1 00:00:10,039 --> 00:00:14,080 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,200 --> 00:00:18,480 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, obviously 3 00:00:18,720 --> 00:00:21,239 Speaker 1: a lot going on in crypto, but I would say 4 00:00:21,440 --> 00:00:24,720 Speaker 1: the two big things are, like, I guess the crypto winter, 5 00:00:24,880 --> 00:00:28,480 Speaker 1: there's been some recovery, but obviously all the coin prices 6 00:00:28,480 --> 00:00:31,160 Speaker 1: are way lower than they used to be. And then 7 00:00:31,200 --> 00:00:34,120 Speaker 1: there's just everything going on on the regulatory side. Yeah, 8 00:00:34,159 --> 00:00:36,559 Speaker 1: it's sort of a double whammy for the industry. And 9 00:00:36,640 --> 00:00:40,680 Speaker 1: I guess it's hard. It's hard to determine causality when 10 00:00:40,680 --> 00:00:43,760 Speaker 1: it comes to price and extra regulation coming in. But yeah, 11 00:00:43,840 --> 00:00:46,680 Speaker 1: it is not a great time for crypto. Well, I 12 00:00:46,760 --> 00:00:52,560 Speaker 1: would say that the historical patterns would suggest the regulators 13 00:00:52,600 --> 00:00:55,240 Speaker 1: like to come in after people have lost money. After 14 00:00:55,240 --> 00:00:57,800 Speaker 1: people have lost money and scams, their investments go down. 15 00:00:58,200 --> 00:01:00,200 Speaker 1: So it kind of makes sense that you see the 16 00:01:00,320 --> 00:01:04,080 Speaker 1: uptick in regulation right after, just like the lines have 17 00:01:04,120 --> 00:01:05,920 Speaker 1: been going down for a while, right, But it does 18 00:01:06,040 --> 00:01:09,000 Speaker 1: prompt these big questions about should the regulators have been 19 00:01:09,040 --> 00:01:12,399 Speaker 1: more proactive, should they have been doing things before people 20 00:01:12,520 --> 00:01:15,160 Speaker 1: lost money? And then what should they do now? Anyway, 21 00:01:15,720 --> 00:01:19,479 Speaker 1: we have the perfect guest to talk about this because 22 00:01:19,480 --> 00:01:22,560 Speaker 1: we are going to be speaking with Brian Armstrong, CEO 23 00:01:22,640 --> 00:01:26,080 Speaker 1: and co founder of coin Base right in the middle 24 00:01:26,080 --> 00:01:30,440 Speaker 1: of all this, the pre eminent American crypto exchange. So, Brian, 25 00:01:30,520 --> 00:01:32,800 Speaker 1: thank you so much for coming on odd Lots. Yeah, 26 00:01:32,800 --> 00:01:34,840 Speaker 1: thanks for having me. I want to ask you a question. 27 00:01:34,880 --> 00:01:38,600 Speaker 1: We've actually asked other executives in the crypto space this 28 00:01:38,680 --> 00:01:41,000 Speaker 1: question before, but I'd love to get your take on it. 29 00:01:41,959 --> 00:01:44,920 Speaker 1: What is yield farming and where does the return of 30 00:01:44,920 --> 00:01:48,360 Speaker 1: it come from? Well, I mean, yield farming has a 31 00:01:48,360 --> 00:01:50,960 Speaker 1: little bit of a bad name, I think in this environment. 32 00:01:51,680 --> 00:01:55,040 Speaker 1: There was obviously with the collapse of Tera, Luna and 33 00:01:55,440 --> 00:01:57,800 Speaker 1: block Fi and some other firms like that. I think 34 00:01:58,520 --> 00:02:01,040 Speaker 1: that's a very valid question to be asking, and I'm 35 00:02:01,080 --> 00:02:03,280 Speaker 1: not sure I couldn't even answer it on their behalf. 36 00:02:04,320 --> 00:02:06,640 Speaker 1: But you know, I think there's a lot of other 37 00:02:06,640 --> 00:02:09,120 Speaker 1: pieces of crypto that people are still excited about, and 38 00:02:10,000 --> 00:02:11,720 Speaker 1: you know, there's lots of things we can build beyond that. 39 00:02:12,520 --> 00:02:14,360 Speaker 1: So one of the things we've talked about on the 40 00:02:14,360 --> 00:02:16,600 Speaker 1: show quite a bit is this idea of crypto as 41 00:02:16,680 --> 00:02:20,280 Speaker 1: kind of the ultimate momentum asset and when money is 42 00:02:20,360 --> 00:02:23,519 Speaker 1: flowing in prices go up and everything is great. When 43 00:02:23,560 --> 00:02:27,480 Speaker 1: money flows out, prices collapse quite quickly, which would seem 44 00:02:27,560 --> 00:02:31,919 Speaker 1: to make the business of being a crypto exchange extremely cyclical. 45 00:02:32,360 --> 00:02:34,480 Speaker 1: But one of the things that stood out from your 46 00:02:34,520 --> 00:02:38,680 Speaker 1: most recent results you just reported relatively recently, you talked 47 00:02:38,680 --> 00:02:41,639 Speaker 1: about how you want to be profitable through the cycle, 48 00:02:41,800 --> 00:02:44,440 Speaker 1: through the upturns and the downturns. Can you talk a 49 00:02:44,440 --> 00:02:48,000 Speaker 1: little bit more about how you plan on doing that. Yeah, Well, 50 00:02:48,040 --> 00:02:50,320 Speaker 1: historically most of our revenue has been from trading fees, 51 00:02:50,360 --> 00:02:53,639 Speaker 1: which you're absolutely right, it is cyclical, and crypto has 52 00:02:53,680 --> 00:02:58,000 Speaker 1: been a fairly volatile asset class goes up and down. Now, 53 00:02:58,160 --> 00:02:59,760 Speaker 1: what we've done is we've started shifting more and more 54 00:02:59,760 --> 00:03:02,240 Speaker 1: of our revenue to what we call subscription and services 55 00:03:02,440 --> 00:03:06,120 Speaker 1: in our financials and our earnings calls. And basically what 56 00:03:06,160 --> 00:03:08,640 Speaker 1: that means is things like usd coin, a stable coin 57 00:03:09,120 --> 00:03:11,560 Speaker 1: that's been a nice growth mechanism for us, even in 58 00:03:11,639 --> 00:03:16,440 Speaker 1: a down crypto market. Things like custody fees, fees that 59 00:03:16,480 --> 00:03:18,600 Speaker 1: we earn on coin base card. People are you know, 60 00:03:18,720 --> 00:03:22,320 Speaker 1: using it for spending in merchant commerce activity, So these 61 00:03:22,320 --> 00:03:25,120 Speaker 1: things are I wouldn't say there's zero percent correlated with 62 00:03:25,320 --> 00:03:27,560 Speaker 1: overall market in crypto, but there are certainly a lot 63 00:03:27,600 --> 00:03:29,720 Speaker 1: less than trading fees, and that's allowing us to build 64 00:03:29,760 --> 00:03:33,079 Speaker 1: a more predictable business. So we started in the industry 65 00:03:33,160 --> 00:03:36,000 Speaker 1: also talk about the regulatory side, and that one whom 66 00:03:36,240 --> 00:03:38,800 Speaker 1: you know will definitely talk a lot about that. But 67 00:03:38,920 --> 00:03:41,800 Speaker 1: in particular, I think yesterday I saw that coin base 68 00:03:42,360 --> 00:03:44,680 Speaker 1: you had some new program I think it was called 69 00:03:44,720 --> 00:03:48,960 Speaker 1: the four thirty five program about you know, call your congressman, 70 00:03:49,080 --> 00:03:52,040 Speaker 1: like let people know that you care about crypto policy. 71 00:03:52,200 --> 00:03:54,920 Speaker 1: And of course like Uber sort of famously started the 72 00:03:55,000 --> 00:03:57,800 Speaker 1: strategy like telling people on the app, like tell your 73 00:03:57,840 --> 00:04:01,119 Speaker 1: local regulators you want to drive an Uber. And I'm 74 00:04:01,160 --> 00:04:02,760 Speaker 1: going to try to ask this in the most like 75 00:04:02,760 --> 00:04:05,920 Speaker 1: diplomatic way possible. And I have many friends who are 76 00:04:05,960 --> 00:04:09,400 Speaker 1: into crypto, and I like many of them. But when 77 00:04:09,400 --> 00:04:12,080 Speaker 1: it comes to crypto, do you want the type the 78 00:04:12,200 --> 00:04:15,640 Speaker 1: type of person who would call their congressmen to tell 79 00:04:15,720 --> 00:04:19,599 Speaker 1: them to do better crypto policy? Is that really the 80 00:04:19,640 --> 00:04:22,279 Speaker 1: type of person that you want sort of being the 81 00:04:22,400 --> 00:04:26,720 Speaker 1: voice of cryptoregulation. Well, I think the average person in crypto, 82 00:04:26,760 --> 00:04:28,080 Speaker 1: and by the way, there's a lot of them, you know, 83 00:04:28,240 --> 00:04:30,960 Speaker 1: one true one in five households now have used crypto, 84 00:04:31,040 --> 00:04:33,600 Speaker 1: about fifty million Americans. This is a this is becoming 85 00:04:33,600 --> 00:04:36,560 Speaker 1: a major constituent of you know, lobbying group and everything 86 00:04:36,560 --> 00:04:39,960 Speaker 1: that's gonna have shape future elections. They want to you know, 87 00:04:40,000 --> 00:04:42,840 Speaker 1: these average people. They may not have the exact solution 88 00:04:42,920 --> 00:04:45,600 Speaker 1: for what the legislation should say around regulation of crypto, 89 00:04:45,680 --> 00:04:49,000 Speaker 1: but they do know that they want elected representatives who 90 00:04:49,040 --> 00:04:51,599 Speaker 1: are going to ensure that this industry comes within the 91 00:04:51,600 --> 00:04:55,320 Speaker 1: regulatory perimeter, offers consumer protection, but also you know, allows 92 00:04:55,320 --> 00:04:57,360 Speaker 1: this innovation to flourish so that it can we can 93 00:04:57,440 --> 00:04:59,840 Speaker 1: update the financial system. You know, eighty percent of a 94 00:05:00,000 --> 00:05:04,160 Speaker 1: Americans now believe that the financial system doesn't work for them. 95 00:05:04,240 --> 00:05:07,440 Speaker 1: It's either too slow, it has too higher fees, it 96 00:05:07,720 --> 00:05:10,080 Speaker 1: doesn't you know, nobody has equal access or not. Everyone 97 00:05:10,080 --> 00:05:12,640 Speaker 1: has equal access to it. And it's not surprising that's 98 00:05:12,640 --> 00:05:14,920 Speaker 1: the case. I mean, the technology behind the financial system 99 00:05:14,960 --> 00:05:17,919 Speaker 1: is sometimes forty years old. It's written in cobalt, and 100 00:05:18,080 --> 00:05:21,039 Speaker 1: these mainframe computers and the laws for it are sometimes 101 00:05:21,080 --> 00:05:23,280 Speaker 1: one hundred years old. They were created before the Internet 102 00:05:23,320 --> 00:05:26,640 Speaker 1: even existed, right, so it's time to update the financial system. 