Bankless - Kraken's CEO on Their Battle Against The SEC

Episode Date: December 14, 2023

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 

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 let us down some pretty dark paths. What we need from Dave Ripley is to protect our funds and build fantastic products. 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. Cracken versus the SEC. Round two. Some context here.

Round two, before we get in. Cracken is one of the two most important exchanges in the U.S. right now. It's also an essential bridge across a bunch of other jurisdictions. Cracken is big in Europe, Australia, Canada, many places across the world. Recently, Cracken 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. Cracken versus the SEC in the state of California, 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? I think it's important that Cracken has to actually fight this time because I think it's pretty clear that the SEC is looking for below the belt wins that they're trying to scrape out of the crypto industry in whatever way that they can. And so Cracken 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 Crackett's got to fight. They're taking this heavy responsibility of advocating for the entire industry on their shoulders and fighting Gary Gensler. and the SEC. Notably, the big thing that the SEC is charging Cracken is allowing securities to trade on their platform. But the SEC is going after Cracken, not the 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 Cracken, and he's had to deal with this twice now. And so he's just going to take the leadership position for the industry and go toe to with Gary Gensler because he has to. And I guess we thank him for it because someone's got to do it. And Cracken is doing this tough job. This would be in my analysis of like the current predicament and opportunity that Cracken finds itself in. Before we get into the episode today, first we disclose. So most of you listening to this already know that Cracken is a sponsor of bankless. It's our

recommended exchange with David and I tell you that at the beginning of most episodes. And why'd we pick Cracken? Because the world needs a bridge to crypto. And Cracken is one of the few exchanges that serve 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. More than that. There is a link to all of our disclosures in bankless.com slash disclosures. You can always access that. I learned at the end of this episode, Ryan, that crack in customers are called crackinites. So we've got the bankless nation, and we also got crackinites. And we also have crackinites in the bankless nation. Shout out to all of you guys. All right, guys, we're going to 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 going to say, what's Cracken? It's Cracken. Cracken knows crypto. Cracken's been in the crypto game for over a decade. And as one is the largest and most trusted exchanges in the industry, Cracken is on the journey with all of us to see what crypto can be. Human history is a story of progress. It's part of us, hardwired. We're designed to seek change everywhere, to improve, to strive. And if anything can be improved, why not finance? Crypto is a financial system designed with the modern world in mind. Instant, permissionless, and 24-7.

It's not perfect, and nothing ever will be perfect. But crypto is a world-changing technology at a time when the world needs it the most. That's the Cracken mission, to accelerate the global adoption of cryptocurrency, so that you and the rest of the world can achieve financial freedom and inclusion. Head on over to crackin.com slash bankless to see what crypto can be. Not investment advice, crypto trading involves risk of loss. Cryptocurrency services are provided to U.S. and U.S. territory customers by Payward Ventures Eek. PVI doing business as Cracken. Metamask portfolio is your one-stop shop to navigate the world of Defi. And now bridging seamlessly across networks doesn't have to be so daunting anymore.

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He is the CEO of Cracken. He's been at Cracken for six years. But this is his first year as CEO. He's replaced former OG and bankless guest Jesse Powell, who is the co-founder of Cracken. And Dave has had a very exciting first year or so as CEO, because the SEC has come after Cracken not just once, but twice. In Gary's campaign, to become maybe the most anti-C-cropto SEC chairman of all time. Those are our words, not Dave's. But Dave, it is wonderful to have you on bank lists in these trying times. How are you doing? Doing great. Yeah, thanks for having me. Looking forward to talking with you guys. Okay, 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 Cracken 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 Cracken? Yeah. So, I mean, I think your summary pretty much covers it on the two events here. You know, one earlier resulted in a settlement. And then this new complaint that just came our way. I mean, honestly, this new complaint is, looks pretty familiar, right?

