On The Brink with Castle Island - Mike Cagney (Figure) on Blockchain Capital Markets (EP.673)

Episode Date: October 7, 2025

Mike Cagney, the founder of Figure joins the show. In this episode we discuss: The process of taking Figure public in September 2025. The market structure for tokenized securities. Perspectives on the key issues being debated in the context of The Clarity Act. Reg NMS considerations for blockchain assets. The impact of stablecoins on the banking sector. The original thesis of Figure and the attractiveness of the HELOC market. The Provenance Blockchain Competition versus legacy financial services firms. To learn more about Figure visit figure.com. Follow Mike on X. Follow Figure on X.

Today on the podcast, I sat down with Mike Cagney, the founder of Figer. Figer is a company that went public in September and that has several exciting lines of business, including a HELOC origination business and a markets division. They also started the provenance blockchain, which is the underlying technology for many of its core activities. It was great to chat with Mike, really like talking about the impact of stable coins in the banking sector and some of the issues that are being debated with respect to the market structure bill and how Figer is thinking about that. I think you'll enjoy this one. So without first, There's my conversation with Mike Cagney, a figure.

Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guests and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only.

Brought down by 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 to Britain's ailing economy with a new round of quantitative easing. You print 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. Mike, thanks for joining us on the podcast.

today. Nice for having me. I guess congrats are in order. First of all, you went public, I think, less than a month ago. So was it on September 11th. So congratulations. What's that been like? It's been good.

I mean, being public is a step in a long process. We're in this for the long game. And we see an enormous amount of value that we're going to be able to create out with the public blockchain and its application of financial services. But it was an important milestone. Great for the team's testament to all the work that's gone in, especially given the last four years. is a regulatory edwin that we've had, being able to come out public, not just to make it

through the regulatory process, but have a public markets want to have access to blockchain businesses, public blockchain businesses. It's great to see. And I think super encouraging for the ecosystem. When we started to shift from a political and regulatory climate, did you see that line of sight towards going public? Was that a catalyst for your business? Yeah. I mean, if you think about last year, 2024, we were trying to go public. We were doubt profitable last year. And the regulator just made it really, really difficult. We were a blockchain business. We did a lot of stuff in crypto. We had a lot of infrastructure around blockchain and crypto. In an effort to try to go public, I split the company in two. And I said, well, look, I'll take the really heavy blockchain stuff and

put it over into figure markets. And I brought up to run figure. My guy worked together for a long time. He was the chief revenue officer at SOPI when I was CEO there. It just became apparent that we weren't going to be able to go by splitting the business part. And so what happened, And in November, when the election occurred, we started thinking, well, this has pretty significant ramifications for the SEC. And that was one of the considerations. But it was also, is there a public market appetite? I went to the bankers and I said, hey, does it make sense to recombine the business?

I gave them the story of why we would recombine and the direction that we would take the business. And they said, yeah, that makes absolute sense. The reality was it was going to be hard to take them public separate anyway because there was so much interdependency. Investors don't like being invested in a public entity when there's a private entity that's critical to the operations. And I understand that. We said, all right, well, let's go ahead and do this recombination. And we started talking about retesting the IPO orders. And it was actually one of my investors that came and said, this is the incredible time we need

to do this. And we just gone through this massive pain to separate into business. That was brutal, miserable. And I'm like, all right, it's a sunk cost. I can't make the decision based on how miserable that experience was we had to think about what is best for our shareholders. And it became pretty clear, pretty quick that recombining was best. But in the beginning, when we were working through with the bankers, Goldman was left on our S-1, and Coleman went through and they were like, ah, you really want to tone down the blockchain stuff. And they really wanted to make it like a fintech 2.0, which sofi pioneered.

And I'm like, but it's not that. And they're like, yeah, but you need you should talk about your loan origination system. And I'm like, but we give the loan origination system away for free. We want to talk about the blockchain and the fact that we built a whole market on blockchain and we're the only ones who have done that and it creates liquidity and like all this hugely differentiated stuff. And I literally just fought with the bankers for like the first couple of months. They're like, don't use the word defy.