103 00:05:26,720 --> 00:05:28,880 Speaker 1: We I think the average voter in America is now 104 00:05:28,920 --> 00:05:31,680 Speaker 1: realizing that crypto is one of the great technologies that 105 00:05:31,720 --> 00:05:34,200 Speaker 1: can help me update that and they want their elected 106 00:05:34,400 --> 00:05:38,120 Speaker 1: representatives to bring that legislation and clarity to the US. 107 00:05:38,720 --> 00:05:40,520 Speaker 1: Just on the political side. I mean, Joe and I 108 00:05:40,600 --> 00:05:42,799 Speaker 1: kind of alluded to this in the intro, this idea 109 00:05:42,920 --> 00:05:45,360 Speaker 1: that now that we have losses and we have big 110 00:05:45,400 --> 00:05:49,080 Speaker 1: scandals in the industry, regulators seem to be becoming more 111 00:05:49,200 --> 00:05:51,680 Speaker 1: active in the space. Can you talk to us a 112 00:05:51,720 --> 00:05:54,800 Speaker 1: little bit about from your perspective, what is it like 113 00:05:55,000 --> 00:05:59,039 Speaker 1: dealing with Washington now versus say, in twenty twenty or 114 00:05:59,040 --> 00:06:02,520 Speaker 1: twenty twenty one. Yeah, well, I would say compared to 115 00:06:02,839 --> 00:06:06,040 Speaker 1: twenty twenty, many more people that I meet with in 116 00:06:06,080 --> 00:06:10,240 Speaker 1: Washington are actually pretty knowledgeable about crypto now. It's no 117 00:06:10,240 --> 00:06:12,600 Speaker 1: longer a niche thing. Some of the conversations I had 118 00:06:12,600 --> 00:06:15,720 Speaker 1: five years ago, you know, they were very basic. But 119 00:06:15,800 --> 00:06:17,920 Speaker 1: most people that I speak with now actually have a 120 00:06:17,960 --> 00:06:23,200 Speaker 1: reasonable understanding of crypto. They there. I think there's two camps. 121 00:06:23,279 --> 00:06:25,480 Speaker 1: One camp is saying, hey, in the wake of FTX, 122 00:06:25,880 --> 00:06:28,600 Speaker 1: I'm afraid of being associated with crypto, and I'm just 123 00:06:28,680 --> 00:06:30,600 Speaker 1: going to kind of wait and see what happens because 124 00:06:30,600 --> 00:06:33,520 Speaker 1: it's too dicey to even go near it. The other 125 00:06:33,600 --> 00:06:35,800 Speaker 1: half of the folks I speak with are saying, you 126 00:06:35,800 --> 00:06:38,520 Speaker 1: know what, this is an opportunity. I'm actually I want 127 00:06:38,520 --> 00:06:40,520 Speaker 1: to be one of the people who helps bring this 128 00:06:40,560 --> 00:06:42,680 Speaker 1: within the regulatory perimeter. And and we can see how 129 00:06:42,720 --> 00:06:45,520 Speaker 1: important that is now with the collapse of FTX, and 130 00:06:45,560 --> 00:06:50,120 Speaker 1: so they're actually drafting legislation, they're trying to gather bipartisan 131 00:06:50,160 --> 00:06:53,400 Speaker 1: support to get some clarity going. And you know, I'm 132 00:06:53,400 --> 00:06:55,840 Speaker 1: personally much more in favor of that ladder group. So 133 00:06:55,960 --> 00:06:57,440 Speaker 1: actually I want to ask you, you know you talk 134 00:06:57,480 --> 00:06:59,800 Speaker 1: about this impulse is like okay, in the wake of 135 00:07:00,560 --> 00:07:03,680 Speaker 1: bring it inside the regulatory perimeter, And part of my 136 00:07:03,800 --> 00:07:07,120 Speaker 1: question is like why because I look at FTX collapse 137 00:07:07,160 --> 00:07:09,560 Speaker 1: and one of the biggest like sort of like crucial 138 00:07:09,560 --> 00:07:13,200 Speaker 1: exchanges in the industry, and nothing bad happened after that. 139 00:07:13,240 --> 00:07:16,560 Speaker 1: There was no fallout or no bailouts, It didn't have 140 00:07:16,600 --> 00:07:19,200 Speaker 1: any spillover. So part of my thing is like, I 141 00:07:19,240 --> 00:07:21,440 Speaker 1: don't want this in any perimeter because that seems to 142 00:07:21,440 --> 00:07:24,000 Speaker 1: work pretty well in terms of the lessons of two 143 00:07:24,040 --> 00:07:27,360 Speaker 1: thousand and eight avoiding too big to fail. What about 144 00:07:27,400 --> 00:07:30,080 Speaker 1: the argument that it's like from a sort of like 145 00:07:30,320 --> 00:07:35,560 Speaker 1: structural like yeah, like financial contagion standpoint, regulators have done 146 00:07:35,560 --> 00:07:40,120 Speaker 1: a pretty good, pretty good job not letting this volatile product, 147 00:07:40,160 --> 00:07:43,960 Speaker 1: this volatile industry create problems for the financial system. Let 148 00:07:43,960 --> 00:07:48,720 Speaker 1: it burns strategy. Yeah, well, you know, I would disagree 149 00:07:48,760 --> 00:07:50,480 Speaker 1: with the idea that nothing bad happened. I mean, a 150 00:07:50,520 --> 00:07:54,200 Speaker 1: lot of people lost money, that's absolutely And I'm glad 151 00:07:54,200 --> 00:07:55,920 Speaker 1: you say that because I did not. You're right, people 152 00:07:55,960 --> 00:07:59,880 Speaker 1: lost their like, yes, yeah, so there was certainly some 153 00:08:00,520 --> 00:08:03,120 Speaker 1: activity there, and I think that's the kind of consumer 154 00:08:03,160 --> 00:08:04,840 Speaker 1: protection we're talking about. I don't I don't think there 155 00:08:04,840 --> 00:08:08,040 Speaker 1: should have been bailouts or anything like that. Nothing in 156 00:08:08,120 --> 00:08:09,720 Speaker 1: crypto is too big to fail. And it's kind of 157 00:08:09,800 --> 00:08:12,680 Speaker 1: antithetical to crypto frankly, to you know, have a bailout 158 00:08:12,720 --> 00:08:15,000 Speaker 1: or something like that. If you the first bitcoin block 159 00:08:15,080 --> 00:08:18,280 Speaker 1: that was mind right had a message in it about that, 160 00:08:18,440 --> 00:08:21,000 Speaker 1: you know, Chancellor on the braink of bailout. So crypto 161 00:08:21,080 --> 00:08:23,160 Speaker 1: was kind of founded almost a bitcoin was founded as 162 00:08:23,200 --> 00:08:25,640 Speaker 1: a result of reaction to the two thousand and eight 163 00:08:25,640 --> 00:08:28,440 Speaker 1: financial crisis. But I think those two ideas can come 164 00:08:28,440 --> 00:08:30,960 Speaker 1: into unity. I mean, we can have and again I'm 165 00:08:30,960 --> 00:08:33,520 Speaker 1: talking about for the centralized actors in crypto, you know, 166 00:08:33,520 --> 00:08:36,720 Speaker 1: the custodian's exchanges, companies like coin base. It's pretty clear 167 00:08:36,720 --> 00:08:39,520 Speaker 1: everybody generally, there's broad consensus those should be regulated. It 168 00:08:39,520 --> 00:08:41,600 Speaker 1: applies some of the best practices and standards, so we 169 00:08:41,600 --> 00:08:44,280 Speaker 1: don't have fraud and corruption and things, you know, wash 170 00:08:44,360 --> 00:08:48,160 Speaker 1: trading or email issues. But the decentralized pieces of crypto 171 00:08:48,240 --> 00:08:51,760 Speaker 1: that's different. I mean, we need to have decentralized protocols 172 00:08:51,760 --> 00:08:53,840 Speaker 1: so that we can have a global, more global and 173 00:08:53,840 --> 00:08:56,520 Speaker 1: fair and free financial system, and that piece. You know, 174 00:08:56,640 --> 00:08:58,240 Speaker 1: I don't think those are going to be regulated because 175 00:08:58,240 --> 00:09:00,800 Speaker 1: there is no central authority for bitcoin or them. For instance, 176 00:09:01,240 --> 00:09:04,760 Speaker 1: what should consumer protections look like in crypto? In your opinion, 177 00:09:04,840 --> 00:09:06,960 Speaker 1: and especially you know, when I think of something like 178 00:09:07,440 --> 00:09:10,560 Speaker 1: doge coin, you know, it's hard for me to come 179 00:09:10,640 --> 00:09:13,959 Speaker 1: up with an economical use case for it, and so 180 00:09:14,040 --> 00:09:16,360 Speaker 1: it's like, well, you can put all the disclosures that 181 00:09:16,360 --> 00:09:18,520 Speaker 1: you want on there, but it seems highly likely that 182 00:09:18,559 --> 00:09:21,320 Speaker 1: people will be losing money on that product at some 183 00:09:21,400 --> 00:09:24,720 Speaker 1: point in time. Yeah, So again I would say, you know, 184 00:09:24,760 --> 00:09:26,920 Speaker 1: the regulation and the customer protection probably should happen with 185 00:09:27,000 --> 00:09:30,640 Speaker 1: the centralized actors, the custodian, the exchange, not necessarily dodge coin, 186 00:09:30,640 --> 00:09:34,240 Speaker 1: which would be another decentralized coin, right, But yeah, I 187 00:09:34,280 --> 00:09:36,920 Speaker 1: mean I think the exchanges and the firms that are 188 00:09:36,920 --> 00:09:40,320 Speaker 1: being built around you know, custody or trading of things 189 00:09:40,360 --> 00:09:42,600 Speaker 1: like that, they are going to have to have, um, 190 00:09:42,760 --> 00:09:45,640 Speaker 1: some of these best practices from the traditional financial services world. 191 00:09:45,640 --> 00:09:48,679 Speaker 1: So you know, let's have audited financials, let's make make 192 00:09:48,679 --> 00:09:52,840 Speaker 1: sure customer funds are segregated from corporate funds, um, let's 193 00:09:52,840 --> 00:09:57,200 Speaker 1: make sure that there's MLKYC programs and avoid avoiding wash trading, 194 00:09:57,200 --> 00:10:00,960 Speaker 1: and yeah, appropriate disclosures are important as well. So those 195 00:10:00,960 --> 00:10:02,920 Speaker 1: are all just kind of good general best best practices. 196 00:10:02,920 --> 00:10:05,400 Speaker 1: But again it's focused on the centralized players as opposed 197 00:10:05,440 --> 00:10:09,600 Speaker 1: to the decentralized pieces. It's interesting you make this distinction 198 00:10:09,640 --> 00:10:13,160 Speaker 1: obviously between you know, there's sort of centralized players and 199 00:10:13,200 --> 00:10:16,480 Speaker 1: then decentralized DeFi stuff. You're kind of becoming a hybrid, 200 00:10:16,520 --> 00:10:19,920 Speaker 1: and you recently launched a layer to roll up to 201 00:10:20,080 --> 00:10:25,440 Speaker 1: help scale ethereum. And I'm curious, as a regulated entity 202 00:10:25,520 --> 00:10:27,640 Speaker 1: and one that has to abide by like finsend and 203 00:10:27,720 --> 00:10:32,280 Speaker 1: anti money laundering laws, can you explain if the tension 204 00:10:32,559 --> 00:10:35,680 Speaker 1: or is there any tension between I believe these sort 205 00:10:35,720 --> 00:10:37,800 Speaker 1: of like a you know, roll up layer twos have 206 00:10:37,920 --> 00:10:42,040 Speaker 1: some sort of centralized sequencer so that the transactions made 207 00:10:42,040 --> 00:10:44,840 Speaker 1: out of them then get back to the main ethereum chain. 208 00:10:45,280 --> 00:10:47,960 Speaker 1: Are you responsible for that and do you hate? How 209 00:10:47,960 --> 00:10:51,440 Speaker 1: do you deal with that as an regulated entity? What 210 00:10:51,559 --> 00:10:55,120 Speaker 1: if someone wanted to or try to launder money through 211 00:10:55,240 --> 00:10:59,520 Speaker 1: this layer two are you facilitating that by putting those 212 00:10:59,559 --> 00:11:04,000 Speaker 1: transactions onto the main ethereum chain. Yeah, so earlier, you know, 213 00:11:04,000 --> 00:11:06,160 Speaker 1: I mentioned that the centralized players like coin base should 214 00:11:06,160 --> 00:11:08,280 Speaker 1: be regulated and I and I was really referring to like, 215 00:11:08,400 --> 00:11:10,760 Speaker 1: you know, our primary revenue stream today csodia in exchange. 