00:20:21 · Molly O'Shea, Brian Armstrong
[00:20:21] S1: So of the announcements and everything that's going on, I thought the everything exchange was really interesting. So I want to get your perspective on that and like where you think Coinbase's competitive advantage is. Yeah. [00:20:36] S0: So the Everything Exchange is a great concept. It's how do we get every asset class in the world tradable in one account? And the benefit of that to the customer is that they have better capital efficiency. Because if your assets are all in one place, you can get better margin, more credit. Right? And then, you know, you can, and then you can actually like trade these things twenty four seven if they're really running on crypto rails. And so it really kinda democratizes or updates the the trading infrastructure for everyone. In terms of Coinbase's unique advantage, I mean so we're storing more crypto than any other company in the world. I'd say we're the most crypto native, and so that's, what's allowed us to build a lot of these things on chain and coming to market first. Yeah. And then I think we have really like the most trusted brand. So that's what people are coming to us so far for. [00:21:28] S1: How have you built such a trusted brand? Crypto is pretty sketchy for some people. You've seen some crazy stuff. So, like, how have you built such a trusted brand in a space that is full of some grifters and bad actors?
00:21:45 · Brian Armstrong
[00:21:45] S0: Yeah. So, you know, at the very beginnings of Coinbase, back in 2012, like, I made a couple of decisions, which I think were quite formative. So I said, number one, I'm gonna try to build this company in The US, and instead of going offshore, even though that was harder because you had the lack of rearguatory clarity. Number two, I'm gonna put my name on it publicly and tell people who I am and what I'm doing. I was not pseudonymous. Right? And then number three, we went and actively sought out licenses. And in many cases, the regulators didn't know anything about crypto at the beginning. We had to act as a educational resource for them. We sometimes sought out licenses before they were even required just to sort of demonstrate good faith and help bring the industry along. And then we ultimately became a public company in The United States, and that comes with a large number of controls and financial audits. So you're correct that, unfortunately, we have seen some bad actors in crypto. You see bad actors in the traditional financial system too, you know, the Bernie Madoffs of the world, the Enrons. And so I think that we've really helped legitimize the industry, and that's contributed to our most trusted brand. Trust can come from lots of places, by way. I mentioned a number of them. It can also come from great design. It can come from great customer support. It can come from basically doing what you say you're gonna do. My hope is that as we continue to go along for many decades and just create a sense of stability here, we will we will help level up the crypto industry and make sure that I I think I think in five or ten years, people are gonna be using financial services. A lot of it will be running on crypto rails. They won't even really know or care about crypto itself. They just like, oh, this is a cheaper way to send money abroad to my family, or it's a I wanna just trade this asset class twenty four seven and sign up on my phone in a few seconds. Like, it's just gonna be the easiest way to get done and the cheapest way to get done with it, whatever they wanna do, and they won't necessarily be crypto zealots or something It's like just the best way to do financial services.
00:23:49 · Molly O'Shea
[00:23:49] S1: We've seen hundreds of billions of dollars move through these cycles. You've definitely seen it and felt it, but I'm really curious because we had Web three point and the consumer demand was insane, and people were trading NFTs, there were lots of fun things going on, and then that kind of washed away, and then now we have prediction markets, and hundreds of billions of dollars are being traded in prediction markets. So one, I'm really curious if you have an answer for this or any sort of estimate, how much money do you think is left on the sidelines as dry powder for these big, huge events? And then two, how do you form your product decisions around that? Why did you decide to go into prediction markets? Like, what's your competitive advantage there?
00:24:32 · Brian Armstrong
[00:24:32] S0: Yeah. Well, the good thing about being in this industry, it's very innovative. So every few months or year, there's some new trend, right? You mentioned a couple of them. And you're right. We're in a cycle right now where prediction markets are really trending. Stablecoin payments are really trending. Derivatives are trading trending. And I think sometimes people say, oh, the the price of Bitcoin's down, so crypto's down. And I have to kinda remind people that, like, crypto's much broader than just Bitcoin now, and so when stablecoins and derivatives and prediction markets are all trending up, you know, Bitcoin might be down. It's like there's always gonna be something that's up and something that's down. That's the nature of financial markets. So what we've tried to really do at Coinbase is just diversify our suite of products to, include everything. So if just recently, I mean, we've been seeing some of the largest IPOs in history start to come to market, and the AI companies, I think, have really, eaten up a lot of the risk capital in the world. Right? That actually might be part of the reason why Bitcoin is down, actually, because people are just trying to get as much of their risk capital into, SpaceX OpenAI and Anthropic right now. And so from a Coinbase point of view, we're like, great. If that's what people wanna trade, guess what? We have pre IPO perps. Right? We're gonna you can get exposure to these things before they go live, and then once they're live and trading, we're gonna have tokenized equities and traditional equities. People can trade, these as well. So, you know, long term, I'm still super bullish on on Bitcoin. I think that I'm hoping we hit the bottom at 60 k or so, and it seems it seems to be trending back up now. But, yeah, as some of these AI companies go go public, and I think the risk capital will start to shift around a bit more, and the the market structure legislation might help as well.
00:26:07 · Molly O'Shea, Brian Armstrong
[00:26:07] S1: I mean, to your point, we are seeing trillion dollar IPOs. That has not happened before. When I talked to Vlad Tenev, I mean, he really wanted to democratize access to these companies because all of the upside was happening on the private side, not where you traditionally get it on the public. [00:26:23] S0: Mhmm. [00:26:24] S1: So with these, like, how are are you first are you actually seeing people transfer their crypto into these pre IPO perp?
00:26:33 · Brian Armstrong
[00:26:33] S0: Yeah. So we we launched, with SpaceX a few weeks ago before they before they went public, and we saw quite a lot of volume on there. And I think to your point about democratizing access, it's this is a very important point. Right? You know, private you know, retail really didn't get access to a lot of these private companies as they were going up in value. I think we can change that, with things like pre IPO perps. I think that, the accredited investor laws really need to get updated in this country. So for people who don't know what that is, you know, to trade in by invest in private companies, you have to become an accredited investor, which basically means you have a certain net worth or income that's quite high. And the intention behind this was good. And they're essentially trying to protect people from high risk investments or scams, but you have to judge these policies, by their intention, but by the results. The results have been quite bad. Essentially, makes it so only rich people can get richer. It's like the most regressive tax. Typically, we wanna have a progressive tax system. Rich people pay more. In this case, it totally benefits rich people who can make more money in the private markets. And once something is valued at a trillion, then only then can retail trade it. It's completely unfair, and so the better way to do it would be a financial literacy test. So it doesn't matter if you're rich or you're poor. If there's a concern about scams, pass a financial literacy test, and then you could trade it in the private market. So that's the kind of thing that maybe once market structure's done, I'll get a chance to go talk with the Senate about.