Coinbase Moving Offshore?! with Tom Duff Gordon VP, International Policy, Coinbase

Ryan and David bring on Coinbase’s VP of International Policy, Tom Duff Gordon VP to discuss Coinbase’s exploration out of the United States. Are they 4D chess? How does the crypto regulation in the U. S. shape up to overseas competition? Why is the U. S. driving crypto innovation abroad? Does the U. S. have any hope? ------ ✨Stake with Swell https://bankless.cc/Swell ------ 🚀 Airdrop Alpha is waiting for you on Bankless.com https://bankless.cc/Alpha ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 🦄UNISWAP | ON-CHAIN MARKETPLACE https://bankless.cc/uniswap 🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask ------ TIMESTAMPS: 0:00 Intro 8:23 Is Coinbase Moving Offshore? 10:00 Coinbase’s International Plan 11:34 Will Coinbase Stay & Fight? 17:38 Is Ether a Security in the EU? 19:30 Ranking Crypto by Geography 24:03 The U. S.’s Crypto Friendliness Ranking 25:30 Coinbase International? 28:28 Coinbase’s Chessboard 32:46 Coinbase’s International Strategy 35:05 What U. S. Retail is Missing Out On 37:05 Coinbase’s Frustration 39:33 Coinbase’s Constraints 45:48 Crypto Game Theory 50:03 Timeline 50:35 Closing & Disclaimers ------ RESOURCES: Tom Duff Gordon https://twitter.com/tomduffgordon Coinbase Moving Offshore? https://www.bankless.com/coinbase-offensive-sec-united-states ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Speaker 00

  Bankless Nation, we have a special bonus episode for you. Is Coinbase moving offshore? That is the question. Has the regulatory climate in the US become so bad that it has caused one of America's largest exchanges to actually relocate to another jurisdiction? That is the question we pose on today's episode. We're going to be talking about Coinbase's Digital Asset Business License from the Bermuda Monetary Authority and what's going on over there. David, who do we have on? We're talking to Tom Gordon, who is a Vice President of International Policy at Coinbase. And this really got on our radar when Tom and his coworker released a blog post that talked about this license that Coinbase has gotten in Bermuda, which has raised the

• 0:45Speaker 00

  question, is Coinbase moving offshore? And are they doing one of those offshore derivatives exchanges, which we all know about? We've seen these before. Is Coinbase doing one? So these are the big questions, and that's the questions that we start with asking Tom about, but then it spirals into a much longer conversation about the global chessboard of international rules and regulations and how that makes some areas easier for Coinbase to operate in and harder for Coinbase to operate in. And how will this landscape change and adapt moving forward? And overall, what is Coinbase's plan for navigating this changing chessboard? So that's the episode.

• 1:20Ryan Sean Adams?

  Before we get into that episode, Bankless Nation, we got a message from our friends and sponsors over at Swell Network. Really cool decentralized staking protocol. David, what does Swell want Bankless listeners to know?

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• 1:58Ryan Sean Adams?

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• 2:04Speaker 00

  Ryan, before we get into this episode, I want to just like bring up this era in In crypto is marked by regulatory. We're talking about Gary Gensler every step of the way. And it's so frustrating.

• 2:15Ryan Sean Adams?

  Regulatory season.

• 2:16Speaker 00

  And it's regulatory season, which is not a fun season to be in. And I remember going through just lessons from cycles of past back in 2018, which was 2020, 2022. So like it was down only, and then it was 2019, which was the year of both building and also frustration. And so, understanding the landscape, and I was newer at the time, but understanding the landscape, because there was also regulatory conversations back then, too. China was banning crypto for the, some of the first times. We were finally seeing crypto have a glimmer of relevancy in Congress, although, albeit briefly. But it was still similar. Now these conversations have moved forward one cycle bigger, crypto's one cycle bigger.

• 2:59Speaker 00

  And so, as we have these much bigger conversations, I just want to remind listeners that this was always inevitable, and this is part of the plan. And just because we are in the pain part of the cycle, that means that the better horizons are on the way. And this is what Coinbase is seeing. This is why they are doing their international strategy. And I think it's going to force the hand of the United States eventually, once we are done gritting our teeth and getting through 2023 regulatory season.

• 3:29Ryan Sean Adams?

