Speaker 1: I mean it's in everyone's interest when criminals enter this
Speaker 1: space to steal from customers or to attack coinbase or whatever,
Speaker 1: that they experience consequences, because that's how behavior changes over time, right,
Speaker 1: And so we do work with law enforcement, not just
Speaker 1: in the US, but overseas as well to help them
Speaker 1: better target the bad guys who are targeting our customers
Speaker 1: and the industry writ large.
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Speaker 3: He everybody, I'm down at the Rippleswell conference in Miami,
Speaker 3: and I have Philip Martin, who's the chief security officer
Speaker 3: at Coinbase. Philip, great to have you. And how are
Speaker 3: you enjoying the conference so far?
Speaker 1: Yeah? Happy to be here. It's a great location. Good
Speaker 1: ask for better weather, yeah, especially a week after Hurricane.
Speaker 3: Thank goodness in miss Miami. Right right, right part or
Speaker 3: it would probably be pretty rough out there. But tell
Speaker 3: us about your background, you know, I saw on your
Speaker 3: LinkedIn you were an army And how'd you end up
Speaker 3: at Coinbase?
Speaker 1: Yeah, so I'm at a coinbase for about eight and
Speaker 1: a half years, joined in from the middle of twenty sixteen,
Speaker 1: and I really ended up a Coinbase because of the
Speaker 1: fascinating security challenges that are present in the crypto space
Speaker 1: and the reality that you know there. It's it's really
Speaker 1: really hard to find another industry where security is so
Speaker 1: critical to the success or failure of a business, as
Speaker 1: we've seen many times many companies over the years.
Speaker 3: Oh sure, and I mean in Coinbase being the largest
Speaker 3: US exchange. If I'm not mistaken, I'm sure you guys
Speaker 3: are under constant attack by whether it's hackers or whatever
Speaker 3: it may be. So what are what does your security
Speaker 3: team look like? What are some of yours?
Speaker 1: So, yeah, you know, as of our last ten Q,
Speaker 1: I think we the number was two hundred and sixty
Speaker 1: nine billion dollars worth of cryptocurrency at coinbase. Wow. And
Speaker 1: that's just custodial. That doesn't count the wallet and all
Speaker 1: the other stuff, if I recall correctly. So we have,
Speaker 1: as you might expect, a fairly large investment in security
Speaker 1: at Coinbase. The security team so I oversee cybersecurity, physical security,
Speaker 1: and some other stuff around technology compliance and things like that.
Speaker 1: So I have about a little under three hundred people
Speaker 1: in that in that overall org focused on security for Coinbase,
Speaker 1: which is percentage wise, is much much larger of an
Speaker 1: investment in security at mode than most organizations. Make sure,
Speaker 1: right were we bounce between you know, five and eight
Speaker 1: percent of the company by headcount just depends on you know,
Speaker 1: who's hiring what. But somewhere in that range is normally
Speaker 1: where where we are in most places you're talking like
Speaker 1: one percent, right or or under one percent is in security.
Speaker 1: And it's not just that, right, we we really do
Speaker 1: talk about especially in the early days, we we would
Speaker 1: make the joke that Coinbase is actually a security company
Speaker 1: that just happens to do cryptocurrency, right, because there's such
Speaker 1: a focus from the top down on on trust and
Speaker 1: on safety, on security and making the right decisions for
Speaker 1: our customers.
Speaker 3: Oh absolutely, And I noticed that you guys have collaborated
Speaker 3: with the FBI and other enforcement divisions and so forth.
Speaker 3: Tell us about that. How are you working with those?
Speaker 1: Yeah, for sure. I mean it's in everyone's interest that
Speaker 1: for when criminals enter this space to steal from customers
Speaker 1: or to attack Coinbase or whatever, that they experience consequences, right,
Speaker 1: because that's how behavior changes over time, right, And so
Speaker 1: we do work with law enforcement, not just in the US,
Speaker 1: but overseas as well to help them better target the
Speaker 1: bad guys who were targeting our customers and the industry
Speaker 1: at large. And this is everything from you know, helping
Speaker 1: educate them all on cryptocurrency need and some of the
Speaker 1: investigative tools that are out there as well as you know,
Speaker 1: we see attacks that they don't because we're in a
Speaker 1: different place in the ecosystem, right and putting that information
Speaker 1: together for them in ways that makes it easier for
Speaker 1: them to you know, to to investigate and to find
Speaker 1: bad guys ultimately hopefully to put them in jail.
