Summarize in up to four sentences.: Coinbase CEO Brian Armstrong joins YF
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Yahoo Finance Video
Thu, September 7, 2023 at 9:01 PM EDT

Coinbase CEO Brian Armstrong joins Yahoo Finance's Brian Sozzi.
Video Transcript

BRIAN SOZZI: All right. Yahoo Finance still stationed at the Goldman Sachs Communicopia Conference in San Francisco, talking some tech, talking some media. Let's talk a little crypto and tech. Coinbase co-founder, chairman, and CEO Brian Armstrong. Welcome to the Yahoo Finance for the first time. Thanks for coming on.

BRIAN AMRSTRONG: Thanks for having me.

BRIAN SOZZI: We appreciate it. I really enjoyed your company's blog post today. It's saying, you know what? If we can't get it done here in the US, we're going to look overseas. Talk us through what made you post something like that.

BRIAN AMRSTRONG: Yeah. Well, we're not going anywhere out of the US. The US is our biggest market. But we do look at everywhere around the world. And we look for regulatory clarity. And that helps us prioritize our investments. So you know, a really interesting stat, 83% of the G20 countries now either already have crypto legislation or it's in progress. And that's attractive for us. That's where we're going to go invest.

The US is a little bit of a laggard here. But I'm sure the US is going to get there, too. We were seeing Congress have a couple of bills go through the House. We're seeing the courts come out with favorable rulings. We're going to get there eventually in the US, too. So, yeah, Coinbase is going to be a US company with a multinational reach.

BRIAN SOZZI: What countries are you focused on overseas?

BRIAN AMRSTRONG: Well, we just launched in Canada last month. That was great. We did a pre-registration statement with the regulator. And Canada has been really great to work with. We launched a payment rail integration, Interac, in Canada. We also launched in May our international derivatives exchange, which is important derivatives. Trading is a big piece of the crypto ecosystem. We need to make sure we're playing there. So we launched that.

So we're going to keep going country by country in major markets. We're also going to make sure that the US has taken care of. We just got approved with our FCM license in the US for derivatives trading. So those will be big.

BRIAN SOZZI: Why are these other countries More open to what you do than the United States?

BRIAN AMRSTRONG: That is a good question. You know, the political environment is tough sometimes in the US. People each have their own interests. But the good news is that there's rule of law in the US. And you know, that has to be followed. So the courts are making sure that that's being enforced.

When I go meet with members of Congress, I think there's broad recognition that this technology is important. It's not going anywhere. And it needs to be done in a safe and trusted way for American consumers to make sure this doesn't go offshore. There's important national security implications of that, too, for the US. I mean, look what happened with 5G and semiconductors. This stuff moved offshore. And now, we're trying to fight like hell to get it back onshore. And so in the US, we need to make sure we've got the legislation in place that other places like Europe have already done.

BRIAN SOZZI: As a founder or co-founder, do you just get frustrated having to deal with all this? Don't you just want to be able to get your technology out there and help people and bring your vision to life?

BRIAN AMRSTRONG: Well, one important part of being a founder is to never give up. And there's always some new challenge that's being presented in front of you. Sometimes those are technology challenges, and those are important, you know, frankly, I'd rather-- we were just focusing on the product and the technology. But if it comes in the form of we don't have regulatory clarity or there's hostility, anytime you enter a new market, there's going to be entrenched incumbents that they have some resistance to that.

That's the history of all technology, whether it was the internet, the electric car. Like, you go back when the bicycle was introduced into American society, people were skeptical of it. And it's because it changes the way society works. And it brings about a lot of improvements. But it's a shift. And the old guard, sometimes, doesn't like that-- those kinds of shifts in society.

BRIAN SOZZI: We've gotten this question before from investors. Now that we finally were able to talk to you, let me ask you this. I mean, do you think the SEC just doesn't want you to succeed?

BRIAN AMRSTRONG: You know, I don't want to comment too much personally. And the SEC, by the way, is made up of many different people. We have really good relationships, I think, with the staff that are at the SEC, many of the commissioners. I do think the leadership there has taken a very hostile view towards crypto regulation by enforcement posture instead of just engaging in rulemaking, as they're required to by law under the Administrative Procedures Act.

