The Pomp Podcast - #400: Kraken Financial CEO David Kinitsky on Crypto's First Bank

Episode Date: October 5, 2020

David Kinitsky is the CEO of Kraken Financial, the first approved SPDI bank under Wyoming's new crypto-friendly legislation. He previously worked at Circle, Fidelity, and Grayscale Investments as well. In this conversation, we discuss the SPDI banking license, what it allows, why Kraken applied, how incumbents are likely to react, and what users can expect from the business moving forward. ============================== Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. David Konitsky is the CEO of Kraken Financial, the first approved SPDI bank under Wyoming's new crypto-friendly legislation. He previously worked at Circle, Fidelity, and Grayscale Investments as well. In this conversation, we discuss the SPDI banking license, what it allows, why Kraken applied, how incumbents are likely to react, and what users can expect from the business moving forward. I really enjoyed this conversation with David, and I hope you do as well. Before we get started, though, I want to talk about our sponsors. First up is BlockFi.

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pompletter.com. All right, let's get into this episode with David. I hope you guys enjoy this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys, bang, bang. I've got David here with me. Thank you so much for doing this, sir. Yeah, thanks for having me on. Absolutely. Let's jump right into your background.

This is not your first rodeo. So maybe talk to us just a little bit about where you grew up and what you did before you got to Kraken. Yeah, so my background is, you know, like a lot of people in this space, kind of a cross section of a bunch of disciplines and experiences that kind of, I'll say like more purposeful, but really just like we're a series of like fortunate accidents that led me to where I am. You know, grew up kind of like a math and science guy in the DC area. But when I went out to college out in Berkeley, kind of only mired in physics and studied actual political economy, and then went to law school, where I studied IP law, as well as corporate and securities law. And so you kind of blend all those disciplines together.

And some might say that's kind of a nice cross section to prepare you for crypto. But quickly after I went into law, I started practicing IP. And then, like I said, corporate and securities, working with private equity and hedge funds, who actually were invested in alternative investments and kind of like strange ones, things like a diamond fund, things like an actual IP and licensing fund. And I got really interested in these kind of esoteric assets and the markets are trying to be developed around them, which led me to kind of leave law and try to be on the fintech and financial services side, which I've done for the last 15 years. First at a company called Second Market in New York, which is actually the predecessor company to Digital

Currency Group or DCG. Second Market was a marketplace where we were building services and trading venues for all sorts of weird and emerging asset classes, things like bankruptcy claims, auction rate securities when that market froze up, pre-IPO private company security. So before Facebook went public, we'd be selling their equity. And that's the market that I worked on ran operations for. Ultimately, we spun that out and sold it to NASDAQ, now operates today as NASDAQ private market. And that was right around the time fortuitously that Barry Silbert and I and others there were getting into Bitcoin. And so the transition to DCG started to take place. And Barry had a series of personal angel and VC investments that got brought over to form what

is now DCG. The fixed income auction rate trading guys became what is now Genesis. And then I set up and ran Grayscale Investments and the Bitcoin Investment Trust, which obviously has been a runaway success, providing a straightforward ETF-like structure for getting access to Bitcoin exposure. Got that listed on the OTCQX, raised a couple hundred million dollars, which obviously due to further fundraisers and price appreciation is now in the billions, but then joined Fidelity Investments thereafter. They approached me and were looking for a digital asset guy to help them figure out

their strategy in the space, work with their executives. Obviously, that has now culminated in all the great work they're doing there. And at Fidelity, I also served as a co-portfolio manager of an internal prop fund with Matt Walsh and Nick Carter, the guys from Castle Island. And so I spent some good time there. And then actually, the last two years before joining Kraken was at Circle, another company in the space, helping them restructure and overhaul their business to streamline it and build it around USDC, their stablecoin, and all their API services around it. But once that project was complete, fortuitously, again, I've known Jesse and the folks at Kraken. And it's been one of the companies I've admired for a long time. So when

this SPDI opportunity came up, I jumped at it. I think it's a massive opportunity for Kraken and the industry at large. You've done so much. What is your official title at Kraken? Does Kraken even have titles for small? I love Jesse. I love Kraken. But that should be the first question. Are there real titles at Kraken? You know, it's a valid question. Kraken is unique in a lot of ways, but people do have titles. And I joined, you know, as an MD, but now with the actual receiving of the charter that we'll talk about, you know, I'll be just dedicated to the actual bank that we're running.

