Jonathon Miller, GM AU/ROW & Regional Co-ordinator APAC at Kraken, joins Amy-Rose on The House is Digital for a conversation on global digital markets, regulation and the evolution of financial infrastructure.
As GM of Kraken Australia, Jonathan shares insights into operating a global digital asset platform across fragmented regulatory environments, the rise of tokenisation and institutional integration, and how digital assets are increasingly becoming part of mainstream financial architecture.
The discussion also explores custody, AI-driven trading systems and the growing role of exchanges as infrastructure providers within the future financial system.
This episode was recorded at the Independent Reserve podcast studio, and we greatly appreciate their ongoing support of The House is Digital.
speaker-1: The House’s digital podcast is where Australia’s tech future takes shape. Welcome to the frontline of Australia’s digital revolution. Welcome to the House of Digital, Miller. You’ve been a member of the Digital Economy Council of Australia since the beginning, actually the Adca days and then the blockchain Australia days. then we, you have been here. Beginning, you are an OG, an old guy.
speaker-0: Don’t rub it in. Yeah, that is correct. Thanks for having me. I feel so happy to be here.
speaker-1: you originally locally back early days 2016, 2017, 50, 14?
speaker-0: Technically 13 on paper. Really kind of.
speaker-1: 13 on paper. Real OG then. We are operating on a global landscape at the moment. Digital asset platforms, exchanges, digital infrastructure is operating globally. But at the same time, each jurisdiction has its own regulations. So how does that translate? What are the frictions look like?
speaker-0: Yeah, mean, firstly, I guess back in 2013, what was interesting about this whole space, and I think the reason a lot of people are excited and remain excited by this technology, digitalized technology, cryptocurrency, all those things, is because it was inherently global. And for me, someone that was interested in, was very interested in supranational currencies, non-state issued currency like Bitcoin was like a mind blowing idea. And so, yeah, I think that the theme of global in some ways, like not even like, you know, if you think about how blockchain networks work, they’re not really even necessarily that conscious of space or place. It’s just kind of like, this is a digital ledger that anyone can access. It’s kind of, it’s… Yeah, by default global because anyone can look at it, but it itself is ⁓ kind of placeless or quantum or something cool. yeah, and the friction points have always been the projection of that digital ⁓ space down onto the… hard surface of the earth. so early on, one of the big friction points was just purely the fact that some people had private keys for crypto in some countries and other people didn’t. And in Australia, there weren’t many people that had crypto. So there’s always been friction points. And now I think the friction point, as you point out, is a little bit more on the legal side. Because at the first couple of years, first three, four, five, six years, really it was kind of just like the internet. People kind of looking at just like the internet. Maybe, okay, it’s looking a little bit more like money. And so you had some AML rules and most of those rules are pretty consistent like cross-sporter. Where it starts becoming trickier is now the way that most regulators are looking at this. technology is through a lens of kind of financial services. Really, that’s kind of where it’s come to. So financial services are not consistent from jurisdiction to jurisdiction. So when you’re running a global exchange, then that’s the really interesting point because you’ve got a split like not singular, but you’ve got a product that, or an experience that a user can engage with around digital assets that can of course be tailored, but really it’s kind of one thing. But then you have all these different jurisdictions saying, ⁓ it’s this, ⁓ it’s that, ⁓ it’s not this, ⁓ And so then you either have to turn it off or you have to modify it or you have to completely revamp it and you have to have different like. legal wrappers or terms and conditions, you different licenses. So the friction point is really around trying to take something that is pretty kind of universal almost and play that out in these different markets. So yeah, it’s tricky. I think it makes it very difficult when there’s divergence. And I think the theme to date has been a pretty significant amount of convergence around AML CTF but divergence around the financial services kind of lens.
speaker-1: So what you’re essentially building, it is global and it’s not just digital asset exchanges actually, it’s most digital platforms are now global and it is becoming more infrastructure than anything else. So. Let me rephrase this. At what stage does your exchange or does your platform become critical infrastructure?
