The Wolf Of All Streets - Why Big Money Is Betting On Crypto Again | Gavin Michael, Bakkt

Starting point is 00:00:00 Legislators and regulators can't even seem to get along. How? Why? How? Why? Why? How? Will you guys ever be cussing meme coins? We trade Doge and Shibu on the platform right now. We'll hold your private keys. We may not hold any of the assets. We may just hold the private keys. All of that's good business for us.

Starting point is 00:00:22 When I first got into crypto in 2016 and 2017, we used to scream, the institutions are here, the institutions are here. But we were wrong. But there were a few companies that were already pushing institutional adoption from the very beginning. None bigger than Bakkt. That's B-A-K-K-T. You guys may remember when Bakkt came in, they were

Starting point is 00:00:44 backed by ICE, no pun intended, and they were going to change the landscape of everything for crypto. And although it didn't happen necessarily in that market, they've been building and growing all of the facets of their business since then, trading, custody, and everything else that you need for institutions to participate in this market. I had a great conversation with their CEO, Gavin Michael, who's worked in basically every single job in legacy banking that you can imagine and worked his way to becoming the CEO of an institution focused solely on crypto. This is an incredible conversation about what institutions are really doing and why it matters. I can remember in the last bear market, if my memory is correct, that the talk of the town was backed.

Starting point is 00:01:36 It was the first company that was coming in that was going to allow institutional trading, institutional investors. It was going to be the gateway. And then we just continued on with the bear market. And the institutional adoption, at least in that cycle, never really happened. Is that a fair assessment? I think it's fair to say that as you go through these markets traditional finance and institutions sort of look at things through it through a different land i think what we're seeing now scott is institutions are definitely coming back into the market they're coming back in differently but they're coming back in and you know when i when i look at backed and i look at where they're positioned you know we have that ice heritage we have a heritage of being you know uh compliant risk managed regulation first in the

Starting point is 00:02:33 in the approach we take and i think as i look at what we do you know we build solutions to enable our clients to to grow with economy, with the crypto economy. And it really is through our institutional-grade custody and trading and on-ramp capabilities that we're really letting our clients leverage the technology. And it's built to be sustainable for that long-term involvement to go through the cycle, to move beyond the bear and be ready for when it comes back. And we're seeing some green shoots. Interestingly, I think in that cycle, probably people laughed off risk management. Everything was only going to ever go up.

Starting point is 00:03:11 There were no problems. And now we saw this mass contagion really last year in 2022. And it sort of even continued into 2023. We're once again in a bear market. So maybe you guys just needed the market to show everybody just how important it was to actually be the adult in the room. Yeah. I like that phrase. We use that a lot internally about the adult in the room. There's definitely a flight to quality happening right now. I think you're right. I think many of

Starting point is 00:03:41 the control frameworks and the things that traditional finance grew up on were somewhat not emphasized strongly enough. I think right now, given everything we're seeing and everything that has happened, people are now focused on, where are my assets stored? People are now focused on, institutions are now focused on, how do I do disaster recovery? How do I do backup? How do I actually run this at that institutional grade that they need in order to have that sustainable involvement with the crypto space? I also think the great thing about what we're seeing now is, as people are coming back into the space, they're coming in beyond just the investable asset. They're looking at tokenization of real-world assets. They're looking at tokenization of market funds. They're looking at how off-exchange settlement works. They're looking at private key backup. We're starting

Starting point is 00:04:38 to see a lot of the fundamentals come back into the market. We like that a lot. We think we benefit from that sort of thinking. There's that a lot. We think we benefit from that sort of thinking. There's that side. Speaking of being the adults in the room, we still have Pepe and Shib and Doge and Shibarium and Elon Musk, Doge, Shib, Shibarium, and all of these points. How much do you think that the more, let's call it, degenerate side of crypto is holding back the institutional adoption or holding back any of the more serious players from coming in? Or do you think they're sort of dismissive of it and view it as a different market entirely?

