The Future of Finance: How Digital Asset Treasuries (DATs) Are Eating Wall Street at KBW2025

Hi everyone. I wasn't aware that you already had some quite some time on DAT. So, we're definitely going to try to spice up the the topic a little bit um with the topic that we have now. Uh quick intros maybe before we get started. Uh my name is Sha Sha.

I'm operating partner at KKR. KKR is one of the leading private investment firms in the world with about 700 billion AUM assets under management. A lot of what we do is actually to kind of own great private businesses and ultimately take them to the public markets, improve them and and take them to the public markets. Um, I've been leading the crypto strategy at KKR for the last couple years where we we've backed a lot of the top crypto VCs in the space and done direct deals um such as Anchorage Digital and yeah, very excited for the discussion today. And Dan, look at us.

We're we're going to be friends. There's no fighting on this stage.

Uh, my name is DK. I am the chief strategy officer at Defi DevCorp. We were the very first USlisted Salana treasury company in uh actually the very first nonBTC DAT to launch back in uh early April. Uh we're sitting on just shy of half a billion dollars worth of Salana today. uh launched by a team of all former Kraken Crypto Exchange employees.

And um prior to DFTV, I was the uh most recently the head of strategy at Kraken Crypto Exchange and spent about eight years in Long Short Equity covering TMT stocks and did two years right out of college at Morgan Stanley.

Uh hey everybody, I'm Joseph Shalom. I'm the CEO of Sharplink Gaming. We are listed on NASDAQ. We're the second largest ETH treasury in the world. uh we've accumulated in the last few months about $3.

8 billion dollars of ether. Um I joined after 20 years at BlackRock and in the last five years led digital assets where we uh went from not managing any assets in crypto to managing over a hundred billion dollars uh having launched the two largest crypto funds in history ibid and etha last year. So thanks for having us.

Yeah. Before we get started on the ETH versus Soul, maybe just a macro, you know, view, right? If we look at the year-to- date fundraising numbers, what I'm see because we've invested into quite a lot of crypto VCs, but the the speed at which crypto VCs have been fundraising has slowed down a lot in the last 2 three years. So, year to date, we're actually seeing about 6 to 8 billion of AUM inflow into cryptovcs and that includes 2 billion into Binance, right? Um so if you strip that out it's actually a much smaller number.

DATs are a new phenomenon this year right and DATs year to date have by estimate um raised about 15 probably now closer to 20 billion um total AUM across all assets obviously started with BTC a lot more um I think in June July um on ETH and then most recently sort of Salana. So the question is like is is there sort of a rotation going on like amongst institutional investors who previously had you know only exposure maybe into institutional crypto VC but now you basically have new instruments such as DAT I think Joe you've you've you've you've built a lot of ETP products as well and how do you see that rotation thesis going on between VC ETF maybe last year and now this year DAT I I just think of it as progress and if you went back two to three years I know we're sitting in Korea in one of the most active retail markets. But most investments at this point in crypto are coming from institutions. And if you look back three to four years ago, institutions did not trust custodians. They did not know how to own, spot, Bitcoin, ETH or Solana.

So they used venture as a proxy. They were familiar with venture capital. They put massive amounts 2019 2021 and it actually underperformed spot. And then the ETFs came out, you know, Black Rockck and 11 other issuers launched a Bitcoin ETF on January 11th last year and it was a more accessible vehicle. You worked with Coinbase and Anchorage and every institutional investor had another ETF.

It was quite easy. I think the challenge with the ETFs, and I'll speak for Ethereum, is the ETFs are not allowed to stake. So imagine you own an asset, you expect it to be a capital appreciation asset, but you can't get the 3% yield. And I think the proofofstake debts will allow investors with a simple click, buy an equity, you get the capital exposure and appreciation, but you also get the ability to fully stake and get the yield. So I don't think this is good versus bad.

It is just progress and I think we're in the early stages of massive massive institutional rotation not just into crypto but into digital securities.

