Coinbase CEO on Regulation, ETFs, Adopting Crypto
Summary
TLDRCoinbase CEO Brian Armstrong discusses the company's role in the crypto ecosystem, emphasizing its growth beyond a simple exchange to a full-service platform. He highlights the importance of the 'Update the System' event in DC, aiming to educate policymakers on the diverse use cases of crypto. Armstrong also addresses the recent ETF approvals, Coinbase's infrastructure challenges, and the political implications of a growing crypto economy.
Takeaways
- đŁïž Coinbase is hosting an 'Update the System' event in Washington, inviting policymakers and members of Congress to discuss the emerging use cases of cryptocurrency.
- đĄ Crypto is seen as a new form of sound money, akin to a digital gold standard, especially in times of high inflation and deficit spending.
- đ Crypto's utility extends beyond being a store of value, with applications like digitizing the dollar, enabling fast and cheap global payments, and supporting decentralized social media for artists.
- đ The recent Bitcoin ETF approvals have led to a significant influx of capital into the crypto market, with Coinbase serving as the custodian for about 90% of the assets in those ETFs.
- đ Coinbase aims to be more than just a crypto exchange, evolving into a trusted platform for storing, trading, and using crypto, potentially becoming a primary financial account for users.
- đŠ The company does not intend to pursue a bank license, focusing instead on 100% reserve banking without fractional reserve practices.
- đ€ Despite the ETF influx, Coinbase has seen increased retail and institutional inflows, indicating that the ETFs have not cannibalized their direct product offerings.
- đ The recent surge in Bitcoin's price and trading activity has highlighted the need for Coinbase to invest further in its infrastructure to handle the growing demand.
- đ Ethereum, like Bitcoin, is expected to have its ETF approved, but political and regulatory challenges may cause delays, with the industry potentially resorting to legal action for equal treatment.
- đ Coinbase's role as a custodian is recognized in five of the eight Ethereum ETF applications, reinforcing its position as a trusted platform in the crypto ecosystem.
Q & A
What is the main purpose of the 'Update the System' event hosted by Coinbase?
-The main purpose of the 'Update the System' event is to discuss the various emerging use cases of cryptocurrency with policymakers and members of Congress, aiming to raise awareness and understanding of the potential of crypto beyond being just a store of value.
How does Brian Armstrong view the role of crypto as a form of sound money?
-Brian Armstrong sees crypto as a new form of sound money, comparing it to a digital gold standard. He believes it serves as a check and balance in the current economic climate, particularly in times of high inflation and deficit spending.
What are some specific use cases of crypto mentioned by Brian Armstrong?
-Specific use cases mentioned include digitizing the dollar for fast, cheap, and global payments, enabling artists to sell directly to their fans, and the development of decentralized social media platforms.
How does the presence of Coinbase and other crypto companies in Washington impact the political landscape?
-The presence aims to educate policymakers about the growing use and importance of crypto technology, emphasizing that being anti-crypto could be politically detrimental, given the increasing number of Americans using this technology.
What is Coinbase's vision for its future role beyond being a crypto exchange?
-Coinbase aims to become the most trusted and easiest-to-use platform for storing, trading, and utilizing crypto. They envision becoming a primary financial account for users in the new crypto economy, akin to a 'crypto bank', without resorting to fractional reserve banking practices.
How has the influx of capital into Bitcoin ETFs affected Coinbase?
-Coinbase has benefited positively from the influx of capital into Bitcoin ETFs. They act as the custodian for about 90% of the assets in these ETFs, providing monetization opportunities without cannibalizing their direct retail and institutional product offerings.
What challenges did Coinbase face during the recent surge in crypto activity and trading volumes?
-Coinbase experienced outages due to the surge in activity and trading volumes, which exceeded their load testing models. This has highlighted the need for further investment in infrastructure to handle the growing importance of Coinbase as a systemic financial institution.
