Coinbase CEO on Binance Buying FTX — Transcript

Full transcript

1. 0:00Crazy day in the crypto markets, what happened today from your purview?
2. 0:05Yeah, well, you know, it's hard to judge too much until all the facts are in, but
3. 0:09it appears that FTSE got into a bit of a liquidity crunch and there were some
4. 0:15risky behavior that they were engaging in.
5. 0:16And, you know, it appears that finance is wanting to come in here and acquire
6. 0:20RTX. But we'll see if that deal goes through.
7. 0:22And I think the broader story that as I think about it, just zooming out is that
8. 0:27over the last few years, you know, companies like Coinbase that are
9. 0:32pursuing a trusted and regulated approach.
10. 0:33We've been trying to seek regulatory clarity.
11. 0:35And sometimes in the absence of that, we've seen customers basically going
12. 0:39offshore to these offshore, unregulated exchanges.
13. 0:43And occasionally we're going to see blowups like this.
14. 0:45I think unless that is resolved somehow. So it is a validation of our strategy
15. 0:50that we've been taking for the long term.
16. 0:52And yeah, I think that's what we've been seeing in these recent markets.
17. 0:57There are big concerns about crypto liquidity and how fickle it is or isn't.
18. 1:02How do you prevent liquidity crunches from happening?
19. 1:08Yeah, well, in Crimea's case, I mean, this kind of liquidity crunch is not
20. 1:12possible to happen because we're not investing customer funds.
21. 1:17We're not doing market making or engaged in any
22. 1:21kind of complex arrangement with other parties that we own.
23. 1:25It's very simple. You know, we're regulated as a custodian
24. 1:27and a brokerage and in exchange, we hold all of the customer assets one to one
25. 1:31back. So if customers want to come and
26. 1:33withdraw those funds, even 100 percent of them, you know, that's fine.
27. 1:36They can withdraw all of it at once. And as a public company, our financial
28. 1:40statements are audited and anybody can go and see them.
29. 1:43So these are the kinds of things that I think helped make us a trusted platform.
30. 1:47And unfortunately, again, in these kind of offshore, unregulated exchanges, it's
31. 1:52a little unclear exactly how their financial statements are orchestrated
32. 1:56and what their relationships are with these other third parties.
33. 1:59You know what's happening with customer funds?
34. 2:01Is it being loaned out without their permission?
35. 2:04And so hopefully this is a good reminder to everybody that, you know, having
36. 2:07trusted companies in this space is what's going to help this space grow
37. 2:10over the long term. So, look, analysts are looking at this,
38. 2:15as you know, and if the deal goes through, of course, and it hasn't yet.
39. 2:18But as a seismic shift in the competitive landscape, how are you
40. 2:24thinking about that? Does does it need mean you'll need to
41. 2:28evolve your strategy at all? No, I mean, I don't think our strategy
42. 2:34changes here. So, I mean, first off, we try not to
43. 2:36look at too much of what competitors are doing and we try to just look at what
44. 2:39our customers want and focus on that. I also think that, by the way, most of
45. 2:43the interactions we have with our competitors in space are they're
46. 2:46cooperative, they're friendly. We're trying to grow the whole space 100
47. 2:48X and it's not so much a competitive thing.
48. 2:52Most of the time. But that being said, I do think, you
49. 2:54know, finance and Coinbase are taking pretty different approaches.
50. 2:58And, you know, we're we're building in a very
51. 3:01trusted, compliant way. We're trying to go get licenses in the
52. 3:04countries where we operate. You know, we're also not just a trading
53. 3:08platform. We don't think trading is the be all
54. 3:10end, all crypto, all that. We have really good products in that
55. 3:12space. We know the reason I got into this and I
56. 3:14got excited about it is I want there to be a more fair and free and global
57. 3:19financial system where there's more economic freedom.
