Institutional Crypto Adoption Just Hit a Turning Point! | John D’Agostino

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If you're that person in the boardroom or a senior
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executive and you're still saying things like, you know, cryptos
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a scam, stuff like that, it's now embarrassing. We are
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moving towards you know, call it convenience, call it speed,
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called whatever you believe drives human behavior. This notion of
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collapsing these various silos. Do we really think that, when
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my twelve year old daughter is my age, that you'll
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have to log on to four different websites to purchase
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these assets. That's just silly.
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visit the link in the description. Hey everyone, welcome into
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the Thinking Crypto podcast. I'm your host, Tony Edward and
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we are recording at Station three in New York's Financial District.
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And joining me today is John Dagostino, who is the
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head of Strategy at Coinbase Institutional. This is John's second
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time on the podcast, and prior to joining Coinbase, John
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was the former head of Strategy for the New York
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Mercantile Exchange, where he led the effort to develop the
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first Middle East energy derivatives exchange in partnership with the
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Dubai government, which led him being the subject of two
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New York Times best selling books.
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John, great to see you. You know, best selling books
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New York Times nothing compared to being on your podcast.
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I'm a huge fan and I appreciate you inviting me back.
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Yeah, John, I really loved our conversation last time. You're
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very thoughtful, you have a lot of knowledge, So I
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figured I got to get you back on to talk
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about what's happening now in the market, but also all
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the great things coinbase is doing. Let's talk about the
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market because in October in Q four, October eleventh, the
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day that lives an infamy big liquidation event. However, we
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seem to be bottoming out right now, big coins up
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a bit. What did your take on everything that's been happening.
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So October tenth was a meaningful event. However, I would
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argue not an unpredictable event in the sense of these
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sort of builds up. Of these build up of leverage's
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natural build up of leverage. I guess a skewed speculative
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to hedging ratio. It's sort of endemic to this asset class.
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And it's not just endemic to crypto. I think it's
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indemic to ascid classes like commodities and other types of derivatives.
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And so this is a natural ebb and flow. These
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asset classes tend there's a ton of potential upside right
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when momentum is swinging up that tends to attract a
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certain type of market participant who's less risk tolerant. During
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those upswing periods, they tend take on excessive leverage. And
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so then you have this resetting. So you have this
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sort of upward escalating sign curve. Now, I know we
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all kind of want to get away with it from that.
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You know, some people just wanted to go up forever.
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It can't, by the way, mathematically it'll be bigger than
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the US economy. Right at some point, it may just
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be this is how the asset trades. And I think
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over time the standard deviation around that sign curve will diminish.
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But I think, you know, again, like I keep saying
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this that before crude oil went negative a few years ago, right,
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and it's an incredibly important assea class that's wildly liquid
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and highly institutional, and so it maybe this is just
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the nature of these acid classes for at least some time.
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So over tenth horrible cataclysmic. But but again, not everyone
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I know who's no sophisticated investor. It's not like out
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of the realm of possibility.
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Right.
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But so let's talk about some good things that came
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from October tenth.
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Right.
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One is there was. There wasn't this incredible fraud discovered.
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There wasn't you know everyone everyone every time there's a
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price correction, everyone starts, Oh, you know, there's some it's
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always this. It's always this mythical Asian hedge fund, right, right,
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and or an exchange blew up or this or that.
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So there was none of that. Right. There were some failures,
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as there always is going to be. But but we
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we went through a massive tide pulling out that didn't
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reveal a terror Luna or an FTX stuff like that.
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That's that's a good thing. That means that in general,
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at least the larger market participants have matured and managed
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risk properly. That's a good thing. Right. We didn't see
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rapid fraud, you know. We so a lot of people
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were hurt, but not in the way that requires massive
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regulatory intervention. Right. So so that's a we don't want
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to October tenth to happen. But if I look back
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and say, in a perfect world, it happened in the
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way that the worst possible scenario weren't realized. So because
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of that, we went into a kind of retrenchment. I
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don't know if we've bottomed. A lot of people were
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saying we needed a catalyst to bottom that. Catalysts might
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have been some recent regulatory signs of positive political pressure
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coming to create a fair resolution around the banking stable
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cooin issue. But I think it's just it's just all
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the market participants licking their wounds for a few months
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realizing okay, we were shaken up, but our risk parameters
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worked out okay, and then slowly and carefully entering into
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the market again. And I do think that's what we're seeing.
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Yeah, it's funny, John, because we didn't see the same
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type of parabola parabola I should say, where you had
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the euphoria and a lot of movement behind the market
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that can be seen in previous bull markets. So I
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almost think on the downside, you may not have that
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same type of extreme dream, extreme selling and fear, even
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though we're seeing a bit of it on the you know,
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sentiment charts. So maybe you know there was a diminished
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bull market and also a diminished bear market.
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Now we're experiencing It's it's great observation and we've we've
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been saying for a while. For a few months, I've
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been very public about this that there's a massive disconnect
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between the institutional fundamentals and market fundamentals and retail fear.
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I think we have. We have levered and speculative bubbles
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within crypto periodically. We also have levered and speculative sentiment
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bubbles in both ways. Right, we tend to be fairly
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bipolar as an asset class. And so just look at
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the numbers recently, right, and in the last couple of weeks,
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we're seeing increased ETF flows. We're seeing significant price increases,
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rallying at bit cooin with still negative funding rates, slightly
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negative funding rates. That's all positive. We're seeing increasing prices,
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decreasing open interest on the future's and derivative side. These
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are all signs of a healthy market. Yet the fear
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and greed index is still at ten. So I don't
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want to I hate telling people how to fear, but
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I would. I've been gently reminding folks for the last
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i'd say month month and a half, is if you
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can afford to invest like an institution, and I suggest
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everyone should. I've had a big proponent of dollar cross averaging,
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only investing what you can lose. It invests that way
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because that allows you to think like a sovereign wealth
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fund or an institution that has you know, three, five, seven,
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ten year time horizons. And if you can invest in
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that way and trade that way and think that way,
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then then you have the luxury of looking at their
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behaviors and they're not panicking and they haven't been panicking
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because they're seeing what I'm seeing, which is nothing has
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changed in the last six months on the downside. It's
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only been upside. We have regulatory leaders now in the US,
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Paul Adkins and Mike Sellig, who are every day signaling
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with language that the most optimistic crypto bitcoin Maxie was
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talking about a year ago. That's an extraordinary Paul Akins
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came out, I think just twenty four hours ago and
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said we gonna have zero latency atomic settlement soon t zero.
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Mike Sellig is is a brilliant and talking about the
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cfcc's role in prediction markets in defile. I mean, the
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political side is fantastic, but but the regulatory side talk
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about a one to eighty that is consistent now over
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the over the last six months and a wonderfully bullish
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catalyst and.
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Sign Yeah, great points there, and is the dichotomy of
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what's happening on the institutional side and how the retail
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masses they're feeling. It couldn't be further apart, because, like
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you said, there's so much building. I mean, just yesterday
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Morgan Stanley said, Hey, we're gonna file for our own
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bigcoin ETF.
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And they're gonna use coinbas as as custodian, which was
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which was great, And uh, there was that announcement. Look,
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I'll leave their competitors. I don't care. Kraken's announcement about
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the FED window fantastic, great for them. I think it's wonderful.
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Uh.
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Ice investing in ok x. I used to compete with
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against Jeff Sprecker at ninem X. I can't wait to
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rip his face off again. Like he's a legend, and
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I admire him tremendously. I loved competing against him back then,
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and I'm looking forward to competing against him again. But
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you know, I love all that. I think it's great.
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I think it's great when high quality players. You know,
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he's trying to find the next coin base, right, But
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all that's wonderful. I'm not seeing a lot of structurally
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negative signs. I struggle to no one can point them
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out to me, except you know, short term price action,
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and if you believe, if you believe as I do,
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that it's just talk a bit bitcoin for a second.
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If you believe that bitcoin as I do, is a
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wonderful long term hedge against monetary debasement, Monetary debasement does
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not occur over weeks or months or even years. It
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occurs over decades, and so you have to measure your hedge.
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Duration should match duration. And so if you're a short
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term trader, you should like the volatility to some degree,
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but just be aware. If you're a short term retail trader,
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you're up against folks who really really know what they're doing.
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On the other side, who have the ability and balance
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sheet to hedge with various OTC products and offshore and
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on shore, so it would just be very cautious about
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trading it in that way.
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Pardon the interruption. Hi, I'm Tony. I'm the host of
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the Thinking Crypto podcast. I wanted to ask you if
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you can please support the podcast by hitting the like
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button subscribing. If you haven't as yet, you can leave
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a comment below as well, And if you're listening on
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a podcast platform such as Spotify, Apple or wherever you
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get your podcasts, please be sure to follow and hit
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the five star rating. I'll let you get back to
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the content. Thank you so much. Well, that's the saying goes,
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bite a blood on the streets right when, and also
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when many are fearful, that's the time to be greedy.
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And when the many are greedy, that's the time.
