Speaker 1: From the heart where innovation, money and power Collie in
Speaker 1: Silicon Valley and beyond. This is Bloomberg Technology with Caroline
Speaker 1: Hyde and Ed Ludlow.
Speaker 2: Welcome to Bloomberg Technology. I'm Ed Ludlow in San Francisco.
Speaker 2: We're standing by for a special conversation with the coinbas
Speaker 2: CEO Brian Armstrong.
Speaker 3: Have a listen.
Speaker 4: Interesting you did and how far do you think you're
Speaker 4: going to have to go here?
Speaker 5: Yeah, well, this was not unexpected. You know, we've been
Speaker 5: in discussion with the SEC for a long long time,
Speaker 5: even going back.
Speaker 6: To before we were a public company.
Speaker 5: We started sharing with them how we operate our business,
Speaker 5: how we list assets on the platform, how we think
Speaker 5: about our staking program, and through a large number of
Speaker 5: allogs back and forth, they allowed us to become a
Speaker 5: public company. You know, we had many discussions with them
Speaker 5: in the last year when their tones started to change
Speaker 5: and they started to come to us with more questions
Speaker 5: about the business.
Speaker 6: So we were very forthcoming.
Speaker 5: We met with them probably thirty times over the last year,
Speaker 5: and we started to kind of ask them for feedback
Speaker 5: and we said, you know, we would like there to
Speaker 5: be a robust market in the US to trade crypto securities.
Speaker 5: Of the thousand plus assets we've reviewed today, we've rejected
Speaker 5: ninety percent of them, the ones we we believer our commodities.
Speaker 5: What feedback do you have for this for us? How
Speaker 5: can we come in and register? How can we work together?
Speaker 5: And unfortunately we were met with silence. We really got
Speaker 5: no feedback in those thirty meetings. The first meeting where
Speaker 5: they were scheduled to come and give us feedback, they
Speaker 5: canceled it a few days before that, and then we
Speaker 5: got a wells notice a few days after that.
Speaker 6: So it's really unfortunate.
Speaker 5: We work with regulators all over the world, other regulators
Speaker 5: here in the US. I think I'm a reasonable person
Speaker 5: to get along with. But unfortunately the SEC and you know,
Speaker 5: this chair has taken a regulation by enforcement approach instead
Speaker 5: of creating a clear rule book in the US that
Speaker 5: can allow this industry to be built in a safe
Speaker 5: and trusted way.
Speaker 4: You know, when was the last time you personally met
Speaker 4: with Gary Gensler and what did you say?
Speaker 6: Right?
Speaker 5: So, when he first came in as the chair, I
Speaker 5: flew out to New York. I reached out to him.
Speaker 5: Our team has reached out. I tried to make an
Speaker 5: effort to connect with him in person, because that's what
Speaker 5: I try to do whenever a new regulator kind of
Speaker 5: comes in. Unfortunately, we were not able to connect at
Speaker 5: that time. I'm not sure why we couldn't get on
Speaker 5: his calendar, and we followed up a few times in
Speaker 5: the year after that. We eventually got a meeting that
Speaker 5: was virtual. You know, it may have been COVID related
Speaker 5: or something like that, but we were able to get
Speaker 5: a virtual meeting. But unfortunately, it was frankly like a
Speaker 5: pretty icy reception. I would say, you know, we sort
Speaker 5: of came in hat in hand and said, hey, Chair Gensler,
Speaker 5: you know you've asked people to come in and register respectfully,
Speaker 5: we're here to register. What would you like us to do?
Speaker 5: What process would you like us to go through? And
Speaker 5: his response was, you know, talk to your lawyer. I'm
Speaker 5: not here to advise you. And that was kind of
Speaker 5: how the conversation started.
Speaker 6: And so and at that point, you know, we realized
Speaker 6: there was a gap.
Speaker 5: You know, we felt like this was an important technology
Speaker 5: that we felt needed to be built in a safe
Speaker 5: and trusted way here in the US, in a way
Speaker 5: that consumers were protected, and I don't know what his
Speaker 5: motivations or you know, his personal views were, but it
Speaker 5: didn't seem like he was on the same page.
Speaker 4: So what does this mean for you if the government
Speaker 4: cracks down so hard on crypto on coinbase SEC? Does
Speaker 4: coinbase exist in five years?
Speaker 6: Absolutely? We do.
Speaker 5: And I want to make an important point, which is
Speaker 5: that the SEC chair may have a certain point of view,
Speaker 5: but that's not representative of the whole US government.
Speaker 6: In fact, quite the opposite.
Speaker 5: I would say the SEC chair is as a bit
Speaker 5: of a really an outlier here kind of in the
Speaker 5: US government. So when I meet with members of Congress,
Speaker 5: I think the broad consensus probably amongst eighty percent of
Speaker 5: people I talked to both sides of the aisle, it's
Speaker 5: a pretty it's a pretty reasonable view they have, which is,
Speaker 5: we don't know exactly what this technology is going to become,
Speaker 5: but we're seeing every other major financial hub in the
Speaker 5: world move towards clear legislation. We need to make sure
Speaker 5: that this innovation happens in the US in a way
Speaker 5: that again, let's just protect consumers. Let's apply some basic
Speaker 5: good ideas around AMLKYC and audited financial statements and make
Speaker 5: sure there's no wash trading let's create a clear market
Speaker 5: structure where you know, businesses can understand which is CFTC, SEC,
Speaker 5: who should they talk to about which types of assets?
Speaker 5: So Congress is recognizing this, and the White House is
Speaker 5: as well.
Speaker 6: Actually, the Biden.
Speaker 5: Administration put out in an executive order about a year
Speaker 5: ago kind of asking all the branches of government to
Speaker 5: sort of say, get your act together on crypto. We
Speaker 5: don't there's some risks, but there's some real important opportunities
Speaker 5: with this technology.
Speaker 6: Let's create a clear regulatory framework.
Speaker 4: Will you fight this all the way to the Supreme Court?
Speaker 4: Do you think you'll have to? And do you have
Speaker 4: the financial resources to do that?
Speaker 6: Yeah? So, even if this takes some time, you know,
Speaker 6: that's okay.
Speaker 5: We've so in Q one we were adjusted a bit
Speaker 5: of positive as a company, even in the depth of
Speaker 5: this crypto bear market, if you want to call it that.
Speaker 5: We have over five billion dollars a balance on the
Speaker 5: balance sheet, right So, and frankly, even though that this
Speaker 5: complaint came in from the SEC, it's really business as
Speaker 5: usual today.
Speaker 6: Right.
Speaker 5: We're continuing to trade the assets that we have on
Speaker 5: our platform.
Speaker 6: You know, we trade over two hundred assets on our platform.
Speaker 5: The sec complaint mentioned just thirteen of them, so a
Speaker 5: relatively small percentage of the assets we trade. We also
Speaker 5: have business overseas in other countries. We arrive a lot
Speaker 5: of revenue from other sources that are not related to
Speaker 5: trading feed So you know, coinbase is well capitalized and
Speaker 5: adjusted a bit a positive and Q one, I think
Speaker 5: we're going to be fine going to court. In fact,
Speaker 5: it's a relatively small portion of our company that you know,
Speaker 5: we have a great legal team, policy team, et cetera
Speaker 5: that's working on this. And what I really want, you know,
Speaker 5: ninety ninety five percent of the company to be focused
Speaker 5: on is just building great products for our customers and
Speaker 5: making sure we don't lose.
