Good morning, Arjun. How are you?
Good. Good. John set us up nicely. No pressure there. I feel like he's interviewed you before in the past, so hopefully I do as good of a job.
I heard there's some good news yesterday for you as well.
Potentially. Yeah, maybe. We can get to that later. I did want to start with something I've noticed walking around the conference since I've been here yesterday, and that's the Kraken by Payward signs. I'm seeing a lot more Payward branding around. What's behind that? Is that a strategic shift for Kraken, for Payward, to be putting the holding company, the parent company, as more of a front and center brand?
No. So the company actually started off as Payward; it was just in the background. And then as the number of products that we started building out have gone more and more into financial services and the different types of customers, we decided to elevate the holding company or the parent brand more so than we did before. So we have Payward Trading, Asset Management, Banking, and now Services, which is essentially everything that we built from day one. We're extending that out to other clients' capabilities and businesses.
You guys have a lot of brands under the Payward brand—I guess a lot of companies. What does a better financial system look like to you? Because you're building something clearly here at Payward that in your eyes is better than what exists as the status quo. What are you building, and what's the vision for Payward in the long term?
We've got this motto internally, which is if you fix money, you fix the world. While it might seem like an extravagant statement, I think you just take a look at over the last 14, 15 years, especially with the advent of crypto, Bitcoin white paper, etc. I think what's most important is when you take a look at why people have been using crypto or getting access to BTC, ETH, and other alts is that they want access to something more than what they had before. Take a step back from what that means. If you're outside the United States or even within the United States, you've had neobanking, but outside you may not have it at all. And so you've got to travel 50 miles, 100 miles to get to what we call a tier one or a tier two bank.
And so access has become sort of what I call not the game, but a standard. Crypto is kind of the first one, which is you've got a mobile phone, you've got a custodial or self-custodial wallet, you can buy something. And now we've extended that out further and further into what are the types of financial services that you can get. So for us, when we say open and global rails for everyone is, okay, great, well how do we use crypto given we're crypto native and we started there, vertically integrated exchange, listing assets, going through that process? What are the types of products and services that we can build, not just for a protocol, but the end consumer, whoever that may be?
And so what we've decided to do is, in order to be able to serve those customers, we have to bifurcate the types of products and services that we have, not too indifferent to a JPMorgan or a financial institution. So you can look up to them and say, okay, this is how they extended out their capabilities to customers worldwide. We want to be able to do the same, but in the way in which the world works today and what we think it'll work moving forward, which is how do you get people access to any of those assets, no matter what they are. You hear these words like tokenized commodities, equities, etc., as like a niche that people are working on. The way we think about it is, great, well how do we take that product, distribute it to billions of people worldwide, not just through our applications that we build on our infrastructure, but even partners that want to work with us? And that's why we partner with other exchanges and fintechs leveraging the infrastructure that we have.
Super app, I think, is the sort of buzzword of the moment, and it's something that some of your peers in the space have been moving in that direction, looking into. I think though super app is probably understating what you guys are trying to do. It sounds like much more of a broader initiative to build financial infrastructure as opposed to just sort of a consumer-facing app, as it were, with all the companies and things that Payward offers in that one app, so to speak.
Yeah, I think what happens is if you start—if you're a startup company and you go pitch investors, the first thing you say is here's my value proposition for a certain set of customers and I'm going to be able to grow, and then ideally you're able to grow that product and scale it as quickly as possible worldwide, right? We've seen this happen obviously at the end of the internet, and now you're seeing that with AI workflow, ChatGPT, etc. The problem with regulated industries like healthcare or financial services is that it's regulated. So each market is a different playbook. Each market has a different set of constituents and customers, and you have to think of it that way. You can't just continue to scale that out if you're doing it in a regulated fashion and you want to get those products and services out.
And so that's how Kraken started, and we've evolved as Payward. We never really took venture capital. We were self-sustained from day one, and so the motto internally was, well, we're going to build financial services for everyone. Well, that's a pretty crazy statement to be able to make to the world in many cases. And so if you say you're going to rebuild the world and you're going to rebuild financial services from the ground up and you want to take out the intermediaries that extract—those are all pretty audacious goals, and so we're going for it. We're going to continue to step in that direction, and it's one of the reasons why we've been able to think that way and have that playbook mostly outside the United States as we've continued to grow. I think that that's probably the right way to think about why we sort of stay strict to that policy.