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To be sure. I've never failed me before. I keep
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a lit little piece of paper in my wallet post
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right after nine eleven or right after nine eleven in
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New York City, two best trades in my life. Ten
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days after nine eleven, I bought my first apartment and
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I bought city stock at I think printed at like
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ninety eight cents, like I forget these. I printed like
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almost the low on City because I was sitting there going, okay,
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if Citi's dead, America, the entire world at this point,
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who cares? Right, We're being ridiculous here, and so two
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best trades in my life. Best tripled my apartment value
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in five years, because I remember back then, who would
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ever live in New York?
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Ever?
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Again? New York is New York is done.
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They said the same thing after COVID, and.
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They're saying the same thing about Dubai. Now, it's just
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it's just ridiculous. So that now is the time to
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go in through these these hyperbolic periods of of of fear.
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It's never failed me before.
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Yeah, it's so fascinating how market cycles, market psychology and
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sentiment works, right, John, And you have to not necessarily
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look at the narratives, but look at the charts and
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the principles of markets and investing, because there's an emotional
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roller coaster. But you have to keep that at bay.
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It's hard, and it's hard, I get it, especially especially
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if you're emotionally invested. If you're investing, you know, maybe
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a little bit too much, if you're I find most
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people don't invest more than more than they should. They
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just mismatch duration. They invest money that they need short
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term in assets that you you really shouldn't. So, you know,
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one of the things I really love about coinbases, uh,
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you know, I find them to be kind of responsible,
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like you know, I you know, I'm a spokesperson for
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the firm, and they know how I feel about this topic.
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And I've never been told you know, no no push
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you know, push push speculative you know, irrational behavior like so, So,
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I do think it's on the It's on the players
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in the market, the exchanges, the big asset managers. I
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do think it's incumbent upon them to continue to push
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this this narrative, no different if I was talking somebody
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about deriatives, trading, edi edy, any idiosyncratic, implicitly levered asset.
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People should do what they want. Ultimately, adults should be
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able to do what they want with their own money.
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But I think it's incumbent upon institutions like ours to
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just remind people that this type of volatility is probably
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not going away. It's gonna get it's gonna get better,
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but it's probably not going away at least in my
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the rest of my career.
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So John would all the things we just talked about
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more again, Stanley and a lot of these big institutions,
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ICE investing in ok X and UH, the SEC and
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the CFDC putting rules together. It feels like we've crossed
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the chasm where institutions no longer viewed it as taboo.
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But they need to have a strategy. It's a must,
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it's critical, and everybody's on the raceline ready to go.
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Maybe when the clarity.
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Act passes absolutely. Look, every major financial institution is hiring
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out a senior senior crypto team. I'm getting the calls
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to like ever, everybody's getting you yeah, not not not
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going anywhere. I love point uh, but but every and
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when I say every, every major brand name financial institutions,
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even the ones where whose CEOs are publicly still you know,
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it's clear. And I said this on another show recently,
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but I do think at this point, if you're that
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person in the boardroom or a senior executive and you're
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still saying things like you know, crypto's a scam and
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stuff like that, it's now embarrassing to be perfectly honest. Right.
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So now I do think some people will like just
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ride out the rest of their career. I think because
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they're embarrassed. They're like they're the if you're if you've
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been very vocally against this asseat class, it's fine, by
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the way, I think we have to do a better
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job like thoughtful, like like Uriel Rebeti is a very
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good friend of mine. Right, He's a he I take
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everything he says very seriously. We disagree. He's a thoughtful critic.
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He's a thoughtful critic. There are non thoughtful critics, and
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I think if you're one of those people, it's a
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bit embarrassing at this point. So you have to either
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have two choices. You can admit I was as wrong
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as wrong can be, or you can just ride out
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your career and hope that you know, you'll never have
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to deal with it, and you might not. My mother
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just switched to online banking, just literally this year. She
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deferred it for forty years because she hates it. But
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but yeah, look, I think I think we are you know,
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I love this notion the coin base talks about this
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everything exchange, because I do think that we are moving
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towards uh, you know, call it convenience, call it speed,
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call it whatever whatever you believe drives human behavior. This
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notion of collapsing these various silos, it makes sense for
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me I perspective, like why should I go to three
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different systems to buy credit? You know, Muni's equities, commodities, crypto,
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Like why should I go to four different systems to
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buy those? So efficiency is great, but just from a
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practical perspective, when you start to collapse those systems, you
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do things like cross margin financing. You can lend against
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cross collatterized assets, which is what tokenization does, and you
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just unlock put aside twenty four seven trading, which is
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also extraordinary, and watching people hedge their exposure to the
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Iran war on DeFi on hyper liquid, you know, over
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the weekend prior to the open that frees up tremendous
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amounts of value. But there is this notion of you know,
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do we really think that when my twelve year old
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daughter is my age, that you'll have to log on
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to four different websites to purchase these assets. That's that's
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just silly.
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Right, So, and this is along the lines of what
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coinbase is building, because you just recently added stock trading
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things along in the futures.
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Now you've heard and Mike Sellen just announced recently that
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US purpose are coming as soon as April. You can't.
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One of the reasons I'm not. I have the luxury.
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It's easy for me to say this because we have
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an amazing policy team that's fighting tooth and nail to
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make sure American consumers get get good choice. So I
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kept the luxuries saying like, I'm not worried about that.
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They have to worry about it. I am not worried
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because because it is absolutely the right move for them
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from a technology perspective, from a American consumer perspective. And
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I just know eventually, over time that wins out and maybe,
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you know, maybe we wind up with a clarity act
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that we don't love. Who knows, but I know over
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time it'll just get whittled down for the benefit of
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the American consumer. No different from my new Uber was
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going to win, right, Remember when all the municipalities were
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fighting Uber and like for a while it was touch
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and go. But like then you use the app and
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you're like, this is just clearly better. It's clearly better.
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It's clearly going to win. They can stall it for
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a while, but eventually the consumer votes with their feet,
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votes with their vote, votes with their dollars, and you know,
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you can accept zero point zero one interest rate or
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you can accept you know, high threes, and you know
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eventually that that wins out.
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And to your point, you know, there's going to be
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a generational shift. Gen Z and these folks, they're more
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digital than even myself, and I think on myself as digital.
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But you know, you give the example of your mom,
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right finally moving to online banking, really growing up in
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a digital world, and they're going to inherit a lot
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of money, and they're going to start investing, and it's
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going to be via the mobile platform, via wallets.
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And they're aware of the inflation return gap that exists.
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They're keenly aware, even even folks who aren't particularly financially focused.
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I hate saying financially alliterated non financially just dude, because
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just because you're not aware of something doesn't mean you're
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not capable of being aware. It's just they want to
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have different priorities in their life, right, So not everyone
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get up every day spending time thinking about their money.
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But I think the average young person is far more
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aware of that gap between inflation and earning potential. And
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so that you know, difference two point zero one percent
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interest and three and a half percent interest compounded over
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a lifetime is massive. That's differen between putting your kids
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into school. That's owning a home and not owning a home.
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So I think they'll demand it. I do, and I
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understand why the banks are fighting. I get it. I
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try to be very sanguine about this stuff. I try
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not to ascribe malice where where self interest is the
368
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more likely excuse. I get it. It's a fantastic motel.
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I would love to be able to borrow at zero
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and borrow it at take in five percent, and lend
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out at zero. I'd love to do that. Who would
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love to do that? So I fully expect they're going
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to completely protect that mote. But their arguments are just silly.
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They're just silly, like this notion that you're comparing a
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levered bank that is putting assets at risk in the
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loan portfolio to a one to one regulated backed narrow bank.
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That argument won't win. I know it won't win.
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And I've often given the analogy. I'm a JP Morgan
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Chase customer. Yeah, and I have my regular checking in
380
00:19:02.880 --> 00:19:06.079
savings and guess what I'm getting zero point zero one
381
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percent or whatever it is in my savings. But what
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I'm currently doing because of stable coins and crypto, I
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put some money in USDC on coinbase, I'm earning my rewards.
384
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I've been doing this for over a year and a
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half Coinbase one customer, and I'm also staking and I'm
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getting more returns.
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00:19:21.160 --> 00:19:23.440
John, Well, you're taking some risk with saking, obviously you
388
00:19:23.519 --> 00:19:24.960
take right you're taking so and you should be paying
389
00:19:24.960 --> 00:19:26.359
you should be by the way, you should be paid
390
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accordingly by taking that excess risk. And that's a wonderful,
391
00:19:29.599 --> 00:19:32.759
a wonderful thing. That's the that's the whole point. So
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00:19:33.039 --> 00:19:34.799
I think I think that's great. So so taking that
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option away under the guise of minimizing risk again, it's
394
00:19:41.160 --> 00:19:43.599
it's it's it's it's. It fails on the merits, it
395
00:19:43.599 --> 00:19:46.440
fails on the tech, it fails on the economic logic.
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And so I am you know, I have the luck
397
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you're saying this, but I am. I am very very
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optimistic that regardless of which administration wins in midterms or
399
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that eventually, the American consumer votes with their feet, votes
400
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with their vote, votes with their wallet, and will not
401
00:20:01.000 --> 00:20:03.880
be okay with a three and a half percent delta
402
00:20:04.680 --> 00:20:06.039
between what they're owed.
