Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Now.
Speaker 3: Another company we've been keeping a close eye on is
Speaker 3: Coinbase and it's set to join the S and P
Speaker 3: five hundred next week. The company's CEO has also been
Speaker 3: calling for lawmakers to pass a stable coin bill. A
Speaker 3: lot of the financial industry watching that bill very very closely.
Speaker 3: We are joined now by Coinbas's CEO who's on Capitol
Speaker 3: Hill right now, Brian Armstrong. And Brian, thanks for joining
Speaker 3: us while you're doing your trip at the hill. But
Speaker 3: first we have to really start with your big moment,
Speaker 3: which is at S and P five hundred inclusion. You
Speaker 3: have been focusing here on expanding your world in financial services.
Speaker 3: Discover was taken out, you're added in. What does it
Speaker 3: say about the moment?
Speaker 1: Yeah, well, it's a huge moment for crypto to now
Speaker 1: be in the S and P five hundred with Coinbase entering,
Speaker 1: and it means that crypto is here to say, people
Speaker 1: are going to have crypto exposure in all their four
Speaker 1: oh one k's and it points a little bit to
Speaker 1: I think where the future of financial services is going.
Speaker 1: Cryptos a technology to update the financial system. We actually
Speaker 1: launched our own index coin fifty, which is the top
Speaker 1: fifty crypto assets market cap weighted, and someday we hope
Speaker 1: people might actually, you know, feel the same way about
Speaker 1: getting the S and P five hundreds of getting in
Speaker 1: the coin fifty index.
Speaker 2: So it's a great moment.
Speaker 3: We were talking a little earlier about e Toro's ipl You
Speaker 3: see other entrants like that come into public markets, wondering
Speaker 3: what it means for you because e Toro is not
Speaker 3: going to be the only one in terms of entering
Speaker 3: that crypto versus stocks world. Do you think coinbase will
Speaker 3: ever get into traditional way equity trading, or at least
Speaker 3: tokenized equity trading in a much larger way.
Speaker 1: Yeah, well, we think that all asset classes are being
Speaker 1: tokenized crypto. Again, it's this technology to update the financial system.
Speaker 1: That means every company, every fintech, every bank, every payment company,
Speaker 1: even non financial service companies are going to be integrating
Speaker 1: crypto payments. It's kind of like when the Internet came out,
Speaker 1: and first you had dot com startups and then comp
Speaker 1: every fortune five hundred company uses the Internet. So we
Speaker 1: think it's going to be very similar and actually this
Speaker 1: is a good thing for coinbase because many of these
Speaker 1: companies when they come to crypto, they're going to.
Speaker 2: Buy our products and services.
Speaker 1: We actually power crypto custody trading payments, especially with stable coins,
Speaker 1: which is a big new emerging activity for lots of
Speaker 1: companies already, and so we're excited about that happening now
Speaker 1: on you specifically asked about tokenized equities. We're excited about those,
Speaker 1: and we want to lean into the crypto native solutions,
Speaker 1: not trade traditional securities in the way that many other
Speaker 1: companies do. We think there's unique advantages to having this
Speaker 1: come on chain, and so we're excited to explore that.
Speaker 1: We've We've met with, for instance, the sec Task Force
Speaker 1: on this recently, and there seems to be a general
Speaker 1: willingness to have these kind of asset classes come on chain.
Speaker 3: Now let's stay posted on that front. Of course, there's
Speaker 3: a big question on how soon that could happen now,
Speaker 3: Brian stable coins, because part of the discussion that is
Speaker 3: looming large in Washington is of course that stable coin bill.
Speaker 3: Now call a trip I made down to Coinbase's New
Speaker 3: York offices. I spoke with one of your deputies, Jesse Pollock,
Speaker 3: and he showed me the way that people are transacting
Speaker 3: on Coinbase via stable coin, often at no fee. I'm
Speaker 3: really wondering from your perspective to the extent that when
Speaker 3: you see a bill passed, how much that could set
Speaker 3: off stable coin payments, peer to peer payments in a
Speaker 3: way that's cheaper than the financial industry does it today.
Speaker 2: Yeah, well, you're right.
Speaker 1: Stable coin adoption, for like USDC, it has grown enormously
Speaker 1: and a lot of it's happening on Base, which is
Speaker 1: a layer two solution that Coinbase helped create. So it's
Speaker 1: a very exciting moment where we're seeing stable coin adoption. Now,
Speaker 1: we also need to make sure that this technology gets
Speaker 1: built here in the US, and that's what this stable
Speaker 1: coin bill is really about.