speaker-0: Well, we’d like to think that, you know, and I speak here kind of about Paywood broadly. So Paywood being the parent company of Kraken and other businesses that it owns that are digital asset related, including businesses like CF Benchmarks, which are, you know, regulated ⁓ index products indices for ⁓ the price of Bitcoin that, you know, futures markets use, for example, big ones ⁓ and then exchanges. So all these different layers, a custody business as well with a banking license, all these different layers I think today are, niche is the wrong word, emergent. So digital assets are still an emergent technology with respect to mainstream adoption. I think that’s still true that not everyone is using. digital assets, crypto and blockchain in their business. Not everyone is using it, but we have a strong view that the future of especially financial services will be a function of digital assets, blockchain and cryptocurrency. that, that will be the core of many different financial services businesses in the future, maybe all. So if that’s true then, ⁓ the stuff that we’re building today, that infrastructure, be that market for price discovery, like a digital asset exchange, or be that an industry which is like a clear price signal ⁓ measure of the value of those instruments, or the custody, that infrastructure, all that kind of stuff underneath that allows you to hold these assets and use them. absolutely it will become critical infrastructure. But what is that tipping point? I don’t think there’s like a specific event horizon. I think it’s just over time, you’re going to start seeing these things being just a fundamental baseline for engaging in finance.
speaker-1: I see the evolution of platforms like Kraken and I don’t know if this is something that you’re looking at, but more of an evolution into obviously banks and marketplaces for tokenized real world assets, perhaps. So the infrastructure question really becomes solidified, I think, when we see on the horizon what your platform and what digital asset platforms will look like in the future. I don’t think we have any idea. how this is going to pan out. But most governments are now paying very close attention to that economic impact, that $24 billion opportunity here in Australia for tokenised real world assets. So I think just by sheer force, you guys are going to be pushed into ⁓ evolution. Do you think policymakers are thinking about that systemic sort of infrastructure or that ⁓ the importance of what you’re building?
speaker-0: I think they’re starting to understand that the technology that we think is really important will be important. ⁓ And you know what’s interesting is that the underlying infrastructure that we all rely on is open source. it’s a, in some ways, a kind of like, ⁓ a really good shift. Like some people talk about this as being destabilizing, as being systemically problematic. ⁓ I think that ⁓ if anything, it’s potentially more resilient as an underlying infrastructure. So that’s really promising. And I think that the really smart policymakers understand that. And they see that This is not just a marginal efficiency game for existing people to add yet another widget in their technology stack. It’s kind of like a rewrite. But at the same time, there aren’t really yet any fully native, from the ground up, kind of digital asset financial services businesses that are ⁓ systemic in the way that you’re, I think, talking about them in the sense that… especially in a market like Australia where there are there’s a lot of concentration ⁓ but I think maybe, maybe just maybe that will change kind of sooner rather than later.
speaker-1: And as your business grows, as digital asset platforms evolve, there is that question around custody and what that looks like. How is that evolving? What does that look like at crack? What is custody?
speaker-0: Yeah, that’s question. What is custody? So I mean, the cool thing about digital assets, crypto assets that use blockchain is that you can kind of hold onto them in a wallet, kind of the same way that you hold on to cash in a wallet. ⁓ As long as you have the wallet in your hands and no one else has got their hands on that wallet, then they’re yours. So custody is kind of inbuilt into the architecture of blockchain. That’s, know, all the private key stuff is really that’s what custody is. It’s, ⁓ it’s using really strong passwords to control digital ⁓ transactions. What does it mean when it comes to providing custody as a service? That’s a very different thing whereby you still use it underlying very strong art like that, cause that’s very strong architecture. The The crypto architecture is extremely strong. It’s what makes the whole thing work. But then you layer upon that. A kind of ease of access piece. So that means that people, for example, can have recovery or they can have another person also with access, but they can control that access and they can maybe have two people to sign. And these kinds of things do exist in the very native on-chain like programming world. But when you build that into a, into a system. a software stack that someone else can use, that’s all of sudden a kind of custody and you’re doing that on behalf of someone else, that becomes then a custody, the provision of a service of custody. And the provision of service of custody of financial products and now digital assets is a regulated activity. So that means you need to do certain things, you need to meet certain requirements. Some of those requirements when it comes to digital assets are still to be fully ironed out, but basically we have an architecture in this country. for what it means to provide custody of assets on behalf of other people. And so then the service that you build needs to not only be architecturally strong, like digitally, like well designed from a software point of view, but it needs to be strong from a governance point of view. It needs to have the appropriate controls, risks, risk mitigants. It needs to meet the regulatory standard in a way that’s transparent, provable. So there’s a whole lot of stuff around the software then that you have to build. So that’s kind of what custody is. What does it mean? It just means that the end user can have perhaps even more reliance, can afford to have more reliance on the person providing that service and they’ll have recourse. So there’s the kind of customer, the safeguarding aspect of what custody is in legislation where you are compelled to do certain things is ultimately for the benefit of the end user. So when we’re talking about custody in Australia at the moment, it’s really about formalizing the rules that mean it’s appropriate for you to be able to say to a third party, I’m looking after these for you, and you can be confident that we’re doing it in these ways.
