Exclusive Interview with Matrixport CEO Ge Yuesheng: In the Next 5 Years, Build a Super Account Connecting Cryptocurrency and Traditional Finance

Interviewer: flowie, ChainCatcher

Guest: Ge Yuesheng, Matrixport CEO

Editor: Marco, ChainCatcher

From founding the mining giant Bitmain to establishing Asia's largest crypto asset management platform Matrixport, Wu Jihan and Ge Yuesheng seem to adhere to a basic principle: avoid reinventing the wheel.

They prefer to operate in blue ocean markets, relying on original eye-catching products to capture market share and become market leaders.

In 2013, Bitmain quickly dominated the market as one of the first companies to engage in Bitcoin mining hardware, once controlling over 30% of the network's hash rate. Founder Wu Jihan was also seen as the only person with a chance to control Bitcoin.

In just over five years, Bitmain became the top crypto unicorn with a valuation of hundreds of billions of dollars.

At the end of 2018, after leaving Bitmain, Wu Jihan and Ge Yuesheng turned their sights to the nascent Asian crypto asset management sector, founding Matrixport and quickly launching the market's first "dual-currency wealth management" product.

Two years after its establishment, Matrixport successfully joined the ranks of unicorns. Today, with over $3 billion in both custody and asset management, Matrixport has become one of the most important leaders in the crypto asset management market.

Avoiding Reinventing the Wheel

In 2018, as Bitmain faced a critical transformation and a potential IPO in the U.S., it fell into a situation where the founders publicly clashed over differing visions. While various media outlets reported extensively on this century's palace intrigue, Ge Yuesheng did not linger too long. He and Wu Jihan quickly left Bitmain, taking around forty to fifty employees with them to prepare for their next entrepreneurial project.

In February 2019, the new company founded by Wu Jihan and Ge Yuesheng, Matrixport, officially launched. This is a one-stop crypto financial service platform that integrates digital asset over-the-counter trading, lending, and custody.

Wu Jihan, who had previously been at the forefront at Bitmain, took a backseat this time, while Ge Yuesheng stepped into the role of CEO.

Transitioning from Bitcoin mining hardware to crypto asset management may not be surprising for those familiar with Ge Yuesheng and Wu Jihan.

Before founding Bitmain, Ge Yuesheng and Wu Jihan met at a private equity fund where they worked as investment analysts. For many in the industry, founding Matrixport was seen as a return for them.

However, for Ge Yuesheng, it felt more like a new beginning.

Leaving Bitmain was not a decision made after long deliberation; Matrixport initially started as an internal department of Bitmain focused on over-the-counter trading and asset custody. Ge Yuesheng mentioned in an interview with ChainCatcher that when a group of Bitmain developers followed them out, the future was still uncertain for them.

After experiencing the regulatory crackdown year of 2018, the crypto market was still shrouded in the clouds of a bear market at the beginning of 2019, and overall market confidence was at a low point.

However, Ge Yuesheng and other core team members at Matrixport remained optimistic about the crypto market and Bitcoin's trajectory, believing that the demographic it attracted would continue to grow and eventually become mainstream financial investment products.

Ge Yuesheng noted that Bitmain's mining business was somewhat distant from ordinary crypto users, and whether this new venture should choose a more inclusive path to provide entry-level financial services for the crypto community became a topic of contemplation.

At that time, mainstream crypto financial services were still dominated by crypto exchanges. Since the emergence of the first exchanges like Bitcoin Market and Mt. Gox in 2010, crypto exchanges had been fiercely competitive, and nearly a decade of intense competition left the market landscape still unclear in 2019.

In May 2019, FTX was just getting started, while Binance, the largest crypto exchange today, had only been established for two years and was still striving for the top position.

At that time, crypto exchanges had become a red ocean for startups, and Ge Yuesheng and others believed it would be difficult to make significant breakthroughs on the shoulders of predecessors. "From the team's consistent style, we also don't like to reinvent the wheel or completely replicate what others have done."

After deep reflection for two to three weeks, Ge Yuesheng and the core members concluded that the crypto industry was relatively lacking in crypto wealth management services. As crypto OGs who had experienced several cycles, they understood well that "in crypto investment, nine out of ten bets lose, or even ten out of ten," and helping users manage their assets to avoid poverty would be the future investment needs of most users.

