This episode explores the critical rebuilding of market infrastructure on the blockchain, detailing how innovations in stablecoins, derivatives, and non-custodial exchanges are setting the stage for a more efficient and accessible financial future, with significant implications for AI-driven trading and transactions.
From TradFi Engineering to Crypto Innovation: Vishal Gupta's Journey
- Vishal Gupta, founder and CEO of True Markets, shares his career trajectory, starting as a hardware engineer at Cisco Systems during the dot-com bust.
- He transitioned to Goldman Sachs, becoming one of the first sales and trading analysts with a computer engineering background, where he focused on electronic trading, order routing, and eventually ran the US listed options business. Vishal notes, "I grew up in that electronic trading world when you know we're talking about pre flash boys like HFT stuff."
- HFT (High-Frequency Trading): An automated trading platform used by large investment banks, hedge funds, and institutional investors that employs powerful computers to transact a large number of orders at extremely high speeds.
- His move to crypto was driven by the perception that TradFi innovation had stagnated, focusing only on speed. He saw crypto's market structure as immature and ripe for development, leading him to roles at Circle, where he headed USDC development, and Coinbase, as head of exchange.
Bridging Crypto and TradFi: Learning from Each Other
- Vishal Gupta discusses the mutual learning potential between traditional finance (TradFi) and crypto finance (CryptoFi). He emphasizes the immaturity still present in crypto markets, particularly highlighting the need to separate execution and custody, a lesson underscored by the FTX collapse.
- True Markets is building non-custodial solutions, including a qualified custodian for assets like Bitcoin and Ethereum, and utilizing MPC (Multi-Party Computation) wallets for DeFi. MPC is a cryptographic technology that allows multiple parties to jointly compute a function over their inputs while keeping those inputs private.
- Vishal points to stablecoins as a key innovation, particularly for collateral and settlement, though he notes that centralized finance (CeFi) exchanges are still learning to fully utilize them.
The Utility vs. Risk Calculus of Tokenization
- Vishal Gupta offers a pragmatic view on asset tokenization, emphasizing a "utility versus the risk" framework.
- He argues that tokenizing assets like the dollar offers high utility (e.g., collateral, airdrops, interest) with relatively low regulatory risk.
- Conversely, tokenizing regulated securities currently presents low utility in crypto-native applications (e.g., as collateral for Bitcoin trades under current Reg M rules) and high risk due to SEC involvement. Vishal states, "if you look at something like a dollar, there's like high utility for like tokenizing the thing... On the risk side, it's actually pretty low risk."
- This framework is crucial for investors and researchers evaluating the viability of tokenizing various real-world assets (RWAs) and their potential integration into AI-driven financial models.
The Evolving Landscape of Stablecoins: Fragmentation and Infrastructure
- Vishal Gupta analyzes the stablecoin market, distinguishing between the US-domiciled market, dominated by USDC (USD Coin), and the international space, largely Tether's domain. USDC is a digital stablecoin pegged to the United States dollar, managed by a consortium called Centre, founded by Circle and Coinbase.
- He anticipates increased fragmentation in the US market as players like PayPal (with PYUSD), Stripe, and banks launch their own stablecoins. PYUSD is PayPal's U.S. dollar-denominated stablecoin.
- This fragmentation necessitates robust infrastructure capable of handling multiple stablecoins. True Markets is building a "stablecoin native platform" designed to support various stablecoins, treating the underlying dollar as commoditized while the "wrapper" (the specific stablecoin) is not.
- For AI researchers, this signals a need for AI agents to be interoperable with diverse stablecoin protocols for seamless transactions and collateral management.
Stablecoins in TradFi: The Path to Broader Adoption
- Vishal Gupta discusses the historical "regulatory capture" that made it difficult to move US dollars into the crypto world, a challenge only a few major players like Coinbase and Circle overcame.
- He foresees that clearer regulation, such as the (anticipated) Lummis-Gillibrand bill, will lead to a proliferation of avenues for dollars to enter crypto, fostering competition.
- True Markets aims to leverage multiple stablecoin on-ramps (Coinbase, Circle, Stripe, PayPal) rather than being the sole dollar entry point, simplifying backend management.
- This evolution is critical for AI investors, as increased liquidity and easier fiat-to-crypto conversion will lower barriers for AI-driven investment strategies in digital assets.
Derivatives in Crypto: Perpetual Futures vs. Options
- Drawing on his extensive experience running both options and futures businesses, Vishal Gupta compares perpetual futures (perps) and options in the crypto space. Perps are a type of futures contract without an expiry date, mimicking a margin-based spot market.
- He notes that perps are popular due to their simplicity (dollar-settled, no chain complexities) but carry risks with high leverage, where "one bad print and you're liquidated, that feels really bad for a retail client."
