Speaker 1: If you're that person in the boardroom or a senior
Speaker 1: executive and you're still saying things like, you know, cryptos
Speaker 1: a scam, stuff like that, it's now embarrassing. We are
Speaker 1: moving towards you know, call it convenience, call it speed,
Speaker 1: called whatever you believe drives human behavior. This notion of
Speaker 1: collapsing these various silos. Do we really think that, when
Speaker 1: my twelve year old daughter is my age, that you'll
Speaker 1: have to log on to four different websites to purchase
Speaker 1: these assets. That's just silly.
Speaker 2: This episode is brought to you by Propy, which is
Speaker 2: leading to charge in putting real estate on chain. Propy
Speaker 2: is a game changer. You can buy and sell real
Speaker 2: estate with cryptocurrencies using the propty platform, which is powered
Speaker 2: by a blockchain of course, and they have a native
Speaker 2: token call pro And I've been an investor in the
Speaker 2: propy token since twenty eighteen. So Propy is a licensed
Speaker 2: Web three pioneer operating since twenty seventeen. They have facilitated
Speaker 2: over four billion dollars in transactions. They're putting titles and
Speaker 2: deeds on chain. They use coinbase for their crypto escro service.
Speaker 2: So this is a great platform and once again they
Speaker 2: are ahead of the curve when it comes to putting
Speaker 2: real estate on chain, and they just launched a great
Speaker 2: campaign where you can earn some of the Propy tokens,
Speaker 2: and it's simply by doing tasks such as sharing their
Speaker 2: vision video, signing up, and inviting a friend, and much
Speaker 2: more so. If you'd like to learn more about Propy,
Speaker 2: visit the link in the description. Hey everyone, welcome into
Speaker 2: the Thinking Crypto podcast. I'm your host, Tony Edward and
Speaker 2: we are recording at Station three in New York's Financial District.
Speaker 2: And joining me today is John Dagostino, who is the
Speaker 2: head of Strategy at Coinbase Institutional. This is John's second
Speaker 2: time on the podcast, and prior to joining Coinbase, John
Speaker 2: was the former head of Strategy for the New York
Speaker 2: Mercantile Exchange, where he led the effort to develop the
Speaker 2: first Middle East energy derivatives exchange in partnership with the
Speaker 2: Dubai government, which led him being the subject of two
Speaker 2: New York Times best selling books.
Speaker 1: John, great to see you. You know, best selling books
Speaker 1: New York Times nothing compared to being on your podcast.
Speaker 1: I'm a huge fan and I appreciate you inviting me back.
Speaker 2: Yeah, John, I really loved our conversation last time. You're
Speaker 2: very thoughtful, you have a lot of knowledge, So I
Speaker 2: figured I got to get you back on to talk
Speaker 2: about what's happening now in the market, but also all
Speaker 2: the great things coinbase is doing. Let's talk about the
Speaker 2: market because in October in Q four, October eleventh, the
Speaker 2: day that lives an infamy big liquidation event. However, we
Speaker 2: seem to be bottoming out right now, big coins up
Speaker 2: a bit. What did your take on everything that's been happening.
Speaker 1: So October tenth was a meaningful event. However, I would
Speaker 1: argue not an unpredictable event in the sense of these
Speaker 1: sort of builds up. Of these build up of leverage's
Speaker 1: natural build up of leverage. I guess a skewed speculative
Speaker 1: to hedging ratio. It's sort of endemic to this asset class.
Speaker 1: And it's not just endemic to crypto. I think it's
Speaker 1: indemic to ascid classes like commodities and other types of derivatives.
Speaker 1: And so this is a natural ebb and flow. These
Speaker 1: asset classes tend there's a ton of potential upside right
Speaker 1: when momentum is swinging up that tends to attract a
Speaker 1: certain type of market participant who's less risk tolerant. During
Speaker 1: those upswing periods, they tend take on excessive leverage. And
Speaker 1: so then you have this resetting. So you have this
Speaker 1: sort of upward escalating sign curve. Now, I know we
Speaker 1: all kind of want to get away with it from that.
Speaker 1: You know, some people just wanted to go up forever.
Speaker 1: It can't, by the way, mathematically it'll be bigger than
Speaker 1: the US economy. Right at some point, it may just
Speaker 1: be this is how the asset trades. And I think
Speaker 1: over time the standard deviation around that sign curve will diminish.
Speaker 1: But I think, you know, again, like I keep saying
Speaker 1: this that before crude oil went negative a few years ago, right,
Speaker 1: and it's an incredibly important assea class that's wildly liquid
Speaker 1: and highly institutional, and so it maybe this is just
Speaker 1: the nature of these acid classes for at least some time.
Speaker 1: So over tenth horrible cataclysmic. But but again, not everyone
Speaker 1: I know who's no sophisticated investor. It's not like out
Speaker 1: of the realm of possibility.
Speaker 2: Right.
Speaker 1: But so let's talk about some good things that came
Speaker 1: from October tenth.
Speaker 2: Right.
Speaker 1: One is there was. There wasn't this incredible fraud discovered.
Speaker 1: There wasn't you know everyone everyone every time there's a
Speaker 1: price correction, everyone starts, Oh, you know, there's some it's
Speaker 1: always this. It's always this mythical Asian hedge fund, right, right,
Speaker 1: and or an exchange blew up or this or that.
Speaker 1: So there was none of that. Right. There were some failures,
Speaker 1: as there always is going to be. But but we
Speaker 1: we went through a massive tide pulling out that didn't
Speaker 1: reveal a terror Luna or an FTX stuff like that.
Speaker 1: That's that's a good thing. That means that in general,
Speaker 1: at least the larger market participants have matured and managed
Speaker 1: risk properly. That's a good thing. Right. We didn't see
Speaker 1: rapid fraud, you know. We so a lot of people
Speaker 1: were hurt, but not in the way that requires massive
Speaker 1: regulatory intervention. Right. So so that's a we don't want
Speaker 1: to October tenth to happen. But if I look back
Speaker 1: and say, in a perfect world, it happened in the
Speaker 1: way that the worst possible scenario weren't realized. So because
Speaker 1: of that, we went into a kind of retrenchment. I
Speaker 1: don't know if we've bottomed. A lot of people were
Speaker 1: saying we needed a catalyst to bottom that. Catalysts might
Speaker 1: have been some recent regulatory signs of positive political pressure
Speaker 1: coming to create a fair resolution around the banking stable
Speaker 1: cooin issue. But I think it's just it's just all
Speaker 1: the market participants licking their wounds for a few months
Speaker 1: realizing okay, we were shaken up, but our risk parameters
Speaker 1: worked out okay, and then slowly and carefully entering into
Speaker 1: the market again. And I do think that's what we're seeing.
Speaker 2: Yeah, it's funny, John, because we didn't see the same
Speaker 2: type of parabola parabola I should say, where you had
Speaker 2: the euphoria and a lot of movement behind the market
Speaker 2: that can be seen in previous bull markets. So I
Speaker 2: almost think on the downside, you may not have that
Speaker 2: same type of extreme dream, extreme selling and fear, even
Speaker 2: though we're seeing a bit of it on the you know,
Speaker 2: sentiment charts. So maybe you know there was a diminished
Speaker 2: bull market and also a diminished bear market.
Speaker 1: Now we're experiencing It's it's great observation and we've we've
Speaker 1: been saying for a while. For a few months, I've
Speaker 1: been very public about this that there's a massive disconnect
Speaker 1: between the institutional fundamentals and market fundamentals and retail fear.
