WEBVTT - Coinbase CEO Brian Armstrong on the Two Big Challenges Facing Crypto 0:00:10.039 --> 0:00:14.080 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.200 --> 0:00:18.480 I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, obviously 0:00:18.720 --> 0:00:21.239 a lot going on in crypto, but I would say 0:00:21.440 --> 0:00:24.720 the two big things are, like, I guess the crypto winter, 0:00:24.880 --> 0:00:28.480 there's been some recovery, but obviously all the coin prices 0:00:28.480 --> 0:00:31.160 are way lower than they used to be. And then 0:00:31.200 --> 0:00:34.120 there's just everything going on on the regulatory side. Yeah, 0:00:34.159 --> 0:00:36.559 it's sort of a double whammy for the industry. And 0:00:36.640 --> 0:00:40.680 I guess it's hard. It's hard to determine causality when 0:00:40.680 --> 0:00:43.760 it comes to price and extra regulation coming in. But yeah, 0:00:43.840 --> 0:00:46.680 it is not a great time for crypto. Well, I 0:00:46.760 --> 0:00:52.560 would say that the historical patterns would suggest the regulators 0:00:52.600 --> 0:00:55.240 like to come in after people have lost money. After 0:00:55.240 --> 0:00:57.800 people have lost money and scams, their investments go down. 0:00:58.200 --> 0:01:00.200 So it kind of makes sense that you see the 0:01:00.320 --> 0:01:04.080 uptick in regulation right after, just like the lines have 0:01:04.120 --> 0:01:05.920 been going down for a while, right, But it does 0:01:06.040 --> 0:01:09.000 prompt these big questions about should the regulators have been 0:01:09.040 --> 0:01:12.399 more proactive, should they have been doing things before people 0:01:12.520 --> 0:01:15.160 lost money? And then what should they do now? Anyway, 0:01:15.720 --> 0:01:19.479 we have the perfect guest to talk about this because 0:01:19.480 --> 0:01:22.560 we are going to be speaking with Brian Armstrong, CEO 0:01:22.640 --> 0:01:26.080 and co founder of coin Base right in the middle 0:01:26.080 --> 0:01:30.440 of all this, the pre eminent American crypto exchange. So, Brian, 0:01:30.520 --> 0:01:32.800 thank you so much for coming on odd Lots. Yeah, 0:01:32.800 --> 0:01:34.840 thanks for having me. I want to ask you a question. 0:01:34.880 --> 0:01:38.600 We've actually asked other executives in the crypto space this 0:01:38.680 --> 0:01:41.000 question before, but I'd love to get your take on it. 0:01:41.959 --> 0:01:44.920 What is yield farming and where does the return of 0:01:44.920 --> 0:01:48.360 it come from? Well, I mean, yield farming has a 0:01:48.360 --> 0:01:50.960 little bit of a bad name, I think in this environment. 0:01:51.680 --> 0:01:55.040 There was obviously with the collapse of Tera, Luna and 0:01:55.440 --> 0:01:57.800 block Fi and some other firms like that. I think 0:01:58.520 --> 0:02:01.040 that's a very valid question to be asking, and I'm 0:02:01.080 --> 0:02:03.280 not sure I couldn't even answer it on their behalf. 0:02:04.320 --> 0:02:06.640 But you know, I think there's a lot of other 0:02:06.640 --> 0:02:09.120 pieces of crypto that people are still excited about, and 0:02:10.000 --> 0:02:11.720 you know, there's lots of things we can build beyond that. 0:02:12.520 --> 0:02:14.360 So one of the things we've talked about on the 0:02:14.360 --> 0:02:16.600 show quite a bit is this idea of crypto as 0:02:16.680 --> 0:02:20.280 kind of the ultimate momentum asset and when money is 0:02:20.360 --> 0:02:23.519 flowing in prices go up and everything is great. When 0:02:23.560 --> 0:02:27.480 money flows out, prices collapse quite quickly, which would seem 0:02:27.560 --> 0:02:31.919 to make the business of being a crypto exchange extremely cyclical. 