CoinFund's David Pakman on stablecoins, crypto regulation and token exits

Clarity on stablecoin regulation could unlock the tokens' adoption by banks and give the crypto industry a workable path to compliance.

The big picture: CoinFund managing partner David Pakman spoke with Axios about the current policy environment, the long-term implications of stablecoin legislation, and how token generation events could create a liquidity path for venture-backed companies.

(This interview has been edited for length and clarity.)

Q: Are we in a crypto recovery, or is this just speculative hype again?

• "We need to be right four to six years from now. So, the price of Bitcoin today is not relevant. But it's relevant over a long period of time.
• Instead, I look at different metrics to know, 'How well are we doing here? Is there a bright future?'
• The most obvious one is stablecoins. We're at $230 billion of stablecoins in about three or four years. And I think we can go 5x that this year if we get a stablecoin bill passed."

How has the regulatory shift under Trump affected the crypto industry so far?

• "[Under the past administration], a significant number of founders we know moved away. They did not want to be sued for writing software. They wanted to be compliant. They tried to follow laws. There just were no laws to follow.
• They had the fear [that] if you launch a token, you might get a Wells notice. So, they moved to jurisdictions where that risk was not present.
• The feeling is [now] you're unlikely — if you're doing your very best, you've hired the best representation and legal minds — now you can at least follow that advice and not worry about the SEC knocking on your door. That's allowed founders to come back."

What kind of regulatory clarity are you hoping for?

• "What will matter is: Do we get a stablecoin bill passed into law? Do we get a market structure bill passed into law?
• Does the SEC clarify what is a security and what is not? Does the CFTC have oversight over things that are not securities, and what's their view on what you can do with them?
• If those questions are answered, you don't have [regulators] standing in your way. You have the market deciding whether they want to buy it or not."

What does a stablecoin bill actually enable?

• "If the stablecoin bill passes, I think you will see the modern payment companies — like Square and PayPal — adopt stablecoins very quickly as a mechanism for denominating what's in your account.
• You'll see traditional banks — many of them — do this very quickly, too. They won't necessarily tokenize all your accounts, but they will offer a peer-to-peer form of payment that is effectively over crypto rails.
• We've heard this from them. Some have told us within three weeks of a stablecoin bill being passed, [they] can launch that product."

Beyond stablecoins, what else are you expecting?

• "I think that puts millions more people on-chain ... with digital assets on-chain.
• Add to that continued ETF adoption, and people will appreciate that digital assets are good investment opportunities. You could lose money on them, but they can also be very productive.
• That leads to more DeFi — what we call DeFi 3.0 — lending them out, borrowing them, staking them, restaking them, providing them as liquidity pools."

Stablecoins are an obvious use case, but what else could crypto be good for?

• "I saw a stat ... If you look at all the private unicorns today, it would take 47 years for them all to IPO at the rate of 183 IPOs a year. That's not happening.
• "We have [another] way. We have token-based businesses that can have a TGE — a token generation event — and list on global exchanges and trade to get liquidity for their shareholders and employees.
• The rest of the venture would love to have that. Right now, most traditional VC funds are stuck waiting for an IPO or M&A. But if we get clear U.S. rules around token issuance, custody, and secondary trading, these token-based models will become a standard path to liquidity.
• That could be a catalyst for more crossover between the crypto-native and traditional tech investing worlds.

Doesn't that raise the risk of another FTX?

• "What I worry about in a regime of very little or no enforcement is we can go back to this period of headline risk — of bad actors. So we want enforcement of laws. We want the bad actors to be cleaned up quickly and the good actors to prosper.
• In the last regime, everyone was a bad actor through the lens of the SEC — even though I think we all know there were so many who were not.
• So, the risk now, if you go too far the other way, is that we don't get enough oversight and end up with more FTXs. Hopefully, that doesn't happen. Hopefully, the good examples outweigh the bad.
• But that's a yellow light we need to be careful of. What you want is clarity, not chaos."