Matrixport was initially positioned as a crypto wealth management platform. In addition to the basic trading functions offered by exchanges, Matrixport had a clearer goal: to prevent clients from falling into poverty.

While 90% of exchange users were retail investors, Matrixport initially targeted rational investors with a certain asset scale, aiming to help this group of high-net-worth individuals and institutions withstand market fluctuations and manage their wealth steadily.

From a market competition perspective, the Asian market for crypto asset management was still a blue ocean at that time.

Choosing a blue ocean market also meant starting from scratch. Although Matrixport had the halo of Bitmain at its inception, everything was almost starting over, and it still faced enormous challenges ahead.

How to help users re-recognize them was a significant challenge for Ge Yuesheng at that time. Crypto asset management is a sector with high compliance requirements, and adapting to the regulatory trends in crypto was no easy task.

Either Make a Splash or Sink Without a Trace

In October 2019, Matrixport launched its first dual-currency wealth management investment product, drawing on the logic of structured financial products from traditional finance. This was also the first dual-currency wealth management product in the crypto field, marking the first time traditional financial models were applied to blockchain.

At that time, most CeFi asset management companies only offered single-currency wealth management products. Similar to traditional bank savings products, single-currency wealth management products allowed holders to earn returns by depositing their coins, divided into fixed and flexible terms.

Launching a market-first product as a startup seemed a bit like gambling.

But for Ge Yuesheng, there was no better choice. In the fast-paced crypto market, he needed to quickly capture the user market. "If the initial product fails to persuade or retain customers, we might just sink without a trace."

In hindsight, they made the right bet. The dual-currency wealth management product quickly fired the first shot for Matrixport's market expansion.

With the arrival of DeFi Summer in 2020, the crypto market began to transition from bear to bull. The demand for higher returns among crypto users was further stimulated.

The "liquidity mining craze" of DeFi experienced explosive growth, with many projects offering returns in the hundreds, thousands, or even tens of thousands, attracting a flood of user funds.

While CeFi emphasized steady wealth management, in the raging bull market where everyone was chasing gains, more institutions and investors also had further demands for the configuration and returns of wealth management solutions. To retain customers, the returns on crypto wealth management also had to keep pace.

At this time, Matrixport's dual-currency wealth management product gained a unique advantage. Compared to single-currency wealth management, dual-currency wealth management, as a short-term investment product, could help users achieve higher returns.

Matrixport's dual-currency wealth management, in line with market demand, quickly attracted imitation from several financial service institutions, digital asset wallets, and exchanges. For example, Binance Pool launched a dual-currency wealth management product, and several CeFi institutions like Huobi also introduced dual-currency wealth management products.

Ge Yuesheng recalled that the dual-currency wealth management product also educated the market to some extent. For a group of relatively mature investors with a certain asset scale, beyond betting on exchanges or holding coins without trading, they could also turn to crypto wealth management platforms like Matrixport to pursue higher returns within an acceptable risk range.

After attracting its first batch of users with the dual-currency wealth management product, Matrixport gradually provided users with a matrix of wealth management products, including flexible, fixed income, structured products, lending, and funds, based on user risk preferences and other dimensions.

In Ge Yuesheng's view, doing crypto asset management is not about suddenly becoming popular with just one product; it needs to be tested over time to accumulate real users.

After guiding users through an entire cycle from bear to bull market, Matrixport officially completed its accumulation from zero to one, establishing a loyal customer base.

"Many users found that Matrixport could indeed help them protect their assets from being devoured in a highly volatile market and also allow them to benefit from the growth cycle of Bitcoin, significantly increasing their wealth."

Ge Yuesheng stated that at that time, Matrixport's asset management scale exceeded $5 billion, with the average asset scale per user also surpassing $10,000. At this point, the Matrixport team had expanded from initially fewer than 100 people to 200, doubling in size.

After experiencing a full cycle of bull and bear markets, what attracted more attention than the star founder aura of Ge Yuesheng and Wu Jihan was the growth potential of Matrixport's own business.

Two years after Matrixport's establishment, on August 2, 2021, Matrixport announced a $100 million financing round at a $1 billion valuation, entering the unicorn club.

