Kraken is going through a major leadership change after what has been a tough year for the crypto powerhouse, and for departing CEO Jesse Powell.
The crypto market is still struggling to recover from a major crash, although Kraken appears to have navigated the crisis better than other rivals. Despite his exchange’s apparent success, Powell found himself in the hot seat over allegations published in The New York Times that he made insensitive comments on gender and race that sparked heated conversations within the company.
Powell hit back by declaring “Back to dictatorship” in a tweet and inviting employees uncomfortable with the company’s culture to leave with four months’ pay. The program was called “jet ski,” as in “You can ride a jet ski off to your next adventure,” he explained in an interview with Protocol in July.
In another interview Thursday, Powell said he is not about to take a jet ski himself to another venture: He’s remaining as board chair and will focus on Kraken’s product development and on advocacy related to crypto regulations. But he also acknowledged, “I honestly don't consider myself to be an amazing manager.”
He said he’s giving up the CEO role because “there's a lot of stuff that I don't enjoy doing as CEO.” He is passing on that torch to COO David Ripley.
In an interview with Protocol, Powell elaborated on his decision, how the workplace dispute reshaped Kraken, and his concerns and fears about “bad proposals” in the ongoing battle over crypto regulations.
This interview was edited for clarity and brevity.
Why are you stepping down?
I like to think of it as stepping up into the chairman role, getting a nice promotion. I've been doing the same job for the last 11 years now. Personally, I’m ready to do something new. The company has gotten to a really good place. Our culture is better and stronger than ever. We've just ironed out a five-year strategic plan. We're in a really good, strong position where I feel like it's a good time to make the change.
The company has gotten to a size where there's a lot of stuff that I don't enjoy doing as CEO of a 3,000-plus-person company. What I really enjoy is the product. So this will allow me to spend more time working directly on the product and less time dealing with all the random business obligations that the CEO has.
Also, I'm looking forward to spending more time on advocacy work, which I think is getting to be more important for the industry. We are starting to see increased attention from the legislature and the velocity of sort of bad proposals coming out is increasing. I think I can provide more value by focusing on those things where I think I'm really good at and enjoy doing.
And I think Dave [Ripley] is better suited. His skill set is a stronger skill set for the needs of the company at this stage.
What are some of the CEO tasks that you don't really enjoy anymore?
Oh, there's a lot of stuff. As the company gets bigger and more professional, we're working on having the option to be a public company, getting all of our things in order. Another level of professionalism that's required, another level of reporting and documentation, and lots of box checking and meetings with auditors and things like that.
There's a lot of extra making sure that everything is in order, and that's all super important, especially for a financial services company. You want to know you're not overlooking things.
That part of the job is really not interesting to me. I'm much more like a zero-to-one kind of guy. I like to take something that's nothing and turn it into something. I really enjoy the product work.
The CEO potentially has to be the primary point of contact for a lot of regulatory work. For example, anytime we get a license for something, the CEO is going to get fingerprinted, fill out these documents with all the personal information and get interviewed and all of this stuff. There's a lot of stuff specific to being a financial services company that is kind of a drag.
And I honestly don't consider myself to be an amazing manager. I think Dave is a really great people manager. I really more so enjoy the work as an individual contributor, like getting into the weeds on the product stuff.
The balance of where my time was going was just increasingly less on the product stuff that I enjoy and more on sort of the bureaucratic parts of running a big business, especially a financial services company that's heavily regulated.
In the context of recent events, people are likely asking if this is Jesse Powell taking a jet ski to sail off to another venture.
[Laughs.] No, I'm not. I still plan to stay incredibly involved with the business. Maybe my work week goes down from 80 hours to 40 hours or something like that. You know the chairman of the board still has a significant number of responsibilities. We'll be adding more board members and forming more committees. We'll be doing a lot more at the board level.
I'm still going to be very actively involved in the product development of the company, the company’s brand, user experience, and things like that. It's more so moving from an explicit kind of an executive leadership management role to the role of an adviser, individual contributor, at a level where I can be in fewer meetings that I don't enjoy.
You're stepping down at a time when the crypto market is reeling from a serious crash, and also on the heels of the workplace controversy that you faced earlier this year. Did those contribute to your decision?
No, definitely not. I don't like that I'm going out at the bottom of the market. It would have been nice to bow out six months ago and take credit for the full rise to the top.
