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- [00:01]
A
Welcome to Galaxy Brains.
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B
An infinite amount of cash. Cash.
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A
I'm your host, Alex Thorne. The US banking system is sound and resilient. Bitcoin meeting new all time high.
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C
If you're not long. If you're not long, you're short.
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A
Satoshi is going to come on there,
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C
laugh hysterically, go quiet. All bitcoin's gonna be erased.
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D
Bitcoin.
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C
Bitcoin's the best crypto. Bitcoin is going to zero.
- [00:27]
A
Welcome back to Galaxy Brains. As always, I'm your host Alex Thorne, head of Firm Wide Research at Galaxy Bitcoin. Not zero. We have a great episode for you this week. Arjun Sethi, co CEO of Kraken and Payword, is our guest. Arjun's been on the show once before, but he was remote. We're recording today live from Consensus in Miami at the Miami Beach Convention Center. It was a great interview with Arjun. The guy is really dialed in. He's got great thoughts on. What I was most impressed. Impressed with actually is the way Kraken balances this institutional grade company now with the decentralization ethos. They do it and talk about it in a way that's better than most by far in this industry. I think that colors everything that Kraken does. Even though they're like a big company in crypto, of course, they're deep in the institutional game and all of that still really carry forward Jesse Powell, sort of ethos of decentralization. One of the oldest crypto firms in the. In the world, Kraken. Great interview with Arjun. We'll also check with our friend BIM at a BB about markets. Before we get to that, I need to remind you to please refer to the link to disclaimer in the podcast notes. Note that none of the information in this podcast constitutes investment advice or an offer recommendation or solicitation by Galaxy or any of its affiliates to buy or sell any securities. Well, here we are, Phineas in Miami yet again.
- [01:37]
D
We've been to Miami several times, usually
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A
to interview Michael Saylor.
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C
That's correct.
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A
It's a little bit different being on Saylor's property versus here at the Miami Beach Convention Center.
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D
Yeah, this is a very exciting conference. Walking around with you, I will admit, is a little overwhelming. There's a lot of people that are trying to. Trying to talk to you and, and you know, it seems like a very positive vibes. I know you write Bitcoin.
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A
Yeah, last.
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D
Last week.
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A
Yeah.
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D
How is it? Really quick, before we jump in, how is it different than bitcoin? I know it's a somewhat different community, but there's a lot of overlap.
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A
It's. It is a different community. I think there are community specific conferences. The bitcoin conference, there's ETH Denver, there's Solana, Breakpoint, and then there's sort of like crypto broad big tent conferences. Consensus and token, I think are probably the two biggest at this point. And they're. They're different because of that. I think this is much more institutional crypto industry focused. It's a lot of the big companies like Galaxy are here because they serve everyone in the industry. The bitcoin conference, frankly, has a ton of institutional bitcoin stuff, but that's really a community, a global community bazaar. Right? That is like Bitcoin has a genuine global cult following, the asset and the network. And the bitcoin conference is sort of like an expression of that. Whereas this is like, you know, it's got everything right. This is more of a financial services crypto conference at this time. And they're both quite exciting to me. I mean, I love both.
- [03:05]
D
Well, it's cool. I mean, this is obviously very appropriate for Galaxy to have a presence because Galaxy touches so many.
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A
We do everything.
- [03:12]
D
Exactly. But it's cool. I mean, we're doing. We've already done three episode. Mini episodes today. We're going to be. We're going to be dropping them periodically over in the coming weeks. Some really cool, great guests. Some are repeat guests from the past. But today we start with Arjun and he's. I mean, it's a huge. I was saying before, he's a huge job. This is sort of like really, Kraken's
- [03:35]
A
a massive company in the space and they've been around, I don't know, for more than 12 years. I forget. I think they were founded in 2013 or something like that. I mean, that was a long time ago. Think about how much has changed.
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D
Yeah, it's, it's a. It's, it's. And it's got real staying power.
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A
I mean, it's.
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D
It's really influential as a business.
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A
Well, thank you, Phineas and our friend Chris and yes, the whole team at Studio Friends for coming to Miami to make this possible. This is, I think, going to go down as our best on site, like, rapid recording session. We did some in Hong Kong and Singapore once before and we did it in Bitcoin M Nashville 2024.
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C
Yes.
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A
But this is.
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D
We're getting better.
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A
We got a great space.
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C
We're getting better at it.
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D
We're getting better at it.
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B
Absolutely.