And I'm like, what do you mean? I'm a very true decentralized blockchain person. There's lots of values like Coinbase is a set other than base, which is moderately decentralized. It's a centralized brokerage exchange. And I'm a decentralized person, and I don't take custody of anything. And I believe in the true premise of decentralization and the value that brings through blockchain. I see three value props of blockchain. There's transactional efficiency, there's liquidity, and there's DFI from a financing standpoint.

To me, DFI is the most powerful thing. When you connect sources and uses of capital, you unlock huge opportunities of rent dismermediation. The whole premise is we're trying to get the DIPI. defy is the promised land here when we no longer have warehouses with you golden sacks it's all on it and they're like yeah you know that scares people don't talk about that blah blah blah i'm like well i'm absolutely going to talk about them i'm fighting the whole time and then circle goes public and then they come back through like hey mike you really think you should emphasize defy put a little blockchain on all the stuff that you're doing and i'm like you're kidding oh okay you guys are right good thing we've got you back

bankers here to help us. I love that story. Let's emphasize defy. The buy side was there from the very beginning. What we had with the buy side was a discussion that I think we made very accessible to them. What we did is we talked through, hey, we use credit to demonstrate two of these three things. We've demonstrated transactional efficiency. We demonstrated liquidity.

And now what we're trying to do is demonstrate defy and the financing site. We launched this product democratized prime. That's how we're doing the defy approach. But we're also taking assets to other L1. I was on call this morning. We're taking yields, which is our stable coin and loan participation, onto Solana and SWI and other networks as part of what our ambitions are. We've demonstrated that on the credit side.

And what I said is, look, I'm going to do something very interesting for you, the buy side. I'm going to do a second Q-Soe. I'm going to do a second version of figure. I'm going to try to launch a second QSIP. And that equity will be peri pursuit to the NASDAQ security, right? Same rights to profit, same governance, same everything. But it's only going to be on the blockchain. It's not going to be on DTCC.

It's not going to trade on the NASDAQ. It's going to trade on our alternate trading system. And our ATS is unique in that it's an actual deep IATS. You and I face off directly and transact there. There's no intermediation, no custodial construct, just bilateral settlement. And I think it's the only ETS that can do that by the way. Other people might argue with me on that. And they're like, well, that's great, Mike.

But why would you do that? The NASDAQ works fine. And I said it does. And so let's be cognizant about where the value prop is. I think there's some transactional efficiency here. Just like I cut 150 basis points of cost out of the securitization process. I'll cut some cost out of this. Like the transfer agent now is just listening to the blockchain.

You know, I'm notification. There's some opportunity costs. That's out of it. Not a huge number. And they're like, oh, is it liquidity? Are we going to trade this 24-7? And I'm like, well, you can, but I don't know how valuable that is. A lot of people are touting 24-7, it's so important, blah, blah, blah.

I've been on FTX to lift them out of bankruptcy, and they had a U.S. equity perp business that traded 24-7. And I can tell you if all that mattered was 24-7, that business would have been flying, and it wasn't. And it was sideways. 24-7 is actually a real value prop either. But here's where it's going to matter for you guys. Around D5, you're going to be able to take that equity and cross-collateralize it and buy

Bitcoin and vice versa. Your ability to use Bitcoin and buy that in a way that's fully integrated in seamless. You can't do that through prime brokerage. You can't do that in your Robin Ownic. Because it's segmented out. But more interesting, today when you guys lend stock out and it goes on special, it's suddenly yielding 40% because there's a squeeze. you don't get the 40%,

your prime broker still paying funds or not funds anymore, silver or whatever they're indexing to. But now you hold the stock, you control it, you let it out yourself, you set the rate and you get the economy. And they're like, that sounds really cool, but what if they don't trade in sync?