And I'm the CEO of what we're tentatively calling Kraken Financial. Still some internal debate about it, but that's the working title for the bank. Can you say what the other names potentially could be? Kraken Bank. Love to have a voter poll. I mean, between Kraken Financial and Kraken Bank, that's not very many options. Yeah. Well, hey, look, you don't want to overwhelm them with choice.

I mean, you can have a write-in ballot if you want. I love that. Okay. So as the CEO of, we'll go with Kraken Financial for now, let's just talk about kind of the news, which is you guys have received this approval. Maybe talk through just what Wyoming is doing that is so special and kind of like what went into setting up the opportunity for you guys to actually apply and get this approval. Yeah, totally.

So yeah, as you referenced last week on Wednesday, we received our charter to become a special purpose depository institution or SPDI, which is the very specific type of bank that we're becoming. And it's a very attractive framework for a lot of different reasons that we'll go into. but there's no shortage of work. It's a culmination of a lot of efforts and in another way, a commencement of a lot more effort. But the Kraken team for well over a year has been working with stakeholders across Wyoming at the legislature, the governor's office, the relevant agency at the Wyoming Division of Banking, and others in the ecosystem like Caitlin Long to help build this

regulatory framework and right-size it and tailor it to the type of digital asset operations and the type of oversight that we think is most appropriate. So a ton of work went in. In earnest, we submitted our application in Q1, end of Q1, beginning of Q2, and then had a public hearing in August, which hundreds and hundreds, maybe a thousand pages, that application document was comprised of. And then we had to present in front of the banking board. And then they deliberated and ultimately decided to give us the charter. And as I said, in some ways, this is a commencement because we still have to now approach the Fed, get our Fed master account

or other domestic correspondent banking relationships, get all operationalize everything ahead of launch, which we're looking at Q1 of next year for. So it's been a process, but it'll be exciting. Got it. And I saw the application binder. I think it was Marco Santori took a picture and tweeted it. And it looked like something your teacher would plop down

on your desk in school and be like, you have to read this, and you'd be like, I'm gonna drop the class. Like, I mean, this thing was really, really in depth. What exactly goes into all of that? Maybe talk a little bit just about like, what are they looking for you guys to provide in that application? Yeah, I mean, look, they, their obligation, the state banking board, in particular, is a government appointed group, whose responsibility is to the state of Wyoming is to take a look at the statutory factors for granting charters to banks and trusts. And there's a series of them, you know, hey, is this good? Does this bank have a reasonable likelihood of

success? Does the management and board have the sufficient experience to do what they said they're going to do? Is this going to benefit the local citizens? Can we ensure the safety and soundness of the organization and customer protection, things like that? And so all the materials that they want to take a look at and do diligence on those factors, we need to provide. And that includes a basic application, but a pretty robust business plan that was, you know, 150, 200 pages, financial projections that accompany it. And then all of the kind of drafted programs and policies and procedures on the compliance side and the security side and the internal control side, we drafted all of that stuff to, and corporate governance side. And they took a look

at all of it to make sure that they weren't just approving anybody out here. So it took quite a bit of work. And that's how you know, you know, we're qualified is that number of pages have like a real life proof of work. I love that. So let's talk about these SPDIs. What exactly is that? What does that mean? What can you do? What can you not do? And just kind of give us a summary of for the non banking experts, like what this actually means? Yeah, as I said, we're a bank, but it's a very specific type of bank. Probably the closest analogous institution is like a custody bank or depository institution of another kind. It's very specific, as I said. It was built from the ground up to kind of have certain features that were very forward-looking and digital asset-centric.