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A
Let's hop right into it with Bimnet ab. Let's go now to our friend Bimnet AB from Galaxy Trading. As always, Bimnet, welcome to Galaxy Brains.
- [04:21]
B
Thanks for having me.
- [04:22]
A
We're here on set in Miami at the Miami Beach Convention center for consensus 2026. I don't know what's your first thought of this conference? You're not a big conference guy the way I am.
- [04:33]
B
I am very impressed. I think there's a lot of institutional attendance and I think in terms of the quality of the participants, protocols, the companies here, you know, it's top tier and I think it's, you know, indicative of a market that's matured and you know, when the big boys show up in size and strength, it's probably a good things for, you know, things to come.
- [05:06]
A
Yeah, they're. They are here, aren't they? There's a lot of. It's not. I mean, we keep saying that the suits are here though. The institutions aren't coming, they are present, they're here. Yeah. In size.
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B
Yeah, absolutely.
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A
You think you're not really a crypto guy. You know, you come from the, you're a rates trader from Citi. What's your impression of the banks now where you came up, getting involved in crypto? Is it real this time?
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B
I think it's very real, 100%. I think the, they are committing real dollars, time, energy and, you know, I think actions speak louder than words. And so I think, you know, I've probably talked to at least six different banks like in the last like 24 hours.
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A
Yeah. And this isn't like, you know, Regional bank of East Dog patch. These are big, the big boys.
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B
Um, and so, you know, like asset managers as well. And so I, I think, you know, like this is crypto's moment to shine and that there's a lot of good stuff happening Now. I will say that, you know, because institutions are here doesn't necessarily mean, you know, the price of XYZ token needs to go up. True. It just means that there is adoption of, you know, the, the financial rails that are, you know, have been innovated by crypto.
- [06:28]
A
Let's talk about markets a little bit. Obviously that's our favorite topic. And I mean, my gosh, as I don't know if it's the post bitcoin Vegas bump or if it's some residual. Maybe you'll tell us. Bitcoin trading almost at 82k. I think it got to like 816 or so.
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B
Yeah.
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A
This is the highest it's been since like the end of January, which by the way was part of the. We were just in a sort of a nonstop free fall into February.
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B
Right.
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A
The end of January, February 5th, was that like 58k?
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C
Bottom
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A
is this just a local move or is the bear market ending? How do you think about it at this point?
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B
I think the structural downtrend that's been in place in bitcoin, you know, since October of last year is still in play and that this is a healthy correction in the trend because markets don't move in one direction. And so, you know, I'm still cautiously bullish in the next sort of like week or two on VTC simply because one, it's broken through some, some resistance. Two, I think, you know, with stretch trading back at close to par, I think they'll be some additional issuance and so some more dap buying. And to be honest, I'm still constructive on, you know, a potential resolution of the Iran situation.
- [08:00]
A
Fire constructive on ceasefire.
- [08:02]
B
Constructive. I mean, it's still holding even though, you know, we've had a little tit for tat.
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A
Yeah.
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B
And I think the market's willing to look through any kind of turbulence with respect to the Iran conflict in the next week or two. Earnings were really good. S and P is trading at all time highs. Risk sentiment is very good. And so, you know, I think there's a little pocket here where the market can continue to do well. But if you ask me, you know, kind of where my outlook is, you know, for the next like three months, I'm a lot more cautious. I think, you know, my playbook is still the bitcoin cycle playbook where you've historically had a, you know, 70 to 75% drawdown from, from the highs. And so I, I think there's still a reasonable.
- [08:52]
A
You only got to like 52% or so, like.
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B
Correct.
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A
Yeah.
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B
And now that, you know, spots rallied so much, you know, in theory it should be harder to move higher simply because of, you know, math. Right. It's a lot harder to move more money.
- [09:08]
A
Yeah, yeah. Required to move a big object.
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B
Correct. Yeah, correct. More force physics, however you want to think about it.
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A
Right.
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B
And then at the same time, you know, it's, it's getting a lot more cheap to play for downside because, you know, vols have been coming lower and so it's been a, you know, spot up volume down tape in terms of like implied vols and.
- [09:32]
A
Yeah.
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B
And so I think you can get some real convexity, you know, if you're looking to get Some protection on.
- [09:39]
A
Interesting.
