Crypto at a Crossroads: Institutional Viability & Remaining Risks w/ Jacob Stephan, Lake Street
Summary
Normalization Phase: Crypto is entering institutional viability, echoing the late-1990s internet adoption curve with ~7% global penetration and growing network effects.
Regulatory Momentum: Bipartisan U.S. progress and fair value accounting are key enablers, though final rulemaking and state-level fragmentation keep some policy risk alive.
Stablecoins: Positioned as the killer app—“dollars with an API”—driving multi-trillion-dollar settlement volumes with 24/7, low-cost global payments.
Onchain Settlement: Visa (V) runs USDC merchant settlement at scale; Mastercard (MA) launched an end-to-end stablecoin layer; JPMorgan (JPM) processes corporate/interbank flows via Onyx/JPM Coin.
Picks and Shovels: Cloud, payments, and semiconductors offer scalable exposure without token risk, benefiting from compute-heavy blockchain workloads and payment rail modernization.
Bitcoin’s Role: Framed as “digital gold” and a long-term treasury sleeve—volatile but asymmetric—where small institutional allocations could materially move the asset class.
Durable Revenue: Growth is shifting from trading to recurring blockspace demand and stablecoin economics, as onchain rails become the “financial plumbing.”
Transcript
This podcast is forformational purposes only and is not an offer or solicitation of an offer to buy or sell securities. SNN network Network, SNN Inc. and the Plano Microcap podcast and the representatives are not licensed brokers, broker dealers, market makers, investment bankers, investment adviserss, analysts, or underwriters. We do not recommend any companies discussed. We may buy and sell securities in any company mentioned and make profit in the event those securities rise in value. We recommend you consult with a professional investment advisor, broker, or legal counsel before purchasing or selling any securities referenced in this podcast. Welcome to the Planet Microcap podcast. I'm your host, Robert Craft. Thank you all so much for the continued support and for tuning in. If you like what you hear on the Planet Microap podcast, please take a moment to rate us five stars on Spotify or Apple Podcast. It really helps folks discover the show and join the Micro Cap investing community. We are already gearing up for our next flagship event, the Planet Micro Cap V Las Vegas 2026 happening June 16 through 18, 2026 at the Bellagio in Las Vegas. Visit planet microcapshow showcase.com for updates and to reserve your spot and I'll see you in Vegas. Now, my guest on the show today is Jacob Steven. He's a senior research analyst at Lake Street Capital Markets. He recently authored a crypto industry white paper and I invited him on to break it down. In this episode, Jacob lays out why digital assets have crossed into institutional viability, a quote unquote normalization phase driven by clear regulation, enterprisegrade infrastructure, and real corporate adoption. We discussed the internet style adoption curve crypto at approximately 7% global penetration. Why regulation is the cornerstone of investability fit 21 progress. How the new fazby fair value accounting and pending clarity in the US and how stable coins quotequote dollars with an API are emerging as the killer app with multi- trillion settlement volumes. Jacob walks through concrete examples from Visa, Mastercard, and JP Morgan. moving beyond pilots to onchain settlement and contrast stable coins payment utility with Bitcoin's treasury quote unquote digital gold role. We also cover the nuance risks centralization at the access layer custody cloud and compliance state-by-state regulatory differences speculative micro cap crypto treasury raises and why bipartisan momentum reduces but doesn't eliminate policy risk. Finally, Jacob shares the picks and shovels angle, cloud fintech payments and semiconductors as scalable ways to participate in the buildout without direct token exposure and why even low singledigit institutional allocations could materially move the asset class. We discussed a number of cryptocurrencies in today's episode. Jacob owns Soul Soli and Bitcoin BTC. And for full disclosure, I also own some BTC as well. Thank you again for tuning in to the Planet Microap podcast and please enjoy my conversation with Jacob Steven. Jacob, thank you for joining me today. How you doing, man? >> Yeah, doing good. Thanks for having me. >> Absolutely. It's great to have you. So, look, I I figured I I mean, I you know, I record the intro usually after we do this, but you know, for those that like to skip through the intro, you know, I the main reason I wanted to invite you on today is, you know, two things. one, you know, I'm seeing all this crypto treasury stuff and um I got a lot of questions. Every red flag is popping up in my head about what is going on here and why. Um, and then secondly, um, you know, so I've been wanting to do something to kind of cover that, but you know, as I'm seeing this, literally, I think the next post I saw was this white paper that you wrote uh, uh, from Lake Street Capital Markets, you know, why institutions are entering crypto. Not saying one has anything to do with the other by any means, but I was like, you know, that's pretty interesting. you know, Lake Street has a has a sterling reputation in in micro cap and, you know, now we're putting out this 100page paper about, you know, why institutions are entering crypto. So, I mean, I thought it was very appropriate. I'd love to to kind of dig in and go through some of the thesis. I had a bunch of questions and whatnot, but before we get into kind of all of that, Jacob, you know, I'd love to know from your perspective, why did you decide to write this paper uh and really dig into the world of crypto? Yeah. So, the purpose of the the paper is really to kind of help institutional investors think through uh what what's going on out there. You know, it's it's very similar to kind of where the the internet was in the late 1990s, but we wanted to help investors think through that now. Uh because we've kind of entered a phase where crypto is more um institutionally viable uh with clearer regulation. Um and you know investors may need to look at implementing you know crypto allocations into their IPS. So um and that also comes with a host of you know kind of picks and shovels players out there. So really it's just to educate the broader investor base um in one kind of conglomerate report uh that's hopefully up to date and and you know people can draw conclusions from on where to allocate money and funds best. >> Absolutely. So, you know, that that hits into my first question a little bit about how, you know, the white papers view of quote here crypto normalization, you know, it really compares a lot to the internet's adoption curve during the late 1990s. What would you say are some of the specific indicators that demonstrate that crypto has crossed this threshold into mainstream finance? Yeah. So I think when you kind of look at uh you know where the internet curve the adoption curve was in the late 1990s um it was kind of from a global basis it was kind of around that you know four to maybe 8% um before really kind of skyrocketing. Um so in I mean very similar to crypto uh in 2024 crypto uh there was about 560 million users which is about 7% of the global population. Um that same level is very kind of what the internet had experienced before taking off. Uh it's more of an analogy um but it's data driven. I mean there's network effects uh that are now kind of self reinforcing I would say um more users to kind of attract more liquidity uh more developing uh more corporate participation u but really what the the fundamental kind of inflection was is the institutional legitimacy for the internet uh so when companies like IBM AOL uh kind of commercialized it we feel that crypto's kind of at that same tipping point now uh you got Wall Wall Street and Silicon Valley kind of both engaged in this. Um, and then as with the internet, you know, early skeptics kind of underestimated the compounding innovation. Uh, you know, and that's kind of our our paper's core argument is that we're entering just kind of this first normal normalization phase. Uh, where crypto becomes more invisible infrastructure. Uh, it's it's more credible. Uh, very similar to how email, you know, was the internet's kind of, you know, killer app. uh you know stable coins and tokenization kind of may prove to be kind of crypto's equivalent of that uh with near uh global kind of financial connectivity and uh instant settlement capabilities. So then what and it sounds like my next question is a combination of factors but which factors amongst regulation, infrastructure and or corporate adoption have been most pivotal in legitim legitimizing crypto. >> Yeah, I would say that the infrastructure made it usable but regulations kind of ultimately what made it investable uh for the majority of of funds available out there. Um all three are definitely intertwined. Uh but the regulatory shift is more the cornerstone. Um you've got bipartisan progress here with FIT 21 being passed in 24. Uh the Genius Act uh which is supposed to be effective in in 2027. Uh and then you got the Clarity Act as well. Um these are really giving institutions kind of the legal footing to enter without existential risk. uh the clarity coupled with new accounting standards um that allow crypto to be fair valued uh quarterly has kind of uh shifted CFO um attitudes from more of an avoidance standpoint to more experimentation. Um and then infrastructure was kind of the next key unlock. Uh you've got custody compliance um payment rails. Uh they're now institutional grade. uh the corporate adoption kind of compounded on that legitimacy. So now you've got household names kind of you know like PayPal uh you know Square or Block now uh Tesla you know they're essentially using onchain assets for payments um and treasuries you know have kind of made crypto tangible for investors and consumers alike. Um, you know, I think once you have the those defined rules around custody, um, and disclosures and accounting, uh, ultimately the last question to answer is, you know, who the regulator of record is. And now we kind of have that with the, uh, the recent bills, uh, in in the, uh, the overall legislative process. So while all factors kind of you know matter uh I think regulation is what built the foundation infrastructure is kind of what made it more usable and then corporate adoptions ultimately kind of increases that credibility >> right so I mean just going off pushing back a little bit on the um on the US policy environment which the report portrays as decisively pro crypto um but but the acts that you just mentioned again correct me if I'm wrong they're not fully enacted the Fit 21 Genius Act and Clarity Act, right? They're not fully enacted and the state level policies kind of remain a little fragmented. I mean, is the claim of regulatory certainty premature and could policy reversals derail some of this institutional confidence? >> Yeah. So, I think it's fair to say that regulatory certainty is emerging rather than uh sort of fully realized at this point. Um, you know, in in our paper, we do acknowledge that the US has kind of entered a a new era of clarity. Um, and but legislation still remains a little bit in that wait and see period. Uh, FIT 21, um, that's obviously passed in the House. Uh, the Genius Act, uh, it was signed in July of this year. Uh, should be effective in January of 2027. And then you've got the Clarity Act, which is still pending in the in the Senate, I believe. you know, collectively these kind of maps the, you know, what I would call the contours, the edges of of regulation. Uh, but final kind of agency rule making is going to ultimately what is be what determines the practical outcome. And then you've kind of got the state level fragmentation a bit. Uh, you know, this is there is no uh, you know, common ground here necessarily. You've got Wyoming who's very, you know, pro- crypto. They're very, uh, pro- capitalism. uh you know they've got the crypto bank charters um and then you've kind of got New York with their bit license who's completely on the other end of the spectrum you know kind of uh constraining innovation a little bit but ultimately on the side of consumer protection um airing on that side of of things. So um you know these these differences are kind of you know a healthy sort of market um rather than you know chaos you kind of have some sort of federalism going on. Uh you know competition among states is is really kind of driving what I would call more regulatory refinement uh versus you know certainty. And then you know obviously institutional confidence um you you could kind of be you know that could be rattled by some sort of political reversal but given that there's been so so much um you know bipartisan support of these bills um I think it's kind of fair to say that you know it seems like a wholesale reversal is kind of unlikely. Um, and now you've got Europe with their, you know, Micah. Um, they they're, you know, not they're not backing down. So, you've kind of got the US trying to remain competitive in that sense as well. So, could receive a reversal. Um, I think you always kind of have that headline risk. Um, especially in kind of an