Speaker 6: Sight of that.
Speaker 5: And so this is a very serious matter that I'm
Speaker 5: going to work on with a couple of our executives,
Speaker 5: But really the vast majority of the company needs to
Speaker 5: keep building because that's how this technology is going to
Speaker 5: ultimately benefit a billion people hopefully.
Speaker 4: How long does the regulatory overhang last? The reality is
Speaker 4: this could take many, many months. And do you think
Speaker 4: that your investors might lose some faith or even your
Speaker 4: customers while you go through this?
Speaker 6: Yeah?
Speaker 5: Well, I mean, look This is not a new concept, right,
Speaker 5: There's been lots of discussion. The SEC has had rhetoric
Speaker 5: around this for several years that I think has influenced
Speaker 5: the market. And so the investors in coinbase are comfortable
Speaker 5: with that if they're because it's all public, right and
Speaker 5: it's not like some secret thing that's being revealed, and
Speaker 5: I think they're taking a long term view that Coinbase
Speaker 5: is a very different company.
Speaker 6: We're kind of an end of one, right.
Speaker 5: We're really the only company that was based here in
Speaker 5: the US that went public that has audited financial statements
Speaker 5: that's taken a compliance first approach. You know, even in
Speaker 5: this recent SEC complaint by the way that came out yesterday,
Speaker 5: it was unfortunate they sort of did it back to
Speaker 5: back with another complaint that went out there, and you
Speaker 5: know that may have been intentional to try to conflate
Speaker 5: the two, but I think people are smarter than that
Speaker 5: and they recognize that. You know, this complaint against Coinbase,
Speaker 5: there were no allegations, no allegations of misappropriation of customer funds,
Speaker 5: There was no allegations of wash trading. You know, myself
Speaker 5: and the executive team were not named personally. It's really
Speaker 5: debating this more technical legal question of are some of
Speaker 5: these assets commodities or are they securities? And I think
Speaker 5: that's something the court will have to decide to sort
Speaker 5: of get some legal press, some case law out there
Speaker 5: which will ultimately benefit us, because that's what we've been
Speaker 5: asking the sec for for a long time, is how
Speaker 5: do we get more clarity? So if we need to
Speaker 5: go to the courts to do it, it's not our
Speaker 5: first choice. We'd rather the regular had just published a
Speaker 5: clear rule book. But if they're not going to do that,
Speaker 5: the courts are there in the US to available ourselves
Speaker 5: of So part.
Speaker 4: Of this was about securities being registered or not in
Speaker 4: terms of how they're listed on your exchange, But part
Speaker 4: of this was about staking also, So staking obviously is
Speaker 4: becoming a more important part of the crypto ecosystem. Do
Speaker 4: you plan, based on how the regulators are treating staking
Speaker 4: to wind down your staking service?
Speaker 5: No, we're not going to wind down our staking service. Again,
Speaker 5: as these court cases play out, it's really business as usual.
Speaker 6: We're going to continue to operate that.
Speaker 5: You know, snake staking only represents about three percent of
Speaker 5: our net revenue, but it is a it's a very
Speaker 5: important function in the crypto community, and it serves an
Speaker 5: important part of these decentralized blockchains. And I guess I
Speaker 5: should mention also that you know, coin basis staking product
Speaker 5: is architected and built in a way to be compliant,
Speaker 5: and we've actually think it's materially different than some of
Speaker 5: the other ones out there which have been called staking.
Speaker 5: And so yeah, we're going to continue to operate our
Speaker 5: staking business.
Speaker 4: So if users wanted their funds back in the staking
Speaker 4: service at this point in time, does coinbase have the
Speaker 4: ability to service that at scale in case that there
Speaker 4: is a larger run on the staking business.
Speaker 5: Yeah, So you know, staking is really something that's a
Speaker 5: decentralized part part of these decentralized protocols. So Coinbase is
Speaker 5: really just you know, it's a pass through mechanism. We're
Speaker 5: helping people access these decentralized protocols. So some of the
Speaker 5: decentralized protocols have, for instance, like a lock up period
Speaker 5: of you know, some number of days when you initiate
Speaker 5: the withdrawal request, and so we're just making that kind
Speaker 5: of information available to the customer. But it's yeah, you know,
Speaker 5: all the the funds are there back to one to
Speaker 5: one that when you're when you're staking something, it's being
Speaker 5: pledged into these these decentralized protocols, and we actually don't
Speaker 5: even have the ability to you know, move it somewhere
Speaker 5: else at that point. It's we're just giving people access
Speaker 5: to these decentralized protocols.
Speaker 4: So the business face withdrawals, does that have a material
Speaker 4: impact on Ethereum's price? And how does cliinbase prepare for
Speaker 4: something like that? What do you mean is there kind
Speaker 4: of a broader run that you have to be prepared for.
Speaker 5: Oh well, okay, so in our business, we're we're not
Speaker 5: a bank, right, we don't do fraction reserve, and so
Speaker 5: there's not really this concept of a run, right, all
Speaker 5: the all the funds are there back to one to one,
Speaker 5: and you don't have to take our word for it.
Speaker 5: You know, are as a public company, we have auditors
Speaker 5: Deloitte in this case, who's gone in and verified all
Speaker 5: of that. You can kind of confirm it in our
Speaker 5: financial statement. So you know, if people want to withdraw funds,
Speaker 5: they one hundred percent of it is there.
Speaker 6: There's no such thing as a run.
Speaker 4: Really, So how do you answer the question of you know,
Speaker 4: on one hand, there is sec that is, you know,
Speaker 4: causing a big overhand in terms of both you guys
Speaker 4: and the industry. On the other hand, just financially, you know,
Speaker 4: rates are higher in the United States, people are more
Speaker 4: inclined to keep their money in a bank. Why should
Speaker 4: they keep their money with you?
Speaker 5: Well, what's interesting in crypto there's been the evolution of
Speaker 5: something called stable coins, right, and so we're actually in
Speaker 5: consort with another company in Circle in the space. We've
Speaker 5: we've created a USD coin, which is the second largest
Speaker 5: stable coin out there. And as you've mentioned, interest rates
Speaker 5: in this environment, that's been both a good source of
Speaker 5: revenue for US, but it's also something that we've passed
Speaker 5: along to customers, so customers can actually earn rewards on
Speaker 5: USDC and get access to some of these higher interestrate environments.
Speaker 4: Brought a question not just about coinbase, but about the industry.
Speaker 4: As you know, more regulatory enforcement actions come to the forefront,
Speaker 4: how much of an overhang do you think that will
Speaker 4: have on crypto pricing.
Speaker 6: You know, it's hard for me to say.
Speaker 5: It was actually kind of surprising yesterday with this complaint
Speaker 5: that came out, crypto was up, which I would not
Speaker 5: have expected.
Speaker 6: So I don't know what to make of that.
Speaker 5: I don't know if it means that people knew something
Speaker 5: was coming but they expected it to be worse than
Speaker 5: it actually was, or if they just felt that, you know,
Speaker 5: they're they're still a believer in it or something. But
Speaker 5: you know, I don't try to predict what's going to
Speaker 5: happen in these markets. You know, we don't operate ahead
Speaker 5: fund or anything like that. We just want to provide
Speaker 5: a good service to our customers around the exchange and
Speaker 5: all the products we offer.