  Yeah, I think that's a great point. What I would add to that is the problem, this, we're still in a bear market, obviously. And this is kind of a regulatory bear. The last bear market, David, back to 2018, you know what kind of bear that was? It wasn't a regulatory bear so much. I know there's some fun in China, that was minor comparison. We didn't have product market fit, okay?

• 3:48Speaker 00

  We had nothing.

• 3:48Ryan Sean Adams?

  We would, we would be begging at that time, please talk about us in front of Congress. MICA regulation in Europe, that would be a dream. Like, oh my God, crypto is actually important enough to pass European regulation on? That would be incredible. And so, even though some of you might be thinking about this regulatory season as it's bearish, let me tell you, this is. This is the most bullish.

• 4:13Speaker 00

  This is a win condition.

• 4:14Ryan Sean Adams?

  This is a win condition. This is a problem that a winning industry actually has where, okay, now it's big enough. We have product market fit. It's established enough. We're at $1 trillion and now the worldwide regulators have to figure out how to handle this asset class. So that's the wider context of you could look at the short run, you could be like bearish. Well, you know, Gary Gensler in the U.S. doesn't get it and you're falling behind. No, this is incredibly bullish. We have major international communities and geographies actually talking about crypto, passing regulation about crypto. It's entered the conversation. There's hearings in Congress about this. So that is the wider context, I think, where we bring on this guest today.

• 4:54Speaker 00

  Yeah, and it's also important to know that like, oh, don't be bearish, Bankless Nation. The only reason why we're saying that is because Ryan and I are from the United States. This is only bearish for the United States. Crypto is fine. It's just going to be better elsewhere. Sorry to the United States citizens, but this is just a bullish crypto conversation for the rest of the world. You know, the United States is a very wealthy and very large market and eventually we need the full weight of the United States behind crypto. But Ryan brings up a very important point of this episode is that when other jurisdictions entice crypto, it forces the United States hand. So this is our dose of hopium that you didn't know that you needed. Not that you even did need it, but first, before we talk to Tom, we have to talk to

• 5:38Speaker 00

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• 7:15David Hoffman?

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• 8:00David Hoffman?

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• 8:29Speaker 03

  Great to be with you.

• 8:31Speaker 00

  So the big news here that I think a lot of people are focusing on is that Coinbase has received a digital asset business license from the Bermuda Monetary Authority, which has led to people wonder, is Coinbase moving offshore? Are you guys abandoning the US? Because, understanding the current regulatory environment in the United States, I don't think anyone could really blame you. But that's a question that everyone has. Is Coinbase moving offshore?

• 8:56Speaker 03

  It's a good question. The simple answer is no. We're proudly US. We're going to stay a US company. I think some of you saw the response to the Wells notice that we put out yesterday, where Brian and Paul talked about the reasons for setting up in the US. We think the US has an awesome opportunity here to kind of lead because of the strength in tech and in finance. But clearly, we've been struggling with a lack of regulatory clarity. So we've been amping up our kind of mission to kind of spread economic freedom globally. We want to bring a billion people into the crypto economy. We can't just do that in the US. So international is a big part of what we're trying to do here. And part of that is trying to light up the map. We go broad and we go deep.

• 9:40Speaker 03

  And we've announced a number of really exciting developments, including the Bermuda license over the last few weeks. So we're going to continue to push for regulatory clarity in the US as much as possible. But equally, we're going to be expanding overseas as well.

• 9:56Speaker 00

  So I think I really want to know what that looks like and what that means. And so is Bermuda like a big area of emphasis is like one question? There's also another question of like, UK also seems to be an area of emphasis. But maybe you can just, we can just zoom out and start at the high level, just the broad scope of international. What is, can you just kind of explain the calculus of like, what is Coinbase's plans at a high level to expand internationally? What does that look like? What should people know?

• 10:25Speaker 03

  Happy to do that. So we tend to look at international in two ways. One is the go-deep markets and the other are the go-broad markets. And we set that out in a blog about a year ago. We have more or less 10 international markets where we want to go deep. So if you look at the kind of in Europe, UK is our biggest international market. And then we have five other kind of European markets, you know, the big ones that you would expect. You know, France, Germany, Italy, Spain, Netherlands and Ireland. And then in APAC, we're kind of going deep. We're onshore in places like Australia and Singapore. And in the Americas, you know, we've just announced some kind of exciting new developments in Canada and in Brazil as well. So these are kind of the markets that we're very focused on. We're equally going broad.

