All-In Summit: In conversation with Brian Armstrong

Ryan Armstrong there he is hey man [Music] let your winner slide [Music] we open source it to the fans and they've just gone crazy [Music] uh Brian Armstrong is the co-founder and CEO of coinbase which is the largest exchange here in the United States and according to Bill Gurley he's hoping for more regulations so he can pull up the ladder behind him so let's start there because we're here for bill gurley's um generally speaking your reaction I thought that was such an amazing talk I was like cheering backstage when I heard that I think we need more of that I haven't seen somebody laid out that clearly in a while he's totally right I mean regulatory

capture is a huge drain on Innovation um you know and the incentives are set up in kind of a bad way right if you take our company for instance um you know if you ask me just personally I think there should be less regulation around this I think it would create more Innovation um you have to society would have to tolerate greater variance right there'd be there'd be more scams there'd be more highs there'd be more lows but the truth of the matter is a lot of times you have regulation and it ends up having the opposite of the intended effect so we don't live in that world where people

are going to say well let's just be hands off and do nothing so when I go to DC the Overton window of discussion is basically we're going to do the regulation for you or you can engage and have have a say and so of course we're going to take the other side and say okay let's try to help craft that regulation but if you ask me just personally as like a citizen there should be less regulation I think what do you think the regulation should be as we kind of get through the boom bust cycle all the scams and fraud that occurred and you know now it seems like the enforcement has gotten particularly intense what would be a balance that would

protect us from going um protect us going forward and eliminate the massive amount of grift the massive amount of crime and stealing and fraud that happened in crypto that we all witnessed in is undisputable but then also would allow us to innovate and not have it all go offshore because you said listen if you don't want us here you opened I think uh on some foreign Islands some entities so you're ready to walk out of America I understand if they don't make great regulations so we're not leaving America that's for sure I mean this is our biggest Market you know I'm an American we started listed everything about Bitcoin and ethereum

what would you do then the thing is that's just I don't think that's in the realm of possibility because that's not what the law says um so we can start with what I think regulation could be or should be and then let's talk about what The Regulators are actually doing because it's a little bit different so you know the the actual regulation that would allow this industry to be built here in a safe way but also protect the Innovation it would do things that are actually kind of similar to the traditional Financial Services industry so you would have some basic rules in place around okay you need to get these audits complete you know lost trading is

illegal let's make an actual process for somebody who wants to register a crypto security and it could trade on a broker dealer or or these kinds of things and so these are actually not rocket science they're just kind of copying a lot of the best practices like AML kyc those kind of things from the traditional Financial Services industry and centralized players in crypto should have to follow those now if you're doing a decentralized thing I don't think that's a financial service business you're never taking possession of customer funds like these decentralized protocols or self your wallets I think that should be treated more like the

software industry and the centralized players should be more regulated now you can also do things like have a Sandbox for Innovation and say okay if you're a startup and you can't afford 20 million dollars a year in legal bills you know you're under a certain amount then you can operate on in this sandbox and there's other things other countries have done what's actually happened is not quite that although there are some good Bills going through Congress unfortunately we have a regulator the chair of the SEC who's kind of weaponized the agency for his own political purposesler right along with Elizabeth Warren who've they just don't want crypto to exist in the

United States isn't their argument well just register like we all do when we sell Securities and what's your best argument for why crypto shouldn't just do what we all do every day which is register Securities I'm all for that yeah I mean there should be a robust healthy Market to trade crypto Securities in the US there is not currently a way to register and so they've been sort of talking out of both sides of their mouth and then saying hey just come in and register and then you'll see these exchanges come in that have never traded a single coin as like you know the ones that are propped up as like the the ones that are

following the rules so they're actually I think what their true intention or belief is behind the scenes and I'm speculating a little bit here is they just don't want it to exist and so they're trying to cast a shadow over the whole industry to make it difficult they're just sending subpoenas and Wells notices exist why I believe it's because um and again this is just me speculating a little bit I think it's because they don't want to lose power they they think the government should run Financial Services they have their hooks into the big Banks they can pressure the big Banks to close accounts on in you know if you have the wrong political opinion or you have you're in the wrong industry

you're in oil and gas or whatever the flavor of the day is they want to be able to pressure companies because they can't get it done through Congress they want to pressure it through the big Banks and crypto in America people should be free to have control of their own money to use new technologies it's fundamentally anti-American what they're doing and I think next year in the elections we need to make sure that all voters and people who are pro-innovation pro technology vote people out of office who are trying to curtail our freedoms around crypto hold on but they're would be that but you're the largest player in um stole a bunch of money from consumers

