Kraken's CEO on Their Battle Against The SEC

Kraken is one of the two most important exchanges in the US right now, it's also an essential bridge across many other jurisdictions. Recently Kraken has come under fire by the SEC for the second time this year. In today’s episode we're joined by Kraken CEO, Dave Ripley. Dave walks us through what it's like to take the reigns of one of the largest US crypto exchanges and how he plans to navigate the constant battles they have to face from US regulators. ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2 ⁠ 🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum ⁠ 👾GMX | V2 IS NOW LIVE https://bankless.cc/GMX 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo 🦄UNISWAP | ON-CHAIN MARKETPLACE ⁠https://bankless.cc/uniswap ------ TIMESTAMPS 00:00 Intro 04:27 Regulatory Action Around Kraken 09:27 Is This a PR Stunt By The SEC? 11:31 "Co-Mingling Funds" & Fighting The SEC 16:28 Hostility Towards Crypto 21:03 Leaving The US? 24:32 Getting To Know the New CEO 28:50 Finding Bitcoin In 2013 32:48 Kraken Values 38:40 Custody & Proof Of Reserves 42:18 Kraken Endgame ------ RESOURCES Dave Ripley: https://twitter.com/DavidLRipley Why Kraken: https://www.kraken.com/why-kraken ------ Not financial or tax advice. See our investment disclosures here: https://bankless.com/disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ryan Sean Adams?

  I don't think we need you to have a prolific Twitter presence. All right, because some, you know, exchange leads have done that and led us down some pretty dark paths. What we need from Dave Ripley is to, is to protect our funds.

• 0:17Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Kraken versus the SEC. Some context here. Round two. Before we get in, Kraken is one of the two most important exchanges in the US right now. It's also an essential bridge across a bunch of other jurisdictions. Kraken is big in Europe, Australia, Canada, many places across the world. Recently, Kraken has come under fire for the second time from the SEC. That's the second time this year. They settled the first complaint. It's cost them $30 million, but this time they are fighting the SEC in court. They're saying enough is enough. Kraken versus the SEC in the state of California.

• 1:02Ryan Sean Adams?

  It's on. So we brought on CEO Dave Ripley to tell us more. And in the process, it's a good opportunity to get to know him as one of the world's most important centralized exchange operators. David, why was this episode significant to you?

• 1:13David Hoffman?

  I think it's important that Kraken has to actually fight this one this time, because I think it's, it's pretty clear that the SEC is looking for below the belt wins that they're trying to just scrape out of the crypto industry in whatever way that they can. And, and so like it's, Kraken is choosing to fight very firmly because they realize that like, if they settle again, then well, what's to stop Gary Gensler from just trying a third time and a fourth time? Because we know Gary Gensler is not about the facts. He is just here for the narrative. He's just here for the perceived win that he can go to take home and show mom and dad, you know, Janet Yellen and Elizabeth Warren. And so, so Kraken's got to fight. And so they're taking this heavy responsibility of advocating for the

• 1:56David Hoffman?

  entire industry on their shoulders and fighting Gary Gensler and the SEC. Notably, the big thing that the SEC is charging Kraken is, you know, allowing securities to trade on their platform. But the SEC is going after Kraken, not the SEC. You United States domiciled issuers of the security, which would be the place that the whole issue has spawned in the first place. They're going after an adjacent service provider. Everything about this is just below the belt. Anyways, this is Dave Ripley's first year as CEO of Kraken, and he's had to deal with this twice now. And so he's just gonna take the leadership position for the industry and go to toe-to-toe with Gary Gensler, because he has to. And I guess we thank him for it, because someone's gotta do it. And Kraken's doing this tough job. This would be my analysis of like the current predicament

• 2:40David Hoffman?

  and opportunity that Kraken finds itself in.

• 2:42Ryan Sean Adams?

  Before we get into the episode today, first we disclose, so most of you listening to this already know that Kraken is a sponsor of Bankless. It's our recommended exchange, but Dave and I tell you that at the beginning of most episodes. And why'd we pick Kraken? Because the world needs a bridge to crypto. And Kraken is one of the few exchanges that's served the industry as that bridge without fail for like 11 years, many cycles. Furthermore, we want them to absolutely beat the pants off of the SEC. There is a link to all of our disclosures in bankless.com/disclosures. You can always access that.

• 3:13David Hoffman?

  I learned at the end of this episode, Ryan, that Kraken customers are called Krakenites. So we've got the Bankless Nation, and we also got Krakenites. And we also have Krakenites in the Bankless Nation. Shout out to all of you guys.

• 3:24Ryan Sean Adams?

  All right, guys, we're gonna get right to the discussion with Dave Ripley. But before we do, we want to thank the sponsors that made this episode possible, including our recommended exchange for 2023 and 2024. I'm gonna say, what's Kraken? It's Kraken. Bankless Nation, we are very excited to introduce you to Dave Ripley. It's the first time on the podcast. He is the CEO of Kraken. He's been at Kraken for six years, but this is his first year as CEO. He's replaced former OG and Bankless guest Jesse Powell, who was the co-founder of Kraken. And Dave has had a very exciting first year or so as CEO, because the SEC has come after Kraken not just once, but twice.