Speaker 4: Before I let you go, I want to ask about
Speaker 4: not crypto, I want to ask about artificial intelligence. Even
Speaker 4: talking about it all day as a crypto entrepreneur, how do.
Speaker 6: You see AI?
Speaker 4: Do you see it as a competing factor in terms
Speaker 4: of dollars going towards technology? Do you see dovetailing with
Speaker 4: your industry at all?
Speaker 6: Well?
Speaker 5: AI is certainly one of those couple really important technology
Speaker 5: trends that the US needs to get right, along with crypto,
Speaker 5: and I think we're seeing a similar question start to
Speaker 5: happen in Congress along with crypto is like, hey, how
Speaker 5: should this be regulated so it can be done in
Speaker 5: a safe, trusted way? I do think there's a couple
Speaker 5: interesting intersections between AI and crypto. One of them is that,
Speaker 5: you know, in the world of AI, there you know,
Speaker 5: it's so easy to mass generate things, whether it's a
Speaker 5: news article or images, and so the provenance of those
Speaker 5: and the authenticity of it can be a little bit
Speaker 5: hard to figure out.
Speaker 6: And in a world of crypto.
Speaker 5: One of the great things about crypto, you know, with
Speaker 5: NFTs and whatnot, you can actually have a digital signature
Speaker 5: that proves, you know, this was issued by Bloomberg or
Speaker 5: by Brian Armstrong or whoever. So I think it could
Speaker 5: be useful to track the provenance of creative works, whether
Speaker 5: that's text, audio, video, et cetera. The other thing that
Speaker 5: might be interesting is that a lot of these these
Speaker 5: you know, bots or autonomous agents in the AI sphere,
Speaker 5: they're going to need to go get things done in
Speaker 5: the world. Right people are already using them to sort
Speaker 5: of say, hey, order my groceries, or you know, maybe
Speaker 5: build this website and spin up this server. And so
Speaker 5: they're going to need financial money. They're gonna need money
Speaker 5: to go do things in the world, these these AI agents,
Speaker 5: and so I think that actually in the future you're
Speaker 5: probably gonna see a lot of cryptotransaction happening between AI
Speaker 5: agents or AI and various businesses around the world because
Speaker 5: crypto is kind of the native money of the Internet.
Speaker 6: The Internet.
Speaker 5: Internet is global, it's decentralized, every country, everybody in the
Speaker 5: world can participate in it, and so it wouldn't really
Speaker 5: make sense to use you know, the dollar or the
Speaker 5: euro in a truly global context. If you you know
Speaker 5: what you want to be country agnostic. So I think
Speaker 5: AI will use crypto more.
Speaker 4: How much are you actually working on that future?
Speaker 5: So our we're not trying to build something that is
Speaker 5: allowing bots to like transact in crypto at the moment,
Speaker 5: but what we are doing is we're building good infrastructure,
Speaker 5: you know, picks and shovels, if you will. So with
Speaker 5: coinbased cloud, for instance, we're making our APIs around how
Speaker 5: crypto is stored and transacted and commerce happens, and we're
Speaker 5: just exposing those kind of like Amazon Web services, but
Speaker 5: to any business that wants to integrate it. So I
Speaker 5: suspect more businesses will integrate that over time, and some
Speaker 5: of those may use AI. We're also using AI in
Speaker 5: our business in a.
Speaker 6: Few other ways.
Speaker 5: I mean, we use it a lot for fraud prevention,
Speaker 5: you know, and unfortunately we get people signing up putting
Speaker 5: in stolen credentials and things like that, and so we've
Speaker 5: developed a lot of really good machine learning to detect that,
Speaker 5: and you know, we're occasionally we're testling it in a
Speaker 5: few other areas too, just like around Actually, like you know,
Speaker 5: our design teams they'll sometimes look at mid Journey or
Speaker 5: Dolly and sort of generate an interface using ANI at least, like,
Speaker 5: you know, show me five ideas for what an interface
Speaker 5: might look like to do remittances in crypto or for
Speaker 5: content creators to have a direct relationship with their audience,
Speaker 5: and what with the interface for that. And AI is
Speaker 5: just like a great assistant, you know, it doesn't. I
Speaker 5: don't think AI really is taking people's jobs. It's taking
Speaker 5: tasks off their plates, largely to make their jobs more efficient.
Speaker 5: And so having like a you know, a research assistant
Speaker 5: or someone like that, you know, a tutor or a
Speaker 5: mentor or a therapist whatever, everybody can have one of
Speaker 5: these paired with them, and I think it'll just make
Speaker 5: humans more productive.
Speaker 4: Ran We're out of time, but thank you so much
Speaker 4: for your time. As for taking our questions.
Speaker 2: Thank you you are watching Bloomberg Technology. That was a
Speaker 2: conversation with the coinbased CEO, Brian Armstrong at Bloomberg Invests
Speaker 2: in New York. Let's bring in Bloomberg Katie Greifeld out
Speaker 2: in New York. It's kind of app some of the
Speaker 2: headlines coming out of that conversation.
Speaker 3: Katie, What were the key takeaways for you?
Speaker 7: It was really interesting to hear a little bit more color,
Speaker 7: a little bit more insight on what Coinbase's sort of communication,
Speaker 7: what the relationship with the SEC has been. It was
Speaker 7: really interesting to hear from Armstrong saying that basically the
Speaker 7: SEC's tone has changed in the past year, that Coinbase
Speaker 7: went to the agency multiple times, was met with silence,
Speaker 7: and as a result, here we are today and we
Speaker 7: knew that they've been critical of.
Speaker 3: The SEC's approach.
Speaker 7: Obviously, we got that statement yesterday basically criticizing what they
Speaker 7: call this reliance on enforcement, regulation by enforcement, and we
Speaker 7: heard more of that today from Armstrong himself.
Speaker 3: As a reminder to our audience.
Speaker 2: The SEC sued both Coinbase and binances US operations this week,
Speaker 2: essentially accusing them of peddling on registered securities.
Speaker 3: What was interesting, Katie.
Speaker 2: On stage, Brian Armstrong referenced that other suit away from
Speaker 2: Coinbase without naming it, and said that to his mind,
Speaker 2: perhaps the sec was trying to conflate the two and
Speaker 2: what did you make of that?
Speaker 7: Yeah, he really tried to draw that line between these
Speaker 7: two cases. Obviously, we've been talking about them in the
Speaker 7: same bread since I think it was what less than
Speaker 7: twenty four hours that separated those lawsuits. But Armstrong said
Speaker 7: that in Coinbase's case, there were no allegations of misappropriation
Speaker 7: of funds, no wash trading, There weren't any executives named.
Speaker 7: And I think that's important because when you think about Binance,
Speaker 7: it's a lawsuit against Binance and also against Chang ben
Speaker 7: Jao of course, the CEO of Binance. That's not the
Speaker 7: case when it comes to coinbas. As Armstrong described it,
Speaker 7: this is really about sort of a legal sort of
Speaker 7: definition of securities. That's the common thread between these two lawsuits,
Speaker 7: basically what is a security? But in terms of the
Speaker 7: Binance allegations, they go.