and perpetrated tens of billions at a minimum of crimes and so they would not say they're doing it to control they would say they're doing it I'm not saying this is my opinion but they said they would be doing it to protect customers and you've had tons of fraud you had issues inside your own company with people pre-trading uh coins before they were listed yeah and so that wasn't us that was an employee who okay got convicted yep former employee the space you would agree is Rife with crime so if they want to you know and that's their counter so respond to their counter what's true about what they say

well they're absolutely correct that this industry has attracted some really bad people right I will admit that if you look at the beginnings of any new technology you know the internet there was lots of scams even in traditional Financial Services we have Bernie Madoff and Exxon periodically right so what you should do in a free Society is if somebody commits fraud absolutely that's what the justice system should do is go after them create a deterrent put them put them in jail you know Sam bankman freed should go to jail it does not mean it does not mean that the industry should be outlawed and the one of the really dangerous things that's happening

is that you know the Constitution says that Congress creates the laws what's happened sort of is that we've created these agencies and because they can just send subpoenas to everybody or publish these guidance letters you know this is kind of the administrative state if you will they are de facto creating laws you know other Industries like in the FDA if the FDA puts out a guidance letter and you don't like it what's what are you going to do it's a de facto law and so there's an interesting constitutional argument around this is like is the administrative State overreaching and I think we've seen that in this example with the SEC

well said but yeah and but isn't one of the fundamental premises of of Bitcoin blockchain technology that we can wrestle away control from the government and so you are de facto putting yourself in this kind of opposing position to the government but you live in a country that the government has the laws and the ability to create new laws and enforce those laws upon you and ultimately crypto is going to be challenged by the fact that it is a challenge to centralize governments yeah I mean that's exactly right anytime you create a startup and you go up against some big incumbent there's going to be a shift of power and you know in

the U.S um the government enjoys this Monopoly on issuing the currency right they have in the US our banks are more privatized than you say China or most other countries but they're quasi-nationalized in in the U.S I mean we talked about the right you know the revolving door and all the kind of oversight and like a bank cannot launch a new product without government approval so you know how how really private Market is it I think some I think Bill Gurley showed that graph of like there haven't been any new Banks really created since Dodd-Frank so it's a quasi-nationalized industry

um of course some people are going to be upset about losing the power of that but um in America this this is a free country and people American citizens should be free to use any technology that they want they should be free to use cryptocurrency and as long as you're not hurting somebody else that should be protected as a freedom here so what's the what's the path Prime because it seems like what you guys are had to do you and others basically use the courts to beat back the administrative State um do you want to talk about that process and you know one example is this Bitcoin Futures thing that just I'm not even sure if it was resolved in

the last few weeks or not there was like a pretty important ruling do you want to just update people about that kind of stuff yeah well the so that is one of the great things about America that makes me bullish on it is that we do have these different branches of government that are such a great check and balance and you're right and the court the judicial branch has been kind of my favorite branch of government in the last few months um and they've really kind of the SEC has gone zero for three in the courts the courts kind of keep upholding rule of law which has been really great so there's been a handful of cases there

was the Ripple one there was the terraform one which agreed on this idea that the underlying crypto assets themselves were not Securities that's a very important fact by the way in our case with the SEC and then um just recently there was this Grace Grace jail trust ETF and um you know the the judge ruled that the SEC was arbitrary and capricious and unlawful and not approving their applications what you mean when you say they're just de facto passing laws where they don't necessarily have the rights to do it they're blocking free enterprise they're blocking the ability for you guys to just do business yeah and unless you're

a big company like coinbase you don't have the legal the budget legal budget to kind of go to court and fight these things out and you know I can tell you as a public company there I talk to a number of other people and they were like you know oh my gosh you can't sue the SEC like or engage in litigation with them um you're a public company you have to settle you have to settle and and like I was sort of the settlement option on the table was to essentially de-list everything other than Bitcoin and so that would have been the Android your business the end of the industry in the US it was it was an easy choice of course if we think the law doesn't say

that we're going to go to court yeah um so I want to ask you about uh use cases Ryan so I think you know we've had Bitcoin now for over a decade I think it's been volatile but I think proven very robust no one's been able to double spend the Bitcoin I think like for store of value I think that use case is pretty much proven then we had the rise of ethereum and this idea of a world computer and there was a lot of talk for a while especially like during the like very frothy sort of bubbly period that there'd be all these use cases you know that were would be built on the world computer people might even be running social networks on them stuff like that