- Vishal suggests that the US options market was historically built for retail, and a robust crypto options solution for US retail is still developing. He sees more personal interest in long-dated call options for expressing a bullish view than in highly leveraged perps.
- For AI researchers, the structural differences and risk profiles of these instruments are key inputs for developing automated trading and hedging algorithms.
The Maturation of Crypto Options and Market Structure
- Vishal Gupta observes that innovation in the perp space is somewhat limited, with current advancements focusing on non-custodial settlement and asset addition. He believes exchanges should evolve from "gatekeepers" to "gateways to new assets," enabling trading of a wider universe of tokens like SPL (Solana Program Library) and EVM (Ethereum Virtual Machine) compatible tokens, with appropriate warnings.
- SPL tokens are fungible or non-fungible tokens on the Solana blockchain, while EVM-compatible tokens operate on blockchains that support the Ethereum Virtual Machine, allowing for smart contract execution.
- He contrasts the fragmented liquidity and wider spreads in on-chain options markets with the more mature and competitive US equity listed options market, where market structure incentivizes tight pricing. The IBIT (iShares Bitcoin Trust) options, for example, benefit from this established structure.
- This highlights for AI investors that the underlying market structure significantly impacts execution quality and cost, a crucial factor for algorithmic trading.
Price Action, Systematic Traders, and Spot Exposure Challenges
- Vishal Gupta, as an exchange operator, states he deliberately does not actively trade crypto to maintain neutrality.
- He observes that systematic traders managing arbitrage or hedges drive a vast majority of crypto trading volume, capitalizing on fee structures and inter-exchange arbs, as there's no equivalent to Reg NMS (Regulation National Market System) in crypto. Reg NMS is a set of rules passed by the SEC to modernize and strengthen the U.S. stock market.
- Vishal emphasizes the difficulty and high cost (200-250 basis points) for US retail to gain even spot exposure to assets like Bitcoin. A basis point is one-hundredth of a percentage point (0.01%).
- True Markets aims to address this by offering a cheaper, safer, and easier interface for trading major cryptos and a wide array of other tokens by the end of summer. This improved accessibility could fuel more sophisticated AI-driven retail investment tools.
Tokenizing TradFi Assets: Beyond Equities
- Revisiting the utility vs. risk framework for tokenization, Vishal Gupta suggests that commodities like gold and oil could be strong candidates due to potentially high utility (collateral, settlement) and manageable risk, unlike the current complexities with tokenizing securities.
- He recounts a shelved project at Coinbase to launch "CB Gold," indicating early exploration in this area.
- Vishal cautions against tokenization for its own sake, stating, "If it's just to trade 24/7, I can do that without tokenization. So, let's make sure we're not just like shoving a product like shoving the solution into the into the problem."
- For AI researchers, the tokenization of diverse, high-utility assets could unlock new datasets and opportunities for AI-powered risk management and automated market-making in these novel markets.
The Future of Market Infrastructure: Prediction Markets and AI Integration
- Vishal Gupta highlights the potential of prediction markets, like Polymarket, in revealing "truth within markets," especially as traditional media trust wanes. This philosophy inspired the name "True Markets."
- He sees a significant opportunity in building foundational market infrastructure—matching engines, cloud solutions, settlement systems (both CeFi and DeFi)—that can be white-labeled for various new markets, including those transacted by AIs.
- Vishal envisions a future where "one AI is going to talk to another AI and want to like transact with them. They're going to need to use something like USDC and wallets... At some point, all those APIs... they're going to want to patch into a patchwork of markets infrastructure."
- This positions True Markets as an infrastructure provider for this emerging AI-driven economy, a critical area for Crypto AI investors to monitor.
Reforming the Public Offering Process: A Measured Approach
- Vishal Gupta offers a nuanced perspective on revolutionizing how companies go public. While acknowledging the archaic nature of current IPO processes, he argues that illiquidity can be a feature for early-stage startups, protecting them from constant market-to-market valuation pressures.
- He suggests that later-stage funding rounds (e.g., Series B) might benefit from more transparent mechanisms like auctions, but early-stage venture capital plays a crucial role that shouldn't be prematurely disrupted by full public trading.
- Vishal reflects on the ICO (Initial Coin Offering) mania, where "everything needs to go public," as a lesson in why new companies might not benefit from immediate, constant market scrutiny. An ICO is a type of funding using cryptocurrencies, often by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks.
- For investors, this suggests a balanced view: while blockchain can improve aspects of capital formation, the traditional venture model still holds value for nurturing nascent AI and crypto projects.
Conclusion
This episode underscores that robust, adaptable market infrastructure is foundational for crypto's next growth phase, particularly as AI agents begin to transact. Crypto AI investors and researchers should monitor the development of non-custodial solutions, multi-stablecoin platforms, and accessible derivative markets, as these will define the efficiency and scope of future AI-driven financial ecosystems.