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 what they faced with Ripple and in XRP and where they lost. So, yeah, I mean, it's particularly disappointing for us and for me to see, you know, kind of the SEC go down this path and kind of the problematic approach that they've had, particularly given that 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 working within those licensing regimes and moving forward, and things are frankly going great in most of those geographies. 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 seem 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, you know, 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? Frankly, not for us. No. I mean, they try to bake in a number of other

things to, you know, kind of make the complaint grab headlines. I mean, frankly, it's, you know, appears to be, and has been for a while, a bit of a PR, you know, a set of PR objectives, being public relations objectives that they have going, you know, 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, right? You know, of course, XRP didn't go their way. The, you know, the gray scale request didn't seem to go well. Of course, you know, they didn't see the outcome they wanted there. Coinbase, you know, that's under progress. It probably takes a room full of lawyers

to debate how that's actually progressing, you know, at this given juncture. 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 in New York. And that's just because that's where you guys are located in California, right? Crackenus Headquartered at the State of California. No, it's not. You know, they can bring it in a number of different jurisdictions, actually. And it, isn't necessarily tied to where we're located. And for what it's worth, we actually don't even have an office in California at this given point in time. And we're not even necessarily located here.

Certainly not more so than Coinbase, who they happen to bring into the Southern District in New York district. So, I mean, part of it is, you know, again, speculation. But are they, you know, kind of looking to try a different district that isn't tied to the one where they've, you know, racked up some of these losses? Okay, so the SEC has collected some Ls 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 to try to get. Speculation. It's speculation. Yeah. It kind of feels like 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. Kind of feels a little bit like that. This is what we're faced with. This is a very reasonable analogy to my. more long with the description. And of course, interestingly, in this complaint, the SEC actually named some of the assets trading on platform to be securities.

Adam from Cosmos, Phil from Filecoin, Maddo 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 in the market in order for these systems to work. And also, notably, they also trade on Coinbase,

which is a public company that the SEC approved, to go public. And so again, just reading through some of the documentation from the SEC, they really leaned into a lot of the allusions to 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. The SEC is trying to bolster up some allusions to FTCs and other exchanges that are not so compliant, which I can imagine as the CEO of a 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 Cracken,

I would imagine that that would be just like disappointing to say the least. Yeah, no doubt. You know, again, I mean, I think you're kind of going back to a similar point that it made earlier about, you know, the element of PR seems to be meaningful here in their approach. I mean, frankly, less so focused on the law. I think when we look at the law and, you know, as we, stayed in our blog and probably some of our tweets and so forth, 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. Part of the charge here and maybe some of the PR was this complaint or this idea that

Cracken is co-mingling funds. Can you address that? Like, what was the SEC talking about? And, you know, what's your interpretation of this? You know, 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 Cracken. I mean, you know, on a factual basis, by and large, all the facts that they attempt to state aren't correct. Later in the complaint, they attempt to qualify one of their claims earlier with regard to co-mingling. Yeah, I mean, we use, you know, segregated accounts for, you know, operating in custodial funds and, you know, that's basically the structure of our platform.

We, you know, have invested meaningfully in all of these different areas with regard to our systems and our platform and security is, frankly, one of the bedrocks for Cracken that, you know, a lot of our clients really appreciate about our platform. And so it, you know, just doesn't really have any basis. Okay. So there was two claims, as I said, two complaints from the SEC this year. The first was actually in February, and Cracken chose to settle that. That was around the staking services that Cracken 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 crypto assets are securities. The one in February, Cracken decided to settle.

I believe this one in November, Cracken is deciding not to settle. This has been the statement out of Cracken that I've seen on Twitter and your press releases that you were intending to fight this. You are intending to push this in the court system. Can you tell me why? Is this just like, hey, they've crossed the line here and no further. We're making a stand. This is our core business. Americans deserve access to crypto assets on exchanges that will protect them. Have you guys just said enough is enough? Is that what's happening? And how's this different than February? Yeah. You know, so I mean, there's a couple of different things. You know, one of the frustrating things about that settlement is we're not allowed to talk about it or 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 description and summary of this particular complaint is exact precisely how we feel. We feel that, you know, it, when you look at the law, the SEC is wrong. And, you know, we intend to prove that in win this case. I guess from, you know, looking at from the outside, obviously not being part of any of that. It just seems like the SEC won, you know, one particular case got, I believe, $30 million in settlement. And now, you know, coming back nine months later to recollect. There's something that feels like deeply unfair, I think. To most folks in crypto that are looking at this from the outside in, I'm sure you can't

