WEBVTT - Coinbase CEO Talks Being Added to S&P, Regulation

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Now.

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<v Speaker 3>Another company we've been keeping a close eye on is

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<v Speaker 3>Coinbase and it's set to join the S and P

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<v Speaker 3>five hundred next week. The company's CEO has also been

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<v Speaker 3>calling for lawmakers to pass a stable coin bill. A

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<v Speaker 3>lot of the financial industry watching that bill very very closely.

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<v Speaker 3>We are joined now by Coinbas's CEO who's on Capitol

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<v Speaker 3>Hill right now, Brian Armstrong. And Brian, thanks for joining

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<v Speaker 3>us while you're doing your trip at the hill. But

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<v Speaker 3>first we have to really start with your big moment,

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<v Speaker 3>which is at S and P five hundred inclusion. You

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<v Speaker 3>have been focusing here on expanding your world in financial services.

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<v Speaker 3>Discover was taken out, you're added in. What does it

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<v Speaker 3>say about the moment?

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<v Speaker 1>Yeah, well, it's a huge moment for crypto to now

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<v Speaker 1>be in the S and P five hundred with Coinbase entering,

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<v Speaker 1>and it means that crypto is here to say, people

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<v Speaker 1>are going to have crypto exposure in all their four

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<v Speaker 1>oh one k's and it points a little bit to

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<v Speaker 1>I think where the future of financial services is going.

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<v Speaker 1>Cryptos a technology to update the financial system. We actually

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<v Speaker 1>launched our own index coin fifty, which is the top

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<v Speaker 1>fifty crypto assets market cap weighted, and someday we hope

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<v Speaker 1>people might actually, you know, feel the same way about

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<v Speaker 1>getting the S and P five hundreds of getting in

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<v Speaker 1>the coin fifty index.

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<v Speaker 2>So it's a great moment.

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<v Speaker 3>We were talking a little earlier about e Toro's ipl You

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<v Speaker 3>see other entrants like that come into public markets, wondering

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<v Speaker 3>what it means for you because e Toro is not

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<v Speaker 3>going to be the only one in terms of entering

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<v Speaker 3>that crypto versus stocks world. Do you think coinbase will

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<v Speaker 3>ever get into traditional way equity trading, or at least

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<v Speaker 3>tokenized equity trading in a much larger way.

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<v Speaker 1>Yeah, well, we think that all asset classes are being

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<v Speaker 1>tokenized crypto. Again, it's this technology to update the financial system.

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<v Speaker 1>That means every company, every fintech, every bank, every payment company,

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<v Speaker 1>even non financial service companies are going to be integrating

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<v Speaker 1>crypto payments. It's kind of like when the Internet came out,

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<v Speaker 1>and first you had dot com startups and then comp

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<v Speaker 1>every fortune five hundred company uses the Internet. So we

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<v Speaker 1>think it's going to be very similar and actually this

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<v Speaker 1>is a good thing for coinbase because many of these

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<v Speaker 1>companies when they come to crypto, they're going to.

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<v Speaker 2>Buy our products and services.

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<v Speaker 1>We actually power crypto custody trading payments, especially with stable coins,

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<v Speaker 1>which is a big new emerging activity for lots of

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<v Speaker 1>companies already, and so we're excited about that happening now

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<v Speaker 1>on you specifically asked about tokenized equities. We're excited about those,

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<v Speaker 1>and we want to lean into the crypto native solutions,

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<v Speaker 1>not trade traditional securities in the way that many other

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<v Speaker 1>companies do. We think there's unique advantages to having this

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<v Speaker 1>come on chain, and so we're excited to explore that.

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<v Speaker 1>We've We've met with, for instance, the sec Task Force

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<v Speaker 1>on this recently, and there seems to be a general

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<v Speaker 1>willingness to have these kind of asset classes come on chain.

