How Kraken Plans to Dominate Tokenization and Perps in 2026 and Beyond

Transcript

Mantle is pioneering blockchain for banking, a revolutionary new category at the intersection of tradi and web 3. Follow mantle official to learn more. >> Arjun, thanks for joining us. Really looking forward to the conversation. I want to just kind of dive right in. I know a lot of people watching and listening are are going to be interested in sort of what your experience was at Kraken on Black Friday. Um I think we we spoke about this when we met in New York a couple months ago. I I spent a year working at Kraken on the marketing team and I was there during Black Thursday uh during the pandemic when Bitcoin crashed below $4,000 and I remember all of us just frantically trying to buy Bitcoin if nothing else to go down with the

ship. Actually ran into some issues with Coinbase trying to do that. But um anyway, yeah. What was your what was your experience like? I mean just seeing these mass liquidations and and as well uh well doumented issues with um Binance and and and some ADLs across perexes etc. >> Sure. I think um I mean so so one thing to sort of note about this is that um I mean sometimes these these events are pretty intense, right? But I don't necessarily think they're unfamiliar, right? you have different types of bursts in the market that can happen um that are you know what we're ready for at any given time which is market

volatility and so when the market moves like this our focus at Kraken and my team's focus was just straight up you know what's our operational discipline what do we need to make sure to make sure that our systems liquidity and our clients are protected that's just you know bar bar none that's like top priority um so we can kind of walk through it one by one and we talk about this a lot right which um you know operational resilience what does that mean built Kraken and um our partners are meant to handle that type of volatility spike um you have to sort of think about liquidity risk client protection as I mentioned and uptime has to be always a muscle memory for everyone it can't be just something um that's like a nice to have just given

how you think about traditional markets so your risk systems have to do exactly what they're designed to do um um in those types of situations right like you you think about all types of systemic risks. Um, from a personal perspective, I've been through many of these for a long time. I guess I'm I'm old and when I think about all of the types of crashes that have happened in history. And so when you've been through multiple liquidation cycles in traditional markets, and then now that we've been in multiple cycles in the early days of crypto, mid days of crypto, and where we are now, I don't think you ever get numb to it. Uh, but I do think you get much more grounded, which is um, you know, how do you focus on the right things?

Can't stress out. um making sure and ensuring all the teams have what they need in order to be able to support you know frankly our clients across the board consumer got our bin market uh professional traders that are thinking about using the platform on any given day and that the platform is continuing to perform. Um, and then there was a couple, you know, days and weeks after that I got to sort of think about it, which was, I think events like this remind you why the crypto infrastructure has been built and continues to be built for these types of extremes, right? It's transparent. It's more capital efficient and it's more robust. Um, and I think that's actually the learning lesson in this isn't that um, hey, this was scary like you know, crypto is is a scary

asset class. It's just that look at how much we've grown over the last, you know, 10 years. Um, and we've continued to come out stronger, faster because everyone around the ecosystem, not just us, has prioritized at that foundation. And I think that's really key. >> Okay. One thing I'm I was really interested to ask you because among major crypto exchanges, I think you're the only one that has co-CEOs, I mean, Dave has been there for for a long time and you joined more recently, but how does the dynamic between the two of you work in your leadership? How how does that all work during a time of crisis when perhaps you are getting calls from panicked clients or or panicked market makers wondering if some of the issues happening perhaps in the other part of the world could could spill over onto

your exchange. Yeah, look the the the co-CEO, you know what's funny is um when we were it was my idea when I was coming in um that I wanted to have a co-CEO structure um and here are the reasons why and I gave um I won't go into the details of that but maybe we will um is that the um the world has like become more and more complicated in some cases and the businesses that have been continuing to expand have also become more complicated. So what do I mean by that? what you've seen in Silicon Valley, which is what people trying to think of as like the epidome of um like the best way to build a business and I'm not necessarily think that's true is that um it's one product um one perspective, one marketing team um and it's a set of

features um that are allow for your customer set. So you're actually going after one customer set, one segmentation, one product. >> When you think about financial services, banking and financial services, if you've looked at these businesses over the last 50 years, what do they have? They have multiple products, multiple financial products, multiple services that adhere to large constituents of customers, not just one. So even the segmentation in like a consu like we say consumer, well within consumer, you've got people that want to save or get yield. Um they want to send and receive. Within professional traders, you have folks that care about certain types of trading FX versus non-FX or crypto to crypto or crypto to fiat like the or you know now real world assets with crypto

um etc etc. The list kind of goes on and then you have your market makers and takers. Then you have your large institutions that hold in custody and they want lending. These are all very different customers with the different um importance and cases of what what they care about. And so the the the Coco model works for us because in my opinion um you know all crypto companies are going to face this issue is that we operate in the intersection of technology and markets and policy all at the same time. So it requires a lot of attention at different times and I think those require different kinds of leadership depth. Um and I think depth is really important because traditionally you've got a lot of CEOs that delegate and they don't know enough of what's happening within their company

in some cases. So they have like these very high level political lines and I and we didn't I didn't want that and I didn't want any of our leaders to have that. That was part of the change. And so having two co-CEOs allows us to run faster and think longer term at the exact same time because we can mix and match where we need to be. And so we've divided a lot of our responsibilities around strengths, platform, product, client experience. Um, and sometimes we jump where we need to together. Uh, but the way it actually like physically looks, if I was to show you like our Slack, we are in every channel together. We're on almost all calls together. So there isn't any um um, you know, day and night between us. It's like we we actually know what is going on. And it's actually not just between us. It's

between a lot of our what we call our pod leaders internally. And so then we have a really good understanding of like okay, how are we thinking about global expansion on an everyday basis? How are we thinking about regulation on an everyday basis? Does the strategy need to course correct on an everyday basis? And so we do make a lot of these big calls together. And so what does that allow you to do? Like a lot of people think, oh, that's slow because when do you connect? We're we're asynchronous. We're fully remote. We're talking to teams all over the world at any given time. Um and and obviously both of us have to sleep some like I'm a I'm a night owl and Dave wakes up in the morning and so we actually just then get 24 you know some coverage um I I work

all weekends um and and so does Dave with like you know different teams and so I think the key is like how do you get continued alignment so then you get decision velocity cultural signal um and like a personal layer with all of these teams. >> Yeah, that makes sense. And I'm just very curious just to bring it back to um Black Friday. I mean specifically is there anything um any anecdote from how you guys worked through that? Um a lot of confusion I'm sure a lot of a lot of concern among employees or just just partners. How did that work during a crisis?