Starting point is 00:05:16 I think it's the latter. I think the market just has multiple sides. I mean, there's always going to be the exuberant business models, the exuberant players, and we'll let them do what they want to do. We'll focus on helping others come in. You know, we give the opportunity for fintechs, for neos, for brokerages, for exchanges to really offer and get access to crypto trading. And they're already working in a trusted environment. I mean, you think about the fintechs that we support today, that we build public, M1, Stash. They're solving for equity trading, they're solving for other asset classes, and they're adding this asset class alongside of it. But we also see the natives. We announced

Starting point is 00:05:58 one Bitcoin and blockchain.com last week at earnings. We're really excited to have them on the platform as partners. I think we're benefiting from others going out in this in this flight to quality yeah that that makes perfect sense i want to talk about the custody side because that seems to have been a major challenge in the in the space now we can dismiss the ftx's and celsius's and blockbys and all those because we know at the end of the day, they're either frauds or hedge funds masquerading as custodians, right? But even now we've seen trusted custodians in the crypto space like Prime Trust also behave fraudulently. So how challenging is it to be a custodian in this space where it's such a novel and unique asset class. You have to protect private keys.

Starting point is 00:06:45 You have to find all these different things. It's not the same as being a custodian for a bank, right? So there's got to be different challenges there. And I think, Scott, that's one of the reasons why custody is really seeing a resurgence. I mean, because it is complicated. You know, our leads right now are 10 times what they were in the back half of last year. It's an anchor product for our business. We offer that secure custody of assets, but we founded it in traditional finance. It's built to uphold this change in regulatory

Starting point is 00:07:19 standards. We are definitely looking at recent industry events because they show the importance of a secure, regulated, qualified custodian. And, you know, we're regulated by NYDFS. We run a limited purpose trust charter. We're a QC. We have a reliable infrastructure. And it really is managed very separately from what we do on the trading side. So we have a separate board of managers. We don't commingle funds.

Starting point is 00:07:52 I'm just giggling because it should be like an obvious statement that your funds aren't commingled, that they're separate businesses. But in crypto, you can't take that for granted. You can't take it for granted. And so we emphasize that on the way through. You can't take it for granted. We emphasize that on the way through. We use multi-layered technology. We have the latest NPC cryptography. We have hardware isolation. We're protecting the funds from the threats that we see. Those threats aren't just cyber. It's internal collusionusion it's human error we have the control framework and because we're a a publicly traded company um we have to demonstrate all of the controls

Starting point is 00:08:33 in a very purposeful way so people gain from us and from the way we we think about running the company and they see these advantages through what we do. We like the product because it generates really stable recurring platform fees as well as assets under custody. So it diversifies the revenue base. We announced Firebox as a partner last week. We're really excited by that as well. Great company to work with. We're obviously using their that as well. I mean, great company to work with.

Starting point is 00:09:05 We're obviously using their technology to fortify the work that we're doing, but the disaster recovery services that we're offering, the move into off-exchange settlement are really important because they allow people to think about the market in a very conventional, very structured way. When a regulator wants someone who has custody under assets, they're going, well, where are your keys stored? What's the backup strategy? We're now able to come in and offer that. We're excited to be part of the qualified custodial network as well. Fireblocks is an absolutely incredible company. I was going to specifically ask you about that partnership since you did just announce it, but you preempted me. Can you actually get a bit deeper in the weeds on how institutional custody works? I've actually

Starting point is 00:09:50 never asked anybody on the show, even though we've had custodians. I think in people's minds, like you said, it's just, I don't know, a guy with a multi-sig and a few safes and a few guys with guns, and we're hoping that the private keys don't get stolen but i'm sure i'm sure it's a bit more complex for that it it it is i mean honestly we have that we have the physical assets so the vault we have you know we have all the security around the vault that you would expect but it's also then uh running all of the ceremonies and being able to show how we industrialize that. We keep most in cold storage, and we use warm as the vehicle to transit the assets in and out. And there's a lot of discipline and control frameworks around how things are held in warm storage. There's obviously insurance policies that back that up as well