403
00:20:07.240 --> 00:20:09.400
And I wish the banks and many of them are
404
00:20:09.400 --> 00:20:13.319
talking about building their own stable coins. Either increase your
405
00:20:13.359 --> 00:20:16.599
interest payments on the regular savings again, or to launch
406
00:20:16.599 --> 00:20:17.799
your own stable coin and compete, and.
407
00:20:17.839 --> 00:20:20.359
They will eventually once they're done fighting this. Now, look
408
00:20:20.359 --> 00:20:22.400
they're gonna fight this. They're gonna again. I would fight
409
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it too, I get it. I would absolutely fight it too.
410
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They're gonna fight it till they lose, and then once
411
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they lose, they're going to enter into the stable coin
412
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race as quickly as humanly possible. And I love competition. Great,
413
00:20:35.519 --> 00:20:37.599
bring it on, let's do it, let's let le let's
414
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see if you can get Let's see if you can
415
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replicate what we've been able to build over ten years.
416
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I welcome the competition. The rising tide lifts all boats,
417
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that's great. I view those entrants as helping my cause.
418
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It gets the word out about the integrity of this product.
419
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It gets word out about the regulated nature of this product,
420
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and it provides marketing, if you will, for a reasonable
421
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alternative to a which will run in parallel. Just just
422
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like bitcoin is not going to displace gold, stable coins
423
00:21:04.480 --> 00:21:06.279
are not going to displace banking. These are very very
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different economic functions. This notion of community banks being killed
425
00:21:10.359 --> 00:21:13.400
by stable quins, community banks are being killed by JESIP
426
00:21:13.440 --> 00:21:15.720
banks and being killed by the JP Morgans of the world,
427
00:21:16.079 --> 00:21:17.960
And I think that's a shame too. I think it's
428
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community banks are wonderful and some of them offer great interests.
429
00:21:20.680 --> 00:21:25.839
So you know, these these false narratives are exactly that
430
00:21:26.400 --> 00:21:31.000
I'm confident it'll be it'll I'm very confident it'll end
431
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in the right way. I just don't know when.
432
00:21:33.720 --> 00:21:35.319
Yeah, how long does this battle play out?
433
00:21:35.359 --> 00:21:39.640
For longer generally longer than people think it's going to well.
434
00:21:39.599 --> 00:21:42.759
Hopefully, And this is my ideal scenario that they find
435
00:21:42.799 --> 00:21:45.640
a compromise because it's holding up the Clarity Act. President Trump,
436
00:21:45.720 --> 00:21:47.759
you know, just recently put out a statement saying the
437
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banks need to put this aside and let's get the
438
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bill through.
439
00:21:50.759 --> 00:21:52.759
But who knows. You know, we're gonna have to wait
440
00:21:52.799 --> 00:21:55.200
and see. We have a great policy team. I'll let them.
441
00:21:55.200 --> 00:21:56.960
It's it's above my above my pay grade, above my
442
00:21:57.000 --> 00:22:00.319
intelligence level. The math of that is really extraordinary. But
443
00:22:01.319 --> 00:22:05.319
I'm really confident in our policy team and Crypto's policy overall.
444
00:22:05.759 --> 00:22:08.720
More important, I know it's the right answer. I know
445
00:22:08.839 --> 00:22:15.160
that tokenization is a superior product to legacy securitization models.
446
00:22:15.359 --> 00:22:17.039
It just is no again, just like I think we
447
00:22:17.079 --> 00:22:19.039
talked about this. I was there when we went from
448
00:22:19.079 --> 00:22:22.759
open ow cry to electronic trading. That took ten years
449
00:22:22.799 --> 00:22:26.359
longer than people thought it would for a variety of reasons,
450
00:22:26.359 --> 00:22:29.359
some valid Right, these are important systems you can't just
451
00:22:29.480 --> 00:22:31.680
change them willy nilly, Right, these are really important systems.
452
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Right if you were sitting on a plane and the
453
00:22:34.440 --> 00:22:36.480
pilot came out and said, hey, I got I got
454
00:22:36.480 --> 00:22:39.200
a great news. The smartest minds in the world have
455
00:22:39.319 --> 00:22:42.720
created a better engine and we're testing it today. You
456
00:22:42.839 --> 00:22:45.640
might be like, I believe in science, but maybe we
457
00:22:45.799 --> 00:22:50.440
test it before before. These are important systems. Here's the
458
00:22:50.440 --> 00:22:54.799
good news. Every time you read about some silly mean coin,
459
00:22:55.480 --> 00:22:57.400
you know, going up and down a billion dollars over
460
00:22:57.400 --> 00:23:00.000
the weekend, or when you read about hyper liquid facilitated
461
00:23:00.720 --> 00:23:03.839
crudel hedging of the like, even if you don't believe
462
00:23:03.839 --> 00:23:08.319
in the underlying product that's testing, it's been tested. We
463
00:23:08.400 --> 00:23:10.279
know it works, we know the pipes work, we know
464
00:23:10.319 --> 00:23:13.559
the resiliencies there. Millions and millions and millions of transactions
465
00:23:13.599 --> 00:23:16.640
are coming nights, weekends, values being transferred, no trade breaks,
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00:23:16.720 --> 00:23:19.880
no no problems. So we have tested it. That's the
467
00:23:19.880 --> 00:23:22.000
good news. A lot of the reasons that it's going
468
00:23:22.039 --> 00:23:25.599
to take longer than we want are our inertia, corporate inertia,
469
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self self enrichment, and that's okay, we'll get we'll get
470
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through that eventually.
471
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It just is going to take some time hard question.
472
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Do you think by twenty thirty five it is up
473
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and running?
474
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Twenty thirty five, yeah, absolutely, twenty three five, yes, I
475
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like seven years. As as as an outlook, it's it's
476
00:23:43.160 --> 00:23:45.160
it's a good number. I think. Beyond seven years, who
477
00:23:45.200 --> 00:23:47.880
the heck can predict anything? Except I know that, I mean,
478
00:23:48.000 --> 00:23:50.759
I know that'll be an institute at that point, because
479
00:23:50.759 --> 00:23:53.599
I just you see that, you see the regulatory trends,
480
00:23:53.640 --> 00:23:57.000
that the rules are hard to roll back. Even more importantly,
481
00:23:57.359 --> 00:24:00.519
it's not just America is not even really leading case. Right,
482
00:24:00.559 --> 00:24:02.000
So so the one thing we don't like is we
483
00:24:02.160 --> 00:24:05.200
don't like when other countries leave progress on progress. And
484
00:24:05.279 --> 00:24:07.480
so if we do have a slight pullback because a
485
00:24:07.519 --> 00:24:09.359
new administration comes in and they get you know, they
486
00:24:09.400 --> 00:24:11.240
get a little scared about everything that happen, they're going
487
00:24:11.279 --> 00:24:14.000
to quickly see all this activity moving offshore. They're going
488
00:24:14.039 --> 00:24:15.839
to see the rise of it and the growth. And
489
00:24:16.119 --> 00:24:18.279
I think, you know, we don't like losing as Americans,
490
00:24:18.279 --> 00:24:20.680
So I think I think we'll you know, again, they
491
00:24:20.680 --> 00:24:22.119
may it's a sign curve, right, we may have a
492
00:24:22.119 --> 00:24:25.680
slight pullback, but the sign curve generally elevates over time,
493
00:24:26.519 --> 00:24:29.920
and I'm very confident that once we have this good thing,
494
00:24:30.279 --> 00:24:31.400
we won't want to go without it.
495
00:24:32.440 --> 00:24:36.480
Now, coinbase offers a suite of products and services for
496
00:24:36.559 --> 00:24:41.640
institutions to be able to onboard and launch theirs crypto services.
497
00:24:41.759 --> 00:24:44.400
So you're working with banks like a PNC and City
498
00:24:44.440 --> 00:24:47.799
and so forth. Yeah, crypto is a service. So what's
499
00:24:47.839 --> 00:24:50.400
the long term vision with that? Because could these banks
500
00:24:50.599 --> 00:24:52.319
use you for a period of time and say, you
501
00:24:52.359 --> 00:24:53.880
know what, I'm going to go build my own thing.
502
00:24:54.240 --> 00:24:57.759
It's a risk you take that risk. I think it's
503
00:24:57.880 --> 00:25:01.000
it's possible, not probable, to be this because look, I
504
00:25:01.319 --> 00:25:05.200
think for the foreseeable future, especially for large, large, massive
505
00:25:05.240 --> 00:25:07.440
firms like P and C and others, uh, this will
506
00:25:07.440 --> 00:25:11.319
continue to be a relatively small part of their overall portfolio.