>> Yeah, I mean look it was a crisis for the market. Um it was less of a crisis for us and as mentioned before our systems were built and we were resilient. It was transparent. we knew what our own risk looked like and then we were there to actually think about more okay well how do we help the other folks that are might be going through some trouble at the at the same time right because it like we only survive as long as our customer survives or clients survives and the protocol survives and any any of the um partners in the ecosystem so a lot of what we were doing is we're reaching out and saying what do you guys need help with um where do you guys have some deficits is that a capital thing is it a liquidity issue what is it that you guys might need and

so then I think it was more about how do How do we make sure we continue to be good actors in the ecosystem and to make sure that the market continues to stay resilient as it comes back? And so we saw a lot of that. I I actually think like I'm just super proud of the team because I just watched the team just stay focused on the things that continued to matter and didn't let the noise get into the way of what they were doing on a day-to-day basis because again as I mentioned before the uh the technology, the system, our risk management, they were all resilient. We didn't have any issues. And in fact, I would actually say this is probably the most calm I've ever seen the team because we were already, you know, meant and built to withstand any of these types of situations.

>> All right, great. So, so let's pull out uh thank you for kind of like walking us through sort of the um the boots on the ground sort of situation there. Let's talk uh what this means for Kraken in more macro terms. Uh I mean, for one, you guys operate her stacks as well. um a lot of focus on sort of that particular product uh for a number of reasons. One, a lot of exploitation is going to be the future of crypto growth as derivatives outpaced spot. Um a hyperlquid story, Aster, it's hard to ignore that. Uh and now Robin Hood, Coinbase, you guys are all competing in it. Um what did you learn about that product in particular and how is it going to inform your per strategy uh as you expand further internationally and

then in the United States? Do you mean our Sorry, are you talking about our per product that we launched like in Europe? Um yeah, not not a Okay. >> Yeah. >> Look, I think what one thing that um people kind of forget about is um you take a step back like what do our what do our customers really want at the end of the day um is that they're moving their collateral um to the crypto ecosystem regardless of what that collateral may mean. Right? So, we talk about BTC, we talk about ETH, we're now talking about tokenized equities. And so, there's a lot of demand for, okay, how do I move my assets to um one synonymous system, but it's also permissionless and have access to be able to do anything I want regardless if that's on a centralized exchange or decentralized um um exchange or protocol

lending, so on and so forth. And so, you're right, you know, derivatives um just like any other market have has continuing to already outpace spot globally. That's not a surprise, right? as markets mature you know participants move towards leverage hedging capital efficiency as I mentioned and so for Kraken that shift isn't a threat it's just a validation of where the industry is heading and exactly where we've been continuing to invest we've been investing there too right so I think the the anchors to sort of look through is again structure evolution um Kraken's positioning that's how I think about it competitive edge now and moving forward and sort of the long-term vision for that so kind of think about it one by one spot Spot trading built the crypto economy, right? Derivatives, uh,

professionalizes it. U, every mature asset class, no matter what it is, equities, commodities, FX, it has evolved this way. Um, it's just more about what the timeline distinction is. So, derivatives bring that stability, liquidity, and price discovery, just like you see in mature markets. The way we've thought about it is that we've been building these rails for many, many years, and we want to get it more right than wrong. So, you think about regulated futures markets. Um, you think about perpetuals in Europe. also like think about like what does real perpetuals mean versus like you know a um distorted version of it which is what some people have been trying to build.

Um you know obviously we uh uh recently um acquired a company like ironically enough it's called small exchange. So I was looking at the headlines it says Kraken acquires a small exchange. Uh but the name of the company >> you got to have the capital S there and that way know it's no it's a DCM and and it's not >> it's a self-deprecating uh >> uh but but what that allows us to do is to think about you know again in a in a in a compliant and regulated way on behalf of our clients. It's like it gives us a you know a CFTC regulated DCM. So it means we can meet clients wherever they trade and and I think that's really important as I'd mentioned before around how to think about one unified collateral system for multiple products retail or institutional spot or derivative. That's how we think

about it. And and look from a competitive edge standpoint there's a lot of smart folks in the ecosystem and sometimes they're only focused on one thing versus the other. Everyone's competing on access and product breath. I think what's more important is well, how do you safeguard your customers assets? How do you make sure that they're secure? How do you in some cases make sure it's private? It's theirs. It's their sovereign asset. We talk a lot about this a lot, which is what was the promise of crypto? What is ownership? What's the promise of cryptos? It's yours. It's not it's not the middle individual or the middle person or the middleman that's taking it and they're going to do something with it. Um, so having a regulated infrastructure with deep liquidity and a reputation for integrity and values, I actually think is like really important.

It's what matters a lot to our customers, which is why we stay in such close contact with them. Um, again, examples of that is like, you know, a lot of our mid-market um customers, our consumer customers, and even our enterprise customers that we have, we're in Slack threads with them, we're in Telegram threads with them just to make sure that we have constant feedback around what we're doing to make the product better. And so in a derivatives driven market um that's what institutional capital in my opinion looks for is like that trust integrity reputation liquidity and regulated infrastructure more than anything else. But DeFi gives you a really good view of what's starting to happen and what the types of innovations are happening on the edge that we have to be able to pay attention to so we can build not necessarily those products but in that

direction which is like how do you make these products for our customers longer term where they trust what we're doing on behalf of them. And you'll see more of that to come over the next, you know, 30, 60, 90 days because we're, you know, moving at a faster and faster pace around what's happening between centralized and DeFi. And look, long term to your question, um, derivatives are never going to replace spot. They're going to integrate with it. They will be larger. But I think of this as a again a we see a single a multi-asset platform where users can move seamlessly between spot, between spot plus margin, futures, tokenized assets. That's the I think that's the future that I would love to live in. um regardless of who I am within um a customer set, that's what we're trying to build for the future.