• 11:08Speaker 03

  Bermuda is going to be part of that kind of go-broad push where we cover other markets kind of, you know, from a single location. And we're also, you know, we have interesting conversations with regulators in the Middle East. I'm sure we'll get on to that and places like India, Indonesia as well. But, you know, stepping back, 10 kind of major kind of go-deep kind of markets internationally. And then some other markets that we're going to cover more from a kind of go-broad perspective. And that's how we kind of carve the world up at the moment.

• 11:35Ryan Sean Adams?

  I know, Tom, you said that Coinbase is not a moving offshore outside of the bounds of the US, though it does have an international strategy. Let me ask you the question, though. Are there conditions under which that might change? I think some of the quotes that we saw circulating from Brian Armstrong, basically that it's not off the table, right? And it seems like very much now Coinbase has decided to double down, dig in and fight in the US, basically, suing the SEC for more rulemaking, responding to the Wells notice very publicly. Brian keeps tweeting out pictures in Washington DC where Coinbase is presumably speaking to folks that are in Capitol Hill.

• 12:20Ryan Sean Adams?

  So it seems very much like the current posture is to actually fight. But if things got bad in the United States, are there other avenues where Coinbase might consider actually moving offshore or at least relocating its headquarters somewhere other than the United States?

• 12:39Speaker 03

  Well, for the time being, we're staying and fighting. You know, when Brian set up Coinbase 12 years ago, there were a number of other crypto companies setting up offshore immediately, but we deliberately decided to establish Coinbase in the US. We've been fighting for that regulatory clarity, I think, as you know well, over the last few years. Last year, we petitioned the SEC for clear rules. Part of the recent writ and court process we're going through with the SEC is to get them to respond to that petition, not telling them how to respond to it, just asking them to respond and to create those clear rules. We want to see the development of a securities market for crypto in the US. We think it's a huge opportunity. So we're not running away. We want to continue to fight the good fight.

• 13:23Speaker 03

  But equally, we are seeing an extraordinarily exciting amount of regulatory development happening internationally, where clarity is forthcoming, right? And there are normally three steps in generating that clarity. First of all, geographies tend to focus on money laundering, terrorist financing. It's step one, travel rule type stuff. Step two is they then think about stable coins because they could become super systemic very quickly, types of licensing and custody rules. And then the third step is technical rules and implementation. We're seeing a huge number of GOs move forward now into stage two and potentially stage three. Europe, for example, with Mika is arguably at stage three. So we have to be engaged in those processes. We want to spread economic freedom.

• 14:07Speaker 03

  We want to bring a billion people into the crypto economy, and we've got to be part of those conversations. Brian said in London, nothing is off the table. And I think what he means by that is we will continue to stay and fight in the US. But equally, our mission is broader, and we will be very present and we'll make sure that we're involved and engaged in all of those conversations in those other markets as that regulatory clarity will bring more users into the ecosystem.

• 14:33Ryan Sean Adams?

  So for Bankless listeners, doing the math, obviously Coinbase needs to be broader other than the 350 or so million Americans who live in this country that wants to get a billion. Of course, there are a lot more people that live outside of the US if that indeed is the mission. Tom, since you've got some of this exposure, you mentioned a few markets already. You also mentioned Amica. I'm curious if you could kind of like rank order the different geographies in terms of how high quality and friendly their crypto regulation regime is. And I know everyone is somewhat still early to this game, of course, because this is a brand new industry, a brand new technology.

• 15:14Ryan Sean Adams?

  But I'm trying to get a flavor. I mean, like, the Middle East, for instance, or areas in Asia, or the UK, or Europe, for example, and then the United States and Canada. Where does everyone stack up if you were to do sort of a, you know, a top 10 list?

• 15:30Speaker 03

  Yes, it's a great question. Maybe I can start by answering that by saying, the debate in the US, which I see a little bit from the inside and the outside around, you know, what is a security and what's a commodity? Should, you know, should this market kind of belong under the SEC or under the CFTC? This is not a debate that I see kind of pronounced in any shape or fashion happening outside of the US, right?

• 15:52Ryan Sean Adams?

  Really?

