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<v Speaker 1>I mean it's in everyone's interest when criminals enter this

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<v Speaker 1>space to steal from customers or to attack coinbase or whatever,

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<v Speaker 1>that they experience consequences, because that's how behavior changes over time, right,

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<v Speaker 1>And so we do work with law enforcement, not just

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<v Speaker 1>in the US, but overseas as well to help them

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<v Speaker 1>better target the bad guys who are targeting our customers

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<v Speaker 1>and the industry writ large.

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<v Speaker 2>Link will be in a description.

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<v Speaker 3>He everybody, I'm down at the Rippleswell conference in Miami,

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<v Speaker 3>and I have Philip Martin, who's the chief security officer

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<v Speaker 3>at Coinbase. Philip, great to have you. And how are

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<v Speaker 3>you enjoying the conference so far?

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<v Speaker 1>Yeah? Happy to be here. It's a great location. Good

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<v Speaker 1>ask for better weather, yeah, especially a week after Hurricane.

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<v Speaker 3>Thank goodness in miss Miami. Right right, right part or

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<v Speaker 3>it would probably be pretty rough out there. But tell

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<v Speaker 3>us about your background, you know, I saw on your

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<v Speaker 3>LinkedIn you were an army And how'd you end up

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<v Speaker 3>at Coinbase?

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<v Speaker 1>Yeah, so I'm at a coinbase for about eight and

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<v Speaker 1>a half years, joined in from the middle of twenty sixteen,

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<v Speaker 1>and I really ended up a Coinbase because of the

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<v Speaker 1>fascinating security challenges that are present in the crypto space

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<v Speaker 1>and the reality that you know there. It's it's really

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<v Speaker 1>really hard to find another industry where security is so

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<v Speaker 1>critical to the success or failure of a business, as

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<v Speaker 1>we've seen many times many companies over the years.

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<v Speaker 3>Oh sure, and I mean in Coinbase being the largest

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<v Speaker 3>US exchange. If I'm not mistaken, I'm sure you guys

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<v Speaker 3>are under constant attack by whether it's hackers or whatever

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<v Speaker 3>it may be. So what are what does your security

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<v Speaker 3>team look like? What are some of yours?

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<v Speaker 1>So, yeah, you know, as of our last ten Q,

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<v Speaker 1>I think we the number was two hundred and sixty

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<v Speaker 1>nine billion dollars worth of cryptocurrency at coinbase. Wow. And

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<v Speaker 1>that's just custodial. That doesn't count the wallet and all

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<v Speaker 1>the other stuff, if I recall correctly. So we have,

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<v Speaker 1>as you might expect, a fairly large investment in security

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<v Speaker 1>at Coinbase. The security team so I oversee cybersecurity, physical security,

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<v Speaker 1>and some other stuff around technology compliance and things like that.

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<v Speaker 1>So I have about a little under three hundred people

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<v Speaker 1>in that in that overall org focused on security for Coinbase,

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<v Speaker 1>which is percentage wise, is much much larger of an

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<v Speaker 1>investment in security at mode than most organizations. Make sure,

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<v Speaker 1>right were we bounce between you know, five and eight

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<v Speaker 1>percent of the company by headcount just depends on you know,

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<v Speaker 1>who's hiring what. But somewhere in that range is normally

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<v Speaker 1>where where we are in most places you're talking like

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<v Speaker 1>one percent, right or or under one percent is in security.

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<v Speaker 1>And it's not just that, right, we we really do

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<v Speaker 1>talk about especially in the early days, we we would

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<v Speaker 1>make the joke that Coinbase is actually a security company

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<v Speaker 1>that just happens to do cryptocurrency, right, because there's such

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<v Speaker 1>a focus from the top down on on trust and

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<v Speaker 1>on safety, on security and making the right decisions for

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<v Speaker 1>our customers.

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<v Speaker 3>Oh absolutely, And I noticed that you guys have collaborated

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<v Speaker 3>with the FBI and other enforcement divisions and so forth.

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<v Speaker 3>Tell us about that. How are you working with those?

