On The Brink with Castle Island - David Kinitsky and Marco Santori (Kraken) on obtaining the first Wyoming SPDI (EP.126)

Episode Date: September 16, 2020

Today, Kraken Financial, a wholly-owned subsidiary of Kraken, became the first financial institution to receive the Special Purpose Depository Institution (SPDI) charter from the State of Wyoming. To celebrate this major milestone, David Kinitsky, CEO of Kraken Financial, and Marco Santori, Kraken CLO, joined us on the show. In this episode:  Why Kraken decided to open an office in Wyoming and pursue the SPDI Why David and Marco chose to join Kraken and work on this project Kraken's journey to obtaining the SPDI and what's next Why Kraken Financial will not seek oversight from the FDIC – and why it doesn't need deposit insurance What an SPDI will enable Kraken to do What distinguishes a full reserve bank – and why take that approach How Kraken Financial would distinguish itself from the standard banks that service crypto companies and from full reserve bitcoin custodians Whether Kraken expects NY to honor reciprocity for the Wyoming SPDI The relationship between Kraken group and Kraken Financial The next steps to take the SPDI approval and become an operational, fully-fledged deposit taking institution What the SPDI will mean for existing Kraken customers  Read more about the SPDI here. 

Hello and good morning. Today's a really exciting day. The state of Wyoming has just granted Cracken's application to form the first special purpose depository institution, or Speedy for short. We've talked about this regulation, which is pretty brand new. Before on the show, we talked about it with Caitlin Long and why it matters. And here we are. A subsidiary of Cracken called Cracken Financial has had their application granted, and they're going to be pursuing a, full reserve bank under the Wyoming regulation. It's actually quite rare for banks to be formed in this country, so it's really exciting to see Wyoming making these great strides and doing in a way that really takes notice of the nature of the instruments that this institution would be custodying,

in particular formalizing the relationship between depositors that might be holding Bitcoin with this institution and the entity itself, which is something that is very unclear for a lot of existing custodians and exchanges. The other thing is that this bank in theory will have access to the Fed window directly. So it could potentially be a fantastic bridge between Bitcoin and the kind of established financial markets. So our former colleague David Kinitsky that Matt and I worked with at Fidelity is the CEO of Cracken Financial. So we're really excited to bring him on the show and talk about it and talk about their successful application, which they rocketed through. Cracken has been cultivating these relationships for a long while, but this is a really

impressive pace here, and we're super, super excited to see what they do. They're actually going to have headquarters in Chayin, Wyoming, really building it out as that emerging tech and Bitcoin hub. We've also got Marco Santori on the show. Many of you will be familiar with him. Marco is the relatively new chief legal officer at Cracken Group. We just couldn't be more excited for these guys. I mean, we've been waiting for this regulation ahead and then for the first approvals to come in. And I'm so pumped to see such a aligned and Bitcoin focus exchange be the first one to get it. Hopefully, first of money. I'm all for more competition in the bank industry, more liberation, more bank charters, and more competition between states. And that's exactly what this represents.

So without further ado, let's dive right into it. Bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of Concentive Easing. You've printed a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the Bitcoin.

Bitcoin. This is a very special episode. We have David Kinnitsky, who is the CEO of Cracken Financial, and Marco Santori, who is the CLO at Cracken Group. We've got them both on the show. Welcome, gentlemen. Thank you for coming on. Awesome. Thanks, Nick. Thank you. Thanks for having us. I'm so pumped for you guys. We have a huge announcement. Cracken has One approval to become the world's first digital asset bank. You are the first ones, Cracken Financial, that is, are the first ones to receive the SBDI, the Wyoming Special Purpose Depository Institution title

from the Wyoming Banking Board. Congrats. That's awesome. Thanks. Yeah, it's super exciting. You know, this is kind of a niche thing, I guess. We've talked about a little bit on the podcast. We had Caitlin Long on here. Obviously, you know, Caitlin, one of the key architects there.