And so there's two components to it. One, on the USD or national currency side, it is a full reserve institution, meaning that we take customer deposits and we maintain 100% coverage on those. We don't conduct fractional reserves or any rehypothecation or associated lending activities that gives rise to some of the insolvency risks of a traditional customer facing and loan making bank. So that's an important feature here. And the benefit of that, it's a tradeoff, right? We can't do that and we can't make money on that, which is how a lot of banks make money. But on the other hand, that allows us to avoid duplicative oversight from the FDIC and certain restrictions around the Bank Holding Company Act. And so it's a real trade-off there because the type of risks that the FDIC and these things are meant to guard against are that type of insolvency risk that stem from the activities we cannot conduct. On the other side, the digital asset side, they built a pretty unique framework here that takes advantage of existing legal concepts like bailments to kind of codify the relationship between depositor and the institution when they give you their digital assets.

They harmonized it with the underlying commercial code, and they have a dedicated supervisory program that says, hey, here's what's required to run this, and here's how we're going to oversee you and examine you and audit you. That doesn't exist anywhere else in the country. So even though you see others pursuing different types of charters or your trust or bank charters, they don't know, they don't have it codified exactly how the examination process or oversight will work. So for those reasons, it was a very attractive framework and a right-sized and reasonable one. Kraken, you know, this isn't regulation just for regulation's sake. This is regulation that allows for this new type of business to run while still mitigating the risks, the real risks that it faces. Got it. And so would it be fair to say that this is basically a banking charter that allows you to merge the legacy-type bank with fiat currency with a digital bank

and solve for very specific differences, not only at one in kind of the federal regulatory level or insurance like FDIC, but also when it comes to these digital currencies, looking at things that are native to digital currencies in terms of everything from storage, relationship, security, et cetera, and it's really trying to solve that problem.

Is that fair? Yeah, yeah. I think you've hit a lot of the nails on the head there. I mean, Kraken's mission has always been to promote the adoption of digital assets to enable more individual financial freedom across the world. Kraken Financial is a key tool in doing that because it allows us to seamlessly integrate

the existing financial system with digital assets. And you're correct that the framework that I talked about spells out very specific rules around how to operate in order to maintain the safety and soundness of the institution and customer protection. Rules around how you should be storing digital assets and what your IT and IS programs should look like, what your internal control structure should look like, things like that. And it's important to note

too, that as a state chartered banks, state chartered banks are given all the same powers as federally or nationally chartered banks here. And so we do expect to pursue a more consolidated coverage, a regulatory coverage model here, rather than trying to get 50 MTLs, money transmission licenses, which by the way, wouldn't give us direct access to banking infrastructure in the federal payment system anyways. Got it. And so what can you not do, right? It sounds like you got to have kind of a hundred percent reserves, but what else can you not do as part of this charter? Yeah. So, I mean, that's the big one. The big one is that we're not taking customer deposits and then lending them out on the backend in a loan portfolio that the customer has no way

of knowing what's in there or assess its risk and has that kind of insolvency risk. So that's definitely the big one. On the other side of what else we cannot do, there's certain components about lending, even on the digital asset side, there's restrictions there as well. Everything there, again, was designed to ensure that this was able to speak to the type of digital asset operations we have while mitigating the type of insolvency risks that a traditional bank faces. And so anything that puts our capital at risk and could lead to insolvency or bankruptcy, they've put provisions in there to kind of curtail that. Got it.

And then from a serving the customer standpoint, is this available to anyone in the world, anywhere in the United States, just in Wyoming? How do you think about kind of addressable market from a customer-based standpoint? Yeah, I mean, so to start, we're going to be focused on U.S. customers, specifically existing Kraken customers.