Speaker 3: Yeah, and there was a report. I don't know there's
Speaker 3: validity to this, but it was in September that North
Speaker 3: Korean hackers were trying to hack the custodians that ep
Speaker 3: cooin ETFs coin Base being the largest at this point.
Speaker 3: Is there any validity today? Have you guys noticed anything
Speaker 3: from that?
Speaker 1: So that was the FBI apart that was put out.
Speaker 1: So they put out sort of a warning and guidance
Speaker 1: to the industry about targeting by North Korea. And look
Speaker 1: that the reality of is North Korey targets crypto all
Speaker 1: the time? Right, this was this was not like a
Speaker 1: heavy a heavy news day in the coin based security team,
Speaker 1: we're well aware that North Korea is a very prolific
Speaker 1: actor in this space. And and and they target all
Speaker 1: the way from you know, big exchanges like coin base
Speaker 1: all the way down to individuals that hold with crypto.
Speaker 3: Now, you guys are also part of the Tech Against
Speaker 3: Scams coalition. Tell us about that.
Speaker 1: Yeah, So this is a coalition we co founded along
Speaker 1: with you know, Meta and Match and other players in
Speaker 1: the tech space because we saw that you know, the
Speaker 1: things like pig butchering scams or you know, romance scams
Speaker 1: or confidence scams that they're they're they're obviously a huge problem, right,
Speaker 1: But one of the issues with them is they don't
Speaker 1: encourage on just one platform. Right there, maybe there's maybe
Speaker 1: there's a dating app match that goes into a WhatsApp
Speaker 1: conversation that goes into maybe like a crypto investment scam
Speaker 1: or or something of that nature. Right, And so each
Speaker 1: of us individually that dating app, well, what they what
Speaker 1: they see is a match occurred, the conversation happened a
Speaker 1: little bit, and then it was taken to a different platform. Right,
Speaker 1: what is what is what's that seed? Not much because
Speaker 1: they're an encrypted messenger, and then we see a customer
Speaker 1: who is in fact themselves. It's not fraud, it's not
Speaker 1: anything like that giving us instructions about sending buying crypto
Speaker 1: or sending it somewhere.
Speaker 3: Right.
Speaker 1: So, each each piece of that individually is very hard
Speaker 1: to stand up and say like, oh, that is a scam.
Speaker 1: But if you look at the pattern across all the platforms,
Speaker 1: you can start to say like, oh, that's definitely a scam, right,
Speaker 1: And so we brought this group together out of what
Speaker 1: had been a bunch of sort of you know, uh,
Speaker 1: bilateral conversations and sharing and sharing into really a consortium
Speaker 1: where you can come together as a as a community
Speaker 1: of technology platforms to share information, to share, to share.
Speaker 1: You know, we're called TTPs technic techniques and procedures that
Speaker 1: the bad guys use to scam people, to coordinate on
Speaker 1: you know, inforsmation, sharing with law enforcements to really to
Speaker 1: bring the whole picture together so we can combat this
Speaker 1: more effectively as a group.
Speaker 3: Yeah, that absolutely makes sense because to your point, these
Speaker 3: things happen on multiple platforms and they take it into
Speaker 3: d MS and all that, and it's so incredible how
Speaker 3: sophisticated it has become. Absolutely, but that's great. That's a
Speaker 3: great correlation. Excuse me, coalation coalition can't say that now.
Speaker 3: I do want to talk about the dynamic between crypto
Speaker 3: and TRADFI and the listed activity because I don't know why.
Speaker 3: Maybe because this new crypto gets the sensationalized headlines. But
Speaker 3: TD bank can do bake a Monday laundering, but it's
Speaker 3: like business as usual. Correct, What is your take on
Speaker 3: that dynamic.
Speaker 1: It's not just TD Bank right, like you go back,
Speaker 1: Wells Fargo had a very similar settlement a few years back.