Speaker 2: Much deeper, some more headlines crossing the Bloomberg terminal in
Speaker 2: wide ranging conversation, really Bloomberg, Nali bassecle also asking about
Speaker 2: AI and Armstrong saying that Coinbase is using AI in
Speaker 2: the field of fraud prevention.
Speaker 3: For example.
Speaker 2: He put a lot of emphasis on this idea that
Speaker 2: Coinbase is a public company and therefore it is audited,
Speaker 2: and so the SEC if it wanted to, could go
Speaker 2: and look under the hood, so to speak.
Speaker 7: That's the interesting thing I mean with Binance. Of course,
Speaker 7: Binance doesn't have headquarters.
Speaker 3: It's a much.
Speaker 7: Different case than Coinbase, which is a US public company.
Speaker 7: It listed in twenty twenty one, again a public company,
Speaker 7: and the fact that we're seeing this lawsuit come against
Speaker 7: them after it was allowed to go public has definitely
Speaker 7: raised a few eyebrows among my sources. But wrapping it
Speaker 7: into the Aicon conversation, very interesting to hear that you know,
Speaker 7: they do see opportunity there. I would imagine that Coinbase
Speaker 7: is a little big busy with this legal fight, but
Speaker 7: sees opportunity there as well.
Speaker 2: I don't want to draw a causal link, but interesting
Speaker 2: to look at the shares. We're off session highs, but
Speaker 2: tick by tick we kind of pushed higher throughout that conversation.
Speaker 2: I notice on the Bloomberg there are buyers out there
Speaker 2: for this name right, Kathy Wood being one of them.
Speaker 3: The usual suspects.
Speaker 7: Yeah, Kathy would adding to her coin based stick across
Speaker 7: ARC's fund. The biggest stake, of course, was added to
Speaker 7: in the Arc Innovation ETF. That's her largest ETF.
Speaker 6: And this is sort of.
Speaker 7: Hermo you know, by her favorite names when they're dipping,
Speaker 7: and that's what she's been doing in coinbase over the
Speaker 7: past year. So unsurprising to see that trading update overnight
Speaker 7: that they also added yesterday on what was what a
Speaker 7: twenty percent draw down. It makes sense when you follow
Speaker 7: her strategy, I.
Speaker 8: Want to go broader for a moment.
Speaker 9: Interestingly, Mike Novograts, of course, the Galaxy Digital talking about
Speaker 9: the SEC is going to take some time. The legal
Speaker 9: overhang remains, but three quarters of the crypto market is
Speaker 9: still for play in the US. He's saying, Look, the
Speaker 9: SEC is not mentioning Bitcoin eighth stable coins.
Speaker 8: What are flows like? What ultimately is this doing to sentiment?
Speaker 7: Well, the question I keep getting is why isn't bitcoin
Speaker 7: reacting more? I mean, Bitcoin is still hanging around levels
Speaker 7: that it's been hanging around for the past several weeks,
Speaker 7: even though again the two largest exchanges have been sued
Speaker 7: at this point, but it really comes down to I mean,
Speaker 7: who's left. We know that retail sort of the marginal
Speaker 7: retail player was flushed out a while ago. You're left
Speaker 7: with sort of these true believers who have been holding
Speaker 7: it for a long time, and that continues to be
Speaker 7: the case. I mean, I track ETFs very closely, both
Speaker 7: globally and in the US, and globally when you look
Speaker 7: at sort of these ETPs that can actually physically hold Bitcoin,
Speaker 7: there's not too much movement in or out because again,
Speaker 7: that marginal player has already been flushed out.
Speaker 9: And I like that you say global, because this ends
Speaker 9: up becoming a global arbitrage story in a way, in
Speaker 9: terms of where you base companies, where talent flows. Are
Speaker 9: you hearing about basically a loss of time in the
Speaker 9: US to the Middle East, Dubai getting its regulatory act together,
Speaker 9: Hong Kong for example, even the UK A little.
Speaker 7: Well, that's the thing. I mean, you listen to US
Speaker 7: crypto advocates in the US, and that's sort of the
Speaker 7: argument that they make that basically the agencies are scaring
Speaker 7: away talent, they're scaring away innovation two overseas, and we
Speaker 7: know that certain regions, certain countries have been trying to
Speaker 7: attract that talent. Dubai in particular. Whether that actually happens
Speaker 7: remains to be seen, or maybe some of the people
Speaker 7: who were in crypto pivot maybe to AI, maybe to
Speaker 7: web three. But that's an open question and it's definitely
Speaker 7: a big question.
Speaker 6: In the industry.
Speaker 9: Katie Greifeld, great to have you with instant analysis. We
Speaker 9: thank her for expertise across crypto. Meanwhile, when I was
Speaker 9: check in on the market, it's another key area of
Speaker 9: expertise at Katie. Of course she's across asset reporter. We
Speaker 9: want to go across asset for you for a moment,
Speaker 9: because well, overall we've seen a little bit of sentiment
Speaker 9: shift once again, tech ticking down, we're off by seven
Speaker 9: tens of percent. We're more worried about interest rates. We're
Speaker 9: more worried about where the Fed goes. Canada a surprise
Speaker 9: rate hike over there. We see the dollar lower versus
Speaker 9: the Canadian dollar, the loonies that's known down three tenths
Speaker 9: of a percent, but notable that Still, we've got to
Speaker 9: look to the Fed the ECB next week. What will
Speaker 9: they do in terms of trying to do this awkward
Speaker 9: balancing act growth on the one hand and inflation on
Speaker 9: the other.
Speaker 8: The two year yield goes up eleven basis points.
Speaker 9: Is basically the market prices in that the rate hikes
Speaker 9: are not done yet.
Speaker 8: Sure, there might be a pause in June d but
Speaker 8: what about July.
Speaker 9: And just quickly looking what's happening in terms of bitcoin,
Speaker 9: because you know it is our risk asset of choice
Speaker 9: when it comes to the tech world, and we're currently
Speaker 9: off by some two percentage points as well, even though
Speaker 9: overall the dollar hadn't been showing so much strength today
Speaker 9: twenty six thousand.
Speaker 2: As we're at right, there are other news items in
Speaker 2: the world of technology that are the making moves in markets.
Speaker 2: Keeping a close eye on Tesla, up for a ninth
Speaker 2: straight session, longest streak of gain since February twenty twenty one.
Speaker 2: The news being the US Treasury Department is saying that
Speaker 2: all Model three variants are eligible for the full seventy
Speaker 2: five hundred dollars tax credit. Netflix off session highs, but
Speaker 2: have been up as much as five percent. Two names
Speaker 2: at least raising price targets on the store Wells Fargo
Speaker 2: and JP Morgan that stopped touching its highest level since
Speaker 2: February twenty twenty two, and Warner Brothers Discovery tackling the
Speaker 2: debt issue by offering a five hundred million dollar tender
Speaker 2: that stock up five percent. Take a look at Coinbase.
Speaker 2: Shares of Coinbase have been hired. That conversation between Shnalie
Speaker 2: Bassak and the CEO, Brian Armstrong one of many interviews
Speaker 2: he's done out inforced responding to the sec suit against them.
Speaker 2: Hired by two point seven percent, but off session high
Speaker 2: is interesting the kind of pushback that he gave during
Speaker 2: that interview, and we will recap later in the hour.