>> Yeah. And I want to talk about tokenization and some of that other stuff a little bit longer. I have to say one thing and I've written this publicly plenty of times in the past, even when I was back at Forbes, one of the things I really admired about Kraken's founder, uh Jesse Pal, >> is that even um when you guys were competing with Coinbase and Binance and the likes, he he always said, "We're we're an exchange. Uh we don't necessarily want to be a wallet." and uh he he encouraged customers to not keep assets on their wallet or on the platform that they weren't encouraging to trade and and that kind of speaks to the idea of customer trust and and and and really kind of using exchanges for what they're they're meant for. Uh to that end though, just related to perhaps I mean you saw a lot of discussion about

uh ADLs and and sort of kind of when it comes to treating customers equally. I know for instance Binance um came under some uh came under some heat for perhaps giving Athena special privileges when it came to to deleveraging etc. I'm not going to ask you to specifically comment on a on a competitor but my question to you is like what can you say about Kraken's ADL policy when it comes to things like that? Um, do you have funds set aside so that you I know derivatives are supposed to be a zero- sum game, but to take on some of that risk during periods of acute market stress or kind of what learnings have you done in order to sort of help um navigate an issue like this um as it happens again,

especially if perhaps like this time I know it wasn't a crisis for Kraken as you said, but perhaps it it could be like what are the lessons that you've taken away from that particular aspect of this episode? Yeah. So, um let's I'll take a step back. So, you mentioned um our our tone um our values which Jesse had, you know, started the company on. Look, we've always encouraged clients to own their own assets. It's like it's key to us, right? If you even take a look at our Kraken values, you know, Kraken, I think it's kraken.com valvalues. Um that's core to Kraken's DNA. That is not going to change. Like fairness is core um to what we do. Um now the interpretation of that can be very different for a lot of um uh people and so um and like again going back to what

this is partly why I came on board from my own experiences of like do I own my assets or not um is uh Jesse set the tone very early and that's going to continue to stay which is like we are a platform for ass um access we're not custody dependence um I think that's really that's like it's a it's a key thing that's really important you can trade with us confidently um but you should also be empowered to self-custody when you want to. We're we're never going to stand in that way. We're not going to create a walled garden. We're not going to say you can't get access to your assets instantaneously. You should always get it. There's never going to be an excuse, which is, oh well, we have these policies in place. Um so, you know, bringing it back to now derivatives and ADL policy. Um and just

to be clear, I'm not sure if auto all your um listeners know that, but like you know, auto deleveraging is essentially how people think about it. um is that um risk discipline is first and foremost which is when it comes to derivatives, risk management cannot be a marketing slogan. It is definitely a marketing slogan for a lot of folks that are out there especially um unregulated venues. Um it's engineering. That's how you have to think about it. So we have always run tight margin frameworks. We've always had robust liquidation engines. Um there's no preferential treatment whatsoever. Everyone plays by the exact same rules. There's no special leverage. There's no deep discounts.

There's no rebates. We don't say it just because you're a larger institutions. We're going to, you know, um, uh, let you go. Whatever we do, we do it for everyone. Um, and we make sure that it's, um, it's transparent and it's open regardless of whatever the program might be. On the ADL side, our approach has been actually pretty conservative as I mentioned before is that it has to be a last sorry last resort mechanism. So, our systems are designed to, and we write about this a lot too. it's like you know publicly available is like our um and maybe we should talk more about it but it's designed to minimize um its use through proper margining circuit breakers insurance protection etc etc.

So when it does trigger, it's again rules-based and it's transparent. It's not discretionary, which is what you see frankly in some of the mature markets of what you've seen in the past, which is like you favor one versus the other. Um on insurance funds, I don't have anything in front of me, so I'm going to speak to what I remember is that like we generally have always maintained a dedicated insurance reserve for our derivatives markets. Um and so they're meant to absorb any sort of residual loss um before any ADL ever that ever might occur. So like that's the right way to in like how we think about it. That's the right way to protect market integrity and client confidence. That that cannot be a um it's not an option, right? It's a it's a requirement around how we think. Um and so again not naming

any names like I don't know specifically what they do, what their process looks like. Um you know sometimes it may or may not be opaque but I think transparency really matters for this which is some platforms chase volume with high leverage or opaque incentives. I don't think that's healthy for the long term. Um, and we've always cho um chosen durability. Um, like our CL our clients trade in a system that prioritizes again fairness and longevity over any sort of short-term growth, which is why we've been around for so long, barely raised any capital. And we haven't chased um growth just to chase the very specific things, especially um if they're not long-term durable.

>> Yeah. Just real quick, um did any clients incur ADL during this crisis? Uh they did. Yeah, absolutely. But um I don't remember how many or what the structure or the the number was, but it was quite low um across the board. >> Okay. All right. So, let's shift gears. I want to go back to small exchange um which is again a really funny name. It kind of reminds me of a gang where the biggest fattest guy who's like 400 pounds. His nickname is tiny. Um but uh >> or or smalls. Yeah, tiny smalls. >> Yeah, something like that. Yeah. Uh just just talk about it. I mean, meeting customers where where they are. I mean, this comes on the back. I think you I forget I'm blanking on the name, but the FCM that you um acquired earlier I think this year for 1.5 billion.

>> Ninja trader. That's right. >> Yeah, Ninja Trader. Thank you. How does that fit into like the bigger plan uh for for Kraken and a really consequential year for the industry? >> Um well, I'm hoping that every year is a consequential year for the industry as we move forward. Um look I I think look we we don't acquire companies just to acquire like we we're like we have this approach internally that we talk about which is we want to be surgical for every um you know time capital and um uh and people that we put towards um uh any initiative like we it shouldn't be a waste of our time and if we have made a mistake we course correct as quickly as possible. Um Somal exchange actually was like um something that we've been

looking at for almost six months to a year. Not necessarily them themselves but the whole industry which is like what are we going to do and this is part of what we had done with the you know FCM Ninja Trader is that um small exchange for us today is a cornerstone move for Kraken in my opinion again as I'd mentioned before it will be u about meeting clients where they are. It's not about where you know crypto started. Um so it gives us that like you know what I say footing and design to operate and exchange listed derivatives under CFTC oversight and like that's very clear um something that only a handful of firms that we'll think about the the other aspect is again for a lot of our um clients what it what matters right like