election cycle period, but there's now economic incentive to crypto. Uh, you've got a job, you know, you have jobs formed out of it. You have a tax base. uh there's payment competition to settle faster and now you have dollarbacked stable coins. Uh so for the US to lead versus ban um it it's kind of essential that we don't fall behind the competition and that ultimately lowers kind of the probability of a you know an outright clampdown so to say on crypto policy. >> Absolutely. And I mean that that goes dovetails right into my next question regarding stable coins because I mean listen I was telling you offline like I was one of those you know dudes I was trying to open up a Mount Gaus account in 2011 you know and trying to figure out how how do I get Bitcoin in a 100 bucks like why are they turning down my my driver's license right now. This is annoying. I know it's I know it's uh you know it's uh my license is good. But anyways, you know, speaking to the role uh the growing role of stable coins because I mean the the thesis around Bitcoin back is decentralized currencies, right? Like we're reshaping the you know economic markets and how you know we transfer wealth and all that stuff. So I mean does that growing role of stable coins suggest this transition toward tokenized fiat systems rather than decentralized currencies? Yeah. So, I think stable coin growth is is certainly interesting. It's more of the market kind of voting um on how crypto should best be used. Uh it's it's kind of the question, you know, we we don't want just a new asset, which is kind of how crypto started. It's we want better payment rails, uh more uh instant settlement opportunities. Uh so, stable coins are, you know, they're basically dollars with an API. You can kind of think of them as they settle 24/7. uh globally there's no correspondent bank friction involved um and that's extremely attractive to trading firms and fintexs um and eventually you know corporate customers who move money cross border um so yeah part of what's happening is kind of a march toward uh tokenized fiat and that's programmable dollars kind of that move more like crypto um there was essentially uh let's see $6 trillion in stable coin settlement volume in 2024. That's more than 10x uh what it was in 2020. So corporates are already using stable coins to move money faster, cheaper, and around the clock. Um and then you've got kind of, you know, the the big players, the big payment networks like Visa and Mastercard. You've got JP Morgan with their JPMcoin. Uh they're embed embedding stable coins into the core kind of settlement functions. Um, ultimately I don't think that really kills, you know, maybe Bitcoin's thesis or anything. Um, from from our understanding, you know, Bitcoin is really still being positioned as kind of that that digital gold, uh, kind of the reserve asset or savings. Um, so it's not money that you spend daily. Um, and stable coins and Bitcoin, you know, they kind of solve two different problems. uh one solves the kind of store of value um outside the system and the other kind of solves the the move the dollars inside the system uh more efficiently and institutions are kind of adopting both at this point. >> All right. So we're I the next I this I have all my questions I I really went for it with you today Jacob. You know I have I have different parts and everything for this interview. I I my part two or part B and that that's really has to do with this institutional and corporate integration. So my first question here is you know the paper sites Visa, Mastercard and major banks as evidence of major adoption but most integrations remain kind of pilot scale or symbolic. Are these firms genuinely committed to onchain operations or simply hedging reputationally against missing a technological trend? Yeah, I think it started as hedging uh originally, but it's not really hedging anymore. Um I mean obviously you know Circle came public earlier this year. Um you know Visa's USDC settlement network uh that actually is you know operational now at this point. Um I think when you look at the uh when you look at last year um circle actually disclosed that there's over 500 million in monthly merchant flows processed through Visa's USDC onchain settlement. Um the couple core functions of that it reduced settlement time from 2 to three days to under 30 minutes and it cut their float cost by up to 90 basis points. uh when you're moving trillions of dollars, um that's certainly, you know, not a not a pilot program anymore. Um it's it's certainly more on the on the function of, you know, full scale operation. Uh and Mastercard's even done the same thing. They followed suit in uh April, I think, of this year. They launched the end to end stable coin settlement layer that's also integrated uh with USDC. Um they have I think they're live in 50 plus markets maybe 60. Um in in terms of JP Morgan you know they have the Onyx blockchain um and their JPMcoin uh that's now live for corporate and interbank payments uh that uh the stat I have here says mid 2025 there was over a billion dollars per day uh that was settled internally on JPMcoin. So uh this is not test volume anymore. This is actual treasury crossber payment flows. Um, city BNY uh melon they're also launching crypto operations. Um, I think BNY Melon's now custody uh in full custody of uh Bitcoin and USDC for its clients. Um, and what I see here happening is classic Fortune 500 kind of behavior with any sort of new infrastructure is what I would say. Um it's you kind of bring the crypto you bring the the capabilities inhouse within your compliant barrier. Um and these firms aren't really chasing like a retail like NFT hype uh like maybe you know some thought it would be in 2020 2021 but uh they're weaponizing the faster settlement capabilities of stable coin the lower float costs and kind of the reduced foreign exchange friction and obviously 247 liquidity too. But I think the the overall signal is pretty clear. Um it's not really marketing at this point. It's not really, you know, it's more of a margin structure and and there's certainly a ton of cost benefits to using stable coins for for payment settlement. >> Well, it sounds like it is almost sort of a marketing play, right? Because I mean the way that you know the downstream consumer would actually better understand all this is that like it's it's not like they're you know it it's more like all right come bank with us because we now have all of these additional capabilities right versus you know maybe another bank that you would do business with you know it's not like a different AI company where you're going you know trying this AI or that you know even though some of them still use technological capabilities to better their overall package but using the example of like Chat Gep versus something else, right? Like you're going to that bank and seeing, okay, they now are fully integrated with all the latest technology versus somebody else and it's all crypto enabled. Like that's kind of their thought process. Correct. >> Yeah. Uh I I would say that it's certainly a marketing uh tactic. Um obviously, you know, when when somebody transfers their money, they want it right away, right? And if you know banks and and you know uh financial institutions can do that cheaper, more effectively and and a lot quicker than their competitors uh ultimately that's you know that's something that they can uh win on 100%. All right. So next question has to do with my other reason for why I wanted to invite you on here today and that has to do with this the corporate treasury uh examples um that are used to justify Bitcoin as this long-term store of value. But these holdings, you know, as evidenced over the years of Bitcoin being around are highly volatile and un unhedged. How realistic is it to consider crypto a stable treasury reserve asset given the 60 80% draw downs in prior cycles? >> Yeah. Um obviously you know crypto has been volatile especially the bull and kind of the the crypto winter um sub uh subsequent of the uh you know 2021 time period. Um I wouldn't call it stable. I would call it kind of more asymmetric to how investors and and companies normally think of capital allocation. Um I think CFOs who are actually doing this think about it as a traditional treasury uh reserve is about capital preservation and liquidity. Bitcoin on the balance sheet is more long-term purchasing power and signaling. Um it's kind of a bet that the debasement of fiat over a decade matters more than volatil volatility kind of quarter over quarter. Um and that's why you see kind of only the highest conviction users adopting so far uh companies with you know extremely high you know cash flow um or gross margins um or two kind of a a deliberate strategy to more align their brand with Bitcoin and kind of you know updating it to the 21st century. So um you know will every company do it? No. Most corporates, they're never going to feel comfortable uh with that level of mark-to-mark uh movement, so to say. But for kind of the, you know, certain profile of company, you know, maybe Capital Light, uh founder le kind of more promotional, want to be loud, um in the market, you know, Bitcoin is kind of a, you know, a functioning as more of a long-term uh treasury asset. and the fact that it's volatile doesn't disqualify it for them. Uh the volatility is part of the upside that they're looking for. Um so that's that's kind of ultimately, you know, how we think through companies taking on from Bitcoin treasuries and and any sort of crypto. >> Okay. Well, now comes the push back question. Uh even more so the fun part. You ready for the fun part? Here we go. We're going to do the fun part. >> Let's do it. >> All right. So look, I we're in Micro Cap. We cover Micro Cap day in and day out. I've seen some ridiculous numbers, 100 million, 250 million raised to, you know, build up our crypto treasury of whatever BScoin, seemingly BS coin. Like I can see the case for Bitcoin. I understand that. You know, it's it's been around the longest se value. It's seen as the gold. Okay, fine. like if that's a strategy you want to do and maybe you're using excess cash. Okay, I I can see that argument that that that I can see the case and the thesis you would put together there. But when you see some of these companies that are going out there saying you know raising this ungodly amount of money that you know whether they had real businesses before or you know now like it just reeks absolutely reeks of all the stuff we've seen you know amongst when things are very trendy if if we're being hon how how do we you know as folks who are listening this and watching this who are micro cap investors that you know now maybe their favorite company is, you know, raising, you know, 500 million for, you know, you know, whatever, you know, computercoin, whatever the pardon my French, sorry, whatever the hell it is, like, you know, help them help us understand that because it it just it absolutely reeks. >> Yeah. So, obviously, you know, huge capital raise cycle has gone on with digital asset treasuries. Um, I think what you're seeing is, you know, companies looking at it as an alternative capital raise cycle. Um, I I think there's a lot of positive benefits to having crypto on your balance sheet. Um, number one, uh, it's kind of like we mentioned the, you know, the debasement of the the fiat currency. Not to cut you off, but like any crypto though, like I I I again I I agree with you about like, you know, maybe Bitcoin, even to a degree like Ethereum, you know, some of the main ones that have been around for a long time, but like >> yeah, >> any crypto. It's almost like this crypto was just made yesterday and now it's like, hey, let's raise $250 million and, you know, that becomes our our treasury crypto. It's like, okay, sure. >> Yeah. I mean, obviously, you know, there's always going to be some bad actors. Um, and you know, I personally don't think that every coin has a utility. Um, so it it's logical to think that, you know, there is some out there that are, you know, seeing this as a way to raise capital, kind of pull the rug out. But, um, and just, you know, ultimately stay a public company. But I think there's several out there that actually have utility. Um, in that, you know, their mission is not only to, you know, ultimately raise as much capital as they can as quickly as possible, but ultimately to kind of see this as a as a value prop and kind of um position themselves into the the broader blockchain that they're supporting. Um, so yeah, I I do acknowledge that there's uh there's some kind of you know, bad actors it seems out there, but ultimately um you know, it it's it's a huge capital race cycle. Um I I think there is some institutional viability to it. I don't I don't think this, you know, these 500 million to a billion dollar raises are, you know, strictly retail driven. Um, I I would say that, you know, the institutional backing behind crypto um is has been pretty prevalent over the last several quarters. >> 100%. Look, I don't mean to put you on the spot with it. It's just, you know, look, for any of us that, you know, again, I don't do a lot of crypto episodes on here. We don't, you know, but like that that was just something that like it you're like, what is going on here? It almost just it almost not only did it wreak