reflect fully on that, but I think you've got a lot of supporters in the crypto community here. Yeah, no, for sure. A couple things. I mean, just, you know, with the settlement, there was no admission of any wrongdoing whatsoever as part of that. You know, that's also a piece of it. But, yeah, I mean, strange to go through all that and they didn't, you know, mention that there might be this other thing about our business that they want to discuss with us. Yeah, it's quite odd. But, you know, 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 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, all of Europe. up underway, European Union, UK is on their way as well. And, you know, the SEC is non-participatory in that process and just, you know, pursuing this path of litigation, you know, based on, you know, laws from, you know, nearly 100 years ago. Dave, I'm just curious, do you have any takes on why? I mean, you know, notably the groups that the SEC is going after, at least on the exchange side are, you know, Krakken and Coinbase, to exchanges that I don't have to remind our listeners were wholly solvent and protected users funds in the crises of 2022. They were the complete opposite of FDX, and rather than receive kind of praise for that

and 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 know, unique undertone of hostility that some in the U.S. government have towards crypto? Like, what's your explanation for this? 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, regulation by enforcement

is clearly that, right? You know, and the companies, there is a notion of, you know, cracking Coinbase. These are companies that, you know, been around a long time, have kind of followed this path of regulatory compliance from the outset, continue to work with jurisdictions everywhere. So why these two companies and why does it seem to, it's likely an aspect of that is like the ease which with they can do this. It's much more difficult for them to go after a company that is outside the U.S., but still happens to be serving U.S. 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.

So it's just because you're in the neighborhood. They feel like they're in close proximity and they could slap you around about. Right. You know, something that we get a group of lawyers to explain, but just like the practicality in the process of bringing a complaint against some offshore business is just much more difficult for them to execute from a tactical standpoint. And so, you know, that's obviously one factor here. So, Dave, you've mentioned that the Cracken has no plans on letting

the SEC just bully cracking around and really the entire industry. And since we're going to go to the course and fight this one, do you have any sort of clarity as to like what that looks like? Like what is this next, what's the timeline? What's the time frame with regards to the Cracken versus SEC, which is now a case. It's now Cracken versus SEC, correct? 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, is it more or less expensive than $30 million. You know, some of the estimates of the cases that have gone before us were quite significant and extreme. I mean, up there in the nine figures area just to fight the case.

Is that part of the strategy, you think, of the SEC? It's like scare you with a sticker shock of a real fight? I mean, for sure, there's like the resources must be a factor for any company that, you know, has to make such a decision, right? I mean, if the amount of resources necessary just to even embark upon it are significant. So, look, I don't know if that's the estimate for this case, you know, what that would be. But, I mean, it's certainly significant amount of, you know, resources necessary to embark upon this type of thing. 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, the sole file, coin, polygon to be, like, not securities, for example, and gives them 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? 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, 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 it'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. Dave, have you guys ever thought about, like, just, like, leaving the U.S.? I mean, like, please don't, first of all. Like, we need functional exchanges

that we can trust in the U.S. And I think U.S. 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? You know, I mean, it's, it is a business decision just the same 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 Cracken as a company is that we are, you know, quite geo-diversified. You know, our biggest market is Europe. Cracken was the first place you can buy and sell

Bitcoin with euros. And then I think that the first place we could buy. sell Bitcoin with British pounds as well. Can allow Cracken grow really strong in those areas for quite some time being the first mover, really. And today, those are actually Cracken's biggest markets, you know, bigger than the U.S., if you will. Does it lead us to, you know, want to exit the United States? That's not our current position.

No. I mean, it's a meaningful market for us. We want to continue to bring our services to clients here. We have a lot of great clients in the United States and we want to continue down that path. And so it's not something that's on the table for us right now at all. You know, we are committed to and continuing 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 things, you know, they have to make business sense. Otherwise, they're just not sustainable. So fortunately, Gary Gensler and that SEC is he's not boss of the world. The other jurisdictions, what's your favorite jurisdiction to work in? 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 U.S.

are these kind of like, you know, U.S. regulator-specific problems, or do you see them echoed in other jurisdictions? Yeah, well, it's probably not true that we can ever say any place is perfect because these are, 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 Europe is heading now with 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, even aside from that, you know, the level of clarity has been beneficial, frankly, 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 U.S. that are trying to get it right. There's all kinds of great people that are working, you know, both in the industry. Yes, even, you know, some people on Congress that are crypto supporters that are working to try and bring this clarity. It's just, you know, that approach isn't held by all. Sello is the mobile first, EVM compatible, carbon negative blockchain built for the real world.

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are the leaders of our centralized exchanges. 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 the arc into becoming the CEO of Cracken. Yeah, sure. So let me see. Where to start. So yeah, the path to this current role. I get into crypto in about 2013. And I founded a company Glidera. That company was acquired by Cracken in 2016, and then I became, you know, took on the role of CEO when I joined Crack and found that acquisition. I held that role for a number of years, six and a half years before moving in the 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.

