How Blockchain & Bitcoin Are Reshaping Wall Street

Mike Cagney discusses Figure's innovative approach to modernizing financial infrastructure using blockchain technology, focusing on native digital assets and DeFi to disrupt traditional capital markets.

• Figure uses blockchain to modernize financial infrastructure, emphasizing native digital assets and DeFi.

• The company focuses on transaction efficiencies, liquidity, and new financing opportunities within capital markets.

• Figure's goal is to democratize finance, offering individuals more control over their assets and challenging traditional banking.

Mike Cagney explains how Figure leverages blockchain for transactional, liquidity, and financing benefits by using native digital securities, aiming to replace traditional capital markets with decentralized finance (DeFi). Figure focuses on creating new markets and opportunities by improving collateralization, liquidity, and cross-collateralization, ultimately democratizing finance and challenging traditional banking models.

Going Public

• 00:01:32 Figure decided to go public to capitalize on the massive opportunities in Web 3.0 and to control its narrative as a public company on a public blockchain. Cagney also drew from his experience at SoFi, where a large capital raise from SoftBank allowed them to take competitive risks. The company allocated nearly 20% of IPO shares to retail investors to promote democratization.

Blockchain Infrastructure

• 00:05:19 Figure focuses on three blockchain value propositions: transactional benefits, liquidity, and financing. Cagney highlights the importance of native digital assets for trading and borrowing and emphasizes that Figure uses blockchain to originate, aggregate, and securitize loans, reducing costs. Figure has evolved into a marketplace operator, enabling third parties to directly access capital in a blockchain marketplace, significantly improving EBITDA margins.

DeFi and Lending

• 00:07:44 Figure aims to demonstrate the value of DeFi by creating a platform where users can borrow against Bitcoin at rates lower than traditional institutions. The company initially seeded its platform, Democratize Prime, on its crypto exchange, showing that borrowing against Bitcoin can be more cost-effective than traditional methods. By building out the DeFi side, Figure intends to provide more opportunities in the lending ecosystem.

Native Digital Equity

• 00:11:27 Cagney envisions creating native digital equities on blockchain to enable efficient bilateral transactions, lending, and asset control. He contrasts this with tokenizing existing securities, which still rely on trust and can introduce issues like double pledging. By using blockchain-native equities, individuals can control their stock loans and access DeFi opportunities, such as borrowing to buy Bitcoin, while also liberating capital tied up in traditional systems.

Stablecoins and Genius Act

• 00:20:50 Cagney believes the Genius Act will enable the use of stablecoins for payments, breaking the monopoly of traditional US payment infrastructure. He notes that banks were wary of stablecoins paying interest and the Genius Act doesn't prevent companies like Coinbase from offering rewards on stablecoin deposits, effectively acting as de facto interest. Figure's stablecoin, Yields, operates as a security and is freely transferable peer-to-peer, currently focused on internal use within Figure's loan market ecosystem.