Starting point is 00:10:40 for both warm and cold. And then as we, you know, but it's not more than just you know we we also offer the the administrative portal into you know the people that we're serving because it's not a black box they want to be able to see their transactions they want to be able to see their assets under custody so there's a whole uh user interface experience that we've built that that is shared with the custody client that allows them to look into and look through and see what is there. Then it's the operational aspects. I'm running the risk across it for when they want to withdraw and how we operate for the withdrawals and how we show

Starting point is 00:11:19 them where things are going. We keep things in warm just for a short amount of time while they go out into where they want it to be. And then we continue to innovate. You know, we want to be able to obviously maintain all the aspects of the offering that make it best in class, you know, but we want to make it easy to launch additional products. You know, at the moment, we self-custody Bitcoin and ETH. We want the ability to add new blockchain

Starting point is 00:11:45 networks. We want to be able to open and add the assets on those networks. We think differently about our listing policies between those that sit within custody and those that we trade. We want to be able to offer retail open loop. But we want to go beyond that into things like institutional staking because we've got a lot of long-term hodlers there who want to be able to see a yield off the assets that they have. So we think of custody as a comprehensive offering that allows us to start with it as an anchor product. We'll store your assets. We'll store your assets as a prime, but we'll also be one of many because many people are looking to diversify their custody holdings as well. We'll hold your private keys. We may not hold any of the assets. We may just hold

Starting point is 00:12:36 the private keys. All of that's good business for us. Then you move into, well, how do we help you trade out? How do we help you stake? How do we then create and give you all of the data you need to be able to run your business? So it is a really involved offering with strong elements of physical security, strong elements of operational risk and control, and then really strong elements of how it then uses the product to be able to go do more with our institutional clients. When I listen to you break that down, my only thought is better you than me. Because I'm even terrified of my own self-custody. Of

Starting point is 00:13:15 course, I take it very seriously. But every time I push a button or open something, I pray that it's going to work the right way. And I think that everybody has probably experienced that who does self-custody. Now, really interesting talking about effectively staking as a service within custody. Because if you take that a step further, I mean, you're really helping en masse if you're cussing a lot of assets to support and secure these networks. I mean, you could theoretically be running Bitcoin nodes with Bitcoin that's custodied. It's really endless what you could do to actually help the protocols that you're custodying assets on behalf of these customers. And so power of attorney over the asset gives you a lot of flexibility. We also see it as not just helping the nodes but related to Lightning as well because we think that we can help accelerate some of the adoption there. So we see Power of Attorney on the Asset as a really good stepping stone, not just for what we can do for our institutional

Starting point is 00:14:18 clients, but how we become more involved in the overall community. And we don't lose sight of the fact that it is a community and it's one that we want to be active in as well. Yeah, that makes perfect sense. And you talked about the fact that you've, I think you said 10x effectively how much interest you've gotten in that. Is that simply because there's 10 times more interest or because it was so bad last year that everybody is funneling into the trusted custodians? I think it's a little bit of both. I think it's firstly, it was so bad that people are funneling in. I think the other thing that is starting to happen, Scott, is the use cases themselves are getting more diverse. And so I think the fact now that you've got people who

Starting point is 00:15:01 want to tokenize a real world asset, you've got to work out where you're going to store the tokens. So I think the great thing and the thing that gets really exciting is that we're moving beyond just the ability to hold a crypto asset or a token, if you like. Those tokens now can… Well, we're still holding a token, I guess. But the tokens are more representative, I guess, is the point I'm trying to make. Yeah, that makes perfect sense. I want to talk about tokenization for sure. But I want to then ask you, because we talked about the fact that you were sort of the only institution that was pushing this before.