So we've been paying attention to it. I watched your hearing with the bank supervisors, I think it was called, which was really cool, well done. And it seems like you were persuasive because you're the first ones to get the SBDI. So congrats. Yeah, thanks. Crocken's been behind the scenes working on these efforts for some time, and we haven't been super public about it. Obviously, there's a long road to haul here, but excited to hit this milestone. And so now we're going to start being a little bit more vociferous about our efforts here.

So we've a lot to cover. Maybe first of all, we can just go into your backgrounds a little bit. So both David and Marco, you guys, are actually fairly new to Cracken. So you've accomplished a lot in a short period of time. David, you actually just joined in April, right? Yep, yep, April. Marco, around the same time, we've been busy boys, for sure. And what was the, how did Jesse,

convince you to kind of undertake this crazy journey to trying to become a sort of federally or I guess state regulated bank but with access potentially to the to the to the to the fed window yeah was that process like yeah well I mean I've known Jesse and the team at cracking for some time just being in the industry and they've always been you know one of my pillars and like an aspirational company that I'd love to work for one of the most highly respect in the space so it was a pretty easy choice to kind of choose Cracken as a destination, but this project was particularly attractive. I'd been like you following the Wyoming SPDI efforts pretty closely. So when this opportunity came up at Cracken, I jumped at the opportunity because I think it's going to be big for Cracken,

but also massive for the ecosystem and the broader banking landscape in the U.S. entirely. You know, when I was listening to your testimony, I was thinking to myself, Damn, if there's anyone that has like pretty much the most suitable background to create, you know, a full reserve crypto bank, it's, it's David. And here you are. That's awesome. Yeah, it's funny to say that, given that I have no direct banking experience in my background, but it feels like I've done almost everything around that. So we're filling out the team with kind of some banking folk, bankers, but but I kind of bring, yeah, you're right, like a lot of the other kind of elements to it. And then obviously supported by a tremendous team across the Cracken organization with Marco and obviously their legendary security team at all.

So Marco, you're also fairly new to Cracken, but you've actually worked with them for a while, right? Yeah, I was actually Cracken's outside council a few years ago primarily on regulatory matters back when I was at Pillsbury Winthrop. I led the blockchain technology team there back in the day. Then when I made my escape, I left private practice to join blockchain.com as its chief legal officer. And then I got poached and I've been cracking. I've been a cracking since April, you know, following the goings on in Wyoming closely, really wanting to get more involved there, but kind of from afar. And now that, you know, when the C.O.

called me up and gave me the opportunity to come and speak to the rest of the broader team about coming to work at Cracken, this was, I mean, this, I make, you know, I make no qualms of it. This is, this was the thing that really put me over the edge. There's there is no there is no place more exciting for a lawyer to work in the world. Full stop. I truly think there is there is nothing more exciting than this going on in financial services anywhere, anywhere on the globe. So it was it it was an easy decision for me. And I guess we're talking about pretty much untrammeled legal territory here with this brand new. regulation, you know, TBD on maybe how some of the other states react. So certainly a lot to

chew on from a legal perspective there. Yeah, that's absolutely right. And look, there's, there's really no, there's no guarantee, as you said, as to as to how other states will take it, how federal agencies will take it. But, and frankly, I think it would be folly to come at this as some sort of event, as some sort of culmination, really, it's a commencement. It's the beginning of a conversation that we think is going to break new ground, but it's going to be a wide-ranging one. It's a conversation between states. It's a conversation between states and the federal government.

And it's a timely one, too, right? There's been so much happening in the world of fintech and payments over the last few years. It's great to be at the same. center of it. Yeah, I think that's a good point, Marco. I mean, you're seeing at the business level across the industry of digital assets and crypto and Bitcoin converging with legacy financial institutions and fintech all kind of being bundled and unbundled together into one. And I think that this type of banking institution kind of plays right at the eddy of all those kind of cross currents together. So it'll be not just important for Bitcoin and the digital asset industry,

but I think for FinTech and financial services more generally as well. So guys, maybe for those who've been following the space, but still trying to wrestle with kind of the state-by-state MSB process and what's going on with the South Dakota Trust and the New York Trust's approach, Washington Trust approach, could you just frame from a business perspective why Cracken wanted to go after this Wyoming SPDI license and what it really enables from just an operational perspective for the company? Yeah, definitely. I'm happy to feel that. And then Marco can kind of fill in the gaps.