• 15:53Speaker 03

  Yeah. So this is sometimes what I think is kind of gets lost and is missing a little bit in the debate in the US. Like genuinely, what happens outside is that we do a token mapping exercise. And this is happening across multiple different kind of geos. So not just kind of Europe, but also parts, you know, the major parts of the Middle East and APAC, where the first thing the regulators and policymakers are doing is trying to figure out, is crypto an existing financial instrument? And should we apply existing financial instrument laws? Or is it something new? Or is it something in between? And I think where the UK is coming out, where Europe is coming out, where Australia and others are coming out, where Japan is, et cetera, is quite simply to say, There are Bitcoin, Ethereum, all these main unbacked tokens.

• 16:38Speaker 03

  These are not existing financial instruments. So therefore, they're going to need a new set of tailored rules. Where some of the regulatory risks are the same and some of the underlying activities are a bit similar. We're going to take existing rulebooks for financial instruments, slightly modify them and apply it to the crypto economy. We'll develop new rules for things like stablecoins. But where we've got tokenized securities, tokenized commodities, tokenized financial instruments. Clearly, those are financial instruments, right? And you just apply the existing financial services law. So it's kind of interesting that the distinction between what's a security and a commodity is mainly only relevant in the US because you have separate regulators with jurisdiction.

• 17:18Speaker 03

  The distinction that we care about outside of the US is, are these things existing financial instruments or not? And that's been a much easier question for everybody to get to grips with. So I feel like answering your question, you just have to start by level setting to say that the conversations and discussions are very different internationally outside of the US.

• 17:38Ryan Sean Adams?

  Let me just dig in that to make sure that that point lands completely. So there's this famous, not famous, but like a viral clip back and forth. Patrick McHenry asking Gary Gensler, is Ether a security? I repeat, is Ether a security or a commodity? Again and again and again, he asked this question. And Gary Gensler would not answer the question, basically. If I went to a governance body in Europe, let's say, and I asked legislators that same question, is Ether a security? What would the answer be? Would the answer be, or is it a commodity? Would the answer be, that's not the right question, that's not the question you should... That's not how we do things. Or would they very clearly be like, oh, this is a new financial instrument. Clearly, it resembles somewhat of a commodity.

• 18:22Ryan Sean Adams?

  What would the return answer be to a question like that?

• 18:26Speaker 03

  Yeah, it's a great question. They would basically say what we look at is slightly different. We want to know, is this an existing financial instrument or is this something new? And so in kind of European terms, you would say, is this a MiFID instrument? And MiFID is the Markets and Financial Instruments Directive, which is the existing kind of corpus of financial regulation. So is it an existing financial instrument that fits in there? Or is it a MICA instrument, right, for which we've got new rules, right, for ARTs and asset reference tokens and stable coins, et cetera? The direction of travel, if you ask this question, Ryan, in Europe, I think is very clear. Ether would not be an existing financial instrument. It would be an other financial token to which the rules under

• 19:08Speaker 03

  MICA apply, not MiFID. Now, that has not been 100% finalized. The ink is not quite yet dry because there are some technical rules that have to be made after the vote in Parliament that we've just recently kind of seen. But that is the direction of travel, which is very clear. And I think that's the same in the UK. And we're going to see that the same across Asia as well.

• 19:29Ryan Sean Adams?

  So Tom, the difference is whether it's MiFID or MICA, and that's almost like traditional finance versus digital finance, let's say. And that would be the kind of the axis of conversation. And clearly, something like Ether is MICA. It's digital finance. It's not traditional finance. And so

• 19:47Speaker 00

  Rather than commodity versus security, it's old versus new.

• 19:50Ryan Sean Adams?

  Yeah, and a new set of rules and kind of thinking like, that seems smart and like desirable and like normal and build up from first principles. I don't know why we're having such trouble in the United States with this, Tom. But anyway, I don't want to delay this. So thank you for digging in. So give us the stack ranking here. Who's on top? Who's got the best regulation? Who's got the kind of the worst?

• 20:18Speaker 03

  Good question. So I won't go through all the countries. Look, I think MICA is good. We support it. There's a lot of Level 2 technical rules that have to come out, but for centralized actors like ourselves, the rules came out in a pretty good place. If we had a small criticism, it would be around the treatment of stablecoins, which we think is a little bit harsh under MICA, but more or less, I think that's a very good framework. I think MICA will also be influential at the global level, because we haven't talked about this either. But whilst we're waiting to see what happens in the US, no one else is standing still, and the global standsetters are also moving. And we're going to get principles from the FSB and Iosco and others later on this year.