Starting point is 00:15:33 I think Fidelity was there at the same time, but much quieter. Now, it seems like everybody has some sort of exposure. Even the ones who say that they hate it have some sort of exposure. Jamie Dimon says it's rat poison. I think that's Warren Buffett, but the same idea. But JP Morgan is settling transactions on private blockchains. It allows their customers to utilize this. So watch what they obviously do, not necessarily what they say. But now you have BlackRock, right? TheyRock talking about an ETF. For me, whether they get approved or not, the stamp of approval that came with the BlackRock

Starting point is 00:16:12 filing was a big eye-opener and a game-changer. Does that help you? Is that more competition? Is it a bigger pie so it doesn't matter? How does that really affect that? I think it's a bigger part which we really like because it's more it's more diverse use cases coming in so it's more places so if you're going to run an etf you need to be able to custody the bitcoin behind the etf so we like that we like that use case a lot i i'm with you scott i like the stamp of approval and i also think again it goes back to you know we're seeing um you know, we saw PayPal introduce its stablecoin, you know, that again, acts as a bit of a stamp of approval, we start to see people settling

Starting point is 00:16:50 transactions over stablecoins, whether they're stablecoins minted on a public or private blockchain. And we like that as well, because what it's starting to show is that the technology itself makes conventional financial services better. That, to me, was always part of the promise. I think now we're following that maturity cycle. As we follow that maturation, we're able to see more diverse use cases, which increases the pie. It means that the services that we've built actually have more applicability, and we like that a lot. Yeah, especially a company like PayPal that, by creating a stablecoin, is effectively disrupting

Starting point is 00:17:33 their own core business model. To me, that's a massive statement because they can either become the Xerox or the Kodak or whatever of the previous cycle and disappear, or they have to actually jump into the pool and disrupt themselves. Yeah. Exactly. I think when you think about use cases, whether you're talking about Lightning or you're talking about stablecoins for settlement, the B2B use case is a really good one. It's really, I think, an important one to establish the technology when you think about business to business payments and doing stuff within entities. And I think that then grows as we

Starting point is 00:18:11 gain experience and we gain exposure. I think that then grows into what else can we start to do, you know, lightning payments, P2P payments over lightning, whether they be, you know, Fiat cross-border remittances, all of those things, I think, really show enormous potential to make financial services better and to make what we see every day as friction go out of the system. I think a lot of people don't realize how quickly and cheaply you can settle fiat over Bitcoin rails. You can settle. Yeah, exactly. Like Stripe. I mean, obviously they're very popular. It's so obvious. But people, I think, just really, they think of Lightning or the Bitcoin network, and they think you can only send Bitcoin.

Starting point is 00:18:49 They say, why would you want to do that? It's volatile, and you can settle fiat over it. Yeah, exactly. And again, it's this diverse storage of the assets, investable assets, speculative into now giving utility and starting to use the asset to allow us to do more with it. Let's talk about tokenization. You've mentioned quite a few times that the tokenization of real-world assets, other assets is really the future. I 100% agree, which is funny when we look at the NFT craze and all those things. Those were sort of experiments on a technology that could be used for so much more, right? NFTs as tokenizing

Starting point is 00:19:32 mortgages and debt and your car title, all of these things. That was always exciting about it to me. What does that process look like in the future, the timeline? And then once again, I mean, you've already mentioned, obviously, Backtrra because seeing those assets, which is wonderful, but how else can you get involved in that side of the future? So I think, Scott, we're being really focused on what part of the value chain can we really contribute to. There are lots of tokenization engines out there. We want to partner with as many of them as possible to sit behind them to make this stuff real. I think you're right. Democratization, inclusion are all good aspects of what this allows us to do. It is also a continuation of electronification of what happens

Starting point is 00:20:17 in financial services. It's taking paper out of the systems. It's allowing things to settle faster. And there are all the advantages because when we remove friction and we move into near real time, we start to allow so many more use cases to happen. And I think a lot of that got lost, as you said, when we saw the NFT craze, we saw people start to bank on scarcity. And you're going, but if you take a step back, it's a non-reputable token. What else can I do with a non-reputable token? I can do a lot with it.

