Exclusive Interview with Backpack CEO Armani Ferrante: Building a Bridge Between Traditional Financial Systems and the Crypto World

Interview: Mensh, ChainCatcher

Guest: Armani Ferrante, Backpack CEO

Armani gives off a very friendly vibe. On his way to the interview location, he politely engages in brief conversations with everyone who greets him warmly. However, he quickly returns to deep thought or replying to messages, leaving no moment of idleness.

The hotel where the Backpack team is staying is in the same complex as the Consensus venue. Armani explains that this is his way of reducing commuting time. In Japan, his residence is also very close to the office—on days without social obligations, he is a workaholic who travels between just two points.

During our conversation, perhaps due to his engineer's meticulous nature, he takes a moment to reflect before defining and breaking down each question before answering. Where he lacks specific evidence, he adds, "You can verify it yourself."

Armani was previously an engineer at Apple. In 2017, he encountered Ethereum and became fascinated by the concept of a "world computer." He almost immediately resigned from his job at Apple and has since devoted himself to blockchain technology development.

Backpack Wallet was established in April 2022. After the collapse of FTX later that year, the company lost 88% of its treasury funds. However, during the crisis, Armani also saw an opportunity for compliant exchanges. Backpack Exchange was founded in March 2023.

In April 2023, Backpack launched the first xNFT series on Solana, Mad Lads, which was a huge success, briefly ranking first in total trading volume across the network, even surpassing established Ethereum blue-chip NFTs like BAYC. During the bear market, Backpack had to rely on the $1.4 million raised from Mad Lads NFT sales to maintain operations.

In February 2024, Backpack completed a $17 million financing round led by Placeholder, with participation from Wintermute, Robot Ventures, Selini Capital, Amber Group, and others.

Currently, Backpack has 57 spot trading pairs, 15 perpetual contracts, and 5 collateral lending liquidity pools. According to Coinmarketcap data, Backpack's total asset value is $34.12 million, of which approximately 54% is in USDC and 26.22% in SOL. As of the time of writing, the trading volume is $6,194,018.

Also alerted by the FTX incident, Backpack places great importance on compliance in various regions and actively seeks licenses. In October 2023, Backpack obtained a Virtual Asset Service Provider (VASP) license from the Dubai Virtual Assets Regulatory Authority (VARA). On December 10, 2024, Backpack officially registered as a Class II member of the Japan Virtual Currency and Crypto Assets Exchange Association (JVCEA). On January 7 of this year, Backpack acquired the European branch of FTX, FTX EU, for $32.7 million. FTX EU previously held a MiFID II license issued by the Cyprus Securities and Exchange Commission (CySEC). Armani stated that the company plans to become the only regulated perpetual contract provider in Europe and has submitted a MiCA notification, expecting to launch in the first quarter of 2025.

In this interview, we talked with Armani about how Backpack, as a young exchange, positions itself in the market, its future product plans, and his personal entrepreneurial life.

From Apple Engineer to Founding an Exchange: A Bumpy Journey of Faith

ChainCatcher: You were an engineer at Apple; why did you decide to enter the crypto world?

Armani: After graduating from university and working at a big company, like any other ordinary engineer, you are just a cog in this massive machine. In 2017, as Bitcoin and Ethereum prices kept rising, that moment was magical. I remember very clearly sitting in a café on Market Street in San Francisco, reading the Ethereum white paper on my laptop, feeling like this was the coolest thing ever. I was completely captivated; I didn’t know what to do, how to make money, or for whom to work, but I knew I wanted to be part of it. So, I quit my job at Apple, even though I didn’t know what I was doing, but I decided to give it a try because everything at that time motivated me.

ChainCatcher: Can you share your entrepreneurial journey from xNFT to Mad Labs and then to Backpack Wallet?