um I think there's sort of been a correction from that I mean I think people now sort of realize there's certain there's a lot of applications where it just makes sense to use a centralized database blockchains wouldn't be efficient enough for that I'm kind of wondering at what point at this point where do we stand in terms of use cases being proven out beyond the original Bitcoin store value like you know what are the other big applications that have either been validated or that we should expect to be built on top of all this this infrastructure yeah so I'll run through a couple of

them that are there already today and then there's a couple on the horizon so obviously trading was this first use case then we saw things like you know stable coins have actually gotten quite a bit of adoption there's about 150 billion or so locked up in stable coins uh useful for payments you know cross-border stuff all kinds of things um you know defy obviously got to I think it's probably about 50 billion total value locked up in that which is not as meaningful I wouldn't say it's been mainstream by any stretch but it's certainly material even nfts got to a pretty I think it came down like 90 plus but it's still it's in the tens of billions okay so those are things I'd

say are you know they they worked and I think they'll grow over time I'll talk about what I think could unlock that next wave of growth too but there's a couple others that are on the horizon so decentralized identity you know ens is probably the most popular one there's only been about three million or so people have used ens so far but you see it show up a lot explain what that is well ens is the ethereum name system so it's a it's a decentralized identity so you can control your own um information online it's not like using Google or Apple or a big so my Twitter X profile my Facebook profile this is who I am I can prove it yeah and this is kind of the vision of web3 is

that if everybody has their decentralized identity then you can now create a follower graph you could make posts associated with that like text video audio to make a decentralized social network you know artists could have a direct relationship with their fans and have provenance and if you're you know seeing CNN and you want to publish an article you it can be cryptographically proven that it came from that account it's not like a fake uh Sax's question why has crypto as an industry and the entrepreneurs there or have done such a terrible job at making it easy for consumers to use the product and I know that's something you've really spent a lot of time on making

this easy or easier and trustworthy but we're in the second decade here and if you ask somebody to you know do what you just said create a decentralized identity they would not even know where to start so maybe we could talk about why that blocker exists yeah so I do think there's a few things that can help unlock this next wave of adoption ux is one of them I mean so it's it starts with what we started with at the beginning pretty much every crypto startup is just getting a subpoena right now and that's not fun especially if you're two kids with a laptop and a dream and like you know your parents are worried you're going to go to jail or something so the the

regulatory apparatus has been quite bad and I think that that'll hopefully shift here in the next few years as we get you know Congress to act or a new SEC chair or cftc or someone but put that aside the other big blocker has been the scalability of the blockchains so to do every transaction on chain is still if you do it on layer one it's like anywhere from five to twenty five dollars it takes anywhere from a few minutes to an hour to confirm so that's like that's not going to work in this to really build decentralized applications where every upvote or like or post could

you know has to happen on chain so we're getting now to layer two solutions which is sort of like the internet going from dial up to broadband and coinbase is trying to help that you know we launched our own Layer Two solution called base recently and it gets the cost and the speed down by about an order of magnitude I the the metric I've been tracking internally and I kind of push our team on is we need every transaction to get under one cent in one second if that that feels like a threshold where we'd see an explosion of new use cases um the last one is the ux as you put it and today it's it's kind of remarkable actually how many people use these

things like Define nfts because the process to actually use it is crazy it's like you you buy the crypto and coinbase sometimes you'll move it to a Chrome extension you have to connect your wallet into this thing and you're like you have to know what private keys are and so if we can just make that where you know it's it's sort of like a WeChat app or something where you know you're instantly connected in your wallet and your identity when you load it up in your browser or equivalent self-custodial wallet and it's just one click and it's done you know that's what we need to get to as an industry scalability ux regulatory Improvement that's a at the core and this is where

you and I we you've been on this week in startups I think three times we've had deep discussions about this the core of financial regulation the United States is based on accredited investors qualified purchasers which are six percent of the country and 94 percent of people in the country are not allowed to participate in the wealth creation that everybody on this stage has benefited from many people in the audience have benefited from which is the formation of companies it sounds crazy that we have not evolved this since the 1930s would this entire problem be solved if we could have an accreditation test a sophistication test where if you passed