- [09:40]
B
In terms of macro, I'm growing everly concerned with the commodity market and the feedback loop into the fixed income market. And what I'll say is one of the things that I've been paying close attention to with respect to this conflict has been longer dated energy contracts. So call it the end of this year or, you know, the start of next year. And essentially what you had happen yesterday was they started trading at local highs. Right. And so people are pricing in higher energy prices for longer. And you have a direct feedback loop into inflation. And look no further than gas prices. The AAA national gas average as of this morning or closed the business yesterday was around like $4.48. Do you want to know where it was a week ago? $4.08. You're talking about a 10% move higher in gas prices in a week. But you know, did the oil contract, front end oil contract move up 10%? No, but you're now getting to the point where, you know, you're seeing prices tick higher in these refined products and goods. Right. And it's not only gas, but it's diesel prices. Diesel prices a year ago were like on a three handle and now you're looking at them on like 6ish.
- [11:08]
A
Wow.
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B
Right. And like, how do you transport like food across the country?
- [11:13]
A
More inflation is coming too. Downstream inflation is going to happen.
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B
What you've seen happen, particularly in Europe, is you're starting to price in an aggressive amount of hikes.
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A
Right?
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B
Right. So the bank of England's expected to go over three times in the next, by March of next year.
- [11:32]
A
Some people think that Kevin Warsh and this Fed is going to cut. Some people think that.
- [11:36]
B
Some people think that. And I think the biggest risk to markets right now is the US might have to hike rates.
- [11:45]
A
And so is the near term risk, the market finally realizing that and acknowledging the threat of inflation. And the. Not only because I've heard, you know, obviously because he's the President's pick. The president has been agitating for lower rates probably his whole life. As far as we know, this guy POTUS was a straight guy. He was probably in kindergarten calling for lower rates. Um, and so everyone has assumed that Warsh is dovish right out of the gate, but obviously our pricing has come down a lot for the number of cuts. It's like less than one cut now, right?
- [12:15]
B
Yeah.
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A
But like you're saying if it turns basically even.
- [12:18]
B
Yeah.
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A
If it turns to hikes, that could
- [12:21]
B
cause a wobble and risk.
- [12:22]
A
Yeah.
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B
And you're seeing this like the UK 30 year yield got to like a trend high, it's closer to 6% than it is defined. And so in the US like 30 year point of the curve is now around 5% as well. And so I think if you look at the inflation picture and you marry it with a labor market that's also still pretty tight, right, like because of a lot of it's immigration, but there isn't like a bunch of new folks joining the labor force and there's some folks leaving the labor force. So the labor market's really tight and so it's going to be very hard to justify cutting and probably a lot easier to justify hiking. And so I think the market is probably underappreciating that risk right now.
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A
All right, we'll leave it there for now. Bimnet Abibi from Galaxy Trading. As always, thank you so much.
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B
Thank you for having me.
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A
Let's go now to our guest, Arjun Sethis, co CEO of Kraken. Arjun, welcome back to Galaxy Brands.
- [13:21]
C
Alex, thanks for having me.
- [13:22]
A
We last saw each other@token 2049 in Singapore in the fall, which was actually before the October 10th, I think, just before, like maybe the weekend before.
- [13:31]
C
That's right.
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A
So crypto was riding high at that moment. We're obviously in liquid prices, I don't know, down in Bitcoin, 35, 40% from there, but it doesn't really feel like a true bear market. Is that your impression?
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C
I think there's a difference between feelings like on a week to week, quarter by quarter basis and you know, the, you know, Trump getting elected and then having the feeling of a bull run for certain assets. But then if you go back five years or 10 years, I think we're in a great place.
- [14:03]
A
Yeah, we are.
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C
I mean the slope is still accelerating.
- [14:05]
A
How, how would you describe the atmosphere like at Consensus here in Miami where we're recording, I don't know, number of attendees or the vibes of the people. Like, how would you, how does that fit into your theory about the state of the market?
- [14:18]
C
It doesn't. I think you have supply and demand dynamics in any market and if you just think about overall market cycles, regardless of asset classes, when people are feeling euphoric about a certain type of idea. And by the way, I think these are good. I actually think sometimes it's good to have overfunding more capital in the ecosystem because it actually just drives a lot of innovation faster. But you also get a lot of what I, I call visitors to the ecosystem. And so it's hard for me to tell where we are right now, I, I would like to say given where we are in the cycle, there's a lot of visitors that are retreating and that might change.