Speaker 1: I think we have. We have levered and speculative bubbles
Speaker 1: within crypto periodically. We also have levered and speculative sentiment
Speaker 1: bubbles in both ways. Right, we tend to be fairly
Speaker 1: bipolar as an asset class. And so just look at
Speaker 1: the numbers recently, right, and in the last couple of weeks,
Speaker 1: we're seeing increased ETF flows. We're seeing significant price increases,
Speaker 1: rallying at bit cooin with still negative funding rates, slightly
Speaker 1: negative funding rates. That's all positive. We're seeing increasing prices,
Speaker 1: decreasing open interest on the future's and derivative side. These
Speaker 1: are all signs of a healthy market. Yet the fear
Speaker 1: and greed index is still at ten. So I don't
Speaker 1: want to I hate telling people how to fear, but
Speaker 1: I would. I've been gently reminding folks for the last
Speaker 1: i'd say month month and a half, is if you
Speaker 1: can afford to invest like an institution, and I suggest
Speaker 1: everyone should. I've had a big proponent of dollar cross averaging,
Speaker 1: only investing what you can lose. It invests that way
Speaker 1: because that allows you to think like a sovereign wealth
Speaker 1: fund or an institution that has you know, three, five, seven,
Speaker 1: ten year time horizons. And if you can invest in
Speaker 1: that way and trade that way and think that way,
Speaker 1: then then you have the luxury of looking at their
Speaker 1: behaviors and they're not panicking and they haven't been panicking
Speaker 1: because they're seeing what I'm seeing, which is nothing has
Speaker 1: changed in the last six months on the downside. It's
Speaker 1: only been upside. We have regulatory leaders now in the US,
Speaker 1: Paul Adkins and Mike Sellig, who are every day signaling
Speaker 1: with language that the most optimistic crypto bitcoin Maxie was
Speaker 1: talking about a year ago. That's an extraordinary Paul Akins
Speaker 1: came out, I think just twenty four hours ago and
Speaker 1: said we gonna have zero latency atomic settlement soon t zero.
Speaker 1: Mike Sellig is is a brilliant and talking about the
Speaker 1: cfcc's role in prediction markets in defile. I mean, the
Speaker 1: political side is fantastic, but but the regulatory side talk
Speaker 1: about a one to eighty that is consistent now over
Speaker 1: the over the last six months and a wonderfully bullish
Speaker 1: catalyst and.
Speaker 2: Sign Yeah, great points there, and is the dichotomy of
Speaker 2: what's happening on the institutional side and how the retail
Speaker 2: masses they're feeling. It couldn't be further apart, because, like
Speaker 2: you said, there's so much building. I mean, just yesterday
Speaker 2: Morgan Stanley said, Hey, we're gonna file for our own
Speaker 2: bigcoin ETF.
Speaker 1: And they're gonna use coinbas as as custodian, which was
Speaker 1: which was great, And uh, there was that announcement. Look,
Speaker 1: I'll leave their competitors. I don't care. Kraken's announcement about
Speaker 1: the FED window fantastic, great for them. I think it's wonderful.
Speaker 2: Uh.
Speaker 1: Ice investing in ok x. I used to compete with
Speaker 1: against Jeff Sprecker at ninem X. I can't wait to
Speaker 1: rip his face off again. Like he's a legend, and
Speaker 1: I admire him tremendously. I loved competing against him back then,
Speaker 1: and I'm looking forward to competing against him again. But
Speaker 1: you know, I love all that. I think it's great.
Speaker 1: I think it's great when high quality players. You know,
Speaker 1: he's trying to find the next coin base, right, But
Speaker 1: all that's wonderful. I'm not seeing a lot of structurally
Speaker 1: negative signs. I struggle to no one can point them
Speaker 1: out to me, except you know, short term price action,
Speaker 1: and if you believe, if you believe as I do,
Speaker 1: that it's just talk a bit bitcoin for a second.
Speaker 1: If you believe that bitcoin as I do, is a
Speaker 1: wonderful long term hedge against monetary debasement, Monetary debasement does
Speaker 1: not occur over weeks or months or even years. It
Speaker 1: occurs over decades, and so you have to measure your hedge.
Speaker 1: Duration should match duration. And so if you're a short
Speaker 1: term trader, you should like the volatility to some degree,
Speaker 1: but just be aware. If you're a short term retail trader,
Speaker 1: you're up against folks who really really know what they're doing.
Speaker 1: On the other side, who have the ability and balance
Speaker 1: sheet to hedge with various OTC products and offshore and
Speaker 1: on shore, so it would just be very cautious about
Speaker 1: trading it in that way.
Speaker 2: Pardon the interruption. Hi, I'm Tony. I'm the host of
Speaker 2: the Thinking Crypto podcast. I wanted to ask you if
Speaker 2: you can please support the podcast by hitting the like
Speaker 2: button subscribing. If you haven't as yet, you can leave
Speaker 2: a comment below as well, And if you're listening on
Speaker 2: a podcast platform such as Spotify, Apple or wherever you
Speaker 2: get your podcasts, please be sure to follow and hit
Speaker 2: the five star rating. I'll let you get back to
Speaker 2: the content. Thank you so much. Well, that's the saying goes,
Speaker 2: bite a blood on the streets right when, and also
Speaker 2: when many are fearful, that's the time to be greedy.
Speaker 2: And when the many are greedy, that's the time.
Speaker 1: To be sure. I've never failed me before. I keep
Speaker 1: a lit little piece of paper in my wallet post
Speaker 1: right after nine eleven or right after nine eleven in
Speaker 1: New York City, two best trades in my life. Ten
Speaker 1: days after nine eleven, I bought my first apartment and
Speaker 1: I bought city stock at I think printed at like
Speaker 1: ninety eight cents, like I forget these. I printed like
Speaker 1: almost the low on City because I was sitting there going, okay,
Speaker 1: if Citi's dead, America, the entire world at this point,
Speaker 1: who cares? Right, We're being ridiculous here, and so two
Speaker 1: best trades in my life. Best tripled my apartment value
Speaker 1: in five years, because I remember back then, who would
Speaker 1: ever live in New York?
Speaker 2: Ever?
Speaker 1: Again? New York is New York is done.
Speaker 2: They said the same thing after COVID, and.
Speaker 1: They're saying the same thing about Dubai. Now, it's just
Speaker 1: it's just ridiculous. So that now is the time to
Speaker 1: go in through these these hyperbolic periods of of of fear.
Speaker 1: It's never failed me before.
Speaker 2: Yeah, it's so fascinating how market cycles, market psychology and
Speaker 2: sentiment works, right, John, And you have to not necessarily
Speaker 2: look at the narratives, but look at the charts and
Speaker 2: the principles of markets and investing, because there's an emotional
Speaker 2: roller coaster. But you have to keep that at bay.
Speaker 1: It's hard, and it's hard, I get it, especially especially
Speaker 1: if you're emotionally invested. If you're investing, you know, maybe
Speaker 1: a little bit too much, if you're I find most
Speaker 1: people don't invest more than more than they should. They
Speaker 1: just mismatch duration. They invest money that they need short
Speaker 1: term in assets that you you really shouldn't. So, you know,
Speaker 1: one of the things I really love about coinbases, uh,
Speaker 1: you know, I find them to be kind of responsible,
Speaker 1: like you know, I you know, I'm a spokesperson for
Speaker 1: the firm, and they know how I feel about this topic.