Yeah, I'd agree with that characterization and maybe just to put some figures behind it because I was uh looking at this in prep for the panel. I think we peaked in terms of VC investment in deals around Q1 of 22. was I think that quarter we had like $12 billion worth deployed. Uh and then of course in the aftermath of FTX we nei never really recovered above a like $4 billion quarterly level. I think even this most recent quarter was somewhere around uh 2 billion.

So we're talking 83% down from uh you know from the peak. And part of that is just a function of what was happening in the US with um operation chokepoint 2.0 know right uh I I think there have been others in the market who have um very clearly made this point before but imagine you are fresh out of college and you're debating doing a startup of some point you know um of some sort and you have a choice between doing an AI startup or a crypto startup and the year is 2023 and you have to take the risk of getting slapped with a wells notice and you know dealing with uh just a really hostile kind of environment and that of course stifled innovation in the industry which uh of course has ripple effects to the amount of investable deals that there are in the market. So uh I'd agree with your characterization that I think this is just a um natural evolution away from that to more uh accessible liquid uh deals and of course uh DATs represent a really uh easy way to not just get crypto exposure but get enhanced crypto exposure.

Yeah. So maybe going from micro to like a little bit more micro right. So a lot of funding, a lot of institutional and equity market interest into into these sort of that pipe raises. At the same time, there's just like a whole host host of new DATs constantly being spun up. Um and now the question around competition and differentiation now matters more and more.

So actually coming back to the topic of our panel, right? How do you see the competition now between these DATs both within your respective assets? So ETH and Soul and then across assets, right? like are there like are there overlaps in investors? Um you know who um how like how do you see that?

Is the competition within the asset bigger or is it across the assets bigger? Um and what's the level of overlap? He's baiting the soul versus ETH debate right now. He just wants it to happen.

We're going to have a great conversation. So um I think there's I I'll take the uh the first part of the question which is on competition between um different dats like that are doing different assets and um there's actually an argument to be made that they're not really competitive with one another right so if you just opened up uh someone's uh Kraken account for example they might hold a little bit of Bitcoin they might hold a little bit of Ether they might hold a little bit of Soul so it doesn't surprise me that in a world where you wanted enhanced exposure to those assets that you might hold a little bit of Micro Strategy, a little bit of Sharp Gaming, a little bit of DFTV, right? And there doesn't really need to be a choose one versus the other. I think there's certainly a huge group of investors, both institutional and retail, who will want uh that kind of exposure spread across a number of uh digital asset treasury companies. On the other side of the coin is this idea that well, do um DATs just compete for uh attention with each other more broadly, right?

And one measure of that might be looking at a company's uh average daily volume relative to its market cap. And what's fascinating is if you look at uh uh let's say the S&P average ratio for ADV to market cap is somewhere around like 0.3 to 0.5% on any given day. And then if you look at Micro Strategy, their ADV to market cap is somewhere around 3 to 4% on any given day.

Right? just by virtue of the volatility of Bitcoin being harnessed across its cap structure uh and all the attention that they um are able to drive. And then if you look at the nonBTC DATs, the ESBs of the world, the DFTVs of the world um very frequently are actually seeing ADV to market cap like well into the double digits. Um and and that to me is just a uh like phenomenal dynamic that has played out and tells me that there is like obviously a lot of mind share going towards the nonBTC DATs. But I don't know if it's necessarily like cannibalized micro strategies volume or done anything um you know uh detrimental in that regard.

So that's one element of the uh competition picture. And then I would say uh between DATs that are pursuing the same asset um I have often compared digital asset treasury companies. I've used a metaphor to describe digital asset treasury companies versus ETFs with this like um river metaphor which is to say if you buy spot or you buy an ETF it's like sitting on a life raft on the river and the river is the price action. Wherever the river takes you, if it goes up or down, uh you, the individual on the life raft, are going to go wherever the river takes you. Uh buying a DAT is like buying a speedboat on the river.

It gets you to your destination much faster. You get the benefit of the price action of the current, but you can accelerate, you can steer, you can slow down if you need to. Um and your job, I think, as an investor is to try to determine uh not just the fastest boat, but also the safest boat, right? You want to pick a ship that is not going to sink and you need to be able to bet on a team that has actually driven a speedboat before. Uh especially with hundreds of these in market right now.