• 4:05Ryan Sean Adams?

  And Gary's campaign to become maybe the most anti-crypto SEC chairman of all time, those are our words, not Dave's. But Dave, it is wonderful to have you on Bankless in these trying times. How you doing?

• 4:16Speaker 02

  Doing great. Yeah, thanks for having me. Looking forward to talking with you guys.

• 4:20Ryan Sean Adams?

  Okay, can you, can we start here? We want to get your background and learn a bit more about you. But before we do, let's talk about current events here. So it seems like the SEC dropped some sort of case on Kraken earlier in 2023 around your staking service. And I believe that was resolved in some way. Maybe you could talk a little bit about that. And now there is a new complaint from the SEC that just dropped, I believe, a month ago, sometime in November. Can you give us some context for all of the regulatory action this year coming into the SEC towards Kraken?

• 4:53Speaker 02

  Yeah, so I mean, I think your summary pretty much covers it on the two events here. You know, one, one earlier resulted in a settlement. And then this, this new complaint that just, just came our way. I mean, it honestly, this new complaint is, looks pretty familiar, right? It's, you know, it's similar to what we've seen, you know, basically Coinbase face. Frankly, not terribly. I mean, there are differences, of course, you know, given our role in the ecosystem vis a vis Ripple, but kind of like the underlying law at play is not terribly different than, than what they faced with Ripple and in XRP and where they

• 5:32Speaker 02

  lost. So yeah, I mean, it's obviously disappointing to see, it's particularly disappointing for us and for me to see, you know, kind of the SEC go down this path and kind of problematic approach that they've had, particularly given that we, we are in markets in Europe, in the UK and Canada and Australia and many different places where we're, you know, working with regulators and they're putting forth clarity and we are, you know, working within those licensing regimes and moving forward and things are frankly going great in, in many, most of those geographies.

• 6:10David Hoffman?

  Dave, I remember reading some of the details on the weekly roll-up that we do every single week, kind of recapping the news. And the charges of the SEC, as we were reading them, seemed to charge you guys with being an exchange, as in you allowed a marketplace to come together for buyers and sellers of crypto assets. And as you were reading the complaint, you just got the idea that apparently just being an exchange is against the rules, according to the SEC. Is there anything that stood out about the complaint, other than just like, it's the same thing that Binance does, that Coinbase does, that every other exchange does? Is there really anything that stood out as exceptional in this complaint from the SEC?

• 6:51Speaker 02

  Frankly, not for us, no. I mean, they try to bake in a number of other things to kind of make the complaint grab headlines. I mean, frankly, it appears to be, and has been for a while, a bit of a PR, set of PR objectives, public relations objectives that they have going with their approach on a number of these different complaints. And so I think that probably the most notable is, you know, things don't seem to be going that well in the Southern District of New York, where they're bringing these claims,

• 7:29Speaker 02

  right? Of course, XRP didn't go their way, the grayscale request didn't seem to go well. Of course, they didn't see what the outcome they wanted there. Coinbase, that's under progress. It probably takes a roomful of lawyers to debate how that's actually progressing at this given juncture. So, you know, one thing that's different, though, from all these is that they're bringing it in a different jurisdiction. So they're bringing it in California, as opposed to Southern District of New York. Where they

• 8:05David Hoffman?

  And that's just because that's where you guys are located in California, right?

• 8:08Speaker 02

  No, they it's not. They uh, you know, they can bring it in a number of different jurisdictions, um, actually, um, and uh, it isn't necessarily tied to where we're located. And for what it's worth, we, we actually don't even have an office in, in California at this given point in time. And we're, um, not, not even necessarily located here, certainly not more so than, than Coinbase, um, who they happen to bring into, um, into the Southern District in New York, uh, District. So, I mean, part of it is, uh, you know, again, speculation, but are they, you know, kind of looking to try a different district that isn't as tied to the one, uh, where they have, you know, racked up some of these, these losses?

• 8:51David Hoffman?

  Hmm. So, okay. So the SEC has collected some L's in New York specifically. And the idea is like, well, they are going to go and try out an alternative, perhaps more favorable jurisdiction. At least try it again. It's, uh, it's speculation. Yeah. It kind of feels like, uh, when I am in middle school or high school and I ask my mom if I can go out with some friends and my mom says no, and then I go over to my dad and ask the same question and try and get my dad to say yes. It kind of feels a little bit like that.

• 9:18Speaker 02

  This is, this is what we're, this is a very, very reasonable analogy to, to my more long-winded description, I guess.

• 9:27David Hoffman?