What are Brian Armstrong's thoughts on the potential approval of Ethereum ETFs?
-Brian Armstrong believes that Ethereum ETFs should be approved, as everyone deserves equal treatment under the law. However, he acknowledges that politicization and regulatory disputes might cause delays, necessitating legal action to ensure fair treatment.
How does Coinbase position itself in the growing ecosystem of crypto custodians?
-Coinbase aims to be one of the trusted pillars in the crypto ecosystem, providing a diverse range of services including custody, trading, financing, and settlement. They encourage self-custody and the development of a diverse custodian ecosystem.
What is the significance of Coinbase's role as a custodian in Ethereum ETF applications?
-Coinbase being named as the custodian in five of the eight Ethereum ETF applications is an endorsement of their platform and highlights their position as a preferred infrastructure provider for the crypto industry.
How does Brian Armstrong connect the issue of inflation to the adoption of crypto?
-Brian Armstrong connects inflation to the expansion of the dollar money supply, which he identifies as a major driver of inflation in the US. He sees Bitcoin as an antidote to inflation, offering a check and balance on deficit spending and helping to maintain the dollar's reserve currency status.
What is Coinbase's strategy for contributing to political dialogue and supporting pro-crypto candidates?
-Coinbase has been advocating for pro-crypto candidates who recognize the need for balanced regulation that protects consumers while fostering innovation. They have contributed to organizations supporting such candidates and aim to ensure that crypto becomes an increasingly important part of the political dialogue.
Outlines
đŁïž Coinbase's Washington Summit and Crypto's Use Cases
Coinbase is hosting an event called 'Update the System' in Washington, D.C., inviting policymakers and members of Congress to discuss the emerging use cases of cryptocurrency. The goal is to dispel the myth that crypto has no practical applications, highlighting its role as a new form of sound money, a digital gold standard, and its potential to revolutionize the financial system. The event aims to emphasize the importance of crypto in the current economic climate and to show the significant number of Americans using this technology, suggesting that being anti-crypto is politically unwise.
đ Future of Coinbase Beyond Crypto Exchange
Coinbase aims to evolve beyond being just a cryptocurrency exchange. With the influx of capital following the approval of Bitcoin ETFs, Coinbase has become a custodian for a significant portion of these assets, opening up new monetization opportunities. The company envisions itself as a trusted platform for storing, trading, and using crypto, potentially becoming a primary financial account for users in the new crypto economy. Coinbase is looking to support over 100 different crypto assets and wants to be the easiest and most trusted place to engage with crypto, without pursuing a traditional bank license due to its fractional reserve system.
đĄ Addressing Inflation and the Role of Crypto
The discussion highlights the connection between inflation and the expansion of the US dollar supply, with Bitcoin positioned as an antidote to inflation. As prices rise, more people are recognizing Bitcoin's role in providing a check and balance against deficit spending. Coinbase's involvement in the political dialogue is emphasized, with the company supporting pro-crypto candidates and contributing to organizations for crypto-friendly elections. The aim is to ensure that the financial system is updated to serve the needs of the people, leveraging crypto as a tool for economic freedom and better financial infrastructure globally.
Mindmap
Keywords
đĄCryptocurrency
đĄCoinbase
đĄETFs (Exchange-Traded Funds)
đĄInflation
đĄDeficit Spending
đĄDigital Gold Standard
đĄDecentralized Social Media
đĄCustodian
đĄSound Money
đĄFinancial System Update
đĄPolitical Advocacy
Highlights
Coinbase is hosting an 'Update the System' event to discuss the emerging use cases of cryptocurrency with policymakers and members of Congress.
Crypto is seen as a new form of sound money, akin to a digital gold standard, especially in times of high inflation and deficit spending.
Crypto is not just a store of value; it is digitizing the dollar, making payments fast, cheap, and global, and enabling artists to sell directly to fans through decentralized social media.