216 00:11:10,760 --> 00:11:13,439 Speaker 1: But you're absolutely right. We are embracing decentralization. At coin Base. 217 00:11:13,520 --> 00:11:16,000 Speaker 1: We have a number of different products and legal entities 218 00:11:16,000 --> 00:11:18,240 Speaker 1: and different ones working in various areas. So we did 219 00:11:18,360 --> 00:11:20,720 Speaker 1: launch this really exciting thing, a layer two solution called 220 00:11:20,720 --> 00:11:23,040 Speaker 1: Base and our goal with that is really to help 221 00:11:23,720 --> 00:11:28,319 Speaker 1: provide more scalability and better usability for layer two solutions. 222 00:11:28,360 --> 00:11:30,600 Speaker 1: So we want to get transactions and ethereum down to 223 00:11:30,760 --> 00:11:33,600 Speaker 1: you a penny or less and help that scale to 224 00:11:33,800 --> 00:11:37,080 Speaker 1: hopefully a billion or more people someday. I think I 225 00:11:37,080 --> 00:11:39,480 Speaker 1: guess the core of your question was really around the 226 00:11:39,559 --> 00:11:43,040 Speaker 1: responsibility from a centralized decentralized pease and I think, you know, 227 00:11:43,640 --> 00:11:46,960 Speaker 1: so base is it has some centralized components today, but 228 00:11:46,960 --> 00:11:48,880 Speaker 1: it's it's going to be more and more decentralized over 229 00:11:48,920 --> 00:11:52,240 Speaker 1: time as as it grows, and so you know, I 230 00:11:52,240 --> 00:11:54,640 Speaker 1: think we have responsibility in terms of you know, transaction 231 00:11:54,679 --> 00:11:56,600 Speaker 1: monitoring things like that that we have to look at 232 00:11:56,640 --> 00:11:59,520 Speaker 1: in the early days, but as it decentralizes, I think 233 00:11:59,559 --> 00:12:02,080 Speaker 1: that again, the centralized actors are the ones that are 234 00:12:02,080 --> 00:12:04,559 Speaker 1: probably going to have the most responsibility there to avoid 235 00:12:04,960 --> 00:12:09,240 Speaker 1: money laundering issues and having transaction monitoring programs things like that. 236 00:12:26,400 --> 00:12:30,760 Speaker 1: So speaking of responsibility, Um, you know, there are thousands 237 00:12:30,880 --> 00:12:34,679 Speaker 1: I think of coins and tokens listed on coin base now, 238 00:12:36,360 --> 00:12:40,000 Speaker 1: dred Okay, I didn't flip through all the pages, but 239 00:12:40,120 --> 00:12:43,480 Speaker 1: there's a lot um And you guys say that you 240 00:12:43,600 --> 00:12:48,120 Speaker 1: never actually list securities, but it feels like nowadays there's 241 00:12:48,160 --> 00:12:52,240 Speaker 1: so much uncertainty over you know, you could wake up 242 00:12:52,280 --> 00:12:54,720 Speaker 1: tomorrow and the SEC says this is a security or 243 00:12:54,760 --> 00:12:57,680 Speaker 1: that's a security. I mean just a little while ago, 244 00:12:57,880 --> 00:12:59,839 Speaker 1: for instance, they were um, I think there was an 245 00:12:59,840 --> 00:13:05,240 Speaker 1: inforcement action on Kim Kardashian for unlawfully touting a crypto security. 246 00:13:05,800 --> 00:13:09,600 Speaker 1: So how can you say with confidence that you don't 247 00:13:09,679 --> 00:13:13,640 Speaker 1: list any securities when it feels like that's a very 248 00:13:13,679 --> 00:13:17,760 Speaker 1: fluid thing at the moment. Yeah, So I think, look, 249 00:13:17,760 --> 00:13:19,840 Speaker 1: the best thing for us and for the whole industry 250 00:13:19,880 --> 00:13:23,079 Speaker 1: would be, here's a clear rule book. Everybody has to 251 00:13:23,120 --> 00:13:24,960 Speaker 1: follow it, you know, and if the rules change, give 252 00:13:25,000 --> 00:13:27,680 Speaker 1: us a new rulebook, we'll follow that one. Right. We've 253 00:13:27,679 --> 00:13:30,480 Speaker 1: actually been requesting that, and we've we've filed a petition 254 00:13:30,520 --> 00:13:32,280 Speaker 1: with the SEC on this. People can read it on 255 00:13:32,280 --> 00:13:35,280 Speaker 1: their website, and we sort of enumerated, Look, these are 256 00:13:35,320 --> 00:13:38,120 Speaker 1: the ways that the current securities laws don't really address 257 00:13:38,160 --> 00:13:41,760 Speaker 1: some of these underlying questions in crypto, like if there 258 00:13:41,840 --> 00:13:44,240 Speaker 1: is no common enterprise or centralized entity behind this thing, 259 00:13:44,280 --> 00:13:47,800 Speaker 1: who who publishes the disclosures? You know, So there's there's 260 00:13:47,840 --> 00:13:51,200 Speaker 1: questions like that. Now, what we've done in the absence 261 00:13:51,200 --> 00:13:53,600 Speaker 1: of that clarity, which again would be the best case scenario, 262 00:13:54,360 --> 00:13:57,400 Speaker 1: is that we have created our own internal process to 263 00:13:57,480 --> 00:14:01,520 Speaker 1: review assets, and we developed something I think it has 264 00:14:01,559 --> 00:14:04,360 Speaker 1: like seventy seventy two points in the legal analysis and 265 00:14:04,520 --> 00:14:06,720 Speaker 1: kind of one area it looks at is securities law. 266 00:14:07,160 --> 00:14:09,880 Speaker 1: It also looks at compliance risk, you know, cybersecurity risk, 267 00:14:09,920 --> 00:14:12,640 Speaker 1: things like that. And we've evaluated probably roughly a thousand 268 00:14:12,679 --> 00:14:16,320 Speaker 1: assets through this process, about eight hundred of them we 269 00:14:16,360 --> 00:14:19,760 Speaker 1: have rejected and for various reasons, whether securities or compliance 270 00:14:19,880 --> 00:14:22,440 Speaker 1: or cyber about you know, two hundred two and fifty 271 00:14:22,520 --> 00:14:25,680 Speaker 1: or something like that, we've decided to list. So, you know, 272 00:14:25,840 --> 00:14:28,120 Speaker 1: I guess the heart of your question is what happens 273 00:14:28,120 --> 00:14:31,120 Speaker 1: if the sec comes out and says okay. So if 274 00:14:31,160 --> 00:14:33,400 Speaker 1: they come out and they and they again we're asking, 275 00:14:33,400 --> 00:14:35,640 Speaker 1: we're asking for more clear rules. Right, So if they 276 00:14:35,640 --> 00:14:38,960 Speaker 1: come out and say, you know, we think this asset 277 00:14:39,040 --> 00:14:41,360 Speaker 1: is a security, that's great. Okay, now we have clarity 278 00:14:41,400 --> 00:14:44,240 Speaker 1: and assuming you know, it's not, if it meets the 279 00:14:44,320 --> 00:14:47,000 Speaker 1: legal definition, it's not going too far. We would be 280 00:14:47,000 --> 00:14:49,240 Speaker 1: happy to sort of update our process in our system 281 00:14:49,240 --> 00:14:53,560 Speaker 1: based on that that new information. Now, ultimately, if they 282 00:14:53,560 --> 00:14:55,240 Speaker 1: publish something and they say, well, we think all these 283 00:14:55,240 --> 00:14:59,360 Speaker 1: assets are securities, well that's not really our understanding of 284 00:14:59,360 --> 00:15:01,560 Speaker 1: the law. And the third party is an external council 285 00:15:01,640 --> 00:15:03,720 Speaker 1: we've worked with, and so there is a line here 286 00:15:03,760 --> 00:15:05,760 Speaker 1: where I think as an industry, and it's not just us, 287 00:15:05,760 --> 00:15:08,480 Speaker 1: it's these asset issuers which are even more primarily affected. 288 00:15:08,920 --> 00:15:10,960 Speaker 1: You know, they would have to say, okay, well, let's 289 00:15:11,000 --> 00:15:13,360 Speaker 1: let a court decide that, because you know, we have 290 00:15:13,360 --> 00:15:15,440 Speaker 1: to follow a rule of law. So does the sec right. 291 00:15:15,480 --> 00:15:18,680 Speaker 1: And so if they put out, you know, their opinion 292 00:15:18,680 --> 00:15:20,880 Speaker 1: about something, that doesn't necessarily mean it's true. It just 293 00:15:20,960 --> 00:15:23,400 Speaker 1: means the court ultimately has to be the decider on that. 294 00:15:23,720 --> 00:15:27,480 Speaker 1: Can you give an example not necessarily of a specific coin, 295 00:15:27,920 --> 00:15:31,520 Speaker 1: but of something that you have seen in tokens that 296 00:15:31,560 --> 00:15:35,920 Speaker 1: you've rejected that to your mind said no, we cannot 297 00:15:35,920 --> 00:15:40,200 Speaker 1: list this because this is a characteristic of a security. Yeah, 298 00:15:40,240 --> 00:15:44,720 Speaker 1: I mean, there's so there's a variety of I mean, 299 00:15:44,760 --> 00:15:46,960 Speaker 1: there's many prongs of the Howie test, right, I mean, 300 00:15:47,320 --> 00:15:48,520 Speaker 1: and I don't want to get into like an in 301 00:15:48,600 --> 00:15:51,240 Speaker 1: depth legal analysis here, but you know we've never done 302 00:15:51,240 --> 00:15:54,320 Speaker 1: a Howie Test episode, and so this could be it, 303 00:15:54,400 --> 00:15:58,720 Speaker 1: but no, go ahead. Yeah, So you know there's multiple 304 00:15:58,720 --> 00:16:00,800 Speaker 1: prongs there, right. I think you know, if if people 305 00:16:00,800 --> 00:16:03,360 Speaker 1: are buying it primarily with this expectation of profit, and 306 00:16:03,840 --> 00:16:07,000 Speaker 1: it's there's you know, there's a common enterprise and and 307 00:16:07,000 --> 00:16:09,600 Speaker 1: and right. So, but if there's something in the like 308 00:16:10,440 --> 00:16:13,960 Speaker 1: speaking in terms of patterns that you see within crypto 309 00:16:14,080 --> 00:16:17,400 Speaker 1: projects that when you look at it's like, no, this team, 310 00:16:17,440 --> 00:16:20,760 Speaker 1: like the type of things the teams do that would say, 311 00:16:20,760 --> 00:16:22,320 Speaker 1: you know what, this token is not going to be 312 00:16:22,440 --> 00:16:25,040 Speaker 1: kosher from coin base. Are there things that you see 313 00:16:25,040 --> 00:16:27,880 Speaker 1: in the industry where you think teams are crossing that 314 00:16:27,960 --> 00:16:30,360 Speaker 1: line into I don't know whether it's the common enterprise 315 00:16:30,440 --> 00:16:35,800 Speaker 1: aspect that preclude them from at least your judgment being 316 00:16:35,840 --> 00:16:37,880 Speaker 1: safe to list. Yeah, I mean so I'll give you 317 00:16:37,880 --> 00:16:42,160 Speaker 1: a security example, but there's others in cyber security and others. Um. 318 00:16:42,920 --> 00:16:44,920 Speaker 1: So you know, look, if you're if you're legitimately just 319 