0:02:32.360 --> 0:02:34.480 But one of the things that stood out from your 0:02:34.520 --> 0:02:38.680 most recent results you just reported relatively recently, you talked 0:02:38.680 --> 0:02:41.639 about how you want to be profitable through the cycle, 0:02:41.800 --> 0:02:44.440 through the upturns and the downturns. Can you talk a 0:02:44.440 --> 0:02:48.000 little bit more about how you plan on doing that. Yeah, Well, 0:02:48.040 --> 0:02:50.320 historically most of our revenue has been from trading fees, 0:02:50.360 --> 0:02:53.639 which you're absolutely right, it is cyclical, and crypto has 0:02:53.680 --> 0:02:58.000 been a fairly volatile asset class goes up and down. Now, 0:02:58.160 --> 0:02:59.760 what we've done is we've started shifting more and more 0:02:59.760 --> 0:03:02.240 of our revenue to what we call subscription and services 0:03:02.440 --> 0:03:06.120 in our financials and our earnings calls. And basically what 0:03:06.160 --> 0:03:08.640 that means is things like usd coin, a stable coin 0:03:09.120 --> 0:03:11.560 that's been a nice growth mechanism for us, even in 0:03:11.639 --> 0:03:16.440 a down crypto market. Things like custody fees, fees that 0:03:16.480 --> 0:03:18.600 we earn on coin base card. People are you know, 0:03:18.720 --> 0:03:22.320 using it for spending in merchant commerce activity, So these 0:03:22.320 --> 0:03:25.120 things are I wouldn't say there's zero percent correlated with 0:03:25.320 --> 0:03:27.560 overall market in crypto, but there are certainly a lot 0:03:27.600 --> 0:03:29.720 less than trading fees, and that's allowing us to build 0:03:29.760 --> 0:03:33.079 a more predictable business. So we started in the industry 0:03:33.160 --> 0:03:36.000 also talk about the regulatory side, and that one whom 0:03:36.240 --> 0:03:38.800 you know will definitely talk a lot about that. But 0:03:38.920 --> 0:03:41.800 in particular, I think yesterday I saw that coin base 0:03:42.360 --> 0:03:44.680 you had some new program I think it was called 0:03:44.720 --> 0:03:48.960 the four thirty five program about you know, call your congressman, 0:03:49.080 --> 0:03:52.040 like let people know that you care about crypto policy. 0:03:52.200 --> 0:03:54.920 And of course like Uber sort of famously started the 0:03:55.000 --> 0:03:57.800 strategy like telling people on the app, like tell your 0:03:57.840 --> 0:04:01.119 local regulators you want to drive an Uber. And I'm 0:04:01.160 --> 0:04:02.760 going to try to ask this in the most like 0:04:02.760 --> 0:04:05.920 diplomatic way possible. And I have many friends who are 0:04:05.960 --> 0:04:09.400 into crypto, and I like many of them. But when 0:04:09.400 --> 0:04:12.080 it comes to crypto, do you want the type the 0:04:12.200 --> 0:04:15.640 type of person who would call their congressmen to tell 0:04:15.720 --> 0:04:19.599 them to do better crypto policy? Is that really the 0:04:19.640 --> 0:04:22.279 type of person that you want sort of being the 0:04:22.400 --> 0:04:26.720 voice of cryptoregulation. Well, I think the average person in crypto, 0:04:26.760 --> 0:04:28.080 and by the way, there's a lot of them, you know, 0:04:28.240 --> 0:04:30.960 one true one in five households now have used crypto, 0:04:31.040 --> 0:04:33.600 about fifty million Americans. This is a this is becoming 0:04:33.600 --> 0:04:36.560 a major constituent of you know, lobbying group and everything 0:04:36.560 --> 0:04:39.960 that's gonna have shape future elections. They want to you know, 0:04:40.000 --> 0:04:42.840 these average people. They may not have the exact solution 0:04:42.920 --> 0:04:45.600 for what the legislation should say around regulation of crypto, 0:04:45.680 --> 0:04:49.000 but they do know that they want elected representatives who 0:04:49.040 --> 0:04:51.599 are going to ensure that this industry comes within the 0:04:51.600 --> 0:04:55.320 regulatory perimeter, offers consumer protection, but also you know, allows 0:04:55.320 --> 0:04:57.360 this innovation to flourish so that it can we can 0:04:57.440 --> 0:04:59.840 update the financial system. You know, eighty percent of a 0:05:00.000 --> 0:05:04.160 Americans now believe that the financial system doesn't work for them. 0:05:04.240 --> 0:05:07.440 It's either too slow, it has too higher fees, it 0:05:07.720 --> 0:05:10.080 doesn't you know, nobody has equal access or not. Everyone 0:05:10.080 --> 0:05:12.640 has equal access to it. And it's not surprising that's 0:05:12.640 --> 0:05:14.920 the case. I mean, the technology behind the financial system 0:05:14.960 --> 0:05:17.919 is sometimes forty years old. It's written in cobalt, and 0:05:18.080 --> 0:05:21.039 these mainframe computers and the laws for it are sometimes 0:05:21.080 --> 0:05:23.280 one hundred years old. They were created before the Internet 0:05:23.320 --> 0:05:26.640 even existed, right, so it's time to update the financial system. 