Welcome to Future of Finance, where Fortune asks prominent people at major companies about their jobs, how their firm fits into the crypto ecosystem, and what this all means for how we use money.
The following is from a recent conversation with Mike Cagney, who cofounded SoFi and later cofounded Figure, where hes CEO. Figure builtand made publicthe Provenance blockchain, which has supported more than $12 billion in transactions.
As he explains below, the key to an increased number of transactions on blockchain may actually bemost people not even realizing theyre using it.
(All interviews are edited for length and clarity.)
When youre at a cocktail party, or talking to people who dont know what the CEO of your company does, how do you describe it?
One of the most important roles that I play with Figure and supporting the Provenance ecosystem is really just evangelizing the use cases for blockchain and trying to make them as tangible and accessible as possible. The most fundamental thing that we strive for is the idea that blockchain allows you to displace trust with truth, so it allows you to create native digital assets where I can look at those assets and know for certain their ownership composition and historyand it allows you to transact bilaterally so that you and I can transact without an intermediate.
An obvious example is when we trade stock. Obviously, you have a buyer and seller, but in between the buyer and the seller, you have an exchange registry introducing clearing brokers, customers, and trustee agentsyou have at least seven parties in that transaction chain. You can distill that down to two, right? That disintermediation is whats of huge value, whether its businesses or customersyoure talking about trillions of dollars in market capitalization that accrues to both the markets themselves but also the blockchain.
Is that part of what made SoFi so successful, eliminating a lot of those inefficiencies? And for you, was blockchain just the next natural step?
When I was at SoFi, I talked a lot about blockchain, but I didnt really understand what it was and what the power of it was. And so I just had an aha moment about this disintermediation construct, where I said, Wait a minute, this actually is hugethis is probably one of the most transformative technologies that well experience in our lifetime.
With comparatively fewer women in tech, especially in blockchain and in crypto, what are some of the lessons learned after exiting SoFi that can be applied to building Figure, and just generally in making the space not just more attractive but more inclusive?
We achieved a lot of great things at SoFi, and we learned a lot as well. We have taken those learnings with us in starting Figure, particularly around culture. One of the biggest changes we incorporated at Figure is hiring people for culture first. When you prioritize ability and skill set during recruitment, you can often leave culture as an afterthought. That then leads to an environment where bad behaviors are tolerated when they shouldnt be, simply because theyre coming from top performers. Our president and head of lending are both women, and that diversity transcends through not just the executive team but also the organization, where we have higher representation of women in product and engineering than tech/fintech averages.
Looking at your site, I saw home equity loans were big, but when people use Figure now, what are you seeing the greatest interest inare two or three things the most popular?
If you think about the evolution of Figure, originally we didnt intend to have a lending platformwe thought we could take the technology into the financial ecosystem and the banks would lean in and use it. When we built Provenance, and made it public, we went to a bunch of banks early on, and my thesis was, Hey, you could do a securitization on here and save, you know, roughly 90 basis points, and every bank universally said, This is great. We love it. Wed like to be the 10th bank to do a securitization on here.
It was very, very clear that no one was going to be a first mover, and we had to be the first mover, so we made the decision to build a lending platform to originate assets on blockchain that would take the buy side. And to participate, because they wanted those assets, that would force the sell side to come in and provide financing on the blockchain for those assets. And it kind of started the flywheel for the ecosystem.
And lending still is a significant business for usits a great business, its a profitable business. But what we were able to do is drive that momentum into more markets and payment transactionsweve been able to get high-profile names like Apollo and Hamilton Lane.
And thats led to?
The thing thats happening right now thats driving a lot of momentum is the NovaWulf-Celsius transaction, where Celsius is obviously in bankruptcy and NovaWulfs coming in, creating a company which those bankruptcy assets fall into. And were issuing public equity against that company on the blockchain. And so, you know, this year youre gonna see a public security and public equity issuance on a blockchainnative to a blockchain. If youd asked me a couple of months ago when that was gonna happen, Id say were probably a few more years out. So thats really accelerating things.