  Right. And of course, and it would, the, the, interestingly, in this complaint, uh, the SEC actually named some of the assets trading on platform to be securities. Uh, Atom from Cosmos, Filecoin, uh, Phil from Filecoin, Matic from Polygon, Sol from Solana, Near, a few others. And these are our crypto networks. These are our crypto assets. They are integral to the functioning of these blockchains. They need to be able to be, uh, in the market in order for these systems to work. And also notably, they also trade on Coinbase, which, um, is a public company that the SEC approved to go public. And so this seemed, and again, just reading through some of the documentation from the SEC, they really leaned into a lot of the allusions to

• 10:10David Hoffman?

  other crypto exchanges, which have had much worse stories. And you know, FTX being the obvious one. And to me, it appears, again, these are just my opinions, that it's really just a narrative campaign to that the SEC is trying to bolster up some allusions to FTX and other exchanges that are not so compliant, which I can imagine as the CEO of an United States domiciled exchange that committed to the United States and has been committed to the United States for 11 and a half years would be supremely frustrating. And it's your first year as the CEO of Kraken, I would imagine that that would be just like disappointing, to say the least.

• 10:50Speaker 02

  Yeah, no doubt. You know, again, I mean, I think you're kind of going back to a similar point that I made earlier about, you know, the kind of the element of PR seems to be meaningful here in their approach. I mean, less so, frankly, less so focused on the law. I think when we look at the law and, you know, as we stated in our blog and probably some of our tweets and so forth, there, there isn't a basis for this complaint here. And so, you know, kind of adding in other things that are, you know, related, unrelated, try to, you know, catch eyeballs are, you know, seems to be part of the strategy.

• 11:31Ryan Sean Adams?

  Part of the charge here and maybe some of the PR was this complaint or this idea that Kraken is co-mingling funds. Can you address that? Like, what was the SEC talking about? And, you know, what's your interpretation of this?

• 11:46Speaker 02

  You know, this is, this is kind of a typical thing that they've gone to in these complaints. They put in a co-mingling claim in the Coinbase complaint as well. They, you know, put one in this particular claim against Kraken. I mean, you know, on a factual basis, you know,

• 12:04Speaker 02

  By and large, all the facts that they attempt to state aren't, aren't correct. Later in the complaint, they attempt to qualify one of their, one of their claims earlier with regard to co-mingling. Yeah, I mean, it, we use, you know, segregated accounts for, you know, operating and custodial funds and, you know, that's basically the structure of our, of our platform. We, you know, have invested meaningfully in all of these different areas with regard to our, our systems and our platform and, and security is, is frankly, one of the bedrocks for, for Kraken. That, you know, a lot of our clients really appreciate about our platform.

• 12:47Speaker 02

  And so it, you know, just doesn't really have any basis.

• 12:51Ryan Sean Adams?

  Okay, so there was two claims, as, as I said, two complaints from the SEC this year. The first was actually in February and Kraken chose to settle that. That was around the, the staking services that, that Kraken was providing. Now, this latest one is basically like, you guys are being a crypto exchange and we're complaining about that because the SEC is alleging that all sorts of these, these crypto assets are securities. The one in February, Kraken decided to settle. I believe this one in November, Kraken is deciding not to settle. This has been the, the statement out of Kraken that I've seen on Twitter and your, your press releases, that you were intending to fight this. You were intending to push this in the court system. Can you tell me why?

• 13:33Ryan Sean Adams?

  Is this just like, hey, they've crossed the line here and no further. We're making a stand and this is our core business. Americans deserve access to crypto assets on exchanges that will, will protect them. Have you guys just said enough is enough? Is, is that what's happening? And how's this different than February?

• 13:51Speaker 02

  Yeah, you know, so I think it's a couple of different things. You know, one of the frustrating things about that, you know, settlement is we're not allowed to talk about it or the, the details of the settlement itself. So that is what it is. I mean, it was certainly different times for the industry and so forth that, you know, back when that happened. But yeah, I mean, all of your, your, your description and summary of this particular complaint is exact precisely how we feel. We feel that, you know, when you look at the law, the SEC is wrong. And, you know, we intend to, you know, tend to prove that and win this case.

• 14:28Ryan Sean Adams?

  Yeah, it's, I guess, from, you know, looking in from the outside, obviously not being part of, of any of that. It just seems like the SEC won, you know, one particular case got, I believe, thirty three, thirty million dollars in settlement and is now coming back nine months later to recollect. There's something that feels like deeply unfair, I think, to most, most folks in crypto that are looking at this from the, from the outside. And I'm sure you can't reflect fully on that, but I think you've got a lot of supporters in the, in, in the crypto community here.

• 14:57Speaker 02

  Yeah, no, for sure. I mean, there are a couple of things. I mean, just, you know, with the, with the settlement, there was no admission of any wrongdoing whatsoever as part of that, you know, that that's also a piece of it. But, yeah, I mean, strange to go through all of that and they didn't, you know, you know, mention that there might be this other, other thing about our business that they want to, want to discuss with us. Yeah, it's quite odd. But, you know, this is, this is what we face right now in the United States. I mean, all of this is, you know, probably the most amazing part of this is that Congress is working hard

• 15:39Speaker 02

  trying to actually get a bill across the finish line to bring clarity to answer these questions and provide a licensing structure, much the same as other countries have done. Canada, Europe, all of Europe underway, European Union, UK is on their way as well.