Speaker 1: And I've never been told you know, no no push
Speaker 1: you know, push push speculative you know, irrational behavior like so, So,
Speaker 1: I do think it's on the It's on the players
Speaker 1: in the market, the exchanges, the big asset managers. I
Speaker 1: do think it's incumbent upon them to continue to push
Speaker 1: this this narrative, no different if I was talking somebody
Speaker 1: about deriatives, trading, edi edy, any idiosyncratic, implicitly levered asset.
Speaker 1: People should do what they want. Ultimately, adults should be
Speaker 1: able to do what they want with their own money.
Speaker 1: But I think it's incumbent upon institutions like ours to
Speaker 1: just remind people that this type of volatility is probably
Speaker 1: not going away. It's gonna get it's gonna get better,
Speaker 1: but it's probably not going away at least in my
Speaker 1: the rest of my career.
Speaker 2: So John would all the things we just talked about
Speaker 2: more again, Stanley and a lot of these big institutions,
Speaker 2: ICE investing in ok X and UH, the SEC and
Speaker 2: the CFDC putting rules together. It feels like we've crossed
Speaker 2: the chasm where institutions no longer viewed it as taboo.
Speaker 2: But they need to have a strategy. It's a must,
Speaker 2: it's critical, and everybody's on the raceline ready to go.
Speaker 2: Maybe when the clarity.
Speaker 1: Act passes absolutely. Look, every major financial institution is hiring
Speaker 1: out a senior senior crypto team. I'm getting the calls
Speaker 1: to like ever, everybody's getting you yeah, not not not
Speaker 1: going anywhere. I love point uh, but but every and
Speaker 1: when I say every, every major brand name financial institutions,
Speaker 1: even the ones where whose CEOs are publicly still you know,
Speaker 1: it's clear. And I said this on another show recently,
Speaker 1: but I do think at this point, if you're that
Speaker 1: person in the boardroom or a senior executive and you're
Speaker 1: still saying things like you know, crypto's a scam and
Speaker 1: stuff like that, it's now embarrassing to be perfectly honest. Right.
Speaker 1: So now I do think some people will like just
Speaker 1: ride out the rest of their career. I think because
Speaker 1: they're embarrassed. They're like they're the if you're if you've
Speaker 1: been very vocally against this asseat class, it's fine, by
Speaker 1: the way, I think we have to do a better
Speaker 1: job like thoughtful, like like Uriel Rebeti is a very
Speaker 1: good friend of mine. Right, He's a he I take
Speaker 1: everything he says very seriously. We disagree. He's a thoughtful critic.
Speaker 1: He's a thoughtful critic. There are non thoughtful critics, and
Speaker 1: I think if you're one of those people, it's a
Speaker 1: bit embarrassing at this point. So you have to either
Speaker 1: have two choices. You can admit I was as wrong
Speaker 1: as wrong can be, or you can just ride out
Speaker 1: your career and hope that you know, you'll never have
Speaker 1: to deal with it, and you might not. My mother
Speaker 1: just switched to online banking, just literally this year. She
Speaker 1: deferred it for forty years because she hates it. But
Speaker 1: but yeah, look, I think I think we are you know,
Speaker 1: I love this notion the coin base talks about this
Speaker 1: everything exchange, because I do think that we are moving
Speaker 1: towards uh, you know, call it convenience, call it speed,
Speaker 1: call it whatever whatever you believe drives human behavior. This
Speaker 1: notion of collapsing these various silos, it makes sense for
Speaker 1: me I perspective, like why should I go to three
Speaker 1: different systems to buy credit? You know, Muni's equities, commodities, crypto,
Speaker 1: Like why should I go to four different systems to
Speaker 1: buy those? So efficiency is great, but just from a
Speaker 1: practical perspective, when you start to collapse those systems, you
Speaker 1: do things like cross margin financing. You can lend against
Speaker 1: cross collatterized assets, which is what tokenization does, and you
Speaker 1: just unlock put aside twenty four seven trading, which is
Speaker 1: also extraordinary, and watching people hedge their exposure to the
Speaker 1: Iran war on DeFi on hyper liquid, you know, over
Speaker 1: the weekend prior to the open that frees up tremendous
Speaker 1: amounts of value. But there is this notion of you know,
Speaker 1: do we really think that when my twelve year old
Speaker 1: daughter is my age, that you'll have to log on
Speaker 1: to four different websites to purchase these assets. That's that's
Speaker 1: just silly.
Speaker 2: Right, So, and this is along the lines of what
Speaker 2: coinbase is building, because you just recently added stock trading
Speaker 2: things along in the futures.
Speaker 1: Now you've heard and Mike Sellen just announced recently that
Speaker 1: US purpose are coming as soon as April. You can't.
Speaker 1: One of the reasons I'm not. I have the luxury.
Speaker 1: It's easy for me to say this because we have
Speaker 1: an amazing policy team that's fighting tooth and nail to
Speaker 1: make sure American consumers get get good choice. So I
Speaker 1: kept the luxuries saying like, I'm not worried about that.
Speaker 1: They have to worry about it. I am not worried
Speaker 1: because because it is absolutely the right move for them
Speaker 1: from a technology perspective, from a American consumer perspective. And
Speaker 1: I just know eventually, over time that wins out and maybe,
Speaker 1: you know, maybe we wind up with a clarity act
Speaker 1: that we don't love. Who knows, but I know over
Speaker 1: time it'll just get whittled down for the benefit of
Speaker 1: the American consumer. No different from my new Uber was
Speaker 1: going to win, right, Remember when all the municipalities were
Speaker 1: fighting Uber and like for a while it was touch
Speaker 1: and go. But like then you use the app and
Speaker 1: you're like, this is just clearly better. It's clearly better.
Speaker 1: It's clearly going to win. They can stall it for
Speaker 1: a while, but eventually the consumer votes with their feet,
Speaker 1: votes with their vote, votes with their dollars, and you know,
Speaker 1: you can accept zero point zero one interest rate or
Speaker 1: you can accept you know, high threes, and you know
Speaker 1: eventually that that wins out.
Speaker 2: And to your point, you know, there's going to be
Speaker 2: a generational shift. Gen Z and these folks, they're more
Speaker 2: digital than even myself, and I think on myself as digital.
Speaker 2: But you know, you give the example of your mom,
Speaker 2: right finally moving to online banking, really growing up in
Speaker 2: a digital world, and they're going to inherit a lot
Speaker 2: of money, and they're going to start investing, and it's
Speaker 2: going to be via the mobile platform, via wallets.
Speaker 1: And they're aware of the inflation return gap that exists.
Speaker 1: They're keenly aware, even even folks who aren't particularly financially focused.
Speaker 1: I hate saying financially alliterated non financially just dude, because
Speaker 1: just because you're not aware of something doesn't mean you're
Speaker 1: not capable of being aware. It's just they want to
Speaker 1: have different priorities in their life, right, So not everyone
Speaker 1: get up every day spending time thinking about their money.
Speaker 1: But I think the average young person is far more
Speaker 1: aware of that gap between inflation and earning potential. And
Speaker 1: so that you know, difference two point zero one percent
Speaker 1: interest and three and a half percent interest compounded over
Speaker 1: a lifetime is massive. That's differen between putting your kids
Speaker 1: into school. That's owning a home and not owning a home.
Speaker 1: So I think they'll demand it. I do, and I
Speaker 1: understand why the banks are fighting. I get it. I
Speaker 1: try to be very sanguine about this stuff. I try
Speaker 1: not to ascribe malice where where self interest is the
Speaker 1: more likely excuse. I get it. It's a fantastic motel.