• 21:01Speaker 03

  But MICA is good. I think it's going to be influential for those global rules. The UK have just started consulting. That framework seems to look a lot like MICA, but it's more flexible in certain areas. So we're quite pleased with the way that that is trending. I would say that there are some markets that I would group as a little bit more cautious on the retail side. And some of that has changed post-FTX. So places like Hong Kong, which is opening up, which is super interesting, because China obviously banned crypto, but Hong Kong is now opening up. And the recent consultation paper from the SFC was really interesting for everyone to see. But I will say, when you dig into that a bit more, the pivot is fantastic,

• 21:45Speaker 03

  but they are very cautious on the retail side. So only a limited number of tokens can be traded by retail users. And a similar hesitancy, we see somewhat in some other geos in APAC, like Singapore. For example, where a huge amount of excitement overall in the space and the technology, but again, concerns around consumer access on the retail side and consumer detriment. And we see that in a number of markets. So I would say, the themes post-FTX, where some jurisdictions are beginning to tighten up and reduce flexibility, tend to be around conflicts of interest and consumer access. And these are things which crystallized over the last few months. But, look, I think we're positive.

• 22:27Speaker 03

  More or less about what's happening in the Middle East, what's happening in Europe, in the UK. Australia kind of one step behind, but their token mapping exercise was very thoughtful and they're moving ahead nicely. Singapore and Hong Kong have good regimes, looks like they're developing good regimes, but perhaps more cautious on the retail side. And then, you know, Japan, you know, we found that a market which was very exciting, a big early mover. But one in which they had quite a lot of localization requirements, particularly on the custody side. So that was a bit harder. But it, you know, without wanting to give you a kind of a full stack ranking. I think we would see from a comprehensive kind of perspective, MICA really being right up there.

• 23:11Speaker 03

  But kind of fast follows from a number of other G O's and the G twenty rules will probably pick up a lot of what MICA says and allow everybody to generate. A bit of consensus because here's the thing, guys, the at the end of twenty twenty three. It could well be that a lot of international jurisdictions or the ones that kind of really matter. Are in stage two or stage three of this process and there are global principles. And it could just be the US, it just finds itself increasingly kind of, you know, standing alone. In the room without, you know, being on this, on this journey. And that's something that concerns us. And again, we're not pleased about that and we're doing everything we can to try and push the US along. But, you know, particularly from my perspective, focusing on the international markets.

• 23:53Speaker 03

  This is a pivotal key year. There's a heck of a lot happening. Things are moving fast. And we have to be part of those conversations, even as we kind of struggle to to get off the ground in the US.

• 24:03Ryan Sean Adams?

  So the US has its own unique problems, you know, and its own unique systems. Maybe it's just not adopted the metric system yet and that, you know, the rest of the world is ahead. And so you're saying that the US, you'd place them at the bottom. In terms of closer to the bottom, lower quartile anyway, in terms of crypto friendliness.

• 24:21Speaker 03

  I would just say that they are, they're just behind where everybody else is, right? On this, on this process because we want to have clear rules, not regulation by enforcement. And that's unfortunately what we've been seeing. So I think they would certainly be, you know, behind the rest of the pack in the sense that we have not seen, you know, white papers, we have not seen open consultation papers, there hasn't been transparent rulemaking that the industry's been invited to engage in. But we have seen that in the UK, we have seen that in Europe, we've seen that in Japan, we've seen it in Brazil, we've seen it in Singapore, we've seen it in the Middle East, we've seen it in Australia, we've seen it in Canada, the list goes on, right? But we have not seen that on the US side. So I think from that perspective, you know, they are, they are lagging. We hope they can catch up, it can be faster.

• 25:05Speaker 03

  But, you know, I think again about Europe, 27 countries came together to agree hundreds of pages of very complicated text, multiple different languages, but they managed it. And they started three years ago. But in the next year and a half, a lot of these regimes are gonna enter into kind of application. And, you know, I hope that the US will be kind of part of that journey.