Armani: I entered Solana in September 2020, when there was almost no ecosystem. I joined this ecosystem and did a lot of things, including DeFi-related work, early wallet infrastructure, developer tools, and so on. These efforts later became very successful, and the network began to grow rapidly in its early stages. It was because of the network's growth that I decided to start my own venture; Solana made me feel for the first time that the infrastructure issues were basically resolved, so I began to think about what problems to solve next to drive the network and the industry forward. At that time, I believed many people understood the importance of mobile and knew that building mobile applications in the crypto space was challenging because the iOS and Android app stores are almost monopolistic. So, my team and I thought about how to build a decentralized app store. This is the origin of xNFT; we wanted to tokenize applications like image tokenization, creating a new distribution channel to establish decentralized applications. That was the initial concept, although we did make some changes later.

ChainCatcher: Why did you choose NFTs as your starting point?

Armani: NFTs are actually a universal form representing some kind of collectible. We usually associate them with things like 10K avatars, funny JPEGs, or CryptoPunks, but they are actually a universal way to own anything. At the same time, those NFT series, especially the 10K-style avatar series, created fantastic communities, with examples like CryptoPunks being very successful. These communities garnered widespread attention in the industry and became one of the most exciting social events in the crypto space. Therefore, this also paved the way for the story of Mad Labs.

We ultimately decided to build our own NFT series for two main reasons: First, if we want to build our own NFT platform and NFT protocol, we should create our own NFT series and become our own users. Second, at that time, the community's enthusiasm was incredibly strong, which felt very exciting.

The Beginning of Backpack: Regional Compliance Opportunities

ChainCatcher: You mentioned that when FTX collapsed, you saw a gap in the exchange market. What is this gap?

Armani: As the industry matures, especially when the situation regarding rules and regulations becomes clearer, exchanges should not be classified simply as decentralized or centralized. A more appropriate classification is: one type has censorship-resistant systems that are widely distributed globally, with no specific regional application rules. For example, the internet is one such case, including decentralized exchanges like Uniswap. The other type consists of compliant entities that are centralized and can enforce rules and tools in any region where they serve users.

As the industry matures, people are forced to fit into one of these two categories. But the challenge is that many people are very good at products; they can build great exchanges but are not adept at building all the operational infrastructure needed to construct a compliant financial institution. Meanwhile, some people are very good at compliance and operations, possibly coming from traditional finance backgrounds, but they are not very skilled at building products and do not understand the nuances of the crypto industry. You will see many people struggling in these two categories, and the real big opportunity lies in taking the middle path, building a financial institution that is very well-suited to this industry, capable of building on-chain solutions, having a wallet, and solving the bridging issues between the traditional financial system and the crypto world.

You can see this happening in many places, like a week or two ago in Japan, where many unregulated exchange apps were kicked out of the app market because they did not comply with Japanese rules. In Europe, all the largest derivatives exchanges were also forced to exit because they did not comply with European regulations. For example, five derivatives exchanges, including OKX derivatives, currently offer almost no derivatives trading in Europe because no one is compliant. So, the opportunity lies here—becoming a compliant, trustworthy participant that solves the challenges between traditional finance and the crypto world, bringing all the value of traditional finance into the blockchain.

ChainCatcher: What products is Backpack currently focusing on to connect traditional finance with the crypto industry?

Armani: There are many different levels of products. You can't just say, "I want to build a competitor to Robinhood or Uniswap" right away. We have two parts, two businesses. One is the wallet, and the other is the exchange.

In terms of the exchange, the primary goal is to establish liquidity. Because as a product, the most important thing is liquidity. So, the first product we are currently focusing on is to build a very attractive trading product. About two and a half weeks ago, we launched our public beta version to test the new product, which we call " Yield Futures" or " Yield Professional Futures," which is different from regular perpetual futures. In our futures product, users can earn yield on their collateral. We have a native cross-chain currency market where you can lend your assets and use those borrowed assets for trading. In the past two and a half weeks, we achieved over $2.4 billion in trading volume just during the testing phase. So, we plan to officially launch in early March, transitioning out of public testing and fully opening up for global users. This is the first product we are building, providing a very attractive trading experience, including spot, margin, lending, and perpetual futures that can earn interest. We have invested a lot of effort into creating a truly excellent and differentiated product that addresses the issues that decentralized exchanges cannot solve. This is our first step.