so regulatory legitimacy so now we've got the DCM now we now we have the FCM so that means we can create and list derivative products in the United States with the same integrity as traditional futures markets. It's like again a bridge between cryptonative and the regulatory world of institutional trust. That's how we think about it. In addition to that, as you mentioned with Ninja Trader, we have client access with via FCM through Ninja Trader, right? So, it's one of the largest futures brokers in the United States. That closure earlier this year gave us the ability to think about how we're going to integrate our infrastructure and their infrastructure and it gives us a direct access to that FCM network and a set of customers. It's a very very large set of customers, right? So it's how we now think about expanding Kraken to reach active than professional traders who are

already understand leverage already understand hedging and already understand futures. Um and while we have a regulatory global footprint, you know, Ninja Trader was in the United States, then that's, you know, a part of our bigger plan, right? So, multiasset roadmap over time, we're going to connect spot futures, tokenized markets under one roof, same standards, different instruments. And I think that's really important. Um, different interfaces, same infrastructure. So, whether you trade BTC, USD or Tesla stock, um, you'll do it ideally from one trusted platform or we can help support it in a one one compliant nature. So I I do think that's um really important. The the other aspect is again it's consistent um with our cultural continuity. What do I mean by that? Um what was Kraken's philosophy is what

we've been talking about here is that like we're building the pipes for the next generation of financial markets regulated where they need to be and then open where they can be and then we'll continue to fight for that. >> Yeah. Uh, and just uh, correct me if I'm wrong, but an FCM is basically a broker that can offer derivatives directly to to retail clients, whereas a DCM is more of that like um, middle player interface between the brokerages that want to trade uh, derivatives on an exchange like like the CME, but can't directly um, they can't directly offer to the customers themselves. So, that's how the two pieces fit in to the to the product stack that you're building.

>> Yeah, it's a little bit more nuanced than that. Like I think the way I think of it is a DCM is a marketplace. So you can think of as a DCM as a regulator marketplace is where the products live and so small exchange gives like crack in the capability um and oversight. So meaning we can design and operate an exchange listed derivatives very directly. FCM you can think of as like the on-ramp right if um sorry I'm trying to dumb it down. Uh so >> I'm I'm pretty dumb. So, >> no, no, no, no. Not at all. I mean, when whenever I got into capital markets, I was like, I don't understand how any >> No, my my wife calls me the smartest dumb guy she knows or the dumbest smart guy she knows. So, >> um, well, I think that's a compliment.

So, so, so the FCN is I think of as like your gateway. Um, and so it's how traders access the exchange and the deposit collateral and execute orders. And so, Ninja Trader historically has played in that space, which is there the FCM. Now, we have a DCM as well, right? So, we got the marketplace and the on-ramp. And so then why that matters is that now you're able to control the product layer, the collateral layer and so you're able to partner and integrate other FCMs if they want if you want to um as a means we can distribute our products to a wider base of traders as well. So it's end to end vertical infrastructure for us as well as other partners given that we are an exchange infrastructure at the same time. So I think of it as product creation all the way to execution.

>> Gotcha. So, so theoretically this puts you in competition then with like the CFTC and um and and SIBO and perhaps even like emerging players like Polyark and Kelshi and and and those type that are kind of getting involved in derivatives as well where you can design >> in theory in theory in theory like obviously these give you the ability to compete with anybody but that's not the point. It's more about okay where do we think about ourselves as a marketplace and then where do we think about ourselves as the on-ramp clearly today we're very much of an on-ramp towards you know crypto you know crypto trading um um assets etc u but obviously the you know the world is very large and so we can think about partnering rather than having to compete you know vertically integrated in some areas >> yeah that that is interesting I'd like

to just explore a little more like how you think you might be able to craft some unique products like with with the DCM and I know you just acquired them this week so it it still might be a little early but it like like different ways of accepting collateral as you mentioned uh or like moving further um down the line on offering products on on longer tail assets. Uh prediction markets is a big one. Um like do you have any interesting ideas on how you're going to use that? As far as I can tell, I don't think Kraken's done very much in prediction markets uh so far. At least you haven't publicly announced anything.

>> Yeah. So I'm I think um so one of the things that we were doing in our Kraken since we started is how do we continue to improve the experiences that we actually have? How do we just make it much better for our customers instead of just running to the next um FOMO category? And it's not to say that any of these categories are FOMO because I actually think there's a lot of changes that are happening, right? Some people call it the financialization of information and knowledge and some people call it the internet capital markets and a lot of these things are converging. I think that's all true. um it's more about a you know a mention of time and so when I say um when we build products or we craft products I really mean markets and instruments that are intentionally designed not copypasted um

and so you have a you've got this nature um or this mimetic nature in the industry where people think about copy pasting and it should work and so we're not going to build something that is a copy paste we need it like what we've done since day one has been very nuanced around like what are we building for our customers sometimes you lose your way, right? Like you make some mistakes along along the way. Uh but it's about building products that solve all of our real participant needs and what our customers want and what they can evolve into. So I do think about new forms of collateral, bespoke exposure, programmable outcomes like you know as we think about actual you know what crypto was meant to be from the Bitcoin paper and beyond. So we're not just listing trades, right? We're like our

goal here is to continue to design markets. Now, how to think about that is think of a futures market like a blank canvas. Um, so just bear with me for a second. I know that sound a little insane. Um, and so on that canvas you can layer new primitives, right? So what does collateral flexibility mean? It's like imagine being able to post ETH, tokenized T bills, even stable coins as margin each with different like um risk weights, right? Okay, that that's one layer. Programmable settlement. Okay, smart contract um base settlement that clears in seconds, not days, right? And then you got um composable exposure. Traders can build synthetic exposures. Um so say think of um like uh BTC volatility

against ETH yield. By the way, I'm just making this up. This might actually not be a great idea. So don't do it. It's not investment advice. Um but onchain and transparent, right? And so it's about creating risk for uh it's not about creating risk for its own sake. It's about creating precision. Um, and so that's what it could look like, right? And so I'm just giving you one example of um, >> yeah, the crossing. >> Yeah, it means a big thing. I mean, I know some of the Wall Street banks are doing it too. I mean, Goldman, I think JPM are letting people now pledge like I shares and stuff as as collateral and >> but it's slow. It's slow and it's not transparent. And I think that's what I mean by like when you think about prediction markets, I actually think it's part of