Speaker 1: I would love to be able to borrow at zero
Speaker 1: and borrow it at take in five percent, and lend
Speaker 1: out at zero. I'd love to do that. Who would
Speaker 1: love to do that? So I fully expect they're going
Speaker 1: to completely protect that mote. But their arguments are just silly.
Speaker 1: They're just silly, like this notion that you're comparing a
Speaker 1: levered bank that is putting assets at risk in the
Speaker 1: loan portfolio to a one to one regulated backed narrow bank.
Speaker 1: That argument won't win. I know it won't win.
Speaker 2: And I've often given the analogy. I'm a JP Morgan
Speaker 2: Chase customer. Yeah, and I have my regular checking in
Speaker 2: savings and guess what I'm getting zero point zero one
Speaker 2: percent or whatever it is in my savings. But what
Speaker 2: I'm currently doing because of stable coins and crypto, I
Speaker 2: put some money in USDC on coinbase, I'm earning my rewards.
Speaker 2: I've been doing this for over a year and a
Speaker 2: half Coinbase one customer, and I'm also staking and I'm
Speaker 2: getting more returns.
Speaker 1: John, Well, you're taking some risk with saking, obviously you
Speaker 1: take right you're taking so and you should be paying
Speaker 1: you should be by the way, you should be paid
Speaker 1: accordingly by taking that excess risk. And that's a wonderful,
Speaker 1: a wonderful thing. That's the that's the whole point. So
Speaker 1: I think I think that's great. So so taking that
Speaker 1: option away under the guise of minimizing risk again, it's
Speaker 1: it's it's it's it's. It fails on the merits, it
Speaker 1: fails on the tech, it fails on the economic logic.
Speaker 1: And so I am you know, I have the luck
Speaker 1: you're saying this, but I am. I am very very
Speaker 1: optimistic that regardless of which administration wins in midterms or
Speaker 1: that eventually, the American consumer votes with their feet, votes
Speaker 1: with their vote, votes with their wallet, and will not
Speaker 1: be okay with a three and a half percent delta
Speaker 1: between what they're owed.
Speaker 2: And I wish the banks and many of them are
Speaker 2: talking about building their own stable coins. Either increase your
Speaker 2: interest payments on the regular savings again, or to launch
Speaker 2: your own stable coin and compete, and.
Speaker 1: They will eventually once they're done fighting this. Now, look
Speaker 1: they're gonna fight this. They're gonna again. I would fight
Speaker 1: it too, I get it. I would absolutely fight it too.
Speaker 1: They're gonna fight it till they lose, and then once
Speaker 1: they lose, they're going to enter into the stable coin
Speaker 1: race as quickly as humanly possible. And I love competition. Great,
Speaker 1: bring it on, let's do it, let's let le let's
Speaker 1: see if you can get Let's see if you can
Speaker 1: replicate what we've been able to build over ten years.
Speaker 1: I welcome the competition. The rising tide lifts all boats,
Speaker 1: that's great. I view those entrants as helping my cause.
Speaker 1: It gets the word out about the integrity of this product.
Speaker 1: It gets word out about the regulated nature of this product,
Speaker 1: and it provides marketing, if you will, for a reasonable
Speaker 1: alternative to a which will run in parallel. Just just
Speaker 1: like bitcoin is not going to displace gold, stable coins
Speaker 1: are not going to displace banking. These are very very
Speaker 1: different economic functions. This notion of community banks being killed
Speaker 1: by stable quins, community banks are being killed by JESIP
Speaker 1: banks and being killed by the JP Morgans of the world,
Speaker 1: And I think that's a shame too. I think it's
Speaker 1: community banks are wonderful and some of them offer great interests.
Speaker 1: So you know, these these false narratives are exactly that
Speaker 1: I'm confident it'll be it'll I'm very confident it'll end
Speaker 1: in the right way. I just don't know when.
Speaker 2: Yeah, how long does this battle play out?
Speaker 1: For longer generally longer than people think it's going to well.
Speaker 2: Hopefully, And this is my ideal scenario that they find
Speaker 2: a compromise because it's holding up the Clarity Act. President Trump,
Speaker 2: you know, just recently put out a statement saying the
Speaker 2: banks need to put this aside and let's get the
Speaker 2: bill through.
Speaker 1: But who knows. You know, we're gonna have to wait
Speaker 1: and see. We have a great policy team. I'll let them.
Speaker 1: It's it's above my above my pay grade, above my
Speaker 1: intelligence level. The math of that is really extraordinary. But
Speaker 1: I'm really confident in our policy team and Crypto's policy overall.
Speaker 1: More important, I know it's the right answer. I know
Speaker 1: that tokenization is a superior product to legacy securitization models.
Speaker 1: It just is no again, just like I think we
Speaker 1: talked about this. I was there when we went from
Speaker 1: open ow cry to electronic trading. That took ten years
Speaker 1: longer than people thought it would for a variety of reasons,
Speaker 1: some valid Right, these are important systems you can't just
Speaker 1: change them willy nilly, Right, these are really important systems.
Speaker 1: Right if you were sitting on a plane and the
Speaker 1: pilot came out and said, hey, I got I got
Speaker 1: a great news. The smartest minds in the world have
Speaker 1: created a better engine and we're testing it today. You
Speaker 1: might be like, I believe in science, but maybe we
Speaker 1: test it before before. These are important systems. Here's the
Speaker 1: good news. Every time you read about some silly mean coin,
Speaker 1: you know, going up and down a billion dollars over
Speaker 1: the weekend, or when you read about hyper liquid facilitated
Speaker 1: crudel hedging of the like, even if you don't believe
Speaker 1: in the underlying product that's testing, it's been tested. We
Speaker 1: know it works, we know the pipes work, we know
Speaker 1: the resiliencies there. Millions and millions and millions of transactions
Speaker 1: are coming nights, weekends, values being transferred, no trade breaks,
Speaker 1: no no problems. So we have tested it. That's the
Speaker 1: good news. A lot of the reasons that it's going
Speaker 1: to take longer than we want are our inertia, corporate inertia,
Speaker 1: self self enrichment, and that's okay, we'll get we'll get
Speaker 1: through that eventually.
Speaker 2: It just is going to take some time hard question.
Speaker 2: Do you think by twenty thirty five it is up
Speaker 2: and running?
Speaker 1: Twenty thirty five, yeah, absolutely, twenty three five, yes, I
Speaker 1: like seven years. As as as an outlook, it's it's
Speaker 1: it's a good number. I think. Beyond seven years, who
Speaker 1: the heck can predict anything? Except I know that, I mean,
Speaker 1: I know that'll be an institute at that point, because
Speaker 1: I just you see that, you see the regulatory trends,
Speaker 1: that the rules are hard to roll back. Even more importantly,
Speaker 1: it's not just America is not even really leading case. Right,
Speaker 1: So so the one thing we don't like is we
Speaker 1: don't like when other countries leave progress on progress. And
Speaker 1: so if we do have a slight pullback because a
Speaker 1: new administration comes in and they get you know, they
Speaker 1: get a little scared about everything that happen, they're going
Speaker 1: to quickly see all this activity moving offshore. They're going
Speaker 1: to see the rise of it and the growth. And
Speaker 1: I think, you know, we don't like losing as Americans,
Speaker 1: So I think I think we'll you know, again, they
Speaker 1: may it's a sign curve, right, we may have a
Speaker 1: slight pullback, but the sign curve generally elevates over time,
Speaker 1: and I'm very confident that once we have this good thing,
Speaker 1: we won't want to go without it.
Speaker 2: Now, coinbase offers a suite of products and services for
Speaker 2: institutions to be able to onboard and launch theirs crypto services.