Starting point is 00:20:52 I think we're starting to see that come in. We're starting to see major exchanges start to think about, how do I tokenize assets to allow faster settlement? The thing that we like is that the clearing, settling, and custody of that still needs to be done every day. Again, it's about being focused and knowing what we are and knowing what we're not. We look at all these tokenization engines that are out there. We look at the plans that we see various asset managers having, exchanges having, and we want to provide that robust infrastructure to make this work at a very fundamental level, at the custody level, rather than stepping

Starting point is 00:21:29 in and saying, well, we'll be the tokenization engine. There's lots of people pursuing that strategy. We just want to work with them. That makes perfect sense. Do you see a day when we see settlement of equities and legacy markets on blockchains and using tokens. It would disrupt a lot of serious players in the business to have settlement peer-to-peer, obviously, with tokens rather than stocks and going through the clearinghouses. But do you think that that

Starting point is 00:21:56 could actually happen? I think it's part of the ambition. I think the challenge is, what problem are we really trying to solve? Do we want to go back? Because the market has really geared itself to T plus two, T plus one settlement. Do we really need to go to T plus zero? And what advantages do we get? But what I do like about it is being able to do things where we're moving capital liquidity in real time, because I think that really does start to enable some really new businesses. I think it allows us to think differently. When we start moving capital in real time, then we start to see a whole lot of power get unlocked.

Starting point is 00:22:34 If you don't have to wait T plus two, T plus one for liquidity to settle, I think that gets really interesting. Yeah. I mean, you look back at the meme stock craze, not the meme coin craze and what happened with GameStop and Robinhood and effectively they just couldn't even cover the orders and had to freeze trading. And that's simply because the settlement takes too long. Too long. Exactly. And I think it's that focus on movement of real-time liquidity that we like a lot. We've obviously talked about the positives of institutional adoption. I think everybody

Starting point is 00:23:04 understands seeing the names that are coming into the space, how quickly and how real it is this time that's really happening. Can't talk about that without talking about sort of the negative, which is the regulatory environment right now in the United States and all of the massive question marks that come with it. How are you navigating this sort of uncertain regulatory environment? It's almost, I would ask you, I would call it negative, but I don't know if it's negative yet. Right? So it seems it's

Starting point is 00:23:32 gearing negative. It's leaning that way, but I think it's just so unclear. Legislators and regulators can't even seem to get along. I just don't understand how you operate a business like yours if you wonder in six months if what you're doing won't be compliant with some new law. So firstly, the path to regulation in the US is obviously slow. It's the ambiguity and the unclear and the uncertainties that make it difficult because without those clear guidelines, we're not going to be able to really move into this elevated innovation, all the things we were just talking about.

Starting point is 00:24:09 I think we see, you know, obviously increased adoption. I think some of the more traditional financial institutions are still wary because they don't really understand. It's not clear what the regulatory landscape looks like. But, you know, we've been waiting a long time for clarity, and we need a well-defined regulatory framework. I think the enforcement actions against bad actors, I'm absolutely supportive of that.

Starting point is 00:24:40 You have to be. But they also don't require any new regulation. Fraud is fraud. That's the law. And a good regulatory framework isn't just defining the rules of the road. It's got to outline how good actors, as you said, conduct their business in a compliant way. We pride ourselves on our BSA compliance, all of the other pieces that we have, the KYC AML work that we do is all of the highest standard. It has to be. We're uncompromising in that. But we see green shoots. And I think that's what I focus on. I think the market structure bill clearing house

Starting point is 00:25:22 financial a couple of weeks ago big move i think the stable coin bill bipartisan support i think the stable coin bill as well uh clearing is also helpful um because it's showing that that that we can remove the what we've seen as the polarization and the and the partisan politics out of the out of the think when we look at the US and we look at the rest of the world, we're seeing clarity in markets of Hong Kong. You know, you're seeing UK, you're seeing EU, parts of Latin are all coming together and coalescing around legislation that makes it very clear.