0:05:26.720 --> 0:05:28.880 We I think the average voter in America is now 0:05:28.920 --> 0:05:31.680 realizing that crypto is one of the great technologies that 0:05:31.720 --> 0:05:34.200 can help me update that and they want their elected 0:05:34.400 --> 0:05:38.120 representatives to bring that legislation and clarity to the US. 0:05:38.720 --> 0:05:40.520 Just on the political side. I mean, Joe and I 0:05:40.600 --> 0:05:42.799 kind of alluded to this in the intro, this idea 0:05:42.920 --> 0:05:45.360 that now that we have losses and we have big 0:05:45.400 --> 0:05:49.080 scandals in the industry, regulators seem to be becoming more 0:05:49.200 --> 0:05:51.680 active in the space. Can you talk to us a 0:05:51.720 --> 0:05:54.800 little bit about from your perspective, what is it like 0:05:55.000 --> 0:05:59.039 dealing with Washington now versus say, in twenty twenty or 0:05:59.040 --> 0:06:02.520 twenty twenty one. Yeah, well, I would say compared to 0:06:02.839 --> 0:06:06.040 twenty twenty, many more people that I meet with in 0:06:06.080 --> 0:06:10.240 Washington are actually pretty knowledgeable about crypto now. It's no 0:06:10.240 --> 0:06:12.600 longer a niche thing. Some of the conversations I had 0:06:12.600 --> 0:06:15.720 five years ago, you know, they were very basic. But 0:06:15.800 --> 0:06:17.920 most people that I speak with now actually have a 0:06:17.960 --> 0:06:23.200 reasonable understanding of crypto. They there. I think there's two camps. 0:06:23.279 --> 0:06:25.480 One camp is saying, hey, in the wake of FTX, 0:06:25.880 --> 0:06:28.600 I'm afraid of being associated with crypto, and I'm just 0:06:28.680 --> 0:06:30.600 going to kind of wait and see what happens because 0:06:30.600 --> 0:06:33.520 it's too dicey to even go near it. The other 0:06:33.600 --> 0:06:35.800 half of the folks I speak with are saying, you 0:06:35.800 --> 0:06:38.520 know what, this is an opportunity. I'm actually I want 0:06:38.520 --> 0:06:40.520 to be one of the people who helps bring this 0:06:40.560 --> 0:06:42.680 within the regulatory perimeter. And and we can see how 0:06:42.720 --> 0:06:45.520 important that is now with the collapse of FTX, and 0:06:45.560 --> 0:06:50.120 so they're actually drafting legislation, they're trying to gather bipartisan 0:06:50.160 --> 0:06:53.400 support to get some clarity going. And you know, I'm 0:06:53.400 --> 0:06:55.840 personally much more in favor of that ladder group. So 0:06:55.960 --> 0:06:57.440 actually I want to ask you, you know you talk 0:06:57.480 --> 0:06:59.800 about this impulse is like okay, in the wake of 0:07:00.560 --> 0:07:03.680 bring it inside the regulatory perimeter, And part of my 0:07:03.800 --> 0:07:07.120 question is like why because I look at FTX collapse 0:07:07.160 --> 0:07:09.560 and one of the biggest like sort of like crucial 0:07:09.560 --> 0:07:13.200 exchanges in the industry, and nothing bad happened after that. 0:07:13.240 --> 0:07:16.560 There was no fallout or no bailouts, It didn't have 0:07:16.600 --> 0:07:19.200 any spillover. So part of my thing is like, I 0:07:19.240 --> 0:07:21.440 don't want this in any perimeter because that seems to 0:07:21.440 --> 0:07:24.000 work pretty well in terms of the lessons of two 0:07:24.040 --> 0:07:27.360 thousand and eight avoiding too big to fail. What about 0:07:27.400 --> 0:07:30.080 the argument that it's like from a sort of like 0:07:30.320 --> 0:07:35.560 structural like yeah, like financial contagion standpoint, regulators have done 0:07:35.560 --> 0:07:40.120 a pretty good, pretty good job not letting this volatile product, 0:07:40.160 --> 0:07:43.960 this volatile industry create problems for the financial system. Let 0:07:43.960 --> 0:07:48.720 it burns strategy. Yeah, well, you know, I would disagree 0:07:48.760 --> 0:07:50.480 with the idea that nothing bad happened. I mean, a 0:07:50.520 --> 0:07:54.200 lot of people lost money, that's absolutely And I'm glad 0:07:54.200 --> 