Speaker 1: Hey, folks, I've got Brett tach Paul, who's the head
Speaker 1: of coinbas Institutional with me. Brett, great to see you. Great,
Speaker 1: see you too, Tony.
Speaker 2: I gotta tell you I owe you a giant gread
Speaker 2: of dat of gratitude. The last time we were together
Speaker 2: was five years ago. It was in the depths of COVID. Yeah.
Speaker 2: I'd just taken my job at Coinbase. I had never
Speaker 2: done a podcast before. Yeah, you had a jinky setup
Speaker 2: at home, so did I. I hadn't practice. And I
Speaker 2: got to tell you, you were very kind to me
Speaker 2: in the interview. And I can't tell you the amount
Speaker 2: of constructive feedback I got. I'm tightening up my answers
Speaker 2: and maybe maybe let's see if I can do a
Speaker 2: better job this time.
Speaker 1: Well, Brett, we've both gone into this incredible journey of
Speaker 1: being better at interviews, right because to your point, I
Speaker 1: was in a dark room you were. Yeah. But Brett,
Speaker 1: amazing growth on Coinbass front, both on the retail and
Speaker 1: institutional side. It's amazing to see how this company has grown. Uh,
Speaker 1: you know, what are some of the things that you're
Speaker 1: most excited about from an institutional adoption standpoint.
Speaker 2: I mean this is a great interview for us to
Speaker 2: go then and now. When I first joined coinbase, we
Speaker 2: had a team of about five people. The only product
Speaker 2: we really had that was up for institutional grade was custody,
Speaker 2: and so you could you could store it safely, but
Speaker 2: you couldn't really buy it at a great price. And
Speaker 2: so if you if you fast forward, we made a
Speaker 2: couple acquisitions to Gomi was the first one that helped
Speaker 2: us build. It was the foundational layer for Prime. But today,
Speaker 2: if I tell you what our product scope is, you
Speaker 2: can think about it in three main verticals. So the
Speaker 2: vertical one is really marketplaces. And so when I think
Speaker 2: about marketplaces, the first thing that'll jump to your mind
Speaker 2: is the is our US spot marketplace.
Speaker 1: So we run that.
Speaker 2: We have the CFTC regulated Futures Exchange, so we've made
Speaker 2: progress there in terms of amplifying you know, volumes. We
Speaker 2: have the Bermudian International Exchange, which has been around for
Speaker 2: about two years now and it's gone from zero percent
Speaker 2: market share and it's you know, peaked at maybe twenty
Speaker 2: and we're doing you know, tens of billions a day,
Speaker 2: So that's been great. That's been our foray into the
Speaker 2: international PERP market, so it's been fantastic, also does Spot.
Speaker 2: And then I'm sure as you know, we announced the
Speaker 2: Derbit you know acquisition, which is based principally in envarn
Speaker 2: now but has an amazing eighty five percent you know
Speaker 2: market share and options and so for us, we maybe
Speaker 2: come back to that later, but that was a very
Speaker 2: important strategic sort of last piece of the puzzle for
Speaker 2: the completion of the of the derivative product and platform.
