Coinbase CEO Brian Armstrong (COIN) is shedding a little light on what his company is working on next. Armstrong tells Yahoo Finance Executive Editor Brian Sozzi about the company's recently launched Base layer 2 blockchain network and things like flatcoin, which he says Coinbase isn't working on yet, but is interested in.
One of the issues facing the crypto industry is the lack of regulatory clarity. Armstrong says there are a few ways the industry to get some clarity, such as through the courts, congress, and the CFTC. He also suggests there could be a new SEC chair in 2024. Armstrong told Sozzi earlier in the interview that it "would certainly help" the industry if Gary Gensler were no longer SEC Chair, which would likely happen if a Republican were to defeat President Joe Biden in 2024. When it comes to the 2024 race, Armstrong thinks crypto could be a "hot topic" in the race for the White House, with Americans holding candidates' feet to the fire to hear their positions on the issue.
Click here for more of Yahoo Finance's coverage from the Goldman Sachs Communacopia + Technology Conference.
RACHELLE AKUFFO: Well, regulation around crypto has been making headlines lately with the SEC filing lawsuits against the several big names in the space from Ripple Labs, to FTX. And it's having significant impacts on crypto investments.
It might be why some crypto exchanges start searching for more regulatory clarity around the globe, at least that's what Coinbase Chairman and CEO, Brian Armstrong, told our executive editor Brian Sozzi at the Goldman Sachs community and tech conference. Take a listen.
BRIAN AMSTRONG: Well, I think stablecoins are a really important stepping stone. So in crypto writ large, it's the most important technology out there to update the financial system. We've seen that that's 67% of Americans think that the financial system is in need of a major update.
Crypto is the best opportunity to do that. So yes, we're going to have decentralized cryptocurrencies like Bitcoin. We're going to have things like Ethereum that are building new application platforms on top that are totally decentralized. But if we need to get people-- sometimes you have to meet people where they are. And so if they want to use US dollars for now, that's great.
We have now US dollars running on crypto rails that are more efficient, more global. They allow you to do cross-border transactions or send small amounts to people no matter what country they're in. So these things are all going to help the crypto ecosystem grow and get to that decentralized vision.
BRIAN SOZZI: I think you put out a tweet recently. I really liked it. You said bear markets are the best time for building. So what else are you building at Coinbase? What should an investor expect to come up on the platform a year from now?
BRIAN AMSTRONG: Yeah, well. I don't want to pre-announce anything here. But a couple of big ones we've talked about recently. So we launched base, which is our layer two solution that's helping blockchains scale. We need to get the costs down, the confirmation times down to be really competitive and payments flow to the path of least resistance.
The less friction you can make, the more payments there will be. We've also been investing a lot in our derivatives platform. So you know, I mentioned that internationally and then in the US as well. So we'll keep pushing on a few of those.
I also put out a blog post talking about some of the future ideas on the horizon. And a number of our venture investments might go into things like that. But I talked about flat coins, which is kind of the next iteration of stablecoins that's more maybe linked to CPI or purchasing power. I talked about--
BRIAN SOZZI: Flat coin?
BRIAN AMSTRONG: Yeah. Flat coin is--
BRIAN SOZZI: Where is that? Is that just only now developing? I've never heard of flat coin.
BRIAN AMSTRONG: Yeah it's a new thing on the horizon. There's a couple teams working on it. We're not building something in that realm yet, but we're interested in it. And how could decentralized reputation protocols work? Or in online games, people now want to own their in-game items and like how could network states be governed? And so there's lots of cool ideas. I put out a blog post and tweet about that too.
BRIAN SOZZI: Where is Coinbase in terms of trading volumes? Are you seeing that improve at all?
BRIAN AMSTRONG: Well, it's come down a bit. I would say since obviously, the 2021 highs and things like that. But we're not like unused to these cycles. So we see when prices go up, obviously, more retail interest. What's interesting in this down market is that we've actually seen there's been a kind of a flight to quality.
So we are seeing more institutions come in and sign up, go through our onboarding process. And they're not necessarily moving huge amounts of capital in yet, but they are onboarding and waiting and seeing say, OK, what's that trigger for them? Maybe it's that blockchain has become more scalable, maybe some regulatory clarity, maybe a court case happens. And I think we'll start to see different amounts of capital actually coming in at that point.
BRIAN SOZZI: When does regulation come? What does that even look like?
BRIAN AMSTRONG: Well, it's already happening in the world at large. You know, I mentioned Europe, the UK, Australia, Canada, Brazil. These regions-- UAE, have all been actually very forward-thinking. 83% of the G20 countries now have this crypto legislation either already in place or in progress.
It's really-- Sorry, I don't know if you're asking just about the US. But in the US, I think it'll happen--
BRIAN SOZZI: In the US.
BRIAN AMSTRONG: Yeah. It'll happen in one of a few ways. So one way is the courts. The courts can be the one to provide the clarity regardless of the outcome of the case. Creating case law is a way to get there if the regulators aren't going to provide it.
Another way to do it is through Congress. Congress is very engaged in this now. Passing-- it looking at this Fit 21 bill which just got bipartisan approval in the House. The stablecoin market structure bill also got bipartisan approval in the House. So we'll see how that makes its way through the Senate and the executive branch.
The CFTC could step up and assert more authority. I also think-- there's a possibility we'll just get a different SEC chair in 2024 or beyond. So we'll try all these things in parallel. Somehow one of them will come through.
BRIAN SOZZI: Before I let you go, I don't think investors realize how much time you do spend talking to regulators and other politicians. What is that like? Did you expect that when you founded Coinbase?
BRIAN AMSTRONG: Well, the role of a CEO is always evolving to what's the most important thing. So I started the company really as an engineer just typing on my laptop, and built the initial version of the app. And then as something grows, it starts to have a really important role to play in society.
And so yeah, you start to engage with governments, world leaders, banks. And we're at that phase now where we need to make sure that we are an educational resource, that we actually bring the crypto community together to make sure our voice is heard.
And there's these great websites like standwithcrypto.org which are helping the crypto industry come together and say, hey, look, 56 roughly million Americans have used crypto now. It's 5x as many as have electric vehicles just, as an example. And we're voters.
We want to donate to candidates that are supporting crypto. We want to show up at town halls. I don't think everybody in DC actually fully realizes how powerful the crypto voting block is. And I think 2024 is an election where the voters of America are really going to hold candidates feet to the fire and say, what is your position on crypto?
Are you going to be a continuation of these existing policies that have been unnecessarily hostile, or are you going to allow this technology to flourish and ensure America's leadership as a technology hub?
BRIAN SOZZI: Do you see certain folks out there in the political sphere as friendly? Any candidates that you say, wow, they get elected, my job might become a hell of a lot easier?
BRIAN AMSTRONG: Yeah. So I mean, I don't want to come out and personally endorse anybody, but yes. If you look at the presidential candidates that are in the running today, they're talking about crypto. And as far as I can tell, all of their comments have been positive.
They see it as an opportunity to challenge-- the policies of the current administration has had in downstream effects with the regulators. That they view as not in line with what the American people want. And so, I think this could become a hot topic in the presidential race in 2024.