speaker-1: Is there any similarity ⁓ with, I guess, the bank? when you sort of, some people, if they’ve got ⁓ money in the bank, they know that perhaps if they’ve been scammed, they’ll be able to go to the bank and they’ll get the recourse. Is it similar infrastructure for the digital asset industry to the banking industry when it comes to custody?
speaker-0: not quite today because I mean and this goes to some of the complexity of the Australian regulatory landscape. There are multiple regulators that look after ⁓ when it comes to especially banks as a specific regulator ⁓ APRA and ⁓ There are specific rules when you get to a certain size and also when you start saying certain things. When you say that you are a bank that means it’s very specific thing legally in Australia. So when you’re providing digital asset custody, you’re not a bank. Interestingly though, I don’t know if you remember this, the original Bitcoin kind of tagline was be your own bank. Yes. ⁓ Which is still pretty interesting because if we go back to the previous comment I was making around the digital architecture of this software, it allows you to kind of hold onto stuff yourself. So you don’t need a third party. That’s very interesting. But if there is a third party involved and there is custody provided that service, then there are rules, but they’re not the same rules as a banking rules, because it’s not the same service being provided. There’s not interest being provided to an individual. There’s not necessarily a set of payments features around that. There’s not necessarily lending around that. the structure and the operations of a bank are ⁓ very regulated in multiple different ways. But custody, the very specific thing of holding onto digital assets for people. And those digital assets might indeed be financial products if they’re say a real world asset like what you’re talking about. Those rules are quite strong and quite firm now. But there’s a gap between doing that and then doing what a bank does.
speaker-1: So there’s some complexity at the moment as we move into that clarity and that regulatory clarity about what custody means for the digital asset industry. But for the most part, it’s solved on the digital asset industry side of things.
speaker-0: Yeah, I mean, think there’s some clear, you know, you know what you need to do. Yeah. Right. And there’s some time now for that to play out, the, especially with the, the legislation now passed, which is fabulous. I think that, you know, there’s some rulemaking, you know, time will tell the devil will be in the detail, but the overarching framework and the existing rules, the existing laws around, ⁓ safeguarding for financial product assets and digital assets. There’s still that layer there from ASIC. So I think between those two things, there’s a pretty clear path.
speaker-1: I would say so too. So when you’re, we talked a little bit about ⁓ evolution and the way that ⁓ digital asset platforms are, it’s rethinking about the future. How do you balance? Cause I know that Kraken is, you’re always coming up with new products and services and cool new features and you talk about widgets. There’s a lot, if you go ⁓ visit Kraken. So how do you balance then when you’re consistently innovating and coming up with these ⁓ new solutions, the consumer protection, because you must be thinking about both sides at the same time.
speaker-0: Yeah, it’s really, it’s really, ⁓ especially for a company that’s building things for many different markets, as we talked about earlier to then have to take a product and kind of make sure that it meets the requirements and all these different markets is, is a lot of work. And sometimes it’s very frustrating for product designers to go and do their job because they keep running up against walls and the walls are different in every, you know, jurisdiction. So that’s tricky. ⁓ but Really, and I guess the cool thing about ⁓ the space that we work in is that That innovation, a lot of that innovation sometimes is happening kind of in the open source world as well. And so there’s this kind of thing that things can be almost tested in a way, not by us, but by the community. And you can then bring more mature things to market via platforms like Kraken. ⁓ And so that’s in some ways perhaps there’s a tension there as well because there’s this urge to be as fast as what’s happening in the open source community. And that is crazy fast, what’s happening there. So yeah, it’s definitely slower, I think as a result of the fact that you are a, you know, regulated business and, ⁓ and, but ultimately I think that, that, that’s an important, you know, mandatory minimum. And there is a benefit for the end client as well, but they know that when they’re dealing with a platform like ours, they’re, they’re, you know, they’re interacting with features that have been vetted in that way, in a way.