• 25:28Speaker 00

  Seeing this like global landscape kind of like play like a chessboard when different parts of this landscape are becoming more difficult to play on and other parts of this landscape are becoming easier to play on is, I think, a useful mental model. There, there's two parts of this conversation that I think are worth separating. And one is like, how easy does parts of this chessboard make it easy to play on? And then what are the values of those locations, right? So the United States makes it very, very difficult to play on that part of the board, but it's a very valuable part of the board because the United States market is huge and wealthy. And, you know, it's always shifting, right? The global relationships to the crypto industry is always shifting. And I think just like in the moments of, at post 2022, it's just a big conversation of like, how is this board shifting?

• 26:13Speaker 00

  The, I think, and that's like one side of the calculus. I think one, the big question that I think users are primarily interested in and like what just the gut reflex is, is like, is there going to be a Coinbase International, right? And we've seen this model before, there's Binance US versus Binance, there's FTX, FTX, FTX US, and then also FTX, right? Is that kind of the mental model that we should be thinking, is there going to be a Coinbase US and Coinbase International? Is that how we should think of this? Or how should like users and consumers of Coinbase think about this?

• 26:49Speaker 03

  So maybe we can come back to kind of the Bermuda announcement. So we are going to have Coinbase International Exchange.

• 26:55Speaker 00

  Okay, that's the new thing.

• 26:57Speaker 03

  So that's the new thing. Really excited about that. So we have a full license kind of now there and you know, we're just starting effectively new product. So perpetual futures, it's going to start with just Bitcoin and Ethereum kind of contracts with kind of wholesale institutional kind of clients. Moderate kind of leverage to kind of kick off, but you know, that will then kind of like scale and proceed and we'll bring kind of, you know, our retail users. Into that and we'll make that available in select markets across the world. So kind of we're excited by that. We've moved, I think. Sensibly into that space. We haven't rushed. We choose high bar regulatory jurisdictions.

• 27:36Speaker 03

  To your point, we kind of almost seek out the parts of the chessboard where it's a little bit harder because we know that if we're able to do that, that's a badge. And people will then trust us and you know, our brand is about being safe and trusted and easy to use and. We don't necessarily want to rush into things and do them wrong. We want to take our time and do them right. So that's why we've taken a bit of time to launch this new product, but we're very excited about it. And I think that will, you know, that will kind of scale. You know, over time. So we will have a US exchange. We will then have a non-US international exchange and then Coinbase will have localized experienced kind of banking rails.

• 28:15Speaker 03

  In the go deep markets that I described kind of, you know, beforehand and we'll continue to announce kind of exciting developments as we. As we kind of continue conversations in other parts of the world, the Middle East and other places.

• 28:28Speaker 00

  Okay, so there's US Coinbase, which we all know, like that's the known quantity. The new thing is. Coinbase International, which is going to accept certain jurisdictions, certain citizens from certain jurisdictions that get approved to access the international exchange. And then there's also kind of like one-off more call it proprietary, I guess, just like more niche coverage of the rest of the world. In more one-off particular fashions. And then you add all of those things together and that's Coinbase, right?

• 28:59Speaker 03

  That's right. That's right. And, you know, and going back to the, and going back to the kind of the chessboard analogy, as, as different geos move through that, through those three phases of kind of figuring out, you know, the AML KYC travel rules first, and then the licensed custody and stable coins, and then the implementation. And by the way, there are other steps around kind of DeFi and other things, but we kind of hope they come later. The, you know, it gets harder and harder, right, to operate in those, in those jurisdictions. But in some ways, you know, that's a good thing, because it means that there's, you know, there are more compliance requirements. Okay, that's difficult, but we're hoping that that is just going to bring more people into the crypto economy, because there'll be more trust in the system, and there'll be incentives for people to be onshore and in those high bar regulatory jurisdictions. And, you know, some of those situations, the

• 29:43Speaker 03

  FTX events and others that we saw, where effectively we had exchanges in offshore, more lightly regulated jurisdictions getting into trouble. I mean, hopefully that will be, that will be lessened as, as we kind of move forward. But that puts a lot of onus and burden on centralized exchanges like ourselves. So we need to be thoughtful and judicious about, you know, where we go deep and, and, you know, making sure that we get that right.

• 30:07David Hoffman?

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• 30:50David Hoffman?

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• 31:35David Hoffman?