the same broader arc, which is price is a reflection of collective intelligence if you if you think of it that way. So whether it's the price of oil, the odds of a rate cut, or the outcome of an event, markets are information engines. So over time, we'll see more and more of these move to onchain too. So again, transparent permissionless uh but grounded in regulated frameworks and and I think you've seen a lot of that from Poly Market and Kelshi. Anyways, um, is that that they're also moving in that same direction. >> I got to say the one of my biggest fears is that DATs start pledging their shares as collateral given uh, given sometimes the way the MNABS are going down. Um, I wrote a story a few months ago on how like all this could potentially come crashing and and that could be one way,

not not the only way, but but one way. So, um there's always that that that give and take like you want people to be have be as flexible as possible with collateral while making sure those different risk segments that you mentioned are appropriately uh cataloged and >> well the the the real killer for any of these which is why people talk about like systemic risk or risk in the system is a they're fragmented b they're not transparent and I think that's the key to why we get so excited about how this infrastructure um gives you a technical foundation to this actually very responsibly. So uh not just us but like anyone could basically use you know DCM and a custody framework to experiment safely within the rules rather than you know craft something um that is you know non-transparent by nature which is what

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drive value to token holders and establish its significance in blockchain for banking. Follow Mantle official to learn more. >> All right, so let's talk about tokenization. Uh I I know you guys have the partnership with Xtos and have started moving into that space. I I've been in crypto I think since like 2012 2013 and and I've seen many cycles of tokenization uh hype and they haven't they've filtered out. Uh this time it certainly does seem to be different though. There seems to be new broader sustained momentum behind it. uh talk to me about your strategy when it comes to to tokenization and I know that some of these initiatives have just gotten off the ground, but but what are some of the

takeaways so far and how do you expect it to grow moving forward? >> So, I think again going back to the core message, um we've seen this hype before. I I've seen that actually since day one since you know the beginning of um you know the beginning of like the crypto movement or the OG movement. I I think the difference of what you're seeing now is culturally there's buy in um regulatory there's buyin and technologically you're seeing um infrastructure that is finally caught up with this vision. So real assets, real compliance, real liquidity um which I think is the key. Um, and so I think you're going to always see this like up

and down of headlines where you had the headlines before but nothing was there. You have the headlines now but it's just starting and so people kind of forget about it. Um, so I think the way we think about it is it's plumbing and we need to continue to build out that plumbing and it takes time and it's not going to happen immediately. So in in 2017 it was conceptual. I don't know if you remember that a lot of people had talked about that which is that it's let's put real world you know assets on chain there but the rails weren't ready. There's no custody standards. no compliant venues, no demand for regulated players. That has changed very quickly. Today, you have all three in place. You've got regulated custody, you got programmable assets, you got institutions that want to trade 247.

That is a number one ask from all of our customers, which we want to do that. Um, and now, you know, and obviously you've got the stable coin market, you got the stable coin bill. Um, and so, you know, now people are thinking about, okay, great. we can actually tokenize an equity, a bond, a fund share, and actually settle it on chain. It's possible. It's instant. It's transparent. Um, and it's across jurisdictions. Um, it can be permissionless for the first time. It doesn't have to be as a part of a walled garden. And so that that's a that's a leap in market design which I think we haven't really seen before, not just that new rapper. And so our our strategy has been, you know, Xox initiative um where it's not again a walled garden.

It's not part of just Kraken. You only get it available on Kraken. It's available to anyone who wants to participate. Um, and we want to be able to help promote that, which is how do we bring more and more markets um on chain. We have obviously have an engine, we've got liquidity, we've got institutional investors, we've got custody, we have we have the ability to move this forward. Um, and so when we talk to our customers and clients and now new investors, it gives investors access to public company shares. I can trade now permission again permissionlessly being the key and it's theirs across your ecosystems. It's not just us right because if they want to do their own you know uh risk based you know solution or trade or access to something we should be able to allow

them to do that especially if we don't we don't you know allow for it or we don't have the ability to provide for that um today or or moving forward. So you know building it into the blockchain neutral and platform agnostic so that liquidity isn't trapped in silos is I think how we thought about it from day one and other people have taken another approach which is it's got to be permissioned we have these issues why perpetuate and replicate the problems within traditional markets when you don't need to. So you want to be able to move between Salana or Ethereum or BNB or Tron or others. That's how tokenization scales in our opinion. And so we've we've anchored it around our regulated infrastructure, RK KYC and compliance and custody so that it's institutional ready from day one and

we're already seeing a lot of interest. So you know you you've seen just a a slew of u uh announcements and partnerships that we've done obviously with um you know Telegram Messenger, Ton Wallet, etc. Um I think you're going to see us continue to do that. So we're not we're not chasing it for novelty. We're we're our goal is like okay well how do you collapse those barriers around how people traditionally thought about defi and tradfi on separate but you give the you get the same trust and security that kraken is known for um and what tradi is known for as well. Yeah, it's funny. I um I remember sitting in a bar in New York. It must been like 2015, 2016, the day before R3 was announced was was unveiled to the world and uh they were going to compete with uh I was I always

say Hyperlid when I mean Hyperledger and Hyperledger when I mean Hyperlid, but it was Hyperledger. Um and it's funny there were so many different uh instances of this. Like I actually wrote a story a couple years ago about how I think I saw the same McKenzie presentation about tokenization six years apart. Uh but but there does seem to be some some new momentum there. Uh I want to just relate to >> well on on that on that front. If you go back in time in history, depending on how far you want to go, I I think I always kind of tell this to a lot of people. I just think it's funny. If you go back in time and you look at anyone who's written about this, consultants, newspapers, etc. Um they talk about how the printing press, like I I go back in time in history all the

time. Printing press bad for the world. Um, industrial revolution bad for the world. Electricity bad for the world. Internet, um, bad for the world. Mobile revolution bad for the world. Bitcoin bad for the world. That's one side. The other side is all of the business people are consultants depending on when they really started. So you can think of it as like, you know, electricity and beyond, computer and beyond, internet beyond. They just talked about how the world whole world was going to change immediately. Um, and it didn't. It just it takes time for these things to ramp up. What's kind of interesting is that every time we've gotten a uh great technology um that gives us more power and freedom in my opinion or sovereignty in some cases, which is a lot of what we see with now financial freedom, which is