I do want to get to your latest earnings results. They show that revenue grew 17% even as transaction volume fell 18%, and keep in mind this is all taking place in a bear market, right? So would you say that what you're seeing from these results at least is that Kraken/Payward is perhaps moving away from sort of that volatility market cycle stickiness that some companies sort of live and die by? I think in an appearance recently you called them market visitors, right? People who kind of come in and out of the space when it's hot and shiny and they leave when it's not. Would you say Kraken now is operating more on like a non-cyclical crypto market basis?
Look, we built the exchange and we built the infrastructure to be multi-product, multi-asset. The crypto industry started off with one, which is Bitcoin, then moved on to Ethereum and then so on and so forth. And so of course you're going to be susceptible to that market. Now as you start expanding into multiple asset classes, as I mentioned, you're just generally going to be less cyclical to very specific markets, and then you're going to ride the wave of other cyclical markets, and then vice versa on the other side. In the crypto industry, spot might be down, but futures and perps are up, derivatives are up depending on which market. If you are also not just in one market—the US has its own macro and micro, but then Asia's different, Europe is different. So we're pretty global, and so sometimes when one market is down for us, another market's going up.
But again, I think the name of the game really is access, distribution to those customers, who they are, and what they're looking for at any given time, especially with what's happening in the world today. When you think about oil futures, and you think about silver, and you think about gold, these are conversations we never had at least in the crypto industry three to five, 10 years ago. Today we are. And I think that's where we've been able to capture our customers' workflow, where they're not now just looking to trade, but they're also looking to get yield or get deposits with us or have that safeguard. And that's why we've extended out where it's not just Payward Trading, but we do banking services now. We do asset management now. We're going to continue to extend that, not just assets that are crypto.
However, the caveat there is that we are crypto native, and so we think about building risk management in that way. Tokenization becomes a large part of that effort, and then bringing in partners along the way where any individual, regardless of if they're an institution, if they're a market maker or taker, or if they're a professional trader, if they're just an average individual, how do we give them the ability to risk manage their assets across multiple asset classes the same way large institutions do that that are not available for everybody?
And you said recently that for a public company to succeed, or for a company looking to go public, then you really need that foundation for compounding growth, right? It can't just kind of go by what we just talked about like market cycles, what's hot, what's not. You've gone through a lot of acquisitions this year at Payward. Would you say that is sort of that grounding foundation that you've been talking about? And then, what really needs to happen from your point of view? I know you have said that you're not rushing to IPO, but what still needs to happen from a business and maybe market standpoint for that to happen?
Yeah, I think this goes back to the FOMO category, which is how do you build a long-lasting, durable company that has partners along the way and build an ecosystem. That doesn't happen overnight. And so if you rush to go public, or similar to when we list tokens for a foundation, what's the value proposition, who are your customers, what are you trying to build, even if it's rails? And so we're doing the same thing. We're just going to build a company that is durable, that works, ideally continues to compound and grows at a faster and faster rate. So that's our ambitions, that's our goal. And so for us, public markets, it doesn't really matter when it or if it happens. It's just more of that if you decide to go public, then you're a company that is durable and that's strong, that's not susceptible to any of the cyclicalities. But that's no different than the private markets.
How would you characterize the state of the crypto market today?
Well, you had mentioned there's a lot of visitors that come in and out of the ecosystem. And so I think last year after the elections, there's just a lot of folks that came in and running at 100 miles per hour. There's more and more speculators that come in. That's pretty natural of any market; it's happening in AI today. You're starting to see some ramifications there in the private credit world. Look, the builders that are building in the crypto ecosystem, that are building in DeFi, they're there. They're continuing to grow. You're seeing initiatives like Hyperliquid; I think those are all exciting. I think we should continue to support that in any way possible. But I think the community has this directionality of oscillating all the time. And I think if you're in it to win it for the long haul, like 10 years out, 20 years out, you're still in it. And if I look at most of the audience today, there's at least a good core group of 20% that are still here.
Yeah, there's the OGs and I'd say just long duration thinkers.
And then there's the folks that just kind of rotate in, regardless if they're regulators, corporations, banks, etc., etc.
Mhm. Want to get to some policy before we run out of time here, but you have been invited to a meeting at the White House tomorrow, I believe, to celebrate the kickoff of the Investor Advisory Committee at the CFTC.