Speaker 9: Carric Well and meanwhile, we got so much more coming
Speaker 9: up and well still the private world of technology, Reddit
Speaker 9: reducing its workforce as part of its planstory structural operations
Speaker 9: and promote growth. Will have the details when we return.
Speaker 9: Listen Bloomberg. It's time now for talking tech. First up
Speaker 9: at Lisa mal CEO of Michael Dell's Family Office, says
Speaker 9: she's looking to diversify her portfolio. The FIRMDFO Management, set
Speaker 9: to absorb an influx of cash and stop once Broadcom
Speaker 9: does eventually close on its purchase of VM where it's
Speaker 9: still with regulators in Europe. I sat down with while
Speaker 9: at the Bloomberg U Voices event, where she shared her
Speaker 9: thought process behind her investments.
Speaker 10: What I have been grappling with is we have this
Speaker 10: impending major liquidity event, and so how should we be
Speaker 10: committing capital today? How do we size our investments today?
Speaker 9: Dell, VMware's largest shareholder, has a thirty six perstake stake in.
Speaker 8: The shares, of course.
Speaker 9: Meanwhile, European chipmaker stem Micro and China's son An are
Speaker 9: planning a three point two billion dollar joint venture to
Speaker 9: build chips fabrication plants in southwest, China's most popular city.
Speaker 8: Now.
Speaker 9: It's part of an effort to tap into China's growing
Speaker 9: market for electric vehicles, but look counters the EUS pushed
Speaker 9: to localize chip production.
Speaker 8: Production is expected to begin in the fourth quarter of
Speaker 8: twenty twenty five. Plus let's talk.
Speaker 9: About a private company now, Reddit planning to cut five
Speaker 9: percent of its workforce, or roughly ninety positions. This is
Speaker 9: according to staff memo from the CEO, Steve Huffman, and
Speaker 9: it was seen by Bloomberg. The online discussion platform is
Speaker 9: also scaling back it's hiring plans. Granite now joins a
Speaker 9: slew of technology companies that have turned to layoffs in
Speaker 9: order to cut costs boof profitability and and of course
Speaker 9: this is an important one to think about, as this
Speaker 9: was a darling that was expected to go public. Maybe
Speaker 9: I helped reopen what has been a frozen IPO market,
Speaker 9: but they've got to show well profitability over just growth
Speaker 9: at all costs.
Speaker 2: Yeah, we reported this story out twenty four hours ago,
Speaker 2: and when I was reading the memo from Steve Huffman,
Speaker 2: the CEO, to staff, it jumps out that this isn't
Speaker 2: an action taken because of hardship in their business environment,
Speaker 2: but because they basically looked at it and said, you know,
Speaker 2: we can achieve break even next year. Of course they
Speaker 2: fared for an IPO in late twenty twenty one, Carro,
Speaker 2: We haven't heard much about that since then. I would
Speaker 2: point out one thing, smaller company two thousand people, so
Speaker 2: five percent is about ninety jobs, which is never pleasant
Speaker 2: to talk about layoffs in the technology industry.
Speaker 9: It's not, but it does, as you say, sort of
Speaker 9: feel small when we think of the one hundreds of
Speaker 9: thousands of people who lost their jobs thus far from
Speaker 9: big tech from some of the other companies. Ultimately, though,
Speaker 9: it's about the way in which you manage and way
Speaker 9: in which you tell people that this is one and
Speaker 9: done or not sprinkling on a continued basis, because otherwise
Speaker 9: it hits morale, right.
Speaker 3: Yeah, it hits morale.
Speaker 2: And you know, Huffman addressed that in the memo that
Speaker 2: we saw, basically saying that this will impact many people
Speaker 2: who have been at that company for a very long time,
Speaker 2: but one that seems to be weathering the storm. And
Speaker 2: as we write in the Bloomberg story, they were a holdout.
Speaker 2: You know, it's taken them until this point of twenty
Speaker 2: twenty three to an act layoffs when many others had
Speaker 2: done the depth of them at the end of last year.
Speaker 9: Well, we've got a lot to talk about when it
Speaker 9: comes to companies having to think about profitability over growth
Speaker 9: and indeed perhaps doing some tie ups to inject more
Speaker 9: growth when it comes to AI at least.
Speaker 2: Welcome back to Bloomberg Technology. I met Ludlow in San Francisco.
Speaker 8: And I'm Karlyine Hyed in New York.
Speaker 9: Let's check in on these markets once again, end because look,
Speaker 9: we are seeing more risk aversion when it comes to
Speaker 9: big tech remember this has been the album former on
Speaker 9: the year. Today we'll pull back almost a percentage point
Speaker 9: in the MASTAC, so we're hitting further low as it
Speaker 9: feels across the main benchmark or reasoning. It's about where
Speaker 9: the Federal Reserve goes next. It's about tackling inflation. It's
Speaker 9: about whether or not we have another hyke come July.
Speaker 9: That's what the market is pricing in on the bond
Speaker 9: market at least.
Speaker 8: Two year, five year.
Speaker 9: That belly of the curve as well, moving thirteen fourteen
Speaker 9: basis points higher as we start to price in what
Speaker 9: the Fed could do. And indeed this is a global perspective.
Speaker 9: We've seen a surprise move from Canada today, the Canadian
Speaker 9: looney going higher versus the US dollar as we get
Speaker 9: that hike to tackle inflation, we look to the ECB
Speaker 9: next week, and of course the Fed. I'm looking at
Speaker 9: Bitcoin currently under pressure, off by two point four percent.
Speaker 8: A lot of regulatory overhang here at the moment.
Speaker 3: Ed, let's get to our next story.
Speaker 2: Carry Twilio and Google Cloud just announce an expansion of
Speaker 2: their partnership to bring google Cloud Generative AI to Twilio's
Speaker 2: customer engagement products. The idea to improve experiences for millions
Speaker 2: of venues. Is Twilio CEO Jeff Lawson joins us. Now, Jeff,
Speaker 2: this is interesting because I think over the history of
Speaker 2: your company, you've worked with Google Cloud closely. Just explain
Speaker 2: in real terms what any of that actually means if
Speaker 2: you're a Twilio customer, what do you get access to
Speaker 2: with this generative AI tool.
Speaker 1: Well, specifically, this Google partnership is a new partnership to
Speaker 1: help bring generative AI and predictive AI into the contact center.
Speaker 1: So by combining Twilio's Flex Contact center product with Google's CCAI,
Speaker 1: we can now automate a wide variety of interactions in
Speaker 1: over thirty languages to prove real time, intelligent automated interactions
Speaker 1: to customers. So, for example, Toyota Connected is one of
Speaker 1: our customers. There are millions of Toyota and Lexus vehicles
Speaker 1: on the road where if you hit the button and say,
Speaker 1: you know, I want to ask for directions for example,
Speaker 1: that's a completely automated experience power by Tulio Flex and
Speaker 1: Google CCAI integrated together to provide that complete automation. And
Speaker 1: this is just part of Tulio's newly announced customer AI
Speaker 1: initiative that we announced yesterday, and customer AI is really
Speaker 1: the intersection of all these new capabilities of generative and
Speaker 1: predictive AI in combining that with the customer journey, and
Speaker 1: every company has this journey as a customer progresses through
Speaker 1: sales marketing service inside the product that companies are trying
Speaker 1: to connect together to create a cohesive and relevant experience
Speaker 1: for those customers. And what Tuilio can do is bring
Speaker 1: generative and predictive AI to the table to help connect
Speaker 1: each one of those experiences on the segment profiles that
Speaker 1: we have living inside of Tilo about each one of
Speaker 1: those customers. And so we're really excited to get this
Speaker 1: out there into the market this week.