So I think when you're looking at them specifically within a particular asset class, you have to um really hone in on the team and whether they're uh a group of um operators who have been in the space for quite some time. And I'm, you know, proud to say at DFTV that the aggregate crypto experience of the team spans uh multiple decades. Yeah, I I'll give a controversial answer. Hope everyone's waiting. Like these DATs are going to be differentiated, but over time they're all going to get to the 5% ownership of the protocol.

It really doesn't matter if we get there first or we get there second. I think the competition is fundamentally different. These aren't trades. These are long-term opportunities. The competition is with traditional finance that likes things to settle in one or two days.

They like friction. They like taking rents. They like intermediating trades. They like it when things are hard. I lived at the largest asset manager in the world.

I understand the market structure. I think the competition is going to be are we fighting over the $4 trillion of crypto market cap or is our target the $700 trillion of traditional finance market structure that we believe should be on a decentralized network that's trusted that is programmable that's digitally native that is atomic and instant settlement. It is the greatest risk reduction in financial services history for trades not to settle in a day and not to have to buy insurance and not to have to worry about your counterparty. So like I'm in this for a decade and it's about fundamentally transforming uh financial markets uh for the better. And if you look at it that way it doesn't matter who gets to 5% first.

What matters is are you promoting your protocol? Are you benevolent? Are you taking that token? in my case, ETH, in your case, Solana, and doing something positive to advance the tokenization, the stable coin initiatives, institutional DeFi, that is the friction and competition because otherwise we're looking at it too small. $4 trillion is nothing.

It's the $700 trillion that is the target of innovation and transformation. And I'll be controversial and I'll say that is what I'm more focused on than arguing about who's going to get to 5% first. That is what's going to transform our daily lives. Sorry, controversial.

Well, I think look, I'll dig dig in a little bit more, right? Like fully agree on the sort of big picture and and sort of the we have to go after the the bigger market, but mnavs on average are compressing very quickly, right? Yet more DATs are spawning. You know, so many bankers, so many sponsors are working on new DATs. So what will ultimately be the success criteria, right?

Um but like what are the differentiating factors? Maybe like one specific example in your respective ecosystem, you know, we all know ETH came up with essentially this whole proof of stake, you know, concept, native yields, right? Staking, etc. Yet on Solana you have like native yield is maybe like six 7%. Right now Ethereum is it's a bit lower.

Is that sort of one of the differentiating factors that we really allows you to compound and generate sort of operating revenues as as sort of a financial you know fundraising you know strategy or or what what what else is there right to to really successfully differentiate?

I I agree with my colleague that the management team matters. I believe that the most liquid tokens are going to be the winners in the long run. But I think there's one metric that is critical for the survival and success of a DAT. It's a very simple measure. It's the daily average trading volume wherever you're listed.

Like we're listed on NASDAQ. There were weeks where we were a top 50 stock. A billion dollars a day in trading volume. And why does that matter? because most of the fundraising is coming through something called an at the market facility.

And you do that by listing and issuing new securities every day as a percentage of your daily volume. And if you look in in the ETH space, um Tom Lee runs Bit Miner. I admire him. Between Bit Miner and Sharlink, it's about 98% of the daily trading volume. And if you don't have daily trading volume, you're not going to be able to raise funds.

So you have to have great management and you have to have a liquid stock. Otherwise, you're going to end up doing dilutive deals. That's my personal opinion. That is the currency of a DAT. It's a liquid stock.

Yeah, I'd uh I would definitely agree with that assessment. I think the thing that I will add because you were adding um you would ask specifically about some like success criteria and what's happening with MNAVs compressing and I sort of view MNAVs as um an output of whether or not you were, you know, maybe successful or not, right? um not too dissimilar from the way you know I don't think Mark Zuckerberg at Meta is going to go and say hey my PE ratio is at 26 or 27 times or something like that my company is successful he's going to go and say I've acquired five additional points of market share this year in the digital ad space like that to me is the input to my business that ultimately matters and for us uh yes ADV is a huge indicator um you know for success and attention but ultimately at the end of the day what matters for us is soul per share growth because if we are talking about crypto treasury vehicles or DATs as permanent accumulation vehicles as vehicles that give you compounding exposure over time to go back to that speedboat analogy um you have to be able to give your shareholders more of the underlying asset over time. The only reason Micro Strategy has outperformed Bitcoin by 2 and a halfx over the last few years uh has been one their ability to monetize volatility and attention via the ADV. But most importantly that has driven Bitcoin per share denominated in Bitcoin by 5x over the last 5 years.