I'm like, I will set it up where our treasury will swap the NMS security for the blotching security, one for one. And that way, by definition, our much liquidity there is on the NMS side, there's the same amount of liquidity on the blockchain side and vice versa. Whether it's jump or others, I will get them to come in and make market on this and cut cross. And that's when everyone was like, well, what does that mean for DTCC?

And I'm like, no, no, you're not thinking about it the way I'm thinking about it, which is, yeah, there's no DTCC here. Like, you don't need a registry. DTCC, I think they generate like $2 billion a year of revenue and they hold about $50 billion of street capital. That's rent. That's great to release. back in the ecosystem, but it's tiny in the big realm of economics here.

The more interesting thing, and what I think the security is going to demonstrate is, well, you don't need DTCC, but you also don't trade on the NASDAQ, you trade on a Dex. You and I can take our Metamask or Phantom or figure wallets and attach to that dust and the tax trade. Not only is there no centralized exchange, there's no introducing broker. So we don't need a Robin Hood account or a Schwab account or whatever. We just attach to the ducts and trade. And it's like, well, if you don't have that you're using broker,

who deals with margin and who deals with stock loan, D5. There's no prime brokeraging. Goldman and Prime, which in the sell side, the prime brokerage is a crown jewel to business. And they generate a ton of money for these guys. All goes away. That's what this is going to be able to demonstrate, which is blockchain has two aspects.

There's the disruption of it. existing financial infrastructure and there's the green field. Equity is clearly a disruption of existing financial infrastructure. And I think we have a very defined path of how it's going to work. And I was out, I think we did 150 investor pitches as part of IPO Roadshow. And about a third away through, I started pitching everybody this on a buy side. And they were like, yes. And what I need you to do is I need you to then say, hey, this is so good.

I'm going to go to my other portfolio companies and say, why don't you have a second cusp on the blockchain? because it's way better for me for both a margining standpoint and a stock from standpoint, I have the same liquidity, I have the same transactional economics, why don't you do this?

And I think we're going to be able to affect change from within the way we've always done it, which is we go first. On the other side, with credit, that's Greenfield. There is no marketplace for credit. We created that, but we did it with our loans first. Now, we have 173 parties that originate on our platform and were a small amount of that production.

But we had to be the first ones to do it. My hope is by the end of this year, we'll have demonstrated the full vertical and the defy on credit and the horizontal expansion into a new asset class being equity, all native on chain, where we have a greenfield example and a disruption example

that indisputably demonstrate why blockchain is so important, so powerful. I love that. And you've gotten into market structure in a way that I just love to geek out on. I'd love to get your take on just what this looks like almost from a regulatory perspective four or five years from now

where you have the NMS market, then you have these blockchain venues, whether they're somewhat decentralized, fully decentralized. The existing byside firms and the broker dealers, do you see them having a fiduciary obligation to connect to these venues? How is best bid, best offer? How is that going to work, do you think?

So one, this is being hotly contested as part of clarity. The challenge we have with clarity is with Genius Act, there was a lot of momentum and a lot of political reason why no one wanted to stand in front of that. And it went through pretty quickly. Now, the banks all feel they got bamboozled on it because post-execution, they realized Coinbase is paying interest on USDC balances. Since it's not circle paying interest, it satisfies the Genius Act, but you're still getting interest on coin, which is what the banks are trying to avoid. With clarity, you're in a much difference. situation where you've got the centralized exchanges that have a very different perspective

to the decentralized folks like myself, I care a lot about how do you deal with a transfer agent in defy? And to me, those are things that are super important. Well, a centralized exchange doesn't care about that. And then you have the existing players like ICE and NASDAQ DTCC that are like, well, how do we take the system we have and apply it to the crypto or blockchain assets? And I view as lipstick on the pig in terms of that process because the benefit here is to rip everything and start over. The challenge from the regulatory standpoint in Best Acts is a big issue. DTCC have this view of, hey, we're going to be able to take a DTCC security, we're going to fault it, and we're going to sell a security entitlement to it. And that security entitlement can be used in DFI,