You know, Kraken is pursuing this to cover three objectives. One is the regulatory one I discussed. We think this is like a right-sized, tailored approach with consolidated coverage. The second one is the infrastructure part I talked about, getting access to the federal payment system and being able to integrate that more seamlessly into our product sets and customer experiences. And the third one is this is an entirely new product and distribution platform. We can do things that banks can do that non-banks can't.

And so to start with, it won't change much to the customer, frankly speaking. We'll, on the back end, just have a different kind of licensure structure, and we'll start to move over more of the infrastructure to the bank. The kind of second phase will be that this bank will take over the actual customer-facing operations and be that kind of portal for all U.S. customers that Kraken serves in the U.S. From there, two things will happen. One, we'll look to whether we could expand internationally. We do expect to be able to do that. TBD, whether that means we'll serve customers directly internationally or simply serve other affiliated Kraken entities, we'll pass that on to their customers. And then the second prong of that third phase

is that we'll be able to start launching new products. Things like we'll be able to launch debit cards and payment services, maybe backed by digital assets. Things like IRA accounts or trust accounts that can hold digital assets. Things like wealth management services, things like qualified custody for institutions or a good control location for broker-dealers.

And then notably, we can also handle different types of assets, securities, commodities, things that a normal custodial or depository bank could do. And so customers in that third phase we'll start to see a host of new features and products. Got it. And so as you think through this, will this require every crypto company to become a bank, right?

And is that kind of where we're headed with these OCC type clarifications and things like that? Or just kind of how do you view maybe the other large incumbent crypto companies and what the impact on them could be from this? Yeah, definitely. So I do like, look, if you're dealing with crypto and the more crypto becomes like financial services and money, they're going to impose

the existing or analogous regulation on it. We've always understood that. So whether it's a money transmission license or some other else, some framework will be required for much of the activities here. I do think that banking will massively grow over the next three years in terms of crypto companies becoming banks and banks engaging in crypto activities. I think that for a number of reasons. One, look, banking, there's a lot of like different types of regulatory regimes for securities and broker-dealers under SEC and FINRA, commodities derivatives under CFTC. Banking is the granddaddy of them all, to steal like a Rose Bowl term. It is the bottom of the financial services stack and is the thing that everything relies on in many ways. And so it gives you kind

of the broadest access, the broadest coverage, and allows you to do a lot more than you could otherwise do. Now, along with that comes with great responsibility to be a good steward of the federal payment system and all of that. So only at first, I would imagine the largest crypto companies pursuing this, it's not easy to do. I would also expect new types of regulatory frameworks to follow Wyoming's lead, whether it's at the state or national level. I think these agencies are going to borrow pretty liberally from this framework. You mentioned the OCC guidance and interpretive letters a couple weeks back. I think July 22nd, they issued the letter about banks being able to custody or deal with digital assets. More recently, I think this

week, they said banks can bank stablecoin issuers, which is great. I think those things could have been done already. It's always been my understanding that that was legally permissible. But it means something to have that written down, especially if you're a big incumbent institution and have executives have risk on their mind, this helps with that. Now, they still have a lot of long ways to go in terms of developing an actual supervisory program and manual, harmonizing with the commercial code, these factors that Wyoming already has in place. So they're a little bit behind there, but I think all these agencies are going to kind of develop something analogous. So again, I'm not an expert in this, but if Wyoming has kind of state-centric legislation,

you could see other states, I guess, kind of incorporate or come up with their own versions of it uh is there a um either threat or an opportunity from a federal level if they just say hey you know what that looks great like a great framework we're actually just going to apply that at the federal level uh and then basically every crypto company could be a federally chartered like banking institution using this framework on a federal level or like how does that work if you know basically somebody comes in over the top of wyoming basically with different regulation yeah no it's like so many things in crypto crypto like kind of forces the issue on these types of weird things you wouldn't think have to do. This is like constitutional law,