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<v Speaker 1>Yeah, for sure. I mean it's in everyone's interest that

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<v Speaker 1>for when criminals enter this space to steal from customers

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<v Speaker 1>or to attack Coinbase or whatever, that they experience consequences, right,

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<v Speaker 1>because that's how behavior changes over time, right, And so

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<v Speaker 1>we do work with law enforcement, not just in the US,

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<v Speaker 1>but overseas as well to help them better target the

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<v Speaker 1>bad guys who were targeting our customers and the industry

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<v Speaker 1>at large. And this is everything from you know, helping

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<v Speaker 1>educate them all on cryptocurrency need and some of the

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<v Speaker 1>investigative tools that are out there as well as you know,

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<v Speaker 1>we see attacks that they don't because we're in a

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<v Speaker 1>different place in the ecosystem, right and putting that information

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<v Speaker 1>together for them in ways that makes it easier for

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<v Speaker 1>them to you know, to to investigate and to find

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<v Speaker 1>bad guys ultimately hopefully to put them in jail.

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<v Speaker 3>Yeah, and there was a report. I don't know there's

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<v Speaker 3>validity to this, but it was in September that North

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<v Speaker 3>Korean hackers were trying to hack the custodians that ep

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<v Speaker 3>cooin ETFs coin Base being the largest at this point.

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<v Speaker 3>Is there any validity today? Have you guys noticed anything

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<v Speaker 3>from that?

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<v Speaker 1>So that was the FBI apart that was put out.

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<v Speaker 1>So they put out sort of a warning and guidance

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<v Speaker 1>to the industry about targeting by North Korea. And look

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<v Speaker 1>that the reality of is North Korey targets crypto all

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<v Speaker 1>the time? Right, this was this was not like a

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<v Speaker 1>heavy a heavy news day in the coin based security team,

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<v Speaker 1>we're well aware that North Korea is a very prolific

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<v Speaker 1>actor in this space. And and and they target all

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<v Speaker 1>the way from you know, big exchanges like coin base

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<v Speaker 1>all the way down to individuals that hold with crypto.

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<v Speaker 3>Now, you guys are also part of the Tech Against

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<v Speaker 3>Scams coalition. Tell us about that.

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<v Speaker 1>Yeah, So this is a coalition we co founded along

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<v Speaker 1>with you know, Meta and Match and other players in

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<v Speaker 1>the tech space because we saw that you know, the

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<v Speaker 1>things like pig butchering scams or you know, romance scams

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<v Speaker 1>or confidence scams that they're they're they're obviously a huge problem, right,

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<v Speaker 1>But one of the issues with them is they don't

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<v Speaker 1>encourage on just one platform. Right there, maybe there's maybe

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<v Speaker 1>there's a dating app match that goes into a WhatsApp

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<v Speaker 1>conversation that goes into maybe like a crypto investment scam

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<v Speaker 1>or or something of that nature. Right, And so each

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<v Speaker 1>of us individually that dating app, well, what they what

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<v Speaker 1>they see is a match occurred, the conversation happened a

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<v Speaker 1>little bit, and then it was taken to a different platform. Right,

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<v Speaker 1>what is what is what's that seed? Not much because

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<v Speaker 1>they're an encrypted messenger, and then we see a customer

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<v Speaker 1>who is in fact themselves. It's not fraud, it's not

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<v Speaker 1>anything like that giving us instructions about sending buying crypto

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<v Speaker 1>or sending it somewhere.

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<v Speaker 3>Right.

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<v Speaker 1>So, each each piece of that individually is very hard

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<v Speaker 1>to stand up and say like, oh, that is a scam.

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<v Speaker 1>But if you look at the pattern across all the platforms,

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<v Speaker 1>you can start to say like, oh, that's definitely a scam, right,

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<v Speaker 1>And so we brought this group together out of what

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<v Speaker 1>had been a bunch of sort of you know, uh,

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<v Speaker 1>bilateral conversations and sharing and sharing into really a consortium

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<v Speaker 1>where you can come together as a as a community

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<v Speaker 1>of technology platforms to share information, to share, to share.

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<v Speaker 1>You know, we're called TTPs technic techniques and procedures that

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<v Speaker 1>the bad guys use to scam people, to coordinate on

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<v Speaker 1>you know, inforsmation, sharing with law enforcements to really to

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<v Speaker 1>bring the whole picture together so we can combat this

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<v Speaker 1>more effectively as a group.