Speaker 1: It's just it's just unfortunately in trad five, it seems
Speaker 1: to be the cost of doing business for these for
Speaker 1: these large banks. It seems crazy, is it's a three
Speaker 1: billion dollar fine is cost to doing business. But but
Speaker 1: that's just the reality. I think it's fascinating that, you know,
Speaker 1: crypto obviously, you know call it twelve years old. Well
Speaker 1: coinbas is twelve years old. Crypto would be fifteen or
Speaker 1: so at this point if we go back to the
Speaker 1: original white paper, Sure, much much newer than the traditional
Speaker 1: financial system, which which is still the criminal sort of
Speaker 1: tool choice. When you talk about moving, you know, illicits
Speaker 1: funds from you know, gained from batacav moving and around
Speaker 1: using other places. It's predominantly done in cash. The fascinating
Speaker 1: thing to me is is, you know, we released a
Speaker 1: list of finance activity report what it was two months
Speaker 1: ago or so where we could put a number on
Speaker 1: the percentage. It was like, I want to I want
Speaker 1: to call it point point three or something percent of
Speaker 1: transactions were in some way related to listed activity. Sure,
Speaker 1: the fact of the matter is, you can't actually do
Speaker 1: that same thing for the traditional economy, for the for
Speaker 1: for dollar based like you can take guesses, but you
Speaker 1: don't know there's no blockchain, there's no record of these transactions.
Speaker 1: You have no idea what you're actually seeing is you're
Speaker 1: seeing a tiny piece of it based on where if
Speaker 1: you're coming from. So to me, that's that's a fascinating benefit.
Speaker 1: Actually a crypto that we can say with like a
Speaker 1: reasonable level of confidence, what the illicited activity is in crypto,
Speaker 1: what percentage is, and over time we can measure it.
Speaker 1: And if we can measure it, we can we can
Speaker 1: try to drive it down right right in a way
Speaker 1: that you can't put a dollar.
Speaker 3: Yeah you mean, Philip, I could just give you a
Speaker 3: suitcase of money right under the table here, nobody would.
Speaker 1: Know, right, and then you know there's there's The other
Speaker 1: fun thing is that is that criminals have spent a
Speaker 1: long time figuring out ways to then take that suitcase
Speaker 1: of cash and get it back into the financial system
Speaker 1: right through money laundering, through all sorts of things. Yeah,
Speaker 1: it's a very well deveuilopt skill right right, and much
Speaker 1: more so than in the blockchain space. Where there's there's
Speaker 1: no such thing as a suitcase of cash. You could
Speaker 1: certainly send me money on the blockchain, but like everyone
Speaker 1: sees that it's it's all there, and I think it's
Speaker 1: it's to me, it's it's a fascinating dynamic.
Speaker 3: Yeah, And I wonder if it's sometimes I wonder, you know,
Speaker 3: it's just maybe the people who don't like crypto a
Speaker 3: sensationalize things and they try to, you know, amp it
Speaker 3: up and make it look like it's bigger than it is.
Speaker 3: But I guess as companies like che Analysis and these
Speaker 3: folks come out and put out and you guys as well,
Speaker 3: like reports on these things, they'll help educate the public,
Speaker 3: educate lawmakers and so forth. Like it's all here, man.
Speaker 1: It's very important. And I mean, all you have to
Speaker 1: do is ask a law enforcement agent, Hey, would you
Speaker 1: rather run moneylaunder investigation and in the in the traditional
Speaker 1: world with shell companies and international transactions or whatever else,
Speaker 1: or would you rather run it on the blockchain? Right?
Speaker 1: And and they will largely tell you on the blockchain
Speaker 1: it's much much much easier, and especially in traditional money
Speaker 1: on and you start going between countries, it just becomes
Speaker 1: impossible so so so hard for law enforcement to walk
Speaker 1: that back.
Speaker 3: Oh yeah, so are you guys doing And I apologize
Speaker 3: if but I miss this because I am a user
Speaker 3: of to coinbase platform.
Speaker 1: Thanks you being a customer.
Speaker 3: Yeah, Like, are you guys doing like any educational awareness campaigns?
Speaker 3: Like I'm going to give you five so too, she's
Speaker 3: to go through this security check to make sure you
Speaker 3: watch out for phishing scams, you watch out for people
Speaker 3: ask you to send them crypto or do whatever.
Speaker 1: So we haven't done that yet, although although it's an idea,
Speaker 1: we're very very interested in sure. We do do a
Speaker 1: lot of of outreach in general, both in app and
Speaker 1: in more you know, through through blogs. And we did
Speaker 1: a video recently that was aimed at at pig butchering,
Speaker 1: sort of explaining the process and helping helping educate potential victims.