58. 3:21So we're enabling people through our products to do all kinds of things with
59. 3:24crypto, including, you know, earning a living and paying for things and
60. 3:27commerce and remittance and peer to peer payments and even accessing Web three in
61. 3:31the world of DAX out there. So
62. 3:34we're going to continue to build towards that.
63. 3:35Our strategy doesn't change, but I do think this could have an impact in terms
64. 3:39of the regulatory landscape and you know, how policymakers are going to
65. 3:44engage with different parties going forward.
66. 3:48Would Coinbase consider buying FTSE us? So I had a number of conversations with
67. 3:56people over the last 24 hours, and there's reasons why that would not make
68. 4:02sense and I'm not quite at liberty to share the details right now.
69. 4:05I think I'm gonna let other people share that if and when they're ready or it
70. 4:10probably all come out eventually. And I think, you know, finance, I'm
71. 4:13sure, is looking at the details of this transaction as well to see if it makes
72. 4:18sense for them. But yeah, I mean, look, we are we're in
73. 4:21a position where we really just want to focus on building our own products.
74. 4:24And it may be a bad situation if this deal
75. 4:28doesn't go through for the customers involved.
76. 4:30And so I have a lot of sympathy for that.
77. 4:33But it's not something where we felt we had the option to come in and acquire
78. 4:37that would make sense for us or their customers.
79. 4:40Well, let's talk about the customers, what's your pitch to FTSE X users about
80. 4:44why they should move their funds to Coinbase over by NANCE?
81. 4:49Yeah, well, as I mentioned at the beginning, I
82. 4:52mean, Christmas has always taken this approach of the last ten years of being
83. 4:56the most trusted easiest to use out there.
84. 4:59And we developed a suite of products over time that allows people to come to
85. 5:02our platform and not just trade, but do all the other kinds of activity, you
86. 5:06know, staking if they want to participate in not engaging in commerce,
87. 5:10web, three various things like that. Of course, we serve different customer
88. 5:13segments, too. We serve regular individual consumers,
89. 5:17you know, institutional businesses and also developers.
90. 5:20And I think the core thing is that, you know, there's a lot of things that would
91. 5:24cause a customer to choose our platform. But in this exact moment in the market,
92. 5:28I think the main thing that top of mind for them are is going to be, are my
93. 5:31funds safe? How do I know that?
94. 5:33Is this a transparent and regulated firm or is this something where I don't have
95. 5:38great visibility into it? And what's my counterparty risk?
96. 5:42So those are the questions people are probably to be asking in this moment.
97. 5:45And that's probably a good reason why they'd come and look at Coinbase.
98. 5:48In fact, we're seeing we're seeing good inflows and activity on a platform, as
99. 5:52you can probably imagine. Oh, really, you're seeing big inflows
100. 5:56right now. Yes, we're definitely seeing increased
101. 6:00activity on the platform there. How concerned are you that.
102. 6:06Finance will have too much power over crypto.
103. 6:10If this deal goes through. Yeah, I mean, so decentralization is one
104. 6:15of the big topics in crypto and it's kind of a core ethos.
105. 6:18And so I definitely think there is a risk in any sense of any party having
106. 6:22too much control. You know, I don't want to speculate too
107. 6:25much on what finance's role would or would not be.
108. 6:28But I think that's up for the market to decide.
109. 6:30Right. And
110. 6:32yeah, I think that that'll get worked out.
111. 6:34I don't have any particular thing that we need to do there, but I do think it's
112. 6:38a top of mind thing for everyone in crypto.
113. 6:40They don't want any one party to have too much control.
114. 6:45On that note, then, how do you think this will impact crypto regulation in
115. 6:49D.C., which, as you know, has been very much a work in progress?
116. 6:55Yeah. So we've certainly been big advocates
117. 6:57working with policymakers in DC to counter more regulatory clarity,
118. 7:01especially around centralized exchanges and custodians and stable coins.