Coinbase aims to be the most trusted and easiest place to store, trade, and use crypto, potentially becoming a primary financial account in the new crypto economy.
Coinbase does not plan to pursue a bank license due to issues with fractional reserve banking, instead focusing on storing 100% of customer assets.
Coinbase is systemically important for powering the new economy and will continue to invest in infrastructure to handle increased traffic and adoption.
Bitcoin's role as an antidote to inflation is becoming part of the political dialogue, with Coinbase helping to support pro-crypto candidates.
Coinbase is the custodian for about 90% of the assets in Bitcoin ETFs, providing monetization opportunities without cannibalizing direct product opportunities.
The influx of capital into the crypto market due to ETF approvals has been positive for Coinbase, with increased retail and institutional inflows.
Coinbase supports over 100 different crypto assets and aims to be a comprehensive platform for trading and using crypto in various applications worldwide.
The Ethereum ETF approval process may face politicization and regulatory challenges, but it should be treated equally under the law.
Coinbase is named as the custodian in five of the eight Ethereum ETF applications, reinforcing its position as a trusted platform.
The crypto ecosystem should have a diversity of custodians, with Coinbase aiming to be one of the trusted pillars for building various financial services.
Coinbase offers a range of services beyond custody, including trading, financing, settlement, and products like staking and Coinbase cards for spending crypto.
The importance of crypto in the financial system is recognized by a majority of Americans, with 87% stating the current system doesn't work for them.
Coinbase's role in Washington is to advocate for a balanced regulatory approach that protects consumers while fostering innovation in the crypto space.
The rise of crypto is seen as a way to update the financial system, bringing economic freedom and good financial infrastructure globally through smartphone access.
Transcripts
want to start here actually not with the
volumes but I want to give you the
chance here because I know you're flying
down to DC and hosting a lot of Congress
over at a summit that coinbase is really
spearheading H including Cynthia lumus
and Patrick McKenry how do you see your
presence in Washington today and why is
it so important for you and Mark andreon
to be
there yeah well you're right we are
hosting an event tomorrow uh called an
update the system event and we're
inviting a bunch of policy makers
members of Congress and the goal is to
talk about all the different use cases
of crypto that are emerging I think
there's kind of this Trope that's out
there which is that you know crypto
doesn't have any use case and it really
couldn't be farther from the truth I
mean crypto first of all it's a new form
of sound money right it's a return to
almost like a new gold standard that's
digital in this time of high inflation
and deficit spending I think people are
really interested in that and it's a
nice check and balance um that'll help
America uh with any of the issues there
it's also digitizing the dollar it's
making payments fast cheap and Global
it's you know allowing artists to sell
directly to their fans decentralized
social media there's all kinds of things
that are emerging around use cases in
crypto and so we want policy makers to
come together to talk about that to get
the word out and also to sh see the the
number of Americans that are actually
using this technology now so that a very
message can be a very important message
can be delivered that you know being
anti- crypto is political suicide in
this political environment now you're
talking so much about other use cases
for crypto outside of even just being a
store of value here as many people see
it as they're entering this asset class
sum for the first time with the Advent
of the spot Bitcoin ETFs it begs the
question how do you see the future of
coinbase there are a lot of questions
about the future of crypto exchanges in
the world where Bitcoin ETFs have gotten
so much share do you see coinbase going
far and above Beyond being simply a
crypto Exchange
yeah so with the you know the ETFs that
got approved we've seen a huge influx of
capital into the system about 12 billion
dollar of inflow have happened and you
know some when that happens sometimes
people ask us well what does that mean
for coinbase well you know it's actually
incredibly positive for coinbase um
we're storing we're the custodian for
about 90% of the Assets in those Bitcoin
ETFs and so we have monetization
opportunities there as a custodian but
we it didn't cannibalize any of the
opportunity in our direct products too
our retail app our institutional product
we actually saw increased inflows there
while the while we saw1 billion of
inflow into the ETFs so the atfs were