Speaker 9: How are you ensuring that people feel comfortable as and
Speaker 9: when they're being serviced with so much more well effect
Speaker 9: people worrying about their data, wondering about how companies are
Speaker 9: owning it. How are you ensuring that this isn't going
Speaker 9: to yes, bring productivity but also a lot of pushback
Speaker 9: at the same time.
Speaker 1: Absolutely, and people should be concerned about privacy and data
Speaker 1: security as well as the effect of large language models
Speaker 1: and AI on many of our experiences and That's why
Speaker 1: we have first of all, only partnered with data or
Speaker 1: partnered with AI companies, so language model companies that are
Speaker 1: going to preserve the privacy and integrity of our customer's
Speaker 1: data and their customers privacy. Second is using that data
Speaker 1: only in the context of that one customer in order
Speaker 1: to make that experience better. Now we are all accustomed
Speaker 1: to this as a net positive as customers and companies
Speaker 1: who do it well. Think about Amazon or Google. Amazon
Speaker 1: homepage are very different because Amazon uses all the data
Speaker 1: they have about us, like what we clicked on, what
Speaker 1: we scrolled past, what we bought, what we didn't buy,
Speaker 1: in order to make that product better. And what we're
Speaker 1: seeing is now every company out there, because of privacy,
Speaker 1: needs to actually take their own first party data, so
Speaker 1: that stream of data about what do people click on,
Speaker 1: what do they buy, what do they not buy, and
Speaker 1: turn it into insights about that customer that then can
Speaker 1: make them smarter and provide a better product and customer experience.
Speaker 1: And that's what TOIL is providing to companies.
Speaker 9: What's interesting ED is, of course, amid what is a
Speaker 9: macro environment that is cloudy to say the least, a
Speaker 9: lot of companies are out there talking about AI effectiveness
Speaker 9: and actually feels like quite a busy space. It's got
Speaker 9: to be about the actual underlying technology here.
Speaker 2: Ed, That's the question I have, Jeff, Like I get
Speaker 2: the Google Cloud relationship, it's long standing. When you build
Speaker 2: the product into your existing platform, where does the underlying
Speaker 2: technology come from? Is the foundation model from Google itself
Speaker 2: and what they've been working on the broad company was
Speaker 2: their at temptation to go to open AI and build
Speaker 2: something on top of GPT three point five or four.
Speaker 1: Well, Google is the first of several partners that we
Speaker 1: are working with, and we'll be announcing more over time.
Speaker 1: And I think that, look, there are going to be
Speaker 1: the right models for the right use cases. The one
Speaker 1: common thread among every vendor that we are working with
Speaker 1: is the fact that we are only going to work
Speaker 1: with vendors and models where we can control the flow
Speaker 1: of data and where we can ensure that data remains
Speaker 1: belonging to our customers, which is the most important thing.
Speaker 1: And look, I think every large language model vendor, I
Speaker 1: think every AI vendor out there realizes that businesses are
Speaker 1: going to want to control this. They need safety and
Speaker 1: security around these models, and they need a human in
Speaker 1: the loop for most of these use cases to make
Speaker 1: sure that as the AI is doing greater and greater workloads,
Speaker 1: we've got great checks and balances on the work that
Speaker 1: they're doing. And so that's what Twilio and I think
Speaker 1: many other software and service companies are doing to go
Speaker 1: create viable products out of the raw capabilities of a
Speaker 1: language model.
Speaker 9: I reference that, Jeff, that in amongst all of these innovations,
Speaker 9: new product launches, partnerships, is a macro environment that is tougher.
Speaker 9: It's been tough to your company in terms of market cap,
Speaker 9: in terms of share price. I'm sure you got push
Speaker 9: back and say I don't look at the share price,
Speaker 9: but ultimately your investors do. And I know that there's
Speaker 9: someone thinking about activist investors at the moment, as perhaps
Speaker 9: some of the control that you've had ultimately in voting
Speaker 9: rights seeps away a little.
Speaker 8: How are you tackling that at the moment, Jeff.
Speaker 1: Well, Look, we've always been a company that is looking
Speaker 1: at the interests of our shareholders and operating the company
Speaker 1: in the interest of our shareholders by talking to the
Speaker 1: shareholders and understanding what they want. So during the era
Speaker 1: of low cost of capital, for the last decade, we
Speaker 1: ran the company to grow the top line, to build
Speaker 1: our market share, and I'm really proud of the company
Speaker 1: that we've built in terms of a four billion dollar
Speaker 1: revenue run rate company during that period of time. Now
Speaker 1: we're in a different environment. Now we're an environment where
Speaker 1: we take that market leadership position that we're in, that
Speaker 1: large customer base that we're in, and turn it into
Speaker 1: a profit generating machine. And that's exactly what we've been doing.
Speaker 1: And I'm really proud of the fact that of the
Speaker 1: last two quarters we have taken a company that has
Speaker 1: never historically generated a consistent profit because that wasn't the goal,
Speaker 1: to now generating more than ten percent non gap operating
Speaker 1: margin in Q one, And so I think we are
Speaker 1: listening to those investors and taking substantive actions to respond
Speaker 1: to the changing needs of investors based on the changing
Speaker 1: needs of the macro environment and interest rate.
Speaker 2: Jeff, specifically, the information reported that you're talking to Legion partners.
Speaker 3: What is the update on that?
Speaker 2: And I notice in the proxy materials published yesterday, the
Speaker 2: first four slides outlined the structure effectiveness track record of
Speaker 2: the management. That's an unusual thing to do. Why did
Speaker 2: you do that well.
Speaker 1: We talked to all of our investors frequently and right.
Speaker 1: We get a lot of opinions, we get a lot
Speaker 1: of points of view, and so it's just a regular
Speaker 1: part of talking to our investors understanding their points of view.
Speaker 1: Regarding the disclosures we made yesterday, we just wanted to
Speaker 1: fight a little bit of I think, you know, misinformation
Speaker 1: or lack of one standing of some of our decisions
Speaker 1: about how our compensation model has worked as we head
Speaker 1: into the proxy modeing season.
Speaker 9: We want to thank you so much for spending some
Speaker 9: time with us talking us all through business model, new applications.
Speaker 8: And focus on AI.
Speaker 9: The TWITTERO CEO Jeff Wilson, thanks, and let's just return
Speaker 9: to what's happening over a Bluebug invest today because billinais
Speaker 9: Stan Drachimiller says he expects that AI guess what it's
Speaker 9: here to stay, and then he interspates owning in video
Speaker 9: shares for a little while longer. He spoke with our
Speaker 9: very own Shanali Bassak at the summit in New York
Speaker 9: earlier today.
Speaker 11: The ais have sort of dominated the long portfolio for
Speaker 11: five or six months.
Speaker 6: If it's as big as I think it is.
Speaker 11: In Vidio is something we're going to want to own
Speaker 11: for at least two or three years, not for ten
Speaker 11: months and maybe longer.