• 16:00Speaker 02

  You know, the SEC is non participatory in that in that process and just, you know, pursuing this path of of litigation, you know, based on, you know, laws from, you know, nearly 100 years ago.

• 16:13Ryan Sean Adams?

  Dave, I'm just curious, do you have any takes on why? I mean, you know, notably, the the groups that the SEC is going after, at least on the exchange side, or, you know, Kraken and Coinbase, two exchanges that I don't have to remind our listeners, were wholly solvent and protected users' funds in the the crises of 2022. They were the complete opposite of FTX. And rather than receive kind of, you know, praise for that and, you know, some, I guess, greater clarity with respect to your status, it seems like this regulators is going out and now going on the offensive. Where do you think this is coming from? Is this just isolated to the SEC? Or as you compare this to other jurisdictions, does this represent some sort of, I don't

• 16:57Ryan Sean Adams?

  know, unique undertone of hostility that that some in the US government have toward towards crypto? Like, what's your explanation for this?

• 17:05Speaker 02

  Well, I mean, there's obviously a undertone of hostility towards crypto as part of this. I mean, you know, pursuing this path of, you know,

• 17:15Speaker 02

  regulation by enforcement is is clearly that, right? You know, and the companies, you know, there's, there is a notion of, you know, Kraken, Coinbase. These are companies that, you know, have been around a long time, have kind of followed this path of regulatory compliance from the outset, continue to work with jurisdictions everywhere. You know, so so why these two companies and and why does it seem to?

• 17:44Speaker 02

  It's likely an aspect of that is like the ease with which they can do this. It's much more difficult for them to.

• 17:52Speaker 02

  And go after a company that is outside the US, but still happens to be serving US clients just from, you know, a practical matter. And so I think that's a big, big part of what we're seeing right now.

• 18:05David Hoffman?

  So it's just because you're in the neighborhood, they, they feel like they can

• 18:08Speaker 02

  Yeah.

• 18:08David Hoffman?

  You're in close proximity.

• 18:09Speaker 02

  You know, again.

• 18:10David Hoffman?

  Slap you around a bit.

• 18:11Speaker 02

  Right. You know, something that, you know, we get a group of lawyers explain, but just like the, the practicality in the process of bringing a complaint against the, you know, some offshore business is just much more difficult for them to execute from a tactical standpoint. And so, you know, that's obviously one, one factor here.

• 18:31David Hoffman?

  So David, you've mentioned that the Kraken has no plans on letting the SEC just bully Kraken around and really the, the entire industry. And since we're now taking, we're going to go to the, the course and fight this one. Do you have any sort of like clarity as to like what that looks like? Like what, what is this next, what's the timeline? What's the timeframe with regards to the Kraken versus SEC, which is now a case, it's now Kraken versus SEC, correct?

• 18:53Speaker 02

  Yep. Yeah, you got it. You know, gosh, what can I say about this? Yeah, it's a long process. It's an expensive process. This is, you know, this is of course.

• 19:03David Hoffman?

  Is it more or less expensive than $30 million?

• 19:07Speaker 02

  You know, I mean, I, you know, the, some of the estimates of the cases that have gone before us

• 19:15Speaker 02

  were quite significant and extreme. I mean, up there in the nine figures area.

• 19:20David Hoffman?

  Wow.

• 19:21Speaker 02

  Just to fight the case, which.

• 19:23David Hoffman?

  Is that part of the strategy you think of the SEC is like scare you with the sticker shock of a real fight?

• 19:29Speaker 02

  I mean, for, for sure, there's like the, the resources must be a factor for any company that, you know, has to make such a decision, right? I mean, it, I mean, if the, the amount of resources necessary just to even embark upon it are, are significant. So look, I don't know if that's the, you know, necessarily the, you know, the estimate for this case, you know, what, what that would be. But I mean, it's certainly significant, significant amount of, you know, resources necessary to, to, to embark upon this type of thing.

• 20:02David Hoffman?

  Is there any, if we're actually working on passing good legislation that can produce clarity here, say that legislation does get passed, that does deem like, you know, Sol, File, Coin, Polygon to be like not securities, for example, and give some kind of a regulatory green light or carve out, would that invalidate this case versus the SEC? Or is there any, how does that variable work here?

• 20:26Speaker 02

  Yeah, you guys got a lot of good like legal questions here. So for sure, it would be, it's a place we want to get to. You know, like I said, you know, we've been working with a number of members in Congress on this particular bill. We're supportive of it. We want to get there. You know, as a technical matter, I'm not certain that it actually, you know, entirely invalidates the complaint that they brought. You know, if there's a new law that that's passed, but undoubtedly it's going to be a positive thing for us. You know, if we get to the place where we have that clarity and that law is in place.

• 21:05David Hoffman?

