ask is, Okay, go ahead, What does the world look like from that moment moving forward with all the other assets that exist. This has been something that's been talked about in the crypto ecosystem since in the 2010s which is, how do I get real-world assets on chain, and how you're able to permissionlessly create products on top of that. And this is where DeFi came along in 2018 to 2020 timeframe. And so I think what's what's really going to be interesting is that stable coins was probably the first use case of traditional real-world assets that was a medium exchange and movement that everyone adopted very quickly, and in the markets where it grew the fastest was the markets where they had a not a lot of ability to be able to move into other durable assets, or what I'd say hedge against their local assets, or their local government or currency, that's one. The other one was that you wanted to be able to save your assets and send your assets and move them, so you think about remittances and payments. And now the next phase is, okay, great.

Speaker 1  8:50  

Well, when I have that, then what else can I do with my capital? And in any of the developed markets, the traditional mentality is, okay, well, how do I think about investing and getting yield on my assets? And that's the next move that you've seen so great. Well, now you pair that with tokenized equities, you pair that with tokenized commodities. What does that look like with global participation, global risk management, global leverage, etc.

Sy Taylor  9:11  

It really does create a bigger market, but it also opens up new consumer bases, new business bases, new capital markets in interesting ways, and I'm fascinated by how you've been positioning yourself across that spectrum. So, there are licenses now in capital markets domestically in the US, and so

Speaker 2  9:29  

we have

Speaker 1  9:30  

MTL licenses, capital markets licenses for like commodities and securities, but I think you know what's more important is in order for the global ecosystem to work permissionlessly, you need to be able to like on when we think about DeFi. How do you marry that with traditional assets and traditional rule of law and a traditional risk management strategies? How do you move that forward at a pace that we haven't seen before?

Sy Taylor  9:55  

Henry Privy describes it a little bit like I still need a launch pad in every. Country, even if I can get up to space, so if digital assets are space, I can get around really easily once I'm there, but getting back down to earth and getting up to space, that's the hard part. And I guess that's where you guys are trying to play a little bit.

Speaker 1  10:10  

Yeah, that's one parallel to look at it, but I think that's for like one specific set of products. The question ends up being, if you are a customer that wants to be able to have access to capital, access to debt, access to speculate, access to assets, and then recursively the same thing again and again, depending on how you want to risk manage. We use the word risk management, but that's a technical term for, like, I want to just have power over my own capital. Yeah, I want to dial things up and down, and depending on what's happening, right? So we talk about hyper liquid, which I think is really interesting, is rest of world, they went from, you know, BTC, ETH to meme coin strategies, then all of a sudden they moved into real world assets, which are, you know, equities, and then price index on equities, and then speculation on that synthetics, but they're also just saying, okay, great, well, there's things that are happening in the world, like there's a war, or there's like inflation or deflation somewhere else, and so I want to speculate, and you know the price of oil, I want to speculate, or gross platinum, and I want to speculate with other commodities like gold and silver, and I think that ends up being really important, because that's actually where you see worldwide risk management decisions happening. Yeah, and so, How do you give as many people in the world that type of access to make that decision, and what's the implication once they have, like, talk to me about the biggest systemic impact of worldwide risk management, and other people in other markets being able to do that. How do you think that changes the nature of markets and how we think about race? So that's actually a great segue into, you look at traditional markets, they're quite siloed, so you know, take a look at FX, you take a look at equities, commodities, et cetera. It's a set of providers, a set of constituents, a set of market makers and takers. Very few can go across and overlap across all these asset classes. The most famous one is Citadel, who we also partner with. And so, actually, I would argue that over the last 50 to 70 years, you've had much more possibilities of systemic risk is the concentration of capital, and then the concentration of, we just centralized everything, whether it's CLS, it's not just centralized, the number of participants have gone down around, you know, the 1000s to hundreds to like the 10s, 20s, depending on, you know, you can even take a look at the bond markets, it's highly concentrated, so when you think about like freezing, when you think about leverage in the ecosystem, when you think about, you know, how do you want to be able to bifurcate risk and have risk absorbed across the board? I might be getting, like, too technical, but I think about, no, I love it, which is shows full. The more you can have the overall ecosystem absorb the risk, it's the better it's for the betterment for the full ecosystem. Crypto, I think, is like the first step along the way, or you have the ability to transparently see what that pool of risk looks like at any given time, that you can make much more informed decisions.