The list of investors included well-known traditional venture capital firms such as K3 Ventures, C Capital, DST Global, IDG Capital, and Qiming Venture Partners, as well as crypto-native funds like Dragonfly, Foresight Ventures, Polychain, and A&T Capital.

Crisis and Opportunity

In 2022, what many did not expect was that after experiencing the explosive bull markets of DeFi Summer and NFT Summer, the crypto industry faced the most severe wave of collapses in history, with CeFi asset management being particularly hard hit.

At the beginning of 2022, the market capitalization of the cryptocurrency ecosystem reached nearly $3 trillion, only to evaporate by $2 trillion by the end of the year, along with the disappearance of major players like Luna, 3AC, Celsius, Voyager Digital, FTX, and BlockFi.

Especially the sudden collapse of the crypto exchange FTX severely impacted a large number of crypto financial institutions. In contrast to the concerns from the outside world regarding Matrixport as a representative of CeFi asset management platforms, Ge Yuesheng remained calm.

On one hand, he viewed this as a necessary historical development. Whether in traditional finance or crypto finance, there will always be some aggressive institutions blindly pursuing high returns, leading to distorted actions and underestimating risks.

On the other hand, Matrixport has always regarded risk control and compliance as top priorities since its inception. Although affected by systemic risks in the industry, there was no need to worry about significant harm.

From the beginning, Matrixport developed its own crypto asset custody system, Cactus Custody, which is an enterprise-level compliant cryptocurrency financial system and secure custody platform created to meet institutional client needs. It is also one of the earliest platforms in Asia to provide institutional-level crypto custody services.

With multiple security mechanisms such as bank-grade security guarantees and cold-hot storage separation, Cactus Custody has maintained a zero-accident record since its establishment. Currently, Matrixport and Cactus Custody have continuously safeguarded the security of nearly $10 billion in assets.

Every financial collapse also triggers a crisis of trust. After a number of CeFi asset management firms fell, users began to view the entire crypto asset management industry with more skepticism. Their concerns shifted from returns to the safety of their principal.

The crypto industry also began to advocate "Not Your Keys Not Your Coins." On the Matrixport platform, there were also instances of customers requesting to withdraw their coins to their own wallets.

For users, no amount of reassuring explanations can match the sense of security that comes from smooth withdrawals. During this phase, Matrixport alleviated user concerns with its smooth and secure withdrawal experience.

For Ge Yuesheng, the trust crisis in the industry would take time to repair, and what Matrixport could do was to continue optimizing compliance and risk control.

Matrixport made several upgrades in its risk control services, such as providing more comprehensive disclosures and maintaining a good track record.

Specifically, regarding decision-making in risk control, Ge Yuesheng explained that unlike many asset management companies where a single individual decides what to do or not, Matrixport established a complete mechanism requiring checks and balances among relevant departments, even involving external committees in major decisions.

At the technical level of risk control, a stable operating mechanism was also established. For various extreme unexpected events, Matrixport needs to ensure the fastest response speed.

Most importantly, Matrixport strives to eliminate counterparty risks as much as possible, minimizing excessive involvement with counterparties in terms of funds.

For the vast majority of on-chain contracts, Matrixport chooses not to participate. For the very few contracts that are used, Matrixport has optimized their permissions and daily monitoring.

Ge Yuesheng is very confident in Matrixport's risk control system, stating, "This is one of the most mature and complete risk control systems in the industry."

The crypto collapse has, to some extent, forced global attention on countries or regions focusing on crypto financial services to accelerate their pace in crypto compliance regulation. Countries and regions such as the U.S., Hong Kong, South Korea, Japan, Singapore, and the European Union have taken the lead in formulating industry regulatory standards.

For CeFi, the crisis also brought opportunities. In October 2022, the Hong Kong Financial Secretary officially released a policy declaration on the development of virtual assets in Hong Kong, beginning to actively embrace crypto and other virtual assets. Since then, asset management service providers focused on Asia have gained a more promising development environment.

In June 2024, the transition period for the licensing system for virtual asset trading platforms in Hong Kong officially ended. The Hong Kong Securities and Futures Commission also disclosed the list of 11 platforms "considered for licensing" (now the list of applicants for virtual asset trading platforms), with Matrixport's subsidiary Matrixport HK being one of them.