- [14:55]
A
Yeah, feels like a little bit more durable than if this is a true bear market. It doesn't feel like 2023 or 2019 the way. So I feel like we're setting higher lows. You know one of the big stories obviously that happening is we call the great convergence between crypto and tradfi. I've got a bunch of questions around this, but Kraken, among many other things that fit into that bucket has a tokenized securities product in X stocks. How has that been going? What's the impetus for wanting to bring stocks on chain?
- [15:30]
C
So I, I, I would go back and take a look at the business model of any company. So for crypto the first asset that people talk about volatility was Bitcoin. Then we started talking about Ethereum and then the offshoots of Ethereum and the alternate universe. Then you had meme coins in between all of this. We talked about stablecoins. If you look at the arc of what's happening in the crypto ecosystem, the promise was how do you make an ecosystem that's permissionless, how do you fit outside of the traditional financial institution? Not in a way that's nefarious, but in a way where there's not these settlement issues, there isn't counterparty risk in the same way there's collateral inefficiency. And in many cases you're bringing, at least from my own personal perspective, you're bringing power back to the individual around the decision making frameworks they have with their own money or capital. And so in order to do that you're going to have multi product, multi venue, multi assets. And our whole goal has been to continue to support that with liquidity, onboarding and offboarding KYC AML in a regulated way. But within the regulatory environment we can add more ways in which people can build permissionlessly on top of our stack or we can extend that out. So we've built products around that. Like defi earn is one of the things that we added. Now to be clear, in our ecosystem we say defi earn, but my parents or some individual in Latin America or Southeast Asia, they just look at can I get a yield on my assets on platform.
- [17:13]
A
It's like a savings account.
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C
Yeah, and I think we're always afraid to use these words, especially what's happening with market infrastructure, Bill, what's happening in Europe. But look at the End of the day, people want to be able to trade, speculate, gamble, predict, save, store, send and get yield on their assets. And then they want to have and they want to be able to do something with that, which is why we go into card services. So in order to be able to do that, you're, you are building certain aspects of banking and financial rails. You're, you're building certain aspects of payments, you're building certain aspects of being able to build speculative products. And so we went on this journey at least mentally over the last 10 to 15 years, but we really accelerated that over the last three to five.
- [17:54]
A
Yeah, you, you have another story inside the great convergence is the traditional, not just crypto building traditional assets on crypto rails, but also the traditional companies building crypto stuff on their rails. Is there like a tension, a competition? You're talking about promoting self sovereignty and more user access. Isn't there sort of this battle right now between like who owns the individual? Is it the more long term, centralized traditional banks versus the new entrant, more nimble, tech focused, you know, the Krakens? And where does that tension you think if you had to predict end or like resolve.
- [18:32]
C
I think the right parallel to draw is what happened with media and newspaper companies in the late 90s and then what happened with the advent of the Internet and what were the types of companies that evolved then? The second wave of that was so you think of New York Times and how they used to make their money and now it's more advertising and subscription. But there was marketplace dynamics. It was very. They had different business lines within the media company that worked for them and they no longer have that today. And that was taken by new incumbents in the ecosystem. Now you can draw that parallel out and say, okay, well that's why tech companies are big. Yes and no. Well, the next phase was E Commerce. Well, E commerce, there's Amazon, but there's also Walmart. Walmart just was able to figure out how to innovate past the threshold where others were not. And they became larger and they were able to build products and services that were positive to the consumer. I think what you have to think about is the crypto companies, how are they evolving as their market evolves? Traditional tradfi financial services companies, how do they evolve? And are they going to be able to build products and services that serve the customer, not just here in the United States, but worldwide? And I think that's where people miss the gap, which is the whole advent of crypto was permissionlessly building products this is why we use the word defi. So borrow, lending, trading new assets. I think the world is moving at a faster pace to innovate. And when we talk about tradfi, we're really just talking about incumbents that are in the United States and Europe that have been used to doing business in a very specific way. And are they going to evolve or not? The faster they evolve, the bigger they get, is my perspective. And my sense is many of them won't, but some of them will.
- [20:13]
A
Yeah. You launched the first ever regulated tokenized equity perps built on top of X stocks.
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C
That's right.
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A
Is this, how big are perps? Are they super important, both for your business, but are they going to be huge in stocks? Like, I mean they've been huge in crypto for a long time. How important are they in your mind?