Sy Taylor  12:48  

The concentration risk is a thing, and being able to go global kind of helps us kind of around that, and it's a systemic, well, not necessarily that

Speaker 1  12:55  

concentration risk always will exist. You just need to know what the concentration risk is, and that's the part where I think people kind of fail to view it. So, for example, okay, same old. Yeah, so if you take a look at equities markets, it's a power law of like a small set of companies that are driving the price via the price in the index, so the price of how people want to think about what the future is going to look like today. It might be more AI driven. Commodity is actually not any different, right? Which is, where does the volume go in crypto? Where does most of the volume play for derivatives or for spot? It's BTC and ETH, and everything else is still long tail. How a low, you can say that there's a mid tail, but like it's still small, and so it's concentrated into types of assets and types of people. Then traders are concentrated, AU, AUM is concentrated, custody is con.. yeah, that's not bad. It just means you know where it is, and so you will know where the risk may lie at any day in time, so you can make the right risk decisions and the frameworks for that. Now, the problem with that is, if you don't have the data, if you don't have transparency, if you can't watch that traceability and flow, then if you're a bank and you're giving leverage to someone who is using that equity leverage somewhere else, it's all untransparent and it's all contract law and private, and so it becomes harder to see where that systemic risk lies for a very long period of time, and we keep getting into this repetitive motion.

Sy Taylor  14:07  

Fascinating. Thank you for going down that rabbit hole with me. I want to also talk about the consumer side a little bit, because you've launched Crack, you've partnered with MoneyGram. Talk to me about both of those initiatives and kind of your consumer approach away from like the exchange heritage that you got

Speaker 1  14:25  

sure, so two sides of the business, if I was to simplify it, is we have a set of products that are built for trading and investing, and then we have the overlap of set of products that are focused on banking and yield and financial services set of products, that's that's the underlying, then we have a first set of first-party apps that do both, right? They traverse both worlds, which is you want to be able to trade, but then you might want to be able to save, right? So, like, not all professional traders are trading all day long. They want to take a break, they want to get yield on their assets, regardless of what that asset is. If that's crypto, non-crypto, trad fi, non-tradify, you have a set of choices. Next set is payroll services. What we've been talking about is, okay, great. Well, how do I get all of our fintech apps, banking partners, anyone who wants to even in DeFi, anyone who wants to access to those same rails that we build upon, we can enable that for them, regardless of where, which country or jurisdiction or market that they're serving, whether it's consumer retail, it's mid-market pro traders, or it's enterprise institutions will want to be able to help promote that, and so that's the way in which we bifurcated the company to serve, like frankly, anybody in the world that wants to be able to dip their toes into these products, and then they can decide how far they want to go, and then we do the same thing, which is we're showing an example of what you can do a global scale, and some people will want to compete, some people want to take slices, and you want to be able to actually promote that in the same way,

Sy Taylor  15:46  

so people can have a set menu version of Kraken, or the a la carte version, like, say,

Speaker 1  15:52  

it's whatever they want, right? And as the world moves more and more into the tokenization of assets, liquidity of those assets, and risk management of those assets, we can provide those for some people, and some people can just do it themselves, but it's a set of solutions that they get access to, or it's gonna be one sliver of what they need for their use case, and so we're gonna be there to help promote and provide and make them successful, regard if it's reap with a card issuance, stable coin movement, deposits, assets, lending, custody, the list goes on, which is, we can provide that for them. It is

Sy Taylor  16:22  

interesting how much the business doesn't look like it did in 2015 2016 At this point, it's like really spread out. I'm also, can you talk a little bit more about the partnership you did with Monogram for Cash Out, because I think that's something that just doesn't compute for most people, and they think our stable coins and digital assets, cash out is like it's almost like an anathema to them, but what, why that decision, so it is, and it isn't, depending on how you look at it, right? So, if you look at the first principles of I have a self-custodial wallet with an asset in there, you've got a self-custodial wallet with an asset in there, and if I want to be able to move assets