  Dave, have you guys ever thought about like, just like leaving the US? I mean, like, like, please don't, first of all, right? We like, we need functional exchanges that, you know, we can, we can trust in the US. And I think US citizens deserve that. But like, let's be honest, I mean, you're running a business and it seems like those in power, sometimes like, just don't want you here. They're making it a lot harder. Have you ever given any thought to that?

• 21:30Speaker 02

  You know, I mean, it's, it is a business decision, just the same as, as anything else, just the same as we decide, hey, are we going to enter XYZ new market? I mean, you kind of have to continually evaluate, do we remain in existing markets? One of the fortunate things for Kraken as a company is that we are, you know, quite geodiversified. Our biggest market is Europe. Kraken was the first place you can buy and sell Bitcoin with euros. And then I think the first place we could buy and sell Bitcoin with British pounds as well, kind of allowed Kraken grow really strong in those areas for quite some time. Being the first mover, really. And today, those are actually Kraken's biggest markets.

• 22:13Speaker 02

  You know, bigger than than the US, if you will. And so, you know, do, does it lead us to, you know, wanna wanna exit the United States? That's not our current position. No. I mean, it's a meaningful market for us. We wanna continue to bring our services to clients here. We have a lot of great clients in the United States and we wanna continue down that path. And so, it's not something that's, you know, on the table for us right now at all. You know, we are committed to and continuing to to serve the United States. I mean, you're right to ask the question, though, as I said at the outset, you know, about these, these things, you know, they have to make business sense. Otherwise, they're just not sustainable.

• 22:55Ryan Sean Adams?

  Fortunately, Gary Gensler in the SEC is, he's not boss of the world. In the other jurisdictions, what's your favorite jurisdiction to to work in? Is, you know, does Europe have this right? You know, how's Canada doing? Do they provide more clarity? Are some of the problems that we're seeing in the US, are these kind of like, you know, US regulator specific problems? Or do you see them echoed in other jurisdictions?

• 23:17Speaker 02

  Yeah, well, it's probably not true that we can ever say any place is perfect because these are the, you know, like, complex issues and challenges and different perspectives all over the place and so forth. But I would say that, you know, where where Europe is heading now with MICA or MECAR, their new regulatory structure, where Canada headed, frankly, theirs is a bit more restrictive. You know, they put caps on level of investment in certain tokens, kind of picking winners versus losers. You know, there's some things that are not as positive. But still,

• 23:59Speaker 02

  even aside from that, you know, the the level of clarity has been beneficial, frankly, in in both these markets. So I think like, at least trying to get it right is kind of step one. Right? And the reality is, we do have a lot of people out there in the US that are trying to get it right. There's all kinds of great people in that are, you know, working, you know, both in the industry. Yes, even, you know, some people in Congress that are crypto supporters that are working to try and bring this clarity. It's just, you know, that that approach isn't isn't held by all.

• 24:33David Hoffman?

  Dave, you're a newer face on the scene in the world of crypto. You've been at Kraken for six years, but just a CEO for just one of them. And I think I like to speak for the industry when we all kind of like to keep an eye on who are the leaders of our centralized exchanges. You know, these are the places that we deposit trust into. And we typically get to know the CEOs of these respective centralized exchanges. So let's get into a little bit of who's Dave Ripley. Talk to us a little bit about your origin stories and then that the arc into becoming the CEO of Kraken.

• 25:06Speaker 02

  Yeah, sure. So let me see where to start. So yeah, the path to path to this current role, I got into crypto about 2013. And I founded a company, Glidera. That company was acquired by Kraken in 2016. And then I became, you know, took on the role of COO when I joined joined Kraken, found that acquisition, held that role for a number of years, six and a half years before moving into CEO role. So long time person in crypto, you know, have all kinds of friends, colleagues and so forth from, you know, the early days. Not,

• 25:46Speaker 02

  you know, I guess I have not a, you know, haven't been a prolific tweeter in my in my past now X.

• 25:56David Hoffman?

  I'm envious.

• 25:58Speaker 02

  You know, social, social profile isn't significant, but I, you know, certainly have been in the industry for for quite some time. And, you know, there's probably all kinds of your listeners that are like, oh, yeah, hey, there's, there's Dave. I remember from that one conference in Atlanta where there was only 100, 100 of us there in 2013 and so forth. Yeah. Previous to this. I guess I had kind of like a two-part career previous to moving into crypto. I started, I was an engineer undergrad, worked as a software engineer for a short while, a few years, then a product manager. This was at technology, various technology companies, Lucen Technologies is a big one, then Cyclo, which was acquired by SAP.

• 26:42Speaker 02

  We were kind of in the enterprise software space, building mobile applications. So, early days in mobile, I was, the most prominent device at the time was Palm Pilot, and the second most prominent was BlackBerry. And so, these were, you know, this is again, early days in mobile, early 2000s. Then business school full-time, Northwestern catalog, and then after that, worked for Boston Consulting Group, which is a strategy consulting firm, worked for across a lot of industries as people do at that company, financial services being one of them. And so, kind of that combination of, you know, financial services and technology leads to fintech being a logical path, but it's not quite the real story.

