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