Kraken CEO: What The Company’s SEC Settlement Means For The Crypto Industry

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Following is the unofficial transcript of a CNBC exclusive interview with incoming Kraken CEO Dave Ripley on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Tuesday, February 21st.

What Kraken’s SEC Settlement Means For The Crypto Industry


ANDREW ROSS SORKIN: Right now in his first interview since the settlement is Kraken incoming CEO Dave Ripley. Good morning to you. Lots of questions about the settlement, but also what it means more broadly to the crypto industry and really how the SEC is policing the world of crypto.

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I think there's still so many unanswered questions about sort of the path of travel and I think a lot of companies out there in your space, you know, confused about what they are allowed to do, not allowed to do, what it means to register with the SEC, all of those things. I'm curious what your lesson is from from this settlement and also I'm curious, are you allowed to talk about it publicly?

DAVE RIPLEY: Yeah, well, thanks, thanks for having me on, Andrew. It's nice and early out here in the West Coast. First time I'm probably up before my kids. But yeah, so happy to, happy to share a number of things. You're right, thanks for the preface.

You know, one of the aspects of the settlement is that we can neither confirm nor deny any of the claims contained with within but I am happy to comment on, you know, crypto, cryptocurrency, regulation policy and a number of the things at play here for sure.

You know, Kraken has been a company that we've been around for over a decade. We're going to be around for another decade and several more to come. We've built the company with a security mindset focused on clients, focused on service and regulatory compliance.

You know, we're active with licenses and registrations across the globe in many different geographies so that's really really how we approach this space.

SORKIN: Dave, let me ask you though one big question in the industry around this settlement in particular is, you know, you're no longer offering this stake you service in the US but you are offering the service elsewhere and that raises a broader policy question around how other companies in your space are supposed to work.

But also, whether Americans or others are going to then basically move towards the international service as opposed to doing it on shore if you will.

RIPLEY: Yeah, well, you're you're hitting all the right questions, honestly. So, you know, when Chairman Gensler was was on your show, you addressed this and so there today are a number of other staking services available right here in the U.S. Chairman says they're all on notice.

But as we sit here and speak today, they're all running. And so maybe these end up getting shut down. We don't know, tough for us to of course, comment.

But one thing that will not happen is that all of the staking services that are running across Asia and other parts of the world will continue to run and we know firsthand that many U.S. customers, U.S. users go to these services offshore.

And what lo and behold happens is that many of these services are in jurisdictions with no regulation, you know, companies that are not interested in a regulatory forward approach and what happens through all this, who are the losers?

The American people, I mean so where they lose opportunities to participate in this innovation and end up with just a really, really suboptimal outcome.

SORKIN: But Dave, who should be responsible for that piece of it? Because any American who is going on these international services I imagine is using a VPN effectively to disguise where they're coming from because technically I think it would not be allowed for one of these international services to serve one of them. Am I right or wrong?

RIPLEY: Yeah well that is that is, you know, potentially the case. You know, they may require a VPN, they may not require a VPN. I think we see both variations from these, you know, these Asian players.

But here the real path here is to come up with, you know, sensible regulation that allows the innovation to thrive here in the U.S., allows great services for, you know, for individuals here in the U.S., but in a safe in a safe way and that's really what we want.

SORKIN: Dave, what do you say to those policymakers who say look, not that this is not a proven space, but that so many of these currencies are quote uncontrollable and that that actually part of the whole decentralization of them, in many respects, makes them out of the balance of regulatory control and that may very well be one of the reasons that regulators are trying in their own way not to approve this stuff and to doing the sort of one off things as opposed to having a clear policy approach.

RIPLEY: You know, well, it's tough to tell I think we see a mixed approach globally, truthfully. And so yes, these, you know, cryptocurrencies are decentralized and it's a new innovation and it's very different but there is regulation of entities, centralized entities, that are often the gateways to these crypto currencies like Kraken. And so you know, for example, I mentioned earlier we have registrations, licenses across the world.

Let's take Europe for example. They have gone for they built something called MiCAR, it's markets and crypto asset regulation, a regulatory framework that answers these questions and provides clarity for businesses in that region for how to actually what needs to be registered and what doesn't, what needs requires a license and what doesn't.

They've already kind of gone through the definition phase. Open for comment from participants in the industry and they’re moving into implementation now.

SORKIN: Are you a believer you talked about some of these exchanges of course are centralized that's actually where the, been the breaking point in some of these. You look at a FTX, or the like, do you think an FTX situation or something like that would have been preventable if that was a business on U.S. shores?

RIPLEY: Well, you know, it's it's a good it's a good question. I mean, there frankly, I was, I was and am quite furious about the fraud that is FTX and Sam Bankman-Fried. I probably haven't been that upset about an industry event since the bailouts of the too big to fail banks back in 2009.

But, you know, I do think that part of the dynamic we're faced with is that yes, there is less of a clear path here in the U.S. and so there is an entity like FTX that largely operated more offshore, served U.S. clients, and yeah, we run in challenges.

SORKIN: Well, the reason I asked and I don't know if you saw the news this morning, FTX Japan is effectively reopening because apparently they they have the cash on their balance sheets.

We've heard, Sam Bankman-Fried had said that was the case and also said similarly about the United States version of it that was living living on shore. That has not reopened yet, but perhaps there's there actually is money there. What do you think of that?

RIPLEY: Well, you know, in the case of Japan, it is one of those jurisdictions where they did create a, you know, specific cryptocurrency regulatory framework. You know, I think, you know, potentially in this case, I actually don't know the details whether there's actually assets there.

It's sounds like they're they're likely are for these clients. You know, I would have to understand the details a little bit better, but that would certainly be a good thing if if those customers are able to get their full assets back.


SORKIN: And then finally, back to the issue of staking where we began. You know, Coinbase has, I don't know if you wouldn't call it a staking program. I don't know what you'd call it.

But there as you said, there was a whole bunch of companies in the U.S. that do have some version of a staking something happening here and it best guess if we were having this conversation two months from now, do you think those services still exist? They've been taken offline, online, what happens?

RIPLEY: Well, look, again, according to Chairman Gensler, they're all on notice and I think he thinks that, you know, they'll be shut down. We have, you know, seen kind of the communication from Coinbase. They seem to think otherwise. I honestly couldn't give you a good answer on this when I think that's part of the problem is that we we just don't have that, you know, clarity from from any of these regulators in the U.S.

SORKIN: And then finally, what is the timeline for your ascension as CEO? I know it was, it was announced but what are we now, we’re in ‘23. It was announced in the fall ‘22.

RIPLEY: Yeah, yeah. So, the timeline is the first half of this year, we're working on identifying a backfill for my current role as Chief Operating Officer, where we're on track there, and we'll look to have the full transition complete first part of this year.

SORKIN: Okay, Dave, thank you, appreciate it. Thanks for waking up early.

RIPLEY: Yeah, sounds good. Thank you, Andrew.