Speaker 9: Meanwhile, we've got a little bit of breaking news, Amazon
Speaker 9: planning an AD tier for prime video streaming service. So
Speaker 9: as we've seen with the likes of Disney, as you've
Speaker 9: seen in Netflix, now Amazon two.
Speaker 8: That's all according to the Wall Street Journals.
Speaker 9: So more to come on Amazon, also more to come
Speaker 9: on Generator AI and indeed investing. We've got so much
Speaker 9: more with Saffi Ventures, Kathy Gao, that's next. This is Bloomberg.
Speaker 9: Guess what we're talking about next, Generator of AI. Of course,
Speaker 9: we are what everyone wants to discuss, and many feel
Speaker 9: that this is truly a platform shift or well maybe
Speaker 9: take the other side of the coin. You think it's
Speaker 9: hype A's dissected or with VC Spotlight Now Kathy Gow's
Speaker 9: with us partner at Saffi a Ventures, and I can
Speaker 9: only imagine how many inbounds you have at the moment
Speaker 9: suggesting that they.
Speaker 8: Are AI or from their ury root in their cause.
Speaker 9: How are you diciphering which company is truly artificial intelligence
Speaker 9: amplified or those.
Speaker 8: That are kind of getting on the bandwagon.
Speaker 12: Kathy, Well, thanks so much for having me back, and
Speaker 12: great question, Caroline. This is a question that we think
Speaker 12: about constantly. I would say the fundamental principles of investing
Speaker 12: haven't really changed. Right at the core, We're still looking
Speaker 12: for companies that are solving a very specific problem and
Speaker 12: have a point of view on their right to win.
Speaker 12: So that could mean owning a very specific and valuable
Speaker 12: workflow for the end user. It could also mean having
Speaker 12: access to and interacting with proprietary and valuable data. But
Speaker 12: a company should have a point of view. And there
Speaker 12: are companies out there that have a thin layer of
Speaker 12: application on top of commoditized infrastructure. For us, those would
Speaker 12: not be companies that we'd be excited to invest in.
Speaker 12: I think another very interesting thing that we have to
Speaker 12: think about as investors is in what situations does it
Speaker 12: make sense for an existing company to add in AI
Speaker 12: features into their product and platform. So a great exam
Speaker 12: sample of this is, you know many of us use
Speaker 12: Gmail or Outlook. We can pop up in our email
Speaker 12: and use auto complete or auto generate to help us
Speaker 12: respond to emails. So that's an example of an existing
Speaker 12: platform integrating folding an aim.
Speaker 2: That's tangible, right, Like I was at Google Io. I
Speaker 2: saw the demo, but Google already owns that, right. And
Speaker 2: so you have all these startups out there in the field,
Speaker 2: and the thing that I want to ask you is
Speaker 2: how confident are you that any of them will ever
Speaker 2: make money? You know one example character AI. We had
Speaker 2: Normaghazier on the show a few weeks ago, and it
Speaker 2: kind of seems like an afterthought. That's alarm bells for
Speaker 2: a VC, isn't it?
Speaker 12: Absolutely well, I would say this.
Speaker 3: I think.
Speaker 12: At Sapphire Adventures, we are building our prepared mind to
Speaker 12: be ready to invest in AI, and I think it's
Speaker 12: going to be a tremendous opportunity for vcs in the
Speaker 12: next three to five years. That being said, it's very
Speaker 12: very new today, right. We want to take some time
Speaker 12: to see how this plays out. If you think back
Speaker 12: to previous technological fundamental platform shifts, the ultimate winners may
Speaker 12: not have been the companies that came out of the
Speaker 12: first wave. And I think of Google right that came
Speaker 12: after Alta Vista and Yahoo, and I think of Facebook
Speaker 12: who came after MySpace and Friends to So for us,
Speaker 12: it's all about learning about the current environment and the
Speaker 12: market and watching what's going to happen and being prepared
Speaker 12: to invest when the timing fields right.
Speaker 2: Earlier in your career, you were looking at China. I
Speaker 2: know it's an air you've thought about, how face is
Speaker 2: the competition between the entrepreneurs here in the United States
Speaker 2: and what entrepreneurs in China are doing. You know, as
Speaker 2: a VC, how do you navigate that field?
Speaker 12: I would say AI is certainly a very very competitive field,
Speaker 12: but I think it's a mistake to only look at
Speaker 12: it as US versus China. It's really a global dynamic.
Speaker 12: The reason companies all over the world are investing in
Speaker 12: AI is because the tremendous potential for AI to transform
Speaker 12: possibly every industry out there. Right, And maybe this is
Speaker 12: me putting on my optimistic hat, but I do think
Speaker 12: that global solutions, global collaboration is what is needed, because
Speaker 12: ultimately AI does have the potential to solve problems in healthcare,
Speaker 12: in climate change. These are problems that transcend national borders, you.
Speaker 3: Know, Caroline.
Speaker 2: The story of the week in this industry was Sequoia
Speaker 2: splitting into three, right, and one of the rationales being
Speaker 2: that they can have a unit focused on China because
Speaker 2: there is opportunity in China, there's entrepreneurs, and there's support
Speaker 2: from the government.
Speaker 9: Yeah, but they can't seemingly manage to do that from
Speaker 9: a globally coordinated manner with the back office that serves
Speaker 9: all three. And to that point, Kathy, how how global
Speaker 9: can you be as a venture fund right now? How
Speaker 9: much you able to navigate these geopolitical headwinds.
Speaker 12: That's a great question, Caroline, And I gotta tell you,
Speaker 12: I'm closely watching what is happening with Sequoia. You know,
Speaker 12: the news is relatively new, so I can't speculate on
Speaker 12: what is happening in Sequoia, but the moves they have
Speaker 12: made will for sure impact the venture capital industry. And
Speaker 12: what Sequoia has publicly said already, which is managing a
Speaker 12: global organization is difficult, right. You have to consider portfolio conflict,
Speaker 12: portfolio conflicts not just in the US, but multiple geographies.
Speaker 12: It is, in fact, very very difficult to handle. And
Speaker 12: sequoia solution to break the firm up into three separate
Speaker 12: entities is just one solution. But I'm very curious to
Speaker 12: see if other large global venture capital firms who are
Speaker 12: also investing in other countries follow suit or come up
Speaker 12: with other creative strategies.
Speaker 2: Saphar Adventures, Kafi Gowa is so good to have you
Speaker 2: back on the program after all these months.
Speaker 3: Thank you so much for your time.
Speaker 11: I do believe, unlike crypto, I think AI is real.
Speaker 11: It's probably it could be as transformative as the Internet.
Speaker 11: It's a huge thing.
Speaker 2: Stanley Druckamiler earlier at Bloomberg invest Let's get more on
Speaker 2: crypto send it over to Bloomberg. Shnali Bassek and Coinbase
Speaker 2: CEO Brian Armstrong.
Speaker 3: Shnali, thank you, Ed.
Speaker 4: And Brian, thank you for joining us. You've had a
Speaker 4: very intense twenty four hours. When you look at what
Speaker 4: the charges the SEC has brought forth against Coinbase, how
Speaker 4: long do you think it will take to fight it,
Speaker 4: especially when you have your chief legal officer telling me
Speaker 4: last night that you would go all the way to
Speaker 4: the Supreme Court if you have to if necessary.
Speaker 6: Yeah.