So I think there's three main reasons why Cracken's pursuing this. The first one is regulatory. The bottom line is that this speedy approach, I think, is a very well and carefully tailored approach to kind of a framework for digital asset companies. It utilizes legal concepts like bailments for crypto custody. It harmonizes the statute with the commercial code underlying it. And it has a dedicated supervisory program for digital assets. No other jurisdiction, state or federal, can say that. It also, and when I said carefully tailored, it's a fully reserved institution, which is important because it avoids some of the solvency risk that a traditional banking institution would face. And as a result, can avoid some duplicative oversight from the FDIC or other implications of, for example,

the Bank Holding Company Act. So I think that's the first bucket is regulatory. The second one as to why Cracken is pursuing this is from an infrastructure perspective. Obviously, digital asset companies and the digital asset industry at large has had challenges with getting banking access. Now, Cracken is probably on the one side of the spectrum of having a slate of tremendous third-party banking partners. But, you know, the fact of the matter is when we have an opportunity to kind of get

direct access to the federal payment system and then be able to more seamlessly and closely integrate that into our product suite and customer experience, I think that's going to be a net win for our end users. And then the third bucket I would say is, you know, this is an entirely new product and distribution platform. There's products and customer sets that we can serve as a bank that we wouldn't otherwise be able to. So those are the big three. But Marco may have some more color on why this is kind of important from a legal and regulatory framework. You know, I think you nailed it. And, you know, the speaking as a lawyer, one of the first things that I know people will, will react to is the unique regulatory framework that this fits into.

And there's there's two elements to that that are really important. One, lawyers around the world, I can already hear the gasps, a bank that's not FDIC regulatory. How could this possibly be? And the, and I mean, I think that if that's the first thing I heard about this, I would probably react similarly. But this isn't some legal loophole. This isn't some end run around the regulatory systems. Spending five minutes looking at what's really going on here makes that much clear. The risks that trigger the SPDI or the SPDI or the SPD.

FDI Act and the risks that call for FDIC oversight, they just aren't present here because there's a tradeoff. The bank, the SPDI cannot engage in fractional reserve. The SPDI can't even re-hypothecate its assets. Traditional banks that can do that, they create real risks. They create insolvency risks. And that is why, that is the reason why we have. FDIC oversight. That's why we need depositors insurance for traditional banks because they do do that and

they do create those risks. So it's it's it's a significant tradeoff. We're saying we're we are not going to engage in that kind of profit maximizing revenue generating business. And in exchange, We don't have the same regulatory oversight. We have a different set of regulators. And that's really just one expression of sort of a fundamental phenomenon here in Wyoming, that the regulators get it. They understand why this is special, why crypto specifically is special, and why digital assets deserve their own custom tailored regime because the risks are different.

And that expresses itself not just in the regulators that they get to oversee us, but in the functional contents of that oversight. And, you know, we're going to have to live with this for a very long time, God willing. and that oversight takes into account the unique elements of crypto. It means that we are going to be required to look closely at the blockchains of the assets that we support and use blockchain forensics and data analysis and clustering and all the rest. It's something that traditional banks not only don't know how to do, but their regulators probably don't even understand how that works. So, you know, this is, again, this is not just some

end run around the existing regulatory system. This is careful tailoring. This is looking at real risks and developing effective mitigators. That's great. So it's pretty clear that the Wyoming regulators are really, you know, ahead on the learning curve here as it compares to other states, at least in my opinion. I wonder if you guys could just speak a little bit to what this process was like for you and for the company to actually get to where you are today. And do you think that this is something where we'll see other companies, whether they be startups or traditional quote-unquote firms pursuing the speed in a similar fashion? Yeah.