from a business case perspective, but it also made it seem like all right well or is this you know a way for providers to you know like ah man we're just printing money right now and doing all these deals like this is sick like you know hey do you want to do a crypto you know like we have all the infrastructure no problem like let's go and you know the unwitting CEO is like oh that actually sounds like a great idea you know and not realizing that like you know it's not them that's actually it's not really a great business case. It's more just like the providers are now just making a crapload of money and you know leaving that company in the dust with this coin that might be worthless you know two three years from now. >> Yeah, like I like I said I you know there is some coins that don't necessarily have a utility that you know maybe >> maybe it's not apparent uh right away. Um and you know there are bad actors in every kind of industry. Um it's just kind of the nature of the game. But you know I I don't you know I think that there is institutional backing behind a lot of these digital asset treasuries now. Um and kind of what we're seeing is you know there's a lot of a lot of these companies are trading below kind of net asset value at this point. >> Um it's almost like a shifting investor base a little bit. um it's people that, you know, aren't necessarily comfortable with stocks that have crypto on their balance sheet or can't own them uh because it's not part of their policy statement. Um so it's kind of a a shifting investor um holder base at this point, but you know, like we said, the there is three legitimate, you know, actually there's several legitimate kind of cryptos out there. um you know but there is a lot that are you know kind of on the the more speculative end we'll call it >> for sure I mean is the real main business case thinking like all right we have this you know we have this asset now as part of our treasury like we can use this you know assuming that it you know yeah there'll be volatility but assuming this goes up over time we can always tap this almost like as a not necessarily a line of credit you own it and you can you know sell some off to go make an acquisition or do something else almost kind of like a a weird crypto spack way thing in a some odd way, right? >> Yeah, I I definitely think at some point um you know, assuming that these altcoins don't crater in value, um there will be acquisitions to be made, but yeah, it's almost like a secondary vehicle um that you know has the capital raising capabilities. Mhm. Yeah. Listen, I'm going to keep monitoring. It's fascinating. I'm I'm still It again, it reminds me sometimes of like the you know, I think it was like in the what was in the I think it was like in 2020, 2021 where, you know, it was like consumer goods companies and all of a sudden they're like, "Yeah, we changed our name to, you know, so and so crypto or like they just bought a bunch of P." You're like, "What is going on here?" This reminds me of all the mining companies that become cannabis companies that became psychedelics companies that became crypto companies and now they're cannabis compan like we you know if you've been in it long enough you've seen all these kind of crazy trends but you know going back to kind of the I guess the the corporate and institutional integration here. Well, I mean, we were kind of on it, but that was that was the main one I really wanted to dig into just to hear what you thought because, you know, I I guess also just to put a pin on it, the main reason that it was I I really wanted to hit on it and really cuz it's one thing that there's bad actors in everything, but with crypto, it's it's been associated with bad actors for a while, right? Like there's there's been a lot of corporate channery and I feel like that's still putting it lightly. You know, there's been some of the craziest bankruptcies, stories, every books, all sorts of stuff covering the crypto craze over the last 14 years, you know, so like to say there's, you know, always bad act is like, okay, but we're talking crypto here. Like it's been a lot. >> Yeah. Yeah. No, 100%. Um I I think that's ultimately why the industry can benefit from regulation. um totally by bringing by having some sort of framework in place is because >> it kind of weeds out those bad actors quickly. Um and you know we've already seen the NASDAQ kind of crack down and say the digital asset treasury um those are going to slow down you know so I think ultimately at the end of the day you know regulation is is kind of what makes this uh institutionally viable the the larger percentage of the capital um that's that's out there. >> Absolutely. So, I mean, you know, not going back to my some of my question, so like how will the new like Fazby accounting standards for crypto holdings impact corporate adoption rates as well? >> Yeah. So, uh I think it's a big deal. Uh under legacy accounting, um if you held Bitcoin, you had to impair it when the price went down. You couldn't mark it back up uh when it recovered. that meant that kind of gap numbers potentially looked worse than economic reality. Um I think this this is basically just a fair value treatment now. Um so you can kind of recognize those asymmetrically. Uh and I think that does two things. It removes kind of this artificial accounting penalty that we used to have um and scare kind of the audit committee and your CFO. Um, and number two, I think it kind of lets management actually tell the story to investors in a cleaner way. Um, you still have volatility in the reported earnings. Um, so it's not like every Fortune 500 company's going to adopt the uh crypto on their balance sheet, but you know, we've kind of moved from the CFO, the board, our accountants won't sign off on our reports to okay, now this is a board level kind of conversation that we're having uh on do we allocate a percentage to crypto? And what parallels do you think exist between the early corporate Bitcoin adoption and the historical precedents like gold standard accumulation or foreign currency hedging? >> Yeah, it certainly echoes both. Um I think the gold parallel is kind of philosophical in a sense. Uh gold was held as kind of a bearer asset um outside uh government control to protect the long-term purchasing power. Um, Bitcoin is kind of filling that same psychological role for some modern investors and uh, corporate customers. Um, especially the ones that kind of believe fiat dilution is a structural kind of feature and not a not a bug necessarily. Um, and then the foreign exchange hedge parallel is kind of operational. uh you know kind of companies are routinely holding non-dollar assets because their cost base or their revenue base is in that currency. Uh but Bitcoin is now being treated uh by some firms almost kind of like a a treasury sleeve of you know supercurrency asset. Uh so something not tied to a central bank so to say. Um and the difference is that you know foreign exchange hedging is kind of more about smoothing the volatility in in earnings and in revenue recognition. But um while Bitcoin's kind of positioning itself more as kind of a macro view, it's less about hedging kind of your exposure, but more like we're aligning our balance sheet with kind of a a world view in a sense. So I think it's kind of an echo of both. um you know, Bitcoin certainly kind of filling that digital gold uh so to say, you know, moniker um whereas, you know, I would say that, you know, the foreign exchange hedging is uh is more kind of just a an operational uh thing that you know, maybe stable coins can help with. >> For sure. So, I mean this my next question kind of dove is a kind of a dovetail on in the positive direction I think. um regarding you know the asset treasure because this is really hitting into the meat of the meat and potatoes of maybe some investors that you know like all right I'm invested in maybe some cloud tech fintech semicondu you know in companies that are generating have real business models doing real you know real companies for I'm not saying all crypto is not real I'm just saying you know they're doing the real companies operating without any crypto but I mean which public companies outside of the crypto pure plays are best positioned to benefit from this blockchain adoption and not counting the >> trans. Yeah. Okay. Um I I'll kind of break it into three separate buckets I would say. Uh cloud players, fintech players, and then kind of the semiconductors. Uh I would say that these are the three main kind of picks and shovels of crypto. Uh so first kind of the cloud and infrastructure. Um, blockchains are very compute hungry. Uh, they run 247. Uh, they're constantly verifying, securing, and indexing transactions. Uh, and that demand flows pretty straight to Amazon, Microsoft, Google. Um, because most of the validator nodes are still live on AWS, um, Azour or Google Cloud. Um so I you know estimates I've seen estimates that put that number north of 60% of major blockchain workloads. Um you know every new roll up or layer 2 spinning up means more rented computing hours uh and storage. So cloud go gross margins are pretty strong. Um I I think from a profitability standpoint the uh the cloud and infrastructure guys certainly have a long uh runway of growth ahead of them. Uh secondly, the kind of the payments and the fintech side of things. Um this is where blockchain kind of quietly behind the scenes goes more mainstream. Uh Visa, they run merchant settlement uh using USDC uh over Solana and Ethereum. Uh that's it's not a test anymore. uh they you know they've rolled it out to 190 c countries uh cutting settlement from that 2 to three days that we mentioned before to now just under 30 minutes. So um and also lowering their float costs as well. Uh so obviously Mastercard's done the same thing uh you know OKX uh the exchange and then you got Fireblocks in that segment. Then you've got PayPal uh who's also using onchain settlement. They've got a stable coin, PYUSD. Uh they're clearing billions a year onchain. Uh Stripe. Uh they've also kind of reenabled USDC payments last year. Um so I I think the the overall kind of payments and fintech sector is is certainly another positive uh growth runway uh that we can see a lot of of benefit from stable coins and and onchain settlement. And then just lastly to touch on the kind of the semiconductor space um you know obviously Nvidia AMD supply a ton of GPUs um that proof of you know proof of stake proof of work uh zero knowledge proofs um you know Marvel Broadcom SEC they also make some of the networking gear and kind of high-speed interconnects for the uh the validator data centers. So I I think you know there's tons of industry I would classify those as probably the top three industries that are poised to see the most benefit from crypto. Um but you know that typically investors think you know crypto as in trading on you know Coinbase or you know trading on an exchange. Uh there's a lot of you know picks and shovels players that still have a significant runway ahead of them. Um especially you know given that we're so early in the adoption of actual you know crypto. um and onchain settlement for stable coins. >> So my next question is that the paper emphasizes that you know in a quote here infrastructure is no longer a bottleneck end quote yet the ecosystem still depends on a few key intermediaries you know Coinbase custody Fireblocks AWS node hosting does this concentration undermine the decentralization ethos and introduce new systemic risks? Uh yeah, this is a kind of a a hotly contested uh subject in crypto currently. Um at the protocol level, blockchains themselves are decentralized, but at the access layer, so the on-ramps, uh you know, custody, management, liquidity, and compliance functions, uh those are very centralized. So you have a handful of kind of qualified custodians and you have a handful of wallet security providers uh and a handful of kind of cloud providers that are running a ton of nodes. Um so that absolutely creates concentration risk. um if one of those critical vendors fails it that single point of failure uh gets hacked or you know becomes politically constrained for whatever reason I mean that's a significant disruption um especially for institutions that aren't set up to self-custody crypto um I think the tradeoff though would be you know institutions want vetted intermediaries they want the you know the auditability the sock 2 compliant um audit it's insurance coverage. Um they want somebody else that can be liable in the situation of you know uh failure. So there's going to be a natural pull I would say towards the professionally managed uh you know apps and applica uh you know exchanges. Uh longer term I think we see kind of a regulated model uh regulated federation I'll call it again. Uh so not one C custodian but kind of several. They're all supervised um interoperable um but still more centralized than kind of what the traditional crypto viewpoint was. Uh it's far less fragile than you know a single point of failure and we're kind of already moving in that direction. Um it just it's going to take some time. >> Got it. So I mean so my next few questions have to do really with or I had a few questions here having to do with regulatory and policy dynamics but quite frankly I think you've answered