You know, I guess I, you know, haven't been a prolific tweeter in my past, now X. I'm envious at times. So, you know, social profile isn't significant. But, you know, certainly have been in the industry for quite some time. And, you know, there's probably all kinds of your listeners that are like, oh, yeah, hey, there's Dave. I remember from that one conference in Atlanta where there was only 100 of us there in 2013 and so forth. Yeah.

I guess I had kind of like a two-part career previous to move it into crypto. I started. I was an engineer undergrad. Worked to a software engineer for a short while, a few years, then a product manager. This was at various technology companies. Lucent technology is a big one, then Cyclo, which was acquired by SAP. We were kind of in the enterprise software space, building mobile applications. So early days in mobile, the most prominent device at the time was the Palm Pilot,

and the second most prominent was BlackBerry. And so these were, you know, this was, again, early days in mobile, early 2000s. Then business school full-time, Northwestern Calog, and then after that, work for Boston Consulting Group, which is a strategy consulting firm, worked 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. 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. I 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. What drew you into it, Dave? I say 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 let us down some pretty dark paths. What we need from Dave Ripley is to protect our funds and build fantastic products.

So 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 a very long time and that's what i see in crack in and that's what 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 the business school that's an interesting resume for someone to be interested in crypto in 2013 it would have been unorthodox you had all these like an acro capitalizing types of 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? 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 I had done, you know, previously is just a little bit different. And then I remember, that I remember I met someone, this was again, like 2014, and who was familiar, he was like, geez, what are you doing here? And I was like, huh, how about that? What a question to get at this event. And I mean, the reason is, like, look, I mean, it really is the mission of crypto, economic freedom, financial freedom,

freedom generally, you know, are things that are, you know, number one on my list for, you know, what I see are the most critical things for us as humankind to get right. And, you know, we haven't always gotten that right and we frankly have gotten it quite wrong. You know, the bank failures and the financial crisis, the great recession of 0809, that hit me pretty hard, you know, frankly, like the injustice of all of that. And so, you know, when I, learned about crypto and Bitcoin, I mean, just so much of it resonated with, frankly, a lot of things that I, you know, learned previously. I mean, you do have these, like, kind of crazy quotes by like a Milton Friedman where he, 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, you know, and others as well, some of the other economists have, you know, have similar quotes like that out there. So anyways, I think it, it really, frankly, starts and ends there. 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, you know, the growth of an impact of the internet, which frankly is like, in some ways a similar mission, freeing of information, freeing of, you know, ability to transact. There's similarities there. So, Dave, I really like that class of 2013 and before, right? These are people who, I think many of them saw 2008 and were like, you know, a bunch of bankers got to bail out, right? And here. is a new monetary system where no one gets bailed out, right? It's like credibly neutral. It's fair from inception. And, 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 developing Cracken 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 bank's made, right? So how do you make sure that Cracken doesn't become like the banks. And we've seen many exchanges, I would say, a couple of notable exchanges in the last year make these mistakes, right? FDX. What was SBF up to? Well, he was taking depositor's money and doing some unsavory things with it, like typical banker behavior. Do you know what I mean? And we've even seen CZ and Binance and, you know, $4.6 billion fine and some issues there as well. What do you plan? What values do you plan to instill in Cracken? What is Cracken here to do? Yeah, I mean, I guess there's a couple of different things.

Like, you know, the values are very much around the crypto ethos for sure. And 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. And that is certainly a bedrock of it. But, I mean, I would also point to kind of our role in the ecosystem in 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 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. And so I think that's a big part of it is that, you know, the mission has is 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 good sidetracked in a lot of other things. Ryan illustrated Cracken as a platform. And so I kind of want to open up that conversation of what is on the roadmap for Cracken and all of his products offerings. I know there's a rumor of a Cracken layer two coming around. I think the last comment that we got from you guys about that was no comment. But like what can it 2020? But feel free to revise that, Dave. Yeah, but feel free to update that if you are inclined.

But overall, like, what can we expect from Cracken in 2024? What are you excited about? 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, when we talk about who are actually our clients, one of the areas we've been quite strong historically are with, you know, more like professional individual traders. We've kind of brought the more advanced tools and charting. capabilities and order types and these types of things for those individuals, performant platform. More recently, over the past a handful of years, we've moved more into, we call it, you know, consumer individuals, retail.