So I think that this, there's a lot of iceberg underneath the water here of the efforts that have been put in by Cracken and others across the ecosystem, really, to get the SPDI frameworks up and running. And as you've noted, the Wyoming folks, from the legislator to the legislature, to the governor's office, to the actual functional regulators at the division of banking, have spent, I've invested a ton of time and resources into getting very, very smart on this. And as I said, being very thorough in how they've formulated the framework and making sure it was harmonized with all of the other kind of factors they needed to consider from the Commercial Code to the Federal Reserve Act to things like that. And so there was a ton of work that was going on behind the scenes from folks like Cracken and partners like Caitlin and partners across the ecosystem at large to inform the regulators and inform certain aspects of the rulemaking that they were drafting around digital asset custody and all and the supervisory program and all of that. So that's been going on for well over a year. But the process as to our direct application for this bank charter started in earnest, you know,

towards the beginning of this year, and we filed our application at the end of Q1, beginning of Q2 of this year. And then, you know, it may not come as a shock. It's no easy feat to apply to be a bank. There is a lot of work that needs to be done in terms of crafting a business plan and, you know, the financial projections and all of the programs, policies, and procedures that you need to document and operationalize eventually in order to make sure that you're protecting your customers and the bank and the institution is sound and safe. And so there's been a lot of work here. And ultimately, the first kind of milestone that that resulted in was, you know, a few weeks

back is that public hearing in front of the state banking board, who is a governor-appointed group that oversees all of the banks and trusts and their applications in the state of Wyoming. And then, obviously, today, their, you know, deliberation and voting and ultimately approval of this SPDI application charter of Krakens. There's more to go, more milestones to hit in terms of applying for a Fed Reserve Master account and securing domestic correspondent banking relationships. And then ultimately, you know, operationalizing everything and getting to launch, which we expect to do sometime in probably Q1 of next year.

And so it's no easy process. A lot of work is still being put into it. But again, the cost-benefit analysis when you look at it, this is just such a tremendous tool to fulfill Cracken's mission of promoting adoption of digital assets to enable financial freedom. This enables us to seamlessly integrate with existing financial systems into the digital asset ecosystem. And so it's well worth all of the investment. When I was watching your testimony, which was live streamed, which was pretty cool, you brought out the application and it was like a book which seemed to be hundreds of pages thick. It was like, I don't know, the Oxford English Dictionary or something.

So clearly the application was no easy lift. And that's how you can tell we're qualified is by the number of pages in the application. So we slap that up there like a prop. But it was real. I mean, look, a lot of work did go into it. And that is a bit of a proof of work in real life. And that's what they want to see. They want to see that you're a safe and sound institution.

It was really interesting, too, just to see kind of how that process went. If you saw the public hearing, it was very formal. You know, it's a very formal process. And yet, Wyoming has a very transparent government that makes, you know, public access to these things available, which is incredible. Obviously, it creates a little more work for some applicants such as ourselves, but it's great to see that government in action. And so when we were talking earlier, you mentioned this is actually really just the beginning of what you expect to be a pretty extended process. So tell us, talk to us about the next steps here and what it's going to take to actually become live and fully operationalized Crack and Financial. Yeah, definitely.

So as I mentioned, this kind of approval from the state banking board and getting the charter for the SPDIs is kicks off this stream of next events. And that includes, you know, approaching the Federal Reserve in particular, the Kansas City branch for a Federal Reserve Master account. That obviously is the back end for our banking operations, certainly the U.S. dollar denominated ones. And most banks not only have a Fed master account, they also have other domestic correspondent banking relationships, either as redundancies or Plan B's or just internal operation secondary accounts. And so that's kind of the next step is approaching and conducting the application process for the Federal Reserve Master account, which again, we expect a positive result out of. And then moving forward with the Division of Banking in Wyoming to say, hey, look, we've got our charter from the Banking Board. We've got our Fed Master account or other correspondent banking relationships. We've got all of these programs and policies that you've seen in place. And now we're prepared to operationalize. Give us the authority to launch. And so the Division of Banking will give us. that approval, and then we'll move to go to market, which, as I said, could be as early as Q4 this year, but most likely Q1 of next year. And so what I didn't mention there is all of the actual building efforts that need to be done. Now, Cracken has a tremendous Cracken global group as an established,