most of them about the extent to what extent has the shift in the US executive branch accelerate global regulatory competition like uh yeah of duh like of course uh that seems like a you could give me one one word yes and I'd be like yeah you're probably right um how do different US state level regulatory approaches is like Wyoming versus New York influence innovation like again yes of course yeah you know depending on which the regulatory is on in each state that's going to influence where people and also like it's kind of pretty obvious like favorable regulatory uh approach and you know you know cheaper cost of living and cheaper place to do business. Yeah, that's probably where they're going to go. Um right any anything that we have to add there? Probably not. >> Yeah. Do we hit it? >> Yeah. I I don't think so. I mean, you know, obviously Texas, North Dakota. >> Yeah. >> Um like you said, cheaper cost of living, cheaper to do business. You know, they've got a lot of pro uh minor friendly laws. >> Uh so, I mean, those are two other states that I'd call out. Um in addition to kind of the Wyoming and and New York examples we mentioned earlier, >> Wyoming, there's going to be a big cattle farm and then just a massive data center. just that >> right >> see that perfectly. That was exactly what I envisioned on my, you know, on my uh my RV trip going north. That's going to it's going to look great. Um uh clear US regulation attract repatriation of crypto. Um yeah, probably um right any anything we have to add there? I mean just this >> yeah you know I think after 2022 when most of the blowoffs happened uh you know a lot of teams a lot of development teams did leave the US uh it wasn't because they didn't want to be here it was because you know banking insurance payrolls uh opening you know any sort of uh you know corporate bank account was impossible uh so if you couldn't even get a bank account here in the US you know you kind of had no choice but to to go somewhere else um I think as the US market relegitimizes itself a bit um we get those defined rules uh we get a a clear framework and you know we see you know I would say that typically we'll probably see the majority of the capital um markets open up for for these companies obviously we're one of the largest um you know I I think we do see a kind of a return from a lot of companies that did leave because ultimately you want to be where your investors are you want to be where your, you know, most of your customers are, you want to be where the the capital markets are as well. >> 100%. All right. So, this was the main question, I guess, from the regulatory and policy side of things, you know, cuz, you know, you mentioned earlier that there is this current bipartisan support for digital asset legislation. How sustainable is that and what political risks still remain? >> Yeah, I would say that, you know, support is it's sustainable. um it's not unconditional. You know why is it sustainable? You know digital assets have kind of crossed over from the tech curiosity to jobs and competition at this point. So once you know something is kind of framed as domestic competitiveness uh you know especially versus all the other major economies out there it tends to get some bipartisan support um because of that tax base and that jobs creation that we talked about earlier. Uh where the risk kind of still is is on the consumer side of things the the consumer protections. um you know, if we see another high-profile failure, uh that looks like fraud or has kind of, you know, a hint of customer abuse, so to say, you know, there's there's going to be some pressure to protect the retail, uh investor and a very short and probably pretty blunt way. Um but I think, you know, different committees in C Congress, um they're still fighting for kind of that jurisdiction. Um agencies don't typically like to give up their turf. Um, so there's a little bit of a turf war going on right now, uh, with crypto, but I think bipartisan support this time is real. Um, you know, it's pragmatic support, not ideological right now. Um, I think the industry has to keep kind of looking boring. Um, it needs to be compliant and it needs to create jobs, um, if it wants to kind of keep that, you know, that bipartisan support intact. which is why we're seeing every new coin sprout up out of like oh a new coin with the 10 new jobs like we're good you know I'm just that was terrible >> yeah and there's a ton of corporate customers launching stable coins now um there's a ton of you know smaller projects from you know like open AAI um you know there's a lot of people that are interested in in launching crypto coins at this point >> for sure so I mean this this gets into the last section you know of the paper and my questions here having to do with like the market and investment outlook. So, you know, while that user growth and stable coin volumes are impressive, um much of that activity is still driven by trading, you know, not real world commerce or productivity gains. Is the crypto sector revenue growth truly sustainable without a clear broad-based utility beyond financial speculation? >> Yeah. So, I think this is kind of a core argument of the bear case. um you know a lot of crypto revenue it still is tied to that leverage um and and trading fees um but I think there's two things that are kind of becoming more durable revenue lines that aren't just you know the number goes up when you know prices are up as well I think block space uh as a commodity you're seeing a lot of willingness to pay for the settlement the data availability um and onchain security uh that looks a lot like kind of paying AWS for cloud computing power. Um it's not, you know, a sexy, you know, model, but it's it's ultimately it's recurring revenue and higher margin. Um and then you got kind of the stable coin uh float and transaction economics. You got tons of dollars that are moving, you know, onchain. It's not necessarily speculation anymore. Um it's about speed uh working capital crossber payment costs um so that's genuine uh that's a genuine utility I would say um and then also you got kind of you know every time you know value moves over stable coin uh rails instead of the legacy you know correspondent networks uh somebody in the middle kind of captures that fee revenue so do we have you know full mainstream you're going to go to Starbucks and buy a coffee with, you know, crypto utility yet? Probably not. Uh we might not need it. Uh you I guess you don't have to really judge, you know, the value of, you know, a certain coin by how many people buy their latte with a a certain coin. Uh you kind of judge it by how much high value settlement um runs through it is what I would say. So it's kind of slowly, you know, becoming the financial plumbing, but you know, plumbing is boring. uh borhin is kind of how industries ultimately get durable though. >> I mean, you know, quick followup to that and I and I know that that it's, you know, everyone's been talking about the idea that, you know, crypto isn't, you know, real judge of it is not necessarily, you know, going to buy your Starbucks, all that. Like that's really not it. It's that is creating this financial plumbing infrastructure. Why don't you think that that I mean I know the easy answer is that it's boring you know nobody wants to hear about that but yeah why that you know you look at AI and that's caught fire because it's the new internet you know why with crypto and the the blockchain technology innovations there why hasn't saying oh this is going to be the new financial plumbing for which all of transactions will happen why hasn't that caught as much fire yet would you say at least amongst kind of the more, you know, the more traditional financial markets. I mean, it's kind of starting to obviously, but you know, why why why hasn't that argument caught more fire? >> Yeah, that's a great question. Um, I think a lot of it has to do with uh things just take time to fully resonate. Um, you know, it it feels like that that rhetoric has been out there for a while. Um, and that's kind of been known by a handful of people, >> but I think we kind of underestimate the the amount of time that it actually takes >> to kind of displace something that's been in, you know, effectively the the plumbing for the last, you know, 60 years. Um, and you know, maybe the, you know, I would say that the uh the credit card, you know, since like two 2000 or, you know, uh, you know, even 20 years ago. So, I think it just takes time. Um, I I would say that, you know, investors still aren't necessarily focused on on crypto. Um, and like we mentioned before, can't own it or u have exposure to it. But I think ultimately that changes and you know, people have to get familiar with how onchain settlement works. Uh, what is a stable coin in general? What what's the utility of it? So I think it's ultimately just a function of time and the human nature of wanting to see things happen quicker um you know as soon as we hear about them and you know kind of see them right away. Well, what's interesting too is you start to think about all the various application you know not just you know from financial plumbing settlement stuff but I mean even just amongst our little world and in you know investing and stock I mean there's a lot of jobs at stake potentially you know if crypto takes hold or blockchain technology and just faster settlement you know no need for you know physical stock certificates anymore you know like all all that stuff you know that all could potentially go away you know using using crypto or using blockchain technology, but you know, it's a little slower, I guess you'd say. You know, >> yeah. Yeah, it's definitely slower than a lot of people want it to be, but um I think, you know, the the framework is is starting to be put in place, and that's that's ultimately the first step uh for any, you know, industry. >> Absolutely. All right, final question for you here today. You know, so given the white papers view of the crypto's 4 trillion market cap versus the 120 trillion in global equities, what would you say is the realistic institutional penetration rate by 2030 and which subsectors are best positioned to capture it? >> Yeah. Um, I think if you think about crypto as an alternative asset sleeve, um, alongside things like gold, commodities, uh, private credit even, uh, you don't need a giant penetration rate, uh, for the numbers to get pretty big. Um, low singledigit allocation from pensions, endowments, um, sovereign wealth funds even, and even corporate customers. Uh, that would be enough to materially move the total crypto market cap. um because the base is still relatively small. I mean only 7% of the the world's population has any exposure to crypto and only 15% of US adults uh have exposure to crypto. Um so I think you know where that capital actually lands first is the most important. I think Bitcoin as treasury or a macro exposure. Uh that's kind of the digital gold allocation um that companies can look at and and take advantage of. And then you also have the the secondary kind of feature the the statement uh the stable coin and kind of payment rails. Um and that's kind of the the monetizing uh global money movement um in bringing it up to the 21st century so to say. Um ultimately you also have the picks and troubles like we talked about uh custody compliance uh secure hardware infrastructure node infrastructure uh payment integration um those are you know becoming investable uh without taking kind of the direct token risk um and institutions really like that. Uh that's something that they're comfortable with. Um and then you kind of have the the specialized compute in the semiconductor players. uh you know every new blockchain, every new onchain AI agent um tokenized device identities, they ultimately drive demand for you know specialized computing and and semiconductors. Uh that's very traditional that's a very kind of attractive um vertical for traditional kind of equity investors as well. uh because it fits inside, you know, the existing semi uh you know, infrastructure that they know already and the cloud frameworks that they've already gotten comfortable with. So, I'd kind of say that, you know, we're not pitching crypto as necessarily a replacement for global equities or anything like that. It's more like we're pitching this as kind of a new sleeve of, you know, assets inside institutional portfolios um and kind of a new costefficient layer inside of payments. Um and to us, you know, that's enough to be transformational without requiring a full reinvention of, you know, the global financial system as it sits today. >> I think that's a perfect place to end it, Jacob. And and thank you again. So where where can our audience go and find more information either to get a copy of the white paper or to get in touch with you if they have any questions? >> Yeah. Uh so we have a a link on our website. It's a short form that you can download our white paper from. Uh lakesrecarkets.com. Um otherwise, you know, I'm on LinkedIn. Uh you can find me on LinkedIn and we can certainly chat there. >> Very cool. Well, Jacob, thank you so much for joining me today. really do appreciate it and answering all my questions and I I really look forward to our next update. >> Yeah, great. Thanks for having me. >> Thank you.