507
00:25:12.119 --> 00:25:15.039
So the idea of pivoting everything and building this out
508
00:25:15.039 --> 00:25:18.680
from scratch, it's very the if you look at kind
509
00:25:18.680 --> 00:25:21.200
of their their forays into sort of like neo banking
510
00:25:21.960 --> 00:25:24.000
hasn't gone very well for most of them because the
511
00:25:24.079 --> 00:25:26.920
very different type of client. This is even more different,
512
00:25:27.319 --> 00:25:30.200
and the technology is different, the infrastructure is different, the
513
00:25:30.240 --> 00:25:33.519
pipes are different. So I am I am not at
514
00:25:33.599 --> 00:25:36.000
least who knows when I'm when I'm dead and buried,
515
00:25:36.000 --> 00:25:37.519
who knows. But but for the course of my career,
516
00:25:37.559 --> 00:25:41.160
in my lifetime, I struggle to see any of these institutions,
517
00:25:41.519 --> 00:25:44.839
seeing everything that we do and the hell we had
518
00:25:44.839 --> 00:25:47.359
to go through to get here, and saying, oh, we
519
00:25:47.640 --> 00:25:49.440
want to we want to replicate that, we want to
520
00:25:49.480 --> 00:25:52.920
get that, we want to go hire three thousand, you know,
521
00:25:53.000 --> 00:25:56.200
dedicated crypto people and build out that infrastructure. I am
522
00:25:56.519 --> 00:25:58.920
particularly as we get, you know, better and better at
523
00:25:58.920 --> 00:26:01.440
it as we scale. It's very somebody like Amazon Web Services, right,
524
00:26:01.480 --> 00:26:04.599
Like I remember, I remember when if you worked at
525
00:26:04.599 --> 00:26:07.160
a hedge fund, you kept tape decks to do your backups.
526
00:26:07.400 --> 00:26:09.599
And I remember when the AWS guys were first coming
527
00:26:09.640 --> 00:26:11.200
around saying, oh, you should just outsource that to the
528
00:26:11.200 --> 00:26:14.119
cloud and everyone there. Oh no, I take my tape
529
00:26:14.119 --> 00:26:16.640
home with me every night. But this isn't nineteen sixty
530
00:26:16.680 --> 00:26:19.000
four like this is. This is like two thousand and two, right,
531
00:26:19.400 --> 00:26:22.000
and and that was of course I do it myself.
532
00:26:22.200 --> 00:26:24.680
Of course, how can I trust you Amazon to do it?
533
00:26:25.039 --> 00:26:28.039
And then Amazon pretty good product and people, I'll do
534
00:26:28.039 --> 00:26:29.279
I'll go with you for a bit, but then I'll
535
00:26:29.319 --> 00:26:32.000
do it myself. And we all know the economics just
536
00:26:32.079 --> 00:26:35.960
don't work. So I think I think it's possible, not probable.
537
00:26:36.759 --> 00:26:39.759
Our crypto as a service business is just going gangbusters.
538
00:26:39.839 --> 00:26:41.480
I don't think I'm allowed to give out numbers, but
539
00:26:41.480 --> 00:26:44.359
it's but it's it's growing like a weed, and I
540
00:26:44.400 --> 00:26:47.839
fully expect it to scale as more and more firms
541
00:26:47.880 --> 00:26:52.160
realize I need a crypto offering regardless of what how
542
00:26:52.200 --> 00:26:56.119
I touch the consumer financial services business, fashion houses, anyone
543
00:26:56.119 --> 00:27:02.039
that has a large consumer retail front facing UI is
544
00:27:02.079 --> 00:27:04.559
increasingly getting calls from the customers saying we want the
545
00:27:04.599 --> 00:27:08.160
option to use store pay transact in crypto in some
546
00:27:08.240 --> 00:27:13.720
way and building it versus leasing it. It's a no brainer.
547
00:27:14.039 --> 00:27:16.720
Oh absolutely, And that's great perspective because the banks have
548
00:27:16.759 --> 00:27:18.799
a lot going on and to go try to build
549
00:27:18.839 --> 00:27:20.799
what you guys have done, it's going to probably take
550
00:27:20.880 --> 00:27:21.240
the years.
551
00:27:21.319 --> 00:27:23.559
And I mean I'm not particularly bank like, and so
552
00:27:23.640 --> 00:27:26.559
it was a cultural shock for me. I mean, everybody
553
00:27:26.599 --> 00:27:29.240
laughs at me whenever I have blazers, so like it
554
00:27:29.240 --> 00:27:31.640
it is. I mean that kind of in the in
555
00:27:31.680 --> 00:27:34.440
the lighthearted way of just there is a cultural change.
556
00:27:35.200 --> 00:27:40.559
But I think that the the Yeah, I'll leave it
557
00:27:40.559 --> 00:27:42.400
at that. I mean, it's it would be very, very
558
00:27:42.480 --> 00:27:48.160
challenging for even the most greedy, greedy financial institution who
559
00:27:48.240 --> 00:27:50.039
thinks they can build it out when when they run
560
00:27:50.039 --> 00:27:52.359
the economics on it, and then you have our liquidity,
561
00:27:52.400 --> 00:27:53.799
you have the fact that we ConTroll about twelve and
562
00:27:53.799 --> 00:27:57.720
a half percent of all custody. Every major government entity
563
00:27:57.720 --> 00:28:01.039
trusts US. I mean, I just I really really struggle
564
00:28:01.400 --> 00:28:03.440
with anyone replicating this from scratch.
565
00:28:04.119 --> 00:28:08.279
So as far as what's in this suite custody spot futures,
566
00:28:08.599 --> 00:28:10.119
is there also a tokenization in there?
567
00:28:10.160 --> 00:28:13.079
Absolutely we have. We've we consolidated all of our disparate
568
00:28:13.440 --> 00:28:15.920
tokenization businesses. We had one in the way you called
569
00:28:15.960 --> 00:28:18.400
Project Diamond into what we call Project Tokenize. So we
570
00:28:18.480 --> 00:28:21.599
now have a one stop shop for tokenizing everything from
571
00:28:21.680 --> 00:28:23.759
stable coins to equities to real estate.
572
00:28:24.279 --> 00:28:24.400
Uh.
573
00:28:24.519 --> 00:28:26.920
And you know, we're being selective about those projects because
574
00:28:26.960 --> 00:28:29.200
I do think tokenization to some degree has a bit
575
00:28:29.240 --> 00:28:32.440
of a garbage and garbage out problem. You can't just
576
00:28:32.519 --> 00:28:34.480
tokenize something and expect if it's you know, if it's
577
00:28:34.480 --> 00:28:37.680
if it's I love my daughter, but her bad photos,
578
00:28:37.680 --> 00:28:39.519
her bad drawing, she makes me just because I just
579
00:28:39.559 --> 00:28:41.799
tokenize Them'm not going to magically because I love them,
580
00:28:41.880 --> 00:28:43.400
I'd buy them, but no one else is going to
581
00:28:43.440 --> 00:28:46.359
want them, so we've been very picky about which projects.
582
00:28:46.400 --> 00:28:48.319
But but I think you know this idea of you
583
00:28:48.359 --> 00:28:50.960
come onto coin basis platform, you can do research through
584
00:28:51.039 --> 00:28:55.799
Yahoo Finance, you can buy and sell any asset via
585
00:28:55.960 --> 00:28:58.799
tokenized model, and we're not the equities aren't tokenized yet,
586
00:28:58.839 --> 00:29:01.240
but that's the plan eventually. And then the key is
587
00:29:01.440 --> 00:29:05.759
using those tokens to cross collateralize, both reducing margin and
588
00:29:05.839 --> 00:29:09.720
also as collateral for loans. That's the key, a one
589
00:29:09.799 --> 00:29:14.000
stop shop for your finances. So ultimately, I think the
590
00:29:14.039 --> 00:29:16.200
goal over time for me at least is is is
591
00:29:16.240 --> 00:29:18.200
I don't want people spending all of their time thinking
592
00:29:18.240 --> 00:29:21.000
about their money. It should be easier, it should be simpler.
593
00:29:22.200 --> 00:29:23.839
And so if you can, if you go from having
594
00:29:23.880 --> 00:29:27.200
to worry about ten different systems for your mortgage versus
595
00:29:27.279 --> 00:29:31.640
your equities trading versus your your loans into one system,
596
00:29:32.079 --> 00:29:35.319
I think ironically the goal is you think about us less,
597
00:29:36.640 --> 00:29:38.960
and I think that would be wonderful, so you can
598
00:29:39.079 --> 00:29:42.359
pursue beauty and art and culture and all that stuff. Right,
599
00:29:43.640 --> 00:29:46.000
my daughter has a show about there's our own show
600
00:29:46.039 --> 00:29:49.559
about financial literacy for children. And you know, the goal
601
00:29:49.599 --> 00:29:51.160
is to get kids to think about it more. But
602
00:29:51.160 --> 00:29:52.960
I'm always telling her, but you want, you want to
603
00:29:53.000 --> 00:29:55.319
become second nature to them. It's like exercise or anything else.
604
00:29:55.359 --> 00:29:56.519
We don't eve think of it. Get up in the morning,
605
00:29:56.559 --> 00:29:58.519
do you push ups, you do your workout. You don't
606
00:29:58.559 --> 00:30:01.759
obsess over that function. And so I think getting to
607
00:30:01.920 --> 00:30:06.279
the everything exchange helps people ironically think about their money
608
00:30:06.559 --> 00:30:09.240
less because they know it's working for them in a
609
00:30:09.279 --> 00:30:09.920
meaningful way.
610
00:30:10.400 --> 00:30:13.759
Yeah, well said, And anecdotally, you know that would be
611
00:30:13.839 --> 00:30:17.599
perfect for me, having everything in one platform and makes
612
00:30:17.599 --> 00:30:21.319
my life easy, less, friction less places to log into
613
00:30:21.440 --> 00:30:21.839
and all that.