I can use it, blah, blah, blah, blah. When they told me this, we were at a dinner when they were talking about this. And I'm like, there's no way you can do this, at least not under the current regulatory structure. Sure enough, after they explained this to me, Commissioner Purs did that memo that said, by the way, a security entitlement of an MS security is still an NMS security and still something best acts. The issue with best execution is you basically have to direct to best bid best offer, at least for a portion of the transaction. It's unfortunate because NMS is sort of classic, the road to hell is paid with good intentions. It actually is not a good thing for people, in my view. But the reason was it was there to prevent you

from being gouged by your broker, sending it to off-market exchanges and so forth. It's actually created a huge market for order flow and other things that aren't necessarily accreted to consumer market participants. But the issue is you have to be able to route to best execution. So a blockchain exchange where you and I are both encumbering the asset and bilaterally transaction, that's the whole definition of blockchain exchange or decentralized exchange. We don't take counterpart of your settlement risk, but that means when I lift your offer or you hit my dig, we swap those assets.

We do not then go and look at cross 12 other pools of liquidity as to where we're going to route the trade. A blockchain native ecosystem won't work in an NMS construct. This is a gap that I think a lot of people in the space are just getting their arms around and realizing because I think some of the brokerage firms are like, oh, we're going to send up our own blockchain and we're going to trade securities on them. We're going to be able to trade Tesla and Intel and Coinbase, whatever. No, you're not because those are NMS security.

This is why when I talk about what I'm trying to do, I have to do it as a second Q-SIP because it can't be the same security. I can't take the NASDAQ security and put it on the blockchain because that's an NMS security, no matter how I do it. So it has to be a different security that doesn't touch a national market exchange. Then you have the ability to create a blockchain-a-of-the-ecosystem where you can transact bilaterally and sell-settles self-clear. And the key is to keep that locked in.

there's a convertibility aspect that you can do with the Treasury side to swap that security. There's a bunch of reg-em considerations, other regulatory considerations you have to have as part of this. So it's not trivial at all, but it's doable. That's kind of what I'm trying to lean in on. Yeah, that's fascinating. And you brought up the clarity bill. I mean, how do you handicap that getting through at this point? This is one of many issues that people are debating.

It just seems a lot more complicated than the stable coin bill. There's sort of two aspects to it, which is what is the immediacy of it in terms of its value to the ecosystem, I think Chairman Atkins has been very clear that, for example, they don't view defy as being under SEC purvey. There's a question of how do we define defy. Is defy decentralized custody or is it all logic on smart contracts? Is it governance of the market system, et cetera, et cetera? And so in the near term, I don't know that it's as important to all of us because I think the SEC, the first thing they did that was huge is they said we're not using enforcement as a policy tool.

And that allowed lots of us to be able to wake up in the morning without fear of an arrest warrant being out there or the Friday afternoon Wells notices, or all the things that were happening, give us some degree of comfort. They've enacted a set of policies or announced a set of intentions that have given a pretty clear indication of the industry, what you can do and what you can't do.

The problem is it's not codified in the law. So just as this is interpretive to the current, chairperson, another chairperson coming in, they'd go back to the way it was before. I think we have a longer runway with clarity. It's not that we have to get done this year or the industry is going to suffer. We've got to get it done in the next two and a half to three years. Or we're going to introduce a huge amount of uncertainty as to our businesses function against election cycles. That's not a good thing. No, it's definitely what we want to avoid. You brought up that dinner we were at, and you had some really interesting comments around the banking sector