Crypto at a Crossroads: Institutional Viability & Remaining Risks w/ Jacob Stephan, Lake Street
Summary
Transcript
This podcast is forformational purposes only and is not an offer or solicitation of an offer to buy or sell securities. SNN network Network, SNN Inc. and the Plano Microcap podcast and the representatives are not licensed brokers, broker dealers, market makers, investment bankers, investment adviserss, analysts, or underwriters. We do not recommend any companies discussed. We may buy and sell securities in any company mentioned and make profit in the event those securities rise in value. We recommend you consult with a professional investment advisor, broker, or legal counsel before purchasing or selling any securities referenced in this podcast. Welcome to the Planet Microcap podcast. I'm your host, Robert Craft. Thank you all so much for the continued support and for tuning in. If you like what you hear on the Planet Microap podcast, please take a moment to rate us five stars on Spotify or Apple Podcast. It really helps folks discover the show and join the Micro Cap investing community. We are already gearing up for our next flagship event, the Planet Micro Cap V Las Vegas 2026 happening June 16 through 18, 2026 at the Bellagio in Las Vegas. Visit planet microcapshow showcase.com for updates and to reserve your spot and I'll see you in Vegas. Now, my guest on the show today is Jacob Steven. He's a senior research analyst at Lake Street Capital Markets. He recently authored a crypto industry white paper and I invited him on to break it down. In this episode, Jacob lays out why digital assets have crossed into institutional viability, a quote unquote normalization phase driven by clear regulation, enterprisegrade infrastructure, and real corporate adoption. We discussed the internet style adoption curve crypto at approximately 7% global penetration. Why regulation is the cornerstone of investability fit 21 progress. How the new fazby fair value accounting and pending clarity in the US and how stable coins quotequote dollars with an API are emerging as the killer app with multi- trillion settlement volumes. Jacob walks through concrete examples from Visa, Mastercard, and JP Morgan. moving beyond pilots to onchain settlement and contrast stable coins payment utility with Bitcoin's treasury quote unquote digital gold role. We also cover the nuance risks centralization at the access layer custody cloud and compliance state-by-state regulatory differences speculative micro cap crypto treasury raises and why bipartisan momentum reduces but doesn't eliminate policy risk. Finally, Jacob shares the picks and shovels angle, cloud fintech payments and semiconductors as scalable ways to participate in the buildout without direct token exposure and why even low singledigit institutional allocations could materially move the asset class. We discussed a number of cryptocurrencies in today's episode. Jacob owns Soul Soli and Bitcoin BTC. And for full disclosure, I also own some BTC as well. Thank you again for tuning in to the Planet Microap podcast and please enjoy my conversation with Jacob Steven. Jacob, thank you for joining me today. How you doing, man? >> Yeah, doing good. Thanks for having me. >> Absolutely. It's great to have you. So, look, I I figured I I mean, I you know, I record the intro usually after we do this, but you know, for those that like to skip through the intro, you know, I the main reason I wanted to invite you on today is, you know, two things. one, you know, I'm seeing all this crypto treasury stuff and um I got a lot of questions. Every red flag is popping up in my head about what is going on here and why. Um, and then secondly, um, you know, so I've been wanting to do something to kind of cover that, but you know, as I'm seeing this, literally, I think the next post I saw was this white paper that you wrote uh, uh, from Lake Street Capital Markets, you know, why institutions are entering crypto. Not saying one has anything to do with the other by any means, but I was like, you know, that's pretty interesting. you know, Lake Street has a has a sterling reputation in in micro cap and, you know, now we're putting out this 100page paper about, you know, why institutions are entering crypto. So, I mean, I thought it was very appropriate. I'd love to to kind of dig in and go through some of the thesis. I had a bunch of questions and whatnot, but before we get into kind of all of that, Jacob, you know, I'd love to know from your perspective, why did you decide to write this paper uh and really dig into the world of crypto? Yeah. So, the purpose of the the paper is really to kind of help institutional investors think through uh what what's going on out there. You know, it's it's very similar to kind of where the the internet was in the late 1990s, but we wanted to help investors think through that now. Uh because we've kind of entered a phase where crypto is more um institutionally viable uh with clearer regulation. Um and you know investors may need to look at implementing you know crypto allocations into their IPS. So um and that also comes with a host of you know kind of picks and shovels players out there. So really it's just to educate the broader investor base um in one kind of conglomerate report uh that's hopefully up to date and and you know people can draw conclusions from on where to allocate money and funds best. >> Absolutely. So, you know, that that hits into my first question a little bit about how, you know, the white papers view of quote here crypto normalization, you know, it really compares a lot to the internet's adoption curve during the late 1990s. What would you say are some of the specific indicators that demonstrate that crypto has crossed this threshold into mainstream finance? Yeah. So I think when you kind of look at uh you know where the internet curve the adoption curve was in the late 1990s um it was kind of from a global basis it was kind of around that you know four to maybe 8% um before really kind of skyrocketing. Um so in I mean very similar to crypto uh in 2024 crypto uh there was about 560 million users which is about 7% of the global population. Um that same level is very kind of what the internet had experienced before taking off. Uh it's more of an analogy um but it's data driven. I mean there's network effects uh that are now kind of self reinforcing I would say um more users to kind of attract more liquidity uh more developing uh more corporate participation u but really what the the fundamental kind of inflection was is the institutional legitimacy for the internet uh so when companies like IBM AOL uh kind of commercialized it we feel that crypto's kind of at that same tipping point now uh you got Wall Wall Street and Silicon Valley kind of both engaged in this. Um, and then as with the internet, you know, early skeptics kind of underestimated the compounding innovation. Uh, you know, and that's kind of our our paper's core argument is that we're entering just kind of this first normal normalization phase. Uh, where crypto becomes more invisible infrastructure. Uh, it's it's more credible. Uh, very similar to how email, you know, was the internet's kind of, you know, killer app. uh you know stable coins and tokenization kind of may prove to be kind of crypto's equivalent of that uh with near uh global kind of financial connectivity and uh instant settlement capabilities. So then what and it sounds like my next question is a combination of factors but which factors amongst regulation, infrastructure and or corporate adoption have been most pivotal in legitim legitimizing crypto. >> Yeah, I would say that the infrastructure made it usable but regulations kind of ultimately what made it investable uh for the majority of of funds available out there. Um all three are definitely intertwined. Uh but the regulatory shift is more the cornerstone. Um you've got bipartisan progress here with FIT 21 being passed in 24. Uh the Genius Act uh which is supposed to be effective in in 2027. Uh and then you got the Clarity Act as well. Um these are really giving institutions kind of the legal footing to enter without existential risk. uh the clarity coupled with new accounting standards um that allow crypto to be fair valued uh quarterly has kind of uh shifted CFO um attitudes from more of an avoidance standpoint to more experimentation. Um and then infrastructure was kind of the next key unlock. Uh you've got custody compliance um payment rails. Uh they're now institutional grade. uh the corporate adoption kind of compounded on that legitimacy. So now you've got household names kind of you know like PayPal uh you know Square or Block now uh Tesla you know they're essentially using onchain assets for payments um and treasuries you know have kind of made crypto tangible for investors and consumers alike. Um, you know, I think once you have the those defined rules around custody, um, and disclosures and accounting, uh, ultimately the last question to answer is, you know, who the regulator of record is. And now we kind of have that with the, uh, the recent bills, uh, in in the, uh, the overall legislative process. So while all factors kind of you know matter uh I think regulation is what built the foundation infrastructure is kind of what made it more usable and then corporate adoptions ultimately kind of increases that credibility >> right so I mean just going off pushing back a little bit on the um on the US policy environment which the report portrays as decisively pro crypto um but but the acts that you just mentioned again correct me if I'm wrong they're not fully enacted the Fit 21 Genius Act and Clarity Act, right? They're not fully enacted and the state level policies kind of remain a little fragmented. I mean, is the claim of regulatory certainty premature and could policy reversals derail some of this institutional confidence? >> Yeah. So, I think it's fair to say that regulatory certainty is emerging rather than uh sort of fully realized at this point. Um, you know, in in our paper, we do acknowledge that the US has kind of entered a a new era of clarity. Um, and but legislation still remains a little bit in that wait and see period. Uh, FIT 21, um, that's obviously passed in the House. Uh, the Genius Act, uh, it was signed in July of this year. Uh, should be effective in January of 2027. And then you've got the Clarity Act, which is still pending in the in the Senate, I believe. you know, collectively these kind of maps the, you know, what I would call the contours, the edges of of regulation. Uh, but final kind of agency rule making is going to ultimately what is be what determines the practical outcome. And then you've kind of got the state level fragmentation a bit. Uh, you know, this is there is no uh, you know, common ground here necessarily. You've got Wyoming who's very, you know, pro- crypto. They're very, uh, pro- capitalism. uh you know they've got the crypto bank charters um and then you've kind of got New York with their bit license who's completely on the other end of the spectrum you know kind of uh constraining innovation a little bit but ultimately on the side of consumer protection um airing on that side of of things. So um you know these these differences are kind of you know a healthy sort of market um rather than you know chaos you kind of have some sort of federalism going on. Uh you know competition among states is is really kind of driving what I would call more regulatory refinement uh versus you know certainty. And then you know obviously institutional confidence um you you could kind of be you know that could be rattled by some sort of political reversal but given that there's been so so much um you know bipartisan support of these bills um I think it's kind of fair to say that you know it seems like a wholesale reversal is kind of unlikely. Um, and now you've got Europe with their, you know, Micah. Um, they they're, you know, not they're not backing down. So, you've kind of got the US trying to remain competitive in that sense as well. So, could receive a reversal. Um, I think you always kind of have that headline risk. Um, especially in kind of an election cycle period, but there's now economic incentive to crypto. Uh, you've got a job, you know, you have jobs formed out of it. You have a tax base. uh there's payment competition to settle faster and now you have dollarbacked stable coins. Uh so for the US to lead versus ban um it it's kind of essential that we don't fall behind the competition and that ultimately lowers kind of the probability of a you know an outright clampdown so to say on crypto policy. >> Absolutely. And I mean that that goes dovetails right into my next question regarding stable coins because I mean listen I was telling you offline like I was one of those you know dudes I was trying to open up a Mount Gaus account in 2011 you know and trying to figure out how how do I get Bitcoin in a 100 bucks like why are they turning down my my driver's license right now. This is annoying. I know it's I know it's uh you know