The Great Convergence The Infrastructure Race for Tomorrow’s Markets

Brian, I want to start at the beginning if you don't mind. I feel like you you built a company sort of like the field of dreams. You built the company, you said, "Okay, someday the regulation will come, you know, and we sort of seem to be right there now. We're at the convergence of traditional finance and decentralized finance. Is it happening faster than you thought, slower than you thought?

And why did it accelerate recently?

Yeah. Well, I read the Bitcoin white paper back in 2010 and it caught my attention about how we could build this more fair and free and global financial system. And kind of naively at that time as a software engineer, I thought, "Oh, this is a great protocol. We could just build some products, integrate it, and the whole world will move to it in a few years." Um, it turns out things don't change quite that quickly and interfacing with the government was a very important effort we made early on to try to make this a trusted and compliant industry.

So, we've seen great progress on that front. I would say the UAE has been a leader here. I'd say the UAE is the other crypto capital of the world. Um, in addition to the United States, the US just recently passed the Genius Act for stable coins. We saw 120 companies announce stablecoin initiatives 3 months after uh that piece of legislation being passed and now market structure legislation in the US is on the cusp of hopefully being passed.

Meanwhile, the UAE has even has been a leader as well and that's attracted a lot of investment including from Coinbase here. So I think you're right in the last year we have seen uh traditional finance lean in. uh Coinbase has been doing uh you know business deals through our crypto crypto as a service products with large institutions like JP Morgan and Black Rockck and fintech companies uh that are out there like like Stripe and PayPal and so the whole world is moving on chain and hopefully we can power a lot of it through our crypto as a service products.

Right. So I I want to make you global regulatory ZAR for a minute and take us to how we get full tokenization because I feel like you have the technology available. I thought you and Larry F gave a great presentation at Dealbook last week talking about tokenizing putting everything on chain accelerating the process of transactions lowering costs etc. But what steps have to happen, Brian, in order for this to be a global phenomenon?

Yeah. Well, tokenization is a really important trend. And just to break it down very simply for anybody still struggling to figure out what that word means, really it's just taking any asset, whether it's a dollar, a share of stock, a share of a fund in Black Rockck or any institution, and minting a token that's one to one representing that underlying asset. then people can buy the token instead of the underlying asset itself and get exposure to that asset. And why would we want to do that?

Well, it just it democratizes access to those assets. It increases demand and liquidity. It eliminates certain categories of risk like like settlement risk and it reduces a lot of the back-end operational costs of running these funds in the traditional way. And so every asset class is coming on chain. They're all being tokenized.

And to your question about how to just make this, you know, available everywhere around the world for everyone, I think the regulatory environment is now clear. It's about actually going and doing the leg work of tokenizing these assets and then making them making it easy to use for the average person. The ease of use needs to be there so you don't have to be a crypto expert. Um, Coinbase, I think, is well positioned to do this with a large base of retail investors and institutional investors that we can go market these products to, and we want to be the leader in tokenization. So, I I did a little research for our interview and there's a the estimate now is there's about $4 trillion of fees associated with transaction confirmation which would include credit card fees, wire transfer fees, you know, legal title transfers and real estate, etc.

Talk to us about the commercial benefits of doing this, how much innovation it could unleash, cost savings, etc.

Well, yeah, you're right. There's a lot of friction still in the economy. You know, if you think about how money moves or these different assets move, like look at I like to look at it across three different dimensions, right? Number one would be speed. Number two would be cost.

Number three would be global reach. So there's some things like if you think about credit cards, they have pretty good global reach and they're pretty fast, but they're expensive. It take costs 2 to 3%. Right? Or let's take swift.

Swift has pretty good global reach, but it's expensive, maybe 20 to $100. It's pretty slow, too. Anywhere from 12 hours to a few days. And so, crypto rails are the only rails that I'm aware of in the world that check all three boxes. They are fast, they are cheap, and they are global.

And just to give you a specific example, you know, USDC, which Jeremy Lair was up here earlier, you know, we have a great partnership with them. USDC payments on base. You can send them anywhere in the world in less than 1 second for less than 1 cent US. There's no other payment rail in the world that can achieve that. And that's why we've seen stable coins grow like crazy.

We're going to see that with every asset class, with stocks, with commodities, with prediction markets, with corporate paper, with government debt, and every asset class is coming on chain. And our goal is to be the everything exchange at Coinbase and be the number one financial account for retail, for institutions, for businesses, for governments to do these transactions in a more low friction, fast, cheap, global way. I want to talk a little bit about Abu Dhabi for a moment. I' I've been coming here now for 20 years, and I always say this, and every time I come back, I'm more blown away by the city and how amazing it is. It's really always becoming.

It's a city of the future. But uh you mentioned something in the earlier part of our interview that this is one of the crypto capitals of the world. So tell us a little bit about your experience here in Abu Dhabi and why Coinbase likes it so much. Yeah, well the mission of Coinbase is to increase economic freedom in the world and I feel like the UAE UAE broadly has very much culturally aligned with that idea. They they're believers in science and technology as a way to improve the future, grow the economy, create prosperity for everyone.

And that's very near and dear to my heart. You know, we have a we acquired this company Darabit. So we now have a presence over 130 people here in the region. They're licensed through VAR in Dubai. But we also work with ADGM here in Abu Dhabi and on our tokenization efforts.

And they've been very forward thinking and just one specific example is they've put out a concept of a sandbox for innovation which I think is very important and brilliant. um you know it allows startups to get off the ground with less legal overhead and friction and within that sandbox they can build and operate. Now, if you start to get to a certain scale, they ask you to come in and get the the real license, but you can get started with less. And I always look at different regions around the world. I speak with government leaders and I tell them, you know, you want to eliminate certain categories of risk, like let's say fraud.