0:07:55.920 you say that because I did not. You're right, people 0:07:55.960 --> 0:07:59.880 lost their like, yes, yeah, so there was certainly some 0:08:00.520 --> 0:08:03.120 activity there, and I think that's the kind of consumer 0:08:03.160 --> 0:08:04.840 protection we're talking about. I don't I don't think there 0:08:04.840 --> 0:08:08.040 should have been bailouts or anything like that. Nothing in 0:08:08.120 --> 0:08:09.720 crypto is too big to fail. And it's kind of 0:08:09.800 --> 0:08:12.680 antithetical to crypto frankly, to you know, have a bailout 0:08:12.720 --> 0:08:15.000 or something like that. If you the first bitcoin block 0:08:15.080 --> 0:08:18.280 that was mind right had a message in it about that, 0:08:18.440 --> 0:08:21.000 you know, Chancellor on the braink of bailout. So crypto 0:08:21.080 --> 0:08:23.160 was kind of founded almost a bitcoin was founded as 0:08:23.200 --> 0:08:25.640 a result of reaction to the two thousand and eight 0:08:25.640 --> 0:08:28.440 financial crisis. But I think those two ideas can come 0:08:28.440 --> 0:08:30.960 into unity. I mean, we can have and again I'm 0:08:30.960 --> 0:08:33.520 talking about for the centralized actors in crypto, you know, 0:08:33.520 --> 0:08:36.720 the custodian's exchanges, companies like coin base. It's pretty clear 0:08:36.720 --> 0:08:39.520 everybody generally, there's broad consensus those should be regulated. It 0:08:39.520 --> 0:08:41.600 applies some of the best practices and standards, so we 0:08:41.600 --> 0:08:44.280 don't have fraud and corruption and things, you know, wash 0:08:44.360 --> 0:08:48.160 trading or email issues. But the decentralized pieces of crypto 0:08:48.240 --> 0:08:51.760 that's different. I mean, we need to have decentralized protocols 0:08:51.760 --> 0:08:53.840 so that we can have a global, more global and 0:08:53.840 --> 0:08:56.520 fair and free financial system, and that piece. You know, 0:08:56.640 --> 0:08:58.240 I don't think those are going to be regulated because 0:08:58.240 --> 0:09:00.800 there is no central authority for bitcoin or them. For instance, 0:09:01.240 --> 0:09:04.760 what should consumer protections look like in crypto? In your opinion, 0:09:04.840 --> 0:09:06.960 and especially you know, when I think of something like 0:09:07.440 --> 0:09:10.560 doge coin, you know, it's hard for me to come 0:09:10.640 --> 0:09:13.959 up with an economical use case for it, and so 0:09:14.040 --> 0:09:16.360 it's like, well, you can put all the disclosures that 0:09:16.360 --> 0:09:18.520 you want on there, but it seems highly likely that 0:09:18.559 --> 0:09:21.320 people will be losing money on that product at some 0:09:21.400 --> 0:09:24.720 point in time. Yeah, So again I would say, you know, 0:09:24.760 --> 0:09:26.920 the regulation and the customer protection probably should happen with 0:09:27.000 --> 0:09:30.640 the centralized actors, the custodian, the exchange, not necessarily dodge coin, 0:09:30.640 --> 0:09:34.240 which would be another decentralized coin, right, But yeah, I 0:09:34.280 --> 0:09:36.920 mean I think the exchanges and the firms that are 0:09:36.920 --> 0:09:40.320 being built around you know, custody or trading of things 0:09:40.360 --> 0:09:42.600 like that, they are going to have to have, um, 0:09:42.760 --> 0:09:45.640 some of these best practices from the traditional financial services world. 0:09:45.640 --> 0:09:48.679 So you know, let's have audited financials, let's make make 0:09:48.679 --> 0:09:52.840 sure customer funds are segregated from corporate funds, um, let's 0:09:52.840 --> 0:09:57.200 make sure that there's MLKYC programs and avoid avoiding wash trading, 0:09:57.200 --> 0:10:00.960 and yeah, appropriate disclosures are important as well. So those 0:10:00.960 --> 0:10:02.920 are all just kind of good general best best practices. 