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<v Speaker 3>Yeah, that absolutely makes sense because to your point, these

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<v Speaker 3>things happen on multiple platforms and they take it into

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<v Speaker 3>d MS and all that, and it's so incredible how

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<v Speaker 3>sophisticated it has become. Absolutely, but that's great. That's a

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<v Speaker 3>great correlation. Excuse me, coalation coalition can't say that now.

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<v Speaker 3>I do want to talk about the dynamic between crypto

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<v Speaker 3>and TRADFI and the listed activity because I don't know why.

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<v Speaker 3>Maybe because this new crypto gets the sensationalized headlines. But

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<v Speaker 3>TD bank can do bake a Monday laundering, but it's

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<v Speaker 3>like business as usual. Correct, What is your take on

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<v Speaker 3>that dynamic.

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<v Speaker 1>It's not just TD Bank right, like you go back,

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<v Speaker 1>Wells Fargo had a very similar settlement a few years back.

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<v Speaker 1>It's just it's just unfortunately in trad five, it seems

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<v Speaker 1>to be the cost of doing business for these for

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<v Speaker 1>these large banks. It seems crazy, is it's a three

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<v Speaker 1>billion dollar fine is cost to doing business. But but

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<v Speaker 1>that's just the reality. I think it's fascinating that, you know,

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<v Speaker 1>crypto obviously, you know call it twelve years old. Well

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<v Speaker 1>coinbas is twelve years old. Crypto would be fifteen or

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<v Speaker 1>so at this point if we go back to the

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<v Speaker 1>original white paper, Sure, much much newer than the traditional

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<v Speaker 1>financial system, which which is still the criminal sort of

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<v Speaker 1>tool choice. When you talk about moving, you know, illicits

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<v Speaker 1>funds from you know, gained from batacav moving and around

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<v Speaker 1>using other places. It's predominantly done in cash. The fascinating

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<v Speaker 1>thing to me is is, you know, we released a

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<v Speaker 1>list of finance activity report what it was two months

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<v Speaker 1>ago or so where we could put a number on

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<v Speaker 1>the percentage. It was like, I want to I want

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<v Speaker 1>to call it point point three or something percent of

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<v Speaker 1>transactions were in some way related to listed activity. Sure,

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<v Speaker 1>the fact of the matter is, you can't actually do

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<v Speaker 1>that same thing for the traditional economy, for the for

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<v Speaker 1>for dollar based like you can take guesses, but you

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<v Speaker 1>don't know there's no blockchain, there's no record of these transactions.

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<v Speaker 1>You have no idea what you're actually seeing is you're

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<v Speaker 1>seeing a tiny piece of it based on where if

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<v Speaker 1>you're coming from. So to me, that's that's a fascinating benefit.

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<v Speaker 1>Actually a crypto that we can say with like a

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<v Speaker 1>reasonable level of confidence, what the illicited activity is in crypto,

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<v Speaker 1>what percentage is, and over time we can measure it.

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<v Speaker 1>And if we can measure it, we can we can

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<v Speaker 1>try to drive it down right right in a way

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<v Speaker 1>that you can't put a dollar.

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<v Speaker 3>Yeah you mean, Philip, I could just give you a

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<v Speaker 3>suitcase of money right under the table here, nobody would.

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<v Speaker 1>Know, right, and then you know there's there's The other

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<v Speaker 1>fun thing is that is that criminals have spent a

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<v Speaker 1>long time figuring out ways to then take that suitcase

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<v Speaker 1>of cash and get it back into the financial system

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<v Speaker 1>right through money laundering, through all sorts of things. Yeah,

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<v Speaker 1>it's a very well deveuilopt skill right right, and much

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<v Speaker 1>more so than in the blockchain space. Where there's there's

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<v Speaker 1>no such thing as a suitcase of cash. You could

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<v Speaker 1>certainly send me money on the blockchain, but like everyone

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<v Speaker 1>sees that it's it's all there, and I think it's

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<v Speaker 1>it's to me, it's it's a fascinating dynamic.