You mentioned Apollo, the Celsius transaction, and maybe youre not at that 10th bank yet, but it sounds like its kind of just a matter of time. Is that fair?
Were getting significant institutional adoption at this point. That slowed down a little bit in the fourth quarter because of what happened with FTX. The regulators, obviously, are taking a very hard look at everything blockchain at this pointcrypto and non-cryptobut I think one of the benefits we have is Figure is probably one of the most-regulated companies in the country. Ive got over 200 licenses for everything, and so theres a degree of comfort that when youre working with us, were doing it in a way thats regulatory compliant.
If the SEC and the CFTC actually sat down and said, All right, heres the plan for crypto, for Web3, for blockchain, here all are the ruleswe have all these rules for banks, would that be helpful for you, or would it not really affect Figure?
It would be great if we had very clear direction in terms of the regulatory landscape. I have a lot of sympathy for the regulators, because things are moving very, very quickly within blockchain. Its a learning curve.
And the industry hasnt done a great job promoting itself. I always point out that the blockchain community never loses an opportunity to shoot itself in the foot: Weve had the ICO debacle, weve had algorithmic stable coins blow up, weve had, you know, decentralized exchangesironically centralized exchangesrunning levered positions blowing up. And so theres just been a lot of things that have happened that have brought a lot of regulatory scrutiny into the space.
Collectively, as an industry, we need to be more proactive and educating around the benefits and the merits of blockchain for use cases, and why it ultimately benefits the consumer. And I think in doing so, we could build a lot of momentum.
A year ago, when it came to potential regulations, many people were thinking about SBF hanging out in D.C. and dropping money on politicians. How much harder now is it going to be for legitimate businesses? How do they erase that FTX skepticism?
What we need are tangible use cases where we can provide a clear demonstration of the benefit to consumers. I think the Celsius transactionbringing transparency into a bankruptcy processand allowing people to access liquidity and trade that security, post bankruptcy, is a good example of that.
I think the problem weve had is, we started off with people thinking, Blockchain is badits used for money laundering. And the crazy thing about that is, as you know, everything you do is public, right? Its very easy to see whats happening. Its actually not a good platform for nefarious activity. And so weve had to dig out of that.
How much of that communication falls on companies like yours, or industry groups or nonprofits, or even just on Twitter users evangelizing?
A lot of that onus is on us ourselves, and at Figure, given the business that we do to make sure that were providing visibility, transparency, and collaboration, I think weve been successful in doing that. I think, in general, you know, we probably need to be more engaged.
On the lobbying side, you raised a really important point that, you know, you dont want to be seen as SBF redux. Theres gonna be some hesitancy among politicians because of that, but the reality is were at a very important state in the life cycle of blockchain, and there are going to be rules made around it. We should be engaged and working with legislators as to what those rules look like.
So whats nextfor Figure, and for the future of finance?
Theres a couple of fundamental changes that are gonna happenI think these are tipping-point changes, I dont think gradualthat are going to happen very quickly. One is around blockchain as paymentsin particular, as you see stablecoin alternatives or regulated stablecoins come to market, the ability to use that rail to displace legacy networks like the ACH interchangewhere you have a programmable network that you can actually do much more withI think thats going to happen. And thats a seismic shift because if you look at who exists within that interchange market, its an enormous number of players and a lot of market capitalization.
I also think youre going to see a movement toward more blockchain-based securities, and that will support more-centralized exchanges that are sort of decentralized exchanges on blockchain. Youll see a legitimate competitor to the NASDAQ and the NYSE pop up. Something like the Celsius transaction, which is the first public equity on-chain, is a watershed moment thats going to bring more in, and actually provide a mechanism where there can be a competitive alternative.
The key to this is, youre never going to really know that youre using the blockchain in either of those circumstances. Youll be trading stocktransacting at a terminal, probably through your phone, through biometriclike you do today. And thats a key point because it reduces friction around blockchain. Where is your wallet? How are you going to manage your keys? And, you know, the reality is, its a relatively straightforward thing to solve for the consumer. At the end of the day, the consumer is going to look at it as moving money or purchasing something or trading stocktheyre not going to view it as a blockchain transaction.