Starting point is 00:26:03 And what we also like about that, Scott, is when you see that clarity, you see consumer sentiment and sentiment overall flip really quickly. And so we've spoken a lot about international expansion, and we like it because when we see that positive sentiment, we want to go into those markets quickly. I'm hopeful that we'll see the clarity that we want, you know, in the near future. I would have said by the end of 23, I think that's being a little too optimistic,

Starting point is 00:26:35 but things are starting to unblock. You know, we're spending time with the lawmakers, with the policymakers, talking about what we need from regulation. We talk about what we like and we talk about some of the deficiencies. The regulators that we speak to, they understand the benefits and the risks. And I am truly heartened that I think the XRP finding a couple of weeks back, it did as a catalyst, it catalyzed action. And I don't think it was accidental that things started to move out of house financials the same time as that binding was happening. I think it's all related. And, you know, we're spending time with the policymakers.

Starting point is 00:27:30 We're spending time with those that support. We're also spending time with those who are skeptical because we have to be working both sides of the angle. It's interesting. I agree with you on the ripple hearing. I think it took the wind out of the SEC's sails to some degree. And it was my feeling how far the rest of the world has gotten ahead of the United States, because I think that the United States regulators believed that the rest of the world would follow. They would wait for us to lead, and they would follow, and now they're way out ahead. And Scott, I think it's not just that they've got ahead, but the fact that they've got ahead in such a short amount of time is the other thing that I've been pleasantly surprised by.

Starting point is 00:28:33 If you think about where a market like Hong Kong was eight months ago, six months ago to where we are now. It's quite incredible. And the thing that I'm also buoyed on by what we're seeing happening in Hong Kong is that the traditional finance organizations are coming along as well. So whilst the cryptos and those that are already engaged in the space welcome the clarity, the traditional finance organizations are coming along as well. And I like that. I like that as well. Yeah, I agree. I would actually go as far as to conjecture. This might be slightly tinfoil hat, although I don't believe that's the case. But a place like Hong Kong that does 180 degrees is probably a reaction to what's happening in the United States. Seeing an opportunity, they've openly what's happening in the United States. Seeing an

Starting point is 00:29:25 opportunity, they've openly said to companies in the United States, come here and we'll bank you. You're getting cut off from your banking. Let's encourage our banks to bank you. So I don't think that that is a tinfoil hat theory. I think that China sees an opportunity, whereas the United States may have seen an opportunity when China shut down or should have, now we're seeing the opposite. Yeah. Yeah. I would align with those thoughts. Yeah. You quietly align with those thoughts.

Starting point is 00:29:52 What do you think the chances that we see an ETF approval are considering this regulatory environment? So I would say that the number of applications that have gone in and from the brands that are supporting it leads me to be slightly more optimistic than I have been in the past. I think in terms of, I think one thing that we all have to temper our expectations about is by the pace at which we expect that to happen. I think there was a fervent activity early on that this was going to be this won't be a long time in coming.

Starting point is 00:30:33 I actually think it's going to be slightly slower than any of us would have initially thought. So I think we have to temper our expectations. But I would suggest that just given the volume of applications and from the brands that I would say I would have a reasonably high expectation. BlackRock doesn't miss, right? They're like 575 out of 576 on approvals. But I guess to your point, the question is not a matter of when, because I think we all know it will happen, but three years and three months are two very different things.

Starting point is 00:31:09 And I think a lot of it could depend on regime change or it not being this SEC. So I agree with you. I just don't think it's going to happen that fast. Do you think that an ETF approval would be a major catalyst for the market if it did happen in the shorter term? I think so, because I think what you're starting to do is bring people in who can get exposure to the asset class without owning the asset class. I think that's been a big part of, I think it will spur on adoption. I really do. Right before we were recording-

Starting point is 00:31:41 Adoption and participation. Adoption and participation. Participation. Which, by the way, I think that now we have to view adoption as participation, which we didn't in the past. I think that people. Which we did, yeah. In the past, people said, if you own it, it's adoption, right? Even if you're just a speculator looking to flip it, that's adoption.