0:10:02.920 --> 0:10:05.400 But again it's focused on the centralized players as opposed 0:10:05.440 --> 0:10:09.600 to the decentralized pieces. It's interesting you make this distinction 0:10:09.640 --> 0:10:13.160 obviously between you know, there's sort of centralized players and 0:10:13.200 --> 0:10:16.480 then decentralized DeFi stuff. You're kind of becoming a hybrid, 0:10:16.520 --> 0:10:19.920 and you recently launched a layer to roll up to 0:10:20.080 --> 0:10:25.440 help scale ethereum. And I'm curious, as a regulated entity 0:10:25.520 --> 0:10:27.640 and one that has to abide by like finsend and 0:10:27.720 --> 0:10:32.280 anti money laundering laws, can you explain if the tension 0:10:32.559 --> 0:10:35.680 or is there any tension between I believe these sort 0:10:35.720 --> 0:10:37.800 of like a you know, roll up layer twos have 0:10:37.920 --> 0:10:42.040 some sort of centralized sequencer so that the transactions made 0:10:42.040 --> 0:10:44.840 out of them then get back to the main ethereum chain. 0:10:45.280 --> 0:10:47.960 Are you responsible for that and do you hate? How 0:10:47.960 --> 0:10:51.440 do you deal with that as an regulated entity? What 0:10:51.559 --> 0:10:55.120 if someone wanted to or try to launder money through 0:10:55.240 --> 0:10:59.520 this layer two are you facilitating that by putting those 0:10:59.559 --> 0:11:04.000 transactions onto the main ethereum chain. Yeah, so earlier, you know, 0:11:04.000 --> 0:11:06.160 I mentioned that the centralized players like coin base should 0:11:06.160 --> 0:11:08.280 be regulated and I and I was really referring to like, 0:11:08.400 --> 0:11:10.760 you know, our primary revenue stream today csodia in exchange. 0:11:10.760 --> 0:11:13.439 But you're absolutely right. We are embracing decentralization. At coin Base. 0:11:13.520 --> 0:11:16.000 We have a number of different products and legal entities 0:11:16.000 --> 0:11:18.240 and different ones working in various areas. So we did 0:11:18.360 --> 0:11:20.720 launch this really exciting thing, a layer two solution called 0:11:20.720 --> 0:11:23.040 Base and our goal with that is really to help 0:11:23.720 --> 0:11:28.319 provide more scalability and better usability for layer two solutions. 0:11:28.360 --> 0:11:30.600 So we want to get transactions and ethereum down to 0:11:30.760 --> 0:11:33.600 you a penny or less and help that scale to 0:11:33.800 --> 0:11:37.080 hopefully a billion or more people someday. I think I 0:11:37.080 --> 0:11:39.480 guess the core of your question was really around the 0:11:39.559 --> 0:11:43.040 responsibility from a centralized decentralized pease and I think, you know, 0:11:43.640 --> 0:11:46.960 so base is it has some centralized components today, but 0:11:46.960 --> 0:11:48.880 it's it's going to be more and more decentralized over 0:11:48.920 --> 0:11:52.240 time as as it grows, and so you know, I 0:11:52.240 --> 0:11:54.640 think we have responsibility in terms of you know, transaction 0:11:54.679 --> 0:11:56.600 monitoring things like that that we have to look at 0:11:56.640 --> 0:11:59.520 in the early days, but as it decentralizes, I think 0:11:59.559 --> 0:12:02.080 that again, the centralized actors are the ones that are 0:12:02.080 --> 0:12:04.559 probably going to have the most responsibility there to avoid 0:12:04.960 --> 0:12:09.240 money laundering issues and having transaction monitoring programs things like that. 0:12:26.400 --> 0:12:30.760 So speaking of responsibility, Um, you know, there are thousands 0:12:30.880 --> 0:12:34.679 I think of coins and tokens listed on coin base now, 0:12:36.360 --> 0:12:40.000 dred Okay, I didn't flip through all the pages, but 0:12:40.120 --> 0:12:43.480 there's a lot um And you guys say that you 0:12:43.600 --> 0:12:48.120 never actually list securities, but it feels like nowadays there's 0:12:48.160 --> 0:12:52.240 so much uncertainty over you know, you could wake up 0:12:52.280 --> 0:12:54.720 tomorrow and the SEC says this is a security or 0:12:54.760 --> 0:12:57.680 that's a security. I mean just a little while ago, 0:12:57.880 --> 0:12:59.839 for instance, they were um, I think there was an 0:12:59.840 --> 0:13:05.240 inforcement action on Kim Kardashian for unlawfully touting a crypto security. 