and how certain folks in the banking sector are really freaking out about deposit flight with stable coins. How do you think about this? And maybe I'll ask a follow-up question just around what would you be doing if you're a bank right now? I've spoken to a bunch of bank CEOs about this. The reality is, I think if you're a regional or a super regional bank, your liabilities are going to come under attack and you're going to lose a lot of them. There are some bank CEOs that they'll, oh, the government will never let that happen. We're going to go to community banking or blah, blah, blah, blah. Other than understand this administration, the populist band of this administration,

which is around Main Street not bailing banks out or allowing banks to have these enterprise franchise models that they always underpaid it on FDIC insurance historically. And I think there's a recognition of that in the administration. You're going to be under attack. What do you do when that happens? part of what we're doing and going out and doing a road show and that we're meeting a bunch of these banks and we're saying, hey, look, there's three things we want to talk to you about. One is this macro event of stable coins. Tragedy did a study that says if interest was paid on these coins, $6.6 trillion would leave the bank liability

side, not just retail, but business deposits as well. I agree with that 100%. I think that that's very correct. And I think it's inevitable, you already have interest being paid on this indirectly. And because of that, you will just get to direct interest. in the not-so-distance future. And so that deposit flight's going to occur. What do you do?

Part of what we're saying is, hey, look, we can show you how to originate assets on blockchain, how to create liquidity and marketplaces on blockchain, and then how to use defy to finance those assets. The paradox of this is the money financing those assets in defy used to be in the bank deposit. You and I taking our deposits out, now putting it in yielding coin,

and then making a decision that, hey, rather than SOFA, we want to make six or seven or eight percent on a defy marketplace lending against loans on an over collateralized basis. We're just reallocating those liabilities away from the centralized bank capital allocator to the decentralized people allocator, where we all make the decision of allocating the finance those assets. But that capital needs to get tapped. And we saw this, and the bank's got to preview this at the end of 22, when the Fed

started to tighten, bank deposits went. from 18.2 trillion to 17.2 trillion. And the banks had a miserable time. They were selling assets on a prior sale basis, trying to get everything off the balance sheet. This is a trillion dollars of liability. So two trillion goes, or $6.6 trillion, which is the Treasury study for interest bringing goes, what's going to happen? Well, absent a solution, you have a financial calamity. Government's not going to let a financial calamity happen. Regularies to step in. The Fed could do like extending health type structures to create leverage and liquidity. for private capital to step into the bank balance sheet void, it's not enough on its own.

Again, the reality is that $6.6 trillion isn't all going to sit in treasuries. You and I aren't going to be content with a 4% yield when we can allocate directly on an over-collateralized basis and get seven or eight or whatever it is. The big thing that we're showing the banks is here's a roadmap to do this. Now, the second thing that we're talking to them about is, and by the way, JP is going to take your deposits. JP coin is going to come and they're going to be able to out-compete you. And some of these regional banks, I think, are a little bit delusional. They're like, oh, no, no, we're going to be able to have XYZ coin and be competitive. I'm like, you're not. This is why you can't win and

chase bottom rewards. You just can't. They're not going to beat them in this fight. Why don't we give you our yielding stable coin? We have a coin called yields and it's actually a secured, so it's not subject to the Genius Act. So it can pay interest. Why don't we give you the yielding coin. By the way, we can hold in treasuries or bank deposits. Your customer puts a dollar into yields. We'll hold it on your balance sheet as liability. You've got to pay interest on it. It's not a free deposit anymore. But you don't have all the costs that you had of managing that deposit historically. You get efficiencies that come off of that. That gives you a defensive position because now you you have an explicit yielding coin whereas JP and the Genius Act doesn't. The deposit is staying with you,

the customer relationship staying with you, the economic scrape is staying with you, but you have to be cognizant of you're either going to have a higher cost deposit or it's going to be in treasuries, and either way, it's going to have some impact on your liabilities, and that's why you need this blot chain ecosystem. We're going out on a roadshow to do this. I joke, the bankers are going to think this is the roadshow of doom, where I should show up and have like, everything in your world is over. But it's not.

