Host (Rachel): Now, as institutional interest in digital assets accelerates, the infrastructure is becoming just as important as the market itself. Copper began as an institutional custodian, but today its platform spans everything from prime brokerage to settlement solutions. I'm fortunate enough to be joined today by Simon Morgan, the CEO of Copper, to discuss how innovations like Clear Loop are helping institutions navigate counterparty risk and what might happen with traditional finance and blockchain-based financial systems. Simon, thanks so much for joining us today.
Simon Morgan: Well, thank you for having me, Rachel. It's a pleasure to be here.
Host: So Copper has obviously evolved quite significantly as an organization. You've moved away from simply custody to also offering settlement and various other parts of the infrastructure stack. Which parts of these are nice-to-haves versus must-haves for an institution?
Simon Morgan: Absolutely. And the first point I would make — just based on your intro — is that we are not a prime broker and never will be. I make that point on purpose because a lot of our clients are actually prime brokers, so we serve them. We did make an announcement yesterday with one of the largest prime brokers in the space, FalconX, which we're very excited about.
But to your point: Copper was born as a custodian, and that really is the starting point for any institution looking at a new asset class. But as anyone who works in the custody business understands, it's a foundational layer from which you build other services. I would categorize Copper today as a market infrastructure and network business — and that network being the Clear network.
What does the network actually do? In simple terms, it connects custodians — and I say that with an "s" on purpose. It's not only Copper on the network; we also have BitGo, and the intention is to add many more. It connects those custodians to trading venues — which today, in a crypto context, are mainly the centralized crypto exchanges. The network then messages margin and settlement amounts between the two. That's effectively what it does.
Host: And why is that so important in the digital asset space?
Simon Morgan: We go on about this a lot, and it's somewhat tedious to hark back to the events of 2022 — but the FTX fallout was seismic for this industry. It exposed all the frailties that existed in market structure at the time, and it certainly wasn't fit for purpose for any institution. Clear Loop was actually already in operation at that point, and we had a couple of exchanges on the platform.
At the time, institutions would have to pre-fund their exchange accounts — effectively taking on explicit credit risk to those venues, which is not how things are done in traditional finance. And of course, as we saw, if a venue goes bust, all that money is lost. Clear Loop was designed to mitigate that risk: a client holds their assets in safe custody, and the network messages margin and settlement amounts between the two. Using blockchain technology and our operational processes, we settle against these exchanges very frequently — in some cases, every hour, 24 hours a day, 365 days a year. The result is that clients' risk exposure toward these venues is very, very small.
Host: Let's talk about settlement speed. How do you see traditional finance and DeFi converging, colliding, or evolving over time?
Simon Morgan: It's happening, I think, a bit quicker than expected. Part of our growth strategy is actually moving away from being purely a crypto asset class business — because anyone involved in this space, who has suffered the ups and downs of BTC prices, understands how difficult it is to make money. The underlying technology is what really matters.
What we have is classic third-party margin segregation, but enhanced by the fact that collateral moves on blockchain rails. Part of our strategy is growing that network by adding more custodians. And even by our own admission: when the real custodians arrive — the GCB banks, the large custodial banks of the world — with serious crypto and digital asset custody products, no one in their right mind is going to choose to custody with Copper. Nor should they. Facing a $1 trillion balance sheet is far more appealing than facing us. The reality is they're not there yet, but they are coming. We're engaging with them and ready for that.
In a similar vein, we've seen announcements from the CME, Nasdaq, and NYSE that they're all going to start 24/7 trading — which means they'll have to accept collateral on weekends and overnight, which means they'll have to use blockchain rails. That's exactly what the Clear network does. That's what we're building toward.
Host: So let's talk about that from a long-term perspective — financial institutions moving into the space. How does that shape your business model and growth strategy?
Simon Morgan: We see it as a huge opportunity, and almost as a transformation of our role. We do custody today mainly because there aren't many alternatives. There are other digital asset custodians in the space — we're engaging with them, and BitGo is already a partner on the network. But if everyone is honest with themselves, balance sheets matter to large clients when choosing a custodian. Our edge and value is in the network and the technology behind it.
So part of my role now is expanding that network to include the major GCB banks of the world — Standard Chartered, Citigroup, JP Morgan, and so on — as well as the existing trading venues that are going to adopt blockchain infrastructure to make their worlds more efficient.
We very much see these institutions as partners, and potentially as future acquirers. The DTCC has announced their big tokenization pilot, and others are doing similar projects. It all meshes together in this network business that we're building.
Host: Amazing. It will definitely be interesting to see how integration and consolidation shape up as more institutions enter this space. Thank you so much for joining us today — always a pleasure to have you on.
