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- [00:00]
A
A lot of people don't understand an ETF is most of the time it's a vehicle that allows people to make investments. Doesn't mean that I'm bullish, doesn't mean that I'm bearish. It means that I'm creating an opportunity for people to do what they want to with their money and it's none of my business what they do with their money.
- [00:23]
B
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- [01:35]
C
Well Steve, welcome to Coindesk. Thrilled to have you on and to chat a little bit about Canary Capital and all the success you guys have had this year.
- [01:43]
A
No, thanks for having me, Dave. This is wonderful.
- [01:46]
C
So listen, before we like dig into your business directly, let's maybe take a giant step back. I mean, you and I have been kind of tackling the regulatory environment and the ETF landscape in the U.S. i don't know, for decades now, but over the past four or five years have certainly been trying to navigate what has otherwise been a little bit of a, how should I phrase it, unique regulatory landscape. So we have gone from significant regulatory headwinds to pretty significant regulatory kind of tailwinds. Maybe just like. Give me a little bit of an update on how you see the regulatory landscape for ETPs and crypto ETPs in the US market right now.
- [02:27]
A
Yeah, I mean, look, I'm seeing a massive shift obviously in the sec. CFTC has been there for a while, but it's certainly even more so positive. Atkins has been fantastic as a chair. He believes in free markets. I think most of us that are involved in crypto are somewhat libertarians, somewhat free market participants, or in some cases like me, maximum. You know, I'm a libertarian. Maximus Free market Maximus. What we have now is an SEC that really embraces innovation. They have offered, in a lot of cases, even safe harbors for any type of innovative product, which is fantastic. That's something that you would have never guessed would have happened. It's a great environment to work in, especially for those of us that have been slogging it for the last 10 years in crypto like you and I have.
- [03:20]
C
Slogging. It's a kind way to phrase it. You know, I, I always think that. Look, with the change in administration, it wasn't just the White House, but the executive board in the White House, the crypto task force, the sec, the openness and the willingness to have people come in and have a dialogue. I, I actually think one of the greatest examples of the pace with which DC is moving is this concept around having a generic listing standard for ETPs in the US market. For crypto. I remind people that the concept of generic listing standards for ETFs generally on the initial run through, was a six year process. And so in June of this year, when we had gotten some guidance from the securities exchanges, the NYSE and CBOE and NASDAQ that, hey, they're thinking about a generic listing standard that's going to be implemented before October. I chuckled. But the reality was that actually transpired. So there's a tremendous amount of momentum and a tremendous amount of dedication of resources, you know, human and legal, that is really helping to kind of advance the ball, which is part and parcel to like my next question, which is all around, as you and I both know, first mover advantage is critical. And Canary has put your investors and yourself in a position to really have taken advantage of that, which is a function of you guys being on your front foot and certainly the advancement and the adoption of a generic listing rule set. So maybe tell me a little bit about your thinking and then kind of how you've been able to win to that.
- [05:00]
A
Yeah, I mean some of this goes back years and you, you mentioned the, the process of building a generic listing standard. It really has been about six years. And I can even remember back the first time I had a meeting with the SEC staff on crypto, which was back in 2017. And to say that the SEC broadly has changed, they really haven't. What has happened is there's less political pressure for things to get done. So going back to 2017, all the way up until probably 2020, all the meetings that I've had, all the, you know, everything that I've done and other people have done, has actually been quite positive. They're willing to take meetings, they're willing to discuss what's exactly going on. I remember talking to them about custodians and how those work and how do you mitigate counterparty risk with custodians? You know, there was actually a big fear back then, you know, because there was a lot of custodians that would just shut down or run off of people's money or, you know, lose money. I mean, starting with Mount Gox. So, you know, there was real concern about having crypto in capital markets, but it wasn't because they didn't want it. It was because they wanted to understand it better and want to understand how you would mitigate risk. So there's always been a desire for innovation and to promote emerging managers like ourselves to do more. It's just taken a long time for that political pressure to subside so that they could actually do what they, what they want to do. You know, they don't want to just sit around and be boring lawyers. They want to be fun lawyers. You know, but so. So these generic listing standards have been in, you know, in progress for a long time, and we, we finally got them, which is absolutely fantastic. It's allowed us to move forward with a lot of other altcoin ETFs, and again, those of us that have been working on Bitcoin for a long time, we saw the pain firsthand for a long time, and now it seems to have really opened up. But as far as utilizing the generic listing standards and utilizing a more free market open sec, we've been able to move fast and get some filings out there ahead of others. And that wouldn't have happened in previous years when they were holding everybody up to go at once. And that really favors the large incumbents. It seems like they're really starting to favor those that are a little bit more nimble. And look, we've got great partners in this. We work with US bank, we work with CoinDesk, we work with several amazing APs, liquidity providers, and you know, and others across the board parallel. And those partners are also very nimble and love advancements in both technology and innovation. So they've been right there with us to continue to advance us being able to move forward as fast as we have.
- [07:40]
C
Right. You know, what I would say is a couple of things just to piggyback on your points. When you engage the sec, the principles of the SEC have not changed. And so when you go with an institutional attitude, it's fair and orderly markets, it's investor protection and it's capital formation. And so if you kind of align with those three tenants and you don't break a law or you don't propose something that's going to break a law, you have a really strong reception. I think the thing that's been most exciting for me in this kind of journey along, bringing crypto ETPs to marketplace, from one ETP guy to another, there has been no discussion around whether the, the actual construct of the ETP is going to work. It's really talking about the underlying asset. And boy, like, you know, we've come a long way, haven't we, where every time you wanted to innovate with an etf, you or an etp, you'd go down to the sec. You'd be talking about, well, is creation, redemption going to work and is the ETF going to work? And then also talking about the underlying assets. Oh boy, we've come a long way.