- [20:31]
C
Look, I think you look at the derivatives market worldwide in crypto or traditional, that is the majority of transactional volume, like upwards of 90%. And you know, if you, if you look at even us as a company, we started with spot moving into persps, but if we were outside the United States we probably would have started with pers and moving down the stack to spot. And so we're, the way I think about it is in the U.S. we're innovative, but outside the United States we're catching up. And that's one of the reasons why we, you know, we built these products for rest of world in a regulated fashion in Europe. And then part of the binomial acquisition in the United States was crypto perps, eventually equity perps, real perps, not, you know, a dated futures contract. I think it's so I think those types of products and services are really important. And then to be able to build that off of pricing that's 24,7 I think is really important because that's when you think about benchmarking the assets on a 24, 7 perpetual basis, I think
- [21:29]
A
that makes a lot of sense. I think the perps, I feel like Tradfi wants perps, like they, I think they see the, you know, automated funding reset, the never the no expiry nature. Are we going to get those like fully in the US soon? I know you guys have stuff. Coinbase has something sort of similar. It's like a five year dated future. It's not quite a perp. CFTC is working on this. Like what's your sense on how soon it's like fully coming in the US
- [21:57]
C
in order for the United States to say stay competitive with the rest of the world, we have to do it. That's my take and that's my line whenever I talk to any regulators or partners in the ecosystem. So having a fake futures pretend to be perps is not, is not real perpetuals. Now you take a step back. Are perpetuals a better product for consumers? And I think the answer is yes, because it's easier to understand, it's easier to educate people on versus some sort of outdated futures contract or even an options contract where people have a tendency to lose money because it's just a complicated financial product to understand. And which is why those types of products are less retail and consumer oriented and they're much more institutional driven. And so when you look at the people that are against these type of products, it's typically institutions because that's where they make most of their money.
- [22:44]
A
Yep. ICE and OkX, NYSE, JPM, all these people working on tokenized stock market stuff. Kraken has a partnership with nasdaq. Why does that win the race? Or is it. Is that not the right way to think about it?
- [22:59]
C
I think the question you have to ask is what's the right race to win? So yes, you can sprint to a destination where you get no yield, you can run the marathon where there may or may not be yield and there's multiple tracks that are out there. I think everyone so far has taken a very specific approach. Let's take the most basic one. Is it permissionless or is it permissioned? Most of these announcements that you've heard are in the permissioned world where it reminds me of how do you create a blockchain that's only internal and is only used at the bank? Okay, great. Well, you can't. It's not interoperable. What is the collateral move? It's not actually instant settlement time. So you're basically perpetuating the problem that has existed rather than bifurcating it out. Where real time settlement transactions happen 24,7 instantaneously and for any asset. That is the whole promise of what we're trying to build and what we want to be able to build for consumers. So if a consumer wants to use a wallet like cash, we should be able to help proliferate that and support it. So our whole goal at Payward is how do we continue to support open Global Financial Rails. I'll say that again, Open Global Financial Rails. And today a lot of it is very internal and siloed. And when you use the word permissioned, it perpetuates siloed activity.
- [24:17]
A
I think that's right. And We, I recall in 20, 2016 there was sort of this refrain. We called it the blockchain, not bitcoin era. All the banks and stuff were interested in blockchain, but they were like, oh no, bitcoin, that's for criminals.
- [24:30]
C
That's right.
- [24:31]
A
But like blockchain, it's, that's the best stuff ever.
- [24:34]
C
Well, the easiest thing to do is to tell consumers and to tell your employees that all of that stuff that's happening in the wild wild west is only criminal and nefarious activities. And that is the same argument they use for the Internet, the same argument that they use for electricity in the 1900s. So that list goes on and on.
- [24:52]
A
So you think they're going to the permissionless chains are still going to win? Feels like they've gained ground even now. They're all the banks and brokerages and such are building on permissionless rails also. Some of them though still trying to resurrect the permission blockchain. Have we made progress and do you think permissionless wins?
- [25:07]
C
I think when you are driven by quarterly earnings headlines, you're going to use the word permissioned, you're going to use the word AI, you're going to use the word blockchain. And no one will move past that to say, okay, well is it interoperable? How does it serve your customers? What do they get out of it? So if you're building a permissioned blockchain that's non interoperable to give people a savings yield that is less than what you get in traditional treasury markets, then it is a terrible product for customers. And that's what you see. And so as I mentioned earlier, either they're going to innovate or they're going to lose their customer base. And I think it'll happen at a faster and faster pace using that same parallel. What are we trying to do? We lived in the permissionless world. We got yields to the best of our ability straight to the consumers. We took away a lot of the middlemen and transactional fees. And so when we go into traditional products, traditional financial rails, banking in some cases like we've done with the Fed master account or SPDI in Wyoming, our goal is, is to get the best maximum yield for our customers. And so we're not saying hey, why don't you have a savings at basis points, we're not saying get 3%, we're getting them 5.8, we're going to get them 8. And at some point we're going to get people privatized credit fund Yields that are also safe and we're going to get them 12 to 14% and we're not going to take 50% or 80% of the profit. We're going to take in some cases basis points to 1% or 2% which is better for the consumers and customers worldwide for the long term.
