Behind the Curtains: FUD, Disclosures & Market Integrity - TOKEN2049 Dubai 2025

Morning everyone. Um, thanks for coming. Jenny, I've known you for quite a few years and it's impressive the traction that you've done at Wintermute. You are for all intents and purposes the largest cryptonative market maker. Is that right?

Yeah, sounds about right. So, you trade a lot of volume. You've constantly looking at markets, centralized exchanges, decentralized markets. We're obviously going to talk about FOD, market integrity, what works in crypto. I'd like to just maybe start for everyone in the audience to kind of level set like what does a market maker like whenever you do in crypto today?

Yeah. So, I guess like on the most basic level, it's about liquidity provision. So starting with centralized exchanges what we primarily do is programmatically provide bits and offers on screen so that yeah markets can stay on one on one hand liquid so that I don't know if you guys want to buy there is like a pretty healthy off there if you want to sell there is a bit um but it's also about that whether you trade on I don't know Binance or Coinbase or Kraken or unis swap you will basically see exactly the same price everywhere so our primary function is to make money on making sure that the prices are just aligned across all exchanges and that's where where you see pretty much biggest chunk of our trading volume coming from. Yeah. So capturing this arbitrage people might say wait a minute like why are crypto markets so efficient that naturally generates a lot of FUD sometimes you know maybe the price of Zcash in one exchange is really high and or different than any other venue and there's reasons for that.

Um tell us why FUD and kind of market inefficiencies kind of what is the state of the crypto market if you were compared to like traditional markets are fairly efficient. How is crypto as a whole operate and is it relative to like a traditional market? Yeah, I think like the FUD is ultimately kind of the same everywhere to be honest like it's not basically blaming different actors. It's not that different in crypto how it is and threadfi like I remember when terra collapsed like one of the most ridiculous fat stories was that the black rockck was behind it which basically like if you know what black rockck does like you would know like how ridiculous this claim would be for them to be involved into something like this but nevertheless people just like okay there is this big company maybe maybe it's them um if you look at for example like CEO of virtue duck like he is very vocal on Twitter and I remember like a a year and a half ago, two years ago like he's been replying to every single like fat person who basically like people were thinking that virtue is well which is like I guess like very very similar to fat we are getting is b like that virtue is the shorting all the talk all the stocks um and again they were just basically ultimately mis misunderstanding how basically balance sheet works because the balance sheet is public because they're public company and they were just mis misinterpreting what was in balance sheet and in our case it's like on one hand like we are one of the largest players in the in the industry and so it's kind of like unfortunately natural for people to ascribe all the things that happen in crypto to big players I don't know moving markets doing stuff uh instead of just market forces doing their doing doing their work and on the other hand it's building um it's like a function of blockchain being very transparent. So I don't know for example price of a token on Binance might start going down because somebody's selling on Binance which is normal and then us reacting by I don't know selling the same token on unis swap or some like mm pool on salana for example people basically see that and they assume that's that's basically causing the drop instead of like reversing intuition and like thinking okay if somebody wants to sell they probably sell it on the most liquid venue there is and basically people misinterpreting what's happening on blockchain has been like the biggest source of fat for us for the last 6 months I would say yeah people forget look in in traditional finance there was a lot of inefficiencies it's compressed as the market has become more sophisticated uh number of players technology I mean people are spending all this infrastructure to get closer to exchanges uh like milliseconds matter um capturing arbitrage is not in and of itself a bad thing it's actually making markets more efficient is a good thing and there's people like you that that do that.

Um, a lot of the conversation in crypto is me and me can mean a million different things and some people say that's really bad. That's toxic. What would you say to that? Like in the context of like integrity and creating more robust crypto markets like what is your position on me for some of these chains? Yeah, I mean it's it's uh we could spend like 20 minutes easily talking about this.

It's it's a really fascinating topic. Like for me well I I'll start with MV is here primarily because the blockchain design made it possible. So a lot of people for example inside Ethereum ecosystem but also other ecosystems complaining about MVB and they complain about people well certain actors taking advantage of it they like to me it's kind of ridiculous because they it's kind of like a self-inflicted wound like you have unis swap design you have as part of unis swap design that somebody can basically sell something or buy something with 100% slippage and that's why m is here in this particular case because like somebody will look in a look into it and front run this person who just sets the slip slipage too high. It's just basically a function of how both Ethereum and Uniswalk work like there is no way around this. Uh but that being said like as a market participant you still have a choice to well for a lack of better word like exploit some types of MV or not like we made a choice very early on for example not to do sandwich attacks because like we thought okay like that's just bad like we know that it's happening but we decided not to do it primarily because we just it's very public like all our wallets are public but also it's just I don't know it's not nice kind of tech to retail like but other types of MV like just on time liquidity yeah that's we do because we okay we have basically competing with this like passive liquidity providers on IMMS but we do give a better price better execution to takers so we think it's it's basically fair fair game is there a particular through this lens of me there's some chains that might say hey look we we're just better design-wise latency wise is there a particular chain that you think is very well suited If you think okay large institutions going to come and trade if like the liquidity the activity is going to really centralize like in a particular chain whether it's Salana or some other chain.