Starting point is 00:32:02 We actually need people to use it and to participate for real adoption. I think that's something, a new mentality in this cycle, right? You agree with that? Yeah, completely. I think that that's the case as well. So listen, right before we started recording, I alluded to the fact that you've worked at almost every bank, it seems, on the planet in some senior role. How, why, how, why, why, how did you come into this Wild West casino over here of

Starting point is 00:32:28 crypto? I know you probably don't view it that way, but you could have probably just stayed there in a much safer environment and not had to have conversations with regulators like this and probably be viewed as crazy by certain people. So I think as I look at it, Scott, I mean, you know, I love all the places I'd worked. I mean, what we'd worked on was largely, you know, using digital disruption to do new things, whether it was new way of banking, new ways of paying, all of that had been a constant theme of the work that I tended to do at those organizations. And I think, you know, when you try to be a disruptor internally, it can go so far. I really like the appeal of outside-in rather than inside-out disruption,

Starting point is 00:33:17 and that's what was attractive. And, you know, Bakkt was attractive because of the ICE involvement, because of the sorts of client base that they had. And the fact that, you know, we've been able to build a product that is really seeing right now a strong product market fit. And it's a different way every day at work. And, you know, you're answering a broader range of issues and questions. But I also feel that with people like, you know, bringing those sort of traditional finance backgrounds into the space helps the space mature faster. Because, you know, we, as you said, I mean, it should be pretty obvious you don't co-mingle customer funds.

Starting point is 00:34:06 You have to implicitly say it now. Yes, exactly. Let me tell you, we don't re-hypothecate. We don't co-mingle. Yes. Yeah, I mean, it's bad. And to me, it's just I was caught in the whirlwind of all of it with everybody in the last years. And it seems so obvious in hindsight.

Starting point is 00:34:25 It's so embarrassing. But what could you do? So what excites you the most outside of tokenization we talked about, but maybe for the future of what can be done that's not happening yet with the technology or in the space, even with your business, looking further down the road, what really excites you for the potential of what can be done? I think continuing to use the rails. We like Lightning a lot.

Starting point is 00:34:52 We have some involvement in the work that we're doing. I think when I look at what it can do for cross-border movement, I think that becomes really exciting. I think the fact that we can do streaming payments, micropayments, the removal of the paywall, I mean, wouldn't it be fantastic to read that article just for the price of the article rather than have to worry about how I subscribe or the way in which we can really change the whole value proposition for how people publish and how content suppliers get paid and content

Starting point is 00:35:26 creators and really innovate around the creator economy more broadly and i think all of that sitting underneath you know what is a set of crypto rails and as you said i mean lots of people go well we're using that to send bitcoin that doesn't make sense we're going why actually no we're using this to make fiat transactions so much better. Wouldn't it be great to go onto a site and just pay for the article? Wouldn't it be great to pay for a video for as long as I watch it? All of these sort of transactions get enabled through the technology that we're talking about. I think that, to me, is if you think about the shifts that we've seen in payments, with real-time payments, with the work that's happening there,

Starting point is 00:36:04 I think this is the next wave. That becomes really exciting, particularly what we can do on B2B payments, what we can do on cross-border remittances, and then what we can start to do to really enhance the consumer experience with micropayments and streaming payments. I think all of that being enabled by the base that we're building is part of the vision. I mean, this was always conceived to be the internet of money. And I think we're finally at a point where we can accelerate again through that maturity cycle to be able to bring that to life and bring that vision to life. And that's tremendously exciting. But I find it interesting that it's kind of come back to Bitcoin as the place to build that on.