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<v Speaker 3>Now let's stay posted on that front. Of course, there's

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<v Speaker 3>a big question on how soon that could happen now,

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<v Speaker 3>Brian stable coins, because part of the discussion that is

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<v Speaker 3>looming large in Washington is of course that stable coin bill.

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<v Speaker 3>Now call a trip I made down to Coinbase's New

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<v Speaker 3>York offices. I spoke with one of your deputies, Jesse Pollock,

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<v Speaker 3>and he showed me the way that people are transacting

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<v Speaker 3>on Coinbase via stable coin, often at no fee. I'm

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<v Speaker 3>really wondering from your perspective to the extent that when

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<v Speaker 3>you see a bill passed, how much that could set

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<v Speaker 3>off stable coin payments, peer to peer payments in a

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<v Speaker 3>way that's cheaper than the financial industry does it today.

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<v Speaker 2>Yeah, well, you're right.

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<v Speaker 1>Stable coin adoption, for like USDC, it has grown enormously

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<v Speaker 1>and a lot of it's happening on Base, which is

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<v Speaker 1>a layer two solution that Coinbase helped create. So it's

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<v Speaker 1>a very exciting moment where we're seeing stable coin adoption. Now,

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<v Speaker 1>we also need to make sure that this technology gets

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<v Speaker 1>built here in the US, and that's what this stable

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<v Speaker 1>coin bill is really about.

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<v Speaker 2>It's a historic moment.

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<v Speaker 1>There's a lot of interest from senators on both sides

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<v Speaker 1>of the isle that I've met with today to get

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<v Speaker 1>this legislation done, and that's what we're here to try

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<v Speaker 1>and help do.

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<v Speaker 2>Now. The details matter, and there's bits of language.

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<v Speaker 1>That are being to go siated right up into the

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<v Speaker 1>last minute, but we're here to try to underscore the

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<v Speaker 1>urgency of this and the fifty two million Americans who've

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<v Speaker 1>used crypto really want to see this legislation get passed

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<v Speaker 1>so that this industry can get built here on shore

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<v Speaker 1>in America.

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<v Speaker 3>Well, you say words matter. What are the words now

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<v Speaker 3>that you would want to see changed as it hits

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<v Speaker 3>the final finish line?

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<v Speaker 2>Yeah, I mean there's a couple examples for you.

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<v Speaker 1>One is that you know, DeFi is something that is

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<v Speaker 1>separate from financial services. We don't think it should be

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<v Speaker 1>included in AML provisions. AML provisions make a lot of

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<v Speaker 1>sense applied to the centralized intermediaries like exchanges and custodians,

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<v Speaker 1>things that coinbases core business, but DeFi should be excluded

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<v Speaker 1>from that, and recent language updates we've seen seem to

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<v Speaker 1>indicate that that's.

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<v Speaker 2>The path they're going on.

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<v Speaker 1>One other area for you to think about is there

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<v Speaker 1>are some prohibitions on paying interest and yield in some

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<v Speaker 1>of the drafts or some of the language that we

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<v Speaker 1>were made aware of. We think that this is a

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<v Speaker 1>you know, banks should have to compete on a level

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<v Speaker 1>playing field with crypto. We think that paying interest in

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<v Speaker 1>yield to customers is good, is a consumer benefit. We

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<v Speaker 1>actually think to American consumers should be able to benefit

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<v Speaker 1>from that, and any company, whether your bank, crypto company,

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<v Speaker 1>should be able to compete on that front.

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<v Speaker 2>Now there's a.

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<v Speaker 1>Lot of debate back and forth about that, but these

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<v Speaker 1>are examples of the kinds of issues that are coming

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<v Speaker 1>down into the line. We want to make sure that

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<v Speaker 1>you know perfect is not the enemy of good enough,

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<v Speaker 1>and getting this legislation passed is the highest priority.

