Bakkt CEO Says Bringing Utility to Crypto Starts With Payments 

Crypto, whether by accident or by design, is facing a banking crisis in the U.S.

That’s why it is increasingly important for industry leaders to drive education around crypto’s utility across key use-cases and act like a “grown up,” Gavin Michael, CEO at publicly listed crypto company Bakkt, tells PYMNTS CEO Karen Webster.

In the wake of Silicon Valley Bank’s (SVB) collapse, the crypto sector’s own two main banks, Silvergate Bank and Signature Bank, subsequently closed within days of each other — one voluntarily and the other somewhat involuntarily.

Michael adds that the customer base “concentration risk” that precipitated March’s mini-banking crisis is now forcing people to “balance what is good business, and what is bad business.”

“We are doing a lot of heavy lifting to prove the point of view that crypto does have a place in the overall financial ecosystem, and that can be as simple as there being digital assets that need to be stored somewhere — or it can go all the way up to actually finding new ways to move money using new and innovative rails,” Michael says.  

He emphasizes that after the series of unfortunate events last year impacted the entire sector, educating and re-educating the marketplace has taken on a mission-critical priority.

“If you are thoughtful and drive a compliant culture, you really are in a position to grow in the right way,” Michael says. “And that’s good for the industry.”

Read More: Banking Crisis Contagion Spreads to Crypto

Crypto Can be a Chameleon, so Its Utility Needs to be Obvious

When asked to define what exactly he considers crypto to be, Michael says it is “a set of infrastructure that allows new ways and new opportunities for people to engage and drive customer value.”

One common use case for this infrastructure is trading, Michael notes, adding, “some of that is in a speculative fashion because people want to diversify their portfolios…but we know that not all crypto assets are created equal, and so that is a big part of the regulatory discussion right now.”

Complicating the trading use case, at least within the U.S., is that absent a reliable, regulated banking partner, crypto companies are being forced to hold both their own money and customer funds with third parties, which can slow down sending and moving funds.

“Where we see the narrative moving now is all around utility — how do we bring utility to the [crypto] space, which is where we start to impact payments,” Michael says.

This includes looking at stablecoins and other digital asset use cases that can “improve settlement time, improve the trust and reliability, all while doing interesting things at the protocol level,” highlights Michael. “How can I add more information about the payment that alleviates some of the processing that needs to happen beyond just the transmission of the currency?”

He adds that “remittances make sense,” emphasizing that the ability to put invoice numbers into payment protocols will allow for reconciliation through ERP (enterprise resource planning) systems in a much simpler way.

See also: Can Crypto’s Value Proposition Ever Translate Into Real Value?

Can Crypto and the Traditional Financial System Peacefully Coexist?

“How do we [as an industry] optimize for the right payment use cases, micropayments, cross-border remittance, how can we do it better than the current rails today?” asks Michael.

He emphasizes that crypto is not trying to replace the existing infrastructure — only that the crypto industry should prioritize providing a new payment rail that works well across other use cases.

“Regulatory clarity is really instrumental in creating the appropriate guardrails so that [the industry] can get the right innovations in place around payments so that they can flourish,” Michael says.

He adds that across the landscape, there are generally “positive signs” that if businesses are solving the right problems, it will bring “really powerful financial innovations” that can coexist alongside traditional finance “for a long time.”

Michael says that he is constantly talking with banks that have customers with digital assets that they would like to be able to store somewhere safe.

“It’s definitely a journey, and one of the first use cases is around storage and accessibility,” he says.

As for what Michael is most excited about when he looks to the future?

“It’s about lighting this ecosystem up…how can we help with tokenization of funds and assets, smoothing out payments by allowing for a simpler way for payments to execute. And how do we be the best partner we can be to the traditional sector, to the FinTechs and Neobanks as they continue to innovate themselves around these same pieces,” he says. “We as an industry need to be very clear to the market about what the crypto value proposition is and the way we represent both it and ourselves.”