The second part is the wallet. You can think of the Backpack wallet as a self-custody key management system. We currently support chains like Solana, Ethereum, Base, Eclipse, Arbitrum, Optimism, Polygon, and we hope to support every chain, like wallets such as MetaMask. However, there is indeed a very important issue that needs to be addressed in the wallet space. If you open Solflare (a wallet for Solana) today, they will tell you a shocking statistic: $2.4 billion is lost every year because people lose access to their crypto wallets, at least that was the case last year. Although I forgot the exact statistic, this is a massive failure for the entire industry. This figure even exceeds the losses of all centralized exchanges combined each year.

Self-custody is one solution. If we do not have self-custody, then you can question a lot of what we are doing. This is also another important part of our product, focusing on how to solve these self-custody issues so that I can confidently tell my parents or friends that they can use cryptocurrency without risk. You don’t have to worry about self-custody, you don’t have to worry about losing keys, and you don’t have to worry about how to use passwords. This is one of the most important issues that need to be addressed today. So, this is where we are starting.

ChainCatcher: Pump.fun, Moonshot, and others are very popular; GMGN is loved by many. How do you view the current competitive trend between centralized exchanges (CEX) and decentralized exchanges (DEX)?

Armani: The very important point I mentioned earlier applies here as well: this is not a competition between decentralized exchanges and centralized exchanges, but rather a competition between censorship resistance and compliance. Depending on which path you choose, you will get very different products and characteristics.

One lesson we learned during this cycle is that there is nothing that decentralized exchanges are better at than issuing long-tail assets. Pump.fun may seem absurd, but it is precisely an example of something that cannot be built in the same way on centralized exchanges. And this is where decentralized exchanges truly excel over centralized exchanges. As for other aspects of the product, margin trading, futures, spot margin, stocks, U.S. Treasury bonds, and fiat on-ramps are precisely the strengths of centralized exchanges. There are subtle reasons behind each aspect; after all, it all comes down to compliance and direct connections with banks. If you want on-ramps, only regulated exchanges can do it best. So, this is the advantage of centralized exchanges, and they will continue to play a role in deeply regulated products. For example, the U.S. stock market is perhaps the best example; this is where the appeal of centralized exchanges lies. But look at examples like Robinhood; if they were to tokenize stocks, they would be able to do it better than anyone else. This is the advantage of centralized exchanges.

When it comes to margin trading, it’s not just about custody. When you engage in margin trading, you don’t have the concept of self-custody. Whether it’s futures or spot margin trading, or options, you don’t own your assets. The system owns your assets; the clearinghouse owns your assets. So, it all comes down to the rules of the system, especially risk management. Therefore, when it comes to margin trading, the boundaries are very blurred. Regarding margin trading, there are indeed pros and cons. For example, if you have decentralized risk management and transparent risk management, projects like Aave do very well. But if you are talking about high leverage and highly volatile assets, that is usually a field for a select few, which is the limitation of decentralization. This issue is almost irrelevant in both CEX and DEX. The question is, who is making these decisions? Who is funding the brand? Who is doing the risk modeling? That is the very important question.

ChainCatcher: What are the biggest challenges you face when building on-chain systems and self-custody wallets?

Armani: These two worlds will continue to merge. So, we are very intentionally combining centralized exchanges and decentralized exchanges in one application. If you have an exchange, you can build the best wallet; if you have a wallet, you can build the best exchange. There are many synergies between the two.

