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Crypto meltdown: We’re ready for ‘significant growth,’ Kraken COO says

Kraken COO Dave Ripley joins Yahoo Finance Live to discuss the crypto bear market, Kraken's culture and product launches, and the outlook for digital assets.

Video Transcript

BRAD SMITH: One of the largest US crypto exchanges is getting a major leadership change amid the current meltdown. Kraken's CEO Jesse Powell stepping up to the chair, that of the exchange's board. In that role, he's going to oversee product and dip his toes into advocacy work after finding himself in the hot seat due to insensitive comments and a poor corporate culture.

Joining us now is Kraken COO, Dave Ripley. He's been tapped to succeed Powell as CEO. Good to have you here with us today. First and foremost, the leadership changes coming after a time where corporate culture has certainly taken a hit. So with all of this in mind, what is the company and the executive team trying to signal to the team, the employee base, even amid so much of the challenges that the broader macroeconomic environment have presented?

DAVE RIPLEY: Yeah, well, thanks for having me on here. I think a couple of things there you wanted to touch on, so culture and then the broader environment. So first of all, on culture, Kraken's culture is thriving. It's amazing. We just recently, of course, did some great work articulating and codifying our culture. And we released that publicly. And it's been a resounding success for us.

On the heels of that, we launched our annual engagement survey. And across the board, we're above industry rankings on almost every category to a considerable degree. So just a fantastic set of team members, Krakenites, as we affectionately call them. And so culture is in a fantastic place. And we wouldn't make this move if that wasn't the case.

On the broader market, for sure, absolutely. It's probably a crypto bear market here. But this isn't our first rodeo. I've personally been through three bear market cycles in my time in crypto. And this one, more than ever, is an opportunity for us.

We've been doing a great job of adding new talent to the team, as the recruiting environment gets a little bit more amenable to-- opens up a bit more and have been focused on scaling the business, scaling the product operations, and all of these types of things that we have an opportunity to do while the market plateaus here. So we're really excited about the opportunity to catch our breath, to really fortify the business, and get ready for some significant growth to come.

DAVID HOLLERITH: Dave, you know, I'm just curious. I know you've been around with Kraken for a while. And between this, like, leadership shift, is there any meaningful change that the company will see that you want to talk-- speak to? I mean, I know, obviously, the company has been talking about doing something like an IPO for years.

DAVE RIPLEY: Sure. Yeah, so great questions there. So, you know, first and foremost, I'll just hit on the similarities. Kraken is incredibly mission driven. Our mission is going to remain steadfast. Our values and our culture, they'll remain unchanged. And this is the constant. But you're absolutely right.

Look, Kraken is-- since the time I joined, we were 50 people, and now we're over 3,000. So as we look forward to grow, we will have to change and adapt. And we'll have to scale the business and look to operate differently, ideally keep some of that innovative and entrepreneurial potential, but frankly, scale and meet the challenges of a larger organization. So that's undoubtedly going to be the case.

And then with regard to IPO and fundraising, for sure. So we are always kind of top of mind with regard to our capital structure and where we sit. We have a strong financial position balance sheet right now. We haven't actually tapped capital markets and fundraising significantly in Kraken's past relative to our peers, if you will. But it's absolutely something out there that we could look to, to fundraise in the future. And whether that be private or public is something that would be TBD.

JULIE HYMAN: Dave, I got to say, there's a lot going on at Kraken. I mean, we talked about the cultural issues a little bit. You guys are reportedly under investigation from the Treasury's Department of Office of Foreign Assets Control over potential sanctions violations.

The former CEO told people to leave the company if they didn't like the culture of the company, if they didn't like what he had to say. And a lot of people didn't like what he had to say. Did you guys have an exodus of people? Are you now, as you're rebuilding and changing the culture, you're trying to hire a lot of new people if those people left to replace them? Like, talk-- I mean, from the outside looking in, it feels like there's a lot of turmoil there.

DAVE RIPLEY: Yeah, like I said, could not be more inaccurate on that last piece there. So, you know, I'm not too sure how else a company would want to operate other than to clearly articulate their culture and ensure that people that are part of the company are actually happy there and want to be part of the culture. And that's exactly what we did.

I'm nearly certain in the absolute dozens of companies that I've worked with, public companies, Fortune 500 companies, that those with the kind of, like, the strongest mission and culture are the most successful. And that's definitely Kraken. And so upon articulating our culture, we did actually take the step to say, like, hey, guys, if anyone here isn't on board with this, we're happy to help you find your next opportunity. And that's what we did--

JULIE HYMAN: So did people leave?

DAVE RIPLEY: Yeah, it was about a fraction of a percent, so a little less than a percent of the total. So it was something just under 30 people, and we have about 3,300 total in the company.

DAVID HOLLERITH: Dave, turning towards the staking side of your business, which has gotten a lot of attention since Ethereum just sort of transitioned to proof of stake, and it's created this whole staking industry, I wanted to ask, have you seen, like, any significant changes with your staking business since the Ethereum merge? I've seen a note from JPMorgan, who sort of pointed out that Ethereum staking hasn't really grown as much as was necessarily anticipated after this merge upgrade.

DAVE RIPLEY: Yeah. You know, I don't know if we expected any kind of, like, instant change or growth in total asset stake due to the Ethereum merge. But we do think it'll continue to grow over time as, of course, the network moves through this transition from wholly proof of work to wholly proof of stake. But there's still time left on the overall transition until it's, like, fully complete.

And so, yeah, we expect staking balances to grow as a share of the total. I mean, in the end, it won't be that all 100% of Ethereum tokens are staked for a whole host of technical reasons. The network, of course, wouldn't function if that was the case due to lockups and so forth. But yeah, we expect it to grow from here and continue to. We see kind of, like, the same continued growth in Ethereum staking that we've seen over the past six months.

BRAD SMITH: Dave, you were reportedly valued at $11 billion in mid-summer this year. The crypto markets have taken a massive plunge, even since that point in time. How has that impacted the company's valuation, the cash positioning? And even as you're kind of looking across, where crypto in the broader kind of buildup of some networks and the still speculation and speculative asset that many investors look at it with, how does that directly correlate to the company's value itself?

DAVE RIPLEY: Yeah, so we, of course, don't know definitively, right? Kraken is a public company, and there isn't necessarily-- or sorry, a private company, and there isn't necessarily price discovery on the valuation of the company in real-time. And so that's something that will come about when we do subsequent fund raises, or someday if the company is public, that would be the case.

BRAD SMITH: Do you need to raise funds right now?

DAVE RIPLEY: We don't. Yeah, we don't. I mean, this is kind of on your second piece there. Yeah, we have a strong financial position. The broader drawdown in market caps of companies, of course, don't impact our balance sheet at all. So that remains unchanged from that standpoint.

JULIE HYMAN: And a quick follow-up on that, Dave, we've seen some other exchanges going out and making acquisitions, right, in this environment. Do you guys see yourselves doing any of that?

DAVE RIPLEY: We do. We have a strong and fully built out M&A team. And they're active. We did a significant acquisition of a company called Staked to really fortify our position in the staking market less than a year ago. And we're kind of continually looking for acquisitions, primarily a lot in new product and tech within the crypto sphere, that makes sense to add to our portfolio.

JULIE HYMAN: Dave, thank you, Dave Ripley, and thanks to Dave Hollerith as well. Appreciate it, guys.

DAVE RIPLEY: Yeah, thank you.