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<v Speaker 3>Yeah, And I wonder if it's sometimes I wonder, you know,

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<v Speaker 3>it's just maybe the people who don't like crypto a

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<v Speaker 3>sensationalize things and they try to, you know, amp it

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<v Speaker 3>up and make it look like it's bigger than it is.

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<v Speaker 3>But I guess as companies like che Analysis and these

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<v Speaker 3>folks come out and put out and you guys as well,

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<v Speaker 3>like reports on these things, they'll help educate the public,

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<v Speaker 3>educate lawmakers and so forth. Like it's all here, man.

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<v Speaker 1>It's very important. And I mean, all you have to

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<v Speaker 1>do is ask a law enforcement agent, Hey, would you

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<v Speaker 1>rather run moneylaunder investigation and in the in the traditional

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<v Speaker 1>world with shell companies and international transactions or whatever else,

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<v Speaker 1>or would you rather run it on the blockchain? Right?

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<v Speaker 1>And and they will largely tell you on the blockchain

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<v Speaker 1>it's much much much easier, and especially in traditional money

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<v Speaker 1>on and you start going between countries, it just becomes

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<v Speaker 1>impossible so so so hard for law enforcement to walk

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<v Speaker 1>that back.

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<v Speaker 3>Oh yeah, so are you guys doing And I apologize

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<v Speaker 3>if but I miss this because I am a user

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<v Speaker 3>of to coinbase platform.

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<v Speaker 1>Thanks you being a customer.

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<v Speaker 3>Yeah, Like, are you guys doing like any educational awareness campaigns?

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<v Speaker 3>Like I'm going to give you five so too, she's

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<v Speaker 3>to go through this security check to make sure you

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<v Speaker 3>watch out for phishing scams, you watch out for people

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<v Speaker 3>ask you to send them crypto or do whatever.

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<v Speaker 1>So we haven't done that yet, although although it's an idea,

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<v Speaker 1>we're very very interested in sure. We do do a

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<v Speaker 1>lot of of outreach in general, both in app and

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<v Speaker 1>in more you know, through through blogs. And we did

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<v Speaker 1>a video recently that was aimed at at pig butchering,

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<v Speaker 1>sort of explaining the process and helping helping educate potential victims.

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<v Speaker 1>We did a and I would say, quick, quick plug here,

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<v Speaker 1>it's on our YouTube channel. It's up there for people

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<v Speaker 1>to see. Your audience probably doesn't need to see it,

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<v Speaker 1>is my guess, but I bet your audience every single

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<v Speaker 1>person out there knows someone who does. Yeah, right, A parent,

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<v Speaker 1>a friend, a whatever. Right, And it's so important for

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<v Speaker 1>those of us who know about this stuff to educate

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<v Speaker 1>potential victims, because that truly is the silver bullet for

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<v Speaker 1>preventing the stuff.

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<v Speaker 3>Yeah, it's spawn on it because I think to your point,

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<v Speaker 3>most of the folks who are here are maybe considered

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<v Speaker 3>early adopters and they're a little more tech savvy. But

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<v Speaker 3>I definitely have family members who are like, what is this?

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<v Speaker 3>I do want to invest, but I'm kind of scared.

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<v Speaker 1>Yeah twenty four phrase seed phrase.

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<v Speaker 3>I'm scared of that.

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<v Speaker 1>Yep, yep. Yeah. At education, Yeah, they really really do.

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<v Speaker 1>And so we see that as a really important piece

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<v Speaker 1>of our place in the ecosystem because the real is

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<v Speaker 1>when we see these these bull runs that were hopefully

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<v Speaker 1>about see another one of knocking that's probably a wood product,

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<v Speaker 1>knocking on wood. There, coinbase sees a large number of new,

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<v Speaker 1>brand new to crypto people coming in for the first shot, right,

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<v Speaker 1>And that's great, and like, we we love the fact

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<v Speaker 1>that that we have that level of trust and approachability

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<v Speaker 1>and ease of use, but it's also very important that

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<v Speaker 1>we educate those people as they enter into the crypto

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<v Speaker 1>ecosystem right on, Like, how is this different from your

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<v Speaker 1>Facebook account? How is this different from even your traditional

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<v Speaker 1>bank accounts, right, and how how are attackers acting in

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<v Speaker 1>the ecosystem? What do you need to be worried about?