Right? So you have to be able to grow the underlying crypto per share uh more quickly than you know individuals and uh um investors could possibly do on their own. uh you certainly have to be able to uh generate yield in a differentiated way and I would say in a like probably risk adjusted way as well right you can't be um taking on uh outsized risk in order to drive the the underlying crypto per share but at the end of the day that's how I um measure success is were we actually able to drive soul per share uh in a meaningful way so maybe coming a little bit about the future scenarios like you know we we are seeing signs of some saturation maybe on the pipe front on ATM, you know, may maybe not yet, but how do you prepare for the inevitable sort of downturn scenario? Let's play sort of devil's advocate maybe next year. And how do you manage risk in in that scenario, right?

Let's imagine crypto bare market comes again, Bitcoin prices draw down 40 50%, sustained MNAF discounts, you know, all of the metrics that you are tracking, right? going down trading volumes, forced liquidations, some market consolidation already starting to happen. We see the news, maybe some activist actions, right, from hedge funds um pushing for change. How do you you know h yeah, maybe just risk management in in in that in that scenario. How how do you think about it?

I think the punchline is you have to be able to generate more of the underlying asset organically in some capacity. That in my view is probably the best bare market protection. So if you take a step back for a second and ask where does MNAV even come from and you peel back Micro Strategy for a moment. So say they're roughly a hundred billion market cap. You back out the software business which is a 0 billion business.

You back out their uh Bitcoin NAV which is like let's call it roughly 60 billion. I know the actual Bitcoin's higher but you got to back out the debt and the preferred equity from that. you're left with like 40 billion, which is this really weird mystery thing that nobody like nobody outside of the DAT space really knows how to attribute that value. And what I discovered early on when I was um getting ramped up on the space is that is the value the market is assigning to future Bitcoin accumulation. Um but the problem with BTC DATs more broadly is that uh there's a circular reference that happens.

the MNAV exists because the market wants you to buy more Bitcoin, but you can only buy more Bitcoin if you have an MNAV that exists, right? So, there's this uh you know, you plug that into Excel, you get all the uh uh the hashtag refs, the all the errors. Um with a proofofstake treasury vehicle, you are freed from that recursivity. The bigger your treasury gets, the more of it you can stake, the more you can deploy on chain, the more of an organic uh source of yield that you have. and they're real like revenue generating business and incredibly high incremental margins.

So I think that's probably one of the best things you could uh have in place uh during a bare market to support NAV. And then of course there certainly other elements at play as well. I think a share repurchase program uh makes a lot of sense uh but only if you are not going to sell the underlying asset to repurchase your shares, right? You don't want to go into a death spiral of uh you know selling your ETH or your soul to go and repurchase shares, right? if you have excess cash on hand, it's certainly um one element to defend MNAV.

Um and then specifically in our case, we are um we thought about this very early on. We are not subject to activist risk uh because we control 80% of the vote. So even if we traded at a discount, we could just wait out a bare market and come out on the other end of it just fine.

Joe,

for me it's very simple. Um most businesses don't scale properly. If you run a DAT, you can you can run a DAT with 10 people, really really qualified professionals. But let's just be clear, if your NAV doubles, if I go from 3.7 billion to 7 billion, I don't have additional costs.

And if the price of ETH comes down, the stock's going to come down. This is clearly a directional bet on Ethereum. Um, in our case, we have a strategic partnership with Consensus, the largest Ethereum company. Joe Luben, the co-founder of Ethereum, is on our board. We're going to build operating companies.