Speaker 5: I mean, look, we don't know exactly how long this
Speaker 5: court case will take, but I do think it's a
Speaker 5: really important opportunity for us, as you know, the leader
Speaker 5: in the US, to go get some clarity for this
Speaker 5: industry and for America so that we make sure that
Speaker 5: this techlogy is built here and it doesn't get pushed
Speaker 5: off shore where.
Speaker 6: Customers can get harmed.
Speaker 5: I think if you just if you go back in
Speaker 5: time a little bit, you know, back to twenty twenty one.
Speaker 5: We had a number of discussions with the SEC about
Speaker 5: becoming a public company and they allowed us to become
Speaker 5: a public company with full knowledge of how we list
Speaker 5: assets and how we operate our staking program. And it really,
Speaker 5: you know, wasn't until a year later or so that
Speaker 5: they started to have more questions.
Speaker 6: We very thoughtfully engage with them.
Speaker 5: I think we met with them thirty times over the
Speaker 5: last year, explaining every aspect of our business. We came
Speaker 5: in hat in hand and said, how do we register?
Speaker 5: We want to register. You know, we even acquired a
Speaker 5: broker dealer license which is still dormant.
Speaker 6: We haven't found a way to activate it.
Speaker 5: We formally petitioned them for more clarity around the rules,
Speaker 5: and we frankly were met with silence. And so unfortunately
Speaker 5: they decided to pursue this policy of regulation by enforcement.
Speaker 5: We've got the Wells notice and now the complaint is
Speaker 5: officially here, and so this is a difficult moment for
Speaker 5: not only the industry, but also for America. We need
Speaker 5: to make sure we get a clear book so this
Speaker 5: this technology can be built here.
Speaker 4: There a point at what you call it quits in
Speaker 4: the United States, given how hard regulators are coming down
Speaker 4: on the industry.
Speaker 6: No, we're not going anywhere.
Speaker 5: I mean, I started this company in the US because
Speaker 5: not only is it a big market, there's there's rule
Speaker 5: of law here, right, you know, we have to follow
Speaker 5: the rule of law. So does the SEC and everybody.
Speaker 5: And so luckily, if we're not getting a clear rule
Speaker 5: book from the SEC, we have the opportunity to avail
Speaker 5: ourselves of the court and we'll start to get some
Speaker 5: case law created, regardless of what the outcome of the
Speaker 5: case is. Honestly, it's a step towards more clarity. The
Speaker 5: other big opportunity we have is really for Congress to
Speaker 5: step in here and act. And I think there's a
Speaker 5: lot of interest in Congress. We saw a bill come
Speaker 5: out last week from you know, mckenry and Thompson sort
Speaker 5: of clarifying Okay, this is the role of the CFTC
Speaker 5: and the SEC, and let's have some good consumer protections
Speaker 5: and what about stable coins? And so I think there's
Speaker 5: a broad recognition within Congress that the US is going
Speaker 5: to get left behind if they don't start to create
Speaker 5: some regulatory clarity because the UK, you know, Hong Kong, Singapore,
Speaker 5: the UAE, these are all saying we want.
Speaker 6: To be crypto and Web three hubs.
Speaker 5: We have clear rule books, Come here and build your business,
Speaker 5: and the US is at risk of being left behind.
Speaker 4: What happens while things are so unclear? Is there a
Speaker 4: chance here that you start to lose customers or even
Speaker 4: banking partners? Here you have JP Morgan, Cross River, all
Speaker 4: these other more traditional financial institutions that.
Speaker 3: You've worked with.
Speaker 4: Do they start to freeze up when the government does
Speaker 4: not have clear rules?
Speaker 5: Well, so far, we haven't seen any risk of that happening.
Speaker 5: I think all of our partners have been very thoughtful
Speaker 5: working with us.
Speaker 6: We've been very.
Speaker 5: Transparent with them, and I think they're frankly waiting to
Speaker 5: see what the outcome of some of these cases are
Speaker 5: too and how does the US get to a path
Speaker 5: of more clarity, Whether that's with the CFTC stepping in
Speaker 5: in some role, Congress, the court case, you know, maybe
Speaker 5: the elections in twenty twenty four change this as well.
Speaker 5: So Our partners have been really great to work with,
Speaker 5: and you know, we're a leading company in the US.
Speaker 6: We're not going anywhere.
Speaker 4: Elections in twenty twenty four. Do some of these pressures
Speaker 4: on the industry potentially go away with a potential changing
Speaker 4: in administration.
Speaker 5: It's possible, yes, I mean I do think that, you know,
Speaker 5: the chair in the SEC here is a bit of
Speaker 5: an outlier frankly in the US government. You know, as
Speaker 5: I mentioned previously, Congress has seems very interested in crafting
Speaker 5: legislation here. The Biden administration actually put out in an
Speaker 5: executive order a year ago or so saying, you know,
Speaker 5: we recognize the potential of this technology, and we want
Speaker 5: to make sure the risks are mitigated. You know, they
Speaker 5: asked the branches of government to go introduce this. We're
Speaker 5: also seeing some of the presidential candidates already for next
Speaker 5: year kind of start to talk about their stances on
Speaker 5: crypto and how they want to accept crypto as you know,
Speaker 5: for donations, and how it should be regulated. So I
Speaker 5: actually think there's a good chance this becomes, you know,
Speaker 5: a relevant issue in the twenty twenty four elections.
Speaker 4: You know, with that said, this could be an overhaul
Speaker 4: overhang for a while here when we look at how
Speaker 4: long that this could play out, not just for you,
Speaker 4: but the whole industry. What does this mean for crypto
Speaker 4: prices overall? Do you think that it's spooking some investors
Speaker 4: away in your conversations with the big institutions.
Speaker 5: Well, you know, yesterday this news came out and surprised me.
Speaker 6: You know, crypto was up that day.
Speaker 5: I you know, I think what's what I interpret from
Speaker 5: this is that the SEC's rhetoric on this has been
Speaker 5: clear for a year or two now, and they've been
Speaker 5: making lots of statements, and so I think if there
Speaker 5: is an overhang, it's probably already been there for a while.
Speaker 5: And I don't think anybody was surprised by this news
Speaker 5: that came out of because the Wells notice came before it,
Speaker 5: and the rhetoric was there before that. So our investors
Speaker 5: are they're long term believers in this technology. I think
Speaker 5: they're looking at it as an opportunity. Frankly, you know,
Speaker 5: if others are fearful, it's probably an.
Speaker 6: Interesting buying opportunity for them.
Speaker 5: But they're excited about this as one of the three
Speaker 5: or four major technology trends happening in the world, and
Speaker 5: I think they, you know, smart investors recognize that the
Speaker 5: US is not going to sit on the sidelines.
Speaker 6: This is too important with technology.
Speaker 4: Ran, thank you so much for your time and for
Speaker 4: joining us on the back of such important news for
Speaker 4: the industry.
Speaker 2: Add back to you the EMOTIONALI Bassett with Brian Armstrong,
Speaker 2: CEO of coinbas Thank you so much.
Speaker 8: Caroline, Well times run out.
Speaker 9: That does it for this edition of Bloembag Technology.
Speaker 8: What a well win tet.
Speaker 2: Yeah, and don't forget you can recap that well wind
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Speaker 2: wherever you get your podcasts.
Speaker 3: From SF from New York. This is Bloomberg