I'm saying if you lean in and embrace this technology, you can actually, gain a lot of market share from your competitors who have their heads in the sand and you're like, this will never happen. It must be a fascinating thing to be one of these executive teams that's actually zoned in on the problem. I get the impression there's quite a few that just aren't aware of it even yet, which is shocking. But it's not just the liability side of the balance sheet that's getting chipped away. It's just the asset side is also getting chipped away. If you just look at the growth of private credit, who's financing buyouts these days, banks getting out of certain lines of business. So if you almost just do a thought experiment on what it would take to save the banks from a liability perspective right now, it would be like unlimited FDIC insurance.

And you could actually build stable coins on top of bank deposits within a genius framework. It's almost like you should be going big and bold with your lobbying efforts. I think what's interesting is almost all the banks recognize this is an issue and all the bank boards are talking about it. But some of them do not want to have a discussion about what the solution is. It is very topical. When we were on our roadshow at one point, but today we have a bank that the board wants to talk about this. Mike, would you be willing to go over and talk to them?

I'm like, sure. And so he comes back. He's like, yeah, they thought you were too scary and they didn't want you to come in to talk to them. They wanted somebody else. And I was like, I'm not that scary. I'm more like a pragmatist in terms of what this is. But we're at a point where this will go slow and then all at once.

But the genie is out of the bottom. With Genius, they're not going to be able to put it back in. And this is the beginning of narrow banking as it affects the regional banks. It will not be for the money centers because the money centers will actually benefit because part of the Genius Act is you can hold treasuries or you can hold bank deposits. JP will hold bank deposits. And ultimately, the margin in stables will go to zero because it's a competitive product and people will figure out ways to pay rewards out.

There's homogeneity of the product, too. why is one stable better than the other, the margin will go to the point where the consumer gets the benefit of the bulk of the carrier to flow. And then it becomes rewards and application and use cases and other things that I think banks like Chase are going to dominate. What could have happened is the government could have taken a more utilitarian approach and said, we're going to create effectively a uniform payment rail for all coin, where no coin can be accepted or denied anything that's conforming as a genius act coin is available for this rail and here's the infrastructure, that's not necessarily a capitalistic approach to do it.

And why I don't think they did it that way, there would have been a utility to it. Unlike in the past when banks would collude together with things like the Visa Network and so forth, I don't think that's going to happen here. I think the big money centers are going to lean in and say, you know what, we can just take this market and they're going to try to do it. I want to rewind the clock a little bit. You were the first person in this industry that really took a big market. I'm talking about Helox now infuse them with this technology.

So what was it that you originally saw that illuminated the fact that a blockchain could be a good implementation for this? And thorny issues there to figure out around MNPI and just curious how you went around operationalizing it. The original thesis that we had was we could originate any private credit, aggregate, securitize it on blockchain and create some savings. That's the first of those three value pops of transaction. action or efficiency. The issue for us, one was MNPI. The issue that we had when we started was

proof of work was still the predominant chain. So Ethereum was still on proof of work at that point. Bitcoin obviously was a proof of work chain. Proof of stake was coming to fruition and proof of history with Solana. But the problem with those networks was they function like a golden data set. So you put a loan on one of those networks, goes out to all the validators. You now have PI at 100 different anonymies. Enonies you can't control. You can't do that. We ended up building a blockchain called Provenance

that went through a couple of iterations. The whole premise on Providence is one of my loans is 5 gigs of data. I put it on Providence. That data goes to an encrypted object store, and what goes to the validators is a hash of that data that they then write, such that if I trade a loan with you six months from now,

they're going to reference that data into the encrypted object, and you're going to be able to tell it or not that was the actual artifact. So it's acting as a data validation agent as a Brazil called data set. And we made Providence public. We own 20% of the utility token on it called hash

the 80% bulk of it's in the foundation and there's private parties that hold it and trade it. And that was a necessary condition, but not sufficient. And that's what I thought would work. And I went to a bunch of banks. I've told this story lots of times where I'm like, hey, you can do this on blockchain.