0:13:05.800 --> 0:13:09.600 So how can you say with confidence that you don't 0:13:09.679 --> 0:13:13.640 list any securities when it feels like that's a very 0:13:13.679 --> 0:13:17.760 fluid thing at the moment. Yeah, So I think, look, 0:13:17.760 --> 0:13:19.840 the best thing for us and for the whole industry 0:13:19.880 --> 0:13:23.079 would be, here's a clear rule book. Everybody has to 0:13:23.120 --> 0:13:24.960 follow it, you know, and if the rules change, give 0:13:25.000 --> 0:13:27.680 us a new rulebook, we'll follow that one. Right. We've 0:13:27.679 --> 0:13:30.480 actually been requesting that, and we've we've filed a petition 0:13:30.520 --> 0:13:32.280 with the SEC on this. People can read it on 0:13:32.280 --> 0:13:35.280 their website, and we sort of enumerated, Look, these are 0:13:35.320 --> 0:13:38.120 the ways that the current securities laws don't really address 0:13:38.160 --> 0:13:41.760 some of these underlying questions in crypto, like if there 0:13:41.840 --> 0:13:44.240 is no common enterprise or centralized entity behind this thing, 0:13:44.280 --> 0:13:47.800 who who publishes the disclosures? You know, So there's there's 0:13:47.840 --> 0:13:51.200 questions like that. Now, what we've done in the absence 0:13:51.200 --> 0:13:53.600 of that clarity, which again would be the best case scenario, 0:13:54.360 --> 0:13:57.400 is that we have created our own internal process to 0:13:57.480 --> 0:14:01.520 review assets, and we developed something I think it has 0:14:01.559 --> 0:14:04.360 like seventy seventy two points in the legal analysis and 0:14:04.520 --> 0:14:06.720 kind of one area it looks at is securities law. 0:14:07.160 --> 0:14:09.880 It also looks at compliance risk, you know, cybersecurity risk, 0:14:09.920 --> 0:14:12.640 things like that. And we've evaluated probably roughly a thousand 0:14:12.679 --> 0:14:16.320 assets through this process, about eight hundred of them we 0:14:16.360 --> 0:14:19.760 have rejected and for various reasons, whether securities or compliance 0:14:19.880 --> 0:14:22.440 or cyber about you know, two hundred two and fifty 0:14:22.520 --> 0:14:25.680 or something like that, we've decided to list. So, you know, 0:14:25.840 --> 0:14:28.120 I guess the heart of your question is what happens 0:14:28.120 --> 0:14:31.120 if the sec comes out and says okay. So if 0:14:31.160 --> 0:14:33.400 they come out and they and they again we're asking, 0:14:33.400 --> 0:14:35.640 we're asking for more clear rules. Right, So if they 0:14:35.640 --> 0:14:38.960 come out and say, you know, we think this asset 0:14:39.040 --> 0:14:41.360 is a security, that's great. Okay, now we have clarity 0:14:41.400 --> 0:14:44.240 and assuming you know, it's not, if it meets the 0:14:44.320 --> 0:14:47.000 legal definition, it's not going too far. We would be 0:14:47.000 --> 0:14:49.240 happy to sort of update our process in our system 0:14:49.240 --> 0:14:53.560 based on that that new information. Now, ultimately, if they 0:14:53.560 --> 0:14:55.240 publish something and they say, well, we think all these 0:14:55.240 --> 0:14:59.360 assets are securities, well that's not really our understanding of 0:14:59.360 --> 0:15:01.560 the law. And the third party is an external council 0:15:01.640 --> 0:15:03.720 we've worked with, and so there is a line here 0:15:03.760 --> 0:15:05.760 where I think as an industry, and it's not just us, 0:15:05.760 --> 0:15:08.480 it's these asset issuers which are even more primarily affected. 0:15:08.920 --> 0:15:10.960 You know, they would have to say, okay, well, let's 0:15:11.000 --> 0:15:13.360 let a court decide that, because you know, we have 0:15:13.360 --> 0:15:15.440 to follow a rule of law. So does the sec right. 0:15:15.480 --> 0:15:18.680 And so if they put out, you know, their opinion 0:15:18.680 --> 0:15:20.880 about something, that doesn't necessarily mean it's true. It just 0:15:20.960 --> 0:15:23.400 means the court ultimately has to be the decider on that. 0:15:23.720 --> 0:15:27.480 Can you give an example not necessarily of a specific coin, 0:15:27.920 --> 0:15:31.520 but of something that you have seen in tokens that 0:15:31.560 --> 0:15:35.920 you've rejected that to your mind said no, we cannot 0:15:35.920 --> 0:15:40.200 list this because this is a characteristic of a security. Yeah, 0:15:40.240 --> 0:15:44.720 I mean, there's so there's a variety of I mean, 0:15:44.760 --> 0:15:46.960 there's many prongs