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<v Speaker 3>I'm wondering where you see this going. We've even heard

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<v Speaker 3>from the Bank of America CEO saying that they would

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<v Speaker 3>see a Bank of America stable coin one day. Once

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<v Speaker 3>you see this bill pass Now, for you, would you

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<v Speaker 3>be considering issuing a stable coin at coinbase.

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<v Speaker 1>But we have a great partnership with Circle on USDC,

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<v Speaker 1>and so that's the primary stable coin that we like

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<v Speaker 1>to advocate for. We think it's the fastest growing major

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<v Speaker 1>stable coin, it's the most trusted, it's the most compliant.

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<v Speaker 1>But to your point about you know, the bank CEOs,

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<v Speaker 1>et cetera, we want everyone to succeed here. We think

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<v Speaker 1>that banks should be able to participate in stable coins.

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<v Speaker 1>It's a huge opportunity and we want to make sure

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<v Speaker 1>any potential legislation doesn't prohibit them or us from doing that.

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<v Speaker 3>So Circle for a moment, Circle is in talks to

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<v Speaker 3>go public do you think anything will change with your

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<v Speaker 3>relationship once it becomes a public company, And frankly, would

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<v Speaker 3>you ever consider buying Circle? I mean, your relationship with

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<v Speaker 3>the company has gotten so close, why not just have

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<v Speaker 3>it in house?

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<v Speaker 2>Yeah, well, we're very excited for their success.

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<v Speaker 1>USDC has been an enormous outcome, and so they deserve

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<v Speaker 1>a ton of.

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<v Speaker 2>Credit for that.

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<v Speaker 1>Them going public doesn't change anything about our commercial relationship.

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<v Speaker 1>But in terms of other deals we might consider in

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<v Speaker 1>the future, I mean that of course would be up

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<v Speaker 1>to them in US but you know, nothing to announce today.

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<v Speaker 3>Are you actively looking at other acquisition targets now? You

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<v Speaker 3>made a lot of news recently with the Derabiit acquisition. Hankkit,

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<v Speaker 3>I will ask you about that, but there is a

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<v Speaker 3>question about how much more dry powder you have to

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<v Speaker 3>do more.

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<v Speaker 1>Yeah, we're always looking at M and A opportunities. You know,

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<v Speaker 1>we do have a pretty large balance sheet that could

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<v Speaker 1>be put to use here, and of course, part of

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<v Speaker 1>the benefit of being a public company now and yes

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<v Speaker 1>five hundred is that you have somewhat of a liquid

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<v Speaker 1>currency to do that. So we're looking at acquisition opportunities constantly.

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<v Speaker 1>It doesn't mean we swing at every pitch, we want

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<v Speaker 1>it to be the right opportunity, because the hard part

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<v Speaker 1>is not buying the company, it's actually successfully integrating it.

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<v Speaker 1>But we've made a number of acquisitions recently. For instance,

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<v Speaker 1>on Base, we acquired a couple of startups. We're looking

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<v Speaker 1>at international opportunities that could aggregate share companies that do

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<v Speaker 1>things similar do we do, and then also things that

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<v Speaker 1>could just accelerate our product.

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<v Speaker 3>Roadmap on derebit. Very curious, of course, this was one

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<v Speaker 3>of the larger acquisitions we've seen in the crypto community,

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<v Speaker 3>a very very milestone moment for coinbase as well. It's

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<v Speaker 3>a derivative exchange, and do you expect it to win

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<v Speaker 3>approval to operate in the US? If so, how soon?

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<v Speaker 2>Yeah, you're correct.

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<v Speaker 1>So it is a derivatives exchange, and that's a big

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<v Speaker 1>push for US. International derivatives trading has been a huge

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<v Speaker 1>area for crypto. It's the vast majority of all crypt

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<v Speaker 1>trading volume actions and we are excited to do that

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<v Speaker 1>both internationally where we operate, and eventually to bring it

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<v Speaker 1>into the US. I don't have an exact timeframe for

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<v Speaker 1>you on that, but we believe that having spot trading

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<v Speaker 1>options and futures all on one unified platform, and we

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<v Speaker 1>can be the trusted counterparty to these traders. That's going

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<v Speaker 1>to be a winning solution both in the US and internationally.