it's uh my license is good. But anyways, you know, speaking to the role uh the growing role of stable coins because I mean the the thesis around Bitcoin back is decentralized currencies, right? Like we're reshaping the you know economic markets and how you know we transfer wealth and all that stuff. So I mean does that growing role of stable coins suggest this transition toward tokenized fiat systems rather than decentralized currencies? Yeah. So, I think stable coin growth is is certainly interesting. It's more of the market kind of voting um on how crypto should best be used. Uh it's it's kind of the question, you know, we we don't want just a new asset, which is kind of how crypto started. It's we want better payment rails, uh more uh instant settlement opportunities. Uh so, stable coins are, you know, they're basically dollars with an API. You can kind of think of them as they settle 24/7. uh globally there's no correspondent bank friction involved um and that's extremely attractive to trading firms and fintexs um and eventually you know corporate customers who move money cross border um so yeah part of what's happening is kind of a march toward uh tokenized fiat and that's programmable dollars kind of that move more like crypto um there was essentially uh let's see $6 trillion in stable coin settlement volume in 2024. That's more than 10x uh what it was in 2020. So corporates are already using stable coins to move money faster, cheaper, and around the clock. Um and then you've got kind of, you know, the the big players, the big payment networks like Visa and Mastercard. You've got JP Morgan with their JPMcoin. Uh they're embed embedding stable coins into the core kind of settlement functions. Um, ultimately I don't think that really kills, you know, maybe Bitcoin's thesis or anything. Um, from from our understanding, you know, Bitcoin is really still being positioned as kind of that that digital gold, uh, kind of the reserve asset or savings. Um, so it's not money that you spend daily. Um, and stable coins and Bitcoin, you know, they kind of solve two different problems. uh one solves the kind of store of value um outside the system and the other kind of solves the the move the dollars inside the system uh more efficiently and institutions are kind of adopting both at this point. >> All right. So we're I the next I this I have all my questions I I really went for it with you today Jacob. You know I have I have different parts and everything for this interview. I I my part two or part B and that that's really has to do with this institutional and corporate integration. So my first question here is you know the paper sites Visa, Mastercard and major banks as evidence of major adoption but most integrations remain kind of pilot scale or symbolic. Are these firms genuinely committed to onchain operations or simply hedging reputationally against missing a technological trend? Yeah, I think it started as hedging uh originally, but it's not really hedging anymore. Um I mean obviously you know Circle came public earlier this year. Um you know Visa's USDC settlement network uh that actually is you know operational now at this point. Um I think when you look at the uh when you look at last year um circle actually disclosed that there's over 500 million in monthly merchant flows processed through Visa's USDC onchain settlement. Um the couple core functions of that it reduced settlement time from 2 to three days to under 30 minutes and it cut their float cost by up to 90 basis points. uh when you're moving trillions of dollars, um that's certainly, you know, not a not a pilot program anymore. Um it's it's certainly more on the on the function of, you know, full scale operation. Uh and Mastercard's even done the same thing. They followed suit in uh April, I think, of this year. They launched the end to end stable coin settlement layer that's also integrated uh with USDC. Um they have I think they're live in 50 plus markets maybe 60. Um in in terms of JP Morgan you know they have the Onyx blockchain um and their JPMcoin uh that's now live for corporate and interbank payments uh that uh the stat I have here says mid 2025 there was over a billion dollars per day uh that was settled internally on JPMcoin. So uh this is not test volume anymore. This is actual treasury crossber payment flows. Um, city BNY uh melon they're also launching crypto operations. Um, I think BNY Melon's now custody uh in full custody of uh Bitcoin and USDC for its clients. Um, and what I see here happening is classic Fortune 500 kind of behavior with any sort of new infrastructure is what I would say. Um it's you kind of bring the crypto you bring the the capabilities inhouse within your compliant barrier. Um and these firms aren't really chasing like a retail like NFT hype uh like maybe you know some thought it would be in 2020 2021 but uh they're weaponizing the faster settlement capabilities of stable coin the lower float costs and kind of the reduced foreign exchange friction and obviously 247 liquidity too. But I think the the overall signal is pretty clear. Um it's not really marketing at this point. It's not really, you know, it's more of a margin structure and and there's certainly a ton of cost benefits to using stable coins for for payment settlement. >> Well, it sounds like it is almost sort of a marketing play, right? Because I mean the way that you know the downstream consumer would actually better understand all this is that like it's it's not like they're you know it it's more like all right come bank with us because we now have all of these additional capabilities right versus you know maybe another bank that you would do business with you know it's not like a different AI company where you're going you know trying this AI or that you know even though some of them still use technological capabilities to better their overall package but using the example of like Chat Gep versus something else, right? Like you're going to that bank and seeing, okay, they now are fully integrated with all the latest technology versus somebody else and it's all crypto enabled. Like that's kind of their thought process. Correct. >> Yeah. Uh I I would say that it's certainly a marketing uh tactic. Um obviously, you know, when when somebody transfers their money, they want it right away, right? And if you know banks and and you know uh financial institutions can do that cheaper, more effectively and and a lot quicker than their competitors uh ultimately that's you know that's something that they can uh win on 100%. All right. So next question has to do with my other reason for why I wanted to invite you on here today and that has to do with this the corporate treasury uh examples um that are used to justify Bitcoin as this long-term store of value. But these holdings, you know, as evidenced over the years of Bitcoin being around are highly volatile and un unhedged. How realistic is it to consider crypto a stable treasury reserve asset given the 60 80% draw downs in prior cycles? >> Yeah. Um obviously you know crypto has been volatile especially the bull and kind of the the crypto winter um sub uh subsequent of the uh you know 2021 time period. Um I wouldn't call it stable. I would call it kind of more asymmetric to how investors and and companies normally think of capital allocation. Um I think CFOs who are actually doing this think about it as a traditional treasury uh reserve is about capital preservation and liquidity. Bitcoin on the balance sheet is more long-term purchasing power and signaling. Um it's kind of a bet that the debasement of fiat over a decade matters more than volatil volatility kind of quarter over quarter. Um and that's why you see kind of only the highest conviction users adopting so far uh companies with you know extremely high you know cash flow um or gross margins um or two kind of a a deliberate strategy to more align their brand with Bitcoin and kind of you know updating it to the 21st century. So um you know will every company do it? No. Most corporates, they're never going to feel comfortable uh with that level of mark-to-mark uh movement, so to say. But for kind of the, you know, certain profile of company, you know, maybe Capital Light, uh founder le kind of more promotional, want to be loud, um in the market, you know, Bitcoin is kind of a, you know, a functioning as more of a long-term uh treasury asset. and the fact that it's volatile doesn't disqualify it for them. Uh the volatility is part of the upside that they're looking for. Um so that's that's kind of ultimately, you know, how we think through companies taking on from Bitcoin treasuries and and any sort of crypto. >> Okay. Well, now comes the push back question. Uh even more so the fun part. You ready for the fun part? Here we go. We're going to do the fun part. >> Let's do it. >> All right. So look, I we're in Micro Cap. We cover Micro Cap day in and day out. I've seen some ridiculous numbers, 100 million, 250 million raised to, you know, build up our crypto treasury of whatever BScoin, seemingly BS coin. Like I can see the case for Bitcoin. I understand that. You know, it's it's been around the longest se value. It's seen as the gold. Okay, fine. like if that's a strategy you want to do and maybe you're using excess cash. Okay, I I can see that argument that that that I can see the case and the thesis you would put together there. But when you see some of these companies that are going out there saying you know raising this ungodly amount of money that you know whether they had real businesses before or you know now like it just reeks absolutely reeks of all the stuff we've seen you know amongst when things are very trendy if if we're being hon how how do we you know as folks who are listening this and watching this who are micro cap investors that you know now maybe their favorite company is, you know, raising, you know, 500 million for, you know, you know, whatever, you know, computercoin, whatever the pardon my French, sorry, whatever the hell it is, like, you know, help them help us understand that because it it just it absolutely reeks. >> Yeah. So, obviously, you know, huge capital raise cycle has gone on with digital asset treasuries. Um, I think what you're seeing is, you know, companies looking at it as an alternative capital raise cycle. Um, I I think there's a lot of positive benefits to having crypto on your balance sheet. Um, number one, uh, it's kind of like we mentioned the, you know, the debasement of the the fiat currency. Not to cut you off, but like any crypto though, like I I I again I I agree with you about like, you know, maybe Bitcoin, even to a degree like Ethereum, you know, some of the main ones that have been around for a long time, but like >> yeah, >> any crypto. It's almost like this crypto was just made yesterday and now it's like, hey, let's raise $250 million and, you know, that becomes our our treasury crypto. It's like, okay, sure. >> Yeah. I mean, obviously, you know, there's always going to be some bad actors. Um, and you know, I personally don't think that every coin has a utility. Um, so it it's logical to think that, you know, there is some out there that are, you know, seeing this as a way to raise capital, kind of pull the rug out. But, um, and just, you know, ultimately stay a public company. But I think there's several out there that actually have utility. Um, in that, you know, their mission is not only to, you know, ultimately raise as much capital as they can as quickly as possible, but ultimately to kind of see this as a as a value prop and kind of um position themselves into the the broader blockchain that they're supporting. Um, so yeah, I I do acknowledge that there's uh there's some kind of you know, bad actors it seems out there, but ultimately um you know, it it's it's a huge capital race cycle. Um I I think there is some institutional viability to it. I don't I don't think this, you know, these 500 million to a billion dollar raises are, you know, strictly retail driven. Um, I I would say that, you know, the institutional backing behind crypto um is has been pretty prevalent over the last several quarters. >> 100%. Look, I don't mean to put you on the spot with it. It's just, you know, look, for any of us that, you know, again, I don't do a lot of crypto episodes on here. We don't, you know, but like that that was just something that like it you're like, what is going on here? It almost just it almost not only did it wreak from a business case perspective, but it also made it seem like all right well or is this you know a way for providers to you know like ah man we're just printing money right now and doing all these deals like this is sick like you know hey do you want to do a crypto you know like we have all the infrastructure no problem like let's go and you know the unwitting CEO is like oh that actually sounds like a great idea you know and not realizing that like you know it's not them that's actually it's not really a great business case. It's more just like the providers are now just making a crapload