Podcast Summary: Unchained — "How Kraken Plans to Dominate Tokenization and Perps in 2026 and Beyond"

Host: Stephen Ehrlich (Unchained, Executive Editor)
Guest: Arjun Sethi, Co-CEO of Kraken
Episode Date: October 28, 2025
Episode #: 932

Overview

In this episode, Stephen Ehrlich interviews Arjun Sethi, Co-CEO of Kraken, about the company’s strategies and vision for dominating the emerging markets in crypto derivatives, tokenization of assets, and on-chain financial infrastructure as they look toward 2026 and beyond. The discussion covers operational resilience through market crises, Kraken’s unique co-CEO structure, the evolving landscape of perpetual derivatives, Kraken’s tokenization initiatives, regulatory engagement, and the company's disciplined approach to growth and innovation.

Major Discussion Points & Insights

1. Navigating Crisis: Black Friday and Kraken’s Resilience

[00:36 – 09:44]

• Black Friday Panic: Ehrlich opens by recalling past Kraken experiences during major market crashes and asks Sethi about operational responses during crises like the recent "Black Friday."
• Operational Resilience:
  • Sethi on surviving volatility:

    “Our focus at Kraken and my team's focus was just straight up, you know, what's our operational discipline? What do we need to make sure that our systems, liquidity, and our clients are protected? ... Uptime has to be always a muscle memory for everyone.” — Arjun Sethi [01:44]

  • Crypto infrastructure’s strength:

    “Events like this remind you why the crypto infrastructure has been built and continues to be built for these types of extremes. It’s transparent, it’s more capital efficient, and it’s more robust.” — Arjun Sethi [03:33]

• Team Calm in the Storm:
  • Sethi credits Kraken’s preparation and transparency, noting the team remained calm and focused, reaching out to help ecosystem partners instead of scrambling internally.

    “This is probably the most calm I've ever seen the team, because we were already meant and built to withstand any of these types of situations.” — Arjun Sethi [09:14]

2. Kraken’s Co-CEO Model and Leadership Dynamics

[04:06 – 08:28]

• Why Co-CEOs?
  • Sethi advocated for a co-CEO model to better handle the complexity and breadth of modern crypto exchanges, which span multiple products, markets, and regulatory domains.
  • Division of strengths:

    “We’ve divided a lot of our responsibilities around strengths—platform, product, client experience—and sometimes we jump where we need to together. ... We're in every channel together. We're on almost all calls together.” — Arjun Sethi [06:30]

  • Continuous Alignment: The structure enables global, round-the-clock leadership and quick decision-making without loss of cultural or operational continuity.

3. The Derivatives (Perpetuals/Perps) Strategy

[09:44 – 15:13]

• Perpets as Growth Engine:
  • The global market is shifting toward derivatives outpacing spot trading.

    “Derivatives, just like any other market, are continuing to already outpace spot globally. That’s not a surprise. ... Derivatives professionalizes [the industry]. Every mature asset class has evolved this way.” — Arjun Sethi [10:45]

• Regulatory and Product Investments:
  • Recent acquisitions (e.g., Small Exchange for DCM status, NinjaTrader for FCM capabilities) allow Kraken to build regulated U.S. derivatives and reach both retail and institutional clients.
  • Key strategy soundbite:

    “We’re building these rails for many, many years and we want to get it more right than wrong.” — Arjun Sethi [12:11]

• Philosophy of Customer Ownership and Openness:
  • Echoes Jesse Powell’s stance encouraging customers to self-custody and using exchanges solely for trading:

    “The promise of crypto was the ownership. What's the promise of crypto is it's yours. ... Having a regulated infrastructure with deep liquidity and a reputation for integrity and values is what matters a lot to our customers.” — Arjun Sethi [13:57]

4. Liquidity, Fairness, & Auto-Deleveraging (ADL) Policy

[15:13 – 20:43]

• Fair Derivatives Trading:
  • Kraken’s ADL (auto-deleveraging) operations are rules-based, transparent, and do not offer preferential treatment.

    “There’s no preferential treatment whatsoever. Everyone plays by the exact same rules. ... Our approach has been actually pretty conservative; it has to be a last resort mechanism.” — Arjun Sethi [17:07]

  • Dedicated insurance reserves are maintained to cover losses before ADL triggers.
  • On Black Friday:

    “We generally have always maintained a dedicated insurance reserve for our derivatives markets. … It was quite low across the board.” — Arjun Sethi [20:35]

5. Expansion Through Acquisition—Small Exchange & NinjaTrader

[20:56 – 25:51]

• Strategic Acquisitions:
  • Small Exchange and NinjaTrader give Kraken both DCM (marketplace) and FCM (broker/on-ramp) capabilities, enabling end-to-end control of the derivatives stack.

    “So we've got the marketplace and the on-ramp ... now you're able to control the product layer, the collateral layer, and ... distribute our products to a wider base of traders.” — Arjun Sethi [25:20]

• Multi-Asset Roadmap:
  • Vision is to connect spot, futures, and tokenized markets under one roof for seamless client experience, whether trading crypto or traditional assets like stocks.