it like a driver's license you could get in the car and drive it knowing the responsibility it takes we could simply give people a test and make them sophisticated investors and then if you wanted to buy cryptocurrency or startups or real estate you would be allowed to do it yeah I know you're hot on this idea and I think the key part what you said is it's not based on your net worth it's based on the it's passing the test your knowledge I think that's a good idea I but by the way I think accredited investor laws are sort of an example what I was saying earlier about regulation that had an unintended effect where you know it was trying to protect

people but it actually made it illegal to get rich unless you're already rich it was like this incredible exclusionary thing um so anyway a version of it that was not based on net worth I think could be good I you know I'm not opposed to that I think it's an economics professor making 150 000 a year would not be able to participate in startups or crypto or whatever whereas somebody who inherited a million dollars would it was crazy to think that that law exists I agree one of the things that you need for a vibrant ecosystem um is a lot of practical thinking sometimes and just having been around crypto since

2011 my observation I just want your reaction is too many people are caught up in the philosophy of being unplugged from the system and you know being unavailable to the man and all of this and all it does is actually create shitty products actually because people don't think about wanting to get to 500 million people people like it when it's used by 5 000 people because there's this weird culture of like let me just build for myself and my you know nine other friends who want to live off the grid I really believe that crypto struggles with that like there are a few people like you who are like I'm just a practical ambitious person who wants to take it to every single person and I

just want your reaction do you see that did you see it before is it changing it's an interesting point I mean there are a lot of people that are the early it's just like crossing the chasm or that book right you know the early people who join these things they really don't like the existing system they're a little quirky they have higher risk tolerance and you do need to get into better bigger concentric circles to cross the chasm right and the internet was the same way I mean the early internet was weird right and and people would compare that to New York Times or watching cable TV and they'd be like oh my gosh this is so illegitimate like

these these silly blog posts and stuff and it slowly became you know bigger than the traditional thing you guys are an example of that so I think crypto will get there but yes it has to there has to be a willingness to bring in the next round of people and the next one and maybe they're into art or maybe they're into just earning a living and paying their family overseas they're not even into crypto itself for some libertarian Paradise yeah and I think exactly right I think this is sort of what explains the massive complexity only somebody who wants to minimize the market would create a nine-step process to be able to do something yeah right because the average smart person would

say that should be two steps done a lot of that complexity arise from the sort of the the substrate which is you're building on top of blockchains and people want that decentralized like trustless sort of layer I mean isn't that I mean I think I think all these companies could be doing a much better job with the UI I agree it's a problem but does it arise from the limitations of the tech stack yeah well it's remember it's just like um people used to only write desktop software like Microsoft Office and then Google came along and they're like hey what if we could do everything in a browser and you know Google Docs and sheets was initially like way worse than a desktop

software it was always going to be slower because it was a new you're building on a web stack and all this and you know the tools got better and JavaScript engines got better and and I think that's the you know Broadband happened I think that's the error that crypto is going through and it's our responsibility as the companies in the space to make this happen no one's going to do it for us we you know there's all these competing protocols there's big there's big egos there's personalities we've got to come together make the tools simpler integrate them make them intraoperable um I this is where I feel like I should

have I could have done so much more over the last five years you know and it doesn't happen in Hardware earlier what's that same happened in Hardware early on yeah and one of the big things I always try to do it I know we have these court cases going on and stuff like that but I always try to make sure and I I told the team this too is like we have great lawyers you know like five percent of our resources is going to go deal with that make sure that's not an issue 95 of us are here to build products let's never lose sight of that otherwise we just become some lawsuit what is the product I'm I'm going to ask you a question before actually does your

mom use coinbase yeah but do you think if you weren't the founder and CEO would your mom use it so the demo like not out of love but out of like necessity or need or interest yeah I mean we've had over 100 million people sign up globally I mean a lot of them are um the biggest demographic is excuse younger right it's people in the 25 35 year old bracket initially the users were often doing they wanted to just own a piece of the future and it was like some trading thing now about half our active customers do something other than trading and it runs the gamut you know they're um they're spending crypto with coinbase card they're earning staking

rewards they're starting to engage in some of these these dapps and and doing payments with standpoints but it's it's a wide range where I'm going with this is do you try to allocate resources inside your company to answer that use case which is all right folks we have this core fervent obvious demo and we can always grow with that demo and wait for that demo to be you know 50 years old but that's going to take 30 years instead we have to get that 50 year old today what is it that he or she actually wants or needs that they'll actually adopt and then all of a sudden 100 million users can become 500 can be become 2 billion absolutely I do think that is our responsibility and that's