Speaker 2: So you're working with banks like a PNC and City
Speaker 2: and so forth. Yeah, crypto is a service. So what's
Speaker 2: the long term vision with that? Because could these banks
Speaker 2: use you for a period of time and say, you
Speaker 2: know what, I'm going to go build my own thing.
Speaker 1: It's a risk you take that risk. I think it's
Speaker 1: it's possible, not probable, to be this because look, I
Speaker 1: think for the foreseeable future, especially for large, large, massive
Speaker 1: firms like P and C and others, uh, this will
Speaker 1: continue to be a relatively small part of their overall portfolio.
Speaker 1: So the idea of pivoting everything and building this out
Speaker 1: from scratch, it's very the if you look at kind
Speaker 1: of their their forays into sort of like neo banking
Speaker 1: hasn't gone very well for most of them because the
Speaker 1: very different type of client. This is even more different,
Speaker 1: and the technology is different, the infrastructure is different, the
Speaker 1: pipes are different. So I am I am not at
Speaker 1: least who knows when I'm when I'm dead and buried,
Speaker 1: who knows. But but for the course of my career,
Speaker 1: in my lifetime, I struggle to see any of these institutions,
Speaker 1: seeing everything that we do and the hell we had
Speaker 1: to go through to get here, and saying, oh, we
Speaker 1: want to we want to replicate that, we want to
Speaker 1: get that, we want to go hire three thousand, you know,
Speaker 1: dedicated crypto people and build out that infrastructure. I am
Speaker 1: particularly as we get, you know, better and better at
Speaker 1: it as we scale. It's very somebody like Amazon Web Services, right,
Speaker 1: Like I remember, I remember when if you worked at
Speaker 1: a hedge fund, you kept tape decks to do your backups.
Speaker 1: And I remember when the AWS guys were first coming
Speaker 1: around saying, oh, you should just outsource that to the
Speaker 1: cloud and everyone there. Oh no, I take my tape
Speaker 1: home with me every night. But this isn't nineteen sixty
Speaker 1: four like this is. This is like two thousand and two, right,
Speaker 1: and and that was of course I do it myself.
Speaker 1: Of course, how can I trust you Amazon to do it?
Speaker 1: And then Amazon pretty good product and people, I'll do
Speaker 1: I'll go with you for a bit, but then I'll
Speaker 1: do it myself. And we all know the economics just
Speaker 1: don't work. So I think I think it's possible, not probable.
Speaker 1: Our crypto as a service business is just going gangbusters.
Speaker 1: I don't think I'm allowed to give out numbers, but
Speaker 1: it's but it's it's growing like a weed, and I
Speaker 1: fully expect it to scale as more and more firms
Speaker 1: realize I need a crypto offering regardless of what how
Speaker 1: I touch the consumer financial services business, fashion houses, anyone
Speaker 1: that has a large consumer retail front facing UI is
Speaker 1: increasingly getting calls from the customers saying we want the
Speaker 1: option to use store pay transact in crypto in some
Speaker 1: way and building it versus leasing it. It's a no brainer.
Speaker 2: Oh absolutely, And that's great perspective because the banks have
Speaker 2: a lot going on and to go try to build
Speaker 2: what you guys have done, it's going to probably take
Speaker 2: the years.
Speaker 1: And I mean I'm not particularly bank like, and so
Speaker 1: it was a cultural shock for me. I mean, everybody
Speaker 1: laughs at me whenever I have blazers, so like it
Speaker 1: it is. I mean that kind of in the in
Speaker 1: the lighthearted way of just there is a cultural change.
Speaker 1: But I think that the the Yeah, I'll leave it
Speaker 1: at that. I mean, it's it would be very, very
Speaker 1: challenging for even the most greedy, greedy financial institution who
Speaker 1: thinks they can build it out when when they run
Speaker 1: the economics on it, and then you have our liquidity,
Speaker 1: you have the fact that we ConTroll about twelve and
Speaker 1: a half percent of all custody. Every major government entity
Speaker 1: trusts US. I mean, I just I really really struggle
Speaker 1: with anyone replicating this from scratch.
Speaker 2: So as far as what's in this suite custody spot futures,
Speaker 2: is there also a tokenization in there?
Speaker 1: Absolutely we have. We've we consolidated all of our disparate
Speaker 1: tokenization businesses. We had one in the way you called
Speaker 1: Project Diamond into what we call Project Tokenize. So we
Speaker 1: now have a one stop shop for tokenizing everything from
Speaker 1: stable coins to equities to real estate.
Speaker 2: Uh.
Speaker 1: And you know, we're being selective about those projects because
Speaker 1: I do think tokenization to some degree has a bit
Speaker 1: of a garbage and garbage out problem. You can't just
Speaker 1: tokenize something and expect if it's you know, if it's
Speaker 1: if it's I love my daughter, but her bad photos,
Speaker 1: her bad drawing, she makes me just because I just
Speaker 1: tokenize Them'm not going to magically because I love them,
Speaker 1: I'd buy them, but no one else is going to
Speaker 1: want them, so we've been very picky about which projects.
Speaker 1: But but I think you know this idea of you
Speaker 1: come onto coin basis platform, you can do research through
Speaker 1: Yahoo Finance, you can buy and sell any asset via
Speaker 1: tokenized model, and we're not the equities aren't tokenized yet,
Speaker 1: but that's the plan eventually. And then the key is
Speaker 1: using those tokens to cross collateralize, both reducing margin and
Speaker 1: also as collateral for loans. That's the key, a one
Speaker 1: stop shop for your finances. So ultimately, I think the
Speaker 1: goal over time for me at least is is is
Speaker 1: I don't want people spending all of their time thinking
Speaker 1: about their money. It should be easier, it should be simpler.
Speaker 1: And so if you can, if you go from having
Speaker 1: to worry about ten different systems for your mortgage versus
Speaker 1: your equities trading versus your your loans into one system,
Speaker 1: I think ironically the goal is you think about us less,
Speaker 1: and I think that would be wonderful, so you can
Speaker 1: pursue beauty and art and culture and all that stuff. Right,
Speaker 1: my daughter has a show about there's our own show
Speaker 1: about financial literacy for children. And you know, the goal
Speaker 1: is to get kids to think about it more. But
Speaker 1: I'm always telling her, but you want, you want to
Speaker 1: become second nature to them. It's like exercise or anything else.
Speaker 1: We don't eve think of it. Get up in the morning,
Speaker 1: do you push ups, you do your workout. You don't
Speaker 1: obsess over that function. And so I think getting to
Speaker 1: the everything exchange helps people ironically think about their money
Speaker 1: less because they know it's working for them in a
Speaker 1: meaningful way.
Speaker 2: Yeah, well said, And anecdotally, you know that would be
Speaker 2: perfect for me, having everything in one platform and makes
Speaker 2: my life easy, less, friction less places to log into
Speaker 2: and all that.
Speaker 1: I want. I want people focused on creating beauty and
Speaker 1: joy in the world. I want I want people who
Speaker 1: are like singers to focus on singing, and I want
Speaker 1: them to have to think less about their money because
Speaker 1: they're confident that they're getting the best yield. I mean
Speaker 1: when you layer on agentic trading into that, like the
Speaker 1: idea of the notion of having an agent say okay,
Speaker 1: here's API into the coin based system, find me the
Speaker 1: best yield a relative to my risk level, and if
Speaker 1: that agent can do it, seamlessly across one system. Using
Speaker 1: the efficient mechanism of tokenization as the financial lubrication, we
Speaker 1: get to that point quicker and then allow the agent
Speaker 1: to take care of that part of our life so
Speaker 1: we could focus on the stuff that makes us. You
Speaker 1: that that's awesome. I have this pipe dream of someday
Speaker 1: everyone in the world who can scrape together five dollars
Speaker 1: of savings using tokenization can invest in the s and
Speaker 1: P five hundred seamlessly, quickly, easily. Forget about the billions
Speaker 1: that would flow into our economy and our capital markets.