For example, you can completely solve the asset recovery issue. Remember the shocking statistic I mentioned earlier—the money lost every year due to self-custody. If you apply modern technology, like account abstraction, you might solve all the user experience issues currently present in self-custody. Therefore, I believe these two will continue to merge. I think the key is to leverage each other's strengths; they are not a zero-sum game.

Focus and Dedication: A Workaholic on a Two-Point Line

ChainCatcher: How do you allocate your time? What does a typical day look like for you?

Armani: My time is mainly spent on two major categories, possibly a third. One is recruitment and company building, and the other is product— you must have a great product and innovate in this area, which I proudly say we have achieved. The third category is coordinating between compliance, product, and engineering so that we can truly solve all problems and build a market with high trust and integrity. So far, we have basically climbed these "mountains."

Next, the "mountain" we need to climb is how to push to market. Now, everything boils down to liquidity. No matter how great your product is or how many healthy regions you can serve, if there is no deep liquidity, then everything is meaningless. So, this is the next "mountain" we need to climb.

So far, we have done very well, both in terms of product and in building a great spot and derivatives product, even in compliance. One of our biggest advantages is our market trust. We can confidently say that we will be one of the most regulated exchanges in the market, and you can go to all major institutions, and they can trust what they are trading. This is why the U.S. capital markets are so special; they are the deepest, most liquid, and most regulated capital markets in the world, with trillions of dollars traded here because people trust it. Everyone knows it is real, not fake, and not manipulated. Bringing this maturity into the cryptocurrency market is also the "mountain" we need to climb next; it will be our focus in the coming months.

ChainCatcher: I heard you are very busy, even going a whole week without time to shower. Is that true?

Armani: Unfortunately, yes.

ChainCatcher: As a CEO of an exchange, do you think it’s better to be a good trader or to be less familiar with trading?

Armani: You must understand your users. If you don’t understand your users, you cannot build a great product. Your job is to build products that solve users' problems. If you are not a user from the start, then you better become one. Not just as a trader. When you talk about futures, you are talking about traders; when you talk about mass-market consumer finance, about an "all-in-one" application covering all funds, you will talk about different market segments. Whether you are using on-chain applications, DeFi, wallets, DApps, etc., you need to know your users' needs.

ChainCatcher: Do you trade yourself?

Armani: Yes and no. I do trade, but I view investing as a Buffett-like approach—holding your punch card, with 20 investment opportunities, punching a hole each time you invest. You only have 20 chances, and then you buy these assets and never sell them; that is your lifelong investment strategy. This is my approach to investing. I think everyone has different methods, but this is not financial advice. But this is how I view the market.

Advantages and Strategy: Tackle the Toughest Challenges First

ChainCatcher: What is Backpack's competitive advantage compared to other exchanges?

Armani: The opportunity we see is that very few exchanges can truly penetrate and bring cryptocurrency into the mainstream consumer finance market. The reason is that only a handful of exchanges are doing the hard work of integrating it into the social framework. This comes down to compliance. Going back to our previous discussion, look at some of the largest markets in the world, see who can operate in these markets and who cannot. And there is a huge gap and opportunity to ultimately bring these products to these regions, which are the largest markets in the world.

That’s why we chose to take this difficult path; although we could have built and launched the exchange a year ago, we didn’t. We took the time to solve problems and obtain licenses globally to build. Our company has only 16 engineers working on one product, and everything is done by these 16 engineers, but we have about 90 people in total, with the rest being compliance, legal, operations, and customer support staff, and not just one language, but all languages, meeting the requirements to establish a trustworthy financial market where you can have the deepest liquidity because you have market integrity and regulatory oversight, allowing all participants, traditional regulated market players, to enter the crypto market. This is the huge opportunity. What we need to do is build this correctly, help the industry mature, and bring the value present in traditional markets into the crypto market, so that cryptocurrency is no longer seen as some unregulated fringe thing, but rather integrated into the social framework. This is a huge opportunity that few people see.

ChainCatcher: Why is Backpack headquartered in Japan?