Speaker 2: It's a historic moment.
Speaker 1: There's a lot of interest from senators on both sides
Speaker 1: of the isle that I've met with today to get
Speaker 1: this legislation done, and that's what we're here to try
Speaker 1: and help do.
Speaker 2: Now. The details matter, and there's bits of language.
Speaker 1: That are being to go siated right up into the
Speaker 1: last minute, but we're here to try to underscore the
Speaker 1: urgency of this and the fifty two million Americans who've
Speaker 1: used crypto really want to see this legislation get passed
Speaker 1: so that this industry can get built here on shore
Speaker 1: in America.
Speaker 3: Well, you say words matter. What are the words now
Speaker 3: that you would want to see changed as it hits
Speaker 3: the final finish line?
Speaker 2: Yeah, I mean there's a couple examples for you.
Speaker 1: One is that you know, DeFi is something that is
Speaker 1: separate from financial services. We don't think it should be
Speaker 1: included in AML provisions. AML provisions make a lot of
Speaker 1: sense applied to the centralized intermediaries like exchanges and custodians,
Speaker 1: things that coinbases core business, but DeFi should be excluded
Speaker 1: from that, and recent language updates we've seen seem to
Speaker 1: indicate that that's.
Speaker 2: The path they're going on.
Speaker 1: One other area for you to think about is there
Speaker 1: are some prohibitions on paying interest and yield in some
Speaker 1: of the drafts or some of the language that we
Speaker 1: were made aware of. We think that this is a
Speaker 1: you know, banks should have to compete on a level
Speaker 1: playing field with crypto. We think that paying interest in
Speaker 1: yield to customers is good, is a consumer benefit. We
Speaker 1: actually think to American consumers should be able to benefit
Speaker 1: from that, and any company, whether your bank, crypto company,
Speaker 1: should be able to compete on that front.
Speaker 2: Now there's a.
Speaker 1: Lot of debate back and forth about that, but these
Speaker 1: are examples of the kinds of issues that are coming
Speaker 1: down into the line. We want to make sure that
Speaker 1: you know perfect is not the enemy of good enough,
Speaker 1: and getting this legislation passed is the highest priority.
Speaker 3: I'm wondering where you see this going. We've even heard
Speaker 3: from the Bank of America CEO saying that they would
Speaker 3: see a Bank of America stable coin one day. Once
Speaker 3: you see this bill pass Now, for you, would you
Speaker 3: be considering issuing a stable coin at coinbase.
Speaker 1: But we have a great partnership with Circle on USDC,
Speaker 1: and so that's the primary stable coin that we like
Speaker 1: to advocate for. We think it's the fastest growing major
Speaker 1: stable coin, it's the most trusted, it's the most compliant.
Speaker 1: But to your point about you know, the bank CEOs,
Speaker 1: et cetera, we want everyone to succeed here. We think
Speaker 1: that banks should be able to participate in stable coins.
Speaker 1: It's a huge opportunity and we want to make sure
Speaker 1: any potential legislation doesn't prohibit them or us from doing that.
Speaker 3: So Circle for a moment, Circle is in talks to
Speaker 3: go public do you think anything will change with your
Speaker 3: relationship once it becomes a public company, And frankly, would
Speaker 3: you ever consider buying Circle? I mean, your relationship with
Speaker 3: the company has gotten so close, why not just have
Speaker 3: it in house?
Speaker 2: Yeah, well, we're very excited for their success.
Speaker 1: USDC has been an enormous outcome, and so they deserve
Speaker 1: a ton of.
Speaker 2: Credit for that.
Speaker 1: Them going public doesn't change anything about our commercial relationship.
Speaker 1: But in terms of other deals we might consider in
Speaker 1: the future, I mean that of course would be up
Speaker 1: to them in US but you know, nothing to announce today.
Speaker 3: Are you actively looking at other acquisition targets now? You
Speaker 3: made a lot of news recently with the Derabiit acquisition. Hankkit,
Speaker 3: I will ask you about that, but there is a
Speaker 3: question about how much more dry powder you have to
Speaker 3: do more.
Speaker 1: Yeah, we're always looking at M and A opportunities. You know,
Speaker 1: we do have a pretty large balance sheet that could
Speaker 1: be put to use here, and of course, part of
Speaker 1: the benefit of being a public company now and yes
Speaker 1: five hundred is that you have somewhat of a liquid
Speaker 1: currency to do that. So we're looking at acquisition opportunities constantly.