Do you have a view on from a technology standpoint which chain is like more equipped to handle like kind of the future of finance so to speak? Not really. Uh I think it's still way too early. Like I think all the chains that currently out there and some of the chains that are going to be launched this year for example they still have like a long way to go and both Ethereum and Salana can still continue developing massively and rapidly. Um I also hold this view that none of the existing chains and potentially like none of the future chains really can handle stuff like NASDAQ for example.

is just it's just something that maybe can be done by app chain on top of those chains but not by like a native one for example. Yeah. So it's yeah it's an interest topic but like I I definitely don't have like a winning chain in mind. You operate across chains wherever inefficiencies exist. Like I'm ultimately yeah well first of all like philosophically I guess I'm very multi-chain person.

Like I know this view was like popular a few years ago but I'm still kind of sticking with it. Um and it's kind of it's very it plays very much to our strengths as well. Like we want to see more competition across centralized exchanges, across dexes but also across chains because that's that's ultimately where our strength is in this like more fragmented but also more like competitive market. Um and I think it's it's good that Salana is trying one sign, Ethereum is trying another thing, and I know Mega and Monet will do another sign, and yeah, it's competition is good. Yeah, we've been going for half the session.

I'd like to transition the conversation more to obviously um we're in a very different regulatory environment this year than we were last year. Um what's your optimistic case or just like house view in terms of market integrity from a regulatory policy lens that you might say here's here's the things that are coming that I'm going to make markets more efficient I'm going to convince more black rocks of the world to come like what do you think if you were to wave a wand and say this is how I would design policy and these are the things that I would really be focused on for any regulator out there listening like what would you kind of tell them? Yeah, I would say to me I'm much more excited to bring more normal people on chain than about necessarily bringing like institutions like institutions will come anyway and like the way they will come it's not necessarily like the most interesting for me even though like we are involved with quite a few of them with their experimentations and like what they do on chain and beyond but when it comes to well let's say like normal people retail what what we see regulators are doing for example in in Europe like with Mika like any exchange that would list a token they would have to do massive amount of disclosures about those tokens which I think is a very good thing because it's currently like very much lacking um and I'm very conscious that like lots of retail people will never bother reading this stuff but having possibility to read like for and it I I personally think it should go like very deep like people should know not just like this pie chart of ownership which everyone posts now which not even which is quite often not even true but they should know like I personally think that they should know about what price like all the major investors entered at at I don't know C drown series A series B like what is the what is the like cost basis for most of them um I do think that it's it would be very good if everyone knows the details about the market making agreements for example because that's also like on one hand there is well you want to know how many market makers are involved how much of the token supply is given to market makers um you want to ideally know at least some details about like all this like call options that part of it and the big challenge for us is like like I would love this stuff to be public but it's kind of like two things like if first of all we need the protocol to agree to it not just us uh to make this public like we cannot just disclose things like most of the times they're just NDA uh NDAs behind them and on the other hand if we are the only market maker who discloses those token agreements it just puts us at a disadvantage with other market makers who just don't bother doing it and so it has to be driven not by us but basically I I think there are like ultimately three different forces that can do it it's it can be exchanges or like trading venues that basically can force those uh disclosures uh upon the market. It can be regulators u and we see like mika for example doing things like I'm really I'm actually pretty cautiously maybe bit I'm pretty excited by the current sec regime in that regard basically what hester pierce is doing about basically like the basic set of disclosures that yeah protocols can provide to sec to basically again to inform the public better and finally maybe we'll see some kind of like third party intermediary rating agency something like this that basically either gathers this information or basically allow protocols to yeah supply this information to basically demonstrate to the public okay we are more transparent like I don't know we all one and here is our pie chart and here is the market making agreements here are the investors and like we are better than this other L1 because we actually transparent about things those things and they are not yeah I mean in traditional markets you have some like editor SEC which is a central repository uh if you're registering to you know, an IPO or any sort of any sort of announcement or anything. It's a very centralized venue and the regulator likes that because market integrity is everyone has access to the same information at the same time.

And crypto is sort of a it's sort of a dichconomy where you have like it's open source. There's all these discords. If you're in the community, there's a lot of stuff that's being disclosed there. And then you have Twitter and you have all these different venues. So it's not like sort of need a central repository.

