Institutional Adoption Just Hit a Turning Point! | Max Bareiss

**Tony Edward** (0:04)
Hey, folks, we are recording at the Injective Policy Summit in Washington, DC.
Joining me is Max Bareiss, who's the head of lending at Galaxy. Max, great to have you.

**Max Bareiss** (0:14)
Thanks for having me, Tony.

**Tony Edward** (0:15)
Max, excited to chat, to learn about the institutional adoption of crypto, the trends that you're seeing on your end. I would love to start with your background. Where are you from and how did you make your way into crypto?

**Max Bareiss** (0:24)
Where am I from? I am from Chicago, Illinois. I grew up there, went to school at the University of Texas, moved back to Chicago, moved to New York in 2020 I've been with Galaxy now four and a half years, been in crypto since 2019
I was at Deloitte prior to joining Galaxy. Galaxy was a client of mine. It was the natural progression to move over there because I was enjoying digital assets a lot more than what I was doing on the tax consulting side, and moved over and took the full plunge into digital assets in February of 2022

**Tony Edward** (1:01)
So Galaxy offers crypto lending to institutions. What are some trends that you're seeing, especially during this bear market time?

**Max Bareiss** (1:08)
Yeah, during the bear market time, one of our hottest products has been the collar loan. You can sell a call and buy a put and get 0% APR financing. There's no margining on it. It's a non-recourse loan because you have the put protection. That's been one of the most popular products during the bear market because it allows for you to have that downside protection. You don't have to worry about the margin calls. We also have done a couple of new product launches this week that I think it's worth talking about because it's topical. We launched the Galaxy On-Chain Financing Rate. We're calling it Gopher, which is a play on SOFR.
It allows for institutions or high-net-worth individuals to access DeFi without having to go directly to DeFi. You can take your crypto, whether it's Bitcoin, ETH or whatever, you can post native Bitcoin directly to us. We'll go through the operational process of wrapping the Bitcoin on your behalf. And then we go to the DeFi protocols. Right now, we're live with Aave, Morpho, Spark and Kamino, where we then take the wrapped Bitcoin, post it to any of those four protocols that I mentioned, and we send back stable coins at a blended rate based on the weighted average that we're borrowing from the different protocols.
That plus we also just closed a $500 million warehouse facility with Grove, which is a part of the Sky ecosystem that will allow for us to really ramp up our lending activities in the non-re-hypothecated segment of the lending markets, so really trying to attack both vectors of the different opportunity sets out there, depending on counterparties, what they want to do from a risk standpoint, and then also trying to optimize for some of the complexities that people face with on-chain and DeFi protocols today.

**Tony Edward** (2:55)
That's really great.
I'm a big believer in DeFi. I believe it's certainly the future. However, it feels like we're in version 1 DeFi where there's still some exploits. Are the institutions, how are you feeling about those things? Are they, does it make it hesitant that they, how much capital they put in and things like that?

**Max Bareiss** (3:13)
I think there's a decent amount of hesitancy, especially with the adoption of AI.
I think one of the, the way I'm looking at it is a little bit different. I feel like right now on-chain and DeFi is being pen-tested because people have access to it right away. And so you have these honey pots across all the different places across all of DeFi and on-chain where it's getting tested in real time and I think it's actually getting hardened in real time. You saw as some of these AI models were coming out earlier this year, you had a lot of those exploits. I think there's a lot of institutions who took note of that and have definitely taken a step back. But I also think this is exactly why somebody like a Galaxy bringing some of these products to light, because we have thought through a lot of the different security measures, a lot of the risk measures, putting ourselves in a position to trade the risk, make sure we're in the room to utilize on-chain. Because like you said, I'm also a huge, huge believer in DeFi.

**Tony Edward** (4:10)
Now from a regulation standpoint, we know the Clarity Act is at the top of the list, we're being passed.