Speaker 1  17:00  

from my self custodial to yourself, custodial. In theory, I can just give it to you without any intermediaries. Now, I might choose to use intermediaries, but I can just give it to you, right? Just how you think about the basic concept of the Bitcoin, it doesn't need to be intermediaries in the middle. That's like the beauty of everything we see that's interoperable and blockchain. Okay, great. Now, when you think about cash, it's the same thing, right? If I just give you $1 bill, there's nobody in between. Yeah, and so, like, you have the dollar bill and I have the dollar bill, or if it's like a.. if it's pesos, if it's any of these emerging markets. Now, if now you look at these two concepts and it's extreme, you say they're different, but they're actually extremely similar. If you look at it from a circular perspective, now in between, we say, okay, great, well, some people need to be able to convert between now these new assets that are coming on chain, and I want to be able to get cash for it. So, one extreme would be I send money from the US to Mexico, and I need to be able to onboard a fiat currency through the exchange or set of providers in the US, and then I need to be able to offboard into cash into Mexico. You can say, "Okay, well, why work with Moneyram? Well, Money Wham already has multiple partners that they work with to be able to convert some form of the currency on the other side to the local currency and give cash to folks. And some of these emerging markets, they're still getting up to speed, where, like, frankly, they might not have a mobile phone yet, but they have only a mobile phone with maybe a self-custodial or non-custodial wallet. They have a set of services that are like fintech, where they get access to a set of products, and they want to be able to move that from, let's call it Bitcoin, and get cash for it. Well, how do you do that? Well, maybe they want to actually just leverage Bitcoin for that cash and then to borrow again. Oh, yeah, so can you use MoneyGram for that too? Now, can you do the same thing with tokenized equities. Can you do the same thing with other assets that we're used to in the developed markets, but they've never had access to in any of these markets, like Argentina or Brazil, or in Mexico, or in Nigeria, or in South Africa, in some cases. And so, like, the list goes on in Southeast Asia. Yeah, and MoneyGram, and those types of partners have a global footprint, where they have actually physical locations to be able to do that,

Sy Taylor  19:01  

we had Anthony, you on the show recently, talking, talking about exactly some of those stuff, and their app, but also that distribution being, they are really powerful and really, really, and well,

Speaker 1  19:10  

here's the flip side to it, MoneyGram now, also they made the announcement for their stable coin, yeah, so what they're saying is that they want to be able to offer financial services style products to their customers. Yeah, and so we'll want to be partners with them around staking that asset, depending on the asset, letting people borrow against that asset if they want to let them get better yields on that asset. And so, you know, everyone is building out financial products, but not everyone has financial rails. And so we're going to do both, but we've already built our financial products on top of our rails. Yeah, now we can give these rails as payroll services to anyone if they need it.

Sy Taylor  19:45  

There's a lot more bb than I think meets the eye, but also crack and urn has been one of the fastest growing products in the space, and like earn products, vaults seem to be creeping into the mainstream a little bit. Is it things like MoneyGram and those payouts use case? Assessor that are driving it, is it regulation? Like, what are factors driving earned products becoming? I think it's the

Speaker 1  20:07  

most simple. So, where do you live? London. Okay, so what do you get on your deposits?