00:16:44,960 --> 00:16:46,880 Speaker 1: trying to raise money for your company or for some 320 00:16:46,920 --> 00:16:49,120 Speaker 1: project like an apartment comment X or something like that, 321 00:16:49,120 --> 00:16:51,280 Speaker 1: that is a security. That's the point of security's law. 322 00:16:51,360 --> 00:16:55,120 Speaker 1: There has to be an investment of money into this thing, 323 00:16:55,160 --> 00:16:57,440 Speaker 1: and for you know, in a common enterprise with an 324 00:16:57,440 --> 00:17:00,800 Speaker 1: expectation of profit you know, based on the others. So 325 00:17:01,520 --> 00:17:03,400 Speaker 1: that should exist, by the way, and we want that 326 00:17:03,480 --> 00:17:06,320 Speaker 1: to exist in the world. Um, we've acquired a broker 327 00:17:06,400 --> 00:17:09,480 Speaker 1: deal license. We were a stormant right now. We we'd 328 00:17:09,560 --> 00:17:11,199 Speaker 1: like to activate it. We're working with the sec to 329 00:17:11,200 --> 00:17:14,280 Speaker 1: hopefully make that happen. Crypto is a technology that could 330 00:17:14,280 --> 00:17:17,879 Speaker 1: make you know, crypto securities could offer benefits and update 331 00:17:17,880 --> 00:17:19,920 Speaker 1: the financial system and improve all kinds of things to 332 00:17:20,160 --> 00:17:22,520 Speaker 1: you know, time to settlement and various things like that. 333 00:17:22,960 --> 00:17:25,919 Speaker 1: So that's an example. Um, you know, if people are 334 00:17:25,960 --> 00:17:28,040 Speaker 1: out there kind of really hyping these things like on 335 00:17:28,080 --> 00:17:32,240 Speaker 1: YouTube and um and the tokenomicxer look sketchy and um, 336 00:17:32,960 --> 00:17:35,520 Speaker 1: you know there's really low float and the insiders are 337 00:17:35,560 --> 00:17:37,600 Speaker 1: selling it. These are all bad fact patterns and those 338 00:17:37,640 --> 00:17:40,840 Speaker 1: are the things we try to avoid for consumer protection. UM. 339 00:17:41,160 --> 00:17:42,919 Speaker 1: You know, there's other ways. There's other reasons we may 340 00:17:42,960 --> 00:17:45,440 Speaker 1: reject assets too, I mean an initiation. Another example would 341 00:17:45,480 --> 00:17:48,960 Speaker 1: be cybersecurity risk. So we often will um evaluate the 342 00:17:49,000 --> 00:17:51,800 Speaker 1: smart contracts for you know, is there some exploit in 343 00:17:51,840 --> 00:17:54,000 Speaker 1: this or there's an ability you know, if if the 344 00:17:54,480 --> 00:17:56,520 Speaker 1: the acid issue is not even like a malicious thing 345 00:17:56,520 --> 00:18:01,080 Speaker 1: but an accidental thing. If they lose the key, everyone's 346 00:18:01,080 --> 00:18:02,920 Speaker 1: phones could be swept or something like that, that that's 347 00:18:02,960 --> 00:18:04,960 Speaker 1: not secure enough right to meet our standards. So that 348 00:18:05,000 --> 00:18:09,480 Speaker 1: those are examples. Is crypto shooting itself in the foot 349 00:18:09,520 --> 00:18:13,159 Speaker 1: in some respects by like resisting the security designation, Like 350 00:18:13,359 --> 00:18:16,800 Speaker 1: is that a tacit admission that maybe there isn't a 351 00:18:16,840 --> 00:18:26,040 Speaker 1: reasonable expectation of profits here? Question? Yeah? Yeah, I mean 352 00:18:26,119 --> 00:18:28,520 Speaker 1: we want actually crypto securities to exist. So we're not 353 00:18:28,560 --> 00:18:30,320 Speaker 1: saying none of these things are securities. But on the 354 00:18:30,320 --> 00:18:31,919 Speaker 1: flip side, is not true either. It's not that all 355 00:18:31,960 --> 00:18:35,680 Speaker 1: of these are securities. Both of those are inaccurate statements. 356 00:18:35,920 --> 00:18:37,520 Speaker 1: And I guess the thing I would say too, is 357 00:18:37,560 --> 00:18:41,080 Speaker 1: that just an expectation of profit alone does not make 358 00:18:41,119 --> 00:18:43,280 Speaker 1: something a security. It has to be meet every prong 359 00:18:43,359 --> 00:18:45,439 Speaker 1: of the how he test is my understanding. So an example, 360 00:18:45,480 --> 00:18:47,919 Speaker 1: you know, people might buy a Picasso painting hoping it 361 00:18:47,920 --> 00:18:51,639 Speaker 1: goes up in value, or buy gold or something like that. 362 00:18:51,720 --> 00:18:56,400 Speaker 1: So those aren't securities. So yeah, I mean basically, Bitcoin 363 00:18:56,400 --> 00:18:58,679 Speaker 1: ethereum and the assets that we trade on our platform day, 364 00:18:58,720 --> 00:19:02,000 Speaker 1: we believe our crypto commodity, and it's you know, people 365 00:19:02,000 --> 00:19:03,639 Speaker 1: trade those. Some of them they want to go up 366 00:19:03,640 --> 00:19:06,560 Speaker 1: in value, just like they buy gold. Other other times 367 00:19:06,560 --> 00:19:10,160 Speaker 1: they're using it for various utility aspects. You know, this 368 00:19:10,200 --> 00:19:11,639 Speaker 1: is sort of I want to get back to the 369 00:19:11,640 --> 00:19:15,040 Speaker 1: regulatory question. But before I forget, can you talk for 370 00:19:15,080 --> 00:19:18,639 Speaker 1: a second about how you view bitcoin specifically, because it 371 00:19:18,680 --> 00:19:22,520 Speaker 1: feels like the crypto industry in many respects has moved 372 00:19:22,560 --> 00:19:26,119 Speaker 1: on from Bitcoin. And I'm sure your mentions on Twitter 373 00:19:26,440 --> 00:19:29,439 Speaker 1: are filled every day with angry, laser eyed people that 374 00:19:29,560 --> 00:19:32,399 Speaker 1: think you hate bitcoin. But it is also true that 375 00:19:32,480 --> 00:19:35,760 Speaker 1: you know you launched you launched an ethereum layer two. 376 00:19:35,840 --> 00:19:37,320 Speaker 1: I don't know if do you have a light do 377 00:19:37,359 --> 00:19:41,080 Speaker 1: you is there a coin based lightning note or we'd 378 00:19:41,080 --> 00:19:43,639 Speaker 1: like to do more with lightning pleasure havin pro lightning 379 00:19:43,760 --> 00:19:47,080 Speaker 1: so but haven't yet. Yeah, and you know there's all 380 00:19:47,119 --> 00:19:50,560 Speaker 1: these issues with like funding for core bitcoin devs, like 381 00:19:50,680 --> 00:19:53,040 Speaker 1: frustration that they don't get enough and can't maintain it. 382 00:19:53,240 --> 00:19:57,840 Speaker 1: What is your view towards bitcoin? I mean, I love bitcoin. 383 00:19:58,000 --> 00:20:01,040 Speaker 1: I honestly, I don't really understand why, Um, anybody might 384 00:20:01,080 --> 00:20:03,520 Speaker 1: think the opposite. I'd kind of like dedicated people do, right, 385 00:20:03,600 --> 00:20:05,800 Speaker 1: I mean, I'm not wrong that you, um, there is 386 00:20:05,880 --> 00:20:08,960 Speaker 1: kind of all abused by bitcoin maxis at one time 387 00:20:09,040 --> 00:20:13,199 Speaker 1: or another. I think that's unfortunate. Um, I don't know 388 00:20:13,200 --> 00:20:15,280 Speaker 1: how seriously to take that. I mean I do see 389 00:20:15,280 --> 00:20:17,000 Speaker 1: people say this on Twitter sometimes but I don't know 390 00:20:17,040 --> 00:20:19,240 Speaker 1: if it's like a widely believed thing. I mean, it 391 00:20:19,280 --> 00:20:21,960 Speaker 1: would sort of defy credulity, right. I mean I've kind 392 00:20:21,960 --> 00:20:24,320 Speaker 1: of almost dedicated my life too like bitcoin and helping 393 00:20:24,320 --> 00:20:26,480 Speaker 1: it grow. I mean literally I read the Bitcoin white 394 00:20:26,480 --> 00:20:28,560 Speaker 1: paper and then decided to quit my job and found 395 00:20:28,560 --> 00:20:31,680 Speaker 1: this company. Um. Now, of course the industry has evolved 396 00:20:31,680 --> 00:20:33,679 Speaker 1: into many things, right, I mean, there's lots of new 397 00:20:33,720 --> 00:20:37,240 Speaker 1: innovations coming out in crypto. But yeah, I'm very pro bitcoin, 398 00:20:37,280 --> 00:20:41,000 Speaker 1: and I think, look, I think there's a very simple 399 00:20:41,119 --> 00:20:43,480 Speaker 1: base case for for bitcoin, which is that it's the 400 00:20:43,520 --> 00:20:46,920 Speaker 1: gold standard in the crypto economy. And I think that 401 00:20:46,920 --> 00:20:49,520 Speaker 1: I'll probably always be true and it'll keep growing. Now 402 00:20:49,600 --> 00:20:52,080 Speaker 1: if things like lightning continue to get traction, I think 403 00:20:52,119 --> 00:20:55,119 Speaker 1: it could also become like a settlement layer. There's um, 404 00:20:55,240 --> 00:20:59,080 Speaker 1: there's people now creating NFTs in bitcoin, and so it's evolving. 405 00:20:59,640 --> 00:21:03,560 Speaker 1: I'm as as an operator of an exchange in custodian 406 00:21:04,200 --> 00:21:07,080 Speaker 1: I try to just be agnostic. I don't. My job 407 00:21:07,160 --> 00:21:09,680 Speaker 1: is to say, is not to tell our customers which 408 00:21:09,680 --> 00:21:11,640 Speaker 1: coin they should use. It is to list and make 409 00:21:11,640 --> 00:21:15,800 Speaker 1: available every coin that meets our standards, the legal tests. 410 00:21:15,800 --> 00:21:19,280 Speaker 1: I discussed and then we need to be agnostics. I 411 00:21:19,320 --> 00:21:23,600 Speaker 1: think some people, because I'm not pro one coin or another, 412 00:21:23,680 --> 00:21:25,840 Speaker 1: they sort of take that as like you must hate 413 00:21:25,840 --> 00:21:28,720 Speaker 1: this thing, But those are two different things. Just going 414 00:21:28,760 --> 00:21:30,560 Speaker 1: back to the SEC for a second, you know, we 415 00:21:30,640 --> 00:21:33,760 Speaker 1: talked about how it does seem like SEC is sort 416 00:21:33,800 --> 00:21:35,800 Speaker 1: of an enforcement mode and there's a chance that you 417 00:21:35,800 --> 00:21:38,600 Speaker 1: wake up tomorrow and there's a bunch of new announcements. 