Starting point is 00:36:43 I think we had this long cycle and maybe that's still happening, of course, but of all these other faster, cheaper blockchains, but Lightning is sitting right on Bitcoin and can do micro-payments fast and cheap. I think the only knock against Lightning for now is you can't do anything in tremendous size. It works very well for micro-payments, but does not work very well if you're trying to move a ton of money. Yeah. And I think that's the next constraint we need to look at. What happens maybe at 20K and above. But I think where we are right now, I think there's lots of opportunity to prove it out to the smaller payments. And you think about paying points in in moving money and this starts to go a long way to solving them i i like it a lot will you guys ever be cussing meme coins

Starting point is 00:37:37 so you know we we we we trade uh doge and shibu on the platform right now. That's giving people what they want. Yeah. I mean, you know, so we trade it, we don't custody it. But part of the investment we're making, as I said earlier, is to open us up to other blockchains and other assets. And, you know, I think one of the important things is that these are ongoing discussions.

Starting point is 00:38:02 You know, when we have a clean listing discussion and we have different and we drive custody and trading differently, obviously because of the trust, but they're not once-and-done discussions and they're not one-way doors. I mean, we took and looked at the macro environment. We took a decision several weeks back to delist a number of coins. But we've been very clear to say that was a response to a macro

Starting point is 00:38:23 that we found ourselves in the moment. It was looking at regulatory. It was looking at liquidity. We have multiple liquidity providers for every coin we trade because it gives us good order execution. If liquidity is not there, then you've got to look at the coin. So when we think about this, we think about it as point in time and they're ongoing discussions and they're not one-way doors by any stretch of the imagination yeah you talk about liquidity has there been a challenge with market makers leaving the united states in this regulatory environment or because of the banking issues that we've seen we we we haven't seen it you know we we we work we have a diversified we have a diverse set of liquidity providers as i said we have multiple for every, and I think that helps offset and mitigate

Starting point is 00:39:08 the risk. I mean, it's an interesting point that it's not a one-way street. A delisting doesn't mean forever, right? Forever. I think people get that impression, but how are you possible, like I said, if the regulatory environment is going to change, you have to be able to be fluent with it. You have to. Yeah, exactly.

Starting point is 00:39:23 And then that's part of being agile. That's part of being able to make the decisions quickly and and then being able to not just make the decisions quickly but back it up with quick implementation and you know we owe that to our partners you know we're b2b to see and so we put a lot of effort into making sure those decisions are able to be made quickly the technology works to be able to respond quickly and we can communicate and work with our partners quickly on both ways, bringing coins on board and taking coins off board. Before I let you go, we talked about participation really being the metric for adoption, I think, at this point. At what point, what would be the thing that would make you say, okay, we've made it?

Starting point is 00:40:02 Is there a certain metric? I think the best way is when I've got people participating in it who don't know they're participating in it. That payment was just made by moving it across Bitcoin. Then I think we've won, Scott. Yeah. When we've abstracted away all of the complexity and ridiculous vernacular that we all use in our small little echo chamber. I think that that's a great answer. And I don't think it's a certain percentage of assets under management from RIAs or anything like that. I really do agree with you that it's actual usage because that's how it will explode. Thank you, Gavin, so much for this conversation.

Starting point is 00:40:37 Where can people look into your work, follow you after this and check out, obviously, Bakkt if we have any institutional clients who might funnel your way. So definitely come and visit us at bakkt.com. Follow me on Twitter at Gavin Michael. And I'm excited by the conversation. I'm excited by the future ahead of us. I think it's been tough over the last little while, but the momentum that we're gaining in the market right now is tremendously exciting and just onward. It's always really encouraging and

Starting point is 00:41:12 inspiring to hear the people who are actually building being still excited during the depths of this sort of crypto winter and bear market, because the perception from the inside is so different from the outside. So thank you for giving us. So thank you for putting a little more wind back in our sails. I appreciate it. Absolute pleasure, Scott. Thanks very much for the opportunity.

The Wolf Of All Streets - Why Big Money Is Betting On Crypto Again | Gavin Michael, Bakkt

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