Sy Taylor  20:13  

About three and 3.2% Okay, so

Speaker 1  20:18  

if we offered you 5.8 to 6%

Sy Taylor  20:20  

on

Speaker 1  20:21  

your fiat currency, would

Sy Taylor  20:23  

you use the product? Depends on the credit risk. Yeah,

Speaker 1  20:25  

but would you like take a chance on using it? Yeah, no. So I do have like quite a bit held in USDC, giving me 10% because like, yeah, you allocate to that. So that's really what it comes down to, is that you've got a set of choices, maybe you have five to 10 in the United States, you might have like 15 to 25 and a lot of these other emerging markets, or even developed markets, are developing even within the greater euro, if you want to call it that, is that they don't have access to these products in their local jurisdiction, and so if they want to move their local currency to USDC or euro equivalent or GBP equivalent, and then get access to those yields, that's a starting point, that's one. Now, the vaults that we have there are we called small, medium, high risk strategies. Yes, small risk is like, okay, there still might be a little bit of risk, but it's closer to treasury yields, but it's permissionless, and it's isolated markets. Then the medium ones, like, here are the strategies that we're going to use, it might be a certain set of crypto strategies, certain set of traditional strategies, and then the high risk might be like all of the above. And here's how, here's how we think about it. Here's what the historical loss ratio may or may not look like over time. We're gonna do even more, which is like advanced advanced strategy, which is like maybe you get 12 to 14% yeah, but it's better than five to six. So you know, there's what I'd call like the FDIC equivalent insured products that you have in the United States, but a certain amount of capital that you could put towards the 250k Then you, you know, then you think about, you know, credit vehicles, and you think about bonds, and you think about other strategies that, like, a BlackRock will have for people as they move up the stack in their wealth. We want to be able to offer all of the things that, like, a billionaire might have access to, yeah, to everyone that's on the street.

Sy Taylor  22:04  

What I find interesting is how many fintech companies are starting to do things with, with some of the bolts at the moment as well, and

Speaker 1  22:11  

they're actually the number one folks that reach out to say, how did you do

Speaker 3  22:13  

it? Yeah,

Speaker 1  22:14  

can we do it? Can you help us? Can we copy you? And we say, you don't need to, we just offer it for you, and want to help you along the way. Yeah, and again, that's where payroll services come,

Sy Taylor  22:21  

because you've got the licensing and everything you need. We had all the license

Speaker 1  22:24  

things, we know how to deposit it, we know how to do the risk management, we know how to do the risk curation, we already have tried and true partners, we've already gone through security and governance, like the list goes on on the things that we've already battle tested, and so instead of going and saying I'm going to figure out the full stack, I think it goes back to, okay, well, if you can work with a banking partner, you can work with an asset manager, you can work with someone who's already built out these risk management strategies over the last 15 years with a loss ratio that's like near de minimis. Why wouldn't you want to continue to work with us?

Sy Taylor  22:54  

I think it's so interesting that fintech companies, as well, that have offered all the competing products in fiat, are still doing this, and they're seeing an opportunity to grow their business from it and grow their TAM and grow their market share, and so they, they do get that advantage. How are you thinking about

Speaker 1  23:10  

you can have the best of both worlds, right? The, they had a set of partners, financial institutions, banks, and rail providers to be able to offer those fintech property products, and the next set is okay. Well, how do you do that in crypto? I think the challenge that people may have initially is that crypto is just rails, yeah, and depending on the asset that you want to offer, and you can choose that because it's your customer set, that's how you're going to pick and choose what other types of strategies you want to offer your

Sy Taylor  23:36  

careers. It's not one size fits all, and I think knowing being able to speak somebody who has seen all of those assets, has experience in them, is like big part of my day job is helping people figure out not just who I should work with, but what should I actually do. I know I want to do something in stablecoins and yield, but like what specifically for my customer. So, having somebody that knows that is extremely valuable. How are you thinking about the state of global regulation at the moment? I mean, you were in many markets, you see the differences between Europe, the Middle East, Latam, North America, Asia Pacific, they seem uneven from my vantage point, but how are you thinking about, I think of all of this as a evolution, so if you, if you go back, you know, six to seven years, you would say US is not a jurisdiction that's going to be excited about crypto, want to promote crypto, et cetera,