- [08:36]
A
Oh yeah.
- [08:37]
C
All I would say is that you're being really humble with some of your first mover advantage. So I'll be the one to say it. Your XRP launch was, as measured by daily trading volume on day one, the number one launch of all ETFs and ETPs in the US market this year. That is an absolutely insane stat. And so I'm going to use a round number of $60 million of daily dollar volume on day one, which is just part and parcel to two things. Number one, you brought something to market where there was demand, and number two, the market wanted it and needed it. And so those type of liquidity parameters are something that really should be applauded. It should be applauded by the crypto industry, it should be applauded by the ETF industry, it should be applauded by, by the markets. So congrats to you guys, that's no small feat.
- [09:31]
A
Yeah, really appreciate it. And look, really acknowledge my team as well. You know, know, we've got great partners, we've got great lawyers, Chapman and Kotler, but, but we also have an Outstanding team that, you know, some of us have been working together for a long time. I'll mention Kevin Farahay for instance. He was head of product at, at Ridex. I mean he created the first equal weight S and P ETF I don't even know how many years ago. Right. And I worked with him at Guggenheim, I worked with him at Valkyrie. And he's joining me again. I brought him out of retirement. Right.
- [10:01]
C
So it's like you know, generation, generation one ETF guy. Absolutely. Yeah. Listed derivatives and structured notes in the early 2000s into, you know, morphing into, into ETF land. Good, good, fun stuff.
- [10:15]
A
Yeah, yeah, no, no, we just got great people, you know, just you know, people that have, that have, that have seen this, that have done it before. That just kind of reflecting back in my, my, my time with Kevin. We actually together first ETF that was actively managed, that held asset backed securities right after the financial crisis. So talk about conversations with the sec. If you think Bitcoin's bad, use a three letter word after Clos blew up and say yeah, we'd like to do structured credit active in an ETF when at that time actively managed ETFs were not a thing. So we had to get by that hurdle. And then asset backed securities are not a highly liquid security and so, so trying to get that through and it was just, you know, it took five years. So you know, we're used to being patient.
- [11:39]
B
Coindesk Bitcoin Treasury Month is brought to you by Genius Group, a bitcoin treasury company listed on the New York Stock Exchange under the ticker GNS. Genius is on its way to hodling 10,000 Bitcoin in its treasury while educating the world on a bitcoin first future Genius has launched the Genius Academy with courses from the likes of Saifa Diya Namous, author of the Bitcoin Standard, Natalie Brunel and many more. Start your genius learning journey for free today at GeniusAcademy AI and earn Bitcoin backed gems. Genius Group Genius isn't measured in iq, it's measured in Bitcoin. Looking for the best way to unlock your crypto's liquidity figure is exactly what you need. Being the largest non bank mortgage lender in the US with over $19 billion. Unlocked on their lending platform, explore their industry low crypto backed loans at 8.91%, interest rates at 50% LTV. They differentiate themselves by offering decentralized NPC custody which protects your crypto ownership in a segregated wallet. They've also recently launched Liquidation protection, which protects you from liquidation during large prices price drops. Whether you're funding a major purchase like a down payment on a home, investing in new opportunities or even buying more bitcoin, Figure makes it straightforward and transparent. Visit their app or click our link below to take out a crypto backed loan with figure today.
- [12:53]
C
What do you see next for the industry? What do you see next for Canary? What do you see next for crypto ETPs or the crypto market more generally?
- [13:01]
A
Look, I still think there's more to come. I believe there's a few more coming out. We've now launched four ETFs as a young manager. That 20, 24 is when we launched our company, you know, so we now have four ETFs and you know, we're, we're very proud of that. But there's a lot more to come. And look, there's going to be some failures, there's going to be some great successes. We're, we're starting to find out that, you know, some of the smaller market cap tokens may not be as sustainable. Some of the larger ones may not either. But a lot of them are going to be very popular and there's a lot of demand for them. The one that I'm most interested in seeing is some of the Meme COIN and some of the NFT ETFs coming because I think we've got a Doge ETF coming, not us, but the market is. And I'm really curious to see how that's going to play out. And we of course have filed for a couple of Meme coin and NFT ETFs which, look, I believe that's the future.
- [13:58]
C
Well, what I always say when people ask me, well, should there be a meme etf? I always remind people that I can put my hand over my heart and say that the ETP structure has been a proven structure that can give individuals and institutions a high degree of credibility, that they can invest in this product, in this wrapper and it will behave and mimic the performance of the underlying asset. You can go long it if you like it, you can go short it if you don't like it. But you're going to get highly credible performance experience in utilizing the ETP to get exposure to, you know, those particular assets, whatever the asset Is, and that ETPs have been battle tested and have proven to be really high quality building blocks to investors portfolios, no matter what the shape or size of the investor is. So I think we would both agree that there's tremendous upside ahead for crypto, for crypto ETPs. And look, Canary Capital is leading the charge and front footed. We thank you for your innovation and for your partnership. And we're thrilled to continue to innovate together in the future.
- [14:58]
A
Yeah, I really appreciate it, Dave. And I'm going to agree with you really fast, too. Just, you know, a lot of people don't understand an etf is it most of the time it's a vehicle that allows people to make investments. Doesn't mean that I'm bullish, Doesn't mean that I'm bearish. It means that I'm creating an opportunity for people to do what they want to with their money. And it's none of my business what they do with their money.
- [15:19]
C
Well, look, on that note, until next time, thanks so much, Steve. Canary Capital, thrilled to have you today.
- [15:26]
A
Thank you so much for having me.