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<v Speaker 3>So what about the future a little more. I'm really

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<v Speaker 3>curious about how you're viewing the tone coming out of

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<v Speaker 3>Washington when it comes to the future of crypto. What

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<v Speaker 3>do you think, besides the table, the stable coin Bill

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<v Speaker 3>will be the biggest change in the industry over the

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<v Speaker 3>next four years.

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<v Speaker 1>Yeah, well, getting legislation passed, of course, would be a

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<v Speaker 1>huge milestone with stable coins and then and market structure

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<v Speaker 1>as I mentioned, But I think the other big opportunity

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<v Speaker 1>on the horizon right now is that stable coins are

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<v Speaker 1>and payments are becoming a bigger and bigger area of

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<v Speaker 1>the economy. I mean, I think ultimately stable coins will

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<v Speaker 1>power the majority of all payments in global GDP or

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<v Speaker 1>in the economy large and crypto is going to become

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<v Speaker 1>the majority of the financial system. It is updating the

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<v Speaker 1>financial system in many ways, so that's going to happen

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<v Speaker 1>across you know, revitalizing our credit markets. There's features that

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<v Speaker 1>coinbase has launched recently, like defive borrow lend, which got

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<v Speaker 1>over one hundred million dollars in loans in one hundred days.

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<v Speaker 2>It's growing like wildfire.

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<v Speaker 1>It's going to update the capital formation markets, how people

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<v Speaker 1>raise money to start a company or to build an

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<v Speaker 1>apartment complex. It's going to tokenize traditional securities, bring them

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<v Speaker 1>online for twenty four to seven trading, allowing people markets

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<v Speaker 1>all over the world to have a level playing field

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<v Speaker 1>and participate in those So, whether it's payments, credit, securities

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<v Speaker 1>in a new gold standard, you know, with bitcoin, I

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<v Speaker 1>think crypto truly is updating the financial system, and we're

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<v Speaker 1>going to get to this world eventually where there's a

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<v Speaker 1>transnational economy that is not controlled by any one country.

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<v Speaker 1>The long tail of fiat currencies probably don't need to exist,

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<v Speaker 1>they could be replaced by bitcoin, but the major ones,

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<v Speaker 1>we'll each have stable coins which are thriving. So it's

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<v Speaker 1>a bright future if we can update the financial system

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<v Speaker 1>and create more economic freedom for people.

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<v Speaker 3>Brian, I'm curious about the conversation around a US strategic

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<v Speaker 3>Bitcoin reserve. More so, I'm also curious whether coinbase will

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<v Speaker 3>be the custodian.

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<v Speaker 1>Well, it's definitely a historic moment for the United States

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<v Speaker 1>of America to declare bitcoin as a strategic asset. That

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<v Speaker 1>was a huge moment I think underappreciated in the markets actually,

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<v Speaker 1>And you know, I believe that they're going through an

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<v Speaker 1>RFP process now, and we're of course throwing our hat

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<v Speaker 1>in the ring to hopefully be that provider there. You know,

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<v Speaker 1>we actually provide crypto services, whether that's custody or trading

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<v Speaker 1>to over one hundred and forty government institutions at the federal, state,

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<v Speaker 1>local level, not just in here in the US, but

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<v Speaker 1>in other countries as well. So I think we would

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<v Speaker 1>be the perverred provider, I hope. But we'll throw our

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<v Speaker 1>hat in the ring and they should run a fair

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<v Speaker 1>and orderly process.