what we're all trying to build for. Um it's it's met with um hey, this is going to happen tomorrow and like we're going to we're going to lose market structure. We're going to lose um in the volatile race, we're going to lose all these things, but at the same time, it's going to disrupt the world. It's going to be great. And they're usually wrong about um the timing, but they're right around like the things that will happen. But usually um all the good things happen first and then no bad things really happen over time. You just kind of see like everyone kind of adapts and it becomes better across the board for all market participants. >> Yeah. How do you how do you like the permissionless? I I I understand the the allure of that, but when it comes to things like like stocks or like if

you're like Apollo's tokenizing a private credit fund or or like something from KKR where there there needs to be white labelled addresses, there needs to be KYC like I I understand the underlying blockchain could be permissionless, but these assets are still permissioned. How do you sort of bridge those two those two elements? Um, look, a lot of these products are for like a different constituent of of people. So maybe look, the bridge between permissionless and institutional tokenization is really just identity aware infrastructure. That's how I kind of think through it. Um, programmable compliance, uh, not gated access. Um, the goal isn't to like wall off institutions from DeFi or vice versa.

Um, it's to make like permissionless systems smart enough to be able to understand who's participating. Now everything that I just said there is hard. It's not easy. Um so take your example which you gave which is tokenized um Apollo credit fund or you know or even our tokenized equities to our Xbox. The challenge isn't the token. It's it's the context of who owns it under what rules and in which jurisdictions. So instead of hard permission permissioning you we you know you you think about like ideally you can think about like attestable identities um wallets that carry verifiable credentials like these are things that you can build but still interact natively on chain right and each jurisdiction can be different I'm not advocating for anything I'm just saying

like this is something that you can do um and so that actually also means that Apollo can have a token that can circulate in the open economy u but only wallets with the right credentials can say like I'm an accredited investor or specific KYC levels whatever or you know etc etc can hold or trade it but it just means that you have more participants to be able to be a part of it which is you can then think about programmable compliance you don't have to um um say everything is a free-for-all it I think it preserves openness while satisfying different types of regulation as you'd mentioned before because you know the world and it jurisdictions are fragmented in some cases but a lot of the world isn't for like the most basic things and and I think actually the more you think about how to build this you

know from the bottom up permissionless the more you're able to say okay great well here's what I can build in order to support that rather than just say I don't want that in the first place which is I think you know people are starting to come around to um as we talk about what's happening uh worldwide in DC or in Europe etc. Okay. Uh just I think maybe one more on tokenization and then in the last 15 minutes or so we have a few more topics to get to. Uh but I am curious the last I think wave of tokenization uh that we saw was really around like integrating central banks a lot of these like like like big big like gibbs and and huge like nine 10 figure like credit issuances etc with integrations with wholesale CBDC pilots.

>> Yeah. Uh it's a different world now like we're post genius act stable coins appear to privately issued stable coins are clearly ascendant uh or treasury secretaries expecting trillions of stable coins moving forward. How does that intersect with this tokenization trend and uh uh is that the launchpad that it really needs to kind of reach the critical mass? >> A lot to unpack there. So, um, yeah, you're right. So, the first wave was about proving that it could be done.

Um, and I think people kind of moved away from what it means to, um, have permissionless systems. Um, I I think look, the key the the key thing that I think is really important that everyone kind of forgets about is distribution, which is what is that wave and how do you actually make that happen? one of the folks that you know sorry the set of folks that paved that way um in the past or even even now has been stable coins right in terms of like what does it mean to be able to distribute um across the board so I think for a lot of these assets that we're talking about which is how do you move from pilot to product a lot of of what you'd mentioned before you know central banks gibs credit you know

credit testing settlement you know onchain etc etc is it had this worldview that they need to figure out how to work within the the confines are construct of how they've been built themselves in the past rather than first principles how do you think about distribution um and I think that's where people um make a lot of mistakes which is what is the what is the onchain settlement frameworks give us the legal foundation to be able to actually build markets right so um who sits where and the way which we've been approaching it is okay great we're crypto first and crypto and so Kraken has actually been sitting at that intersection um the place where infrastructure can become commerce.

That's how I sort of think through those um those lines and pieces since we've spent so much time building out a global footprint to do that in the first place. And so I I think of it as like three phases for any of these which is phase one institutional proof. The early tokenization wave has been led by the GIBS or or sorry has been led by this is what we want to do or even you know you can think about like city's regulated liability network. I don't know what that means. Um or JPMs like Onyx, uh BIS projects, etc. Um those are all controlled environments. They're proving a concept. They have not been able to approve distribution or access or um that it is helpful as a as a yield product um to a customer. Um and so the

questions they keep asking is can they do credit, can they do FX, can they do repo, you know, live onchain, etc. Um second phase as you know the world has evolved is where we're getting to um regulatory clarity obviously genius act as you mentioned is like it gives the same institutions now hopefully not just us but you know other folks to work with us to operate not just experiment before they were experimenting in closed environments. Now they have an framework which I think is really important and my hope is that more and more participants come in is that now they have a framework around issuance around disclosure and uh stable settlement units and this is already paving the way for what it will look like for the next evolution of tokenization and so I think really comes down to phase three which

is what we're all talking about now which is why we talked about tokenized stocks is commercialization right that's where we are now which is like who's going to build layers where tokenized instruments can actually trade settle circulate distribute where is liquidity? How do you think about price discovery? And where can user access actually happen across the board? Um and so, you know, we we've been um really really passionate that we don't want to be a central bank. You know, we don't want to be like um where I think JPM is a central bank to a certain extent. We want to be a distribution layer for anyone um to be able to get their products um access to the customers, right? So tokenized treasuries, credit funds, equities, they

need regulated venues, they need custody, they need interoperable markets. Um, and I think that's where Kraken continues can continue to serve, which is what we've already started with. Um, I I think it's really cool in that st stable coins and tokenized credit already has paved the way for programmable settlement. So you can actually now think about like delivery versus payment on chain instantaneously, right? Like I think of it at that layer. That's what makes tokenized assets in my opinion much more commercially viable not just the like conceptually elegant. So that's that's what I think about how we push for push for and so the you know the first decade is tokenization. Um now it's like okay we've proved that it works u concept now it's like the next decade is going to be how do we prove it at scale we integrate? How do we move