you know, practice amongst all these functional groups from engineering to security, to legal and compliance. And so we have to operationalize some of those within this entity. The one interesting nuance here is that this is a wholly owned subsidiary of, you know, Cracken group of companies. But because it's a bank, it needs independent governance and operations. And so that's another big factor that folks won't see that will be under the service. Surface is operationalization of the bank, but in that nuanced approach of kind of being a subsidiary but being an independent operation at the same time. So assuming that you are able to get that Fed master account, how would this NADD distinguish itself from either the bank that established traditional banks that service crypto companies, the Fiat side, and also kind of the full reserve crypto custodians that service individuals. that just want intermediate access to Bitcoin, for instance.

How would Cracken Financial, where would it sit in that rubric and how would it kind of distinguish itself? Yeah, I think there's a couple of different ways. I mean, to be a successful organization to do the things that Crackin and Crackin Financial do, there's a lot of different skill sets and core competencies that you need to be good at. And so while you can point to like one or two of core differentiators,

for example, you know, being the first digital asset, native bank, having that direct Fed master account access, you just need this broad swath of abilities. And, you know, for example, coming from a traditional, if you're a traditional financial institution, it's unlikely that you already have, you know, the necessary developer and security processes and programs in place to operate, you know, proper digital asset custody and safekeeping. On the other hand, if you're a digital asset company, you probably don't have some of the banking practices in place. I think this really, the differentiation is marrying the two and being able

to come at this from a digital asset first approach and getting that banking integration and access directly, which is unique here. It's very different to say, hey, I'm a big banking institution, and I'm just going to bolt on digital assets as like an almost like customer acquisition strategy, which seems to be a lot of the plays from fintech and other institutions. It's very different than Cracken's approach, which is a very mission-driven and digital asset and customer-centric approach. And I think that's a big differentiator for us. And in terms of the clients that you expect to enlist with Cracken Financial, I mean, would this be a situation where you would be servicing the other subsidiaries or entities under Cracken Group

or trying to attain kind of retail depositors on both the Fiat and the Bitcoin? or going after institutions that wanted that full stack experience. What do you kind of expect in terms of a client base? Yeah, yes to all of the above, but probably on like a phased rollout approach. I think at first we'll be focused on the U.S. market and existing or prospective customers of Krakken as it stands today. That'll be kind of like the first focus area. But you're absolutely right that from there, we can extend our reach by serving institutions

with qualified custody and other kind of offerings that are more tailored towards them. We can expand our reach by, yes, serving the broader group of Cracken entities and operations. And then, yeah, we can serve kind of a dual channel approach of, hey, your digital asset native customer who is already attracted to Cracken, we can serve you there. But then, yeah, we have this whole other possible new channel of kind of like a bank, a traditional kind of online and mobile banking experience with tied into digital assets on the back end. And then, yeah, international is a possibility, too, that we're still looking at the go-to-market for. And so Wyoming isn't just kind of a legal domicile for you guys.

David, you actually moved to Wyoming in pursuit of this opportunity, and you're actually going to physically have an office in Cheyenne, right? Yeah, no doubt. I mean, Wyoming's been, is a great partner from not only this kind of regulatory or, you know, banking regime, but also is just a business environment. I'm pretty excited to have become a Wyoming resident recently and moved from New York, which I always kind of joke, but I'm serious, are kind of more similar than different in a lot of different ways. You know, I think that what attracted me to New York was kind of a, it was a space of freedom. You could do, be what you wanted, do what you wanted, whenever you wanted. I don't know if that's going to be the case going forward as much,

but certainly Wyoming is a different type of freedom of enabling you to do what you want and be what you want and be left alone. So I love that aspect of it. It's also part of a growing tech and industry corridor stretching up from Denver to Cheyenne and an ecosystem that ties into the University of Wyoming here. So yeah, we're going to be opening up an office over the next couple months and then expanding our footprint pretty dramatically over the next year or two. And we do envision to kind of build an ecosystem around the greater kind of Cheyenne, Laramie Denver region. And who knows, maybe that'll extend into some other kind of core efforts that are near and dear to some Bitcoiners' hearts like repopulated the American West with