418 00:21:39,119 --> 00:21:43,119 Speaker 1: Wouldn't you think the ultimate goal is for the SEC 419 00:21:43,400 --> 00:21:45,480 Speaker 1: when it comes to crypto. Do they just want it 420 00:21:45,520 --> 00:21:49,520 Speaker 1: to go away entirely? Or are they aiming for, you know, 421 00:21:49,800 --> 00:21:53,080 Speaker 1: the industry to still exist but maybe in a different 422 00:21:54,240 --> 00:21:57,040 Speaker 1: in a different way, or a JP Morgan in City 423 00:21:57,080 --> 00:22:02,359 Speaker 1: instead of coin base. And yes, Unice law Well, I 424 00:22:02,359 --> 00:22:04,320 Speaker 1: mean I always want to be hesitant to kind of 425 00:22:04,359 --> 00:22:07,080 Speaker 1: speculate on the motives of people within the SEC. I mean, 426 00:22:07,800 --> 00:22:09,639 Speaker 1: I think we have a pretty good relationship with different 427 00:22:09,680 --> 00:22:14,360 Speaker 1: people on staff and commissioners, and I guess the real 428 00:22:14,359 --> 00:22:17,080 Speaker 1: answers I don't know. I suspect that there are different 429 00:22:17,080 --> 00:22:19,680 Speaker 1: people with different views inside the SEC. I think it 430 00:22:19,720 --> 00:22:23,480 Speaker 1: wouldn't surprise me if some people their view they actually 431 00:22:23,520 --> 00:22:25,159 Speaker 1: just wanted to go away they wish this whole thing 432 00:22:25,160 --> 00:22:27,280 Speaker 1: would go away. I think I don't think I would 433 00:22:27,280 --> 00:22:28,760 Speaker 1: hope that that's not a majority of view. I know 434 00:22:28,760 --> 00:22:30,960 Speaker 1: it's not the majority of view of Americans, and I 435 00:22:31,000 --> 00:22:32,920 Speaker 1: don't see how would be in the interests of America 436 00:22:33,040 --> 00:22:36,800 Speaker 1: or are you know, protecting consumers to wish it would 437 00:22:36,840 --> 00:22:39,360 Speaker 1: go away, because clearly it's not. One in five households 438 00:22:39,359 --> 00:22:41,520 Speaker 1: in the US are using this stuff and they're just 439 00:22:41,560 --> 00:22:44,040 Speaker 1: going to use unregulated things off shore if if we 440 00:22:44,040 --> 00:22:45,480 Speaker 1: don't get our act together in the US. So I 441 00:22:45,520 --> 00:22:48,720 Speaker 1: think the majority view is more like, we know that 442 00:22:48,760 --> 00:22:51,200 Speaker 1: this is going to exist, we just need to bring 443 00:22:51,240 --> 00:22:53,919 Speaker 1: it within the regulatory perimeter. I wish that they were 444 00:22:53,960 --> 00:22:56,399 Speaker 1: doing that by just again publishing a clear rule book 445 00:22:56,440 --> 00:23:00,800 Speaker 1: and going through a rulemaking process with industry, but it 446 00:23:00,840 --> 00:23:02,720 Speaker 1: hasn't happened as much to date. And so you know, 447 00:23:02,760 --> 00:23:04,920 Speaker 1: if it needs to be more enforcement based and then 448 00:23:04,960 --> 00:23:07,600 Speaker 1: some of this stuff gets figured out via case law, 449 00:23:07,640 --> 00:23:09,760 Speaker 1: I mean that's okay too, it'll just take a little longer. 450 00:23:10,080 --> 00:23:13,720 Speaker 1: Why do you think that regulatory response has so far 451 00:23:13,800 --> 00:23:16,760 Speaker 1: been kind of disjointed. I think it's fair to say, 452 00:23:16,800 --> 00:23:19,600 Speaker 1: like maybe disjointed or unclear. Was it a lack of 453 00:23:19,640 --> 00:23:24,400 Speaker 1: resources or regulators just didn't understand the space. What was it? 454 00:23:25,160 --> 00:23:27,359 Speaker 1: Maybe can clarify what do you mean disjointed? Well, I 455 00:23:27,359 --> 00:23:31,720 Speaker 1: guess um, slow maybe and unclear? You know, to your 456 00:23:31,800 --> 00:23:34,040 Speaker 1: point this idea that we go in and ask them 457 00:23:34,160 --> 00:23:37,320 Speaker 1: questions and they don't give you answer, right, Oh man? 458 00:23:37,560 --> 00:23:40,359 Speaker 1: I frankly I I you know, I'm spending a lot 459 00:23:40,400 --> 00:23:42,240 Speaker 1: more time in DC. I'm trying to figure this out too. 460 00:23:43,200 --> 00:23:45,320 Speaker 1: Perhaps I was a little naive coming in. I kind 461 00:23:45,320 --> 00:23:48,919 Speaker 1: of assumed that, you know, when you're running a business, 462 00:23:49,560 --> 00:23:51,919 Speaker 1: that the regulators just give you the rules and then 463 00:23:51,920 --> 00:23:53,919 Speaker 1: you just follow them, and that would have been like 464 00:23:54,720 --> 00:23:58,840 Speaker 1: how I assumed it would work. But it seems to 465 00:23:58,880 --> 00:24:02,200 Speaker 1: be more complicated than that. Maybe it's like there's various 466 00:24:02,240 --> 00:24:05,280 Speaker 1: political motivations. There's different factions within the government who have 467 00:24:05,280 --> 00:24:10,480 Speaker 1: different goals. You know, people who've gotten legislation past, they've 468 00:24:10,480 --> 00:24:12,200 Speaker 1: told me it's kind of like a small miracle. Whenever 469 00:24:12,200 --> 00:24:14,200 Speaker 1: it happens, you have to kind of get the House 470 00:24:14,240 --> 00:24:16,600 Speaker 1: and the Senate and the President all aligned and the 471 00:24:16,960 --> 00:24:18,600 Speaker 1: you know, there has to be a real impetus for 472 00:24:18,640 --> 00:24:21,280 Speaker 1: it to happen. I kind of believe this thing with 473 00:24:21,359 --> 00:24:24,320 Speaker 1: FDx is maybe that impetus. Maybe this is our moment 474 00:24:24,320 --> 00:24:26,639 Speaker 1: to finally get some clarity in the next year, at 475 00:24:26,720 --> 00:24:30,880 Speaker 1: least give another regulatory question, though not about not SEC related. 476 00:24:31,960 --> 00:24:36,080 Speaker 1: It seems like some banks are de banking crypto companies, 477 00:24:36,119 --> 00:24:38,880 Speaker 1: but it does I do not get the impression that 478 00:24:38,880 --> 00:24:42,040 Speaker 1: that is a risk for coin base. Do you perceive 479 00:24:42,160 --> 00:24:46,040 Speaker 1: that to be a regulatory advantage for you, that smaller 480 00:24:46,160 --> 00:24:48,760 Speaker 1: exchanges may have a harder time getting a banking partner 481 00:24:48,760 --> 00:24:51,800 Speaker 1: in this environment? Well, look, I mean I'd hate to 482 00:24:51,840 --> 00:24:54,960 Speaker 1: consider that to be an advantage. You know, we haven't 483 00:24:54,960 --> 00:24:56,879 Speaker 1: had any issue with any of our bank partners. I 484 00:24:56,920 --> 00:25:00,560 Speaker 1: do think that there's a there's a general moment in 485 00:25:00,600 --> 00:25:05,120 Speaker 1: the wake of FTX where, you know, reasonably so bank 486 00:25:05,200 --> 00:25:08,879 Speaker 1: regulators are asking tough questions and they're and they're basically 487 00:25:08,880 --> 00:25:11,520 Speaker 1: coming in and saying, what are the liquidity risks if 488 00:25:11,520 --> 00:25:15,960 Speaker 1: you're gonna take crypto deposits? Um? You know, is it 489 00:25:16,000 --> 00:25:18,800 Speaker 1: is it okay to be making loans against those deposits? 490 00:25:18,880 --> 00:25:21,360 Speaker 1: Or are they too risky? And um? I think those 491 00:25:21,359 --> 00:25:24,640 Speaker 1: are totally fair questions to ask. So, yeah, I don't 492 00:25:24,640 --> 00:25:27,280 Speaker 1: think that we would have any kind of major crackdown 493 00:25:27,280 --> 00:25:29,120 Speaker 1: and say, well, you can't bank crypto companies. I haven't. 494 00:25:29,119 --> 00:25:31,640 Speaker 1: I haven't heard that from any anybody. And by the way, 495 00:25:31,680 --> 00:25:34,160 Speaker 1: that that would be probably exceeding their authority because Congress 496 00:25:34,160 --> 00:25:36,000 Speaker 1: has to make those kinds of decisions about what is 497 00:25:36,040 --> 00:25:38,840 Speaker 1: allowed in the economy. Um. But if they're coming in 498 00:25:38,880 --> 00:25:41,960 Speaker 1: and asking questions about liquidity, I think that's probably reasonable 499 00:25:42,560 --> 00:25:45,000 Speaker 1: quick to follow up on that. Um, would you or 500 00:25:45,080 --> 00:25:49,000 Speaker 1: have you put any lobbying or any of your DC 501 00:25:49,280 --> 00:25:54,320 Speaker 1: effort towards guaranteeing or making sure that anyone provided you know, 502 00:25:54,440 --> 00:25:57,480 Speaker 1: provided other basic checks that like that crypto can't be 503 00:25:57,920 --> 00:26:01,280 Speaker 1: I guess discriminated again within the banking system. Is that 504 00:26:01,320 --> 00:26:04,399 Speaker 1: an effort you've made it? Well, I'm certainly in our 505 00:26:04,400 --> 00:26:07,520 Speaker 1: messaging and in our conversations with members of Congress and 506 00:26:07,560 --> 00:26:10,480 Speaker 1: the Senate, we have made that point to them, which is, 507 00:26:11,119 --> 00:26:13,119 Speaker 1: we want to just be treated on a level playing field. Right, 508 00:26:13,200 --> 00:26:18,000 Speaker 1: don't unfairly penalize crypto versus traditional financial services. But um, 509 00:26:18,680 --> 00:26:20,840 Speaker 1: you know you shouldn't like allow us to have a 510 00:26:20,920 --> 00:26:24,120 Speaker 1: lighter weight system or anything like that either. So it's 511 00:26:24,200 --> 00:26:27,000 Speaker 1: it's a balance. Um. You know, we've mentioned this a 512 00:26:27,040 --> 00:26:28,800 Speaker 1: couple of times, But I'd be curious to get your 513 00:26:28,800 --> 00:26:33,399 Speaker 1: take on what happened to FTX, Like when when you 514 00:26:33,440 --> 00:26:36,320 Speaker 1: know that one week in November I think was shocking 515 00:26:36,480 --> 00:26:39,679 Speaker 1: for a lot of people for very different reasons depending 516 00:26:39,680 --> 00:26:41,479 Speaker 1: on who you are. But what was it like for 517 00:26:41,520 --> 00:26:44,600 Speaker 1: you when when you saw, you know, it happens so 518 00:26:44,680 --> 00:26:47,119 Speaker 1: quickly you had the Twitter exchanges and then you had 519 00:26:47,119 --> 00:26:50,200 Speaker 1: a bankruptcy file I think filing within like seven or 520 00:26:50,320 --> 00:26:52,919 Speaker 1: ten days. Yeah, I mean that that was a wild week. Um. 521 00:26:53,000 --> 00:26:55,159 Speaker 1: I was actually in Japan at that time, meeting with 522 00:26:55,200 --> 00:26:59,040 Speaker 1: our team there and talking with regulators and government folks 523 00:26:59,040 --> 00:27:01,360 Speaker 1: in Japan, and I got a call from somebody who 524 00:27:01,400 --> 00:27:04,639 Speaker 1: said it's bad, like we think FTX is going to 525 00:27:04,680 --> 00:27:06,640 Speaker 1: go down in the next forty hours and Sam might 526 00:27:06,640 --> 00:27:08,399 Speaker 1: go to jail. And I was like, okay, tell me 527 00:27:08,440 --> 00:27:10,120 Speaker 1: more what happened. And I kind of started to piece 528 00:27:10,119 --> 00:27:13,560 Speaker 1: it all together. You know. I had a chance to 529 00:27:13,640 --> 00:27:16,560 Speaker 1: chat just briefly with Sam actually and cz during that 530 00:27:16,600 --> 00:27:20,720 Speaker 1: whole thing, and I was just doom scrolling Twitter, I 531 00:27:20,720 --> 00:27:23,920 Speaker 1: suppose like a lot of people, and I mean, really 532 00:27:24,119 --> 00:27:25,560 Speaker 1: that's not true. I Mean the first thing that I 533 00:27:25,560 --> 00:27:29,320 Speaker 1: really thought about was, Okay, what is our exposure any 534 00:27:29,359 --> 00:27:32,080 Speaker 1: of this. So we immediately went and you know, underwrote 535 00:27:32,160 --> 00:27:35,359 Speaker 1: any of our counterparties, including FTX itself, but any that 536 00:27:35,440 --> 00:27:40,719 Speaker 1: might have secondary effects. And then we started to think about, Okay, well, 537 00:27:41,359 --> 00:27:43,639 Speaker 1: this is actually quite validating of our strategy over the 538 00:27:43,680 --> 00:27:46,159 Speaker 1: last ten years of being built in US, trying to 539 00:27:46,160 --> 00:27:50,199 Speaker 1: embrace compliance, not trying to cut any corners. How can 540 00:27:50,240 --> 00:27:52,720 Speaker 1: we make sure that people understand that coin base is 541 00:27:53,240 --> 00:27:56,359 Speaker 1: it's not like FTX. And I basically thought about it 542 00:27:56,359 --> 00:27:59,320 Speaker 1: as there's gonna be a it's gonna be a black 543 00:27:59,320 --> 00:28:02,439 Speaker 1: eye for the industry, but this is ultimately coin stands 544 00:28:02,480 --> 00:28:05,520 Speaker 1: to be a huge net beneficiary of this because it's 545 00:28:05,520 --> 00:28:08,800 Speaker 1: going to bring an increased focus on compliance and trust, 546 00:28:08,800 --> 00:28:10,400 Speaker 1: which is what we've been doing for the last ten years. 