Speaker 1: What a wonderful marketing program for the US government. Like,
Speaker 1: how great would it be if everyone in the world
Speaker 1: woke up, looked at their phone and had and their
Speaker 1: future was tied to the economic miracle that is US
Speaker 1: capital markets? Right, That's what tokenization has the potential to do.
Speaker 1: So that's why I get excited about the Everything exchange model.
Speaker 2: Yeah, to your point, and I don't think a lot
Speaker 2: of people know this, but not everyone around the world
Speaker 2: can access the SMP five hundred. No, but if you
Speaker 2: put in tokenized format, it makes it easier and you have.
Speaker 1: To worry about amlka Wait. See, I understand all that
Speaker 1: there's there's there's things we have to figure out. But again,
Speaker 1: AI is going to be able to do a better
Speaker 1: job of recognizing bad transactions. Our current system of like
Speaker 1: you know, of filing stars, you know, manually when we
Speaker 1: see something doesn't work very well. So I get it.
Speaker 1: There are issues, just like with driverless cars, there are
Speaker 1: issues we have to figure out. But like if you've
Speaker 1: ever been in a driverless car, you know that is
Speaker 1: the future. There's no We'll sort out that other stuff.
Speaker 1: So again, just this notion of you know, a person
Speaker 1: scrapes together five dollars of savings and says, where do
Speaker 1: I put this? I want to invest in the US
Speaker 1: economy in a cheap, simple, clean way. I think we
Speaker 1: should We should give that away for free. I think
Speaker 1: we should be it should be zero commissioned trading as,
Speaker 1: just as the US government should subsidize it as as
Speaker 1: the best marketing program in the world for believing in
Speaker 1: the US government and economy.
Speaker 2: It's funny because there's something along those lines being built.
Speaker 2: And this is kind of going off left field, but
Speaker 2: you know, they're talking about these accounts, investment accounts for kids.
Speaker 2: I think the US government's working on. Yeah, see if
Speaker 2: you can do that globally where people you know, that
Speaker 2: would be a win win.
Speaker 1: Yeah. Time, every time a child is born, we're in
Speaker 1: a five dollars goes into the S and P five hundred.
Speaker 1: I mean the problem is like there's there's the cost.
Speaker 1: This costs more than five dollars between all the friction
Speaker 1: and the mL. If you can solve that problem, so
Speaker 1: it's technology is one piece, then there's a government regulatory piece.
Speaker 1: But but again, I just I just struggle. Why wouldn't
Speaker 1: want Why wouldn't want to live in a world where
Speaker 1: everyone on the planet is vested into the well being
Speaker 1: of our country? That just seems like a wonderful place
Speaker 1: to live. And I want I want an FTS to
Speaker 1: work because I want, you know, a young artist to
Speaker 1: be able to finance. I want it to be more.
Speaker 1: I can't I can't play a note, I can't draw
Speaker 1: a circle on a piece of paper. I want the
Speaker 1: world to have more of that. And so if tokenization
Speaker 1: and n FTS can finance the creation of beauty, art
Speaker 1: and culture in this world, I'll probably get fired for this.
Speaker 1: But if if crypto does nothing else but that, it
Speaker 1: will have accomplished a wonderful a wonderful thing. Yeah.
Speaker 2: Absolutely. You know, on the tokenization piece, are your clients
Speaker 2: primarily building on Base or are you able to support
Speaker 2: them on other blockchains as well?
Speaker 1: So we we predominantly based. We encourage we encourage Base,
Speaker 1: but but we yes, we any of the r C
Speaker 1: twenty compatible token is I want to say, there's always
Speaker 1: development costs of integration, so I don't want to the
Speaker 1: engineers are going to kill me, right, There's always some cost.
Speaker 1: But yeah, so so any compatible token we can, we
Speaker 1: can work with. And if it's other stuff, it's a
Speaker 1: lot harder, it's a lot more expensive to integrate. Uh.
Speaker 1: But but yes, but we are you know, we do
Speaker 1: encourage folks to use to use Base.
Speaker 2: Yeah, I've seen some institutions, I think JP Morgan some
Speaker 2: others have mentioned they are moving some of their tokenized
Speaker 2: assets onto Base.
Speaker 1: Yeah, and so forth. Which is it's it's it's great,
Speaker 1: it's cheap, it's clean, its fast, it doesn't have bottleneck issues.
Speaker 1: So uh, you know, I'm not one chain believer guy,
Speaker 1: but but I think that, uh, you know, if we
Speaker 1: can make it easy and clean and simple for folks
Speaker 1: to on board, which I think Base does, then you're
Speaker 1: in a very very good position to be one of
Speaker 1: the I think all like liquidity pools, like exchanges, these
Speaker 1: are tend to be oligopolies, not monopolies. They probably won't
Speaker 1: be one hundred of them, but they're probab won't be
Speaker 1: just one. But I think we have we're in the lead,
Speaker 1: I think, to be one of the let's say five
Speaker 1: to ten that sort of dominate globally over time.
Speaker 2: And John coinbase is not only working with institutions. I
Speaker 2: read that you're helping the country of Bermuda to go
Speaker 2: on change. Yeah, which is wild.
Speaker 1: I'm a huge fan of Premier Berg the Bermuna team.
Speaker 1: I UH personally am working with his office to help
Speaker 1: build new rules so hedge funds kind of a confident
Speaker 1: place to trade uh derivatives UH. And then separate from that,
Speaker 1: coinbas is doing incredible work with the Bermudan government UH
Speaker 1: to make it the you know, the premier you know
Speaker 1: offshore from my perspective offshore and not from their perspective
Speaker 1: from my offshore jurisdiction, UH, to build and trade and
Speaker 1: house these assets and obviously are international exchange is headquartered there. UH,
Speaker 1: so massive fan. He's they have a great tech team
Speaker 1: as a guy there it goes by g who's just
Speaker 1: who's really extraordinary. So Bermuda really has just been before
Speaker 1: I'm a big fan of the UAE, but before the UE,
Speaker 1: even before the UAE kind of sort of waving in
Speaker 1: this business. The Permutan government and I think even as
Speaker 1: I think Premier Bert as he leaves his office will
Speaker 1: continue that legacy. And they've just been fantastic, fantastic partners.
Speaker 1: So what does that encompass.
Speaker 2: Is it the use of stable coins for payments for
Speaker 2: let's say taxes and things like that, but also blockchain
Speaker 2: in their back end of managing their paperwork.
Speaker 1: And absolutely yeah, So there they are trying to become
Speaker 1: blockchain nation and trying to integrate the technology into all
Speaker 1: databases that government uses to make it easier for citizens,
Speaker 1: whether it's expats coming in and working there, all that,
Speaker 1: all real estate transactions, payments, taxation payments. So it's really
Speaker 1: you know, technologists will talk about eating their own dog food.
Speaker 1: As a government, they're massively eating their own dog food there.
Speaker 1: And you know what, it's a good place to do it, right.