Speaker 1  24:30  

et cetera, and then one of the markets that were the first to adopt slash I don't want to say regulate, but propose design and implementation of laws was Europe, yeah, and so I think a lot of people make the mistake of there's regulation based on laws, and then there's like proposal, like what the laws should look like, so that there's proper regulation for those regulators to regulate in the previous, yeah, and I think that's actually an important distinction, which is, okay, great, well, Europe. In my opinion, did a really great job of saying, well, we know these assets and these asset classes are going to be important long term, but we don't know what they're going to look like. So, how do we regulate them and what structure we can use? There's one piece. The other one is like, okay, great. Well, people keep talking about tokenized assets, tokenized commodities, real-world assets. We also don't know what that's going to look like. So, how do we create a flexible framework for people to innovate and sandbox within that, then the last one is self-custodial versus traditional regulator products, which is where the first ones to say if the customer wants self-custodial products, we should be able to enable that, and other companies should be able to be there to provide that. You take all of these things that I think the companies that have done a good job, and it's not just us, they've been other companies that have been able to do the same thing that are in DeFi, like on, like, namely Ave, you know, they're, you know, they got their Mika license and CBI as well. It's okay. Great. Well, now they're able to offer better products and services in those jurisdictions because the rules are set. Yeah, and now we've gone from design to implementation, and as we've implemented, they've gone back and said, okay, you know what, these things don't make sense for what you're doing, so you can continue to tweak, and we don't continue to tweak and adjust it with them, and so we're, we're giving them risk management strategies along the way too, because they're asking for the same feedback. My hope is that all the other jurisdictions rolled wide are going to do the same thing. US is a little bit more tricky, because you've got the SEC and the CFTs, and you have banking all sort of not at each other's throats, but I'll have like different views of what the world should look like, and so, and MTL licenses per state as well, and so all of these rules and regulations that have been in the past trying to figure out how to shoehorn that in around what digital strategies are going to look like, and then vice versa, what are the digital strategies and assets going to look like moving into traditional assets, because if you have a tokenized equity, it's still equity. If you have tokenized commodity, it's still commodity. If you've got a one to one backed stable coin, it's still treasuries underneath it. And so there are rules that apply to that, and that's what we're in the now in design and implementation mode for in the United States, but I think, like Mexico, Brazil, all these other markets that have been, you know, they've already been, you know, keeping their feet wet in digital assets. Are also looking at the United States and Europe and say, okay, right now these guys have created their structure, what do we adapt and adopt to that's exactly the same, so that you can actually have, you know, cross-border economics, you can have cross-border laws, you can have, like, you know, KYC and AML compliance, that is, you know, strict across the board, not in the strictest sense, but it's common across the board. Yeah, and I think that's the most important piece that people kind of miss.

Sy Taylor  27:31  

Over a point zero forum, they talk a lot about functional equivalence, and I think that's like a very technical term for where we're trying to drive to. I'm curious on what case you would make for the TradFi institutions specifically, and also the banks, right, who some of whom historically have famously been quite anti-stable coin, quite anti-Bitcoin, quite. But then now it seems to me like, well, if people want to buy and trade it, they'll follow their customers. But is there an upside for tokenization to those traditional financial institutions, because when crypto started, it was very much alike. We're trying to take those guys down. Do you think that's changed, and how do you think it's changing?

Speaker 1  28:09  

Look, when you start any movement, the first thing you say is, let's take the incumbents down, because the way in which they build products is not good, and so we want to disrupt it or revolutionize, and hear these words all the time, and so for example, if you take a look at the technology companies, what do they do? They, you know, you, they had, you know, mechanisms of e-commerce, they had mechanisms of brick and mortar companies, they had mechanisms for payments, and so they went and just evolved and made it better and better and better. Now today we look at some of those companies as incumbents, and then we also take a look at the companies that were able to evolve over time, so you know, banks got bigger because they also got better at being able to offer products and services online and on mobile. The ones that didn't are the ones that are suffering the most. Yeah, you know, there was a argument that if you go back far enough in history, these deposit funds or money market funds, or sorry, our money market account would take away from deposits yen, and that was actually a main argument, which didn't make any sense, because you just had much more market participants, and as you had more market participants, actually everything grew. Yep, that's the kind of the way I think about it, is it's the same thing that's happening worldwide here now. Yeah, is that the people that have first participated in crypto are just new market participants that didn't have access before. It's growing the pie, and it's growing. It's not just growing the pie of existing customers, folks that just never were there on the first, they're in the first butcher. And then you've got new unbounded market, 10, which is like always hard to assess in the beginning, because people get scared. The one, the analogy I like to use is that when Amazon was growing, a lot of folks were scared about what Amazon was going into, and hey, they're doing everything that that they do in the brick and brick and mortar shops, but like two companies actually came out pretty well. The one that did the best is Walmart, but like Best Buy did as well. Walmart is bigger than it has ever been before, because they adopted the brick and mortar strategy, they adopted the online strategy, the mobile commerce strategy, the payment strategy, the banking strategy. They said, "Okay, well, let's just do everything, because we've got a large captive audience. Amazon ended doing a lot of the same things too, and more. And so, if you take a look at the both, there's wide