6. Tokenization: Plumbing for On-Chain Assets

[32:03 – 41:57]

• Real Momentum This Cycle:
  • Sethi notes genuine buy-in now from cultural, regulatory, and technological perspectives, unlike hype cycles in 2017–2021:

    “Today you have all three in place ... regulated custody, programmable assets, institutions that want to trade 24/7.” — Arjun Sethi [33:19]

• Open, Multi-Chain Approach:
  • Kraken’s XStocks partnership offers tokenized equities not just on Kraken, but permissionlessly across multiple chains.
  • Philosophy:

    “Building it into the blockchain neutral and platform agnostic so that liquidity isn't trapped in silos is, I think, how we thought about it from day one.” — Arjun Sethi [34:55]

• Bridging Permissioned and Permissionless:
  • Sethi describes “identity aware infrastructure” as the key to reconciling institutional compliance needs with the open/blockchain model.

    “The bridge between permissionless and institutional tokenization is really just identity-aware infrastructure … programmable compliance, not gated access.” — Arjun Sethi [39:10]

7. The Impact of Stablecoins on Tokenization

[41:06 – 46:45]

• Stablecoins as Catalysts:
  • The shift is away from experimental, permissioned CBDC pilots to scaled, permissionless, privately-issued stablecoins.

    “What you had mentioned before ... is they have this worldview that they need to figure out how to work within the confines ... rather than first principles, do you think about distribution?” — Arjun Sethi [42:17]

  • The future: tokenized assets with on-chain settlement, commercial viability, and instant delivery-versus-payment.

8. Kraken’s Inc Chain and the Open/Defi Bridge

[47:59 – 53:49]

• Purpose of Kraken’s Blockchain (Inc):
  • Not a closed, corporate Layer 2, but an open, compliance-focused platform for composable finance, lending/borrowing, and on-chain execution.
  • Open infrastructure, trusted gateways:

    “Inc is open by design. Anyone can build on it, connect to it. ... We're going to treat it as compliance and reliability as first class citizens.” — Arjun Sethi [50:22]

  • The utility of INC’s native token is to incentivize ecosystem growth, liquidity, and governance—avoiding the “gimmick” traps of earlier projects.

9. Regulatory Engagement and Clarifying Crypto Policy

[53:49 – 58:05]

• Kraken’s Stance:
  • Proactive, constructive engagement with U.S. and global regulators, advocating for clear and fair rules—not special treatment.

    “It’s not a partisan thing. … As long as there’s clear, consistent rules of the road for American innovators and American companies like us, ... we can upstate expand with substance in the ecosystem.” — Arjun Sethi [54:25]

  • Notes Europe’s lead by example, moving from debate to implementation.

10. Growth, IPOs, and Long-Term Focus

[58:05 – 61:10]

• Disciplined Growth Philosophy:
  • Kraken remains close to its cultural roots: “privacy, your assets are your own,” barely raising capital, operating profitably, and staying transparent with customers.

    “We're living proof that we don't need to be subsidized or raise billions of dollars in order to do X, Y and Z. We can do it when we need to … much more surgical.” — Arjun Sethi [60:28]

• Avoiding Speculation on Future IPO or Funding:
  • Sethi emphasizes Kraken’s self-determination and durability, planning three, five, even ten years out, rather than chasing “hype” or immediate scale.

Notable Quotes & Memorable Moments

• On Calm During Crisis:

  “This is probably the most calm I've ever seen the team, because we were already meant and built to withstand any of these types of situations.” — Arjun Sethi [09:14]

• On Customer Ownership & Exchange Philosophy:

  “The promise of crypto was the ownership. ... It’s yours. It’s not the middle individual or the middle person or the middleman.” — Arjun Sethi [13:57]

• On Fairness in Derivatives:

  “Risk management cannot be a marketing slogan. It is definitely a marketing slogan for a lot of folks ... It’s engineering. That’s how you have to think about it.” — Arjun Sethi [16:56]

• On Tokenization Past and Future:

  “In 2017 it was conceptual… Today you have all three in place: regulated custody, programmable assets, institutions that want to trade 24/7.” — Arjun Sethi [33:19]

Key Timestamps for Reference

• Black Friday & Crisis Management: [00:36–09:44]
• Co-CEO Model Discussion: [04:06–08:28]
• Perps & Derivatives Strategy: [09:44–15:13]
• ADL Policy & Customer Fairness: [15:13–20:43]
• Small Exchange & Product Stack: [20:56–25:51]
• Tokenization Strategy: [32:03–41:57]
• Stablecoins & Tokenization Future: [41:06–46:45]
• Inc Blockchain and Open DeFi Vision: [47:59–53:49]
• Regulation & US Policy: [53:49–58:05]
• Growth, Discipline, IPOs: [58:05–61:10]

Final Thoughts

The episode provides a candid and comprehensive look at Kraken’s bid to lead the future of crypto—by building robust, fair, and open infrastructure for derivatives, tokenization, and on-chain finance. Sethi’s vision is grounded in operational resilience, customer trust, and disciplined innovation, with an emphasis on bridging traditional finance and DeFi without sacrificing openness or integrity.