Armani: Japan is one of the largest markets in the world and also one of the most challenging markets to enter due to its strict compliance requirements. You cannot just serve Japanese users casually; many companies have tried, but those companies have recently been kicked out of the app store. Therefore, we believe we have the capability and technology to solve these problems and do the right thing in a way that very few crypto-native exchanges can. Japan is also a very livable place.

ChainCatcher: But it seems that Japanese people are not very enthusiastic about trading; the Japanese market may be more conservative.

Armani: Every place in the world has a different culture, but I think many people overlook that Japan was once a focal point for cryptocurrency. For example, Binance originated in Tokyo. Due to many hacking incidents involving exchanges, regulations became very strict, forcing many people to exit. But now, Japan is filled with radical policies, attitudes, and spirit regarding cryptocurrency, which is very exciting. Recently, we saw that Japan's cryptocurrency tax rate will drop from 55% to 20% or 25%. This is a huge change that will bring a lot of capital inflow into the Japanese crypto market. So, I believe the tide is changing in Japan, and the future opportunities are here.

ChainCatcher: Do you have any upgrade data you would like to share with us? For example, trading volume, user numbers, or financial data.

Armani: When we started the exchange, we did $60 billion in trading volume. We call it pre-season because the exchange was not fully built at that time; we only offered spot trading for Solana, Bitcoin, and Ethereum. At that time, especially in the Chinese-speaking market, everyone was excited to see a new exchange after the FTX incident. Since then, we have done a lot of work and are finally ready to start from several major markets and connect to the largest capital market liquidity globally. The real opportunity is that cryptocurrency is the capital market native to the global internet, not just in China, but also in Japan, the U.S., Europe, and Africa, everywhere. That is the essence of cryptocurrency; it is borderless.

March is when we truly begin. Now we have a complete beta testing plan, we have launched the new yield futures product, the margin system is also online, and all compliance infrastructure is in place. In the past two and a half weeks, just in the beta testing phase, we have completed about $2.4 billion in trading volume, and with the trading season approaching, we expect activity to grow significantly.

ChainCatcher: What is the decision-making process for Backpack to list meme coins?

Armani: There are several questions to ask yourself. The most fundamental question is: Do users want this? Users are never wrong. So there are many key performance indicators (KPIs) to refer to, but from a qualitative perspective, is there really a demand from users?

Next, there is a more important question, which is the integrity of the market. This question is much harder to solve: Is this market safe? It’s not just exciting; it’s decentralized to the extent that it won’t become a market manipulated by insiders. I think this is a huge criticism that meme coins currently face.

This is true on centralized exchanges and decentralized exchanges alike. So this is one of the most important things. Will this market become an information-asymmetric market where some parties harm others? A huge benefit of centralized exchanges is that we are a filter, which can be both good and bad. I think many people are dissatisfied with centralized exchanges now because they feel there is a lot of value extraction, whether everyone is competing for the next listing opportunity, wanting to go live on the first day and as quickly as possible, without really knowing or caring what the project is; they only see their competitors doing the same thing. So they also want to go live first. Typically, market charts will look like this: rise first, then fall. This is a very fair criticism and also a point we want to counter.

Everyone is caught in this prisoner’s dilemma, looking at their competitors and asking themselves, will they list? If they do, do I have the option not to list? I take pride in our judgment to always do the right thing, but these are also the thoughts every exchange is grappling with. This is the dilemma behind it.

ChainCatcher: Last year, Backpack just completed its Series A financing. What was the funding from the last round primarily used for?

Armani: The last round of financing was mainly used to build the team, hire personnel, ensure we could obtain the necessary licenses globally, and ultimately enter the market. This includes engineers, compliance personnel, customer support, operations, legal, etc. Building an exchange is a massive undertaking; it’s different from traditional tech companies, which only need to hire a bunch of very smart engineers and product people to get started. Our team members have very diverse skill backgrounds from different countries; we are an international team.