speaker-1: And so there’s that innovation happening on one side and there’s the growth on that side. But then there’s this new element of institutional intersection happening across markets and ETFs. What are you seeing in there as you’re in the middle of it? Actually, I can see ⁓ Kraken a lot in the middle of that institutional dialogue.
speaker-0: Yeah, there’s different layers there, I think. ⁓ And I, you know, I’m only exposed to certain parts of that in my role. ⁓ But we have whole dedicated services, pay would, it’s called Payward Services, that really does a kind of, and the custody business, especially, I think, and the benchmark business, Benchmarks, those have always been very directed at. institutional clients, because they’re the ones that have the need. They have the demand for that. ⁓ But now that it’s becoming, as we’ve discussed, a little bit more of a, not necessarily ubiquitous yet, but I think there’s a requirement for any financial services business out there to get their head around and potentially be involved in. ⁓ the use of or the deployment of or the consumption of digital assets. Now that that’s happening, there’s this, a kind of very different kind of demand, a demand not just for exposure to Bitcoin, which has been the institutional story to date. You know, for the last four years it’s been… ⁓ get exposure via ATFs or get exposure via the market in some way. Maybe that’s one of the Bitcoin treasury companies or holding it yourself and holding custody or trading it. That’s kind of one layer. But the other layer is how do I use digital assets in my business? How do I tokenize or, know, I mean, that’s probably the biggest thing, frankly. ⁓ so, yeah, so Payward Services is the kind of the B2B effectively. What’s Paywood? Paywood is a parent company of Kraken and it’s the overarching business that owns the ⁓ Kraken brand, the CF benchmarks, the Ninja Trader, these other platforms. so it shares all these businesses are deeply using digital assets and the custody business as well. ⁓ so those shared services are something that other businesses, institutions are now really interested in. They’re interested in how do I embed custody into my business. So for example, I think we did some work with the bank called Bunk in Europe and we provided the kind of custody infrastructure behind their offering to their clients. so that’s a crypto exposure inside their app, in a banking app.
speaker-1: friend. Are you saying that around the world?
speaker-0: Yes, yeah, yeah, that’s becoming, that’s a kind of entry level thing that people are doing. And then the next layer is, well, how do I integrate tokenized assets into my platform? And what does that look like? And how do I tokenize my assets, for example, they might be issuing bonds or they might be doing other things. So that, and that’s something that lots of providers have been providing service around, but what we’re seeing is this kind of a need for a full stack set of services that you can bring to the table to enable that in another financial services business. So that’s probably the next wave of institutional innovation or institutional adoption that I’m seeing.
speaker-1: I wasn’t planning on talking about this, but I am curious because I’ve heard that there are some building of AI agent shading mechanisms within platforms and also some guys on the side are building some AI agents, of automated little… clones of themselves, I guess you could call them, is Kraken using AI in different ways that you can talk about.
speaker-0: Yeah, I can. ⁓ So firstly, think that Kraken has always been a platform where ⁓ professional traders like to trade because of liquidity, the infrastructure, the… the services, the APIs. ⁓ And so the development of API, like trading bots that use APIs is just not new. So that’s just, know, anyone using any high frequency trader is building an algorithm. Now people might be using an agent to help them build an algorithm. They still have to consume an API. So that’s kind of like, there’s kind of two worlds is like the service that we provide, which is a market. And then there’s access to that market via the UIs or the APIs or whatever the fixed API, whatever the API might be. or the interface. And then you’ve got people developing bots. And now people are developing bots really quickly because they’re using AI tooling to develop these things. And then they’re developing agents, which are a bot, but the bot has a bit more control. So yes, there’s that interaction. ⁓ What we have done to help people who are using AI tools is we’ve got a a command line interface, ⁓ which allows you to then interact with the APIs on your account using these tools. there’s, again, it’s another exposed point, know, an end point for ⁓ clients to be able to interact, but it’s more of an AI native end point that has an NPC server and allows people to build, you know, using whatever they’re… AI tool their choice is and then they don’t necessarily host servers. They can kind of interact on a via the computer, which is a really, that’s an interesting innovation being able to build bots on your computer and have them run and interact with platforms. Quite cool. I think the next layer up from that is do you build AI tooling inside your business for the use of other people? Now Kraken has a huge amount of AI tooling that we use on our side of the kind of bright line, but on the use aside we’ve just made sure that we’ve got really good connectivity for people who want to use those toolings. We will probably, and I can’t speak more about this, I’m not close enough to it and there’s nothing to announce, but it seems inevitable that businesses are going to start blurring that line a little bit and maybe building AI tooling that then… third parties can use from inside the app. But at this point in time, we’re not building AI agents for people to then run around and do stuff on the platform. We’re allowing people to access the platform in the ways we already have, but making it smoother and more kind of facilitating, you know, the use of these new technologies to interact with us. And we’re using those technologies ourselves, but there’s this kind of area here that, you know, you’re seeing some businesses, you know, build agents that then people can interact with. And I feel like that That’s a really interesting but potentially harder area to get right. And so we’re just being patient there.