Speaker 2: So that's that's pillar one. Pillar two is what I
Speaker 2: spent most of my time on. Pillar two is the
Speaker 2: prime platform, and that's grown. Like I said, we just
Speaker 2: had that core custody product, but now we added on
Speaker 2: smarter order route, then we added stacking, then we added
Speaker 2: a very comprehensive financing. So now we call that a
Speaker 2: prime brokerage platform. And really that's the single place that
Speaker 2: you can go to do all the things that you
Speaker 2: need to do with crypto and so that for me
Speaker 2: has been super exciting. That is the place that all
Speaker 2: the ETF business that we wont is on that same
Speaker 2: platform is the platform that services are high net worth clients,
Speaker 2: and so I just want to make the distinction. Once
Speaker 2: you're on that platform, all the clients have the opportunity
Speaker 2: to get all the features. You can consume as much
Speaker 2: as you want or as little as you want, as
Speaker 2: robust security, as detailed as you'd like on complex workflows
Speaker 2: or simplified ones, and so Prime is the main platform
Speaker 2: that people on board to. Now the interesting thing about
Speaker 2: that platform is, and you're going to hear more about
Speaker 2: it today at the conference, is we're trying to expose
Speaker 2: all the infrastructure that we've built and calling it as
Speaker 2: a service. So I now we're going to talk about
Speaker 2: that in a second, but think about everything we do
Speaker 2: is a so custody as a service, wallet as a service,
Speaker 2: trading as a service, and I have great, great hopes
Speaker 2: for that business to probably one day eclipse actually the
Speaker 2: size and skill what we've got now. So that's the
Speaker 2: that's the main pillar. And then the third pillar is
Speaker 2: coin based asset management, which is still in its i
Speaker 2: would say beginning stages. We bought a business called One
Speaker 2: River Digital and rebranded it SEBAM. It's in the process
Speaker 2: of raising funds for things like bitcoin yield. They have
Speaker 2: multi straft, they have credit opportunities, so they have a
Speaker 2: suite of services which comes at a really good time
Speaker 2: because that business was purchased you know post you know,
Speaker 2: call two years ago, when we had a lot of
Speaker 2: headwinds from a regulatory and other standpoint, and now with
Speaker 2: everything that we're seeing, that business has a lot of momentum.
Speaker 2: So those are the three the three pillars that's exciting.
Speaker 1: It's amazing the growth that coinbas has had on that
Speaker 1: institutional front with the acquisitions and much more given the
Speaker 1: change in the regulatory environment towards crypto in the US.
Speaker 1: Are you seeing a lot of demand from big banks
Speaker 1: and institutions and things like that.
Speaker 2: You know, I've been through a couple of phases now
Speaker 2: where sometimes it's big cooin price, sometimes it's other things.
Speaker 2: Right now, I would say it's it's all the above.
Speaker 2: So it's the the staying power, the establishment of the
Speaker 2: asset class, the building of demand for the investment case.
Speaker 2: It's you're gonna hear a lot today about utility. So
Speaker 2: we've talked about it for years, but you know, is
Speaker 2: the stable coin payment moment finally here? And I think
Speaker 2: it is. I think having Jeremy on stage earlier and
Speaker 2: with Circle going public, I think is a great testament
Speaker 2: to that. And then thirdly, it's regulation, and so never
Speaker 2: have I seen I mean I've been I've been in
Speaker 2: you know, call it regulated financial services for a long
Speaker 2: period of time through bull markets, bear markets, Dodd Frank.
Speaker 2: You know, I've never seen, ever, ever seen, and administration
Speaker 2: turned so quickly from an anti to a pro with
Speaker 2: the acceleration of real regulation that I'll propel the industry forward.
Speaker 2: So now if you ask me if I'm seeing demand,
Speaker 2: I mean, holy cow. So we managed if you think
Speaker 2: about it in a world where it seemed like everything
Speaker 2: was against us, in a world where everything was against us.
Speaker 2: Stable coin volumes, We're able to grow in volume, Institutional
Speaker 2: adoption grew in volume. ETFs came to market in an
Speaker 2: unfriendly regime with record success. You had, I would say,
Speaker 2: a tiering of the very largest financial players, thinking through
Speaker 2: the fact that they must have a strategy, so they've
Speaker 2: been building for years. I can name a few names there.
Speaker 2: But then the second tier of players, there's a little
Speaker 2: bit of a am I in this thing or not
Speaker 2: in this thing? If I don't have the resources to
Speaker 2: build it, what am I going to do? All of
Speaker 2: a sudden, Now FOMO is kicked in like you've never
Speaker 2: seen before. So every large financial services firm, venture firm, uh,
Speaker 2: competing bank, upstart, brokerage, you name it is now interested
Speaker 2: in finding what the accelerated path to getting involved is.
Speaker 1: That's great to hear. Now, obviously you support issuers ETF
Speaker 1: issuers like black Rock. Are you seeing more demand on
Speaker 1: the ETF side or stable coins or for tokenized assets
Speaker 1: or just simply trading crypto in different ways?