what I'm pushing people internally on and we need to drive the utility of crypto because if it's just the speculative thing for what you know I didn't get into this because of trading I'm not really like a Trader I got into it because I wanted there to be a more open and fair and free financial system for the world that reduced friction allowed new businesses Capital formation all these things to happen you know take out the middlemen who are just charging all these fees so that's that's what we have are you tempted to then go outside the U.S like because then when you say that but I think most people would say ah go

to India and sit on top of UPI go to Africa so how do you maintain that Focus yeah so we are definitely focused on International expansion I just I just wanted to make the point clear we're not giving up the home base um but yeah there's there's a lot we just launched in Canada um last month um you know we just launched an International Exchange earlier this year uh which I think will help us get to a bunch of a wide range of markets our self-custodial wallet could do better in Emerging Markets um India is its own uh challenge I've we launched and it got shut down three days later and we're gonna try to relaunch it

again so we we need to get it together in Emerging Markets too Ryan while we have a few minutes um can you share with us some of your work outside of coinbase you've been making investments in projects like research Hub you've started new limit maybe share with us if there's a Common Thread to some of the work you're doing outside of coinbase does it connect back or is it entirely distinct yeah well I mean the thing I get excited about is how do we accelerate progress in the world and I think Technology Innovation some of the regulatory challenges all this all the stuff you guys talk about it's part of the reason why I love the Pod is like this is a unique voice in

the world that is pro Builder Pro crypto it's like we can we can just listen to the Pod by the way oh I mean you've been on you're really the seventh bestie in terms of appearance frequency yeah you've been on twice yeah but anyway I think that that voice is so missing in our society and so I just love that you guys have taken the mantle on that but um yeah so anyway my investments have followed along with that research Hub is is trying to make scientific research more like open source software and make that more efficient um you know new limit is doing research into longevity with epigenetic programming so I'm trying to use my own Capital to further this and just

accelerate progress in the world get people to build more stuff and before we wrap I want to I want to mention one thing you know everybody clapped when I mentioned um the voting situation next year with crypto and how important that is and uh we did we created this website stand with crypto.org everybody should go check out we're trying to get people to raise their hand and say that they want to stand up in our democracy and uh make sure make sure that the right rules get put in place for crypto so if people can check out each candidate is the most Pro crypto at this point I mean I know RFK seems to be right yeah I mean it's been interesting um and

you know by the way coinbase is apolitical but I if anything in service of our mission around crypto is fair game but a lot of the the channel Challenger presidential candidates have all been pretty Pro crypto I mean the vague um I think I think Tim Scott is good on this I think DeSantis is good on this I think RFK so I'm hoping this becomes a bigger issue in the presidential race and you know the Biden Administration with with Warren and Gensler has not been good for Americans on this Dimension and it's pushed a lot of tech jobs over so much of a a crater has Sam bankman fraud put on the industry it's definitely not good I mean this it

reminds me a little bit of Mount gox when that happened back in the day and um luckily people turn the page on this thing and they move on after about a year and so I think we're coming up on that did you meet with him and I know he wanted to do business with you at what point did you realize this guy was a complete sociopathic fraud you know I I wish I could have told you that I knew in advance um I had met him and spent time with them here in their period I didn't know right sorry didn't get a sense when you met him no I got the sense that he was very smart and that he was perhaps a bit Reckless um and young and I I wondered I wondered at times like where is he

getting all this liquidity to go write these huge checks and everything I knew what our budget was and I was like I didn't I don't know where he was getting the money but customer accounts apparently but um everyone said the same thing about Bernie Madoff by the way no one knew when they met him no like no one meets the guy and says and what about CZ there's like there every few months there's something on Twitter that blows up about how binance is just there's something amiss yeah you know I don't want to comment on that I I've met CeCe a number of times too and I think he's done a lot of good things for crypto but I don't have any insight

inside information into what's going on inside their house so we'll have to see Brian I just want to say you know it's very brave uh I think the work you're doing and uh it both in terms of when we talked about on the pod people can refer to the episode about you know the cancel culture and uh hysteria uh you know in people's slacking rooms and I you getting focused and being a driven CEO that really wants to do good for people in the world who you and Toby the two most seminal business CEO essays of the last two years yeah I think you turned the tide from and made people really focused on what matters which is building products that help humanity and

for that we thank you thank you foreign [Music] [Applause] [Music] oh my God