547 00:28:27,720 --> 00:28:29,919 Speaker 1: I want to ask a little bit about you know, 548 00:28:30,320 --> 00:28:33,399 Speaker 1: start the price crypto winter, and obviously there's been a 549 00:28:33,400 --> 00:28:36,240 Speaker 1: bit of a bounce, but the bounce has basically just 550 00:28:36,280 --> 00:28:38,680 Speaker 1: been like because the Nasdaq has bounced two and it 551 00:28:38,720 --> 00:28:42,080 Speaker 1: looks many of these coins sort of looked pretty highly 552 00:28:42,120 --> 00:28:45,840 Speaker 1: correlated to other risk assets, and for years I feel 553 00:28:45,880 --> 00:28:48,640 Speaker 1: like there was this case to investors that they should 554 00:28:48,680 --> 00:28:51,240 Speaker 1: buy crypto for two reasons. One it was this new 555 00:28:51,360 --> 00:28:55,560 Speaker 1: uncorrelated asset class, and two, in the case of bitcoins specifically, 556 00:28:55,800 --> 00:28:59,480 Speaker 1: it was really good as an inflation protection thing, and 557 00:28:59,040 --> 00:29:02,360 Speaker 1: that league it just got, you know, the highest inflation 558 00:29:02,480 --> 00:29:05,920 Speaker 1: in forty years, and bitcoin really hasn't gone anywhere. It's 559 00:29:05,960 --> 00:29:09,000 Speaker 1: flat over the last several years, and the coins all 560 00:29:09,080 --> 00:29:11,600 Speaker 1: seemed to buy and large at this point seemed to 561 00:29:11,640 --> 00:29:14,560 Speaker 1: more or less be correlated with like the NASDAC or 562 00:29:14,640 --> 00:29:18,000 Speaker 1: QQQ or whatever. What is the case and what do 563 00:29:18,000 --> 00:29:21,400 Speaker 1: you feel about, like, so, what's the new case to 564 00:29:21,560 --> 00:29:24,720 Speaker 1: be made? After people have seen narratives, these old narratives 565 00:29:24,760 --> 00:29:27,480 Speaker 1: that the industry was pretty loud about making. I'm not 566 00:29:27,560 --> 00:29:29,680 Speaker 1: saying you I don't know, but many in the industry 567 00:29:29,720 --> 00:29:32,560 Speaker 1: definitely were have not held up in terms of like 568 00:29:32,600 --> 00:29:35,640 Speaker 1: the case for investing in it. Yeah, well, I guess 569 00:29:36,040 --> 00:29:38,440 Speaker 1: I'm just sort of laughing a little bit, because, you know, 570 00:29:38,680 --> 00:29:41,080 Speaker 1: crypto being has been roughly as volatile as the stock 571 00:29:41,120 --> 00:29:43,920 Speaker 1: market recently. And I can tell you there's many years 572 00:29:44,040 --> 00:29:46,440 Speaker 1: coin base where people would constantly ask me, it's so volatile, 573 00:29:46,440 --> 00:29:47,840 Speaker 1: no one'll ever use it. And so now that it's 574 00:29:47,840 --> 00:29:51,120 Speaker 1: just on part with volatility of the stock market. I'll 575 00:29:51,160 --> 00:29:52,840 Speaker 1: take that as a slight win at least a step 576 00:29:52,840 --> 00:29:55,920 Speaker 1: in the way testa shares to buy coffee either. Yeah. Yeah, 577 00:29:55,960 --> 00:29:59,080 Speaker 1: but anyway, well, okay, so obviously we have stable coins 578 00:29:59,120 --> 00:30:02,040 Speaker 1: for commerce now, which which is a good piece of 579 00:30:02,080 --> 00:30:05,240 Speaker 1: the puzzle. But let's go back to your question about 580 00:30:06,160 --> 00:30:09,280 Speaker 1: in an inflation hedge. So you know, I think there 581 00:30:09,320 --> 00:30:12,800 Speaker 1: certainly was this belief and I, frankly I shared this 582 00:30:12,840 --> 00:30:17,360 Speaker 1: belief too, which was that crypto bitcoin specifically. Actually, this 583 00:30:17,440 --> 00:30:20,800 Speaker 1: is where people hopefully the bitquin Maxie's kind of aligned 584 00:30:20,800 --> 00:30:22,560 Speaker 1: with my thinking is that that that is sort of 585 00:30:22,560 --> 00:30:26,120 Speaker 1: the new gold standard in the crypto economy, and it 586 00:30:26,160 --> 00:30:28,680 Speaker 1: would be something that people flee to in times of uncertainty, 587 00:30:28,680 --> 00:30:31,360 Speaker 1: with guaranteed scarcity and things like that. Just you know, 588 00:30:31,560 --> 00:30:33,720 Speaker 1: similar to like real estate has a you can't make 589 00:30:33,800 --> 00:30:36,600 Speaker 1: more of it, so at least the land part of it. 590 00:30:36,600 --> 00:30:38,960 Speaker 1: So there is sort of a guaranteed scarcity component. It's 591 00:30:38,960 --> 00:30:42,320 Speaker 1: a nice insulation hedge. Now. I think what happened is 592 00:30:42,480 --> 00:30:45,120 Speaker 1: I was frankly surprised to see how quickly crypto came 593 00:30:45,160 --> 00:30:48,360 Speaker 1: down in an environment of high inflation, where I thought, 594 00:30:48,520 --> 00:30:50,560 Speaker 1: maybe the world is shifted, maybe we're ready now where 595 00:30:50,560 --> 00:30:53,520 Speaker 1: this would be considered an inflation hedge. It turns out 596 00:30:53,520 --> 00:30:55,920 Speaker 1: we were way too early for that. Now, I think, 597 00:30:56,280 --> 00:30:58,280 Speaker 1: I guess my current updated thinking on that is that 598 00:30:59,080 --> 00:31:01,760 Speaker 1: we still need Probably crypto is still too smaller percentage 599 00:31:01,760 --> 00:31:04,320 Speaker 1: of the global economy to it's being treated more like 600 00:31:04,360 --> 00:31:08,080 Speaker 1: a growth you know, asset or something as opposed to 601 00:31:08,240 --> 00:31:11,320 Speaker 1: like a true like a gold standard or something. And 602 00:31:11,360 --> 00:31:13,720 Speaker 1: so I mean we probably rely need the cryptoconomy to 603 00:31:13,800 --> 00:31:16,120 Speaker 1: grow ten x, twenty x or something from here to 604 00:31:16,160 --> 00:31:18,040 Speaker 1: start to have that sort of a role in the 605 00:31:18,080 --> 00:31:22,360 Speaker 1: broader macro environment. You know, you mentioned stable coins there, 606 00:31:22,440 --> 00:31:25,320 Speaker 1: and I just remembered once upon a time, I guess 607 00:31:25,360 --> 00:31:27,640 Speaker 1: a few years ago we had Sam Bankman freed on 608 00:31:27,720 --> 00:31:29,680 Speaker 1: and we asked him to explain to us what would 609 00:31:29,680 --> 00:31:35,680 Speaker 1: happen if tether just suddenly collapsed? And I'd be curious 610 00:31:35,680 --> 00:31:38,360 Speaker 1: to get your I guess in retrospect respect, we should 611 00:31:38,360 --> 00:31:41,480 Speaker 1: have asked SPF what would happen if FTX actually collapsed? 612 00:31:41,520 --> 00:31:46,240 Speaker 1: But in retrospect, can you talk to us about your 613 00:31:46,320 --> 00:31:52,440 Speaker 1: impression of Tether's role in the crypto ecosystem? Um, well, look, 614 00:31:52,640 --> 00:31:55,040 Speaker 1: I'm not here to sort of criticize anybody in the ecosystem. 615 00:31:55,040 --> 00:31:59,360 Speaker 1: I don't. I don't really. You know, we've utilized Tether 616 00:31:59,440 --> 00:32:01,480 Speaker 1: in various ways, is on our platform in different times. 617 00:32:01,480 --> 00:32:03,520 Speaker 1: I know, they've been investigated by various parties and they 618 00:32:03,560 --> 00:32:05,560 Speaker 1: reached settlements and they sort of had they got comfortable 619 00:32:05,560 --> 00:32:09,560 Speaker 1: with various ways. You know. Look, our focus at this 620 00:32:09,600 --> 00:32:12,360 Speaker 1: point has been on USD coin. We have a partnership 621 00:32:12,400 --> 00:32:14,480 Speaker 1: with Circle on that, and I think that's been a 622 00:32:15,200 --> 00:32:17,360 Speaker 1: that I feel very comfortable saying. I you know, I 623 00:32:17,400 --> 00:32:20,080 Speaker 1: understand more about it, and it feels it's well backed, 624 00:32:20,360 --> 00:32:22,320 Speaker 1: it's one to one backed, and it's audited and all 625 00:32:22,320 --> 00:32:25,400 Speaker 1: these things. I just don't have as much information on Tether, 626 00:32:25,440 --> 00:32:27,360 Speaker 1: but I don't have anything negative to say. Certainly they 627 00:32:27,360 --> 00:32:30,320 Speaker 1: don't have no no beef with them, let me ask you. 628 00:32:30,320 --> 00:32:33,880 Speaker 1: You know, look, obviously, after all this time and even 629 00:32:33,960 --> 00:32:37,040 Speaker 1: well before the FTX, as you know, there's been there's 630 00:32:37,080 --> 00:32:39,440 Speaker 1: there's just a lot of skepticism still to this day 631 00:32:39,480 --> 00:32:42,040 Speaker 1: about crypto, and I think many people say, yeah, it's 632 00:32:42,080 --> 00:32:44,960 Speaker 1: not it's not going to go away, but like it's 633 00:32:45,000 --> 00:32:47,360 Speaker 1: still it's just speculations. People are just in it for 634 00:32:47,360 --> 00:32:50,920 Speaker 1: the money and there's no real use case outside of 635 00:32:50,960 --> 00:32:54,640 Speaker 1: maybe some niches, but like Web three isn't really a 636 00:32:54,800 --> 00:32:58,040 Speaker 1: thing yet, and I'm curious, like a lot of people 637 00:32:58,280 --> 00:33:01,959 Speaker 1: in crypto have done faint stastically well and you know, 638 00:33:02,080 --> 00:33:06,240 Speaker 1: like you know, made an extraordinary amount of money despite 639 00:33:06,240 --> 00:33:09,720 Speaker 1: the fact that buy and large, these coins aren't really 640 00:33:09,840 --> 00:33:13,480 Speaker 1: used for much outside of making money. And there's not 641 00:33:13,640 --> 00:33:18,120 Speaker 1: a you know, decentralized Facebook that exists. You know, there's 642 00:33:18,160 --> 00:33:20,160 Speaker 1: a there's a good reason why it would be nice 643 00:33:20,200 --> 00:33:23,160 Speaker 1: to have one, because it's sort of scary to think about, 644 00:33:23,160 --> 00:33:25,760 Speaker 1: like how much power is in the hands of Elon 645 00:33:25,840 --> 00:33:28,200 Speaker 1: Musk or Mark Zuckerberg and all these people, but by 646 00:33:28,200 --> 00:33:31,560 Speaker 1: and large, like nothing exists. Like when does that happen? 