incredibly positive for the industry
they were a regulatory approval they
unlocked New Pools of capital and
coinbase is going to be not just a place
where you store crypto it's a place
where you can actually trade crypto you
can use it increasingly in many
different applications all over the
world and and it's not just Bitcoin
either you know we support
um over a 100 different crypto assets so
we want coinbase to be the most trusted
and easiest to use place to to store
crypto to trade it and to actually use
it and we can actually become people's
primary Financial account in some cases
in this new crypto economy kind of like
a crypto
Bank yeah one might say that I don't
think we're ever going to go get
actually a bank license because Banks
get licenses to do fractional reserve of
the assets um I don't really think
that's the right path I think it's
caused all kinds of ISS issues with bank
failures and and that kind of thing we
don't want to do fractional Reserve we
want to store 100% of customers assets
or if they prefer they don't even have
to store it with us they can do self-
custody and you know if they choose to
opt in their funds into some product to
um earn rewards or something like that
they can choose to do that we're not
going to do it on their behalf um in the
way that Banks do with fractional
reserves so it's a new paradigm I think
that um there's a new generation of
people who are looking at they want to
see crypto update the financial system
because you know 87% of Americans when
you survey them they say the current
Financial system doesn't work for them
fractional Reserve is just one piece of
that but if you look at you know credit
card fees and overdraft fees and why
does it you know take two or three
business days to send an a transfer and
so our financial system really needs to
get updated and that's what we think is
that crypto is this most important
technology to update the financial
system globally bring economic freedom
and Good Financial infrastructure to
people all over the world if they just
have a smartphone with an internet
connection uh before we update the
system we have to talk about some of the
things you've seen on coinbase in recent
weeks as well as other exchanges kind of
hiccups along the way as we've seen this
new activity really bring Bitcoin to new
highs and then back off those highs
Brian what have you learned from the
outages in recent weeks over a coinbase
when we we have seen those elevated
volumes in activity and trading after
we've seen such inflows into the
ETFs yeah well we've seen a real surge
of activity on our platform and last
year we spent a lot of time uh doing
load testing and making sure we could
handle a 10x surge of traffic you know
what's incredible is that as Bitcoin
touched and surpassed the previous
all-time highs in the the span of about
an hour we saw more than a 10x surge of
traffic come in and so it exceeded even
our models of um the amount of interest
that could come in in a short period of
time so I think what's happening is that
coinbase is becoming a you know
systemically important financial
institution for the world to power this
new part of the economy and we're going
to have to continue to invest in our
infrastructure um at an even greater
level than we have in the past so you
know look it's good it's a signal of
adoption of crypto and how important
it's becoming in the economy but that
just makes our job even more important
and we got to make sure we're we're
serving our partners and our our
customers with good infrastructure I
think it begs the question as well you
know last about a week or so ago we saw
record uh prices here for Bitcoin itself
which of course attracted a lot of
interest into other crypto assets I want
to ask you about ethereum here for a
minute because we've already gotten past
those spot Bitcoin ETF approvals
ethereum has always been a very popular
crypto asset but when you think about
the tone in Washington and what we've
seen after that Bitcoin ETF approval do
you think it's going to be as easy the
second time around I shouldn't say easy
because it did take years to get here
but as smooth or as likely uh for
investors to see that e ethereum ETF be
approved uh just as
swiftly
yeah I mean I think the ETFs the
ethereum ETFs very clearly should be
approved and you everybody deserves
equal treatment under the law
unfortunately um some of this crypto
stuff has gotten a little bit
politicized at our federal agencies and
there's unfortunately this kind of turf
war between the cftc and the SEC about
you know is it a commodity is it a
security Etc and I think the facts are
pretty clear that ethereum is a
commodity but that's not going to stop
folks from trying to throw a wrench into
things and so
you know if if it does get delayed
unfairly um I think the industry will
have to follow a similar path to what
happened with Bitcoin which is they'll
essentially go to the courts and you