614
00:30:22.880 --> 00:30:25.119
I want. I want people focused on creating beauty and
615
00:30:25.200 --> 00:30:26.799
joy in the world. I want I want people who
616
00:30:26.839 --> 00:30:30.519
are like singers to focus on singing, and I want
617
00:30:30.559 --> 00:30:33.160
them to have to think less about their money because
618
00:30:33.160 --> 00:30:35.000
they're confident that they're getting the best yield. I mean
619
00:30:35.039 --> 00:30:37.240
when you layer on agentic trading into that, like the
620
00:30:37.279 --> 00:30:40.319
idea of the notion of having an agent say okay,
621
00:30:41.359 --> 00:30:44.119
here's API into the coin based system, find me the
622
00:30:44.119 --> 00:30:46.720
best yield a relative to my risk level, and if
623
00:30:46.759 --> 00:30:49.839
that agent can do it, seamlessly across one system. Using
624
00:30:49.880 --> 00:30:54.480
the efficient mechanism of tokenization as the financial lubrication, we
625
00:30:54.559 --> 00:30:56.720
get to that point quicker and then allow the agent
626
00:30:56.799 --> 00:30:58.240
to take care of that part of our life so
627
00:30:58.279 --> 00:30:59.960
we could focus on the stuff that makes us. You
628
00:31:01.440 --> 00:31:06.359
that that's awesome. I have this pipe dream of someday
629
00:31:06.759 --> 00:31:10.000
everyone in the world who can scrape together five dollars
630
00:31:10.000 --> 00:31:12.960
of savings using tokenization can invest in the s and
631
00:31:13.000 --> 00:31:17.119
P five hundred seamlessly, quickly, easily. Forget about the billions
632
00:31:17.119 --> 00:31:19.359
that would flow into our economy and our capital markets.
633
00:31:19.759 --> 00:31:23.640
What a wonderful marketing program for the US government. Like,
634
00:31:23.880 --> 00:31:25.599
how great would it be if everyone in the world
635
00:31:26.160 --> 00:31:28.240
woke up, looked at their phone and had and their
636
00:31:28.279 --> 00:31:31.200
future was tied to the economic miracle that is US
637
00:31:31.319 --> 00:31:35.680
capital markets? Right, That's what tokenization has the potential to do.
638
00:31:36.920 --> 00:31:39.920
So that's why I get excited about the Everything exchange model.
639
00:31:40.279 --> 00:31:42.160
Yeah, to your point, and I don't think a lot
640
00:31:42.200 --> 00:31:45.279
of people know this, but not everyone around the world
641
00:31:45.279 --> 00:31:48.200
can access the SMP five hundred. No, but if you
642
00:31:48.200 --> 00:31:51.440
put in tokenized format, it makes it easier and you have.
643
00:31:51.400 --> 00:31:53.319
To worry about amlka Wait. See, I understand all that
644
00:31:53.319 --> 00:31:55.319
there's there's there's things we have to figure out. But again,
645
00:31:55.400 --> 00:31:56.559
AI is going to be able to do a better
646
00:31:56.680 --> 00:32:00.200
job of recognizing bad transactions. Our current system of like
647
00:32:00.240 --> 00:32:04.240
you know, of filing stars, you know, manually when we
648
00:32:04.279 --> 00:32:06.799
see something doesn't work very well. So I get it.
649
00:32:06.799 --> 00:32:09.000
There are issues, just like with driverless cars, there are
650
00:32:09.039 --> 00:32:11.000
issues we have to figure out. But like if you've
651
00:32:11.000 --> 00:32:12.440
ever been in a driverless car, you know that is
652
00:32:12.480 --> 00:32:14.480
the future. There's no We'll sort out that other stuff.
653
00:32:14.480 --> 00:32:17.920
So again, just this notion of you know, a person
654
00:32:18.319 --> 00:32:20.519
scrapes together five dollars of savings and says, where do
655
00:32:20.599 --> 00:32:22.720
I put this? I want to invest in the US
656
00:32:22.799 --> 00:32:26.160
economy in a cheap, simple, clean way. I think we
657
00:32:26.200 --> 00:32:28.240
should We should give that away for free. I think
658
00:32:28.240 --> 00:32:31.559
we should be it should be zero commissioned trading as,
659
00:32:31.599 --> 00:32:33.720
just as the US government should subsidize it as as
660
00:32:33.759 --> 00:32:37.839
the best marketing program in the world for believing in
661
00:32:37.880 --> 00:32:39.440
the US government and economy.
662
00:32:41.240 --> 00:32:43.960
It's funny because there's something along those lines being built.
663
00:32:44.119 --> 00:32:45.839
And this is kind of going off left field, but
664
00:32:46.559 --> 00:32:50.359
you know, they're talking about these accounts, investment accounts for kids.
665
00:32:50.400 --> 00:32:52.839
I think the US government's working on. Yeah, see if
666
00:32:52.839 --> 00:32:57.079
you can do that globally where people you know, that
667
00:32:57.119 --> 00:32:57.799
would be a win win.
668
00:32:57.920 --> 00:33:00.279
Yeah. Time, every time a child is born, we're in
669
00:33:00.319 --> 00:33:03.640
a five dollars goes into the S and P five hundred.
670
00:33:03.680 --> 00:33:06.640
I mean the problem is like there's there's the cost.
671
00:33:06.720 --> 00:33:08.640
This costs more than five dollars between all the friction
672
00:33:08.680 --> 00:33:11.119
and the mL. If you can solve that problem, so
673
00:33:11.160 --> 00:33:14.359
it's technology is one piece, then there's a government regulatory piece.
674
00:33:14.720 --> 00:33:16.960
But but again, I just I just struggle. Why wouldn't
675
00:33:16.960 --> 00:33:18.920
want Why wouldn't want to live in a world where
676
00:33:18.960 --> 00:33:22.160
everyone on the planet is vested into the well being
677
00:33:22.240 --> 00:33:24.720
of our country? That just seems like a wonderful place
678
00:33:24.759 --> 00:33:26.960
to live. And I want I want an FTS to
679
00:33:27.000 --> 00:33:29.200
work because I want, you know, a young artist to
680
00:33:29.240 --> 00:33:30.759
be able to finance. I want it to be more.
681
00:33:30.759 --> 00:33:32.759
I can't I can't play a note, I can't draw
682
00:33:32.759 --> 00:33:34.839
a circle on a piece of paper. I want the
683
00:33:34.880 --> 00:33:37.720
world to have more of that. And so if tokenization
684
00:33:37.799 --> 00:33:41.160
and n FTS can finance the creation of beauty, art
685
00:33:41.200 --> 00:33:44.799
and culture in this world, I'll probably get fired for this.
686
00:33:44.880 --> 00:33:47.440
But if if crypto does nothing else but that, it
687
00:33:47.480 --> 00:33:51.680
will have accomplished a wonderful a wonderful thing. Yeah.
688
00:33:51.720 --> 00:33:55.720
Absolutely. You know, on the tokenization piece, are your clients
689
00:33:55.759 --> 00:33:58.559
primarily building on Base or are you able to support
690
00:33:58.559 --> 00:34:00.200
them on other blockchains as well?
691
00:34:00.359 --> 00:34:04.200
So we we predominantly based. We encourage we encourage Base,
692
00:34:04.279 --> 00:34:07.079
but but we yes, we any of the r C
693
00:34:07.200 --> 00:34:11.480
twenty compatible token is I want to say, there's always
694
00:34:11.519 --> 00:34:13.559
development costs of integration, so I don't want to the
695
00:34:13.559 --> 00:34:15.280
engineers are going to kill me, right, There's always some cost.
696
00:34:15.320 --> 00:34:18.559
But yeah, so so any compatible token we can, we
697
00:34:18.599 --> 00:34:20.400
can work with. And if it's other stuff, it's a
698
00:34:20.440 --> 00:34:23.760
lot harder, it's a lot more expensive to integrate. Uh.
699
00:34:23.800 --> 00:34:25.719
But but yes, but we are you know, we do
700
00:34:25.840 --> 00:34:27.719
encourage folks to use to use Base.
701
00:34:27.960 --> 00:34:30.800
Yeah, I've seen some institutions, I think JP Morgan some
702
00:34:30.840 --> 00:34:33.679
others have mentioned they are moving some of their tokenized
703
00:34:33.719 --> 00:34:34.679
assets onto Base.
704
00:34:34.840 --> 00:34:36.840
Yeah, and so forth. Which is it's it's it's great,
705
00:34:36.840 --> 00:34:39.639
it's cheap, it's clean, its fast, it doesn't have bottleneck issues.
706
00:34:40.840 --> 00:34:43.400
So uh, you know, I'm not one chain believer guy,
707
00:34:43.559 --> 00:34:45.840
but but I think that, uh, you know, if we
708
00:34:45.880 --> 00:34:47.679
can make it easy and clean and simple for folks
709
00:34:47.679 --> 00:34:50.440
to on board, which I think Base does, then you're
710
00:34:50.440 --> 00:34:52.480
in a very very good position to be one of
711
00:34:52.519 --> 00:34:55.440
the I think all like liquidity pools, like exchanges, these
712
00:34:55.440 --> 00:34:58.679
are tend to be oligopolies, not monopolies. They probably won't
713
00:34:58.679 --> 00:35:00.440
be one hundred of them, but they're probab won't be
714
00:35:00.519 --> 00:35:03.400
just one. But I think we have we're in the lead,
715
00:35:03.480 --> 00:35:05.719
I think, to be one of the let's say five
716
00:35:05.840 --> 00:35:09.239
to ten that sort of dominate globally over time.