state versus federal stuff. It's pretty interesting to see. Even outside of crypto, you're seeing this in the fintech world and traditional financial services. You're seeing the convergence of all three of these worlds, digital assets, fintech, traditional financial services, and the regulators are following suit. As I mentioned before, state chartered banks and federally or nationally chartered banks have the same powers. Now, the nuance there is that when you're a state-turned-bank, generally, you get recognition and reciprocity across state lines in your peer states. There's some nuance there, especially here, where other states have very crypto-specific verbiage and laws. One example is New York with the BitLicense. We would expect to

have to jump through a couple more hoops to re-enter New York there. But at the federal level, there's federal preemption. And so that issue is much more settled. So that would be the one benefit if that does happen. And you're right to say that there's both a threat and an opportunity. I view it as an opportunity because it's a competitive landscape, which forces state by state and versus federal to kind of up their game. And so I would expect, and you're seeing the SEC kind of lean this way, federal regulators to do the same. Now, whether it should be governed by the state or the federal government is certainly beyond my pay grade. Got it. And so when you think about kind of the impact, we talked about crypto companies, what about the large incumbent banks

or financial service providers who historically have had nothing to do with crypto? Does this provide a pathway for them to go pursue? Maybe the OCC thing is more impactful? Like just how do you see the reaction from the incumbents? Yeah. So as I said before, I think that the OCC letter, it's not rulemaking, it's not legislation, it's an interpretive guidance and saying what me and many others have already understood to be the case, that they could do this. But as I said, it really does matter from a risk framework. When you're a big and competent institution, you're saying, well, our existing business is this big. This crypto market currently is this big, right? And the risk is X, Y, and Z. This helps at least on the risk side. And so it

does help there from an institutional level, but also a personal and individual level. There are real people in the boardrooms and the executive levels making this decision. Whoever has to make the decision wants something like that in their hand to say like, look, it's okay. And you also need a leader there to be able to push things forward. Like I said, it was a fidelity. Fidelity is perfectly positioned in terms of incumbents to do this stuff because one, it has a CEO and chairwoman who personally is invested in this. Obviously it's like a private family, by and large family owned and run business. So it has more leeway than a public company might. But others in the space, seeing Fidelities of the World, seeing this type of legislation or rulemaking

or guidance come out, it absolutely helps and kind of helps get away with the IBG, YBG problem. I'll be gone, you'll be gone problem. A lot of executives sit here and say, crypto is not going to be a thing for five, 10 years. We're all older. We're going to be retired by then. I don't care, right? And so it's really risk averse.

This at least helps mitigate that. Got it. In terms of the fidelities of the world, it seems like there are a number of institutions that are kind of crypto-friendly or crypto-forward thinking. Is there a worry that this banking charter, whether it's at Wyoming, federal, or other states, just becomes a resource game? And therefore, like the legacy incumbents just have more resources and therefore kind of beat all the crypto companies to the punch? and it's almost like a regulatory arbitrage or like a regulatory moat to some degree. Yeah, regulatory capture something.

Yeah, and look, we see that. This is not like unique to this. Like you see it in tech with Facebook and these other things, all the big, they want more regulation because it stops smaller competitors in some ways, right? That may be the case. I will say though, what has happened here again

is a more streamlined, right-sized, you know, reasonable regulation. And so it is meant to allow folks who are the size of a Kraken or potentially even smaller to kind of participate in this banking style game. If you had a full-fledged bank, that would require even more assets. So if anything, given where we are today, this helps the other direction, if anything. I would also point out that there's also the idea that banking or financial services is a stack. And so to the extent that banking is at the bottom of the stack, and there's bankers, banks, and enterprise kind of bank software and stuff, that will be able to enable smaller companies to build on top. And then you have the kind of, where on the stack do they expand? Do the bottom go up or does the top go down? At least it enables that to happen. So in my mind, it's a good thing. Got it. And because it's in Wyoming, you have to build the company in Wyoming. Talk a little bit just about internally how you guys have thought about, you know, subsidiary standalone company, what the relationship between the Kraken Financial or Kraken Bank is to kind of legacy Kraken. And then from a team perspective, you've got a bunch of pitchers sitting on the wall behind you. So I'm assuming you're either coming or going and kind of explain that a little bit.