Speaker 2: Well, we can all see the ETF itms are going
Speaker 2: up day by day, and so really what that is?
Speaker 2: And you know, personally, I love this because I hate
Speaker 2: going around and trying to promote buying things. It's it's
Speaker 2: it's not, that's not really what I do. What I
Speaker 2: what really what I do is I build the tools
Speaker 2: and services and to help people make smart decisions on
Speaker 2: behalf of their clients. But there's no better, uh, there's
Speaker 2: no better data point of demand than when what you
Speaker 2: see from ets right, and so so I would say
Speaker 2: it still feels like predominantly retailed them for the most
Speaker 2: part is coming in. Institutional demand is building on top
Speaker 2: of it, and so ETFs has been an enormous catalyst.
Speaker 2: I would say, in a again, in an unfriendly regime,
Speaker 2: to be the first building block for what comes next,
Speaker 2: and so stable coin is now coming after with regulations,
Speaker 2: so you need the same core infrastructure to do things
Speaker 2: like send receive right, and so that's that's building the
Speaker 2: demand picture on top, I would say the less imaginative
Speaker 2: institutions that are still a little bit on the sidelines,
Speaker 2: not sure if opening are brokerage to investment cases in
Speaker 2: bitcoin is the thing they are interested in, things like
Speaker 2: collateral management and the speed with which money moves around
Speaker 2: the world, and so so stable coins is that is
Speaker 2: another source of gravitational pull. And then tokenization is much
Speaker 2: talked about. It's still a very eclectic list of things.
Speaker 2: We're going to talk a little bit more later. That's
Speaker 2: going to be feature in my conversation with with Blackrock
Speaker 2: later so so so stay tuned there. But there's a
Speaker 2: long list of things I think, some of which I
Speaker 2: think are interesting to be tokenized. But I would say
Speaker 2: a lot of the the the each of the each
Speaker 2: of the issuers think of it that way that is
Speaker 2: thinking about tokenization is thinking about it slightly differently. I'd say,
Speaker 2: one one compelling value cases an asset manager who wants
Speaker 2: to find new distribution channels, you know, just simply trading
Speaker 2: tokenized stock could be interesting for you know, certain firms
Speaker 2: to do follow on issuances. I'll leave that as a
Speaker 2: glimmer in the eye. But you know, running full service
Speaker 2: firms and doing cost reduction, there's a lot in there.
Speaker 2: So I'd say it's an eclectic mix of motivations to
Speaker 2: pursue tokenization. The one thing that I find is interesting
Speaker 2: is that it seems that a lot of the leaderships
Speaker 2: of these firms all believe that they should have some
Speaker 2: sort of strategy towards tokenization.
Speaker 1: So do you see these exchanges seeing excuse me, these
Speaker 1: institutions seeing this as the next big macro trade, but
Speaker 1: also technology that they need to build on to stay
Speaker 1: relevant given that it's going to be the rails they're
Speaker 1: going to power the financial markets.
Speaker 2: Do you know I found Felipe Lafont was just on
Speaker 2: stage earlier and he was talking about just the size
Speaker 2: of the different types of asset classes and one of
Speaker 2: the things, and Jeremy was on stage. He was talking
Speaker 2: like his big picture of you. Jeremy's was interesting. He
Speaker 2: was talking about how maybe disintermediation at banks would one
Speaker 2: day really come to light and so if on the
Speaker 2: topic of tokenization. I feel like maybe disintermediation and efficiency
Speaker 2: of If you're a banker or someone that follows how
Speaker 2: assets get created and distributed, there's a lot of friction
Speaker 2: in the process, and so it's good for issuers and
Speaker 2: good for investors both to have lower friction and lower
Speaker 2: cost in a process. And so I see that as
Speaker 2: really being an engine of growth for tokenization. That's where
Speaker 2: I think actually the market will coalesce sure.
Speaker 1: So Brett, obviously you guys have been doing an amazing job.