717
00:35:10.000 --> 00:35:13.000
And John coinbase is not only working with institutions. I
718
00:35:13.119 --> 00:35:16.119
read that you're helping the country of Bermuda to go
719
00:35:16.199 --> 00:35:17.719
on change. Yeah, which is wild.
720
00:35:17.800 --> 00:35:20.039
I'm a huge fan of Premier Berg the Bermuna team.
721
00:35:20.159 --> 00:35:24.559
I UH personally am working with his office to help
722
00:35:26.559 --> 00:35:29.000
build new rules so hedge funds kind of a confident
723
00:35:29.000 --> 00:35:32.639
place to trade uh derivatives UH. And then separate from that,
724
00:35:32.679 --> 00:35:35.840
coinbas is doing incredible work with the Bermudan government UH
725
00:35:35.840 --> 00:35:38.239
to make it the you know, the premier you know
726
00:35:38.320 --> 00:35:41.760
offshore from my perspective offshore and not from their perspective
727
00:35:41.920 --> 00:35:45.239
from my offshore jurisdiction, UH, to build and trade and
728
00:35:45.280 --> 00:35:49.679
house these assets and obviously are international exchange is headquartered there. UH,
729
00:35:49.880 --> 00:35:52.320
so massive fan. He's they have a great tech team
730
00:35:52.320 --> 00:35:54.960
as a guy there it goes by g who's just
731
00:35:55.280 --> 00:35:58.199
who's really extraordinary. So Bermuda really has just been before
732
00:35:58.440 --> 00:36:00.320
I'm a big fan of the UAE, but before the UE,
733
00:36:00.400 --> 00:36:02.119
even before the UAE kind of sort of waving in
734
00:36:02.159 --> 00:36:05.079
this business. The Permutan government and I think even as
735
00:36:05.119 --> 00:36:08.079
I think Premier Bert as he leaves his office will
736
00:36:08.119 --> 00:36:11.760
continue that legacy. And they've just been fantastic, fantastic partners.
737
00:36:12.199 --> 00:36:13.320
So what does that encompass.
738
00:36:13.440 --> 00:36:15.519
Is it the use of stable coins for payments for
739
00:36:15.800 --> 00:36:18.880
let's say taxes and things like that, but also blockchain
740
00:36:18.920 --> 00:36:21.119
in their back end of managing their paperwork.
741
00:36:21.199 --> 00:36:23.679
And absolutely yeah, So there they are trying to become
742
00:36:23.719 --> 00:36:27.039
blockchain nation and trying to integrate the technology into all
743
00:36:27.159 --> 00:36:31.039
databases that government uses to make it easier for citizens,
744
00:36:31.800 --> 00:36:34.480
whether it's expats coming in and working there, all that,
745
00:36:34.519 --> 00:36:39.599
all real estate transactions, payments, taxation payments. So it's really
746
00:36:39.679 --> 00:36:42.760
you know, technologists will talk about eating their own dog food.
747
00:36:42.760 --> 00:36:46.159
As a government, they're massively eating their own dog food there.
748
00:36:47.119 --> 00:36:49.760
And you know what, it's a good place to do it, right.
749
00:36:49.760 --> 00:36:53.079
It's a relatively small economy. They've got a very very
750
00:36:53.079 --> 00:36:56.480
progressive innovative leader in premieer Bert. They've got a government
751
00:36:56.519 --> 00:37:00.000
that's backing the initiative. You know, Bermuda's It's funny permuting
752
00:37:00.119 --> 00:37:02.800
came and kind of have this ongoing rival. I worked
753
00:37:02.800 --> 00:37:05.119
for Cayman Company for a long time and like Bermuda
754
00:37:05.199 --> 00:37:07.079
used to be the center of excellence for hedge funds
755
00:37:07.079 --> 00:37:09.400
and then came and kind of stole it, and so Bermuda,
756
00:37:09.440 --> 00:37:10.920
I think this is their way of sort of leap
757
00:37:10.960 --> 00:37:14.320
frogging other other offshore jurisdictions and kind of winning back
758
00:37:14.400 --> 00:37:19.800
that that massively profitable business. And again, I just I've
759
00:37:19.840 --> 00:37:22.559
just been blown away with their technical proficiency and their
760
00:37:22.559 --> 00:37:24.679
their openness and their willingness to stick with it, right
761
00:37:24.679 --> 00:37:26.639
because crypto has gone through these cycles and it had
762
00:37:26.679 --> 00:37:29.880
been really easy to say quietly kind of just shelve
763
00:37:30.079 --> 00:37:33.840
all of that. But I think Bert and his administration
764
00:37:33.960 --> 00:37:37.360
understand that, you know, this is this is the future,
765
00:37:37.480 --> 00:37:40.480
this is you know, and the countries that put work
766
00:37:40.480 --> 00:37:42.360
on it now it's like it's like when coinbase went public,
767
00:37:42.400 --> 00:37:45.000
you know, in decades whatever long ago, right, that was
768
00:37:45.000 --> 00:37:46.880
not a popular position to be, and it wasn't a
769
00:37:46.880 --> 00:37:48.760
good position to be. I was, I was I joined
770
00:37:48.800 --> 00:37:50.920
a little bit later, but it took a lot of
771
00:37:50.960 --> 00:37:53.559
courage to go through that, and I think I think
772
00:37:54.719 --> 00:37:58.400
I give kudos to the Bremnian government for never losing
773
00:37:58.440 --> 00:38:01.440
faith and being just a very, very great ally of
774
00:38:01.440 --> 00:38:01.920
the industry.
775
00:38:02.800 --> 00:38:05.480
It always fascinates me and I love watching this human
776
00:38:05.519 --> 00:38:08.760
behavior and what companies do in game theory. One move,
777
00:38:08.880 --> 00:38:11.320
one player takes a move, and then all of a sudden,
778
00:38:11.639 --> 00:38:14.440
there's a like, wait a minute, we need to catch up,
779
00:38:14.800 --> 00:38:17.519
and it's so fascinating. So I'm curious, you know, when
780
00:38:17.679 --> 00:38:20.119
Bermuda gets that online and they're up and running and
781
00:38:20.119 --> 00:38:22.800
everybody's like, okay, we had to have a plan as well.
782
00:38:23.320 --> 00:38:25.280
So I hope that's the case a little bit. You know,
783
00:38:26.400 --> 00:38:28.119
it's hard for some of these systems to change, right.
784
00:38:28.159 --> 00:38:30.480
My friends and I was in Saudi Arabia recently and
785
00:38:30.480 --> 00:38:32.039
they were making fun of me because I was talking
786
00:38:32.079 --> 00:38:34.639
about going to the DMV to get my license renewed,
787
00:38:34.920 --> 00:38:36.760
and they pulled out their phone. They're like, well, what's
788
00:38:36.760 --> 00:38:38.800
wrong with you Americans? And they hit one button. I
789
00:38:38.800 --> 00:38:41.320
renewed my license like this. And so to some degree,
790
00:38:42.000 --> 00:38:44.360
some of these countries that maybe didn't have the infrastructure
791
00:38:44.440 --> 00:38:47.800
historically already built out, they can just leap frog easier.
792
00:38:47.840 --> 00:38:50.000
So you know, it's not as I think if Bermuda
793
00:38:50.039 --> 00:38:51.920
gets it right, It's not as simple like you know,
794
00:38:52.280 --> 00:38:54.440
for I think America to just kind of upgrade and
795
00:38:54.480 --> 00:38:57.199
get to that model. But it certainly creates a burning
796
00:38:57.239 --> 00:39:00.920
platform for the other offshore territories to move fast, and
797
00:39:00.960 --> 00:39:03.800
then that kind of spreads through. Look at by places
798
00:39:03.800 --> 00:39:07.400
like the UAE and just how hyper efficient that process is.
799
00:39:07.440 --> 00:39:09.559
I mean, expats move there and they're kind of fully
800
00:39:09.599 --> 00:39:13.199
set up with all their government services and days, not
801
00:39:13.239 --> 00:39:16.079
even weeks or months. So so yes, there was a
802
00:39:16.079 --> 00:39:20.840
burning platform created by that successful integration.
803
00:39:21.920 --> 00:39:22.119
You know.
804
00:39:22.159 --> 00:39:24.719
The good news is it's just it is embedding itself
805
00:39:24.760 --> 00:39:27.639
into every aspect of our economy. I think it's happening
806
00:39:27.679 --> 00:39:30.800
more slowly than some Cryptonati people who are who just
807
00:39:30.800 --> 00:39:33.679
really wanted to move to move like that. But but
808
00:39:33.719 --> 00:39:36.199
from my perspective just watching how slow it was just
809
00:39:36.199 --> 00:39:38.920
to go from open outcry to electronic trading, it is
810
00:39:39.000 --> 00:39:44.519
just it's extraordinarily successful. And yeah, and so so I'm
811
00:39:44.599 --> 00:39:46.519
I'm thrilled with the pace. I'd love if we to
812
00:39:46.519 --> 00:39:48.719
move faster, but so far thrilled with the pace.