Yeah, I'm sitting here in Wyoming now, loving it. I did recently relocate here. We built this structure. Kraken Financial is a subsidiary of Kraken, the broader Kraken group of companies. But because it is a bank, it needs independent governance and management and operations, unlike a traditional subsidiary. So we have our own board of directors, independent board of directors. We have, you know, management that is dedicated to this actual entity. We have our own balance sheet, our own, you know, everything there. So while we obviously kind of are bankrolled, so to speak, and supported by Kraken and share similar visions and missions and objectives, we are in many ways an independent company. That said, you know, one of the things that comes along with that is this kind of like Wyoming footprint that we expect to have. As I said, I recently relocated from New York City. I've been living there for 15 years, though, you know, I've been all over the country, so pretty versatile, luckily. But I'm seeing that path from New York to Wyoming happen more and more. In many ways, they're very different. In many ways, they're very similar from like, look, I went to New York.

I was attracted to it because of freedom, right? I mean, like you could be who you are, do what you want when you want. Why don't we kind of share some of the same principles? A lot of other differences, of course, but it's great. So we're building an office here currently slated for Cheyenne, which is a great region to be in. It's where the state capital is. So we can work with our regulators and division of banking.

We can talk to the legislature. We have access to the University of Wyoming down the road here. And it's part of like the corridor north of Denver, which obviously is a growing and budding tech scene in and of itself. So we'll build an office here, expect to have 10 to 25 heads in the first year. We expect to kind of build a lot of operations here, support the local ecosystem, which is obviously a lot of the motivation and impetus for Wyoming in creating this as a jobs economy diversification play. And so we already are and have been sponsoring hackathons, conferences, supporting the local talent pipeline out of Wyoming, bringing more people here for our company events. In fact, the broader crack organization is looking at a company-wide relocation program and even considering re-domiciling its corporate entity and headquarters here. So we're committed. We found great partners here. I think it's a great place to do business.

A little known fact, next to Delaware, the next biggest state where the most companies are domiciled, Wyoming. Really? I did not know that. Yeah. Awesome. What are the roles that you guys are going to be hiring for? So if anyone's listening to this and wants to DM me on Twitter, they don't have to, and they can simply go and find out where they can get a job with you guys. Yeah, no, I appreciate that. We're always looking for good folks. So we're looking to fill out the C-suite with a CCO, Chief Compliance Officer and Chief Financial Officer. and then from there move down into the other managerial roles of the operational operations

finance and compliance departments and then on to more junior kind of like staff level roles so definitely going to be hiring a ton here and always interested in talking to quality candidates where is the website the same as just going to kraken.com or should they go to like kraken financial dot yeah so the we we leverage the same kind of job site as kraken right now uh we'll probably have a landing page at some point soon of our own. But for right now, yeah, Kraken.com. Got it. What's been the biggest surprise during this entire process? You know, if I talked to you four years ago, I doubt you thought that you were going to be the CEO of a bank sitting in Wyoming. Just what that process to kind of getting here? What has that surprise been?

Yeah, I mean, maybe it's full circle. I was born in El Paso, which is just down I-25. I mean, number of hours, but kind of maybe I'm returning home. Once you drink from the Rio Grande, you always come back they say so uh it's kind of like a homecoming here out west um yeah no so a number of things right um i look back on my career and be like oh it all ties together neatly obviously like make things up in your head we're all sense making machines as humans um but but realistically when i look at this um i think you're seeing the dispersion and distribution of financial centers in the financial game all over the world uh you know coming having lived in new york for the past 15 or so years, outside of a sojourn to Boston, you know, it's very interesting to see, because