You want to get rid of that, but you don't want to get rid of market risk. Market risk means that a thousand ideas should be tried. Maybe 80% of those ideas will fail. Those businesses will go out of business, but that's good. That's the only way you're going to discover the best ideas is to have a thousand flowers bloom.

And so I think Abu Dhabi especially and the UAE have done a great job of finding the right balance. Very clear rules eliminating certain kinds of risk like fraud but allowing market risk to to happen and for people to go try to build the future and some will work and some won't and that's good. want to want to talk about one of I mean this is one of my observations of you and it's among your many skills but I feel like you have been a great champion of introducing institutions to the world of blockchain and crypto and decentralized finance but talk a little bit about some of the obstacles that are out there and tell the audience how you try to get people that are perhaps older used to the traditional financial system over those obstacles. What are some of the things you say to them?

Yeah, well, Coinbase, I think, has done a really great job of building those bridges into traditional finance. And I have to give really a lot of credit to our team. Many of them are here. Our institutional team, I think, is the best in the world. And they have a different go-to market uh function than say a purely consumer app, right?

In a consumer app, it's mostly about the product. If you ever have to contact us for customer support, it means something has gone wrong. Institutional sales has a very different muscle. It's about personal relationships. It's about being able to go through all the diligence items.

It's about speaking their language. Um being available to pick up the phone at any time. And and also the product has to be good. And so we've won more than our fair share of mandates with these large institutions. Um you know, Standard Chartered is just being announced.

Uh P PNC Bank. We've done a lot of great work with JP Morgan, Black Rockck, and they trust us as a US public company with our audited financial statements from the big four, but they also trust us um to com to meet all of their regulatory and compliance needs, and that's why we've become the provider of choice to these large institutions.

I want to talk a little bit about your personal philosophy. you you've you've been through tumultuous markets, lots of ups and downs. Yet, when I see your messaging and Coinbase's messaging, it's been remarkably steadfast in terms of your philosophy about Bitcoin, other assets of course. Tell us a little bit about that philosophy and how you stay so sturdy in times of great volatility.

Yeah, well, they say that every company is a reflection of its founder, the c the culture. And I think for whatever reason, that's always been my demeanor is like when things are really good, I I I'm not that happy. I just like a little happy. And when things are really bad, I'm not that sad, you know? I'm just like a little a little down.

And so I think of myself as a moderating influence on the crazy volatility and I have just very long-term thinking and persistence to get through building anything in the world. And so one of the things I like to say internally to the team is it's never as good as it seems, never as bad as it seems. when there's irrational exuberance in the market, don't believe it. Don't dial up your costs. Don't leverage everything to the hilt.

And also, when there's despair and blood running in the streets, you know, don't believe that hype either. Um, I also try not to read mainstream media. I just uh I try to uh wake up every day and think about what do I want to get done for the long term. Start start the day with my top three things and then maybe I'll check in on what everybody else is doing in the world. But I try to be more proactive with long-term thinking and not reactive to whatever everybody else's agenda is.

So I mean in the in the past by sort of 2020 to 2025, I think we've had exponential growth in the space. Uh let's talk about 2025 to 2030. Where do you see the space 5 years from now? Where do you see Coinbase?

Yeah. Well, there's a lot of tailwinds right now. I think 2025 we'll look back on is the year where we finally got regulatory clarity in major markets around the world and the United States government created a strategic Bitcoin reserve. I think that'll that's a landmark moment. Many other countries I think will follow suit.

Um we saw uh a lot of institutional capital flow in and with this stable coin bill being passed we saw again 120 announcements from different companies integrating stablecoin payments. So crypto now has a daily use case with stablecoin payments and probably prediction markets as well. It's no longer just a speculative asset class that's purely focused on trading. There's a daily use case like stablecoin payments is just growing up and to the right whether crypto is up or down. And so we're ready for updating the entire financial system.

I think on you know onchain capital formation is going to happen. Borrowing and lending are already starting to happen. If you think about Coinbase 5 years from now in 2030, our goal is to be the number one financial service app in the world for consumer business institutions and update the financial system uh with crypto.

So I'm I'm I want to be the imaginary new customer and I've downloaded the Coinbase app on my phone and I've opened it up and I began the process of purchasing some cryptocurrencies. What what is the message from Brian Armstrong, the CEO, to the new crypto enthusiast that's come on as a Coinbase customer?

Well, I mean, we want to b strike this fine line between financial literacy, um, helping people make good choices, giving them the right information to make those choices for themselves. Um, increasingly AI is going to be playing the role of a financial adviser to people. So, we take that responsibility seriously, but we also believe in free markets. We want people to be able to they should be able to choose to do whatever they want, right? So, if you want to go look at some high-risk asset that just came on the market and we're going to put the right disclosures in front of you.

We're going to we're going to let you know what other people are saying about it. Um, and you can make your own choice whether to buy that or not. Um, it's a little bit like Amazon or something, right? Like you see user reviews on Amazon or on Uber, you see reviews of the driver. Uh there might be a product on Amazon with two stars, but you can still choose to buy it if you want.

So I believe in free markets uh but I also believe in giving customers the information to make the right decision.

We got about 30 seconds. Any last words to this audience?

We have a product event on December 17th coming up in about a week in San Francisco, but people can tune into the live stream. We're going to be announcing everything that we've worked on in the second half of this year. We're going to be talking more about this everything exchange concept and stable coin payments and um the world of tokenization. So, please tune in to the product event and learn a little bit more about what we're up to at Coinbase.

Well, I'm I'm very proud to be a Coinbase customer, Brian, and thank you very much for everything, ladies and gentlemen. Brian Armstrong.