- [26:42]
A
Speaking of worldwide, you announced here at consensys partnership with MoneyGram, one of the biggest and oldest money global money transmitters or remittance providers. Tell us a little bit about that partnership and why it's exciting for Kraken.
- [26:56]
C
So there's this concept of the developed economies and then the developing economies. What's really interesting is that the developing economies are moving faster across the board over the last 10 years. Payment rails, you think about, you know, the payment rails that is in Brazil and what they did in India and you're seeing that in China today. You know, forget the politics of like how these happen is that you're able to get access to people that are going to be in the new billion plus range in population, access to capital as quickly as possible. Once you have access to capital, then you want access to debt. And one of the interesting things here is in the developed nations we think of that as, oh, we don't need that. We have all of our systems in place. The problem is, is that our systems are becoming outdated at a faster and faster pace because getting access to capital, getting access to debt, getting access to having better yields is becoming harder and harder for the, let's call here in the United States for the average day, sorry, for the average American individual. And so that's why you're seeing these products and services proliferate in these emerging economies. They're still pretty cash oriented so they want to be able to have access to cash or their local currency. What we call offboarding in a place like Mexico, in a place like Brazil, but more importantly in a place like Nigeria or Uganda or Kenya or any of these emerging markets, Southeast Asia as well, Philippines, Cambodia, Vietnam, etc. So these markets is where MoneyGram is the strongest. And I think a lot of people forget that as you've had Global Crossing, global movement, globalization in some cases where people have been moving all over the world, they send money back home and then they want access to, you know, capital and debt again.
- [28:36]
A
Yeah.
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C
And so MoneyGram is one part of that puzzle, but it's a large part of that puzzle which is if I held usdt, if I held usdc, if I held Bitcoin, if I held an Altcoin, and now If I hold tokenized equities, which is a large portion of that market, then you want to be able to have an off boarding mechanism.
- [28:52]
A
Yeah, they have a lot of distribution on the ground stuff. Couple more questions before we wrap. At Nircon, recently you said that you would trust an AI agent or AI agents to manage 100% of your crypto portfolio inside of a year. Haseeb from Dragonfly pushed back on it in that conversation. I really recommend people watch. That conversation was very interesting. What does an agent get to do today versus in six months or two years? Like why, why are you so confident this is coming in the near term?
- [29:20]
C
Look, we're going through the same conversation about what does an AI agent or what does your local LLM or a cloud ALM have access to in what I call the people that are on the forefront, like my personal machine, they have access to everything. So I actually feel like I'm living 20 years in the future and maybe I'll feel like I'm living 100 years in the future as every week there's innovation that's really exciting. Now obviously I've created my own governance and security structure so that it doesn't have access to my bank account and everything. So on the other side now the permissioned world or the permissioned ecosystem or the tradfi folks. And I think this is where the risk lies for companies like us, like Kraken, where we might end up being like tradfi, where we say, well, you need governance and you need these rules. What an agent can or cannot do. I think the way to think about an agent is the same way in which you think about a human. What does a human have access to and what do you want them to have access to? You want them to have access to capital, you want to have them access to debt, you want to have them access to yield payments, et cetera, so they can do some of the similar work or augment the work of humans by a factor of. You know, I know this might sound crazy, a million X. So today I have agents and sub agents running in the thousands. That basically means that I have like an army working on my behalf.
- [30:41]
A
Yeah.
- [30:41]
C
And I trust it. So am I going to be willing to trust them with my capital the same way I trust bank of America or Merrill lynch or Morgan Stanley with my capital and I'm calling them. Those are all antiquated, archaic systems. There is no doubt in my mind over the next six months, probably maybe even sooner, on some of the products that we're launching that it won't even be crypto. I would want to have 100% of my assets moved into agents being able to proliferate it and manage it on my behalf.