of the Howie test, right, I mean, 0:15:47.320 --> 0:15:48.520 and I don't want to get into like an in 0:15:48.600 --> 0:15:51.240 depth legal analysis here, but you know we've never done 0:15:51.240 --> 0:15:54.320 a Howie Test episode, and so this could be it, 0:15:54.400 --> 0:15:58.720 but no, go ahead. Yeah, So you know there's multiple 0:15:58.720 --> 0:16:00.800 prongs there, right. I think you know, if if people 0:16:00.800 --> 0:16:03.360 are buying it primarily with this expectation of profit, and 0:16:03.840 --> 0:16:07.000 it's there's you know, there's a common enterprise and and 0:16:07.000 --> 0:16:09.600 and right. So, but if there's something in the like 0:16:10.440 --> 0:16:13.960 speaking in terms of patterns that you see within crypto 0:16:14.080 --> 0:16:17.400 projects that when you look at it's like, no, this team, 0:16:17.440 --> 0:16:20.760 like the type of things the teams do that would say, 0:16:20.760 --> 0:16:22.320 you know what, this token is not going to be 0:16:22.440 --> 0:16:25.040 kosher from coin base. Are there things that you see 0:16:25.040 --> 0:16:27.880 in the industry where you think teams are crossing that 0:16:27.960 --> 0:16:30.360 line into I don't know whether it's the common enterprise 0:16:30.440 --> 0:16:35.800 aspect that preclude them from at least your judgment being 0:16:35.840 --> 0:16:37.880 safe to list. Yeah, I mean so I'll give you 0:16:37.880 --> 0:16:42.160 a security example, but there's others in cyber security and others. Um. 0:16:42.920 --> 0:16:44.920 So you know, look, if you're if you're legitimately just 0:16:44.960 --> 0:16:46.880 trying to raise money for your company or for some 0:16:46.920 --> 0:16:49.120 project like an apartment comment X or something like that, 0:16:49.120 --> 0:16:51.280 that is a security. That's the point of security's law. 0:16:51.360 --> 0:16:55.120 There has to be an investment of money into this thing, 0:16:55.160 --> 0:16:57.440 and for you know, in a common enterprise with an 0:16:57.440 --> 0:17:00.800 expectation of profit you know, based on the others. So 0:17:01.520 --> 0:17:03.400 that should exist, by the way, and we want that 0:17:03.480 --> 0:17:06.320 to exist in the world. Um, we've acquired a broker 0:17:06.400 --> 0:17:09.480 deal license. We were a stormant right now. We we'd 0:17:09.560 --> 0:17:11.199 like to activate it. We're working with the sec to 0:17:11.200 --> 0:17:14.280 hopefully make that happen. Crypto is a technology that could 0:17:14.280 --> 0:17:17.879 make you know, crypto securities could offer benefits and update 0:17:17.880 --> 0:17:19.920 the financial system and improve all kinds of things to 0:17:20.160 --> 0:17:22.520 you know, time to settlement and various things like that. 0:17:22.960 --> 0:17:25.919 So that's an example. Um, you know, if people are 0:17:25.960 --> 0:17:28.040 out there kind of really hyping these things like on 0:17:28.080 --> 0:17:32.240 YouTube and um and the tokenomicxer look sketchy and um, 0:17:32.960 --> 0:17:35.520 you know there's really low float and the insiders are 0:17:35.560 --> 0:17:37.600 selling it. These are all bad fact patterns and those 0:17:37.640 --> 0:17:40.840 are the things we try to avoid for consumer protection. UM. 0:17:41.160 --> 0:17:42.919 You know, there's other ways. There's other reasons we may 0:17:42.960 --> 0:17:45.440 reject assets too, I mean an initiation. Another example would 0:17:45.480 --> 0:17:48.960 be cybersecurity risk. So we often will um evaluate the 0:17:49.000 --> 0:17:51.800 smart contracts for you know, is there some exploit in 0:17:51.840 --> 0:17:54.000 this or there's an ability you know, if if the 0:17:54.480 --> 0:17:56.520 the acid issue is not even like a malicious thing 0:17:56.520 --> 0:18:01.080 but an accidental thing. If they lose the key, everyone's 0:18:01.080 --> 0:18:02.920 phones could be swept or something like that, that that's 0:18:02.960 --> 0:18:04.960 not secure enough right to meet our standards. So that 0:18:05.000 --> 0:18:09.480 those are examples. Is crypto shooting itself in the foot 0:18:09.520 --> 0:18:13.159 in some respects by like resisting the security designation, Like 0:18:13.359 --> 0:18:16.800 is that a tacit admission that maybe there isn't a 0:18:16.840 --> 0:18:26.040 reasonable expectation of profits here? Question? Yeah? Yeah, I mean 0:18:26.119 --> 0:18:28.520 we want actually crypto securities to exist. So we're not 0:18:28.560 --> 0:18:30.320 saying none of these things are securities. But on the 0:18:30.320 --> 0:18:31.919 flip side, is not true either. It's not that all 0:18:31.960 --> 0:18:35.680 of these are securities. Both of those are inaccurate statements. 