you think of, you know, New York, London, Singapore, as these financial capitals, that's something to distribute a little bit more. Same thing is happening, obviously, with tech, a very similar story there. Maybe it's exaggerated on Twitter by a lot of people, everyone's moving out of the cities. It's like, talk to me when a 20-something who's single moves out of New York or San Fran, right? But in any event, a couple things have surprised me in this process. One, the Wyoming folks have been incredibly savvy. They've done their homework much more so than any other regulator or agency that I've ever encountered in my life. They've kind of fought this from the ground up. They've done the work to get smart on digital assets. They've done the work

to harmonize this with their peers in other states and at the federal levels. And they're really looking to build something here with the support of the legislature and the governor's office. So that's really surprised me, just how savvy and far ahead of the game they were. The other thing here that's really surprising to me is just how many, since the announcement last week, we started to become a little bit more public about it, just how many and the types of organizations that we've been talking to that have been inbounds. And the same thing I saw when we were trying to sell the Bitcoin Investment Trust back in 2013. I mean, you go into Citi or whatever institutional investor and pitch it to them, I mean, the heads would cock, the eyes would squint up, and it's like, what are you talking about? And in some ways, that's still the same when you're talking about banking relationships in the digital asset industry. But the amount of like partners who want to be our correspondent banking partner who want to build on top of what we're building, and the names has been really accelerated from where I thought it would be. That's awesome. Before I get into the rapid fire questions to wrap this up, I got one question. Jesse's been on once or twice, I can't remember. What's the best and worst thing about working with Jesse?

uh it's interesting so uh let's see here he's got to be careful look at him look at him look at me screaming in my chair here you got me all nervous hot around the collar no no jesse's like jesse's great i'm like look i've known jesse before this and i've admired him for a long time um i i love the way that like he has and this is reflected in kraken it's like the customer centric and willing to challenge and take a stand on things that um in the near term it'd be easy to roll over on and say, look, let's just go path of least resistance or whatever. But if it doesn't align with our mission, our values, and in fact, at the end, what we believe to be in the best interest of the customer, he fights for that quite a bit. He also obviously thinks out of the box

and carefully considers things from a very different perspective, for sure. Obviously, I think, I forget who said this, but if you work for a company whose CEO isn't at least a little bit intense like move to a different company you know what i mean and so jesse has a great engine on him he's always thinking he's always trying to get involved uh which is tremendous um but what you're also seeing at the same time is kraken and jesse go through this maturation process of building this kind of like uh very kind of financial corporate company that expands across the globe and in order to kind of take that next leg up and so it's been a tremendous thing to watch it uh it is fascinating to me to see somebody who has built you know one of the

great crypto companies and kind of really uh you know been at the tip of the spear of innovation and kind of push the pace uh of growth then have to go deal with uh regulators politicians banks like the the uh the clashing of styles there has to be uh an absolute uh thing to see yeah yeah I know. I mean, like he has his own style, but people appreciate authenticity, which he certainly is. And people appreciate straight shooters and new ways of thought. It's shocking and it's great to see him. You see him on Twitter. He has opinions. He puts himself out there. Most financial services company executives just say, it's easier if I just don't have an opinion, right? So it's great to see that. Absolutely. Before I wrap up, two questions, then you could ask me one. First

one is what is the most important book that you've ever read oh the most important book that i have ever read slaughterhouse five kurt vonnegut why uh i think it like brought a very unique perspective to you know you're taught about world war one two in history um kind of like it from a very specific perspective the perspective that he brought on it um was very different very humanizing very individual in nature and i think it kind of um under the lies a lot of what i see today and like, you know, in the media, um, you know, or elsewhere where, you know, a lot of different perspectives, uh, truth is a very elusive and hard thing. Um, and I think it's been instructive. Love that answer. Uh, second one's more fun aliens, believer or non-believer.

