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Crypto platform Coinbase is one of several companies in that arena that's looking to expand their reach and if
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they can become a one-stop shop for everything in that landscape. To that end, Coinbase has a deal in place to
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purchase Echo, a platform that allows companies to raise capital using the blockchain. The deal through rarish
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reports is around $375 million. to give us a sense about this deal and the state
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of the crypto market. It's a pleasure to be joined here on the line by Wharton
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Professor Itai Goldstein. It great to talk to you again. How are you, sir? >> Uh, I'm I'm doing uh good, thank you.
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It's always great to talk to you. >> Thank you. All right, so this deal
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becomes announced. We kind of see a very interesting crypto marketplace right now. What are your thoughts about
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Coinbase making this type of a move? >> Yes, I think it's very interesting. I
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mean it comes on top of other moves that they made uh in uh recent uh weeks uh basically uh acquiring other firms and
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trying to expand their hold on the crypto market. Uh and again there is a lot of competition a lot of new
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innovation a lot of firms that are are trying to to push ahead and I think this is consistent with uh this overall trend
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that we are seeing. So the component that seemingly is talked about in this deal is that of being able to I guess
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more easily raise capital. Take us into the importance of that component especially for this marketplace right
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now. Right. So you know what Coinbase is mainly doing it's an exchange uh for uh
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cryptocurrencies and uh if you want to buy one uh currency and sell another currency uh you know uh Coinbase is the
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is the place to go and you can do a lot of these trades there. Uh but of course there are other aspects uh to uh crypto
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markets and and one is just uh raising capital for new currencies for new products. We have seen uh a lot of it
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going on up uh to uh 2017 in the form of ICOs initial coin uh offerings. Uh but then uh because it was so easy to do it
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there were uh no uh obstacles really. Uh there were a lot of uh these issuances that uh were not uh were not good. there
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was a lot of fraud uh and and then regulators kind of put uh the brakes on that and uh we didn't see that being
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revived since then. There were other forms of raising capital but not quite the same. Um and now I think uh it's
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it's coming back. Uh so certainly uh with uh the revival of ICOs and the importance of raising capital more
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generally that will be an important part of the crypto universe. And one of the other points talked about a lot is the
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regulatory side of cryptocurrency at the moment and some of the moves made by the
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current administration, the Trump family uh in and around the the landscape of cryptocurrency that maybe there is
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somewhat of an easing on the regulatory side that is allowing uh some of these companies in the crypto space to feel
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like they can make more moves, they can make more acquisitions right now. Yes, this is certainly uh a big part of
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the story. Uh so what we see with the new administration is that they are supporting uh crypto in many different
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ways. Um you know they have their own uh products as you mentioned but also uh there there is new uh regulation new
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legislation that that is basically trying to uh make it easy remove some of the uh regulatory uncertainty and uh
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kind of give a green light to a lot more activity in this arena and and we see that and I think when you're looking at
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the revival of a lot of the crypto activities including the ICOs that can potentially come back as I mentioned uh
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I think a lot of it has to do with the fact that uh right now there is at least in the short term uh less regulatory
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uncertainty uh there aren't as many obstacles and uh firms uh around uh the the globe uh and of course the crypto
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universe are basically trying to take advantage of that and coming up with new deals with new product and so is the
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expectation that in terms of of capital formation uh the blockchain is opening more doors for companies and entities to
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be able to raise this type of capital using these digital assets as we move forward that it just has opened another
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pathway to do that. >> Yes, I think this is the expectation. I would say maybe this is the hope. Uh I'm
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not sure it is the expectation but it is uh certainly the the hope. uh you know when you're thinking about crypto more
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generally uh really this is an attempt uh to revolutionize the financial system and have an alternative system where the
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typical things we did in the traditional financial system can be done more efficiently and what they are saying in
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a more decentralized way and raising capital is an important part of it. So when ICOs uh started the idea was that
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this is going to be a new way to raise capital. As I said as it started to boom we also saw a lot of bad things that are
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coming with it in particular the fraud all all these uh coins that really had uh nothing uh behind them. Um I think in
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the long run we'll have to see where this evolves. Right now they have uh less regulatory uh scrutiny and they can
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do more things. uh but it in the end of the day uh there has to be a very convincing use case that is coming out
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of it. I will say one thing that we see about crypto is a lot of it right now is
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is kind of a lab where they are doing a lot of uh experiments on different uh things different processes. Uh but right
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now a lot of it is um really just in the crypto world. So for example, you buy one crypto and sell another crypto uh
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you know you're using one crypto as a collateral when you're borrowing another
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crypto and so on. I think the real test at the end of the day is how much this is going to migrate into uh the the
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broader financial system and whether these innovations are going to have a big effect there. Well, and that's
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really been a question I think for quite a while, hasn't it? in terms of understanding just how far
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cryptocurrency will go in terms of its development and really its implementation into the larger financial
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community as we move forward. Correct. >> Yes, absolutely. I I think this is
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really the big uh question mark as as I said right now it's a little self-referential, right? You're just
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using one crypto to buy another crypto and and so on. And uh this is what a lot of the trade a lot of the lending and
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borrowing is is all about. uh at the end of the day we'll have to see whether
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this is really kind of a new way uh to to trade to raise capital to lend and and borrow that's the big test and you
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know so far we haven't really uh seen it I think I think it's a great uh
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laboratory we see a lot of great experiments that there is really interesting technology that allows you
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to do some things more efficiently but but it hasn't really changed the way that the main financial markets are
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working >> so I'll I'll finish with this as this has all developed in the last several
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years. Are there areas that you are focused on that you are anxious to see whether or not they develop?
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>> Um, you know, I I would say one of the the main things right now that we see in
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in the frontier of all this is uh stable coins. uh which is kind of interesting because uh crypto really started as a
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way to move away from traditional uh financial markets but now stable coin is sort of promising to keep a peg uh to a
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fiat currency like the like the dollar. uh but right now if I had to point to uh
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like one product that that is really uh moving forward and seems to have a lot of potential it is it is stable coin and
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the question there is how this is going to change uh money the notion of money the use of money uh the product of money
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and there's certainly a lot of discussion around the world in central banks uh you know what does that mean to
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traditional uh money and to to monetary policy so I think that's probably the
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main thing uh to watch right now stable coin uh all the other things are u maybe a
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little uh more experimental and and again when you're thinking about say uh the defi the decentralized uh financial
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system uh so far it is really uh just bounded in in uh the the world of crypto and we haven't really seen it uh pushing
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uh outside of that uh but but that would be interesting to see as well always great to talk with you and get your
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insight thanks very much >> thank you very much thank Thank you. Ei Goldstein Wharton professor of economics
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and professor of finance. That's it.