Speaker 1: We did a and I would say, quick, quick plug here,
Speaker 1: it's on our YouTube channel. It's up there for people
Speaker 1: to see. Your audience probably doesn't need to see it,
Speaker 1: is my guess, but I bet your audience every single
Speaker 1: person out there knows someone who does. Yeah, right, A parent,
Speaker 1: a friend, a whatever. Right, And it's so important for
Speaker 1: those of us who know about this stuff to educate
Speaker 1: potential victims, because that truly is the silver bullet for
Speaker 1: preventing the stuff.
Speaker 3: Yeah, it's spawn on it because I think to your point,
Speaker 3: most of the folks who are here are maybe considered
Speaker 3: early adopters and they're a little more tech savvy. But
Speaker 3: I definitely have family members who are like, what is this?
Speaker 3: I do want to invest, but I'm kind of scared.
Speaker 1: Yeah twenty four phrase seed phrase.
Speaker 3: I'm scared of that.
Speaker 1: Yep, yep. Yeah. At education, Yeah, they really really do.
Speaker 1: And so we see that as a really important piece
Speaker 1: of our place in the ecosystem because the real is
Speaker 1: when we see these these bull runs that were hopefully
Speaker 1: about see another one of knocking that's probably a wood product,
Speaker 1: knocking on wood. There, coinbase sees a large number of new,
Speaker 1: brand new to crypto people coming in for the first shot, right,
Speaker 1: And that's great, and like, we we love the fact
Speaker 1: that that we have that level of trust and approachability
Speaker 1: and ease of use, but it's also very important that
Speaker 1: we educate those people as they enter into the crypto
Speaker 1: ecosystem right on, Like, how is this different from your
Speaker 1: Facebook account? How is this different from even your traditional
Speaker 1: bank accounts, right, and how how are attackers acting in
Speaker 1: the ecosystem? What do you need to be worried about?
Speaker 1: What do you need to be aware of? So so
Speaker 1: so important that they get that early, because that makes
Speaker 1: the scammers job so much harder.
Speaker 3: Yeah, great point. Well, I hope you credit me with
Speaker 3: the idea by giving.
Speaker 1: People stable points.
Speaker 3: Absolutely what's on your roadmap? You know, what do you
Speaker 3: guys have in store for remain your twenty twenty four
Speaker 3: and maybe into Q one.
Speaker 1: Yeah, I mean, I don't want to get too much
Speaker 1: into into like what's coming out, what kind of products
Speaker 1: are showing up, that kind of thing. I think you'll
Speaker 1: see us continue to focus on consumer protection, on making
Speaker 1: sure that both both in the custodial and in the
Speaker 1: non custodial space, with you know, coin based wallet, the
Speaker 1: smart wallet that we were relatively recently rolled out, and
Speaker 1: with you know, the DeFi space compuming to grow, there's
Speaker 1: there's there's a there's a lot of work we can
Speaker 1: do there to help people again make that next jump
Speaker 1: from buying and holding on coin base to participating in
Speaker 1: the the on chain economy and doing so safely, right
Speaker 1: and with awareness of the risks and threats. We've done
Speaker 1: things like you know, ad this is last year, but
Speaker 1: add transaction transparency to coin based wallets so you can
Speaker 1: actually see, hey, you're about to sign something, what what
Speaker 1: is this going to do? Right in terms that humans
Speaker 1: can understand without having to figure out read through the transaction,
Speaker 1: figure out what's in there, which the reality is not
Speaker 1: only a small percentage of crypto users can do. Right.
Speaker 3: Question that just came to mind, Yeah, are your user profile?
Speaker 3: So let's say I have a user profile. Is that
Speaker 3: on chain at all? Or is it more like Web two?
Speaker 1: So so it depends on the product you're talking about, right,
Speaker 1: So if it's coinbase, like the retail you're logging into
Speaker 1: coinbase dot com, right, that customer profile that is that
Speaker 1: is a moral Web two thing. But if you have
Speaker 1: a coin based wallet, the app which is self self custodial,
Speaker 1: you can, you know, in there you can do it
Speaker 1: like an eth id or a base name. Now you
Speaker 1: can you know, start to build that sort of online profile.
Speaker 1: It's actually an area I'm a very very excited about
Speaker 1: for the future. And I don't you know, I don't
Speaker 1: know if this comes from coinbase, it comes from others.