119. 7:06We also think that the innovation potential in defy and self custodial
120. 7:09wallets that needs to be preserved. And I actually think, by the way, those
121. 7:13things have the ability to create an even more transparent and trusted
122. 7:18financial system going forward, because all of those things are on chain in the
123. 7:22open. And, you know, you don't have to trust a
124. 7:24third party. You can basically trust math and code
125. 7:27and and yourself to operate in those environments.
126. 7:30So it's very important to preserve that potential.
127. 7:33But I think one of my big fears and thing I would caution against is that I
128. 7:37think some people in DC may be tempted to say, hey, this is why we need more
129. 7:40stringent regulation. And I guess my pushback to that would be
130. 7:44these these exchanges were, you know, our operating largely offshore,
131. 7:49unregulated. It was not because of proposed
132. 7:52regulation here in the US or in any other major market.
133. 7:55The the issue here is that most of the regulators have been too focused on
134. 7:59onshore companies that are basically trying to play by the rules like
135. 8:02Coinbase. And that's fine to focus somewhat there.
136. 8:05But meanwhile, the customers were going to these off or unregulated exchanges
137. 8:09and the regulators basically were not sanctioning that activity or preventing
138. 8:13it from happening. And so we're seeing that risk now
139. 8:16emerge. I think the regulatory poses that are in
140. 8:19motion, like the DS TPA bill going through Congress.
141. 8:22These are, you know, heading in the right direction.
142. 8:24Some of the language needs to be thought more closely, especially on day five.
143. 8:28But if that kind of stuff comes to fruition, that'll be good.
144. 8:31Then we just need to enforce a level playing field for the whole industry.
145. 8:34And that's the part that has not been happening today.
146. 8:37And just to give you one statistic, you know, if you look at sport and futures
147. 8:41volume, more than ninety five percent of that productivity trading volume is
148. 8:45actually moves outside of the U.S. and I think it's largely been due to
149. 8:48that lack of regulatory clarity. What happens if this deal doesn't go
150. 8:53through, Brian? What then?
151. 8:57Well, you know, it does appear that some customers at RTX would be taking losses,
152. 9:02and that's not a good thing for anybody. And then I think the industry needs to
153. 9:08think about how to go on from there and again, seek that clear regulation, get
154. 9:12the level playing field that's enforced equally around the world.
155. 9:16And, you know, companies succeed, companies fail.
156. 9:19That's part of capitalism and happened in traditional finance as well.
157. 9:23But it doesn't mean that the whole thing gets the whole traditional economy gets
158. 9:26called into question. So the same thing is true here in
159. 9:28crypto. Just means we need to keep building
160. 9:30better systems and have that regulatory authority for decentralized actors.
161. 9:36Sandbank been free, it has been a huge political donor.
162. 9:39Big presence in Washington, do you think he loses some credibility as a result of
163. 9:44this? I mean, it's hard to imagine that you
164. 9:48wouldn't. I mean, that's a very difficult
165. 9:50situation where, you know, I actually think he was very passionate and
166. 9:53articulate in many these meetings. He drove the conversation forward and I
167. 9:56give him credit for that. But there's probably a lot of people in
168. 10:00D.C. right now kind of scratching their head,
169. 10:02feeling like they got duped or deceived by this person who may have not had
170. 10:07things exactly in order. And I don't you know, I don't know
171. 10:11exactly how that happened and how he ended up in that position.
172. 10:14But it might cause them to be a little bit more skeptical of where they're
173. 10:19getting donations from or what the purpose of those donations are.
174. 10:23And I hope it doesn't, you know, taint their view of the crypto industry
175. 10:25broadly. There is a lot of people out there like
176. 10:27myself that are in our policy team and many others, you know, a 16 zee and hon
177. 10:33venture paradigm that out there driving a lot of this regulatory and policy
178. 10:37work. And yeah, I hope they remember that
179. 10:39there's people working in this space that are that are here for the long
180. 10:43term.