Key takeaways

• The digital asset industry is poised for massive growth due to regulatory changes that have expanded the total addressable market.
• Further regulatory clarity could potentially double the total addressable market for digital assets.
• Going public is essential for integrating traditional financial firms into the crypto ecosystem.
• BitGo has raised significantly less capital compared to its competitors, showcasing strong operational efficiency.
• The timing of an IPO is crucial, with a bull market significantly influencing its success.
• Going public can provide more business opportunities than the costs associated with being a public company.
• The costs of being a public company include significantly higher insurance and audit requirements.
• The public process for crypto companies was effectively closed for four years, impacting their ability to go public.
• Choosing investment partners is more about compatibility and brand alignment than just financial terms.
• Many traditional investors lack deep knowledge of crypto, affecting their engagement.
• GAAP accounting standards do not adequately cover the unique revenue structures in the trading industry.
• Every asset can be tokenized, which is a fundamental premise for the future of finance.
• BitGo’s business model is often misunderstood as merely custodial, but it encompasses much more.
• The complexity of accounting in crypto arises from the various definitions and classifications of assets.
• Innovation consistently prevails over time, except when hindered by government regulation.

Guest intro

Mike Belshe is the Co-Founder and CEO of BitGo, a leading digital asset custody and security company that recently went public. He pioneered multi-signature wallet technology and the Threshold Signature Scheme for securing digital assets, establishing new security standards for institutional crypto markets. Prior to founding BitGo in 2011, Belshe was one of the first engineers on Google’s Chrome team and created the SPDY protocol, which formed the foundation for HTTP/2.0 and fundamentally improved web speed and efficiency.

The growth of the digital asset industry

• The digital asset industry is expected to massively grow due to regulatory changes that have expanded the total addressable market.

  — Mike Belshe

• Each time we get kind of another piece of goodness in it like clarity act if that comes through I think it’s gonna double our tam again in terms of companies who are willing and able to participate.

  — Mike Belshe

• Understanding the regulatory landscape and its impact is crucial for predicting market growth.
• Regulatory changes have tripled the total addressable market for digital assets.
• Further clarity in regulations could lead to exponential growth in market participation.
• The expansion of the market is driven by increased regulatory acceptance.
• Stakeholders should remain informed about upcoming regulatory developments.
• The potential for growth is significant, with regulatory advancements playing a key role.

The importance of going public

• Going public is essential for bringing traditional financial firms into the crypto ecosystem.

  — Mike Belshe

• The reason for us to be public where we sit is about bringing everybody in the industry into the ecosystem… this is just our next evolution of being transparent.

  — Mike Belshe

• Public listing fosters transparency and industry growth.
• Traditional firms face challenges partnering with private crypto companies.
• BitGo’s public status aims to integrate more traditional firms into the ecosystem.
• Transparency is a strategic move for fostering industry growth.
• The public process was closed for crypto companies for four years, affecting timelines.
• Going public can offer more business opportunities than the costs incurred.

Financial implications of being a public company

• The costs of being a public company include significantly higher insurance and audit requirements.

  — Mike Belshe

• The cost of being a public company can range significantly, with practical estimates around $15 to $20 million a year.

  — Mike Belshe

• Being a public company involves substantial financial commitments.
• Insurance and audit requirements increase significantly after going public.
• Companies must weigh the business opportunities against the costs of public status.
• The financial implications are a critical consideration for companies considering an IPO.
• Understanding these costs is crucial for strategic decision-making.
• The benefits of public status may outweigh the financial burdens.

Challenges in investment partnerships

• Choosing investment partners is more about compatibility and brand alignment than just financial terms.

  — Mike Belshe

• Cantor Fitzgerald is notably more knowledgeable about digital assets compared to other investment banks.

  — Mike Belshe

• Strategic relationships are prioritized over financial incentives.
• Compatibility and brand alignment are key factors in partnerships.
• Knowledge of digital assets is a significant advantage for investment banks.
• Cantor Fitzgerald stands out for its expertise in digital assets.
• Investment partnerships require careful consideration of strategic goals.
• Financial terms are not the sole determinant in partnership decisions.

The learning curve for traditional investors

• Many traditional investors lack deep knowledge of crypto, which affects their engagement.

  — Mike Belshe

• The learning curve for traditional investors in crypto is steep, often starting with basic concepts.

  — Mike Belshe

• Traditional investors face a steep learning curve in the crypto space.
• Basic concepts are often the starting point for traditional investors.
• The gap in knowledge affects traditional investors’ engagement with crypto.
• Understanding the learning curve is crucial for fostering better engagement.
• The initial hesitance and questions from investors highlight the knowledge gap.
• Bridging this gap is essential for increasing traditional investment in crypto.

Accounting challenges in the crypto industry

• GAAP accounting standards do not adequately cover the unique revenue structures in the trading industry.

  — Mike Belshe

• The SEC requires special exceptions for companies to report net revenue instead of gross revenue.

  — Mike Belshe

• GAAP standards pose challenges for financial reporting in trading.
• Special exceptions from the SEC are needed for accurate revenue reporting.
• The complexity of accounting in crypto arises from asset classifications.
• Future clarity in accounting standards is anticipated.
• Understanding these challenges is crucial for accurate financial reporting.
• The current standards do not fully accommodate the trading industry’s needs.

The potential of tokenization and fiduciary protection

• Every asset can be tokenized, which is a fundamental premise for the future of finance.

  — Mike Belshe

• Institutions require fiduciary protection for large sums, which is why they often use trust companies alongside exchanges.

  — Mike Belshe

• Tokenization is a foundational belief driving BitGo’s strategy.
• Fiduciary protection is essential for institutional investments.
• Trust companies play a crucial role in providing security for large sums.
• Tokenization has significant implications for the financial industry.
• The future of finance is closely tied to the concept of tokenization.
• Understanding these dynamics is crucial for navigating the evolving landscape.

BitGo’s business model and market strategy

• BitGo’s business model is often misunderstood as merely custodial, but it encompasses much more.

  — Mike Belshe

• BitGo’s focus is on building infrastructure rather than being pigeonholed as a custodian.

  — Mike Belshe

• BitGo’s strategy extends beyond custody services.
• The company’s focus is on infrastructure development.
• Understanding BitGo’s broader strategy is crucial for stakeholders.
• The market often misunderstands BitGo’s role and ambitions.
• BitGo’s infrastructure focus provides a competitive advantage.
• The company’s strategy is essential for its positioning in the crypto market.

The role of innovation in the financial sector

• Innovation consistently prevails over time, except when hindered by government regulation.

  — Mike Belshe

• Incremental innovation is driven by adaptation and intelligence over time.

  — Mike Belshe

• Innovation is a driving force in the financial sector.
• Government regulation can hinder innovation’s progress.
• Incremental innovation requires adaptation and intelligence.
• Understanding the role of innovation is crucial for navigating the financial landscape.
• The tension between innovation and regulation is a critical issue.
• Sustained innovation occurs through strategic adaptation and intelligence.