- [31:08]
A
I have to ask then, because you've said that these capabilities, agentic products and capabilities are coming in weeks and months, not years. What is, I mean, you guys do trading, lending stocks, distribution cards, all this stuff. Like where, where do you think the agent agentic product lands first? You know, what's the first agentic product here? Something for trading. Something to help me rebalance my portfolio.
- [31:32]
C
Look, I think it's going to be, I truly believe it's going to be all of them at once. You saw Stripe make announcements around what they're doing with payments. I think it'll proliferate e commerce brands and companies faster. But look, look at what you see in defi. Like we're, we're. What's really interesting is that I think AI and crypto blockchain are like a brother sister in the ecosystem. They are hand in hand going to be able to change things all over the world at a really quick pace. So I think payments are going to come, I think onboarding and offboarding is going to come. I think managing your capital and wealth is going to come. But each market is going to be different because that specific market has a problem that they need to serve. So emerging economies, what are they going to use? Developing economies, what do they need? So I think that it's all going to happen at once and I see that already. So for our ecosystem, we want more people to trade on our platform. We want to have people have more access to that capital or that debt or their AOP or their custody and lending. And so we need agents to be able to have access to our exchange. So we already, we already launched our CLI, but that's like V001. Like we've got like, you know, 10x more versions to go over the next couple of weeks. And so we have to think in the same way, which is agents are a new customer set. Sub agents are a new customer set. Local lms are a new customer set. It's really exciting.
- [32:52]
A
I do love the local LLM. And your point about your home agent. I've got my agents working at home right as we speak, building out stuff
- [32:59]
C
I've learned through six or seven laptops already and the new ones are already there.
- [33:03]
A
Nice. You also push back on the idea that I would cause like a SaaS apocalypse or be a huge job loser in the economy. Others I think are starting to see the data seems to be bearing out your point of view that actually there are more software engineers being hired. Where do you think that lands in the end? I mean, is a net job creator or a job destroyer?
- [33:23]
C
I think you have to look at the slope. So in the short term, a lot of companies have had an abundance of vendors that they may or may not have needed. We also employed more people than we needed post Covid. And so you had a large set of companies go through this delayering. You saw some recent announcements with some other companies saying the same thing. I don't necessarily think that's AI, it's just workflow. Automation has been large part of that trend.
- [33:50]
D
Right.
- [33:51]
C
And AI is going to be a larger part of that trend. Getting access to more workflow and being able to do more with less. Okay, well what does that allow you to do when you, when you do that? At a base level, the slope would tell you that you're able to do more. You're able to build more products and services for your consumers. More companies are going to be started to be able to proliferate that ecosystem. So I believe it's a net positive in terms of the types of products and services that you can build. And you're already seeing that in the ecosystem. So the question ends up being, do you see a dip in the slope before it turns back up?
- [34:25]
A
You said that the attack surface grows as much as the security surface grows. As it relates to AI and the threats, obviously it's not clear whether they were AI system. We've seen some major and impactful defi vulnerabilities. What keeps you up at night? As the co CEO of one of the world's biggest crypto exchanges, is there an AI compliance component to cyber security that people should be worried about?
- [34:46]
C
Look, frankly, what's keeping me up at night isn't what I'm worried about. It's how much more we're able to do over the last six months. It's probably more. I've. I've probably never worked harder in my life than I have over the last six months, which is crazy because we all used to work pretty hard. And, and it's really just. How do you prioritize what to say no to? Right. Like if I had the ability. I'm thinking about hiring more people, but I'm not sure it's a prudent thing to do for the types of products that need to be built first right now versus what needs to be built in the future. And because we're Able to do so much more. You get a lot more excited around what you can do and how much closer it is. You have a tendency to think, should I spend more money here? Should I do more? And I think the answer is now, how do you again, do more with less? But how do you focus and prioritize on three things?
- [35:34]
A
Yeah.
- [35:35]
C
Not 50.
- [35:36]
A
You confirmed a confidential S1 filing in April. So that, for our viewers means an intention to go public. Take Payword public. Anything you can say about the status of that or you know what it's like. A lot of crypto firms went public last year, Galaxy uplisted, the nasdaq. Is the market great at this moment for that? Are you guys plowing ahead? Like, anything you can share about that?
- [36:00]
C
So one of the, you know, how I spend my time is another hat that I wear is on the asset management side. And I'm on the board of many companies where we're having the same conversation, which is, should you go public or not?
- [36:12]
A
Right.
