Dave Ripley, Kraken | theCUBE + NYSE Wired: Crypto Trailblazers

Yeah, great to be here. So news is out there.

Yeah. Well, it's fantastic and particularly if you contrast it to where we were a year and a half ago or a year ago, or even less than that, six months ago, let's face it, back in November, we had change of administration. The U.S. policy environment was frankly couldn't get any worse in the previous year and now there's just massive tailwinds on the U.S. policy front, and that's frankly had a lot of positive impacts on the broader market, Kraken as well. So yeah, we went from talking about litigations with the government to talking about strategic Bitcoin reserves.

Yeah. Well, you hit on a few good points as far as new technologies, products and services that have come to market. You mentioned the ETF, you mentioned about non-custodial. We can tackle those two. They in some ways go in different directions, but I think they're both meaningful for the ecosystem. So on the ETFs, for example, a regulated product, a product that's accessible, familiar for many that are in TradFi, if you will, whether it's individuals or even hedge funds. The advent of the ETF actually drove a significant new adoption of institutions actually. Previously we had HFTs and VCs and hedge funds somewhat in the space just trading on native crypto markets with the ETF that brought in the RIAs. And of course they were able to offer crypto for the first time really to their clients. And so I think that's a fantastic part of the ecosystem to bring more people into crypto. But then if you flip to the other side with non-custodial and decentralized exchanges, that's really exciting, frankly more exciting. And we've seen over time that the share of total trading volume in the crypto industry has moved from at one point 0% on decentralized exchanges to now we're in the 15-ish, 15% of total, pushing 20% of total, which is a fantastic development honestly.

Yeah. Well, here again, there's been a shift in our business that has somewhat tied to the market but also tied internally. So over the past year and a half, we've actually spent a lot of time fortifying our existing geographies. U.S., Canada, U.K. Europe and Australia, those are our core geographic markets, bringing more product to those geographies, which required a lot of work on the licensure side and a number of different things. And we've also localizing the product, ramping marketing. And we've achieved a lot of those goals. So now we get to turn our attention more towards expansion. So new geographies. There's a lot of exciting markets out there where crypto's really interesting LATAM, places in Middle East, Asia Pacific, and we're looking into all of those now.

Well, again, I'll probably point out two things that almost might feel like they're in somewhat different directions, but we both think they're meaningful. So one is potentially more of a convergence of crypto and traditional financial services. And so we see a lot of the companies in the traditional financial services space coming into crypto. And we think that the two are going to merge. So you see on the institutional side, of course, BlackRock came in earlier in the year with the ETF, CME and ICE have been in for a while and you name it. Of course the FinTechs as well, Robinhood, Revolut and so forth. So you see all this. But then when we look towards our customers there is this dynamic where, hey, they're interested in trading and investing and that might apply to both crypto assets and beyond. And so I think there's this convergence and Kraken's going to be a part of that, whether it's tokenized equities or something in that direction, tokenized other assets, were starting to move in that direction. And then on the flip side, again, it's this brave new on-chain world where we talk about DeFi, decentralized exchanges, and we're really leaning hard into [inaudible].

Yeah, it's a great point. I think it's both. I'll hit the entrepreneurial one first because this is really the first time that we've seen in decades, hundreds of years, where there's been this level of entrepreneurial ability in the financial services space. And so we see particularly in the on-chain crypto world, a number of different companies that are a couple people on Telegram or Signal or whatever it is, and they're launching apps that get adoption into the hundreds of thousands of users and even revenue. We encountered one new app wallet that was ramped up to eight figures in revenue. And that's just with a couple people. And I think that trend is more true now in financial services effort. It's actually a trend that is kind of across technology with AI and all these types of things as well.

Yeah, that's a good question on the trading side. Look, I mean, I think in crypto, one of the things we've seen is just a proliferation of the number of assets and cryptocurrencies out there. And that has been true historically, and there's been ebbs and flows. And we've kind of seen that ramp up over the past, I don't know, six months plus meme coins and all of those opportunities out there. So I think the general trend is going to be more, not less.