813
00:39:48.960 --> 00:39:51.199
I often remind people of the S curve adoption to
814
00:39:51.280 --> 00:39:53.079
study that and just look at the Internet and even
815
00:39:53.079 --> 00:39:56.880
mobile phone adoption, Like we went from the big brick
816
00:39:57.039 --> 00:39:59.719
phones to the flip right and the small ones that
817
00:39:59.800 --> 00:40:01.880
to it's smartphones. But I took what twenty years.
818
00:40:02.199 --> 00:40:04.000
I actually looked at at the five to seven year
819
00:40:04.039 --> 00:40:07.920
growth rate of adoption of things like smartphones, the Internet,
820
00:40:08.239 --> 00:40:12.559
and personal computing, and crypto's right there, right there, it's
821
00:40:12.599 --> 00:40:15.920
about seventeen to twenty two percent of people have engaged
822
00:40:15.920 --> 00:40:18.519
with that system. Smartphones a little bit faster, that's that's
823
00:40:18.599 --> 00:40:22.320
understand understandable. Personal carpito is a little slower, and Internet
824
00:40:22.400 --> 00:40:25.760
usage was about the same. So we are I consider
825
00:40:25.840 --> 00:40:28.119
crypto to be in its modern form about seven years,
826
00:40:28.159 --> 00:40:30.559
seven years old more or less. I know it's existed longer,
827
00:40:30.559 --> 00:40:33.400
but in terms of accessibility, right, it's been accessible to
828
00:40:33.559 --> 00:40:37.280
the average consumer for about that time. We are right there,
829
00:40:37.480 --> 00:40:39.800
like we are, we are there, so now it's up
830
00:40:39.800 --> 00:40:41.760
to us. Now it's up to us to improve the UIs,
831
00:40:42.320 --> 00:40:45.400
make a cleaner, more efficient, better for the type of
832
00:40:45.400 --> 00:40:49.199
person who doesn't they have the ability to learn the system.
833
00:40:49.480 --> 00:40:52.360
They just don't have the time or energy. I am
834
00:40:52.679 --> 00:40:56.000
just now, finally, after a decade of fighting with my wife,
835
00:40:56.159 --> 00:40:58.480
I am just now learning Apple. I just got my
836
00:40:58.480 --> 00:41:02.559
first iPhone and I refused and what my daughter turned
837
00:41:02.599 --> 00:41:05.760
twelve and she got her iPhone and that was that
838
00:41:05.840 --> 00:41:08.679
was the burning platform to make the forcing function. And
839
00:41:08.719 --> 00:41:11.079
I hate every second of it. And it's not that
840
00:41:11.119 --> 00:41:13.760
I can I'm fairly technical. I can do it. I
841
00:41:14.320 --> 00:41:15.960
just can't be bothered. Man, I just don't want to
842
00:41:16.039 --> 00:41:19.679
learn a new system. Command P versus control P. Oh
843
00:41:19.719 --> 00:41:23.039
my god, I keep doing the wrong one. And you know,
844
00:41:23.199 --> 00:41:28.239
people have to We can't force people to shift attention
845
00:41:28.320 --> 00:41:31.320
away from their families, their hobbies, their careers to learn
846
00:41:31.360 --> 00:41:33.559
a new system. We have to meet them somewhere. And
847
00:41:33.880 --> 00:41:37.119
we are, we are. The interfaces are getting demonstrably better.
848
00:41:37.880 --> 00:41:41.360
Are you leveraging AI in both the building aspect of
849
00:41:41.360 --> 00:41:44.559
the ideation process but also as a functionality in the
850
00:41:44.639 --> 00:41:45.920
app and the wall and things like that?
851
00:41:46.159 --> 00:41:48.440
Sure? I mean, like Brian is on record saying, if
852
00:41:48.440 --> 00:41:50.480
you're an engineer a coinbase, you don't use AI, you're
853
00:41:50.480 --> 00:41:52.320
in trouble. So yeah, I mean we are. He is
854
00:41:52.440 --> 00:41:55.639
all over it. And my understanding from me, I have
855
00:41:55.639 --> 00:41:57.639
this lot. I'm very luck lucky to have this position
856
00:41:57.679 --> 00:42:00.440
at MIT where I am a fellow at there a lab,
857
00:42:00.480 --> 00:42:02.559
so I get to kind of see all the research
858
00:42:02.599 --> 00:42:05.440
and that is kind of the focal point for where
859
00:42:05.800 --> 00:42:09.000
the real meaningful impact on businesses is happening. So on
860
00:42:09.039 --> 00:42:12.599
the coding side, separately, we are absolutely looking at a
861
00:42:12.599 --> 00:42:16.119
alternatives to speed up onboarding and AML surveillance things like that. That's
862
00:42:15.960 --> 00:42:17.800
going to be a windfall for that, and I think
863
00:42:18.239 --> 00:42:20.800
it's always wonderful when when you can improve efficiency but
864
00:42:20.840 --> 00:42:23.320
also improve the outcome. Right, So it's it's one thing
865
00:42:23.360 --> 00:42:25.719
to improve efficiency and we're going to be massively more efficient,
866
00:42:25.800 --> 00:42:28.079
have to give up a little bit of, like you know, quality.
867
00:42:28.400 --> 00:42:30.400
In this case, it's the opposite. It's it's it's a
868
00:42:30.400 --> 00:42:35.920
better system than manually monitoring and making subjective judgments on
869
00:42:36.079 --> 00:42:39.559
your personal financial activity, like who am I to determine
870
00:42:39.559 --> 00:42:42.239
whether a payment that you're making is good or not right?
871
00:42:42.840 --> 00:42:45.199
And by definition, when you put humans in charge of that,
872
00:42:45.679 --> 00:42:48.840
and you know the the negative outcome if you don't
873
00:42:48.840 --> 00:42:53.039
catch something and it's awful, the consequences are severe, and
874
00:42:53.079 --> 00:42:55.639
so any human being will set two tight risk parameters
875
00:42:55.679 --> 00:43:00.239
because they're scared. I completely understand if here's here's Tony, here,
876
00:43:00.360 --> 00:43:02.360
welcome to your new job. Your job is to monitor
877
00:43:02.400 --> 00:43:07.760
people's financial spending and highlight bad potential bad actors. And
878
00:43:08.159 --> 00:43:09.599
most of the time you're gonna be wrong. Most of time,
879
00:43:09.599 --> 00:43:13.519
we'd be totally innocent, Tony. But if you miss one
880
00:43:14.280 --> 00:43:18.639
and it's terrorism financing, you're responsible for people dying indirectly. Right,
881
00:43:18.960 --> 00:43:21.519
what are you gonna do in that situation. You're gonna
882
00:43:21.519 --> 00:43:23.920
you're gonna be hyper hyper vigilant, and you're gonna air
883
00:43:24.000 --> 00:43:27.440
on the side of cut everything off. Right. Well, that's
884
00:43:27.440 --> 00:43:30.320
not efficient that that doesn't necessarily just the best outcome. Right.
885
00:43:30.639 --> 00:43:35.159
So the combination of human judgment and especially when you
886
00:43:35.159 --> 00:43:37.760
have to look at millions and billions of transactions, right,
887
00:43:38.000 --> 00:43:41.239
So clearly it's bet And Christian Carlo's got a really
888
00:43:41.280 --> 00:43:43.639
great thesis about this of he talks about the toll
889
00:43:43.679 --> 00:43:45.800
booth on a highway. It's like, right now, we go
890
00:43:45.920 --> 00:43:48.599
make you through hell to open up an account, but
891
00:43:48.639 --> 00:43:51.360
then we don't really want you, right, you speed all
892
00:43:51.360 --> 00:43:53.440
you want versus the reality is when you go on
893
00:43:53.440 --> 00:43:54.880
a tote with an highway, you just give that you
894
00:43:54.920 --> 00:43:57.159
pay the toll quickly, and then you have cameras and
895
00:43:57.199 --> 00:43:59.239
you have helicopters and right, and you have people, and
896
00:43:59.280 --> 00:44:02.360
so you pluck out the bad actors. Right. We don't
897
00:44:02.360 --> 00:44:03.800
make you sign a piece of paper at its hold
898
00:44:03.800 --> 00:44:06.599
with pledging that you won't speed. We actually watch what
899
00:44:06.679 --> 00:44:09.239
you're doing, and if you're speeding and driving recklessly, we
900
00:44:09.679 --> 00:44:12.519
stop you and we find you. So AI allows us
901
00:44:12.559 --> 00:44:15.719
to do that with financial services. Right, So let's look
902
00:44:15.760 --> 00:44:19.880
at your actual behavior, and let's let's target the folks
903
00:44:20.039 --> 00:44:25.159
who are bad actors as opposed to penalizing people and
904
00:44:25.239 --> 00:44:27.519
not letting them on board to the highway to begin with.