Speaker 1: It's a relatively small economy. They've got a very very
Speaker 1: progressive innovative leader in premieer Bert. They've got a government
Speaker 1: that's backing the initiative. You know, Bermuda's It's funny permuting
Speaker 1: came and kind of have this ongoing rival. I worked
Speaker 1: for Cayman Company for a long time and like Bermuda
Speaker 1: used to be the center of excellence for hedge funds
Speaker 1: and then came and kind of stole it, and so Bermuda,
Speaker 1: I think this is their way of sort of leap
Speaker 1: frogging other other offshore jurisdictions and kind of winning back
Speaker 1: that that massively profitable business. And again, I just I've
Speaker 1: just been blown away with their technical proficiency and their
Speaker 1: their openness and their willingness to stick with it, right
Speaker 1: because crypto has gone through these cycles and it had
Speaker 1: been really easy to say quietly kind of just shelve
Speaker 1: all of that. But I think Bert and his administration
Speaker 1: understand that, you know, this is this is the future,
Speaker 1: this is you know, and the countries that put work
Speaker 1: on it now it's like it's like when coinbase went public,
Speaker 1: you know, in decades whatever long ago, right, that was
Speaker 1: not a popular position to be, and it wasn't a
Speaker 1: good position to be. I was, I was I joined
Speaker 1: a little bit later, but it took a lot of
Speaker 1: courage to go through that, and I think I think
Speaker 1: I give kudos to the Bremnian government for never losing
Speaker 1: faith and being just a very, very great ally of
Speaker 1: the industry.
Speaker 2: It always fascinates me and I love watching this human
Speaker 2: behavior and what companies do in game theory. One move,
Speaker 2: one player takes a move, and then all of a sudden,
Speaker 2: there's a like, wait a minute, we need to catch up,
Speaker 2: and it's so fascinating. So I'm curious, you know, when
Speaker 2: Bermuda gets that online and they're up and running and
Speaker 2: everybody's like, okay, we had to have a plan as well.
Speaker 1: So I hope that's the case a little bit. You know,
Speaker 1: it's hard for some of these systems to change, right.
Speaker 1: My friends and I was in Saudi Arabia recently and
Speaker 1: they were making fun of me because I was talking
Speaker 1: about going to the DMV to get my license renewed,
Speaker 1: and they pulled out their phone. They're like, well, what's
Speaker 1: wrong with you Americans? And they hit one button. I
Speaker 1: renewed my license like this. And so to some degree,
Speaker 1: some of these countries that maybe didn't have the infrastructure
Speaker 1: historically already built out, they can just leap frog easier.
Speaker 1: So you know, it's not as I think if Bermuda
Speaker 1: gets it right, It's not as simple like you know,
Speaker 1: for I think America to just kind of upgrade and
Speaker 1: get to that model. But it certainly creates a burning
Speaker 1: platform for the other offshore territories to move fast, and
Speaker 1: then that kind of spreads through. Look at by places
Speaker 1: like the UAE and just how hyper efficient that process is.
Speaker 1: I mean, expats move there and they're kind of fully
Speaker 1: set up with all their government services and days, not
Speaker 1: even weeks or months. So so yes, there was a
Speaker 1: burning platform created by that successful integration.
Speaker 2: You know.
Speaker 1: The good news is it's just it is embedding itself
Speaker 1: into every aspect of our economy. I think it's happening
Speaker 1: more slowly than some Cryptonati people who are who just
Speaker 1: really wanted to move to move like that. But but
Speaker 1: from my perspective just watching how slow it was just
Speaker 1: to go from open outcry to electronic trading, it is
Speaker 1: just it's extraordinarily successful. And yeah, and so so I'm
Speaker 1: I'm thrilled with the pace. I'd love if we to
Speaker 1: move faster, but so far thrilled with the pace.
Speaker 2: I often remind people of the S curve adoption to
Speaker 2: study that and just look at the Internet and even
Speaker 2: mobile phone adoption, Like we went from the big brick
Speaker 2: phones to the flip right and the small ones that
Speaker 2: to it's smartphones. But I took what twenty years.
Speaker 1: I actually looked at at the five to seven year
Speaker 1: growth rate of adoption of things like smartphones, the Internet,
Speaker 1: and personal computing, and crypto's right there, right there, it's
Speaker 1: about seventeen to twenty two percent of people have engaged
Speaker 1: with that system. Smartphones a little bit faster, that's that's
Speaker 1: understand understandable. Personal carpito is a little slower, and Internet
Speaker 1: usage was about the same. So we are I consider
Speaker 1: crypto to be in its modern form about seven years,
Speaker 1: seven years old more or less. I know it's existed longer,
Speaker 1: but in terms of accessibility, right, it's been accessible to
Speaker 1: the average consumer for about that time. We are right there,
Speaker 1: like we are, we are there, so now it's up
Speaker 1: to us. Now it's up to us to improve the UIs,
Speaker 1: make a cleaner, more efficient, better for the type of
Speaker 1: person who doesn't they have the ability to learn the system.
Speaker 1: They just don't have the time or energy. I am
Speaker 1: just now, finally, after a decade of fighting with my wife,
Speaker 1: I am just now learning Apple. I just got my
Speaker 1: first iPhone and I refused and what my daughter turned
Speaker 1: twelve and she got her iPhone and that was that
Speaker 1: was the burning platform to make the forcing function. And
Speaker 1: I hate every second of it. And it's not that
Speaker 1: I can I'm fairly technical. I can do it. I
Speaker 1: just can't be bothered. Man, I just don't want to
Speaker 1: learn a new system. Command P versus control P. Oh
Speaker 1: my god, I keep doing the wrong one. And you know,
Speaker 1: people have to We can't force people to shift attention
Speaker 1: away from their families, their hobbies, their careers to learn
Speaker 1: a new system. We have to meet them somewhere. And
Speaker 1: we are, we are. The interfaces are getting demonstrably better.
Speaker 2: Are you leveraging AI in both the building aspect of
Speaker 2: the ideation process but also as a functionality in the
Speaker 2: app and the wall and things like that?
Speaker 1: Sure? I mean, like Brian is on record saying, if
Speaker 1: you're an engineer a coinbase, you don't use AI, you're
Speaker 1: in trouble. So yeah, I mean we are. He is
Speaker 1: all over it. And my understanding from me, I have
Speaker 1: this lot. I'm very luck lucky to have this position
Speaker 1: at MIT where I am a fellow at there a lab,
Speaker 1: so I get to kind of see all the research
Speaker 1: and that is kind of the focal point for where
Speaker 1: the real meaningful impact on businesses is happening. So on
Speaker 1: the coding side, separately, we are absolutely looking at a
Speaker 1: alternatives to speed up onboarding and AML surveillance things like that. That's
Speaker 1: going to be a windfall for that, and I think
Speaker 1: it's always wonderful when when you can improve efficiency but
Speaker 1: also improve the outcome. Right, So it's it's one thing
Speaker 1: to improve efficiency and we're going to be massively more efficient,
Speaker 1: have to give up a little bit of, like you know, quality.
Speaker 1: In this case, it's the opposite. It's it's it's a
Speaker 1: better system than manually monitoring and making subjective judgments on
Speaker 1: your personal financial activity, like who am I to determine
Speaker 1: whether a payment that you're making is good or not right?