Bison. I can't promise that right off the bat. But it's something that I'm looking at pretty closely. That's a key secondary objective here. Yeah, it's not many of our mission documents, but it's on a notepad in my office. Restoring the Bison sphere, as they say. Yep, that's right. The mega fauna. A lot of Bitcoiners talk kind of, I'm not sure if it's entirely sincere or ironic, but they talk about establishing Bitcoin citadels in the freer states out West and maybe less sort of onerous from a tax perspective as well. But you're actually instrumentalizing that. So I think a lot of Bitcoiners are pretty jealous of your transition to Wyoming and moving out to a ranch and everything. Yeah, hey, we're looking forward to being one of the pillars of that citadel. And hopefully, once we get up and running, we'll be able to kind of invite all who want to come to worship at our cathedral.

Marco, this might be more of a question for you, but one of the things I'm really curious about here is just the posture of New York as it relates to reciprocity here. So maybe could you speak a little bit about, you know, what reciprocity is and how you expect this to unfold? And I mean, could New York not honor this speedy designation? Is that a potential outcome here? It's good questions. Reciprocity works in a number of different ways. Chief among them is simply that the state's law exempts banks. And the speedy is a bank.

And for many states, there isn't much of a conversation. on the law is more of a conversation of, hey, we're operating in your backyard. If there's any, if, you know, if there's any issues, then we're here. We have an open contact for you and an open line of communication, I should say. And that's really the end of the conversation unless there are some substantive issues that arise. For other states, it's not as clear on the statute. For other states, banks are very, very carefully defined. find or banks are simply not even exempted. Now, obviously there are more aggressive regulatory

interpretations and regulatory approaches that we could take given given the power of being built on a clear and explicit bank charter like Crack and Financial will be. But that's not really our style. It's not really our regulatory style. I live down the street from the New York Department of financial services for one. And two, I've I've, I've, I've, I've been working with the, with the DFS for years. And look, under under, under Ben Loski, which is now, well, I should say under Ben Loski, the DFS got a bad rap for the bit license. I, I personally testified against it. I thought it was ill-conceived as drafted. I thought it was probably, well, I knew that it was well-intentioned, but the language that they ultimately came to choose and to rely on, well, it was just not very well-tailored.

And for a regulatory endeavor whose flag and whose banner had printed on it, the words carefully tailored, well, I think it was a disappointment to a lot of people. And if you look to the numbers and to the practical effects, there's not a whole lot of argument out there that it was chilling on the industry, that it did not foster innovation and that New Yorkers have been out in the cold for a long time when it came to new crypto innovation. that said, Ben Loski's administration was two superintendents ago. It's a long, it's not only a long time in terms of the clock on the wall.

It's a long time in regulatory circles. There have been two new administrations since then. And I think it would have been easy for those administrations to sort of blindly enforce the language that the, Loski regime that the Lossi regime wrote and approved, it would have been easy for them to completely ignore it if they didn't support it. Like I think a lot of the crypto bar didn't support it. But those administrations, both of them, they didn't do either of those things. Instead, they took actually really thoughtful approaches to administering the BIT license.

that I think is paid dividends for the industry. And most recently, under under under under the current administration, there have been liberalizations proposed of the bit license and streamlining of the approval process required under the bit license. So that's that's all to say that I think that the the current administration has demonstrated a, a really thoughtful approach to implementing the BIT license. And we really look forward to working with them. I can't predict how they're going to treat a speedy charter in New York. We're not going to be the only ones with a speedy charter.

So this isn't going to be a one and done issue. Let's just address the crack and problem and move on. This is this is a new. conversation that's going to have to take place, not just in New York, but across the country. And regulators are going to have to figure out where they stand on this issue. I think that in New York, in particular, a state that has a lot of experience regulating a lot of different kinds of financial institutions, I personally look forward to the conversation. I think that, I think it's going to be a fruitful one.

