As optimism grows for the Securities and Exchange Commission (SEC) to approve a spot bitcoin ETF (BTC-USD), Coinbase (COIN) CEO Brian Armstrong sits down with Yahoo Finance Executive Editor Brian Sozzi to discuss his 2024 outlook, calling crypto "the future of money."
Despite regulatory headwinds, Armstrong notes crypto's resilience, with prices up 90% year-to-date. However, he says the "unclear rulebook" so far features "a lot of unanswered questions," causing "consumer harm" in the absence of clear-cut regulation. With Congress and courts left to navigate standards, Armstrong views crypto oversight in the US as being "behind" that of other countries.
Nonetheless, Armstrong remains bullish on further adoption driving crypto's staying power. He believes an approved spot bitcoin ETF could spur another influx of investors and institutional capital while also raising awareness — though he cautions that additional policy clarity is still needed on crypto's path towards mainstream viability as an asset class.
And now we're even starting to see this third pillar come online, which is crypto as a new type of application platform. This is what people are calling Web3. It's a new way for people to build applications and a totally decentralized way with decentralized identity, decentralized social networks, decentralized scientific research. And it's the future of the internet. So it's much bigger than people think realize, who are still thinking about it just as one asset class. And that's something that's exciting.
BRIAN ARMSTRONG: Well, you can always look back at these things at 2020 hindsight and try to make sense of it. But I think in this case, a few things. One is we've had a number of ETFs being filed by the biggest asset managers and financial service firms in the world. And by the way, Coinbase has been named as of course, the custodian and almost all of those, which is great.
But I think the market is hoping and anticipating as we are that in Q1, we'll see some of those approvals come through. But more importantly, I think what people are reacting to this year is crypto is here to stay. I mean, think about all the bad headlines, the enforcement actions. There were CEOs going to jail. And yet crypto prices are up 90% year-to-date. And so I think the industry is kind of sending a very clear message here that this technology is here to stay. 38% of young people, if you survey them, they say they think crypto is the best way they have to have some new sort of economic opportunity in life. 90% of Americans are frustrated and upset with the current financial system as it exists.
And so, yes, there's going to be ups and downs. But this movement is here to stay and we need to send that message to Washington, too, by the way, because I think not everyone there is aware of that.
BRIAN SOZZI: The bitcoin-- that ETF, when do you see that being approved? And then once and if something along those lines gets approved, what happens? What happens to the Bitcoin prices? What happens to this industry?
BRIAN SOZZI: Yeah. Well, of course, you know, I don't have any kind of insight information about when exactly it would be approved. But I think myself and others in the industry we're all kind of hoping that might happen early next year. But what happens is big new pools of capital can now flow into these ETFs. There's certain pools of capital where there are restrictions or bylaws don't allow them to say, sign up to a Coinbase account and own digital assets directly, but they can own an ETF.
And so these are where the largest pools of capital in the world, you know, pensions, endowments, hedge funds, things like that, where they may be able to now move into the crypto space. Now just owning a Bitcoin ETF is great. You're going to be able to get exposure to bitcoin. But I also think it's going to bring a lot of people into the crypto space who may want to trade and own other assets. They may want to use crypto. They might want to earn yield on their assets or do institutional financing.
And so I see it as a benefit not only for bitcoin, bringing more pools of capital, but also for Coinbase's existing business, Coinbase Prime for our institutions, Coinbase retail for our retail customers. It's also just going to drive activity and awareness there. So I think it's all around good. And Coinbase has a place to play in the value chain here directly with customers but also as a custodian for the ETFs.
BRIAN SOZZI: You've been very vocal, Brian, on the need for regulation, whatever form that may be. I mean, do you think New laws would have prevented some of the blow-ups we saw in 2022?
BRIAN SOZZI: Yes, I do. I mean, look, some of the rules are already clear that are out there. You have to follow AML, KYC rules, OFAC sanctions. And I think that part of the ecosystem is already pretty clear. But there's a whole bunch of questions, which are not answered currently under the law about-- you know, just a great example is, are some of these assets a security or a commodity, right? Gary Gensler when he was asked by Congress this question for Ethereum, which is one of the major assets, you know, he couldn't answer that question.
And so these are big unanswered questions in the space. Now what has this done. I mean, it's basically driven a lot of the activity offshore to unregulated platforms. Those have had major issues this year as everyone has seen. And that's caused a lot of consumer harm, including for American investors. And so when there's not a clear rulebook, the industry is not going to be built in America, that's bad for the American economy. But it's also bad for American retail investors, who are getting hurt by going offshore to these unregulated products.
So ideally, the first case option would have been the regulators work with industry under the Administrative Procedures Act. They do a rulemaking process, publish clear rules. Everyone has to follow the same rules. That would allow the industry to flourish in the US. Since that didn't happen, instead we've had to kind of rely on the courts to create case law, to create some precedent. And ultimately, I think going to have to rely on Congress to pass new legislation that would clarify, you know, where does the CFTC and the SEC, what are their roles in this? So it's not having this turf war, lack of clarity pushing the industry offshore.
And the last thing I'll just say is I think the US is actually kind of behind on this. I mean, 83% of the G20 countries out there have already started work on crypto regulations and new laws. So the US is behind. There are two bills going through the House right now that have gotten bipartisan support in the House committees. We're hoping those go to a full floor House vote early next year.
BRIAN SOZZI: You really plugged into the DC and the regulatory scene, Brian, as you should. I mean, it makes sense. You have to be up to breast, up-to-date on this stuff. Do you get the sense that regulators are taking what Jamie Dimon said seriously on a potential ban of crypto?
BRIAN SOZZI: No. I don't think that's serious. And it's actually strange because, although Jamie Dimon's comments were a bit perplexing, internally at JPMorgan, they're actually advancing several projects working on blockchain and crypto technology. So there's such a large organization. I think sometimes the left hand doesn't know what the right hand is doing.
But, no, there's no world in the United States where 52 million Americans have used crypto now. This isn't 38% of young people believe this is an important tool for their economic growth in the future. I mean, it would be political suicide to be anti-crypto and try to ban it to that extent, right?
And so I think next year we need to send a very clear message on that. There's actually-- there's an organization, standwithcrypto.org, which has been bringing together the crypto customer base in the US and trying to get to a million of them that will raise their hand next year before the elections and kind of say, all right, we really want to be a crypto advocate. I want to vote for pro-crypto candidates. I want to donate. I want to call my congressman and representative.
So between the $78 million Super PAC that came out yesterday, which is a huge step for the crypto industry, and this standwithcrypto.org grassroots movement, I think we've got a really big chance to send a message in DC.
JOSH LIPTON: That was our conversation with Coinbase CEO Brian Armstrong.