- [36:13]
C
And I think a company that's ready to go public needs a few things. You need a foundation for compounding growth. And I think a lot of people forget that. And so when crypto was sexy and popular, a lot of people thought, okay, let's just go public. And you get a lot of what I call short term visitors to the ecosystem, crypto companies themselves, as well as investors that are coming into the ecosystem, regardless if that's private or public. Some people know how to capitalize on that really well and some people don't. And I think the rush to go public for any company is usually wrong because they say, hey, we got this window. Well, what happens when the visitors leave and the supply and demand dynamics change? And then those investors go to AI and then they go to the next thing. To the next thing, right? So they retreat from your company. And so they are not thinking, you know, three, five or 10 years out. Luckily for us, a lot of our shareholders are internal folks. We didn't raise a lot of capital until recently. And the only people that we raise capital from were highly strategic or ourselves. Right. Like I invested in my own company, right? And so I'm thinking 10 years out, because I want Kraken and now Payword, our parent brand, to be durable across multiple products, multiple assets and multiple revenue sources. So the only thing we're creating right now is the foundation to be able to support us and the ecosystem. And that requires us to think 10, 20 years out, not quarter by quarter, which is what you see a lot of companies do, which is why they want to go raise a ton of money or not enough money in the public markets, which hurts them and their talent and their companies. Long term.
- [37:42]
A
Yeah, in it for the long term. I like that. All right, quick questions to end here. What's something in the last year or so that you've changed your mind on?
- [37:50]
C
I thought that the AI ecosystem had hit its local maxima. And when all these, you know, I think OpenClaw really opened up my eyes to the speed at which things are changing at a faster and faster pace. So we built workflow tools, leveraging OpenAI, Anthropic, even Grok in many circumstances. Two years ago, then a year ago we threw it all away and built new workflow systems. Six months ago we threw it all away and built new workflow systems. And six weeks ago we threw everything away and we started from scratch. And I think it's really important to continue to do that for everything you do. And is that better for the company or is it worse? And it's been tremendously better for us. And I have this term that I use, strong beliefs, loosely held, which is what do we believe in the long term and then what are we willing to change our mind on to still hit that goal? Whereas strong beliefs, tightly held, is that you just never change your mind and just get sideswiped.
- [38:47]
A
You said you burned through six laptops. What are you building at home for AI in general? Like what are you using it for personally? Arch and demand.
- [38:54]
C
Yeah. So, you know, a lot of what's happening in the AI ecosystem is we talk about Nvidia GPUs, you think about the new clusters, data centers, what people aren't talking about. And what I'm seeing is that with the advent of people leveraging agents on their computer and the new systems that they're capable of building, we're using generalized CPU all over again. So these terms like overclocking, running hot is happening all over again. And it reminds me of what we used to do when we used to build games and shareware and open source projects and. Yeah, I mean, I've overclocked all my computers and I burned right through them. And it's like I said, it's the most exciting time I've ever felt and I'm sure I'll continue to do it.
- [39:42]
A
Yeah, I love the local models thing. It's almost. I drew a comparison to bitcoin mining, a contrast. Started extremely decentralized over the years as centralized on ASICS. It feels like the AIs are starting more centralized. You know, you've got your subscription to Claude, but with the, as the LLMs improve, the local LLMs improve and then maybe it becomes more decentralized. Maybe the future is everyone with an AI in their basement. Not necessarily a my hope is that
- [40:06]
C
that's the future because what I'm able to do on my laptop I want to now do on my phone and it's just harder and that, I mean it's, it's, it's just like the early days of like the self custodial wallet and like what I could do with my money, it's mine. And if we can get to a place where we can innovate at that pace on behalf of a customer, I honestly think it's like a really exciting, brave new world.
- [40:30]
A
Arjun Sethi from payword Co CEO of Kraken. Thank you so much for coming on Galaxy Brains.
- [40:34]
C
Thanks for having me.
- [40:35]
A
That's it for this week's episode of Galaxy Brains. Thank you to our guest Arjun Sethi from Kraken and our good friend BIM at AB from Galaxy Trading and to our friends Phineas and Chris from Studio Friends here on site at Consensys in the Miami Beach Convention Center. Everyone have a safe and happy weekend and we will see you next week. Thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, head of Firmwide Research at Galaxy. Follow me on X at Intangiblecoins, follow Galaxy Research on X at GLXY Research. Read our written reports@galaxy.com research and don't forget, if you like Galaxy Brains to like and subscribe on your favorite podcast platform like YouTube, Spotify, Apple Podcasts and more. We'll see you next time.