905
00:44:28.280 --> 00:44:31.360
So I think Coinbase's thesis is let's let's be as safe,
906
00:44:32.320 --> 00:44:35.440
but let's switch it and make it open architecture so
907
00:44:35.559 --> 00:44:37.760
anyone can on board, which they should be able to
908
00:44:37.800 --> 00:44:39.880
do the billions and billions of people who are under banked,
909
00:44:40.320 --> 00:44:42.960
and then let's monitor and make sure that they're conforming
910
00:44:43.039 --> 00:44:46.920
to reguatory rules. That that seems to me be a
911
00:44:46.920 --> 00:44:49.039
lot more fair than the current model.
912
00:44:49.360 --> 00:44:51.800
John, I'm gonna send this clip what you just said
913
00:44:51.800 --> 00:44:53.800
there to the members of Congress that we can they
914
00:44:53.840 --> 00:44:54.679
can figure it out.
915
00:44:54.760 --> 00:44:58.440
No, no, no, no, I'm not policy. We have an amazing
916
00:44:58.400 --> 00:45:00.800
team and far and everyone that they're they're incredible and
917
00:45:00.800 --> 00:45:02.360
they're doing the and I know there's a right way
918
00:45:02.360 --> 00:45:04.760
to have these discussions. I just do every I've been
919
00:45:04.760 --> 00:45:07.320
a few politicians and everyone I've met, like off camera
920
00:45:07.400 --> 00:45:09.800
has been very reasonable, and I just think we'll get
921
00:45:09.800 --> 00:45:11.679
there because that's just the better way to do it.
922
00:45:11.760 --> 00:45:13.559
But I think it's more of the education, Like they
923
00:45:13.719 --> 00:45:17.000
need to understand. Look, I understand this is technology is
924
00:45:17.119 --> 00:45:21.280
rapidly different, and we're starting to see more and more
925
00:45:21.320 --> 00:45:23.920
folks get educated and understand it. But still there's still
926
00:45:23.920 --> 00:45:28.239
that hold up of understanding the centralized software and trying
927
00:45:28.239 --> 00:45:30.800
to put those middlemen in place right instead of.
928
00:45:30.840 --> 00:45:34.119
Looks it's a scary concept, right, Like like transferring massive
929
00:45:34.119 --> 00:45:37.159
amounts of value peer to peer is a is going
930
00:45:37.199 --> 00:45:41.239
to be it's going to be a battle because I
931
00:45:41.239 --> 00:45:44.880
don't think governments are going to give up that. A
932
00:45:44.920 --> 00:45:46.239
cynical way to put it was they won't want to
933
00:45:46.239 --> 00:45:48.559
give up control. I think a more reasonable way to
934
00:45:48.559 --> 00:45:50.360
put it is they don't want to give up visibility
935
00:45:51.840 --> 00:45:54.800
and and so the industry is going to have to compromise.
936
00:45:56.320 --> 00:46:01.480
And but but it's such a better system of value transmittal.
937
00:46:01.519 --> 00:46:05.280
It's just so much better these open chains, public chains
938
00:46:05.559 --> 00:46:08.400
that it will win eventually, but they'll have to be
939
00:46:08.920 --> 00:46:10.239
gradual compromise over time.
940
00:46:11.039 --> 00:46:13.400
John, I want to ask you about the crypto loan
941
00:46:13.920 --> 00:46:17.440
service and products that you coinbase provides because it's been
942
00:46:17.440 --> 00:46:20.559
doing really well with bitcoin, ether and then recently x
943
00:46:20.679 --> 00:46:24.000
RP doge eight to like coin. Is that only for
944
00:46:24.039 --> 00:46:25.840
retail but also institutions as well.
945
00:46:25.880 --> 00:46:30.280
So it's both for retail and institutions. Yeah, and you know,
946
00:46:30.320 --> 00:46:33.440
look part of the whole the whole thesis around organization.
947
00:46:33.559 --> 00:46:36.199
As you have you make these instruments more fungible, You
948
00:46:36.239 --> 00:46:38.880
make them more easily be used for collateral because they
949
00:46:38.880 --> 00:46:41.440
can be understood priced by the lender, They can be
950
00:46:41.480 --> 00:46:43.280
liquidated by the vendor in the case of in the
951
00:46:43.280 --> 00:46:46.440
case of price movement or default, and they can be
952
00:46:46.480 --> 00:46:49.800
moved between systems, and they the correlations of the of
953
00:46:49.840 --> 00:46:52.920
the assets can be better constructed, so you can give margin,
954
00:46:52.960 --> 00:46:55.760
offsets and whatnot based on the collateral the client has
955
00:46:55.840 --> 00:46:58.239
with us. So coinbase is making a big push. I
956
00:46:58.280 --> 00:47:01.880
think that was part of our reset of presentation, and
957
00:47:01.960 --> 00:47:03.719
we've put on money where our mouth is, and we've
958
00:47:04.519 --> 00:47:06.440
I can't give you these act numbers, but we've we've
959
00:47:06.440 --> 00:47:08.440
put on money where our mouth is in terms of
960
00:47:08.480 --> 00:47:11.760
issuing that balance sheet out to the industry. So you
961
00:47:11.760 --> 00:47:18.599
know that that is that function is essential. We I'd argue,
962
00:47:18.599 --> 00:47:20.480
to the point of it would be it would be
963
00:47:21.239 --> 00:47:24.280
disingenuous to say we believe in tokenization and we believe
964
00:47:24.320 --> 00:47:26.719
in the improved fungibility and speed and flexibility of these
965
00:47:26.760 --> 00:47:29.079
assets and then not put our money where our mouth
966
00:47:29.119 --> 00:47:31.199
is and say we're willing to lend against this better
967
00:47:31.280 --> 00:47:34.280
form of asset. And so that's there for retail, and
968
00:47:34.320 --> 00:47:39.199
that's there for institutional and it's people are making themselves.
969
00:47:39.199 --> 00:47:41.519
They're availing themselves of that of that function, which is great.
970
00:47:42.440 --> 00:47:43.800
What's on your road map for this here? I know
971
00:47:43.800 --> 00:47:45.559
you guys are working on a lot and you've done that.
972
00:47:45.559 --> 00:47:47.679
There's so many things that have been built, But.
973
00:47:48.119 --> 00:47:50.239
What can you share? I think derivatives? Right, So, so
974
00:47:50.360 --> 00:47:53.800
us US purpose being unlocked is just absolutely massive. We've
975
00:47:53.800 --> 00:47:56.400
got the integration of prediction markets through calshe, through our coin,
976
00:47:56.440 --> 00:47:59.760
through through our coin based system, increased lending through retail.
977
00:48:00.280 --> 00:48:02.440
Just you know, I think I don't have a timeline,
978
00:48:02.480 --> 00:48:05.480
but eventually getting two tokenized equities, which, by the way,
979
00:48:05.519 --> 00:48:07.920
every major exchange is now is now looking at. So
980
00:48:07.960 --> 00:48:09.199
I think it's a bit of a race to get
981
00:48:09.199 --> 00:48:11.480
all that done and the idea again to collapse all
982
00:48:11.480 --> 00:48:16.199
of this onto a unified tokenized system where you just
983
00:48:16.239 --> 00:48:20.840
bring down these silos, you improve speed, improve flexibility. Twenty
984
00:48:20.840 --> 00:48:22.840
four seven three six at least for now twenty four
985
00:48:22.880 --> 00:48:27.239
seven five trading and twenty twenty four five trading moving
986
00:48:27.239 --> 00:48:31.559
to twenty four seven three sixty five trading, we are
987
00:48:32.199 --> 00:48:35.559
What's great is Coinbase gets to be in the position
988
00:48:36.199 --> 00:48:39.679
of the entity that's pushing the envelope. And I know
989
00:48:40.199 --> 00:48:43.280
because I've worked at these exchanges, they're smart people there.
990
00:48:43.760 --> 00:48:48.199
They will be aggressively competing with us, and I like
991
00:48:48.280 --> 00:48:50.119
being in that position. Right, We get to push the
992
00:48:50.199 --> 00:48:53.079
envelope and have everybody else catch up. So I think
993
00:48:53.079 --> 00:48:55.719
those are those are the big things, increasing lending, increasing
994
00:48:56.000 --> 00:49:02.280
project tokenies, getting our our you know, systems all together
995
00:49:02.800 --> 00:49:05.239
so we can start to buy and sell every asset
996
00:49:05.360 --> 00:49:07.280
through tokenization on a single platform.
997
00:49:07.639 --> 00:49:09.760
Well, John, I'm looking forward to having you back on
998
00:49:09.800 --> 00:49:11.679
maybe and like let's say four to five months or
999
00:49:11.719 --> 00:49:14.199
six months where you can talk about these new things
1000
00:49:14.199 --> 00:49:15.840
as they go live. But thank you so much for
1001
00:49:15.960 --> 00:49:17.880
joining me, Tony, Thank you so much for having me,
1002
00:49:18.480 --> 00:49:21.039
Thank you so much for tuning in. Please hit the
1003
00:49:21.159 --> 00:49:23.519
like button subscribe if you haven't as yet. If you're
1004
00:49:23.519 --> 00:49:26.559
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1005
00:49:26.760 --> 00:49:28.840
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1006
00:49:29.159 --> 00:49:29.960
Thank you so much,