know the courts will compel uh The
Regulators to follow the follow the
rules follow the law right um and give
equal treatment under the law so it it
may take additional effort but I think
um it they really should be approved
right away and and I was really pleased
to see that coinbase was actually named
as the custodian in five of the eight
ethereum ETF applications so it
continues to be endorsement of us as a
platform that um people want to build on
top of that was what I was going to ask
you what is coinbase's role as more
crypto assets see an ETF wrapper come to
the surface here of course you have a
large custody business here you are kind
of running the show here when it comes
to most of the spot Bitcoin ETFs but do
you think that this is also a business
where more people will seek to diversify
their custodians will that have a big
impact on your
business well we want there to be a
diversity of custodians in crypto and of
course people should be able to store
crypto themselves too that's one of the
unique things in crypto you can kind of
be your own custodian so there should be
a diversity in the ecosystem I think
coinbase is really just trying to be one
of those trusted pillars that folks can
build on and it's great like the ETFs
they can build on top of us as a
custodian they also need trading
Services often uh financing you know
settlement other other sorts of services
that we provide but there I think
there's even if we get you know an ETF
for Bitcoin ethereum salana kind of go
on down the list um and eventually by
the way we should have index funds you
know hopefully there someday there can
be a coinbase 500 kind of like the S&P
500 with the top 500 coins by by market
cap um all kinds of things could get
built in the future but these aren't
just passive Investments that people
want to do crypto increasingly has more
and more utility people are paying for
things you know now with usdc you can
actually send it instantly anywhere in
the world for free um on a on ethereum
layer to solution called Bas so we can
revolutionize payments um you know what
I talked about earlier with artists
getting paid and decentralized social
media it's kind of the future of how the
internet is going to get built and how a
lot of applications are monetized so
people are going to come to coinbase
when they want to hold crypto directly
when they want to actually use crypto
when they want to get access to staking
and other products uh coinbase cards so
they can spend their crypto at any
Merchant where Visa is accepted I think
these are very additive we can be an
infrastructure provider to traditional
financial services and we can be the
retail app the institutional app for
people who want to directly use crypto
now Brian as you head to Washington now
for the summit tomorrow I also want to
kind of point out here that you've had a
large voice here in advocating for pro
crypto candidates where does the rubber
hit the road is it really making a
difference at the end of the day when
America is also facing a whole host of
other challenges like
inflation well it's funny actually
inflation ties really neatly into crypto
I mean the expansion of the dollar money
supply is probably the biggest driver of
inflation in the US and a lot of average
people you know they may not think about
quantitative easing or fiscal deficits
but they do notice that the prices or
things have gone up at the gas station
or the grocery store and so inflation is
a big tent pole issue I think
increasingly people are starting to
realize that Bitcoin is the antidote to
inflation it is a very important check
in balance on deficit spending and I
think for the US uh to remain um a
global superpower a financial Hub
technology Hub and for the dollar to
keep its Reserve currency status which
you know I very much want as an American
we need a check and balance because of
course you know in the early 1970s the
dollar was fully decoupled at that time
from hardback Commodities like gold and
since then it's followed a similar
pattern to other nations around the
world so anyway I think I think Bitcoin
is increasingly becoming a part of the
political dialogue and coinbase has
tried to help out here um help these 52
million Americans who've used crypto by
the way you know that's 5x the number
that own an electric vehicle 3x that you
know have a union card so it's it's a
massive constituency and I don't think a
lot of people in DC realize that we've
contributed to organizations like stand
withth
crypto.com in the super Tuesday
elections so we really need to get Pro
crypto Pro inovation candidates elected
that recognize the need for regulation
that balances protecting consumers we
have to leave it there we're hitting up
against a break but we hope to have you
back soon and good luck with that
conference over there tomorrow we'll
want to hear all about it later that's
coinbase CEO Brian Armstrong
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