Some of their 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. and 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 the experience in all those different pieces.

Then if you go to the other side, 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. You know, one of our most prominent products in that space is our benchmark and 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 Cracken, powered by CF benchmarks. So, you know, we're kind of directly, you know, have an interest in those ETF applications being approved and moving forward from that standpoint. Can you go into that a

little bit more? Talk about that relationship between CF benchmarks and the ETF applications. Like, can you just unpack that a little bit more? Yeah, well, I mean, a lot of these. different products, whether it's kind of like, you know, the cash traded derivatives, which the CME offer, they require an index, much the same as the ETFs do as well. And so the price of an index is built by, well, another set of prices, which happen to be the prices on all of the, or not all, but, you know, several major exchanges out there, Crack and B. And 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 then used by the ETFs themselves to actually set the price for their

products. 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. It's pretty cool. You know, it is, right? I mean, the custodians are largely going to be crypto companies. We're launching our custody offering in the coming month. And 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 Tradfai company, but they've also been in crypto for quite some time, too. So maybe you've got to give them a little bit of credit there just for having been in the space for a while as well.

Yeah, we do. And hopefully it's normalizing things over in, you know, Tradify world. I wanted to ask you about this. So you mentioned custody. Of course, you know, crack in like other exchanges, but you guys are certainly one of the largest has, you know, 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, yeah, Ocean's 11, Brad Pitt and all those guys, right? And 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 that, 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 Cracken was famously one of the very first exchanges that actually published proof of

reserve. So there's some cryptographic guarantee that the assets held in custody, we're actually in, you know, Cracken's custody, and you could verify that on chain. What's the latest and greatest there? Where would you like to see the industry go and where's cracking going with respect to custody and proof of reserves? 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 we're requires a huge amount of investment in technology, operational side. Frankly, the entire

company. I mean, we have one of our values there, productively paranoid, is all about instilling each and every crackenite, this level of awareness around security. And I mean, you could see it across our client engagement team in just thousands of crackenites, how present this concept is of security and it really is everyone's role. So this is absolutely the first place to start with, when we talk about custody and protecting funds. We have a huge investment there. Nick Prokoko, our chief security officer, fantastic talent, build a great team.

But it really goes beyond that. It's everyone throughout engineering and operations and all these other areas that play a significant role. That's the bedrock. That's the foundation. That's the most important piece. There are a number of these other pieces, whether it's, you know,

a regulatory license for custody, whether it's, you know, this proof of reserve attestation, whether it's, you know, a security audit, like a SAC type 2 audit or something along those lines, which we've done many of these different pieces here. A lot of those pieces were more focused on like communicating to others, you know, 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, again, attestation 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 coming with a custody license. But, you know, the underlying piece is right where you started, Ryan, and is definitely the most important. All right, well, let's talk 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 Cracken, obviously right now is 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 Cracken? Has Cracken 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? Yeah. Classic question that they, you know, tell me, we're just, you know, can't say much on. I know frustrates you guys as well. But yeah, I mean, look, I mean, all these things are out there for us. You know, cracking his own 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 Cracking today. 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 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 will continue to want to have as part of our business going forward. But yeah, nothing really specific to say on, you know, public side of things. Well, Dave, thank you so much for spending the time

with bankless today. And just like, you know, being open and introducing yourself to the crypto community. I know you're going to be an important figure in kind of the years ahead is one of the leading crypto exchanges for sure. And best of luck to Cracken. Like, seriously, I'm glad that Cracken is taking a stand against the SEC and has decided not to exit the U.S. but to stand and fight. And I think many bankless listeners are right here with you in that fight. And we appreciate you're doing it. Awesome. Well, thanks so much, guys. Great talking with you. The last question for you, Dave. What's Jesse up to these days? Jesse Powell? Well, you know, he's chairman of the board for cracking. So he, you know, stays involved from that lens, you know, decent amount. Of course,

at the board meetings and so forth. It gets to do more of the fun stuff, huh? It gets to keep it spicy on Twitter. In a good way. That way I like. Amazing. Well, thank you so much, Dave. This has been a pleasure. Yeah. Thanks, guys. Thanks, Dave. Action items for you, Bankless Nation. We'll include. a link to something that Dave talked about during the conversation. Why Cracken with the mission and values of Crackins? It's a fantastic read. And there's a link in the show notes. Gotta 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.