• 27:25Speaker 02

  I didn't so much set out to say like, hey, fintech is what I want to do, I'm more set out to say, hey, Bitcoin, at the time, we didn't really call it crypto, Bitcoin was, you know, what I wanted to do. Learned about Bitcoin, did the proverbial rabbit hole, just the same as you guys probably did, again, back in 2013. You know, the more I learned about it, the more excited I got, and yeah.

• 27:48Ryan Sean Adams?

  What drew you into it, Dave? I think one thing I'll just comment on is, I don't think we need you to have a prolific Twitter presence, all right? Because some, you know, exchange leads have done that and led us down some pretty dark paths. What we need from Dave Ripley is to protect our funds and build a fantastic product. So, and from all that I've observed from you so far, is, you know, you're just a fantastic operator, right? And like, there's like, you've been here since 2013, there's kind of like, we call it in crypto, this Lindy effect, you know, of just like, we start to trust things that have been in the industry and survived multiple cycles for.

• 28:31Ryan Sean Adams?

  A very long time and that's what I see in Kraken and that's what I I see in you. I'm curious, back in 2013, I mean, you did the consulting track, right? You saw, you know, early tech, you also went to business school. That's a, that's an interesting resume for someone to be interested in crypto in 2013. It would have been unorthodox. You had all these like macro capitalist types of, you know, rebels and that sort of thing. And here you are, you're coming from business school in Boston Consulting, you've got that pedigree. What drew you into Bitcoin in 2013? Why that rabbit hole?

• 29:05Speaker 02

  Yeah, you know, it's interesting and I remember you're describing it quite well. I remember being at, again, the conferences that I referenced before and, you know, maybe you get in a conversation, someone asked what you were up to, you know, now or previously or whatever, and I would answer and most people weren't familiar, you know, with what, what I had done, you know, previously is just a little bit different. And then I remember, um, that I remember I met someone, this was again, like 2014, and who was familiar and you were like, he was like, geez, what are you doing here? And I was like, huh, how about that? What kind of a, what a question to get at this, at this event.

• 29:44Speaker 02

  And I mean, the reason is like, look, I mean, it really is the, I mean, the, the mission of crypto, economic freedom, financial freedom, freedom generally, you know, are, are things that are, you know, number one on my list for, for, you know, what I see are the most critical, critical things for us as humankind to get right. And, um, you know, we haven't always gotten it right and we frankly have gotten it quite wrong. You know, the, the bank failures and the financial crisis, the great recession of 08, 09,

• 30:26Speaker 02

  that, that hit me pretty hard, you know, frankly, like the injustice of, of all of that. And so, uh, you know, when I learned about crypto and in Bitcoin, I mean, just so much of it start, you know, resonated with, frankly, a lot of things that I, I, you know, learned previously. I mean, you do have these like kind of crazy quotes by like a Milton Friedman where he, uh, you know, says, you know, something that doesn't exist today, but will exist in the future, you know, some form of e-cash. And so I think, um,

• 30:59Speaker 02

  You know, and others as well, some of the other other economists have, you know, have similar quotes like that out there. So anyways, I think it, um, uh, you know, it really frankly starts and ends there. Um, I mean, there are other aspects as well, which is, you know, just kind of always like technology and innovation and, you know, the newness of it and, uh, you know, the growth of an impact of the internet, uh, which frankly is like, in some ways, a similar mission, freeing of information, freeing of, uh, you know, economic ability to transact, uh, you know, there's, there's similarities there.

• 31:35Ryan Sean Adams?

  So Dave, I really like that, like class of 2013 and before, right? The, these are people who, uh, I think many of them saw 20, uh, 2008 and were like, you know, a bunch of bankers got to bail out, right? And here's a new monetary system where, uh, no one gets bailed out, right? It's like credibly neutral. It's, it's, it's fair from inception. And, uh, you know, I think many of that class, those OGs kind of came from that perspective. One question I have for you is like, you are, uh, developing, um, Kraken as a platform, not just an exchange, but its entire like crypto asset platform, I would say at this point in time. How do you avoid the mistakes that the, the banks made, right?

• 32:17Ryan Sean Adams?

  So how do you make sure that Kraken doesn't become like the, the banks? And we've seen many exchanges, I would say, um, you know, a couple of notable exchanges in the last year make these mistakes, right? FTX, uh, what was, uh, SBF up to? Well, he was, um, taking depositors money and doing some unsavory things with it, like typical banker behavior. Do you know what I mean? Like, uh, and, uh, we've even seen CZ and Binance and, you know, $4.6 billion, uh, fine and some issues there as well. What, what do you plan, what values do you plan to instill in Kraken? What is Kraken here to do?

• 32:55Speaker 02

  Yeah. I mean, I guess there's a couple of different things, like, you know, the values are very much around the crypto, crypto ethos for sure. Um, and

• 33:06Speaker 02

  In our culture, and by the way, there's awesome. You know, we actually articulate this really clearly on our website. If anyone's interested, go check it out.