647 00:33:31,840 --> 00:33:33,880 Speaker 1: Because there's like tons of money has been made, but 648 00:33:33,960 --> 00:33:36,040 Speaker 1: when do we get like this sort of like okay, 649 00:33:36,120 --> 00:33:39,160 Speaker 1: now there's a thing that's been delivered that people will 650 00:33:39,280 --> 00:33:43,400 Speaker 1: use for non speculative purposes. Yeah, so I guess, you know, 651 00:33:43,440 --> 00:33:46,040 Speaker 1: I'll disagree a little bit with this idea that, um, 652 00:33:46,320 --> 00:33:49,360 Speaker 1: it's it's all speculation, right. I think that was probably 653 00:33:49,360 --> 00:33:51,520 Speaker 1: a fair thing to say five years ago or so. 654 00:33:51,600 --> 00:33:53,680 Speaker 1: But and there's not going to be some moment where 655 00:33:53,680 --> 00:33:55,960 Speaker 1: it all flips. It's it's a gradual thing. And so 656 00:33:56,520 --> 00:33:58,680 Speaker 1: we've actually tracked this inside coin base. You know, what 657 00:33:58,800 --> 00:34:02,160 Speaker 1: percent of our active customers are doing something other than 658 00:34:02,200 --> 00:34:06,120 Speaker 1: trading with crypto and it's now over fifty percent. What's 659 00:34:06,160 --> 00:34:09,279 Speaker 1: an example of that, like buying an NFT something other 660 00:34:09,320 --> 00:34:13,480 Speaker 1: than trading. Yeah, that's an example, and there's lots of 661 00:34:13,520 --> 00:34:15,319 Speaker 1: other examples. I'll kind of give you a framework for 662 00:34:15,320 --> 00:34:17,600 Speaker 1: how I think about how it's evolved over time. But 663 00:34:19,040 --> 00:34:21,640 Speaker 1: you know, obviously those people doing commerce, they're doing borrowing 664 00:34:21,640 --> 00:34:26,319 Speaker 1: and lending, they're you know, earning money, they are doing 665 00:34:26,360 --> 00:34:31,200 Speaker 1: things like staking. And here's how to think about it 666 00:34:31,200 --> 00:34:33,400 Speaker 1: over time. Right, So, the first use case of crypto 667 00:34:33,520 --> 00:34:36,040 Speaker 1: was really a new form of money or this new 668 00:34:36,200 --> 00:34:38,400 Speaker 1: asset class that got created, and a lot of the 669 00:34:38,400 --> 00:34:42,239 Speaker 1: activity early on was speculative. Although just I don't want 670 00:34:42,280 --> 00:34:45,120 Speaker 1: to undersell that first point, because by having a new 671 00:34:45,160 --> 00:34:47,840 Speaker 1: form of money that is global and decentralized and guaranteed 672 00:34:47,840 --> 00:34:49,680 Speaker 1: to be scarce, that that is no small thing, right. 673 00:34:49,719 --> 00:34:51,000 Speaker 1: I Mean, we sort of take it for granted in 674 00:34:51,000 --> 00:34:53,200 Speaker 1: the US that our currency is relatively stable, even though 675 00:34:53,440 --> 00:34:57,000 Speaker 1: it inflates more recently. Most people in the world, that 676 00:34:57,080 --> 00:34:59,399 Speaker 1: is a luxury. They do not have and it would 677 00:34:59,400 --> 00:35:02,080 Speaker 1: be an incredib will benefit to humanity if only the 678 00:35:02,120 --> 00:35:04,680 Speaker 1: only thing crypto ever did was have a form of 679 00:35:04,680 --> 00:35:06,560 Speaker 1: sound money for the world that anybody could have as 680 00:35:06,600 --> 00:35:08,640 Speaker 1: long as they have a smartphone. That that's a that 681 00:35:08,719 --> 00:35:10,680 Speaker 1: is a game changer. Okay, so let's not undersell that. 682 00:35:11,160 --> 00:35:13,239 Speaker 1: But beyond crypto being just a new form of money, 683 00:35:14,239 --> 00:35:17,600 Speaker 1: it also became a new type of financial services, right defy. 684 00:35:17,719 --> 00:35:19,720 Speaker 1: And we saw different ways for people to do borrowing 685 00:35:19,719 --> 00:35:23,320 Speaker 1: and lending and you know, commerce payments and staking and 686 00:35:23,920 --> 00:35:25,759 Speaker 1: various things like this, and so that that was all 687 00:35:25,880 --> 00:35:28,040 Speaker 1: very good. Now the third realm is kind of what 688 00:35:28,040 --> 00:35:30,200 Speaker 1: you touched on, is being you know about decentralized social 689 00:35:30,200 --> 00:35:32,200 Speaker 1: and everything. We call it Web three. It's it's not 690 00:35:32,239 --> 00:35:34,640 Speaker 1: only new type of money and new type of financial services, 691 00:35:34,680 --> 00:35:37,560 Speaker 1: but a new application platform even things that have nothing 692 00:35:37,600 --> 00:35:40,360 Speaker 1: to do with financial services. And you know, I'm pretty 693 00:35:40,360 --> 00:35:44,719 Speaker 1: excited about, for instance, decentralized identity with EANs. That's a 694 00:35:44,760 --> 00:35:48,200 Speaker 1: foundational component, so people's identity doesn't have to be sort 695 00:35:48,239 --> 00:35:50,840 Speaker 1: of owned by a big tech company. Once you have 696 00:35:50,880 --> 00:35:53,359 Speaker 1: decentralized identities, you can connect them in a social graph. 697 00:35:53,400 --> 00:35:56,680 Speaker 1: You can make decentralized social networks. You can have public 698 00:35:56,719 --> 00:36:00,840 Speaker 1: profile pages with badges and accreditation and know your badge, 699 00:36:00,880 --> 00:36:04,320 Speaker 1: you know, accessing to buildings like proof of attendance, concert tickets, 700 00:36:04,360 --> 00:36:07,680 Speaker 1: like all these kind of things, um new business models 701 00:36:07,719 --> 00:36:11,160 Speaker 1: for you know, the music industry and like like YouTube, Spotify. 702 00:36:11,200 --> 00:36:13,279 Speaker 1: You can imagine all these things being built in a 703 00:36:13,320 --> 00:36:15,840 Speaker 1: new way. We can imagine them to. I guess the 704 00:36:15,960 --> 00:36:18,400 Speaker 1: question is why why hasn't it happened yet? You know, 705 00:36:18,440 --> 00:36:21,040 Speaker 1: we're talking It's been like a decade, more than a 706 00:36:21,080 --> 00:36:24,520 Speaker 1: decade since the White Paper, So why why if this 707 00:36:24,600 --> 00:36:27,560 Speaker 1: is such revolutionary technology and it's so much better than 708 00:36:27,560 --> 00:36:29,760 Speaker 1: the way we've been doing things, why hasn't the adoption 709 00:36:29,840 --> 00:36:33,120 Speaker 1: been quicker? Yeah? Well, I think one reason is, um, 710 00:36:33,360 --> 00:36:36,200 Speaker 1: the scalability of the blockchains has been one thing that 711 00:36:36,280 --> 00:36:38,280 Speaker 1: we could unlock that would help it move even faster. 712 00:36:38,880 --> 00:36:41,239 Speaker 1: I think the usability needs to get a lot simpler, right. 713 00:36:41,280 --> 00:36:43,360 Speaker 1: The average person doesn't really know what a private key is. 714 00:36:43,400 --> 00:36:46,319 Speaker 1: They don't want to, you know, install Chrome extension to 715 00:36:46,600 --> 00:36:50,040 Speaker 1: understand some thing like they It needs to be just 716 00:36:50,440 --> 00:36:54,440 Speaker 1: simpler for the average person. And I guess, you know, 717 00:36:54,480 --> 00:36:56,399 Speaker 1: look at the Internet as an example, right, I think 718 00:36:56,400 --> 00:36:58,879 Speaker 1: like the very foundational pieces of the Internet might even 719 00:36:58,920 --> 00:37:01,399 Speaker 1: go back to like the sixties or something. But you know, 720 00:37:01,800 --> 00:37:04,919 Speaker 1: you started to see um tell net and like these 721 00:37:05,040 --> 00:37:07,920 Speaker 1: very early you know types of things come together, like 722 00:37:07,960 --> 00:37:10,640 Speaker 1: in the eighties, I think it was um so we 723 00:37:10,719 --> 00:37:14,239 Speaker 1: think of the Internet as really happening from like the 724 00:37:14,280 --> 00:37:16,520 Speaker 1: year two thousand or something like that. And that again 725 00:37:16,600 --> 00:37:18,399 Speaker 1: that's by the way, you know, twenty three years now, 726 00:37:18,719 --> 00:37:21,520 Speaker 1: but it took a lot of foundational work to happen 727 00:37:21,600 --> 00:37:24,600 Speaker 1: before that. You know, broad scalability, broadband had to happen, right. 728 00:37:24,840 --> 00:37:27,239 Speaker 1: Another thing another Internet at now, crypto as well. I 729 00:37:27,280 --> 00:37:30,920 Speaker 1: mean people are working on hashcash and all those for 730 00:37:31,239 --> 00:37:34,240 Speaker 1: decades in some case. I mean the prehistory of bigcoin 731 00:37:34,320 --> 00:37:36,760 Speaker 1: just pretty long as well. Well those were like research papers, 732 00:37:37,239 --> 00:37:38,880 Speaker 1: I mean they you know, tell net was like a 733 00:37:38,880 --> 00:37:40,479 Speaker 1: real thing that had I don't know how many people, 734 00:37:40,600 --> 00:37:43,040 Speaker 1: maybe a million people using it or something. But um 735 00:37:43,600 --> 00:37:46,239 Speaker 1: or like that first you know, fiber that had to 736 00:37:46,239 --> 00:37:49,920 Speaker 1: get laid in the ground and everything. But um yeah, look, 737 00:37:49,960 --> 00:37:51,879 Speaker 1: I would love it to happen faster. I mean, let's 738 00:37:51,880 --> 00:37:54,080 Speaker 1: be honest, Like the regulatory environment has not helped either. 739 00:37:54,200 --> 00:37:57,319 Speaker 1: It's like there's a there's a fear in this in 740 00:37:57,360 --> 00:37:59,759 Speaker 1: the United States that if you start a company in 741 00:37:59,800 --> 00:38:02,640 Speaker 1: this space, like you're just going to be have a 742 00:38:02,640 --> 00:38:05,040 Speaker 1: bunch of legal bills and you know, subpoenas in your 743 00:38:05,040 --> 00:38:08,279 Speaker 1: inbox or whatever. So that's not helping either. But we 744 00:38:08,320 --> 00:38:11,719 Speaker 1: can't blame it entirely on that. It's the technology needs 745 00:38:11,760 --> 00:38:15,720 Speaker 1: to be more scalable, more usable, and it's all happening, 746 00:38:15,760 --> 00:38:17,520 Speaker 1: it's just taking a while. And I want to ask 747 00:38:17,600 --> 00:38:20,080 Speaker 1: I have one last question, and it's a coin Base 748 00:38:20,560 --> 00:38:23,960 Speaker 1: specific question and is inspired by another guest that we've 749 00:38:23,960 --> 00:38:27,640 Speaker 1: had on in the past, Jim Chanos, who has been critical. 