The approval process by the Hong Kong Securities and Futures Commission is strict, involving various aspects of security compliance issues such as the platform's technology and security measures, anti-money laundering and counter-terrorism financing compliance, trading mechanisms, risk management, and investor protection measures.

Being included in this list is also a result of Matrixport's efforts in security compliance. Since its inception, Matrixport has been promoting the application for compliance licenses in multiple regions and has now obtained licenses for a trust company in Hong Kong, a lender's license, a U.S. money services license, a UK FCA compliance authorized representative company, and is a member of the Swiss FINMA SRO-VFQ.

The Next 5 Years: Building a Super Account Bridging Traditional Finance and Crypto Finance

In 2024, on the occasion of Matrixport's 5th anniversary, it was valued at $1.5 billion and selected for the 2024 Hurun Global Unicorn List.

Having traversed two bull and bear cycles, Matrixport has accumulated a large number of loyal users and boasts a vast product matrix.

Matrixport provides trading, lending, custody, and payment services for digital assets to institutions and qualified individual users, covering almost all wealth management needs of crypto users across various risk levels.

Matrixport's business boundaries are also continuously expanding. Not only did it independently develop an institutional-level third-party custody solution, Cactus Custody, at its inception, but Matrixport is also strategically positioning itself through the crypto exchange BIT, the on-chain real-world asset platform Matrixdock, and the investment institution Matrixport Ventures.

This places high demands on a company's ability to identify real market needs and manage human resources. Like many startups, Matrixport has also launched some products that did not meet market demand and ultimately discontinued them after failing to meet expectations.

Now, Ge Yuesheng has his own criteria for determining what to pursue and what not to.

First, closely following mainstream narratives is a basic logic. On this basis, if something can be avoided, it should be avoided; for example, if customer demand is not widespread, it can be skipped. "Pursuing simplicity allows for better risk control."

After the first five years of exploration, Matrixport's asset management and custody amounts have both reached around $3 billion, placing it among the largest crypto asset management scales in Asia.

What are Matrixport's goals for the next five years?

Ge Yuesheng stated that on one hand, Matrixport's mission remains to help users navigate through bull and bear markets, withstand market fluctuations, and earn money in sync with industry growth.

"The market space for crypto wealth management will continue to grow." Earlier this year, after the approval of Bitcoin spot ETFs, Bitcoin once surged past the $70,000 mark, with its market capitalization temporarily surpassing that of silver.

Ge Yuesheng indicated that this means the future appreciation multiples for Bitcoin and even Ethereum will not be as large and rapid as in previous cycles.

"It may be easy to rise from a few thousand dollars to tens of thousands, but moving from tens of thousands to hundreds of thousands will be much more challenging, and Bitcoin's total market cap may exceed that of gold, making that growth much harder."

In Ge Yuesheng's view, as investment opportunities for hundredfold or even thousandfold returns become rare, users' investment psychology will shift from seeking speculative wealth to asset management. Some users who previously earned and lost on exchanges will begin to seek more professional wealth management platforms to help them preserve assets, reduce risks, and earn more rational returns.

On the other hand, Matrixport needs to embrace traditional finance and serve a larger user base.

At the beginning of 2023, after the wave of collapses and reshuffling in the crypto financial sector, the industry began to return to rationality, seeking integration with traditional finance.

The attempt to bridge traditional finance and crypto finance through the RWA (Real World Assets) track has attracted large traditional financial institutions such as Goldman Sachs, Hamilton Lane, and Siemens, as well as CeFi players like Binance and Matrixport, and DeFi protocols like MakerDAO and Aave, all vying to position themselves.

Among them, the tokenization of U.S. Treasuries is the main route driving RWA development. Matrixport's asset management platform Matrixdock launched the "Short-term Treasury Bill Token" (STBT), introducing traditional finance's risk-free interest rates to crypto users. In addition to reducing credit risk, STBT generates stable interest for holders.

Following RWA, the integration speed of increasingly mature crypto finance and traditional finance is expected to accelerate.

Today, Matrixport has completed a one-stop crypto asset management loop from deposit, trading, custody, wealth management, to withdrawal, serving as an important entry point for most crypto users and even traditional finance users.

How to continuously expand boundaries and become a super account bridging traditional finance and crypto finance is Matrixport's development goal for the next five years.