• 33:18Speaker 02

  And that is certainly a bedrock of it. But I mean, I would also point to kind of our role in the ecosystem and how we see ourselves. I mean, one of our fundamental roles in the ecosystem is we're a bridge. You know, the mission is to drive adoption of cryptocurrency so that, you know, everyone can achieve financial freedom. But, you know, our role in doing so is that of a bridge. And so we're looking to bring people across that that bridge and provide them an easy, safe way to get to cryptocurrency. Also, a liquidity pool for individuals to go back and forth. We know these things are going to necessarily coexist as they do today for, you know, some time to come.

• 33:59Speaker 02

  And so I think that's a big part of it is that, you know, the mission has us focused and we know our role. And that's kind of the foundational piece of our role is to be a bridge and, you know, not get sidetracked in a lot of other things.

• 34:12David Hoffman?

  Ryan illustrated Kraken as a platform. And so I kind of want to open up that conversation of what is on the roadmap for Kraken and in all of his products offerings. I know there's a rumor of a Kraken layer two coming around. I think the last comment that we got from you guys about that was no comment.

• 34:30David Hoffman?

  But like, what can But feel free to revise that. Yeah, but feel free to update that if you are inclined. But overall, like, what can we expect from Kraken in 2024? What are you excited about?

• 34:40Speaker 02

  Yeah, so let me see, quite a few things. Where to start? So we got kind of already set the foundation, hey, we're this bridge. One of the things we've been like, you know, we talk about who are actually our clients. One of the areas we've been quite strong historically are with, you know, more like pro professional individual traders. We've kind of brought the more advanced tools and charting and capabilities and order types and these types of things for those individuals. Performant platform.

• 35:08Speaker 02

  More recently, over the past handful of years, we've moved more into, we call it, you know, consumer individuals, retail. Some, some of our companies use that term. Building a much more simple experience. And one of the things we want to do is take some of that ethos that we've built with for pro individual traders that allow them the ability to, you know, frankly, find ways to, you know, build and protect wealth. Bring that to consumers, individuals. That means, you know, making sure they have accessible assets to invest in and, you know, the education to go along with it and ways to navigate, navigate the experience and all those different pieces. Then if you go to the other side,

• 35:53Speaker 02

  institutions is kind of in a, you know, an area where we have been for quite some time, but not substantially so. And we're certainly building there as well.

• 36:04Speaker 02

  You know, one of our most prominent products in that space is our benchmarking indices business. It goes by different names, CF benchmarks. We're the market leader there. So like all of these new ETF applications, the majority of them are powered by Kraken, powered by CF benchmarks. So, you know, we're kind of directly have, you know, have an interest in those ETF applications being approved and moving forward from that standpoint.

• 36:33David Hoffman?

  And then you go into that a little bit more. Talk about that relationship between CF benchmarks and the ETF applications. Like how, what's that? Can you just unpack that a little bit more?

• 36:42Speaker 02

  Yeah, well, I mean, a lot of these different products, whether it's kind of like, you know, the cash traded derivatives, which the CMA, CME offer, they require an index, much the same as the ETFs do as well. And so the price of the, the price of an index is built by, well, another set of prices, which happen to be the prices on all of the, not all, but you know, several major exchanges out there. Kraken being one of them, but also Coinbase and Bitstamp and Paxos and others, right? And so that kind of provides a more robust, stable price that is

• 37:26Speaker 02

  then used by the ETF, ETFs themselves to actually set the, set the price for their, you know, for their, for their products.

• 37:35David Hoffman?

  Okay. It is kind of cool to see when these ETF products come online that it actually is just a bunch of infrastructure built by our industry to serve the ETF products.

• 37:46Speaker 02

  You know, it is, right? I mean, the custodians are largely going to be crypto companies. We're off, we're launching our custody offering in the coming month, month. So we're really excited about that. Obviously Coinbase has had one out there for a while. I mean, Fidelity has a custody offering, but I mean, and they're certainly a TradFi company, but they've also been in crypto for quite some time, too. So you maybe got to give them a little bit of credit there, just for having been in the space for a while as well.

• 38:20Ryan Sean Adams?

  Yeah, we do. And hopefully, it's normalizing things over in TradFi world. I want to ask you about this. So you mentioned custody, of course, Kraken, like other exchanges, but you guys are certainly one of the largest, has billions of dollars in custody. And just like wrapping your head around that, right? I remember, you know, you guys know those casino heist movies that used to be really popular, like Ocean's Eleven, Brad Pitt and all those guys, right? They would go and they would like do a heist on a casino or something like this. And there's this pocket of all of this money inside of the casino. Well, that's what kind of exchanges are, right? It's all of these bearer assets

• 39:02Ryan Sean Adams?

  that are, you know, you have to secure. And that requires massive specialization. Again, it benefits from Lindy. How do you know if your exchange is secure? Well, how many decades has it been providing secure custody of private keys, right? And also, there's some special things we can do in crypto that other types of vaults in the analog world just can't do, which is like proof of reserves. Do you have any takes on this custody business? And how we can kind of move the industry forward? I know Kraken was famously one of the very first exchanges that actually published proof of reserves. So there is some cryptographic guarantee that the assets held in custody were actually in Kraken's custody, and you

• 39:47Ryan Sean Adams?

  could verify that on-chain. What's the latest and greatest there? Where would you like to see the industry go? And where's Kraken going with respect to custody and proof of reserves?