So, a previous panelist was talking about DATs as a vehicle that ends, like you accumulate and you stop. If you own billions and billions of dollars of ETH, the things you can do to lend, borrow, run transactions, validate, secure transactions, you can actually build additional revenue businesses, which sometimes are correlated, but sometimes are not. And if you just think of the basic financial metrics, if you own billions of dollars of ETH and you can get as little as 3% yield, you're going to have a hundred million dollars of revenue. So, like you can weather a downturn pretty well. Imagine then that you build operating businesses on top of it because I'm not in this to create a 5% ownership in ETH and stop and do nothing and just become a giant dividend company.

We're going to lift the community. We're going to seed and uh support protocols and over time we're going to help accelerate institutional adoption of digital assets and it's going to transform the world. So, if you're thinking about this as like measuring our MNAV at a certain date, or you're thinking about this just as a uh financial vehicle, that's not who we are. We're building an Ethereum operating company, and we're going to change the world. I know that sounds crazy, but there's $700 trillion of frictioned assets that need to exist in digital form.

One last thing I'll say. I'm going to predict that if people have a moment, read ERC80004. It's a proposed Ethereum protocol around trusted agents. I predict that most people in this room, if you have a crypto account or a brokerage account, you're going to have an AI agent that's going to understand your goals, your risk tolerance, your sentiment, where you think of the world from a prediction market. and it'll have registries, identities, and boundaries and will be able to run your financial life as an extension of yourself.

Earlier this year, I thought it would take years. I think that'll happen if not this year, early next year. These technologies are going to fundamentally change how we live, and that's why I'm in it. I retired after 20 years at BlackRock. I could have stayed and managed a hundred billion dollars of ETFs.

This is much more interesting. Sorry, I know I sound very controversial, but if you're just in it for a trade, I think you're in the wrong room. This is going to be a transformation of our fundamental economic uh framework and it's going to be a paradigm shift.

All right, maybe closing statements. I think Joe, you already started on sort of future outlook, but what's your predict maybe a little bit more specific to the DAT market? What what's your prediction how the DAT landscape will look like in three not 5 years let's say 3 years like how will the what role will it play and and and what meaning will it have right for all of us

I think in any token that's liquid with sufficient market cap you'll have two three four winners who are scale operators who have daily volume in their stock and depending on the pace of institutional investments they get they may get to the terminal ownership value and then what do you do? Do you stop or do you do other things? I I think there's too much focus on the moment. I personally predict if you're token number 188 and you're creating a DAT and you have no market cap, it's going to be very very hard to survive. But I think the top tokens will do remarkably well.

And then the question is how successful will their protocols be? And I think if you look at Bitcoin, Ethereum, Salana, they're going to be here for the long run and they're going to change our lives. And I think you're early in that investment cycle. Don't think you've missed out on the price action. Now is a great time to accumulate.

Yeah. Um, we've said for a while at DFTV now that like Salana is consumer grade crypto. It's like the iOS of blockchains. And to piggyback on uh Joe's point over here that our goal is to obviously grow a soul per share as quickly as possible, but a natural second order effect of that is when the treasury gets to a big enough size, we can obviously meaningfully deploy assets onchain. And we've already done that today.

We've got roughly 10% of our treasury on chain today. And my hope is a few years from now that that can be a much greater amount. um it makes strategic sense for us because you know if we're bullish on the underlying asset that we're accumulating of course we should be supporting the ecosystem more broadly and um you know it gives us a way to really control our own destiny. So I think um you know supporting the ecosystem of the asset that you are accumulating is going to be an absolute necessity for DATs to really differentiate going forward and um you know it it sort of feels like a a moral obligation for us as operators of these DATs to make sure that um you know the ecosystem is as successful as possible and that we are the best advocates possible for um you know in our case Salana and in uh Espat's case Ethereum. So, um, yeah, there will obviously be fewer DATs, uh, in a few years than than there are today.

But I think the, um, the ones that'll emerge will be the ones with the, uh, I'm going to say most disciplined operators who know crypto very well and are are very clearly in it for, um, I'm going to say crypto ideals ideology because, um, they just love what it represents.

All right, I think we're out of time. Thanks very much for the discussion.

Thank you everyone.

Thank you. All right. Well, thank you our panelists for that lively, informative, and thought-provoking discussions. A huge round of applause for our three gentlemen.