all these assets? how do we distribute it um and get engagement across the board? And so my my uh passion here is that our goal is to make those institutional innovations that we've talked about actually more and more accessible to a larger audience of people. So there's not like a consortium wall, but it can be built through an open infrastructure that anyone can build can can be uh sorry that anyone can build upon. >> Yeah. And I think the the real key there and I remember like all those pilots and VC's it's the secondary market trading like that that's the real key the the like achieving enough distribution that there's liquid secondary markets for all these funds so that people when someone acquires them they know that they can use them and offload them and bring them back etc. That that seemed to be the

hiccup. It wasn't a technology problem or even a business problem. it was more like a coordination problem to to try to to try to retrieve that critical mass and uh and who knows maybe stable coins is the key to that by putting all of this stuff on these permissionless rails as opposed to um permissioned uh blockchains. Uh one more product question and then I want to get to what's happening in DC and just a couple of things to wrap up. Um the Inc. blockchain I always found it pretty fascinating. I mean, there's lots of different I mean, Robin Hood, Coinbase, Crypto.com. I'm sure I'm forgetting some that have launched various like L2s and blockchains. You guys are a little different than Coinbase and Bass in the sense that you have a separate foundation and there's the stencil based a gap between the two as opposed to

Coinbase that directly runs base. Uh, but but how does that fit into your your bigger plan and and how does the Inc. token how is that going to be incorporated in your product offerings? So, I I think about everything we just said, right, which is how you think about regulated venues, how do you think about what's open? Um the the analogy I like to use a lot is you've got um you know, Android or iOS, right? And so, what made um Apple products really um beautiful in some cases or great and elegant was that some very specific products were vertically integrated.

some products were open in terms of you had um other people that could build upon the operating system. Um and so I kind of think about all of these the same way which is like okay great what do we do as an exchange? What do we do in terms of infrastructure? Um and so you know we've continued to look at where markets are going. So you know your question like why does ink even exist? Like why do we need another blockchain? Why do we need another layer to it? And so we think of it as how do we give our clients secure scalable foundations for the next phase of what onchain markets are going to look like while also understanding how the market is continuing to evolve especially in the DeFi ecosystem right so it's a I think of it as a overall over time as we

work with the foundation other you know um projects that are being built is how do you think about the tissue between Kraken's regulated world and the open defi ecosystem right because you do want innovation to happen as fast as possible you want to be able to support that. So when I look at where the markets are going, onchain settlement, composable liquidity, programmable collateral, um, and we I think we've realized more and more that we've needed a chain that's purpose-built for those types of financial primitives, not just for something that's just completely open and it can be anything for anyone. So do you know, does that mean you want speculation? Sure, people can do that.

If you want to build memes, sure, you can do that as well. But I think it's more about how do you think about performance transparency uh composability where more and more institutional grade infrastructure can be built, right? And so we've started launching that. We had titer that just launched last week. Um, we've got another set of products that are launching over the next 30 69 days that are, you know, that are vertically integrated um, in a way that's like great for the chain plus um, the application. We're helping to collaborate. We're helping to build, we're starting to give out um, support for that. the foundation is becoming more and more focused on what do these DeFi native systems need safely right off the bat. And so how it fits into Kraken's plan, you know, outside of the Inc. plan is how do you think about

onchain execution layer for again multiple assets and how do we make sure that we can give access to um our customers around you know traditional spot, traditional futures, you know, custody products that live within a again I think a regulated perimeter in some cases as we've been talking about. So I think what we want to be able to do is leverage Inc. and build upon that so that we have more and more products that we can build into the perimeter of DeFi that people want to have access to so that you do the basics. And I know it sounds, you know, corny in some cases, but how can users lend? How do they borrow? How do you think about, you know, trading on chain? Um it's we've already done this directly from our experience with um building out an exchange in a central order book and

providing liquidity in a safe and secure way. How do we do that more and more and extending into DeFi? And I think importantly is again it's not a walled garden for us. It's a bridge to be able to participate. Anyone else can can participate too. They can see examples of what they can do and how they can participate in it. Um so then again assets now can now move between Kraken and other Inc. products that are being built with you know more transparency clear compliance rails in some cases and developers can build upon it without having to ask us for permission to they can get access to our customers and I think that's more and more important rather than us having to control a walled garden or that's how people sort of think about it and you've seen everyone rush to this which is um we got

to do it too because we got to own it and I think our goal is going to always be um you know what's the um definition of open versus closed inc is open by anyone can build on it, connect to it. We're going to support that. Um the difference is that we're going to what we do there is we're going to treat it um as you know compliance and reli reliability as first class citizens. So instead of like an open network that ignores um you know jurisdictions regulations for what we do it's going to be one that you know it's open but we're like responsible in terms of like the products that we build on behalf of our customers. So I think of it as a again open infrastructure with trusted gateways. These words that I'm using though can be very very nuanced because you know trusted gateways can also mean

closed walls and we're very very focused on making sure this is open. We want to be able to make sure that ink can be for our customers and our institutions and the trust that they have is like where institutions can meet that um composability in the first place to the ink token. um you know this is something that the foundation is actually quite focused on um like we're helping to provide guidance there but I think the way to sort of think about it is you can't create a token um that's a gimmick which is what you see a lot of the time in the ecosystem um and what you've seen with past actors it has to be a coordination layer where we're all participating in order to make it successful right and so you have to think about network security governance incentivizing liquidity through you know

protocols like we have with tyro first of many to come um which Again, Tyro is like our native lending protocol built on a so early users can then, you know, earn points. They can participate in the ecosystem. They can actually be a part of the community that is participating in the in the future of what the bigger story of Hink is going to be in terms of aligning users, developers. Um, and I think you have to do that right. And there's plenty of examples in the past of what we've seen where you need to make sure that this is a community first um uh shared onchain economy, not um you know a top- down corporation coming in saying like we're going to own more and more of this etc. which is what you see with a lot of the other folks.

>> Gotcha. Okay. I know we just have about five minutes left so I want to um wrap up with a fun conversation regulation. Um there's a there's a big meeting happening in DC tomorrow between Senate Dems and uh and the industry. I know your co-CEO uh Dave is going to be there. Uh do you have any expectations like what are you hoping to to get out of it? I I know that I just did an interview before we joined with our regulatory writer and uh it doesn't seem like clarity or market structure has a real chance of of finishing of being signed this year. What are your hopes?