And I am confident that we will end up on the other side of this being good stewards of New Yorkers' trust. Well, that's a good answer. And I'm glad that the industry has you out there on the front lines having those conversations. You've obviously seen the ebbs and flows of this industry for a long time. Thanks for saying that. David, maybe just to kind of ask you a general question. You're someone who's seen the ebbs and flows of this for a long time too. I mean, you've been at some really iconic companies in the space ranging from DCG to fidelity to circle to crack in.

You know, just curious more broadly, when you think about how this industry is maturing, what are some of the metrics and milestones and just what is your thought process around measuring progress in terms of are we on the right track? and is this industry evolving the way you thought it might be evolving, you know, back in the DCG days or the early Fidelity days? You know, how do you just think about what's happened to the industry? I think you can sum it up with maybe I'll, I'm making this up as I go, but I'll call it the head tilt test. When I walk into a big financial institution or a regulator's office and talk about Bitcoin and digital asset industry, the angle by which they tilt their heads in confusion is a good indicator of where we are when it was, when I, I was back at DCG and just spinning up gray scale in the Bitcoin Investment Trust, when I'd go

into the SEC or FINRA or Citigroup's offices and talk about this, that head would tilt pretty far and would look at me like I had two heads. Nowadays, not so much. I think it's something that people understand that they're going to have to grapple with. It is here. It is just a fact. I think the denialism is kind of going away a little bit. So I think that's like a key thing, whether they agree with it or think it's good or bad or whatever their normative opinion about it is, I think more and more people understand that this exists and this is going to exist. That sounds pretty low bar or trivial. It's not coming from where we came from, I assure you.

So I think that's an important thing, just taking this seriously and understanding that whether they like it or not, they need to deal with it. So I think that's a big positive. A lot of people talk about adoption and whatever that means. I'm a little still unclear on. But I think that the infrastructure that has been built has been on a steady clip. I mean, I tell you, when we were trying to set up the Bitcoin Investment Trust and trying to figure out what our safekeeping or custody solution would be, I mean, there was nothing.

It was barren. I mean, there wasn't even good software out there that existed. Basically, we were ecstatic that when Armory came out, you know, when basically a hobbyist physicist from Johns Hopkins, created this piece of software, like that was a big development because it had a, you know, watch only account and you could have multiple like wallets and things like that. We've come a long way from there. So if you look at that infrastructure as well, that's another massive, massive development that we've been here. You know, coming back to the adoption side,

obviously there are metrics on price and, you know, the quote unquote market capitalization of some of these assets. And, you know, people like to maybe poo-poo that. But it's real. Like, it's important. Price matters. And asset size matters. It absolutely does, like whether you like it or not. And so, yeah, it's a crude and often misused metric, but it's an important one. And so I think by all of these measures, it's grown by leaps and bounds. And I think what we're doing here is kind of the next kind of booster pack on this jet ship here to basically formalize and mature the industry into the banking world.

It's gone through a lot of other financial services institutions from the capital markets or broker-dealer. side and maybe commodities and CFTC regulated side. But banking has been elusive as of now. So I think that this is the next leg up. That makes sense. And then, you know, the other thing that's evolved a lot since the time you've been in the industry is just the narrative. You know, there's there's a time when Bitcoin was like the credit card killer. There's been the world computer for Ethereum, you know, so when you think about where that narrative is now just for the industry, it feels to me like Bitcoin and just general store of value assets has a, kind of a clear macro narrative now that's resonating. But when you think about just the breadth of all

the types of assets that Cracken has, are there other narratives that you see are kind of gaining adoption or that people are really interested in? Or is most of the demand coming from that sound money narrative? Yeah, it's hilarious to see how these narratives evolve. I mean, within the digital asset or crypto space, Bitcoin's almost boring. It's like the boomer coin, right? Which is nuts. It's absolutely nuts to look back at, you know, 10 years ago to think that like Bitcoin is this boring, kind of like safe, steady, sound store of value that is like the, you know, incumbent in the room amongst other digital assets. Getting boring is good from that perspective.