Yeah, well thanks for using the term platform to refer to Kraken because that's how we think about it. We have a platform that serves a set of products to a number of different customer segments. We put it in three buckets. Individual consumers, individual advanced traders, individual professional traders, and then institutions. There's of course a spectrum of those groups. But yeah, we really see how do we take a set of products, whether it's trading, investing products, hedging, derivatives, staking some of this new on-chain stuff and find a way to meet each of those customer segments where they are and make it accessible, make it how they want to interact with these various different products, and that's the power of our platform is the ability to do that.

Well, it's a great point. I mean, this is not to say that look, everything starts and ends with the customer. I mean, that's the whole objective of this whole thing. And it's really, hey, I mean, we talk about platform, it's a means to an end and the end is, hey, how do we serve more customers better more quickly, offer them more products of what they want and better user experience, easier, safer, all of those types of things? So that's really the objective of thinking about it that way.

Yeah, so I think a couple of different things. So one is look, the foundation of Kraken, how the company was founded, was on this foundation of security, market-leading service. Also, in order to operate in the markets that we operate and provide a great experience we need to support the domestic fiat currency, which also means regulatory compliance. And so that's the foundation in order to offer that best-in-class experience for our customers. And so we lead with that. And then the other thing that I'll mention is that where we Kraken initially came out into the crypto space was focusing on individual advanced traders. And so we were one of the first to go multi-token, one of the first to offer margin, one of the first to move into derivatives. And so we've been really strong with that group. And so I think as we move into, for example, the new on-chain world will be looking to make sure that we serve that population as well.

Yeah, I'll maybe just call out a couple. So one, we actually just released our headline financials for the full year 2024, and we did that frankly on a path to being more transparent about financials and being in the public markets and so forth. And so we're committing to do that on a go-forward basis, which is something we were one of the first to offer proof of reserves and so look, we're going to be moving even more so in this direction. The couple of numbers to highlight, one would be 1.5 billion in revenue. So that just gives a little bit of a frame of the size and scale of Kraken. We're off across a number of major markets offering a lot of product that all stack up to that 1.5 billion in total revenue. The other thing to note is ARPU, so average revenue per user, around $2,000 per year annually. And that is one of the highest level ARPUs versus all of our peers. Much of that is tied to we're really strong with those individuals that have a deeper relationship with Kraken, more the individual advanced traders that are more active. And so that's one of the things that differentiates Kraken, is that we have high quality customers, if you will, that seek to come back high retention. And that's just a testament to where we've invested.

Yeah, sure. Look, I mean, I think as I mentioned before, Kraken is one of the top places to go for crypto in the space. I mean, we've built the company on a foundation of security compliance, top level service, incredible user experience. And now looking ahead, we're going to be offering some of the most innovative and new products in the marketplace.

It's incredibly legit. I mean, our founders, Jesse and Thanh referred to Kraken often as a security company with an exchange built on top. It's everything. I mean, it's absolutely critical. It has been critical in the crypto space and it'll continue to be. We invest massively in this area. We have hundreds of people focused on just in the security function, but then when you look more broadly, there's a security mindset that's deep in our values across all parts of the company, the engineering team, also the client support team. And so I think it's across the board and we really emphasize it.

Yeah. Look, I mean, I would say one thing about Kraken, we're certainly not maximalists on this dimension. I mean, part of the fantastic part about cryptocurrency and blockchain innovation is that you do have this open permissionless platform where anyone can build, anyone can use it, but also anyone can build on it. And I think that's one of the powers of it. And so I mean, we do embrace all of these different aspects. The multiple layer ones out there, we want to be a part of those, give people access to them. We do have a layer two now, Ink, which is off to fantastic start. So look, I think all of those are fantastic. And that's really the essence.

Yeah. Well look, I mean as far as the trailblazers and the history of crypto and the dirt blowing in our face, for sure. Look, I've been through now three bear markets in crypto and after the first two, I came into the third and I was like, "You know what? We got this now. This is going to be simple. No big deal." And then we went through what we did over the past two and three years and I was like, "Okay, this was effing challenging." And each market dynamic, each part of the cycle brings its own set of challenges. And so I think frankly, we learn a lot and we learn something new each time. Going forward, look, I mean, I think we're really in optimistic place, certainly for the industry and even more so for Kraken.