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Digital Currency Group: Building the Leading Financial Services Holding Company for Web 3.0

David Lawee & Chengpeng Mou
02 Nov 2021

Founded in 2015, DCG is a financial services holding company providing critical financial and infrastructure-level services to the digital asset industry. DCG owns and operates five independent businesses: Grayscale, Genesis, Foundry, Luno, and CoinDesk, in addition to its own portfolio of more than 200 investments. We are thrilled to support DCG and partner with founder and CEO Barry Silbert and his extraordinary team.

By CapitalG investors David Lawee and Chengpeng Mou

2021 has been a watershed year for crypto — so much so that it has ignited the Web 3.0 era. Built on top of the internet protocols of Web 1.0 and the advanced functionalities of Web 2.0, Web 3.0 is unleashing innovations newly unlocked by crypto- and blockchain-based technologies.

Web 3.0 is based on an open, decentralized internet owned directly by its users. It can only succeed once usage reaches a critical mass, and users are both coordinated in their efforts and incentivized to support the broader community. More than 100 million people around the world now hold some form of cryptocurrency, and all of the dominos are beginning to fall into place. For example, cryptocurrencies are becoming an asset class and a store of value. All tokens worldwide now command a combined market capitalization of over $2 trillion, enabling user behaviors and community building not previously possible. We’re also seeing significant traction in Decentralized Finance (DeFi), which already has over $100 billion in value locked, as well as Non-Fungible Tokens (NFTs), which are quickly approaching $50 billion in annual transaction volume.

We’ve reached an inflection point in the sector comparable to where we were with Web 1.0 back in 1998 — the same year that internet usage reached the 100 million threshold — except that this time the rates of adoption and innovation are happening faster and more intensely than before. We predict that there will be over 1 billion Web 3.0 users very soon — a milestone not achieved by the internet until 2005.

Despite its rapid growth, Web 3.0 is still nascent. Maturation is being facilitated by increasingly clear regulatory guidance, but token prices are volatile, market manipulations common, blockchains not fully scalable and proof-of-work protocols too energy-consumptive. We are confident these challenges will be resolved over time. It truly feels like the internet circa 1998, back when Yahoo was disrupting AOL, and Google was transitioning from a dorm room project into an early angel-backed startup. We’re in awe of the Cambrian explosion of innovations taking place across Web 3.0 in DeFi, NFT, scalability solutions and base layer protocols, but what’s most exciting is that this is only the beginning.

DCG is well-positioned to win a large share of the trillion-dollar crypto market

DCG has built an impressive collection of industry-leading businesses, the sum of which is greater than the individual parts combined. For example, Grayscale, with $55.5 billion under management, is now the world’s largest crypto asset manager and enjoys household brand recognition. Recently, Grayscale applied to convert its flagship GBTC product into an ETF, potentially bringing crypto access to millions of new investors. In the meantime, Genesis has become a leading full-service crypto prime broker. At $25 billion originations a quarter, Genesis boasts one of the industry’s largest balance sheets, providing investors a secure marketplace to trade, borrow, lend and custody digital currencies.

Some of DCG’s more recent subsidiaries have generated equally impressive track records. Coindesk is emerging as a media leader, organizing the world-renowned Consensus conference and publishing industry standard indexes. Foundry, which was started in 2019 to provide infrastructure mining and staking services, now operates the largest North American mining pool. Luno, which was acquired by DCG in 2020, is the market-leading crypto exchange for many of the world’s emerging markets and is quickly expanding into more geographies.

Collectively, these businesses are playing an important role in the industry because they’ve become the “on-ramp” to the crypto world for institutions and millions of people worldwide. And DCG isn’t only accelerating the adoption of crypto; they are accelerating the development of a more transparent and efficient financial system built on top of bitcoin and blockchain technology instead of traditional financial incumbents.

With a nearly perfect track record of building successful subsidiaries, DCG is uniquely well-positioned to leverage future growth trends within the crypto industry. And as crypto continues to grow, DCG’s businesses are poised to gain even more market share in an increasingly large pie. Given their strong market position, diversified and critical services and impressive balance sheet, DCG’s opportunities to expand into adjacent products and services seem practically limitless.

CapitalG’s Investment in DCG

We first met DCG founder and CEO Barry Silbert in 2013 at a blockchain industry conference — back when Bitcoin was trading below $200, and purchasing coins involved physically mailing checks to Japan. Even then we recognized Barry as the kind of leader the crypto sector needs — disciplined, humble and long-term oriented. In short, he is exactly the kind of leader we strive to back.

At CapitalG, we are thesis-driven, spending years researching a sector before making high conviction bets on teams we believe will come to define a sector. While we have been involved in crypto as individuals since 2013, CapitalG started tracking it as an institution in 2017. Now that crypto has reached its inflection point, we’re excited to lean heavily into the sector, and we’re thrilled that DCG is CapitalG’s first investment in the space.

We believe that DCG will be among crypto’s few truly industry-defining leaders. We are excited to invest in them and to partner with them on their important journey to transform crypto into the major global asset class it’s destined to be.

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