And so, you know, that's the courts have now pushed back, which is good. But I think somehow this is going to be resolved, whether it's the CFTC stepping up, Congress creating new legislation, the courts creating that clarity. Or maybe next year we'll have a different SEC chair. Somehow this is going to get resolved in the US. And it's like that old Winston Churchill quote, right? It's that the US always does the right thing but only after exhausting every other option.

BRIAN SOZZI: Do you realize your ultimate vision for this company? Does someone else, besides Gary Gensler, need to be in that seat?

BRIAN AMRSTRONG: I don't think so. I mean, that would certainly help. But in this environment right now in the US for us, it's kind of business as usual. You know, we're continuing to operate. There's more developers entering the crypto ecosystem every year, even if the prices are down.

You know, frankly, if you look at the last 11 years of Coinbase's history, we've gone through four cycles now like this where the prices go up, the prices come down. But every time, it's at a new plateau, right? I mean, if you look at trough to trough, we're way up over 2019. You know, it's hard for us-- if you zoom out, it's kind of hard for us to feel like we're really in a crypto winter. I mean, Bitcoin is still over 20,000.

And, you know, we take a long-term perspective on these things. So we're unfazed. We're unflappable. We're not going anywhere. We're going to keep building. And this technology is going to benefit, you know, hopefully, a billion or more people around the world someday.

BRIAN SOZZI: What's your take on the spot Bitcoin ETF? Is that something that will ignite the next move higher in crypto and the crypto winter?

BRIAN AMRSTRONG: Yeah. It's been great to see so many ETF applications being filed, especially by these blue chip firms-- you know, Fidelity, BlackRock, the biggest names in traditional financial services. So by the way, Coinbase has been named as the custodian on all but one of these ETF applications that's been filed. So we have an important role to play here in the ecosystem.

But, you know, it shows that new pools of capital could come in when these ETFs get approved. That's exciting. I personally think it's very additive. Sometimes people think, oh, isn't that going to be competitive with Coinbase? We want crypto to be integrated into all aspects of the financial services industry, you know, every bank, every ETF, every payment channel. We just saw this week Visa said they're going to be having USD coin move over the rails. We want it to be integrated into all aspects of the financial services industry.

BRIAN SOZZI: In some respects, though, is it tough to see? and this is a currency or technology that it was the anti-currency. Now you have these big financial institutions coming in here throwing their weight around.

BRIAN AMRSTRONG: Yeah. Well, I think stablecoins are a really important stepping stone, you know. So in crypto writ large, it's the most important technology out there to update the financial system, right? We've seen that 67% of Americans think that the financial system is in need of a major update. Crypto is the best opportunity to do that.

So, yes, we're going to have decentralized cryptocurrencies like Bitcoin. We're going to have things like Ethereum that are building new application platforms on top that are totally decentralized. But if we need to get people-- you know, certainly, you have to meet people where they are. And so if they want to use US dollars for now, that's great. We have now US dollars running on crypto rails that are more efficient, more global. They allow you to do cross-border transactions or send small amounts to people no matter what country they're in. So these things are all going to help the crypto ecosystem grow and get to that decentralized vision.

BRIAN SOZZI: I think you put out a tweet recently. I really liked it. You said bear markets are the best time for building. So what else are you building at Coinbase? What should an investor expect to come up on the platform a year from now?

BRIAN AMRSTRONG: Yeah. Well, I don't want to pre-announce anything here, but a couple of big ones we've talked about recently. So we launched Base, which is our layer two solution. That's helping blockchains scale. We need to get the costs down, the confirmation times down to be really competitive. And payments flow to the path of least resistance. The less friction you can make, the more payments there will be.

We've also been investing a lot in our derivatives platform. So you know, I mentioned that internationally both and then in the US as well. So we'll keep pushing on a few of those. I also put out a blog post talking about some of the future ideas on the horizon. And a number of our venture investments might go into things like that. But I talked about flat coins, which is kind of the next iteration of stablecoins, that's more maybe linked to CPI or purchasing power. I talked about--

BRIAN SOZZI: Flat coin?

BRIAN AMRSTRONG: Yeah. Flat coin is--

BRIAN SOZZI: Where is that? Is that just only now developing? I've never heard of flat coin.

