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00:00As I understand it you believe a sea change is happening in the crypto world and that mainstream acceptance is coming. And here to stay. What do you want or what do you expect. Falcon X is piece of the larger pie. What do you expect that piece to look like going forward. Yeah thanks so much for having me Emily. At a high level I think Falcon just to define that so that we understand what part of the market really Falcon makes is a one stop shop built specifically for institutions. We help them. Tucson's all the way from creating credit clearing and custody through our offers. So essentially I think one of the biggest transitions that's happening right now because a lot of traditional institutions coming to the space is the expectation for the at all brokerages. Right. No longer. I've been looking for simple workflows on a retail centric exchange. They're looking for very complex issues like the workflows like peoples one business a settlement leverage you know pre export X leverage while having the ability to settle. So from that standpoint a lot of institutions coming from the traditional world that expecting the brokerage services that they're used to and that is one place where Valve connects as a company would love to basically play. So you've been in the process of raising money. The valuation keeps going up. How do you want to use that money and why keep raising money. Yeah that's a great question. In terms of the fundraise itself right. We want to be able to be in a position to power the group that's happening to the industry more broadly. Emily the first and foremost if you look at our growth in just a matter of one year less than in the year with a team of 40 45 people we had to scale up our transaction volumes to about 6 billion dollars on a monthly basis. We grew 12 times in one year in terms of revenue. Revenues grew by about 15 times the last four months four to five months. About a hundred or so institutions came to the platform. So what that means is we need infrastructure that can scale seamlessly can provide the same level of trust in the laboratory. So all of that means like we need to be hiding on the engineering of the product side of things. And the second part of Leap as a lot of institutions come in. We've been in the front and center of that. And if you look at the diversity of institutions coming in it's going a lot right. It's no longer just the traditional hedge funds. A lot of corporate treasuries public and private are thinking a lot of retail aggregators are thinking a lot of New York banks are thinking. So when these customers come in they expect a much more nuanced answer in terms of what is bitcoin. How should I go about it. How should we get the exposure the right. How should we custody it. So what that means is it translates to a lot more. Why bite such wide lip service in the form of customer subsystems. So we're going to be using our money primarily for scaling up our engineering teams. And the second part of the customer success side so that customers have a good experience. So what do you make of Coinbase is listing getting back. Obviously Coinbase going public you know is being considered as this sort of moment where crypto could go mainstream. And it certainly is symbolic. But you know there's still scrutiny happening. You know isn't that another challenge. I think it's actually a good thing for international cricket. Emily I think first off Coinbase listing it's a defining moment for crypto as an industry I think. Why. If you look at the source of funding that are shaping the industry it's like either either selling tokens or your future cash flows or venture capital money. Now forensic analysts for the first time they saw a company that incubated 80 years back go all the way to public market listing at 70 billion dollars a plus. What that means is for a lot of traditional and shoot a traditional venture capitalists it's a nice validation of what the space could mean. As a result we are seeing a very good influx of extremely high quality money. I think that's very powerful. Now on the second part of the question that you asked in terms of what does it mean institutions in general are looking for better regulatory clarity. If you look at what's going on in some of the details I'm not available but having a diverse set of expectations that own market data integrity how create some of reported all these things. The clarity around that is going to be really powerful for institutions in general for approving things like best execution. So while the delay is they push just the excitement off by two three four weeks it's actually a welcome change for institutions in crypto. It's also supported by data last time last three times. Major you know regulatory moves happen. Institutions reacted very well. Rather it's like the new that. But mixed. Are you SDP. So likewise we are beginning to hear good things about. Must have been sure since working because have not very watered. In fact they're welcoming the opportunity that regulators are looking at market data and all of this closely. Is there any MSA interest around Falcon Acts have financial institutions been shopping. So especially with the last six months Yes a lot of major banks. They're all considering the build versus buy decision primarily because that a lot of their own customers are reaching out to them in terms of understanding what crypto means to them. So yes. Over the last six months it's it's been a lot of inbound not just from U.S. banks on its insouciance but also worldwide. So Bitcoin now at fifty four thousand seven hundred dollars. I've had folks tell me it's going to infinity the moon and beyond. Give me a more realistic number. Where do you think this is headed. So. Yeah man I've seen crazy numbers come up but I'm not sure if all of those things are justified. But what I can definitely tell Emily is this time there is a much more fundamental shift than what we saw in 2017. Crypto Bull Run. What is that fundamental shift especially within the backdrop of world printing. A lot of money. Six to eight billion dollars at least. Lot of institutions are beginning to see bitcoin as an inflationary hedge especially with Barbara Dow Jones and Druckenmiller Stanley Druckenmiller talking about it. That really brought a lot of value to teach critical institutions and political hedge fund. So that is one aspect not the second fundamental shift that we are seeing is the Balkanization of the US dollar. Why does it be interesting. I believe in from our standpoint when we look at how these institutions are evolving. They all came in for bitcoin exposure because of conflict study hedge. After that they started some of them a small portion although I started experimenting with the medium. Now the third shift that we're seeing is instead of us using US dollar as basically though the base for these transactions that are beginning to use USD seed which is a stable coin that's backed the US dollar. The beauty of USD seems like it's 24/7. You can walk on over the weekends as well as crypto is moving over the weekends. A lot of these traditional institutions will never have the infrastructure to create all the weekends. Now we're trading over the weekends and really averaging the efficiency of USD being deaf to improve the balance sheet efficiency. So with all these fundamental shifts coming in I'm much more efficient. A live optimistic compared to the 27 deans of the world. Every. You also think institutions and corporations are all going to be investing within a few years. Do you think companies like Uber who said you know we're not investing right now we're not speculating and others will be eating their words. And and at what point do they say well we're going to invest in it too. In your view. Yeah I mean that's a that's a great question if you look at the interest of corporate treasuries coming in. We saw the first wave of them come in October November and a lot of them were just dipping their toes right. I mean yes there is this 8 percent decline exposure from Mark Tessler but that is 14 feet. Most times we see about 1 to 2 percent. Now they're really cautiously coming in especially with the recent announcements with some major companies coming in. There's a lot more activity. I mean we are in conversations with a meaningful number of Fortune 500 companies now. Some of them are really skeptical. They're like yeah I mean bitcoin exposure. Tell us about Bitcoin. We're not shocked. But what is interesting Emily is the worst comes of it. Rob those corporate treasuries I'll be also looking at maybe not Bitcoin exposure. We're not ready for it. But new generation of crypto is much much more efficient than what you're seeing in the traditional markets. A commercial bank would potentially give you eighty two hundred and thirteen hundred and forty basis points on the crypto side of the equation that's factoring in for players like us. We're seeing about you know 600 to 700 basis points and that is where even the most conservative people are jumping in.

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Coinbase Going Public a Defining Moment for Crypto: FalconX CEO

FalconX CEO Raghu Yarlagadda explains his company's position in the cryptocurrency market. He also shares his thoughts on Coinbase going public and why he sees their listing being delayed as a good thing. He speaks to Emily Chang on "Bloomberg Technology." (Source: Bloomberg)

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