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<v Speaker 1>What do you need to be aware of? So so

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<v Speaker 1>so important that they get that early, because that makes

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<v Speaker 1>the scammers job so much harder.

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<v Speaker 3>Yeah, great point. Well, I hope you credit me with

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<v Speaker 3>the idea by giving.

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<v Speaker 1>People stable points.

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<v Speaker 3>Absolutely what's on your roadmap? You know, what do you

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<v Speaker 3>guys have in store for remain your twenty twenty four

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<v Speaker 3>and maybe into Q one.

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<v Speaker 1>Yeah, I mean, I don't want to get too much

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<v Speaker 1>into into like what's coming out, what kind of products

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<v Speaker 1>are showing up, that kind of thing. I think you'll

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<v Speaker 1>see us continue to focus on consumer protection, on making

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<v Speaker 1>sure that both both in the custodial and in the

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<v Speaker 1>non custodial space, with you know, coin based wallet, the

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<v Speaker 1>smart wallet that we were relatively recently rolled out, and

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<v Speaker 1>with you know, the DeFi space compuming to grow, there's

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<v Speaker 1>there's there's a there's a lot of work we can

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<v Speaker 1>do there to help people again make that next jump

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<v Speaker 1>from buying and holding on coin base to participating in

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<v Speaker 1>the the on chain economy and doing so safely, right

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<v Speaker 1>and with awareness of the risks and threats. We've done

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<v Speaker 1>things like you know, ad this is last year, but

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<v Speaker 1>add transaction transparency to coin based wallets so you can

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<v Speaker 1>actually see, hey, you're about to sign something, what what

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<v Speaker 1>is this going to do? Right in terms that humans

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<v Speaker 1>can understand without having to figure out read through the transaction,

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<v Speaker 1>figure out what's in there, which the reality is not

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<v Speaker 1>only a small percentage of crypto users can do. Right.

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<v Speaker 3>Question that just came to mind, Yeah, are your user profile?

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<v Speaker 3>So let's say I have a user profile. Is that

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<v Speaker 3>on chain at all? Or is it more like Web two?

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<v Speaker 1>So so it depends on the product you're talking about, right,

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<v Speaker 1>So if it's coinbase, like the retail you're logging into

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<v Speaker 1>coinbase dot com, right, that customer profile that is that

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<v Speaker 1>is a moral Web two thing. But if you have

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<v Speaker 1>a coin based wallet, the app which is self self custodial,

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<v Speaker 1>you can, you know, in there you can do it

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<v Speaker 1>like an eth id or a base name. Now you

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<v Speaker 1>can you know, start to build that sort of online profile.

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<v Speaker 1>It's actually an area I'm a very very excited about

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<v Speaker 1>for the future. And I don't you know, I don't

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<v Speaker 1>know if this comes from coinbase, it comes from others.

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<v Speaker 1>Probably probably the answers all of the above, but is

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<v Speaker 1>like on chain identity is notuch an exciting area for

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<v Speaker 1>me because it gets it gets into the area of

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<v Speaker 1>challenges with like non authentic behavior, right AI deep fakes

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<v Speaker 1>that kind of stuff. One of the ways that we

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<v Speaker 1>start we start to approach a solution there is through

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<v Speaker 1>like really great online identity and reputation. Right, if I can,

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<v Speaker 1>if I can know that, you know, this picture was

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<v Speaker 1>actually signed by Philip Martin's key, and that key has

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<v Speaker 1>been you know, I have a driver's license detached, I

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<v Speaker 1>have a whatever I have, I have attestations from coinbase

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<v Speaker 1>about my ky C and and Chase and whoever else.

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<v Speaker 1>Then I can say, okay, that's probably a real person. Yeah,

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<v Speaker 1>and they sign that. Now, maybe I'm still lying about it.

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<v Speaker 1>That's fine. But over time, as that reputation builds, it

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<v Speaker 1>becomes okay, you know, he has a lot about the

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<v Speaker 1>last ten photographs he published. This is has a higher

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<v Speaker 1>chance of being authentic and legitimate. Right, But the base

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<v Speaker 1>of that ecosystem is this strong identity layer that we

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<v Speaker 1>just don't have today.