There's just never a perfect time to do this. And of course, there's this transition phase. This is not actually going to be effective for several more months, probably at the soonest January 2023. We still have to backfill Dave's role, bring the new COO in, have Dave start handing off his responsibilities to the new COO, before he starts taking on a significant number of my responsibilities.
We ran a long process to evaluate over a dozen other candidates for this role, as well. This process has existed long before the workplace controversy. That doesn't have anything to do with it. In fact, that whole incident, I think, served to just embolden and galvanize the team. I think it was great and that we were able to get out a lot of bad fits from the company. We ran an employee engagement survey, following the jet ski program, and people are more engaged and satisfied with their work than ever.
The whole thing was really a blessing in disguise. It just turned out really positively for the whole company. Following that, we actually got just a surge in new job applicants, an unprecedented number of new job applicants, a lot of people saying they're tired of the woke workplaces where they're at and they would love to work in a place like Kraken with the kind of culture that we have.
You mentioned that you wanted to focus on bad proposals that have emerged in the conversation around regulation. What are some examples that you hope to address directly in this new role?
There's a lot of dangerous things happening in the world all the time, specifically in the U.S. Much of the world looks to Washington for policy and just ends up copying what the U.S. does. I think we have kind of an outside influence. What we do reverberates around the world. There's some language and some legislation that has come up that's sort of indirect attacks on crypto. I don't know if it's done intentionally, or if the authors of the legislation just really don't understand what the implications are of the language.
It’s stuff like the tax implications of doing certain crypto trades or exemptions to the size of a taxable transaction. The Tornado Cash thing is a good example of something that has really dangerous implications for the whole space. We don't think that OFAC can actually sanction a smart contract. I think the implications of that are really scary and dangerous.
The SEC just said that they feel because there's a concentration of Ethereum nodes in the United States that gives the United States full jurisdiction over the Ethereum network. I think it is a huge overreach, and we need to push back on that.
There have been other statements in legislation that sort of tried to capture DeFi in a way that tried to put it under the standard BSA [Bank Secrecy Act] rules [where] basically any transaction that happens on a blockchain has to have sender and recipient personal information attached to it, effectively treating it just like the banking system, which would mean a ton of the value of it is destroyed.
We don't want to shoot ourselves in the foot. I think crypto is a national security issue, a national economic issue. I think we need to be supportive of it as we were with the internet. I think it would be a disaster if we created some laws that just basically forced all the bitcoin companies to go offshore.
How do you react to initiatives within the industry to implement more KYC and AML rules?
I think it's a really delicate balance to strike. You want to satisfy legitimate concerns about criminal use of proceeds or money laundering and things like that. But at the same time, you don't want to create a complete panopticon surveillance state where everyone's transactions are fully monitored and approved by some state authority.
As we just saw in Canada with the trucker protests, when the government disagrees with you, they will freeze your bank accounts for protesting and, you know, due process be damned. You can come fight for your money later. That's something that I think we didn't think we would see in the West. I get scared that that kind of thing will happen when the government has the ability to freeze funds and to identify the people involved in every single transaction.
I think the implications are really scary. I think people have a right to financial privacy. I don't think you should have everything that you do, every purchase that you make, published for the whole world to see on a blockchain forever for all time. It's just something we need to watch out for.
It was reported that your successor, Dave Ripley, wants to focus more on small retail traders. Can you elaborate on that, especially in the context of how some of the push for regulation was due to the crash and the perception that a lot of real retail consumers are getting hurt?
I don't think that that's the case with this regulation stuff. I think we've been through many cycles in crypto. Obviously, crypto is not an exception in this market. I mean, the whole stock market has lost [considerable] market cap. I think people, when they don't know if they're gonna be able to afford gas or groceries next week because of inflation and the energy shortages, they just don't have as much money to speculate.
People got wrecked in the stock market. I think they're feeling the pain at the gas pump. Any kind of risky investment class of asset is taking a hit now because of the uncertainty.
In terms of Kraken, retail focus is definitely a priority for us. Where we're investing most of our resources is in bringing in the next billion retail users, much more so than than we're interested in bringing on more business clients or hedge funds or things like that. So Dave’s right when he says our strategy is really to focus the majority of our effort on retail consumers.