>> Um well, what a what a doomsayer. Um, look, we we've uh I mean, we've been doing this for a long time, right? And and I think, you know, um the Genius Act was like the first push um for us to be able to get to an understanding between market regulators, market participants, um uh market clarity that uh like we're here to stay and we want to make sure that we are within a regulated environment. we've like this is the first time in history you've seen you know companies that are building technology and liquidity systems say like we need clarity right and we've seen that right and so not not a pun on the clarity act we'll get there

in a second I I think um we've been spending a lot of time I I don't think there is a week where myself or Dave or any of our senior leaders are not in DC of course we have our our team that's on the ground there educating at the end of the day which is what's our what's our real message um to policy makers is that the US can finally move from uncertainty to clarity which is what again no pun in the clarity act um and and the broader genius framework um is historic and and it's it's not because they regulate crypto it's that they're recognizing that as a true part of the financial system so look we're we're I'm pretty optimistic that we are going to continue to move down that path we're also last in the ecosystem right if you take a look at um Europe is ahead of us the

first time regulation gives clarity to those institutions and folks um and they're in implementation mode, not not sort of debate debate mode. And so the meeting with Senate Democrats or Republicans in the past is always about engaging in good faith. This is not a this is not a partisan thing, right? We're not asking for special treatment. No one around the um no one around the table is saying like we're better than anyone else. It's just like, hey, as long as there's clear, consistent rules of the road, um, for American innovators and American companies like us, uh, where we don't have to build offshore, we're not forced to build offshore, our customers are not forced to build offshore, um, we we can get to a place where we can upstand sorry, expand with substance in the ecosystem. So, look,

the the US has built um, and has built like one of the greatest global financial systems in the world. Um, we can continue to do it. We can augment it and we can do it for this digital era. And so that's the conversation that we're trying to have that we're trying to continue to move into versus sort of the the the the you know the ticky tax and the doomsayers that are out there. And I think you know they're there to protect the banks, protect monopolies and protect the things that like are bad for us consumers in in our opinion. Um and so we want to make this bottoms up customer-led um protocolled innovationled where the US can lead. Um and and I think that's a responsible innovation story versus, you know, sort of the back and forth. And so

Kraken stance like where are we? We've played we've always continue to play the long game. We're registered. We're licensed. We're compliant in every jurisdiction we operate and we want to make sure that we can continue to align not just us but the rest of the participants that are there including the DeFi protocols that haven't got as much of a voice that they need. is that if we have a unified framework that lets firms compete and innovate without ambiguity, that's great. And that's where, you know, Dave is uh going to be there next week. I was there in the prior ones. We go back and forth depending on um you know, the House, the Senate, the SEC, the CFTC, the White House. Um we're going to want to continue to contribute um constructively to help bridge what I would consider technical reality with policy goals. And

we want to help lawmakers design rules that protect consumers but preserve as much innovation here in the United States versus moving everything offshore. >> Gotcha. And just just to wrap up, I mean, I'd like to just kind of look ahead. I mean, what's next for Kraken the rest of the year 2026? I know it was reported, I believe, at Fortune you guys raised 500 million at a at a 15 billion valuation. Uh kicking tires on on an IPO. um don't know how much you can comment on that, but I'd love whatever thoughts you can share, but but just in general beyond that, I mean, are there more acquisitions along the way? Like, what are your like two or three top goals that people should look out for?

>> Um, look, what one of the greatest things that, um, I think we do at Kraken, which is what got me so excited, um, uh, is that like we want to imbue the cultural values that Jesse had said, which is privacy. It's, you know, it um your assets are your own. Um and so, you know, we've always done this. Like we barely raised any capital in the past. I'm forgetting the exact number. I think it was less than 25 million. >> Yeah. It's that's always kind of astounding to me. I uh I think even when I first joined there, I realized you raised such little money. I almost wondered like how it gives you the runway to or the the balance sheet to make some of these big acquisitions. Uh I mean, I guess operating profitably, but uh

>> yeah. Yeah. And so part of part of what we wanted to do though was also hey like we are um we are in charge of our own destiny but we do it in a durable path right and so it's why we don't comment on anything um fundraising debt um um even on policy. We don't comment on any of the rumors. We're we are we say things when we're in the room and then we disclose when we think it's important but then we're transparent with our customers too which is like here's our financials. Here's how we operate. Here's our proof of reserves. Here's why you can trust us. here's how we're regulated, here's our licenses, etc. And so I can say what I can say about Kraken, which is really important, is that like yes, we're in a strong position. We're profitable. We have them

for a very long time. We grow in a disciplined way. We're going to continue to grow and we've been very well capitalized for a very long time to execute on our long-term road map. You asked me earlier, how do you think about ADO? It's like we've have risk frameworks, but we also have discipline frameworks around how we think about growth. We're not trying to chase something. Um, we want to be able to make sure that when we create a product, it is a great product. We craft a product and we make it better and better over time. And so I I think we're actually frankly fortunate enough to be one of the few platforms in the industry that has been consistent about that um through every market cycle, which is like we're living proof that we don't need to be subsidized or raise billions of dollars in order to do X, Y, and Z.

we can do it when we need to for things that are much more surgical around um how we think about flexibility of growth, flexibility of building, not financing. Um so a lot of the stuff, you know, um again, as we've gotten larger and larger and we've shared more of our information, that's when the rumors start and and I think what we do is we just clarify and say here's what we've done, here's how we've substantiated, here's the metrics that support it, and here's how we're trying to build our company for the long haul. That's durable. It's not something that necessarily we'll do in six months to a year, but where are we three years out, five years out, 10 years out? >> Gotcha. Um, anything else you'd like to to add before we wrap up?

>> No, I mean, I think it's great that uh um you you guys are asking these questions. Um I've been watching for a long time and so um that's it's an honor being here and so I appreciate you you taking the time to ask these questions about myself and Kraken. >> Great. All right. Well, yeah, thanks so much. Thanks for joining. I'll be back as well with more interviews with key news makers like like Arjun. Arjun, thanks so much for the time. Really appreciate it. >> Thanks, Stephen. Appreciate it.