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<v Speaker 3>Yeah, And I can't wait for that. And I know

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<v Speaker 3>it's going to be a transition from any of these platforms.

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<v Speaker 3>But like, as a content creator, I deal a lot

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<v Speaker 3>with fake Oh sure, impersonating me vming people. But you know,

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<v Speaker 3>there's no dialogue box to drop down to verify this

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<v Speaker 3>is Tony's profile, it's verified on eth whatever block chain.

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<v Speaker 3>There's nothing like that.

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<v Speaker 1>Yet it has It's one of the elements of solving

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<v Speaker 1>this problem. I think that that has to come along.

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<v Speaker 3>Yeah, for sure. Question are you guys using AI in

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<v Speaker 3>any way to help booster security and to help you along?

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<v Speaker 1>Sure? So, I mean, look, AI is a technology like

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<v Speaker 1>anything else, right, It's going to be used for good

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<v Speaker 1>and evil. Yeah, and on the good side, actually, on

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<v Speaker 1>both sides. My my sort of take on this is

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<v Speaker 1>AI doesn't make things better, it makes them faster in general, right,

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<v Speaker 1>So like and it can it can sort of even

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<v Speaker 1>the playing field to some extent, right, So example, jenerative

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<v Speaker 1>AI is a great example here about we're taking skills

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<v Speaker 1>that used to be in the realm of like an

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<v Speaker 1>individual expert with photoshop, you know, changing image is to

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<v Speaker 1>anyone who can type can generate a relatively convincing thing

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<v Speaker 1>image very very very quickly. Right on the security side,

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<v Speaker 1>there's a lot of places where there's a benefit in

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<v Speaker 1>making things faster and in leveling a playing field. Right,

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<v Speaker 1>So you can level up a relatively junior employee to

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<v Speaker 1>to you know, not an expert by any means, but

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<v Speaker 1>you can give them suggestions, say, hey, like, I think

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<v Speaker 1>you should probably look at this thing rather than that thing.

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<v Speaker 1>There's a lot of areas where you know, like suggestion

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<v Speaker 1>recommendation engines are are very useful in security. There are

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<v Speaker 1>a lot of areas where you know, security has a

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<v Speaker 1>data problem, right, where we have lots and lots of

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<v Speaker 1>signals and alerts and things. How do we find the

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<v Speaker 1>ones that really really matter?

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<v Speaker 3>Right?

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<v Speaker 1>So AI can be helpful in that area. A I

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<v Speaker 1>can be helpful in you know, finding bugs in code

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<v Speaker 1>things like that. So we've played around with with you know,

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<v Speaker 1>bringing AI into alterning smart contract. So far it's not

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<v Speaker 1>been great, but very very early, right, So we've played

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<v Speaker 1>with things like that where we believe that AI can

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<v Speaker 1>can play role in the future.

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<v Speaker 3>Wow, final question here ply you go, are you seeing

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<v Speaker 3>that hackers and scammers are using AI to try to

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<v Speaker 3>attack you guys? And I don't know if there's a

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<v Speaker 3>way to figure that out, but I.

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<v Speaker 1>Mean, right, like, we're not as much as I would

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<v Speaker 1>like to be I fly on the wall there. Right,

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<v Speaker 1>we've certainly seen stories in in in the media and

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<v Speaker 1>online that you know that that say that attackers are leveraging,

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<v Speaker 1>especially in scams, are leveraging AI a lot more to

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<v Speaker 1>make their operations more efficient. Right, so instead of having

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<v Speaker 1>a call center full of right people doing these scams,

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<v Speaker 1>they can automate at least parts of it. Uh So,

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<v Speaker 1>there certainly seems to be reporting to that effect, Philip.

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<v Speaker 3>Great stuff, and obviously you got maybe the most important

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<v Speaker 3>job at coinbase, protecting all those.

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<v Speaker 1>I don't know about that, but it's certainly a fun job.

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<v Speaker 3>H So well, thank you so much for joining me

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<v Speaker 1>That trapping me