And I'm definitely, definitely still a firm believer in Bitcoin along a lot of the different narratives. And it frustrates me when people try to pick and choose a correct. narrative, what this is. It's a lot of different things. And so I think that's important. It serves a lot of different masters. But like outside of Bitcoin, yeah, obviously like the Ethereum kind of world computer narrative or, you know, open finance and now defy has obviously gone into some interesting new territory. There's a there there, but probably not where we are right now. There's some interesting stuff happening. That's really fun for traders and viewers.

of the space, it's amazing. I love it, but it's probably got a little ways to go along the curve to kind of get to a more expansive and ubiquitous place that Bitcoin is now fast approaching. But it's wild to see that narrative of Bitcoin just establishing itself and just entrenching itself within this larger macro narrative. I think that within other macro narratives, this concept of like open finance and the internet is important in a time of tumult, political. where you're starting to see borders reassert themselves in a much more serious way. The openness or potential openness, now it's not like the internet is impervious to borders. It is certainly subject to them.

But it does look like there is that narrative coming back pretty strongly, this kind of like open, global, financial inclusion and financial freedom narrative. And that's from Bitcoin onto Ethereum and beyond that I think is a major important new narrative that I'm seeing. Something we haven't asked yet actually is what will be the effect, if any, of this new bank charter on existing cracken customers? Will anything change for them? Yeah, I think that, so from a customer vantage point, as I mentioned, we're focusing initially on the U.S. market of existing cracking customers. And at first, probably not a lot will change. Certainly not a lot dramatically.

basically will be operating in the U.S. under this kind of new framework. But what you will see then is as a result of this better kind of regulatory standing and positioning that Krakken will have in the U.S. and the direct access to the payment systems and that infrastructure there, we would expect customers to see much better kind of faster, cheaper funding mechanisms and better, more seamless customer experiences. the fact of the matter is still on a lot of digital asset exchanges, getting dollars onto them and off of them is still very suboptimal. And so you'll start to see that improve.

And then hopefully we'll be able to serve new types of customers and new jurisdictions with the same kind of products and services that Cracken has today. So not a lot will change except for like quality improvements and feature improvements over the first probably year. But then thereafter you're going to start to see a host of new jurisdictions, products, and distribution channels that this enables. Well, David and Marco, any closing remarks on the speedy and where this leaves you as a business? I think, no, just I think it's like super exciting. I think it's underappreciated.

I think you guys obviously are ahead of the curve on this like many other things. And I think that it hasn't yet caught on to the broader digital asset ecosystem or the financial mainstream media. But I think it built pretty quickly. And once we get out the door, you're going to see a lot of people who I think are a lot of institutions who kind of have a different regulatory strategy already set or are waiting to see kind of what Cracken and the first players who pursue this type of institution, how that plays out. And then I think you're going to see it make massive waves. Another thing is you're going to see all of these other state and national banking regulators

borrow liberally from the Wyoming framework. And I think it's going to change for the better some of the kind of banking uncertainty that you're seen among state and federal regulators. Yeah, I think that's right. Wyoming is capturing so much mind share in the world of financial services with this move. It's just a matter of time before we see other states, Texas, California, states that have the ability to move quickly, too. They can be more nimble than the federal.

government. We're going to see those states move to develop their own blockchain initiatives. And I think it's a net positive for all of us. Do we wish we were the only crypto company in the world and we can get all those revenues and all those profits? Well, I don't think any of us would complain about that. But I think we're just delighted to see the advancement and the progress for the community and for the industry at large. We are very much still in the rising tide phase that raises all ships together. And I think we have a lot to look forward to. Well, I speak for myself and Matt when I say that we are so excited to see you guys hit this key milestone. And we can't wait to see you become a fully fed connected bank and pushing that narrative forwards and advancing the cause

Wyoming, which has been so excited to watch. So congratulations again, and thanks for coming on both David and Marco. Awesome. Thanks, Nick. Thanks, Matt. Always great to chat. Thanks, guys.