Oh, you know what? I love a good, like I'm specific about it, but I love conspiracy theories, like very specific ones. Uh, so absolutely a believer. My favorite one though, uh, is the moon landing like are you telling me that the united states went to the moon in the 60s and literally no one has ever set foot again on it that's all right you ready so uh i used to joke all the time and so you're telling me they were live streaming from the moon but i can't get sunday football to live stream correctly right you know in 2020 but somebody corrected me i did not know this we've gone four times it was all within a span of i think like four or five years uh but then we never went back so no one else has are you telling me that russia or china wouldn't

be like we can do that right it seems odd to me i don't know just saying so what what are the probabilities do you think it's more probable that we didn't go to the moon or more probable that aliens exist oh man let's see all my guys who are like actual like bayesian like risk guys and stuff will hammer me on this for sure uh like i think from a uh it's probably more it's more probable that it's more probable that there are aliens just in the grand scheme of things that there's everything right probably is what i would say that's fair answer all right you could ask me one question to finish up what you got for me what color would you say your eyes are color of my eyes yeah oh they're blue the the screen screws you don't get more nuanced than that they're kind of

green too no just what are you but more seriously though um like beyond uh like financial services or whatever uh here in the crypto space outside of like traditional financial services and regulatory stuff what are you like most excited about here uh well i'm cheating because i just revealed everything yesterday uh one of my partners and i jason uh we've been uh buying a bunch of digital art and basically the thought process is if you if you take gold and bitcoin you put them next to each other like bitcoin superior in every way right and then if you take traditional art and digital art you put them next to each other digital art is um superior in every way and so i think like exactly what you're talking about in 2013 you'd be like what the

hell is that right uh that's about to play out all over again with digital art compared to this traditional art um and what becomes interesting to me is like you not only are going to get a better user experience like i just hang a screen on my wall and it can change as motion there can be noise like all that kind of stuff uh with just the art itself but then also you start to look at like you know the traditional art world is heavily heavily manipulated right it's all like okay everyone come together in this one room and then we're going to auction something off. And like, we've done all this marketing and it's like, wait, what? Like now there's just the internet, right?

You just put things up and anyone with an internet connection can like have access to it. So I think that like, that's probably one big area. And then the second area that I find absolutely fascinating is this idea of like complete decentralization of like an organization. So kind of like the Dow was kind of like an attempt. I don't think we're anywhere near like a legitimate shot again. But I do find it very fascinating if you can basically, you know, imagine if you could have an organization where there was no leadership and all the decisions were made by like driving consensus. like that's super interesting uh again i don't want to be a part of any of it i don't want to like risk any capital there yet like we're just nowhere near being able to do that but i think like that general train of thought is fascinating yeah yeah we're early there but it is amazing like

think of coast theorem as transaction costs get lower firms kind of dissolve into like uh the world i mean it'll it'll be really fascinating for sure i don't want to say what company it is but i saw one company that they basically had taken their cap table and they had put it on the bitcoin network like they basically were like tokenizing on the bitcoin network and i don't understand all the technical details uh but i was talking about like making a potential investment they started talking i was like wait what like there's no organization you just saw like yeah that's where the world's going right and uh it may not happen for a while but at some point it's definitely gonna happen i know i love i love the space i mean look there's so much stupid stuff happening

But who am I to say what's stupid? The ability to try stuff is pretty unprecedented in this world. There's going to be some spilt milk, for sure. But it's interesting. I talked to Sam Bankman-Fried from FTX and Alameda Research, and he had a great way to put it. He basically said, if you're a capitalist, you don't care about what is stupid and what's not. You just care about how to make profits. And when you look at it through that lens, like, okay, that's something that I think Wall Street will get very excited about, right? I love him and Dan at CMS. Like, do you want to be right or do you want to make money? Which is it? That's exactly right. All right, David, where can people find you on the internet and find out more about Kraken Financial? Yeah, so go to kraken.com. I mean, if you're an existing customer,

expect to hear more from us soon. If you're not, sign up for kraken.com so you can get access as early as possible. And then, you know, at Kanitsky, K-I-N-I-T-S-K-Y on Twitter. Awesome, man. Thank you so much. We'll have to do this again in the future. Yeah, for sure.