We'd like to be the 10th bank to do this. And that's when we said, all right, we'll do it ourselves. In doing it ourselves, we had to be very cognizant of we don't want to fight it out with rocket on first lien mortgage or SOFi up personal loans while we're trying to convince the market to use blockchain. It's not going to work. And we had to find, again, the greenest field we could play in on credit where we think we could originate a valuable asset and not have to compete with anyone to do it. And that's why we chose something like we want credit. It's a mortgage and it is a mortgage asset.

but it's one that hasn't been done well and hasn't been used well. Product market fit historically has been poor for it. It's a great substitute for personal loans, for example. What we were able to do is bring the personal loan experience. So a couple minute application process, your money in a couple days, into something that historically took 45 days to get, but was a better product downstream. What a lot of people don't understand,

and when we think about moats and competitive modes, what we had to do in the beginning is leave a lot of money on the table. Notably, in the beginning, people would come to us and say, I'll buy your loan, but don't want to buy it on blockchain. Pay you more of you don't make me buy it on blockchain. And my capital market people are like, can you just sell them $50 million, not on blockchain, and the rest can be on block. And I'm like, no, absolutely not. And we left a lot of money on the table. And then we had people come to us and say, hey, I don't like your credit box. So if you originate to my credit box, I'll pay one, two, three points more for the loans. Same situation.

You do that and then you don't have ubiquity of the asset and liquidity that you can create off of that ubiquity. The reality is most entities don't have the ability to leave that money on the table. If you're a mortgage company, you run razor thin margins and you take the money when it's there. If you're a startup, that requires a decent amount of capital and persistence in patient investors where they're like, well, why don't you just be FinTech 2.0? Because we're building FinTech 3.0. I had that experience on multiple fronts early on.

My board giving me crap about, well, you know, this online lender is doing better than you, blah, blah. And I was like, well, because I'm building into something bigger. And then I got all kinds of grief about, well, you know, BlockFi and FTX are doing better than you. And I was like, well, because I'm not trying to do what they're trying to do. Ultimately, the long game won. And I think that's what we've always persisted in and why we've been very particular on the private capital side. and trying to do so on the public capital side as well is get investors that buy into that long-term vision because there's a lot of distractions and diversions that come up on the road

that seem like near-term better opportunity, but take you away from that long-term objective of building real value. That makes total sense. And on the market's business, just talking about the long-term here, I mean, you don't have to squint too hard to see that this technology and people building things on top of that like yourselves could be a real competitive disruption to CME in some of these bigger shops. How do you think about that and just competing against some of these incumbents and what their reaction function will look like?

I've never shied away from competing against entrenched interests. When we started SOFI, obviously, we were pushing hard against banks in general. And I think we were very successful building our business off of that. I think we figure, it's even broader. It's not just the banks per se. In fact, the banks are more partners with us that figure than competitive. but a lot of the market structure, I think that's been one of the challenges with blockchain

in that generally innovation happens marginal first order. It's DTCC figures out a way to get from T plus 1 to T plus 0, as we've gotten from T plus 3 to 2 to 1. What blockchain's doing is basically just blowing everything up and doing it in a completely different way. And blowing it up means that their model doesn't work anymore. There is no marginal innovation. I always joke about this when I see like Visa's running Stablecoin experiments.

Well, Stablecoin really worked. There wouldn't be a Visa network because there's no chart caps. People to understand what Visa's value properly is, it's management of that chartback process. And where Stablecoin, it's cash. There is no pullback or redemption. So if they really embraced it, they wouldn't have a model. It would be a completely different business. And so to me, that's what the opportunity is.

And it kind of goes back to those factions of interest within Climbled. I don't think that the winning game is to try to promote a centralized ecosystem into blockchain and crypto assets because I think that the established players are very, very good at that centralized ecosystem. I don't think that any crypto exchange, for example, can stand up against what NASDAQ and ICE have built on a very pursuit basis. I think what you can do is you can do it decentralized because they'll never do it that way. and because their model won't work that way.

