Hi there from Consensus. The Block team is here with Arjun Sethi, who is of course the co-CEO of Kraken. Arjun, we just spent some time on stage at Solana Accelerate. It's been a big year for Kraken. Pretty much a year since you guys launched X stocks. A lot has happened since then. Huge amount of trading volume. Can you just give us a TLDR of the journey over the last year and how much you've seen in terms of growth with X stocks?
Yeah, so thanks for having me. I think what's most important is you take a step back and you look at the overall crypto ecosystem. The promise was lower settlement times to none, moving your collateral the way you want to, and it was most appealing to speculators and traders at the beginning. But over time what happens is that you want some of those assets to accumulate value or you get a yield on those assets. But that's no different than consumer retail all over the world or mid-market. And I think tokenized equities for us was just a natural evolution from BTC to ETH to alts to meme coins to stablecoin revolution to now real-world assets. And then within real-world assets, tokenized equities we think is the fastest way and most recognizable asset for people worldwide to be able to adopt what tokenization of any asset is going to be in the future. And so, you know, 10 years ago if you looked at adoption of stablecoins, backed one-to-one, it was not on a steep clip. It just took time and you had algorithmic stablecoins as well. And we've seen that story play out. And I think tokenized equities is in the same pathway where there's multiple different models. There's debt securities, there's one-to-one backed instruments, there's synthetic systems outside. And so, we're all starting to coalesce on what's best for the customer, what's safe, how do you proliferate it, and then what are all the products and services that you build on top of it? And that has to be a combination of centralized world, TradFi, and DeFi coming together. You're starting to see early versions of that, but they're all attacking it in different ways. And our whole goal has been to feel what does the customer want? We'll build that, and then work our way back up.
I was curious to ask you about that because you look at someone like Robinhood who last year launched their kind of tokenized equities platform as an Ethereum L2. How did you kind of decide as Kraken to tackle tokenized equities and bring them on chain because they're pretty chain agnostic from what I can see.
I think regardless of the chain, what's more important is is it interoperable with other ecosystems? And the answer most of the time is no. And we took the very specific route, similar to how you think about stablecoins, which is this shouldn't only be within the Kraken ecosystem. It shouldn't be walled gardens. It should be that if you use a Phantom wallet, a MetaMask wallet, if you use a decentralized exchange, DEX, if you use another centralized exchange like Bybit, that we should be able to build an infrastructure to support everybody. That's what we built up. That's probably why we continue to proliferate not a very concentrated portfolio, but multiple consumer retail folks all over the world, and including Europe where we worked with regulators to get the product out in a permissionless way, as well as other markets that are unregulated to have permissionless tokens.
I just want to look at the numbers here. $5 million worth of value that's been settled on chain. That's a huge amount, and that's also considering that your US customers can't use X stocks on Kraken right now.
What's the timeline for that being open? And do you think that's going to open the floodgates and make $5 million look like peanuts?
I don't think it's going to open the floodgates the way people think. I think people think okay, now that you've got let's say a market structure in the United States, the ICC gives the blessing around what tokenized equities is going to look like in the United States. It's not like these broker-dealers and these banks and institutions are going to change their collateral systems. So, what's more important is what's the access that you get all over the world? How does that access move? What does money movement look like? Again, how do you think about debt or access to capital for those assets for other FinTechs that want to be able to provide it? And so, most of the adoption for us right now on the platform are all FinTech companies, in Mexico, in Brazil, in any of these markets. So, think about what Africa's going to look like. Think about what Southeast Asia's going to look like. All of these emerging economies are going to come on. So, they're going to do a quick leapfrog. As they leapfrog and they have assets and they want to think about wealth management, debt, movement of that collateral, working with larger institutions, those larger institutions then adhere to it to say, okay, great, well, my customer wants to X, Y, and Z. I need to flip and make this available. So, I think that journey takes 5 to 10 years. It doesn't take 5 months. On the flip side, we're already there. And so, as we get more and more adoption in our ecosystem within Kraken, within Payward, as well as outside the United States, we're able to sort of look at new ways in which we can monetize or add value-added services. So, assets under custody, assets under management, banking rails, those are the types of things I'm working on at Payward at a high level so that we can support all of the ecosystems that are building for innovation. And the faster and faster it compounds, we have products and services that are there to support it.
What is the onboarding process for specific tokenized securities? Is it anything and everything that you see being traded on Kraken, Bybit, Coinbase?
So, today it's equities. And over time it'll be other assets that will be also securities, right? So, if you think about a credit fund yield, if you think about commodities yield, we'll be adding all of those as well. So, when I say real-world assets, the types of assets to think of immediately because they've got pricing and you have something that you can build around it, like perps, are going to be commodities and it's going to be equities.