Speaker 1: And by definition, when you put humans in charge of that,
Speaker 1: and you know the the negative outcome if you don't
Speaker 1: catch something and it's awful, the consequences are severe, and
Speaker 1: so any human being will set two tight risk parameters
Speaker 1: because they're scared. I completely understand if here's here's Tony, here,
Speaker 1: welcome to your new job. Your job is to monitor
Speaker 1: people's financial spending and highlight bad potential bad actors. And
Speaker 1: most of the time you're gonna be wrong. Most of time,
Speaker 1: we'd be totally innocent, Tony. But if you miss one
Speaker 1: and it's terrorism financing, you're responsible for people dying indirectly. Right,
Speaker 1: what are you gonna do in that situation. You're gonna
Speaker 1: you're gonna be hyper hyper vigilant, and you're gonna air
Speaker 1: on the side of cut everything off. Right. Well, that's
Speaker 1: not efficient that that doesn't necessarily just the best outcome. Right.
Speaker 1: So the combination of human judgment and especially when you
Speaker 1: have to look at millions and billions of transactions, right,
Speaker 1: So clearly it's bet And Christian Carlo's got a really
Speaker 1: great thesis about this of he talks about the toll
Speaker 1: booth on a highway. It's like, right now, we go
Speaker 1: make you through hell to open up an account, but
Speaker 1: then we don't really want you, right, you speed all
Speaker 1: you want versus the reality is when you go on
Speaker 1: a tote with an highway, you just give that you
Speaker 1: pay the toll quickly, and then you have cameras and
Speaker 1: you have helicopters and right, and you have people, and
Speaker 1: so you pluck out the bad actors. Right. We don't
Speaker 1: make you sign a piece of paper at its hold
Speaker 1: with pledging that you won't speed. We actually watch what
Speaker 1: you're doing, and if you're speeding and driving recklessly, we
Speaker 1: stop you and we find you. So AI allows us
Speaker 1: to do that with financial services. Right, So let's look
Speaker 1: at your actual behavior, and let's let's target the folks
Speaker 1: who are bad actors as opposed to penalizing people and
Speaker 1: not letting them on board to the highway to begin with.
Speaker 1: So I think Coinbase's thesis is let's let's be as safe,
Speaker 1: but let's switch it and make it open architecture so
Speaker 1: anyone can on board, which they should be able to
Speaker 1: do the billions and billions of people who are under banked,
Speaker 1: and then let's monitor and make sure that they're conforming
Speaker 1: to reguatory rules. That that seems to me be a
Speaker 1: lot more fair than the current model.
Speaker 2: John, I'm gonna send this clip what you just said
Speaker 2: there to the members of Congress that we can they
Speaker 2: can figure it out.
Speaker 1: No, no, no, no, I'm not policy. We have an amazing
Speaker 1: team and far and everyone that they're they're incredible and
Speaker 1: they're doing the and I know there's a right way
Speaker 1: to have these discussions. I just do every I've been
Speaker 1: a few politicians and everyone I've met, like off camera
Speaker 1: has been very reasonable, and I just think we'll get
Speaker 1: there because that's just the better way to do it.
Speaker 2: But I think it's more of the education, Like they
Speaker 2: need to understand. Look, I understand this is technology is
Speaker 2: rapidly different, and we're starting to see more and more
Speaker 2: folks get educated and understand it. But still there's still
Speaker 2: that hold up of understanding the centralized software and trying
Speaker 2: to put those middlemen in place right instead of.
Speaker 1: Looks it's a scary concept, right, Like like transferring massive
Speaker 1: amounts of value peer to peer is a is going
Speaker 1: to be it's going to be a battle because I
Speaker 1: don't think governments are going to give up that. A
Speaker 1: cynical way to put it was they won't want to
Speaker 1: give up control. I think a more reasonable way to
Speaker 1: put it is they don't want to give up visibility
Speaker 1: and and so the industry is going to have to compromise.
Speaker 1: And but but it's such a better system of value transmittal.
Speaker 1: It's just so much better these open chains, public chains
Speaker 1: that it will win eventually, but they'll have to be
Speaker 1: gradual compromise over time.
Speaker 2: John, I want to ask you about the crypto loan
Speaker 2: service and products that you coinbase provides because it's been
Speaker 2: doing really well with bitcoin, ether and then recently x
Speaker 2: RP doge eight to like coin. Is that only for
Speaker 2: retail but also institutions as well.
Speaker 1: So it's both for retail and institutions. Yeah, and you know,
Speaker 1: look part of the whole the whole thesis around organization.
Speaker 1: As you have you make these instruments more fungible, You
Speaker 1: make them more easily be used for collateral because they
Speaker 1: can be understood priced by the lender, They can be
Speaker 1: liquidated by the vendor in the case of in the
Speaker 1: case of price movement or default, and they can be
Speaker 1: moved between systems, and they the correlations of the of
Speaker 1: the assets can be better constructed, so you can give margin,
Speaker 1: offsets and whatnot based on the collateral the client has
Speaker 1: with us. So coinbase is making a big push. I
Speaker 1: think that was part of our reset of presentation, and
Speaker 1: we've put on money where our mouth is, and we've
Speaker 1: I can't give you these act numbers, but we've we've
Speaker 1: put on money where our mouth is in terms of
Speaker 1: issuing that balance sheet out to the industry. So you
Speaker 1: know that that is that function is essential. We I'd argue,
Speaker 1: to the point of it would be it would be
Speaker 1: disingenuous to say we believe in tokenization and we believe
Speaker 1: in the improved fungibility and speed and flexibility of these
Speaker 1: assets and then not put our money where our mouth
Speaker 1: is and say we're willing to lend against this better
Speaker 1: form of asset. And so that's there for retail, and
Speaker 1: that's there for institutional and it's people are making themselves.
Speaker 1: They're availing themselves of that of that function, which is great.
Speaker 2: What's on your road map for this here? I know
Speaker 2: you guys are working on a lot and you've done that.
Speaker 2: There's so many things that have been built, But.
Speaker 1: What can you share? I think derivatives? Right, So, so
Speaker 1: us US purpose being unlocked is just absolutely massive. We've
Speaker 1: got the integration of prediction markets through calshe, through our coin,
Speaker 1: through through our coin based system, increased lending through retail.
Speaker 1: Just you know, I think I don't have a timeline,
Speaker 1: but eventually getting two tokenized equities, which, by the way,
Speaker 1: every major exchange is now is now looking at. So
Speaker 1: I think it's a bit of a race to get
Speaker 1: all that done and the idea again to collapse all
Speaker 1: of this onto a unified tokenized system where you just
Speaker 1: bring down these silos, you improve speed, improve flexibility. Twenty
Speaker 1: four seven three six at least for now twenty four
Speaker 1: seven five trading and twenty twenty four five trading moving
Speaker 1: to twenty four seven three sixty five trading, we are
Speaker 1: What's great is Coinbase gets to be in the position
Speaker 1: of the entity that's pushing the envelope. And I know
Speaker 1: because I've worked at these exchanges, they're smart people there.
Speaker 1: They will be aggressively competing with us, and I like
Speaker 1: being in that position. Right, We get to push the
Speaker 1: envelope and have everybody else catch up. So I think
Speaker 1: those are those are the big things, increasing lending, increasing
Speaker 1: project tokenies, getting our our you know, systems all together
Speaker 1: so we can start to buy and sell every asset
Speaker 1: through tokenization on a single platform.
Speaker 2: Well, John, I'm looking forward to having you back on
Speaker 2: maybe and like let's say four to five months or
Speaker 2: six months where you can talk about these new things
Speaker 2: as they go live. But thank you so much for
Speaker 2: joining me, Tony, Thank you so much for having me,
Speaker 2: Thank you so much for tuning in. Please hit the
Speaker 2: like button subscribe if you haven't as yet. If you're
Speaker 2: listening on a podcast platform such as Spotify or Apple,
Speaker 2: please follow and leave a five star rating.
Speaker 1: Thank you so much,