Speaker 1: You've been growing at a rapid pace. What's on your
Speaker 1: roadmap that you can share?
Speaker 2: So now that we've got so the dearbit transaction we
Speaker 2: talked about earlier was really important. So our high level
Speaker 2: company objectives are going to be grow internationally, grow and
Speaker 2: in derovatives. I want to capture the next wave of
Speaker 2: institutional adoption. So the customer experience has to be a
Speaker 2: great one across all those things. One of the things
Speaker 2: that's really powerful and important about our platform is being
Speaker 2: able to do all the things in one place. But
Speaker 2: then just not the convenience of that and the operational
Speaker 2: safety of that, but the efficiency of capital. Right, So
Speaker 2: think about having cross margin across you know, purpse, options, futures,
Speaker 2: spot and different things. And now that we have I
Speaker 2: don't want to get too technical, but now that we
Speaker 2: have options and we've longer dated markets, we have a
Speaker 2: long list of take that in combination with the long
Speaker 2: list of ETF products that would like to come to market,
Speaker 2: you now have actually all the ingredients to do things
Speaker 2: like structured products. So if you want new capital, institutional
Speaker 2: capital to invest money in a marketplace that's still volatile,
Speaker 2: right but with bitcoin adder near you know, all time highs,
Speaker 2: what would you like to have You'd like to have
Speaker 2: an investable product, or you keep things safe, you buy
Speaker 2: at the right price, but also you have some assurance
Speaker 2: that you're not going to lose everything, right, so you
Speaker 2: want to be able to cap your downside, maybe give
Speaker 2: up a little bit of upside. And so once you
Speaker 2: have a full suite of financial instruments that allows you
Speaker 2: to put these these pieces together, it allows new types
Speaker 2: of new types of capital formation to come into crypto.
Speaker 2: That may be a little bit of a tratfy you know, reference,
Speaker 2: but it's a really important one because if you want
Speaker 2: sovereign wealth funds and people that don't just you know,
Speaker 2: buy pitcoin and hold and close their eyes and hope
Speaker 2: for the best. You're going to have more sophisticated people
Speaker 2: that want to have more tailored risk profiles, volatility profiles.
Speaker 1: Et cetera. That's great. I know. One of the things
Speaker 1: that has been talked about a lot is yield on
Speaker 1: crypto assets. And folks have a long term view. They'll
Speaker 1: buy their bitcoins and the ether and so forth, but
Speaker 1: if once it's sitting there, they want to be able
Speaker 1: to earn on it. So I think you may have
Speaker 1: touched on it being able to create products around that
Speaker 1: and for them to earn over time.
Speaker 2: Yeah, So one of the things I heard coming out
Speaker 2: of Bitcoin Vegas was yield. I mean, I guess at
Speaker 2: this one everyone's decided to own pitcoin, So that's good. Yeah,
Speaker 2: but now what do you do with it? And how
Speaker 2: do you make you yield from it? And so our
Speaker 2: asset manager CBM actually has a bitcoin yield product. They're
Speaker 2: in the in the international market and raising money in
Speaker 2: and around that, and so there's ways you can do
Speaker 2: it more aggressively, less aggressively. But you can do covered calls,
Speaker 2: you can do you can do basis trades. But what
Speaker 2: I would like to see come into the marketplace. I'm
Speaker 2: the sort of person that likes to have safe things
Speaker 2: come in, have have the expected return meet the realized return.
Speaker 2: So like I got the thing that I thought I bought,
Speaker 2: and so I think bitcoin yield with you know, four
Speaker 2: to eight percent targets feels like a reasonable way to
Speaker 2: begin to offer that product. And so there'll be I
Speaker 2: think a myriad of ways that people can do it,
Speaker 2: and DeFi in all sorts of different ways, but it's
Speaker 2: definitely thematic.
Speaker 1: Oh that's exciting, Brett. We're gonna have to do a
Speaker 1: longer conversation about this. So maybe it's a five year
Speaker 1: anniversary when we do a longer podcast. Yeah, thank you
Speaker 1: so much.
Speaker 2: All right, great to see it's gone.