• 39:56Speaker 02

  Yeah. You know, all of these things. I mean, I like where you started. You started in the right place. I mean, when we talk about custody, I mean, we start with security, right? And that is the foundation. That's like what actually matters, right? What level of security are we bringing? For these funds, for these assets. And that requires a huge amount of investment in technology, operational side. Frankly, the entire, the entire company, and we have this, one of our, one of our values there, productively paranoid is all about instilling in each and every

• 40:33Speaker 02

  Krakenite, this, you know, level of awareness around security. And I mean, you could see it across our client engagement team in just thousands of Krakenites, how, how present this concept is of security and it really is everyone's role. So this is absolutely the first, first place to start with when we talk about custody and protecting funds. We have a huge investment there. Nick Percoco, our Chief Security Officer, fantastic talent, built a great team. But it really goes beyond that. It's everyone throughout engineering and operations and all these other areas that that play a significant role. That's the bedrock. That's

• 41:16Speaker 02

  the foundation. That's the most important piece. There are a number of these other pieces, whether it's, you know, regulatory license for custody, whether it's, you know, this proof of reserve attestation, whether it's a, you know, a security audit, like a SOC, you know, SOC type two audit, or something along those lines, which we've done many of these different, different pieces here. A lot of those pieces are more focused on like communicating to others, you know, where, where things are at as opposed to like the actual security itself, right? And, you know, just trying to, you know, provide some level of transparency or, yeah.

• 42:01Speaker 02

  Again, attestation that, you know, the, you know, that a lot of these things are in place. And so, yes, we're looking to do all of those. Like I said, you know, but the proper launch of the custody business, a big part of that is, you know, coming with a custody license. But, you know, the underlying piece is, is right where you started, Ryan, and is definitely the most, most important.

• 42:22Ryan Sean Adams?

  About maybe a little bit of the end game here. And I don't know what you guys are thinking or if you can comment on any of this. But Kraken, obviously, right now, it's a private company, right? So it's owned by a set of individuals. And I don't even know what the kind of the structure looks like. What's the end game for Kraken? Has Kraken considered going public at some point in the future? Does it kind of continue as is for decades to come? Does it get acquired by someone else? Is it too early to even ask these questions? What's your take there, Dave?

• 42:57Speaker 02

  Yeah. Classic, classic question that they, you know, tell me we're just, you know, can't say much on. And I know it frustrates you guys as well. But yeah, I mean, look, I mean, all these things are out there for us. We, you know, Kraken is owned to your, you know, one of the questions you mentioned in there. You know, part by founders, part by employees, part by investors. And that, you know, that makes up the shareholder, the set of shareholders for Kraken today.

• 43:26Speaker 02

  You know, I mean, I definitely think, you know, it's a growth space and, you know, we'll want to continue to, you know, build relationships with investors. We frankly have done probably less fundraising than many of our peers historically. It have been more kind of, you know, built, you know, frankly, just, you know, built off of what we've been able to deliver from, you know, investing back into the business. But yeah, I mean, that's certainly something that we'll continue to want to have as part of our business going forward. But yeah, nothing really specific to say on, you know, public, public side of things.

• 44:00Ryan Sean Adams?

  Well, Dave, thank you so much for spending the time with Bankless today. And just like, you know, being open and introducing yourself to, to the crypto community. I know you're going to be an important figure in kind of the years ahead as one of the leading crypto exchanges for sure. And best of luck to Kraken. Like, like, seriously, I'm glad that Kraken is taking a stand against the SEC and has decided not to exit the US, but to stand and fight. And I think many Bankless listeners are right here with you in that fight. And we appreciate you doing, you doing it.

• 44:31Speaker 02

  Awesome. Well, thanks so much, guys. Great talking with you.

• 44:33Ryan Sean Adams?

  Last question for you, Dave. What's Jesse up to these days? Jesse Powell?

• 44:37Speaker 02

  Well, you know, he's chairman of the board for Kraken. So he stays involved from that lens, you know, decent amount, of course, at the board meetings and so forth. So.

• 44:48Ryan Sean Adams?

  He gets to do more of the fun stuff, huh?

• 44:51David Hoffman?

  He gets to keep it spicy on Twitter. In a good way, in a way I like.

• 44:54Ryan Sean Adams?

  Amazing. Well, thank you so much, Dave. This has been a pleasure. Action items for you, Bankless Nation. We'll include a link to something that Dave talked about during the conversation. Why Kraken? With the mission and values of Kraken. It's a fantastic read. And there's a link in the show notes. Got to end with this, of course. Crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.