of money and you know leaving that company in the dust with this coin that might be worthless you know two three years from now. >> Yeah, like I like I said I you know there is some coins that don't necessarily have a utility that you know maybe >> maybe it's not apparent uh right away. Um and you know there are bad actors in every kind of industry. Um it's just kind of the nature of the game. But you know I I don't you know I think that there is institutional backing behind a lot of these digital asset treasuries now. Um and kind of what we're seeing is you know there's a lot of a lot of these companies are trading below kind of net asset value at this point. >> Um it's almost like a shifting investor base a little bit. um it's people that, you know, aren't necessarily comfortable with stocks that have crypto on their balance sheet or can't own them uh because it's not part of their policy statement. Um so it's kind of a a shifting investor um holder base at this point, but you know, like we said, the there is three legitimate, you know, actually there's several legitimate kind of cryptos out there. um you know but there is a lot that are you know kind of on the the more speculative end we'll call it >> for sure I mean is the real main business case thinking like all right we have this you know we have this asset now as part of our treasury like we can use this you know assuming that it you know yeah there'll be volatility but assuming this goes up over time we can always tap this almost like as a not necessarily a line of credit you own it and you can you know sell some off to go make an acquisition or do something else almost kind of like a a weird crypto spack way thing in a some odd way, right? >> Yeah, I I definitely think at some point um you know, assuming that these altcoins don't crater in value, um there will be acquisitions to be made, but yeah, it's almost like a secondary vehicle um that you know has the capital raising capabilities. Mhm. Yeah. Listen, I'm going to keep monitoring. It's fascinating. I'm I'm still It again, it reminds me sometimes of like the you know, I think it was like in the what was in the I think it was like in 2020, 2021 where, you know, it was like consumer goods companies and all of a sudden they're like, "Yeah, we changed our name to, you know, so and so crypto or like they just bought a bunch of P." You're like, "What is going on here?" This reminds me of all the mining companies that become cannabis companies that became psychedelics companies that became crypto companies and now they're cannabis compan like we you know if you've been in it long enough you've seen all these kind of crazy trends but you know going back to kind of the I guess the the corporate and institutional integration here. Well, I mean, we were kind of on it, but that was that was the main one I really wanted to dig into just to hear what you thought because, you know, I I guess also just to put a pin on it, the main reason that it was I I really wanted to hit on it and really cuz it's one thing that there's bad actors in everything, but with crypto, it's it's been associated with bad actors for a while, right? Like there's there's been a lot of corporate channery and I feel like that's still putting it lightly. You know, there's been some of the craziest bankruptcies, stories, every books, all sorts of stuff covering the crypto craze over the last 14 years, you know, so like to say there's, you know, always bad act is like, okay, but we're talking crypto here. Like it's been a lot. >> Yeah. Yeah. No, 100%. Um I I think that's ultimately why the industry can benefit from regulation. um totally by bringing by having some sort of framework in place is because >> it kind of weeds out those bad actors quickly. Um and you know we've already seen the NASDAQ kind of crack down and say the digital asset treasury um those are going to slow down you know so I think ultimately at the end of the day you know regulation is is kind of what makes this uh institutionally viable the the larger percentage of the capital um that's that's out there. >> Absolutely. So, I mean, you know, not going back to my some of my question, so like how will the new like Fazby accounting standards for crypto holdings impact corporate adoption rates as well? >> Yeah. So, uh I think it's a big deal. Uh under legacy accounting, um if you held Bitcoin, you had to impair it when the price went down. You couldn't mark it back up uh when it recovered. that meant that kind of gap numbers potentially looked worse than economic reality. Um I think this this is basically just a fair value treatment now. Um so you can kind of recognize those asymmetrically. Uh and I think that does two things. It removes kind of this artificial accounting penalty that we used to have um and scare kind of the audit committee and your CFO. Um, and number two, I think it kind of lets management actually tell the story to investors in a cleaner way. Um, you still have volatility in the reported earnings. Um, so it's not like every Fortune 500 company's going to adopt the uh crypto on their balance sheet, but you know, we've kind of moved from the CFO, the board, our accountants won't sign off on our reports to okay, now this is a board level kind of conversation that we're having uh on do we allocate a percentage to crypto? And what parallels do you think exist between the early corporate Bitcoin adoption and the historical precedents like gold standard accumulation or foreign currency hedging? >> Yeah, it certainly echoes both. Um I think the gold parallel is kind of philosophical in a sense. Uh gold was held as kind of a bearer asset um outside uh government control to protect the long-term purchasing power. Um, Bitcoin is kind of filling that same psychological role for some modern investors and uh, corporate customers. Um, especially the ones that kind of believe fiat dilution is a structural kind of feature and not a not a bug necessarily. Um, and then the foreign exchange hedge parallel is kind of operational. uh you know kind of companies are routinely holding non-dollar assets because their cost base or their revenue base is in that currency. Uh but Bitcoin is now being treated uh by some firms almost kind of like a a treasury sleeve of you know supercurrency asset. Uh so something not tied to a central bank so to say. Um and the difference is that you know foreign exchange hedging is kind of more about smoothing the volatility in in earnings and in revenue recognition. But um while Bitcoin's kind of positioning itself more as kind of a macro view, it's less about hedging kind of your exposure, but more like we're aligning our balance sheet with kind of a a world view in a sense. So I think it's kind of an echo of both. um you know, Bitcoin certainly kind of filling that digital gold uh so to say, you know, moniker um whereas, you know, I would say that, you know, the foreign exchange hedging is uh is more kind of just a an operational uh thing that you know, maybe stable coins can help with. >> For sure. So, I mean this my next question kind of dove is a kind of a dovetail on in the positive direction I think. um regarding you know the asset treasure because this is really hitting into the meat of the meat and potatoes of maybe some investors that you know like all right I'm invested in maybe some cloud tech fintech semicondu you know in companies that are generating have real business models doing real you know real companies for I'm not saying all crypto is not real I'm just saying you know they're doing the real companies operating without any crypto but I mean which public companies outside of the crypto pure plays are best positioned to benefit from this blockchain adoption and not counting the >> trans. Yeah. Okay. Um I I'll kind of break it into three separate buckets I would say. Uh cloud players, fintech players, and then kind of the semiconductors. Uh I would say that these are the three main kind of picks and shovels of crypto. Uh so first kind of the cloud and infrastructure. Um, blockchains are very compute hungry. Uh, they run 247. Uh, they're constantly verifying, securing, and indexing transactions. Uh, and that demand flows pretty straight to Amazon, Microsoft, Google. Um, because most of the validator nodes are still live on AWS, um, Azour or Google Cloud. Um so I you know estimates I've seen estimates that put that number north of 60% of major blockchain workloads. Um you know every new roll up or layer 2 spinning up means more rented computing hours uh and storage. So cloud go gross margins are pretty strong. Um I I think from a profitability standpoint the uh the cloud and infrastructure guys certainly have a long uh runway of growth ahead of them. Uh secondly, the kind of the payments and the fintech side of things. Um this is where blockchain kind of quietly behind the scenes goes more mainstream. Uh Visa, they run merchant settlement uh using USDC uh over Solana and Ethereum. Uh that's it's not a test anymore. uh they you know they've rolled it out to 190 c countries uh cutting settlement from that 2 to three days that we mentioned before to now just under 30 minutes. So um and also lowering their float costs as well. Uh so obviously Mastercard's done the same thing uh you know OKX uh the exchange and then you got Fireblocks in that segment. Then you've got PayPal uh who's also using onchain settlement. They've got a stable coin, PYUSD. Uh they're clearing billions a year onchain. Uh Stripe. Uh they've also kind of reenabled USDC payments last year. Um so I I think the the overall kind of payments and fintech sector is is certainly another positive uh growth runway uh that we can see a lot of of benefit from stable coins and and onchain settlement. And then just lastly to touch on the kind of the semiconductor space um you know obviously Nvidia AMD supply a ton of GPUs um that proof of you know proof of stake proof of work uh zero knowledge proofs um you know Marvel Broadcom SEC they also make some of the networking gear and kind of high-speed interconnects for the uh the validator data centers. So I I think you know there's tons of industry I would classify those as probably the top three industries that are poised to see the most benefit from crypto. Um but you know that typically investors think you know crypto as in trading on you know Coinbase or you know trading on an exchange. Uh there's a lot of you know picks and shovels players that still have a significant runway ahead of them. Um especially you know given that we're so early in the adoption of actual you know crypto. um and onchain settlement for stable coins. >> So my next question is that the paper emphasizes that you know in a quote here infrastructure is no longer a bottleneck end quote yet the ecosystem still depends on a few key intermediaries you know Coinbase custody Fireblocks AWS node hosting does this concentration undermine the decentralization ethos and introduce new systemic risks? Uh yeah, this is a kind of a a hotly contested uh subject in crypto currently. Um at the protocol level, blockchains themselves are decentralized, but at the access layer, so the on-ramps, uh you know, custody, management, liquidity, and compliance functions, uh those are very centralized. So you have a handful of kind of qualified custodians and you have a handful of wallet security providers uh and a handful of kind of cloud providers that are running a ton of nodes. Um so that absolutely creates concentration risk. um if one of those critical vendors fails it that single point of failure uh gets hacked or you know becomes politically constrained for whatever reason I mean that's a significant disruption um especially for institutions that aren't set up to self-custody crypto um I think the tradeoff though would be you know institutions want vetted intermediaries they want the you know the auditability the sock 2 compliant um audit it's insurance coverage. Um they want somebody else that can be liable in the situation of you know uh failure. So there's going to be a natural pull I would say towards the professionally managed uh you know apps and applica uh you know exchanges. Uh longer term I think we see kind of a regulated model uh regulated federation I'll call it again. Uh so not one C custodian but kind of several. They're all supervised um interoperable um but still more centralized than kind of what the traditional crypto viewpoint was. Uh it's far less fragile than you know a single point of failure and we're kind of already moving in that direction. Um it just it's going to take some time. >> Got it. So I mean so my next few questions have to do really with or I had a few questions here having to do with regulatory and policy dynamics but quite frankly I think you've answered most of them about the extent to what extent has the shift in the US executive branch accelerate global regulatory competition like uh yeah of duh like of course uh that seems like a you could give me one one word yes and I'd be like yeah you're probably right um how do different US state level