Speaker 1: It doesn't mean we swing at every pitch, we want
Speaker 1: it to be the right opportunity, because the hard part
Speaker 1: is not buying the company, it's actually successfully integrating it.
Speaker 1: But we've made a number of acquisitions recently. For instance,
Speaker 1: on Base, we acquired a couple of startups. We're looking
Speaker 1: at international opportunities that could aggregate share companies that do
Speaker 1: things similar do we do, and then also things that
Speaker 1: could just accelerate our product.
Speaker 3: Roadmap on derebit. Very curious, of course, this was one
Speaker 3: of the larger acquisitions we've seen in the crypto community,
Speaker 3: a very very milestone moment for coinbase as well. It's
Speaker 3: a derivative exchange, and do you expect it to win
Speaker 3: approval to operate in the US? If so, how soon?
Speaker 2: Yeah, you're correct.
Speaker 1: So it is a derivatives exchange, and that's a big
Speaker 1: push for US. International derivatives trading has been a huge
Speaker 1: area for crypto. It's the vast majority of all crypt
Speaker 1: trading volume actions and we are excited to do that
Speaker 1: both internationally where we operate, and eventually to bring it
Speaker 1: into the US. I don't have an exact timeframe for
Speaker 1: you on that, but we believe that having spot trading
Speaker 1: options and futures all on one unified platform, and we
Speaker 1: can be the trusted counterparty to these traders. That's going
Speaker 1: to be a winning solution both in the US and internationally.
Speaker 3: So what about the future a little more. I'm really
Speaker 3: curious about how you're viewing the tone coming out of
Speaker 3: Washington when it comes to the future of crypto. What
Speaker 3: do you think, besides the table, the stable coin Bill
Speaker 3: will be the biggest change in the industry over the
Speaker 3: next four years.
Speaker 1: Yeah, well, getting legislation passed, of course, would be a
Speaker 1: huge milestone with stable coins and then and market structure
Speaker 1: as I mentioned, But I think the other big opportunity
Speaker 1: on the horizon right now is that stable coins are
Speaker 1: and payments are becoming a bigger and bigger area of
Speaker 1: the economy. I mean, I think ultimately stable coins will
Speaker 1: power the majority of all payments in global GDP or
Speaker 1: in the economy large and crypto is going to become
Speaker 1: the majority of the financial system. It is updating the
Speaker 1: financial system in many ways, so that's going to happen
Speaker 1: across you know, revitalizing our credit markets. There's features that
Speaker 1: coinbase has launched recently, like defive borrow lend, which got
Speaker 1: over one hundred million dollars in loans in one hundred days.
Speaker 2: It's growing like wildfire.
Speaker 1: It's going to update the capital formation markets, how people
Speaker 1: raise money to start a company or to build an
Speaker 1: apartment complex. It's going to tokenize traditional securities, bring them
Speaker 1: online for twenty four to seven trading, allowing people markets
Speaker 1: all over the world to have a level playing field
Speaker 1: and participate in those So, whether it's payments, credit, securities
Speaker 1: in a new gold standard, you know, with bitcoin, I
Speaker 1: think crypto truly is updating the financial system, and we're
Speaker 1: going to get to this world eventually where there's a
Speaker 1: transnational economy that is not controlled by any one country.
Speaker 1: The long tail of fiat currencies probably don't need to exist,
Speaker 1: they could be replaced by bitcoin, but the major ones,
Speaker 1: we'll each have stable coins which are thriving. So it's
Speaker 1: a bright future if we can update the financial system
Speaker 1: and create more economic freedom for people.
Speaker 3: Brian, I'm curious about the conversation around a US strategic
Speaker 3: Bitcoin reserve. More so, I'm also curious whether coinbase will
Speaker 3: be the custodian.
Speaker 1: Well, it's definitely a historic moment for the United States
Speaker 1: of America to declare bitcoin as a strategic asset. That
Speaker 1: was a huge moment I think underappreciated in the markets actually,
Speaker 1: And you know, I believe that they're going through an
Speaker 1: RFP process now, and we're of course throwing our hat
Speaker 1: in the ring to hopefully be that provider there. You know,
Speaker 1: we actually provide crypto services, whether that's custody or trading
Speaker 1: to over one hundred and forty government institutions at the federal, state,
Speaker 1: local level, not just in here in the US, but
Speaker 1: in other countries as well. So I think we would
Speaker 1: be the perverred provider, I hope. But we'll throw our
Speaker 1: hat in the ring and they should run a fair
Speaker 1: and orderly process.