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<v Speaker 3>It's interesting because you see very mixed responses from people

0:10:57.760 --> 0:11:02.720
<v Speaker 3>across the crypto community around the administration's approach to crypto,

0:11:02.840 --> 0:11:07.960
<v Speaker 3>but particularly the president's approach to crypto. Bloomberg recently reported

0:11:08.000 --> 0:11:11.080
<v Speaker 3>that the top buyers of the meme coin that are

0:11:11.080 --> 0:11:14.120
<v Speaker 3>buying for seats at the White House dinner or the

0:11:14.880 --> 0:11:18.800
<v Speaker 3>President's dinner. For those meme coin holders, many of these

0:11:18.840 --> 0:11:22.800
<v Speaker 3>buyers are likely foreign based on what we have seen

0:11:23.160 --> 0:11:27.280
<v Speaker 3>of the purchasers of these coins. Now, from your perspective,

0:11:27.440 --> 0:11:30.560
<v Speaker 3>what does this say about how much activity has moved

0:11:30.600 --> 0:11:34.520
<v Speaker 3>offshore and does it create an issue for the way

0:11:34.840 --> 0:11:38.160
<v Speaker 3>that crypto is evolving on shore in the United States.

0:11:40.080 --> 0:11:42.760
<v Speaker 1>Yeah, well, I'm not sure about the numbers specifically on

0:11:42.800 --> 0:11:45.080
<v Speaker 1>the Trump meme coin, but I know that written large,

0:11:45.120 --> 0:11:48.520
<v Speaker 1>the crypto industry has largely moved offshore from the US

0:11:48.600 --> 0:11:50.480
<v Speaker 1>because of the lack of clarity of rules in the

0:11:50.559 --> 0:11:53.640
<v Speaker 1>last four or five years, especially, so I'd say it's

0:11:53.720 --> 0:11:54.880
<v Speaker 1>roughly eighty percent.

0:11:54.640 --> 0:11:55.960
<v Speaker 2>Offshore at this point.

0:11:56.200 --> 0:12:00.320
<v Speaker 1>And for people who care about national security rules law,

0:12:00.720 --> 0:12:02.200
<v Speaker 1>you know, that's a huge issue. We need to make

0:12:02.200 --> 0:12:05.640
<v Speaker 1>sure that this gets brought onshore into the regulatory perimeter.

0:12:06.000 --> 0:12:08.520
<v Speaker 1>And whether people that love crypto or hate crypto, they

0:12:08.520 --> 0:12:11.840
<v Speaker 1>should be for legislation which does that. And that's a

0:12:11.840 --> 0:12:14.240
<v Speaker 1>lot of what these urgency of these bills getting passed,

0:12:14.320 --> 0:12:16.080
<v Speaker 1>even including the stable coin bill tomorrow.

0:12:16.240 --> 0:12:18.280
<v Speaker 3>What do you make more largely to the president's approj

0:12:18.320 --> 0:12:20.560
<v Speaker 3>on crypto. There are people who are on one hand,

0:12:20.559 --> 0:12:23.680
<v Speaker 3>are very happy that he's pushing the initiatives forward in

0:12:23.720 --> 0:12:26.000
<v Speaker 3>the United States, but there are also people who are

0:12:26.040 --> 0:12:30.280
<v Speaker 3>frustrated that his own projects are taking finances money away

0:12:30.320 --> 0:12:33.720
<v Speaker 3>from other projects, well.

0:12:33.880 --> 0:12:35.920
<v Speaker 1>From our perspective, We've been very happy with the President's

0:12:35.960 --> 0:12:37.800
<v Speaker 1>approchon crypto. I mean, he said that he wants the

0:12:37.840 --> 0:12:40.120
<v Speaker 1>US to be the crypto capital of the world. He's

0:12:40.480 --> 0:12:43.160
<v Speaker 1>told Congress that he wants this legislation both for stable

0:12:43.160 --> 0:12:44.600
<v Speaker 1>coins and market structure to be.

0:12:44.600 --> 0:12:46.360
<v Speaker 2>Passed before the August recess.