And decentralization is better. And so I can go through the custodians. There's a period of time that Anchorage had this wonderful moat because they were a regulated entity that could be tested crypto. While they don't have the moat in it, they're being aggressive. They're trying to work with Tether and others on product, and I commend them for that. But it's a much more competitive dynamic in centralized custody.

Decentralized custody, MCC, is in my mind, the better solution. but it doesn't involve any of those enemies, at least in the capacity in which they've always participated. They could still be node operators on an MPC network. That's not the same as them holding the asset or the economic from that. So I'm not afraid of the entrenched interests because a lot of what we're doing, when you dial it back and look at the true infrastructure,

is Greenfield. So even the equities trading that I talked about, it's not that I'm trying to build a better NASDAQ or NYCEM. I don't want the centralized exchange. I'm trying to build a debt to do this. there there isn't that competition. Maybe one of the last things I'll ask you is just around Providence. So you guys were really early to this, this concept of getting behind your own chain,

birthing it. Stripe's doing that now, Circle's doing that now. What do you think about that? And are we going to see more of these corporate birthed public blockchains versus the Ethereum style blockchain origins? One of the things that I've come to terms with, I used to think one blockchain to rule them all. I don't view that anymore.

I think that there's going to be lots of blockchains and requirement of lots interoperability. And I think that the value proposition of those blockchains will differ significantly in that some will create value. There's certain idiosyncratic aspects of provenants that don't exist on networks like Salana or SWAT or SWE, where there's ways for them to extract value off of that in terms of people using it. And just like there's value props in those other networks too, like SWE and Salon are both much faster than provenants. I would argue none of them are as fast as NASDAQ right now. and that's sort of a pragmatic limitation that will be solved.

We will fix that problem. It's technology. It will be fixed. It's just not necessarily relevant or prevalent today. Five years ago, people were building chains because they're like, hey, we can issue this token and people will pay a lot of money for it.

And people were pitching in these use cases. I'm like, I don't understand why you need a blockchain. Well, because we can sell the token. And I was like, but blockchain is very limiting in what it does, which is if you do not have a native digital asset on the chain, It's basically worthless technology. Obviously, again, lots of heat from other people in the ecosystem on this and arguing to me about how valuable oracles are and all those other stuff.

But to me, if you create a new digital asset, the blockchain has a lot of value. You don't. It doesn't. A lot of people today are also looking at that in the same way, is to, oh, they look at the market cap of Solana, for example, and they're like, well, why don't we have that? I don't know if things are going to converge up to the market cap of Solana or they're going to go the other direction. I don't know if it's the D-Aps that live-on chain

that extract the economics or the L1 itself. Obviously, if you look at the market cap of MasterCard Visa, it's over a trillion dollars. Okay, well, blockchain could displace that. It's not crazy to think a blockchain would have a trillion-dollar market cap because it's displacing that economic structure. But is it the blockchain or is it the smart contracts

and the other applications that are built on top of it that or does it all just go back to the ecosystem? is a consumer surplus at the end of the day. That's right. I think we're in the very nascent stages of all this. And so I understand why everyone wants their own blockchain. I just don't think that it's practical. Well, Mike, I feel like I get smarter every time I hear you talk.

Thanks for coming on. And where can we send people to learn more about figure? You can go to figure.com for figure stuff, figuremarkets.com, for the crypto blockchain stuff and Providence.com for what we're working on with that protocol. Awesome. Well, congrats on all the success. Thanks again for coming on. Thanks for having me.

Thanks for listening to another episode of On the Brink with Castle Island. To learn more about Castle Island, visit castle island. And to listen to all of our podcast episodes, please visit castle island.vc slash podcast or just click on the tab on our website. Thanks for listening.