BRIAN AMRSTRONG: Yeah. It's a new thing on the horizon. There's a couple teams working on it. We're not building something in that realm yet, but we're interested in it. And you know, how could decentralized reputation protocols work? Or you know, in online games, people now want to own their in-game items. And like, you know, how could network states be governed? And you know, so there's lots of cool ideas. I put out a blog post and tweet about that, too.

BRIAN SOZZI: Where is Coinbase in terms of trading volumes? Are you seeing that improve at all?

BRIAN AMRSTRONG: Well, it's come down a bit, I would say, since obviously the 2021 highs and things like that. But we're not-- we're not like unused to these cycles, right? So we see when prices go up, obviously, more retail interest. What's interesting in this down market is that we've actually seen there's been a kind of a flight to quality. So we are seeing more institutions come in and sign up, go through our onboarding process.

And they're not necessarily moving huge amounts of capital in yet, but they are onboarding and waiting and seeing say, OK, what's that trigger for them? Maybe it's the blockchain has become more scalable, maybe some regulatory clarity, maybe a court case happens. And I think we'll start to see different amounts of capital actually coming in at that point.

BRIAN SOZZI: When does regulation come? What does that even look like?

BRIAN AMRSTRONG: Well, it's already happening in the world writ large. You know, I mentioned Europe, the UK, Australia, Canada, Brazil, these regions, UAE, have all been actually very forward-thinking. 83% of the G20 countries now have this crypto legislation either already in place or in progress.

It's really-- I don't know if you're asking just about the US. But in the US, I think it'll happen--

BRIAN SOZZI: In the US.

BRIAN AMRSTRONG: Yeah. It'll happen in one of a few ways. So one way is the courts. The courts can be the one to provide the clarity regardless of the outcome of the case. Creating case law is a way to get there if the regulators aren't going to provide it.

Another way to do it is through Congress, right? Congress is very engaged in this now passing-- it looking at this FIT21 Bill, that's-- which just got bipartisan approval in the House. The stablecoin market structure bill also got bipartisan approval in the House. So we'll see how that makes its way through the Senate and the executive branch.

The CFTC could step up and assert more authority. I also think, you know, there's a possibility we'll just get a different SEC chair in 2024 or beyond. So we'll try all these things in parallel. Somehow, one of them will come through.

BRIAN SOZZI: Before I let you go, I don't think investors realize how much time you do spend talking to regulators and other politicians. What is that like? Did you expect that when you founded Coinbase?

BRIAN AMRSTRONG: Well, the role of a CEO is always evolving to what's the most important thing, right? So I started the company really as an engineer just typing on my laptop and built the initial version of the app. And then, you know, as something grows it starts to have a really important role to play in society. And so, yeah, you start to engage with governments, world leaders, banks.

And we're at that phase now where we need to make sure that we are an educational resource that we actually bring the crypto community together to make sure our voice is heard. And there's these great websites like standwithcrypto.org, which are helping the crypto industry come together and say, hey, look 56 roughly million Americans have used crypto now. It's 5x as many as have electric vehicles, just as an example. And we're voters. We want to donate to candidates that are supporting crypto. We want to show up at town halls.

I don't think everybody in DC actually fully realized how powerful-- realizes how powerful the crypto voting block is. And I think 2024 is an election where, you know, the voters of America are really going to hold candidates' feet to the fire and say, what is your position on crypto? Are you going to be a continuation of these existing policies that have been unnecessarily hostile? Or are you going to allow this technology to flourish and ensure America's leadership as a technology hub?

BRIAN SOZZI: Do you see certain folks out there in the political sphere as friendly, any candidates that you say, wow, they get elected, my job might become a hell of a lot easier?

BRIAN AMRSTRONG: Yeah. So I mean, I don't want to come out and personally endorse anybody. But yes, if you look at the presidential candidates that are in the running today, they're talking about crypto. And so far, as far as I can tell, all of their comments have been positive. They see it as an opportunity to challenge the policies that the current administration has had in downstream effects with the regulators that they view as not in line with what the American people want. And so I think this could become a hot topic in the presidential race in 2024.

BRIAN SOZZI: I'm sure it will. Coinbase co-founder, chairman, and CEO Brian Armstrong, welcome to the Yahoo Finance community. We really appreciate you coming on.

BRIAN AMRSTRONG: Thanks for having me.

BRIAN SOZZI: Thank you so much.