What’s On the Horizon for Digital Assets? A Conversation with Mike Novogratz, CEO of Galaxy
Anna Paglia, Chief Business Officer for State Street Global Advisors, sat down with Mike Novogratz, CEO of Galaxy Asset Management, for an incisive conversation on why digital assets may hold the power to further democratize finance and economies in the years to come.
Anna: What do you think is next on the horizon for the digital asset ecosystem? And, as adoption of digital assets accelerates, what impacts do you think might surprise people?
Mike: Blockchains underpin the entire digital asset ecosystem and have the potential to upgrade our financial rails, creating a faster, more accessible, and equitable economic system.
At the core of this transformation are stablecoins — digital currencies pegged to traditional assets, like the US dollar. They provide the price stability necessary for everyday transactions and cross-border payments. Similar to how stablecoins and other tokenized assets will modernize the movement of money, decentralized finance (DeFi) will transform financial services.
“We're at an inflection point where digital assets are becoming integral to the future of finance. The institutions that recognize this and move early will capture market share and innovation. Those that don’t? They may face challenges to catch up or risk becoming obsolete.”
DeFi platforms are offering traditional financial services — lending, borrowing, insurance — without intermediaries. And the potential implication is significant: A more open and inclusive financial system, where anyone with an internet connection can access capital markets without the toll takers.
The real innovation here is how smart contracts on blockchain can automate and streamline these services. DeFi introduces new ways to generate yield, manage risk, and deploy capital, all while reducing friction and cost. We’re at the early stages of this evolution, but DeFi — and blockchains — are poised to democratize finance in ways we haven’t seen before.
Anna: What needs to happen for digital assets to go mainstream in your opinion? How do you think investment vehicles like the ETF wrapper help?
Mike: The upcoming Great Wealth Transfer is one of the most significant economic events of our time. As baby boomers age, approximately $84 trillion in wealth is set to move to younger generations, primarily millennials and Generation Z, over the next two decades.1
This unprecedented shift in capital represents not only a transfer of wealth but a transformation in how that wealth will be managed, invested, and grown.
For institutions, this moment presents a strategic opportunity. Digital assets are primed to become a mainstream component of the investment landscape — those who recognize and adapt to this change may be well-positioned for the future.
“We’re at the early stages of this evolution, but DeFi — and blockchains — are poised to democratize finance in ways we haven’t seen before.”
But a few things still need to happen. Clear, consistent regulation is essential for digital assets to be treated as legitimate financial instruments. Once a comprehensive regulatory framework is established, traditional financial players can engage with this asset class more confidently and at scale.
The good news is we’ve seen great progress on the regulatory front in 2024. With the approval of spot bitcoin and Ethereum ETFs earlier this year — and with the increased availability of funds delivering targeted exposure to blockchain companies and crypto futures — investors can now access digital assets through familiar and regulated financial products.
Digital Assets: The Next Frontier for Markets and Investors
Digital assets are anything that can be created and stored digitally. As applications for them grow, so could their value to economies and financial markets.
These products offer a secure, compliant pathway for investors to enter the market and to gain exposure to the digital asset ecosystem, without navigating the complexities of managing private keys or setting up wallets.
Anna: How should TradFi institutions be thinking about adapting their offerings to tap the potential of digital assets and why?
Mike: Adapting means more than just adding bitcoin or Ethereum to balance sheets — it's about understanding how blockchain can enhance core financial services by offering enhanced transparency, auditability, and security on-chain.
Settlement times, for example, can be reduced from days to minutes. Costs associated with intermediaries can be slashed. Whether it's for payments, trading, or capital markets, blockchain technology streamlines these processes in ways traditional infrastructure can't match.
“With the approval of spot bitcoin and Ethereum ETFs earlier this year — and with the increased availability of funds delivering targeted exposure to blockchain companies and crypto futures — investors can now access digital assets through familiar and regulated financial products.”
We're at an inflection point where digital assets are becoming integral to the future of finance. The institutions that recognize this and move early will capture market share and innovation. Those that don’t? They may face challenges to catch up or risk becoming obsolete.
One approach traditional firms have taken is partnering with established digital assets firms that have been innovating in this space for years. Firms like Galaxy have already built up the infrastructure and expertise required to navigate the digital asset ecosystem during every part of the market cycle.
Anna: How might increased access to, and stability of, digital assets impact the way people save, invest, and plan for their financial futures?
Mike: In regions facing high inflation, stablecoins can offer a lifeline. Inflation erodes people's life savings, acting as a wealth destroyer by reducing the purchasing power of local currencies. This devaluation can wipe out years of hard-earned savings and make it increasingly difficult for individuals to preserve their wealth.
“For institutions, this moment presents a strategic opportunity. Digital assets are primed to become a mainstream component of the investment landscape — those who recognize and adapt to this change may be well-positioned for the future.”
Stablecoins provide an alternative that could potentially shield individuals and businesses from the damaging effects of inflation, allowing them to protect and preserve their purchasing power. In addition, stablecoins are increasingly being used to construct robust payment systems on crypto rails, streamlining cross-border transactions and remittance payments, while also bringing costs down. The average transaction cost of sending remittances using stablecoins stands at 0.5% to 3% of the transfer amount, far lower than the 6.35% average cost of sending $200 through traditional payment networks.2
This demonstrates that stablecoins aren’t just a niche corner of the digital asset ecosystem; they are competing directly with legacy payment systems due to their significant advantages, including faster transaction speeds, lower costs, and 24/7 availability.
Moreover, bitcoin plays a crucial role in this evolving financial landscape. As the original cryptocurrency, bitcoin has established itself as a potential store of value and a long-term hedge against inflation thanks to its fixed supply and ongoing adoption by institutional and retail investors alike.
And I believe that adoption will only accelerate with advancements in blockchain, as the ecosystem strengthens, and as access to crypto assets broadens via regulated investment vehicles like the ETF.