750 00:38:28,000 --> 00:38:29,920 Speaker 1: I don't know if he's ever short coin Base, but 751 00:38:30,000 --> 00:38:33,239 Speaker 1: he's certainly been critical the company. And he says two things. 752 00:38:33,320 --> 00:38:35,879 Speaker 1: He's like, Hey, how is it that in like these 753 00:38:35,960 --> 00:38:38,759 Speaker 1: most incredible some of the most incredible bull markets ever 754 00:38:38,920 --> 00:38:43,719 Speaker 1: for crypto company hasn't been profitable. But also that so 755 00:38:43,840 --> 00:38:46,160 Speaker 1: much of the revenue you do make is because of 756 00:38:46,200 --> 00:38:50,600 Speaker 1: the huge gap between what institutional traders on coin base 757 00:38:50,719 --> 00:38:55,560 Speaker 1: pro pay versus the commissions on regular coinbase. And it's 758 00:38:55,600 --> 00:38:57,879 Speaker 1: pretty easy, or at least was, to switch back and forth. 759 00:38:57,920 --> 00:39:01,000 Speaker 1: But maybe people didn't realize how much cheaper one could 760 00:39:01,000 --> 00:39:04,400 Speaker 1: trade just by like a few clicks on the website 761 00:39:04,400 --> 00:39:07,239 Speaker 1: to get over to the pro side, Like how much 762 00:39:07,280 --> 00:39:10,160 Speaker 1: compression is there going to be? And have you know 763 00:39:10,160 --> 00:39:12,480 Speaker 1: what do you say that to the argument that retail 764 00:39:12,520 --> 00:39:15,200 Speaker 1: investors have sort of gotten a raw deal compared to 765 00:39:15,280 --> 00:39:20,239 Speaker 1: the more more professional ones. Yeah, um, so I'm not 766 00:39:20,320 --> 00:39:21,960 Speaker 1: sorry I caught the first part exactly, but I think 767 00:39:22,120 --> 00:39:26,759 Speaker 1: I mean, is profitable during this csane bull market? Right, 768 00:39:26,840 --> 00:39:28,120 Speaker 1: That's what I thought I heard you said. But in 769 00:39:28,160 --> 00:39:31,400 Speaker 1: twenty twenty one we were actually okay, very profitable. UM 770 00:39:31,840 --> 00:39:34,360 Speaker 1: did about four billion dollars of EBNA in groups revenue 771 00:39:34,360 --> 00:39:38,000 Speaker 1: SWY twenty two we were not okay because the market 772 00:39:38,040 --> 00:39:39,799 Speaker 1: came down quite a lot, and we've made some really 773 00:39:40,160 --> 00:39:42,520 Speaker 1: some cuts and adjustments to try to get to an 774 00:39:42,600 --> 00:39:44,879 Speaker 1: environment where we can generate even a hopefully in any 775 00:39:44,920 --> 00:39:47,320 Speaker 1: market environment. But I guess the core your question is 776 00:39:47,320 --> 00:39:52,200 Speaker 1: really around feed compression. Yeah, yeah, um, okay. So there's 777 00:39:52,239 --> 00:39:54,040 Speaker 1: a there's a number of pieces to this. So the 778 00:39:54,080 --> 00:39:56,360 Speaker 1: first is that it's true there are difference in pricing 779 00:39:56,480 --> 00:39:59,239 Speaker 1: amongst our customers UM if they want to trade through 780 00:39:59,239 --> 00:40:01,160 Speaker 1: more of a pro interfew base or a simple interface 781 00:40:01,200 --> 00:40:03,480 Speaker 1: there's also a difference in pricing, of course, based on 782 00:40:03,480 --> 00:40:06,040 Speaker 1: how much trading volume they do. There's tiers, there's tiers 783 00:40:06,040 --> 00:40:07,320 Speaker 1: of that, and so I think what we've seen is 784 00:40:07,320 --> 00:40:10,680 Speaker 1: there's a willingness for customers to pay basically for ease 785 00:40:10,680 --> 00:40:14,440 Speaker 1: of use and simplicity and trust. And so I don't think, 786 00:40:14,480 --> 00:40:15,920 Speaker 1: by the way, our fees are not really out of 787 00:40:15,960 --> 00:40:18,000 Speaker 1: line with the rest of the market. I mean, there's 788 00:40:18,000 --> 00:40:20,520 Speaker 1: sometimes there's firms that kind of advertise like zero fees 789 00:40:20,600 --> 00:40:24,320 Speaker 1: or whatever, and you know they're payment order flow or 790 00:40:24,360 --> 00:40:26,680 Speaker 1: there's like different things that you're paying a fee one 791 00:40:26,719 --> 00:40:30,960 Speaker 1: way or another. It's sometimes not always obvious, right. One 792 00:40:30,960 --> 00:40:33,440 Speaker 1: of the thing I'll mention is that we actually we 793 00:40:33,440 --> 00:40:35,680 Speaker 1: actually launched something called coin Base one, which is like 794 00:40:35,680 --> 00:40:39,080 Speaker 1: an Amazon Prime type subscription, and for customers who pay 795 00:40:39,120 --> 00:40:40,680 Speaker 1: for that, I mean, they get a number of things 796 00:40:40,760 --> 00:40:42,480 Speaker 1: like a million dollar acount protection and all these kind 797 00:40:42,480 --> 00:40:44,640 Speaker 1: of things, but one of the things they get is 798 00:40:45,239 --> 00:40:48,680 Speaker 1: you know, reduced fee trading basically, and that's something we're 799 00:40:48,680 --> 00:40:52,920 Speaker 1: sensitive to as well for our power users. Basically, all right, Armstrong, 800 00:40:53,080 --> 00:40:56,560 Speaker 1: CEO coin Basis, thank you so much for coming on avelots. 801 00:40:56,600 --> 00:40:58,440 Speaker 1: We've wanted to have you for a long time. I'm 802 00:40:58,480 --> 00:41:01,040 Speaker 1: thrilled we finally made it happen. Yeah, this is great. 803 00:41:01,080 --> 00:41:17,000 Speaker 1: One of the best set of questions I've had in well, Tracy. 804 00:41:17,160 --> 00:41:19,160 Speaker 1: That was a lot of fun. I really enjoyed that. Yeah, 805 00:41:19,239 --> 00:41:20,960 Speaker 1: I'm glad we were finally able to do it. And 806 00:41:21,200 --> 00:41:23,799 Speaker 1: I guess kudos Bryan for coming on and answering our 807 00:41:23,920 --> 00:41:26,880 Speaker 1: questions in the midst of a deep crypto winter. Yeah, 808 00:41:26,880 --> 00:41:32,239 Speaker 1: it is interesting. There's just the myriad regulatory things right now, 809 00:41:32,280 --> 00:41:35,759 Speaker 1: and I have to say I do have sympathy and 810 00:41:35,800 --> 00:41:39,640 Speaker 1: I've heard it from other people in the industry, particularly 811 00:41:40,200 --> 00:41:42,399 Speaker 1: with this idea, because it's one thing to like go 812 00:41:42,560 --> 00:41:45,719 Speaker 1: to the SEC and laut and clear five rules around 813 00:41:45,760 --> 00:41:48,319 Speaker 1: security is not getting any answers. But then you also 814 00:41:48,400 --> 00:41:51,360 Speaker 1: hear entities in the industry and they're like, no, we 815 00:41:51,360 --> 00:41:53,719 Speaker 1: didn't even want to launch until we were sure we'd 816 00:41:53,760 --> 00:41:56,120 Speaker 1: be on the right side of the law. And then 817 00:41:56,200 --> 00:41:59,000 Speaker 1: like they're still in like pre launch phase three years later, 818 00:41:59,040 --> 00:42:02,200 Speaker 1: while other people have made you get punished for engage 819 00:42:02,280 --> 00:42:04,479 Speaker 1: an whereas if you don't ask questions and just launch, 820 00:42:04,560 --> 00:42:06,920 Speaker 1: sometimes that's better. Yeah, And then the only thing that 821 00:42:07,000 --> 00:42:09,440 Speaker 1: you know they do go after things like the Kim 822 00:42:09,560 --> 00:42:13,879 Speaker 1: Kardashian token, which was not that big, and so it's like, 823 00:42:14,040 --> 00:42:17,480 Speaker 1: you know, I have some sympathy I feel like for 824 00:42:18,040 --> 00:42:21,080 Speaker 1: entrepreneurs on this particular point within the industry. I mean, 825 00:42:21,080 --> 00:42:24,799 Speaker 1: I do think the lack of regulatory clarity is worth discussing. 826 00:42:24,880 --> 00:42:28,920 Speaker 1: But the argument for why a regulator might want to 827 00:42:28,960 --> 00:42:31,480 Speaker 1: do that is because well, if you start imposing all 828 00:42:31,520 --> 00:42:34,040 Speaker 1: these rules or unveiling all these new rules, then you 829 00:42:34,280 --> 00:42:38,319 Speaker 1: de facto legitimize it, And maybe maybe they don't want 830 00:42:38,360 --> 00:42:39,920 Speaker 1: to do that, but you know, if they don't want 831 00:42:39,960 --> 00:42:42,319 Speaker 1: to do that, then they should also maybe come out 832 00:42:42,400 --> 00:42:46,040 Speaker 1: and say that because it isn't But like I said, 833 00:42:46,120 --> 00:42:48,000 Speaker 1: and it is definitely true that a lot of people 834 00:42:48,200 --> 00:42:52,120 Speaker 1: lost money, Like I do think there is perhaps in 835 00:42:52,120 --> 00:42:54,200 Speaker 1: this view that we should take it more as a 836 00:42:54,239 --> 00:42:56,920 Speaker 1: win that the collapse of FTX didn't have like a 837 00:42:56,960 --> 00:43:01,399 Speaker 1: broader macro contagion, especially you know, given what we saw 838 00:43:01,440 --> 00:43:03,360 Speaker 1: in two thousand and eight when the collapse of what 839 00:43:03,680 --> 00:43:07,200 Speaker 1: Shadow Banks then had this huge impact. And so like 840 00:43:07,320 --> 00:43:09,600 Speaker 1: this idea of bringing it in the perimeter, like maybe 841 00:43:09,640 --> 00:43:11,279 Speaker 1: there are some perimeters we want to keep it out of. 842 00:43:11,400 --> 00:43:13,319 Speaker 1: I don't know, people are lost money, but at least 843 00:43:13,360 --> 00:43:15,719 Speaker 1: the financial system to collapse. That's like the best we 844 00:43:15,719 --> 00:43:18,239 Speaker 1: can hope for nowadays. It's not terrible, all right? Shall 845 00:43:18,280 --> 00:43:20,080 Speaker 1: we leave it there? Let's leave it there. This has 846 00:43:20,080 --> 00:43:23,320 Speaker 1: been another episode of the Old Thoughts podcast. I'm Tracy Alloway. 847 00:43:23,400 --> 00:43:25,680 Speaker 1: You can follow me on Twitter at Tracy Alloway and 848 00:43:25,719 --> 00:43:28,000 Speaker 1: I'm Joe wi Isn't All. You can follow me on 849 00:43:28,000 --> 00:43:31,560 Speaker 1: Twitter at the Stalwart. Follow our guest Brian Armstrong. He's 850 00:43:31,640 --> 00:43:36,520 Speaker 1: at Brian Underscore Armstrong. Follow our producers Kerman Rodriguez at 851 00:43:36,600 --> 00:43:40,279 Speaker 1: Kerman Arman and Dash Bennett at Dashbot. And check out 852 00:43:40,360 --> 00:43:44,080 Speaker 1: all of our podcasts at Bloomberg under the handle at podcasts, 853 00:43:44,400 --> 00:43:46,799 Speaker 1: and for more odd Lots content, go to Bloomberg dot 854 00:43:46,800 --> 00:43:50,440 Speaker 1: com slash odd Lots, where we post transcripts. Tracy my blog, 855 00:43:50,440 --> 00:43:53,800 Speaker 1: and we have a newsletter comes out every Friday. Thanks 856 00:43:53,800 --> 00:43:54,280 Speaker 1: for listening.