0:12:46.720 --> 0:12:49.439
<v Speaker 1>You know, declaring a strategic bitcoin reserve here in the

0:12:49.520 --> 0:12:52.880
<v Speaker 1>US was an incredible milestone. So from our point of view,

0:12:52.920 --> 0:12:56.360
<v Speaker 1>it could not be a better outcome versus what we

0:12:56.400 --> 0:12:58.520
<v Speaker 1>saw over the last four years, where the lack of

0:12:58.559 --> 0:13:02.400
<v Speaker 1>clarity was really weaponized togat inst the industry. But what's

0:13:02.480 --> 0:13:05.000
<v Speaker 1>positive is that crypto is truly bipartisan. I mean, the

0:13:05.000 --> 0:13:07.839
<v Speaker 1>President's leadership here has been amazing, but I think that

0:13:08.320 --> 0:13:10.520
<v Speaker 1>Congress and especially in the Senate, the folks I talk

0:13:10.559 --> 0:13:13.640
<v Speaker 1>to you, there's now a strong bipartisan majority of people

0:13:13.640 --> 0:13:16.440
<v Speaker 1>who want to see pro crypto legislation get passed.

0:13:17.920 --> 0:13:19.320
<v Speaker 3>Right, I want to start off where we left off.

0:13:19.320 --> 0:13:22.480
<v Speaker 3>We're talking about other competitors in the space. E. Toro

0:13:22.760 --> 0:13:26.280
<v Speaker 3>being a new trading you know, publicly traded company, for example,

0:13:26.480 --> 0:13:29.840
<v Speaker 3>but also foreign companies that are entering the US potentially

0:13:30.200 --> 0:13:34.000
<v Speaker 3>because they're excited about lighter regulations or at least clearer

0:13:34.040 --> 0:13:37.240
<v Speaker 3>regulations and rules of the road. Do you see much

0:13:37.280 --> 0:13:39.520
<v Speaker 3>more competition ahead for Coinbase.

0:13:40.600 --> 0:13:43.120
<v Speaker 1>Yes, I mean actually, I think that many different companies

0:13:43.120 --> 0:13:45.559
<v Speaker 1>are now coming into crypto with this regulatory clarity on

0:13:45.600 --> 0:13:48.080
<v Speaker 1>the horizon. And you know, one way to look at

0:13:48.080 --> 0:13:50.359
<v Speaker 1>that is you know, oh, no, there's too much competition.

0:13:50.600 --> 0:13:52.160
<v Speaker 1>The other way to look at it is I think

0:13:52.160 --> 0:13:54.240
<v Speaker 1>it's an incredible improvement because you know, you have to

0:13:54.240 --> 0:13:58.280
<v Speaker 1>remember in the past the industry is just being attacked.

0:13:58.360 --> 0:14:01.079
<v Speaker 1>Our competitors were more like FTI and these kinds of companies.

0:14:01.160 --> 0:14:02.760
<v Speaker 1>I'd much rather be in the world we're in now,

0:14:02.800 --> 0:14:05.840
<v Speaker 1>where we have lots of companies coming in and by

0:14:05.880 --> 0:14:08.200
<v Speaker 1>the way, those are all potential customers of our products

0:14:08.240 --> 0:14:11.040
<v Speaker 1>and services. So to me, I just see tam expansion

0:14:11.240 --> 0:14:13.960
<v Speaker 1>when I see regulatory clarity, I think it's a huge unlock.

0:14:14.360 --> 0:14:16.080
<v Speaker 3>Brian, we're looking forward to seeing where it all goes,

0:14:16.080 --> 0:14:20.200
<v Speaker 3>that is Coinbased CEO Brian Armstrong. Of course, during his

0:14:20.360 --> 0:14:23.240
<v Speaker 3>visit to Washington, we're looking forward to getting a readout

0:14:23.440 --> 0:14:26.280
<v Speaker 3>because of course the rules are changing under the ground