0:18:35.920 --> 0:18:37.520 And I guess the thing I would say too, is 0:18:37.560 --> 0:18:41.080 that just an expectation of profit alone does not make 0:18:41.119 --> 0:18:43.280 something a security. It has to be meet every prong 0:18:43.359 --> 0:18:45.439 of the how he test is my understanding. So an example, 0:18:45.480 --> 0:18:47.919 you know, people might buy a Picasso painting hoping it 0:18:47.920 --> 0:18:51.639 goes up in value, or buy gold or something like that. 0:18:51.720 --> 0:18:56.400 So those aren't securities. So yeah, I mean basically, Bitcoin 0:18:56.400 --> 0:18:58.679 ethereum and the assets that we trade on our platform day, 0:18:58.720 --> 0:19:02.000 we believe our crypto commodity, and it's you know, people 0:19:02.000 --> 0:19:03.639 trade those. Some of them they want to go up 0:19:03.640 --> 0:19:06.560 in value, just like they buy gold. Other other times 0:19:06.560 --> 0:19:10.160 they're using it for various utility aspects. You know, this 0:19:10.200 --> 0:19:11.639 is sort of I want to get back to the 0:19:11.640 --> 0:19:15.040 regulatory question. But before I forget, can you talk for 0:19:15.080 --> 0:19:18.639 a second about how you view bitcoin specifically, because it 0:19:18.680 --> 0:19:22.520 feels like the crypto industry in many respects has moved 0:19:22.560 --> 0:19:26.119 on from Bitcoin. And I'm sure your mentions on Twitter 0:19:26.440 --> 0:19:29.439 are filled every day with angry, laser eyed people that 0:19:29.560 --> 0:19:32.399 think you hate bitcoin. But it is also true that 0:19:32.480 --> 0:19:35.760 you know you launched you launched an ethereum layer two. 0:19:35.840 --> 0:19:37.320 I don't know if do you have a light do 0:19:37.359 --> 0:19:41.080 you is there a coin based lightning note or we'd 0:19:41.080 --> 0:19:43.639 like to do more with lightning pleasure havin pro lightning 0:19:43.760 --> 0:19:47.080 so but haven't yet. Yeah, and you know there's all 0:19:47.119 --> 0:19:50.560 these issues with like funding for core bitcoin devs, like 0:19:50.680 --> 0:19:53.040 frustration that they don't get enough and can't maintain it. 0:19:53.240 --> 0:19:57.840 What is your view towards bitcoin? I mean, I love bitcoin. 0:19:58.000 --> 0:20:01.040 I honestly, I don't really understand why, Um, anybody might 0:20:01.080 --> 0:20:03.520 think the opposite. I'd kind of like dedicated people do, right, 0:20:03.600 --> 0:20:05.800 I mean, I'm not wrong that you, um, there is 0:20:05.880 --> 0:20:08.960 kind of all abused by bitcoin maxis at one time 0:20:09.040 --> 0:20:13.199 or another. I think that's unfortunate. Um, I don't know 0:20:13.200 --> 0:20:15.280 how seriously to take that. I mean I do see 0:20:15.280 --> 0:20:17.000 people say this on Twitter sometimes but I don't know 0:20:17.040 --> 0:20:19.240 if it's like a widely believed thing. I mean, it 0:20:19.280 --> 0:20:21.960 would sort of defy credulity, right. I mean I've kind 0:20:21.960 --> 0:20:24.320 of almost dedicated my life too like bitcoin and helping 0:20:24.320 --> 0:20:26.480 it grow. I mean literally I read the Bitcoin white 0:20:26.480 --> 0:20:28.560 paper and then decided to quit my job and found 0:20:28.560 --> 0:20:31.680 this company. Um. Now, of course the industry has evolved 0:20:31.680 --> 0:20:33.679 into many things, right, I mean, there's lots of new 0:20:33.720 --> 0:20:37.240 innovations coming out in crypto. But yeah, I'm very pro bitcoin, 0:20:37.280 --> 0:20:41.000 and I think, look, I think there's a very simple 0:20:41.119 --> 0:20:43.480 base case for for bitcoin, which is that it's the 0:20:43.520 --> 0:20:46.920 gold standard in the crypto economy. And I think that 0:20:46.920 --> 0:20:49.520