Speaker 3: It's interesting because you see very mixed responses from people
Speaker 3: across the crypto community around the administration's approach to crypto,
Speaker 3: but particularly the president's approach to crypto. Bloomberg recently reported
Speaker 3: that the top buyers of the meme coin that are
Speaker 3: buying for seats at the White House dinner or the
Speaker 3: President's dinner. For those meme coin holders, many of these
Speaker 3: buyers are likely foreign based on what we have seen
Speaker 3: of the purchasers of these coins. Now, from your perspective,
Speaker 3: what does this say about how much activity has moved
Speaker 3: offshore and does it create an issue for the way
Speaker 3: that crypto is evolving on shore in the United States.
Speaker 1: Yeah, well, I'm not sure about the numbers specifically on
Speaker 1: the Trump meme coin, but I know that written large,
Speaker 1: the crypto industry has largely moved offshore from the US
Speaker 1: because of the lack of clarity of rules in the
Speaker 1: last four or five years, especially, so I'd say it's
Speaker 1: roughly eighty percent.
Speaker 2: Offshore at this point.
Speaker 1: And for people who care about national security rules law,
Speaker 1: you know, that's a huge issue. We need to make
Speaker 1: sure that this gets brought onshore into the regulatory perimeter.
Speaker 1: And whether people that love crypto or hate crypto, they
Speaker 1: should be for legislation which does that. And that's a
Speaker 1: lot of what these urgency of these bills getting passed,
Speaker 1: even including the stable coin bill tomorrow.
Speaker 3: What do you make more largely to the president's approj
Speaker 3: on crypto. There are people who are on one hand,
Speaker 3: are very happy that he's pushing the initiatives forward in
Speaker 3: the United States, but there are also people who are
Speaker 3: frustrated that his own projects are taking finances money away
Speaker 3: from other projects, well.
Speaker 1: From our perspective, We've been very happy with the President's
Speaker 1: approchon crypto. I mean, he said that he wants the
Speaker 1: US to be the crypto capital of the world. He's
Speaker 1: told Congress that he wants this legislation both for stable
Speaker 1: coins and market structure to be.
Speaker 2: Passed before the August recess.
Speaker 1: You know, declaring a strategic bitcoin reserve here in the
Speaker 1: US was an incredible milestone. So from our point of view,
Speaker 1: it could not be a better outcome versus what we
Speaker 1: saw over the last four years, where the lack of
Speaker 1: clarity was really weaponized togat inst the industry. But what's
Speaker 1: positive is that crypto is truly bipartisan. I mean, the
Speaker 1: President's leadership here has been amazing, but I think that
Speaker 1: Congress and especially in the Senate, the folks I talk
Speaker 1: to you, there's now a strong bipartisan majority of people
Speaker 1: who want to see pro crypto legislation get passed.
Speaker 3: Right, I want to start off where we left off.
Speaker 3: We're talking about other competitors in the space. E. Toro
Speaker 3: being a new trading you know, publicly traded company, for example,
Speaker 3: but also foreign companies that are entering the US potentially
Speaker 3: because they're excited about lighter regulations or at least clearer
Speaker 3: regulations and rules of the road. Do you see much
Speaker 3: more competition ahead for Coinbase.
Speaker 1: Yes, I mean actually, I think that many different companies
Speaker 1: are now coming into crypto with this regulatory clarity on
Speaker 1: the horizon. And you know, one way to look at
Speaker 1: that is you know, oh, no, there's too much competition.
Speaker 1: The other way to look at it is I think
Speaker 1: it's an incredible improvement because you know, you have to
Speaker 1: remember in the past the industry is just being attacked.
Speaker 1: Our competitors were more like FTI and these kinds of companies.
Speaker 1: I'd much rather be in the world we're in now,
Speaker 1: where we have lots of companies coming in and by
Speaker 1: the way, those are all potential customers of our products
Speaker 1: and services. So to me, I just see tam expansion
Speaker 1: when I see regulatory clarity, I think it's a huge unlock.
Speaker 3: Brian, we're looking forward to seeing where it all goes,
Speaker 3: that is Coinbased CEO Brian Armstrong. Of course, during his
Speaker 3: visit to Washington, we're looking forward to getting a readout
Speaker 3: because of course the rules are changing under the ground