Speaker 1: Probably probably the answers all of the above, but is
Speaker 1: like on chain identity is notuch an exciting area for
Speaker 1: me because it gets it gets into the area of
Speaker 1: challenges with like non authentic behavior, right AI deep fakes
Speaker 1: that kind of stuff. One of the ways that we
Speaker 1: start we start to approach a solution there is through
Speaker 1: like really great online identity and reputation. Right, if I can,
Speaker 1: if I can know that, you know, this picture was
Speaker 1: actually signed by Philip Martin's key, and that key has
Speaker 1: been you know, I have a driver's license detached, I
Speaker 1: have a whatever I have, I have attestations from coinbase
Speaker 1: about my ky C and and Chase and whoever else.
Speaker 1: Then I can say, okay, that's probably a real person. Yeah,
Speaker 1: and they sign that. Now, maybe I'm still lying about it.
Speaker 1: That's fine. But over time, as that reputation builds, it
Speaker 1: becomes okay, you know, he has a lot about the
Speaker 1: last ten photographs he published. This is has a higher
Speaker 1: chance of being authentic and legitimate. Right, But the base
Speaker 1: of that ecosystem is this strong identity layer that we
Speaker 1: just don't have today.
Speaker 3: Yeah, And I can't wait for that. And I know
Speaker 3: it's going to be a transition from any of these platforms.
Speaker 3: But like, as a content creator, I deal a lot
Speaker 3: with fake Oh sure, impersonating me vming people. But you know,
Speaker 3: there's no dialogue box to drop down to verify this
Speaker 3: is Tony's profile, it's verified on eth whatever block chain.
Speaker 3: There's nothing like that.
Speaker 1: Yet it has It's one of the elements of solving
Speaker 1: this problem. I think that that has to come along.
Speaker 3: Yeah, for sure. Question are you guys using AI in
Speaker 3: any way to help booster security and to help you along?
Speaker 1: Sure? So, I mean, look, AI is a technology like
Speaker 1: anything else, right, It's going to be used for good
Speaker 1: and evil. Yeah, and on the good side, actually, on
Speaker 1: both sides. My my sort of take on this is
Speaker 1: AI doesn't make things better, it makes them faster in general, right,
Speaker 1: So like and it can it can sort of even
Speaker 1: the playing field to some extent, right, So example, jenerative
Speaker 1: AI is a great example here about we're taking skills
Speaker 1: that used to be in the realm of like an
Speaker 1: individual expert with photoshop, you know, changing image is to
Speaker 1: anyone who can type can generate a relatively convincing thing
Speaker 1: image very very very quickly. Right on the security side,
Speaker 1: there's a lot of places where there's a benefit in
Speaker 1: making things faster and in leveling a playing field. Right,
Speaker 1: So you can level up a relatively junior employee to
Speaker 1: to you know, not an expert by any means, but
Speaker 1: you can give them suggestions, say, hey, like, I think
Speaker 1: you should probably look at this thing rather than that thing.
Speaker 1: There's a lot of areas where you know, like suggestion
Speaker 1: recommendation engines are are very useful in security. There are
Speaker 1: a lot of areas where you know, security has a
Speaker 1: data problem, right, where we have lots and lots of
Speaker 1: signals and alerts and things. How do we find the
Speaker 1: ones that really really matter?
Speaker 3: Right?
Speaker 1: So AI can be helpful in that area. A I
Speaker 1: can be helpful in you know, finding bugs in code
Speaker 1: things like that. So we've played around with with you know,
Speaker 1: bringing AI into alterning smart contract. So far it's not
Speaker 1: been great, but very very early, right, So we've played
Speaker 1: with things like that where we believe that AI can
Speaker 1: can play role in the future.
Speaker 3: Wow, final question here ply you go, are you seeing
Speaker 3: that hackers and scammers are using AI to try to
Speaker 3: attack you guys? And I don't know if there's a
Speaker 3: way to figure that out, but I.
Speaker 1: Mean, right, like, we're not as much as I would
Speaker 1: like to be I fly on the wall there. Right,
Speaker 1: we've certainly seen stories in in in the media and
Speaker 1: online that you know that that say that attackers are leveraging,
Speaker 1: especially in scams, are leveraging AI a lot more to
Speaker 1: make their operations more efficient. Right, so instead of having
Speaker 1: a call center full of right people doing these scams,
Speaker 1: they can automate at least parts of it. Uh So,
Speaker 1: there certainly seems to be reporting to that effect, Philip.
Speaker 3: Great stuff, and obviously you got maybe the most important
Speaker 3: job at coinbase, protecting all those.
Speaker 1: I don't know about that, but it's certainly a fun job.
Speaker 3: H So well, thank you so much for joining me
Speaker 1: That trapping me