speaker-1: Yeah, I’m actually ⁓ really curious about what the trading world looks like when people are just going about their business with their agents running around in the back, in the background, doing some of their business for them and how that impacts on a market where there’s twice the amount of people doing twice the amount of trade at speeds that we haven’t seen before. And what that looks like for the market and how platforms like yours operate. under that sort of, in that environment because ⁓ with the, the co-work, for example, ⁓ AI set up, ⁓ it is very easy to create an entity that does your work for you across your whole PC. And so I imagine there’s going to be some, some rogue agents running around doing some things.
speaker-0: Well, I just think the barrier to entry now for building a bot has come like down to almost zero. And so, you know, I guess again, we’ve always had a platform that allows people to interact with it via API. So it’s really no different for us in that sense. Maybe there’s just going to be, maybe just maybe it’s going to be harder for the market makers to, to compete for an edge because there’s more and more markets. So really the people who are stand to be challenged here are people who have capitalized on slow traders or people who are less sophisticated. And I think there’s always that dynamic in every market between professionals and people who are casual. And there’s a gap there that then gets, you know, that’s an arbitrage that professional traders operate on. And that’s the market. That’s the business model for not all, but many is to find where you can be better in the market than others, right? That’s the nature of these spaces. for people who are algorithmic trading though, they’re now competing with more algorithms. yeah, maybe that margin comes down. It’s hard to predict what happens to markets, whether that means there’s gonna be more activity, less activity, ⁓ better, more efficient markets, less efficient markets, hard to know. But yeah, don’t think it’s not necessarily gonna be a problem per se. I think it was gonna be interesting journey there.
speaker-1: ⁓ I don’t think it’s gonna be a problem. It’s just gonna be very interesting to see how it unfolds. So I’m just gonna close with ⁓ quite a big question around when we look back at this particular time, what do you think the commentary will be around what we did right? What did we understand about financial markets? What didn’t we understand about financial markets? If you had your little crystal ball. Yeah, and financial markets.
speaker-0: about digital assets. ⁓ yeah, I think what I would say is we’re probably going to look back at what has happened over the last, let’s call it 10 years and wonder why we thought it was so hard because I think that for many people who have been in the, in, in, guess on the technology side in this industry have always believed this to be the future of finance. And there’s been, think perhaps a fair bit of resistance from traditional financial services. ⁓ businesses, maybe because it’s a threat. Technology is always and you’re seeing it with AI as well. Technology is a threat to existing business models as much as it is an opportunity. okay, you’re balancing these things and there’s, I think that there’s been a fair bit of resistance, but really now there’s an opportunity to innovate. Like there hasn’t ever been before, I think on both fronts that we’ve discussed today and you know, looking back, I think that if anything, I think we’ve, we’ve definitely got it right to say that this is a, a new technology and we should recognise it as being novel, but also what we should be doing is suggesting and creating the frameworks for ⁓ innovation potential. And so maybe what we’ll realise is that actually we probably could have done this slightly differently if we’d done it all again, but you know, that’s high-side for you.
speaker-1: Yeah. And I mean, we’re reliving internet, the story of the internet. history repeats and probably will as well. Thank you so much for coming on the show.
speaker-0: Thanks so much for having me, it’s been great.
speaker-1: digital, where policy meets innovation. Stay curious, stay inspired and be part of the movement building Australia’s next economy. The future is happening now. See you in the next episode.
speaker-0: you