regulatory approaches is like Wyoming versus New York influence innovation like again yes of course yeah you know depending on which the regulatory is on in each state that's going to influence where people and also like it's kind of pretty obvious like favorable regulatory uh approach and you know you know cheaper cost of living and cheaper place to do business. Yeah, that's probably where they're going to go. Um right any anything that we have to add there? Probably not. >> Yeah. Do we hit it? >> Yeah. I I don't think so. I mean, you know, obviously Texas, North Dakota. >> Yeah. >> Um like you said, cheaper cost of living, cheaper to do business. You know, they've got a lot of pro uh minor friendly laws. >> Uh so, I mean, those are two other states that I'd call out. Um in addition to kind of the Wyoming and and New York examples we mentioned earlier, >> Wyoming, there's going to be a big cattle farm and then just a massive data center. just that >> right >> see that perfectly. That was exactly what I envisioned on my, you know, on my uh my RV trip going north. That's going to it's going to look great. Um uh clear US regulation attract repatriation of crypto. Um yeah, probably um right any anything we have to add there? I mean just this >> yeah you know I think after 2022 when most of the blowoffs happened uh you know a lot of teams a lot of development teams did leave the US uh it wasn't because they didn't want to be here it was because you know banking insurance payrolls uh opening you know any sort of uh you know corporate bank account was impossible uh so if you couldn't even get a bank account here in the US you know you kind of had no choice but to to go somewhere else um I think as the US market relegitimizes itself a bit um we get those defined rules uh we get a a clear framework and you know we see you know I would say that typically we'll probably see the majority of the capital um markets open up for for these companies obviously we're one of the largest um you know I I think we do see a kind of a return from a lot of companies that did leave because ultimately you want to be where your investors are you want to be where your, you know, most of your customers are, you want to be where the the capital markets are as well. >> 100%. All right. So, this was the main question, I guess, from the regulatory and policy side of things, you know, cuz, you know, you mentioned earlier that there is this current bipartisan support for digital asset legislation. How sustainable is that and what political risks still remain? >> Yeah, I would say that, you know, support is it's sustainable. um it's not unconditional. You know why is it sustainable? You know digital assets have kind of crossed over from the tech curiosity to jobs and competition at this point. So once you know something is kind of framed as domestic competitiveness uh you know especially versus all the other major economies out there it tends to get some bipartisan support um because of that tax base and that jobs creation that we talked about earlier. Uh where the risk kind of still is is on the consumer side of things the the consumer protections. um you know, if we see another high-profile failure, uh that looks like fraud or has kind of, you know, a hint of customer abuse, so to say, you know, there's there's going to be some pressure to protect the retail, uh investor and a very short and probably pretty blunt way. Um but I think, you know, different committees in C Congress, um they're still fighting for kind of that jurisdiction. Um agencies don't typically like to give up their turf. Um, so there's a little bit of a turf war going on right now, uh, with crypto, but I think bipartisan support this time is real. Um, you know, it's pragmatic support, not ideological right now. Um, I think the industry has to keep kind of looking boring. Um, it needs to be compliant and it needs to create jobs, um, if it wants to kind of keep that, you know, that bipartisan support intact. which is why we're seeing every new coin sprout up out of like oh a new coin with the 10 new jobs like we're good you know I'm just that was terrible >> yeah and there's a ton of corporate customers launching stable coins now um there's a ton of you know smaller projects from you know like open AAI um you know there's a lot of people that are interested in in launching crypto coins at this point >> for sure so I mean this this gets into the last section you know of the paper and my questions here having to do with like the market and investment outlook. So, you know, while that user growth and stable coin volumes are impressive, um much of that activity is still driven by trading, you know, not real world commerce or productivity gains. Is the crypto sector revenue growth truly sustainable without a clear broad-based utility beyond financial speculation? >> Yeah. So, I think this is kind of a core argument of the bear case. um you know a lot of crypto revenue it still is tied to that leverage um and and trading fees um but I think there's two things that are kind of becoming more durable revenue lines that aren't just you know the number goes up when you know prices are up as well I think block space uh as a commodity you're seeing a lot of willingness to pay for the settlement the data availability um and onchain security uh that looks a lot like kind of paying AWS for cloud computing power. Um it's not, you know, a sexy, you know, model, but it's it's ultimately it's recurring revenue and higher margin. Um and then you got kind of the stable coin uh float and transaction economics. You got tons of dollars that are moving, you know, onchain. It's not necessarily speculation anymore. Um it's about speed uh working capital crossber payment costs um so that's genuine uh that's a genuine utility I would say um and then also you got kind of you know every time you know value moves over stable coin uh rails instead of the legacy you know correspondent networks uh somebody in the middle kind of captures that fee revenue so do we have you know full mainstream you're going to go to Starbucks and buy a coffee with, you know, crypto utility yet? Probably not. Uh we might not need it. Uh you I guess you don't have to really judge, you know, the value of, you know, a certain coin by how many people buy their latte with a a certain coin. Uh you kind of judge it by how much high value settlement um runs through it is what I would say. So it's kind of slowly, you know, becoming the financial plumbing, but you know, plumbing is boring. uh borhin is kind of how industries ultimately get durable though. >> I mean, you know, quick followup to that and I and I know that that it's, you know, everyone's been talking about the idea that, you know, crypto isn't, you know, real judge of it is not necessarily, you know, going to buy your Starbucks, all that. Like that's really not it. It's that is creating this financial plumbing infrastructure. Why don't you think that that I mean I know the easy answer is that it's boring you know nobody wants to hear about that but yeah why that you know you look at AI and that's caught fire because it's the new internet you know why with crypto and the the blockchain technology innovations there why hasn't saying oh this is going to be the new financial plumbing for which all of transactions will happen why hasn't that caught as much fire yet would you say at least amongst kind of the more, you know, the more traditional financial markets. I mean, it's kind of starting to obviously, but you know, why why why hasn't that argument caught more fire? >> Yeah, that's a great question. Um, I think a lot of it has to do with uh things just take time to fully resonate. Um, you know, it it feels like that that rhetoric has been out there for a while. Um, and that's kind of been known by a handful of people, >> but I think we kind of underestimate the the amount of time that it actually takes >> to kind of displace something that's been in, you know, effectively the the plumbing for the last, you know, 60 years. Um, and you know, maybe the, you know, I would say that the uh the credit card, you know, since like two 2000 or, you know, uh, you know, even 20 years ago. So, I think it just takes time. Um, I I would say that, you know, investors still aren't necessarily focused on on crypto. Um, and like we mentioned before, can't own it or u have exposure to it. But I think ultimately that changes and you know, people have to get familiar with how onchain settlement works. Uh, what is a stable coin in general? What what's the utility of it? So I think it's ultimately just a function of time and the human nature of wanting to see things happen quicker um you know as soon as we hear about them and you know kind of see them right away. Well, what's interesting too is you start to think about all the various application you know not just you know from financial plumbing settlement stuff but I mean even just amongst our little world and in you know investing and stock I mean there's a lot of jobs at stake potentially you know if crypto takes hold or blockchain technology and just faster settlement you know no need for you know physical stock certificates anymore you know like all all that stuff you know that all could potentially go away you know using using crypto or using blockchain technology, but you know, it's a little slower, I guess you'd say. You know, >> yeah. Yeah, it's definitely slower than a lot of people want it to be, but um I think, you know, the the framework is is starting to be put in place, and that's that's ultimately the first step uh for any, you know, industry. >> Absolutely. All right, final question for you here today. You know, so given the white papers view of the crypto's 4 trillion market cap versus the 120 trillion in global equities, what would you say is the realistic institutional penetration rate by 2030 and which subsectors are best positioned to capture it? >> Yeah. Um, I think if you think about crypto as an alternative asset sleeve, um, alongside things like gold, commodities, uh, private credit even, uh, you don't need a giant penetration rate, uh, for the numbers to get pretty big. Um, low singledigit allocation from pensions, endowments, um, sovereign wealth funds even, and even corporate customers. Uh, that would be enough to materially move the total crypto market cap. um because the base is still relatively small. I mean only 7% of the the world's population has any exposure to crypto and only 15% of US adults uh have exposure to crypto. Um so I think you know where that capital actually lands first is the most important. I think Bitcoin as treasury or a macro exposure. Uh that's kind of the digital gold allocation um that companies can look at and and take advantage of. And then you also have the the secondary kind of feature the the statement uh the stable coin and kind of payment rails. Um and that's kind of the the monetizing uh global money movement um in bringing it up to the 21st century so to say. Um ultimately you also have the picks and troubles like we talked about uh custody compliance uh secure hardware infrastructure node infrastructure uh payment integration um those are you know becoming investable uh without taking kind of the direct token risk um and institutions really like that. Uh that's something that they're comfortable with. Um and then you kind of have the the specialized compute in the semiconductor players. uh you know every new blockchain, every new onchain AI agent um tokenized device identities, they ultimately drive demand for you know specialized computing and and semiconductors. Uh that's very traditional that's a very kind of attractive um vertical for traditional kind of equity investors as well. uh because it fits inside, you know, the existing semi uh you know, infrastructure that they know already and the cloud frameworks that they've already gotten comfortable with. So, I'd kind of say that, you know, we're not pitching crypto as necessarily a replacement for global equities or anything like that. It's more like we're pitching this as kind of a new sleeve of, you know, assets inside institutional portfolios um and kind of a new costefficient layer inside of payments. Um and to us, you know, that's enough to be transformational without requiring a full reinvention of, you know, the global financial system as it sits today. >> I think that's a perfect place to end it, Jacob. And and thank you again. So where where can our audience go and find more information either to get a copy of the white paper or to get in touch with you if they have any questions? >> Yeah. Uh so we have a a link on our website. It's a short form that you can download our white paper from. Uh lakesrecarkets.com. Um otherwise, you know, I'm on LinkedIn. Uh you can find me on LinkedIn and we can certainly chat there. >> Very cool. Well, Jacob, thank you so much for joining me today. really do appreciate it and answering all my questions and I I really look forward to our next update. >> Yeah, great. Thanks for having me. >> Thank you.