Your point around exchanges is good. Like Misari tried to do this but failed. um exchanges actually require this information but don't publicly disclose it. Um it feels like it's a regulator that should step in and say here's kind of the best practice or as an industry we come together um to create best practices. Um what are you guys doing at Wintermute to push this forward?

Yeah. So I guess on regulatory side we basically became a lot more involved with regulators basically helping to guide them like where the things the disclosures regime should go like my perfect disclosure regime is basically protocols submitting this data to I don't know SEC or FCA like whoever and basically it and that being completely like okay you can submit it you might not submit submit it but if you don't submit it then I don't know put on your website just like you know this I don't know cigarette packs like okay this will kill you like if you don't provide it then you have to put like big red I don't know statement on your website we are not like submitting anything to SEC so buy this at your own risk or something like that I think that that would be kind of ideal because then as a retail investor you can just make a choice okay you go and buy a token with full disclosures on the CC website or you go buy this like crazy thing which is where where you're completely not protected by anything. Um like that would be ideal but I'm also yeah realistic enough to not think that's where regulators will end up going. Yeah, that's fair. So we're here next year.

What does the market integrity and structure look like from a policy standpoint and from a what it means to your P&L in terms of being able to capture like a viable business of these inefficiencies? Kind of walk us through what the what your best case or just your operating assumption is for you know the next 12 months as it relates to market structure and your business. Well, I guess started with operating assumption. I don't think much will change because it does take quite some time for regulators and like lawmakers to actually enact stuff like even if you have if you have some laws happening this year which is possible like there is a market structure bill in US for example currently being discussed like it will still go into effect like one or two years from well at best like two years from now I think so it will just take time because they will have to give protocols and other market participants time to adjust to it time to apply for this regime. So like we won't see that much next year, but who knows like maybe we'll see some I don't know maybe SEC will enable some some kind of like semi-obligatory disclosure regime and we'll see some movement there like that that would be quite quite interesting.

We got some extra time so it's not directly related to the topic but it's something that I think is really interesting as an industry which is we all there's a lot of talk about tokenized stocks and bringing equities on chain. Why? because you know the rest of the world can't easily trade Apple, Nvidia, Tesla stock. Um what's your position on that and how does Wintermute capture that flow? A do you think it's going to happen?

What does it look like and what's your role in that process? Uh I think it's definitely going to happen like a very interesting like decision point for a lot of uh well stocks I guess is well basically like big big part of why SEC will never be like super friendly towards tokens. I think ultimately is like we play this like we do this dance of like saying okay tokens are like valless governments tokens like there is no like value in them but ultimately like we all almost like see them as equities in the end and I think what a lot of regulators don't want to see is basically a new company or even existing company like they don't want Nvidia to just issue a token if the token uh regulations will be much more friendly than equity regulations so coming like to tokenized equities. I think we'll we'll see like regulators being very protective of that and them trying to kind of like figure out okay how do we deal in this world where well I don't know North Korea can buy Nvidia for example or steal Nvidia from somebody or I don't know Russia or like where else like can just buy whatever equities they have like receive dividends from this equities maybe even participate in governance for those equities like how do they square this down like will But will it basically result in all those equities being completely like KYC gated? So it's like permission pools only or yeah or is it possible that we'll actually see like completely permissionless nature of this which again like for us cryptonative people would be ideal because it removes a lot of friction and also opens up those instruments to people in like developed countries who currently don't have access to them.

Uh but it's just really really hard. Um on vintre side we're very much looking to participate in this uh but it's again it's really dependent and I'm not sure like it's like 100% solved like it's really dependent like how it's going to be solved on regulatory side. Yeah I know we're wrapping up in time but on a more personal note you've been in the industry for many many years you built one of the most impressive firms. Um, what is something that for perhaps for the audience, you wish you knew when you were starting in your crypto journey that you know now to be true? Yeah, I think like number one saying is just yeah competition is overrated I guess like not in a yeah it might sound like a bit like I don't know uh high and mighty but you basically like you should never think that you should not enter the market because it's I don't know too competitive like ultimately so much of it comes to perseverance so much of it comes to basically doing things very different from your competitors and not being like too afraid to experiment, not being too afraid to like move fast and uh just try new things.

Like I would say like first couple of years of our existence, we moved way too slowly because we just were too afraid to go into areas which we thought were too competitive. But in reality like the pie was way bigger and there was just like so much more opportunity to just do things differently which we ultimately did but we could have done it much faster. That's awesome. Well, that's a great word of encouragement for everyone out there. Maybe someone out there is going to build the next market maker.

So yeah. I know we know we know people are doing that. Yeah. Great. Amazing.

Right. Thank you so much.