Sy Taylor  30:20  

Whole Foods, yeah, to get into the freaking ball, so yeah,

Speaker 1  30:22  

and so I think where the banks are probably making the most mistakes is that they've been so used to one specific source of revenue, if you're all, if you're concentrated with one source of revenue, which is deposit yields, and you don't share the interest with your customers, then yeah, you're going to be at risk if you can't diversify your revenue stream into other areas,

Sy Taylor  30:39  

I find it so interesting that the biggest franchise, the growing franchise, and the jewel in the crown of JP Morgan, Citi, HPC, is often their payments and transaction banking business, and those are the things that are driving for them, in many analysts' view, and my own personal opinion, driving a lot of their stock price appreciation, versus the Nim business, which has been sort of broadly flat since the financial crisis, so is interesting to make that point. Last question for you, then talk to me about your IPO ambitions. Why go public? Why now? You know, what are the things that you guys are looking to when it, when it comes to getting into the public markets?

Speaker 1  31:16  

So we confidentially filed last year in November, and so that's the announcement that we've made. Look, I think I always go back to, like, my philosophical structure, which is, what are the types of companies that you want to build, and when you start off in the early days of a company, and you've got one product, one solution. We talked about power law and concentration, so you end up being pretty concentrated in within one product area, in the 2000s it was easier to go public. It was also more companies, more companies were public, and you used to go public at, let's call it 25 to 50 million revenue, then over time it went 50 to 100 million revenue, 100 to 500 million revenue, and so in order to be a public company, and given that I wear a bunch of different hats, you've had to sort of evolve your company outside of a concentrated set of products in one product. Salesforce is probably a good example, which is they bifurcated over time. Yeah, but they still were a system of record, and they build more and more value-added services on top of that. If I look at financial services, you're kind of seeing the same arc now. Yes, a lot of companies went public with one product, and they had volatility along the way.

Sy Taylor  32:24  

Robin Hood neared that.

Speaker 1  32:25  

Robinhood is another one, Coinbase is another one. And what you've seen, the most successful companies over a period of time, is a foundation, and they have a set of products that get compounded and built upon that. Yeah, and the way we look at, you know, our 20 year, 30, or even our 40 year journey of what we're trying to do, and the folks around the table, trying to build that, is what does our foundation look like today? Where the, where may the deficits lie today versus where they might, might lie in, you know, the future, and we want to be able to cover for that, so that we can build and innovate on the products that really matter. And so, if you look at the world over the last three years, you've had a AI innovation, you've had AI agent innovation, you've had wallet transformation, you've had stablecoin transformations, so a lot of it is for us gearing up to be able to support that, and then how do you, in a world where the only constant is going to be change, how do you make sure that your company is adaptable to that

Sy Taylor  33:15  

adaptability? The umbrella that you now have with payroll, I think that is an interesting structure. It worked for Alphabet, so it might work for you guys too. And so, fascinating. Well, Arjun, thank you so much for being on tokenized. If people want to learn more about you and get in touch with Payword or Kraken, or any of the things you do, whether they're good to do that, you just go to payword.com for Payword and Payword Services, or you can go to kraken.com and see our old, or not old, but our existing exchanges are most storied product. Phenomenal. Thank you so much for being on the show.