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• 31:54Speaker 00

  You know Uniswap. It's the world's largest decentralized exchange with over $1.4 trillion in trading volume. You know this because we talk about it endlessly on Bakers. It's Uniswap, but Uniswap is becoming so much more. Uniswap Labs just released the Uniswap Mobile Wallet for iOS, the newest, easiest way to trade tokens on the go. With the Uniswap Wallet, you can easily create or import a new wallet, buy crypto on any available exchange with your debit card with extremely low fiat on-ramp fees, and you can seamlessly swap on mainnet, Polygon, Arbitrum, and Optimism. On the Uniswap Mobile Wallet, you can store and display your beautiful NFTs, and you can also explore Web3 with the in-app search features, market leaderboards, and price charts, or use Wallet Connect to connect to any Web3 application. So you can now go directly to DeFi with the Uniswap Mobile Wallet.

• 32:39Speaker 00

  Safe, simple custody from the most trusted team in DeFi. Download the Uniswap Wallet today on iOS. There is a link in the show notes. So I think this is actually kind of a dumb question, but I'm going to ask it anyways. The other offshore derivative exchanges that is now Coinbase is like adding into themselves into the category of are Binance, and Bitmex, and FTX, and maybe a few other ones that I can't remember. But just like, it's not necessarily a great list to be on. And so like, what's Coinbase's international's like strategy around that? Like, what are the thoughts about that?

• 33:15Speaker 03

  Sure. Look, we only see kind of high bar jurisdictions. And just to spend just one second on Bermuda. Bermuda has been hugely impressive to us. They have one of the first kind of digital asset legislative frameworks. The DARPA, they call it, the Digital Assets Business Act, which came out in 2018. The current premier, who is extraordinarily articulate and sophisticated, who speaks to consensus and others' premier. But he was the finance minister that I think took that bill through parliament. So he understands this very well. The BMA, which is the Bermuda Monetary Authority, they also look after kind of a global financial centre for reinsurance.

• 33:57Speaker 03

  So they only wanted to attract high quality digital asset exchanges and players. They have an ecosystem of about 17 VASPs, I think, at the moment. So they have experience, they have expertise. I think they are well connected to other regulators globally and international standard setters through the insurance play. So it's a very different place to some of those other more lightly regulated jurisdictions that other exchanges have decided to place themselves in. So we feel very good about Bermuda, about the robustness with which they put us through that licensing process. And we're exciting to be kicking off our new perps offering in that jurisdiction. So the list that you cited is an interesting one.

• 34:42Speaker 03

  We hope that we're not going to add to that list. Certainly Bermuda, I think, has been cautious about finding the right partners. And our reputation for being trusted and easy to use and compliant forward is incredibly important for us, which is why we're going to take this step by step and incrementally build the product to make sure that everybody comes along on this journey with us.

• 35:06Ryan Sean Adams?

  So two versions of Coinbase, one Coinbase International, the other is kind of the Coinbase that maybe many retail investors in the US sort of use. I just want to emphasize or get clarity, there will be a different set of products in Coinbase International. Those derivatives that you mentioned for Bitcoin and ETH a little bit earlier, to be clear, they are not available for US consumers. Like, you can't actually, we don't have the regulatory framework. Like, what's preventing you from getting those products onto Coinbase in the US? Because I'm betting you would have had them already if you had the ability to do that. So what is US retail missing out on?

• 35:52Speaker 03

  So I think about 75% of kind of daily trading volume is in the kind of the perps market rather than the spot market. So it's a product that is extremely sought after by kind of clients. That's where a lot of the volume is. But we want to make sure that we do this in a regulatory compliant way. And so you need to have very clear rules of the road. And in the US right now, that framework doesn't exist, which is why, you know, those products will not be available to kind of US retail users, which is why the exchange is a offshore, highly regulated exchange and will make that, will make those products available to select kind of geos but outside of the US. So again, we are hoping very much that the US will kind of catch up. We've petitioned them to kind of create the clear rules, both for the spot market, but

• 36:37Speaker 03

  also on the, on the derivative side as well. And, you know, we're hopeful that we'll get there, but we're not right now. And so, you know, we have to kind of adapt. But equally, we have to kind of follow market demand and clients want trusted counterparties in this kind of perps market. And so we're kind of stepping into that role. It's a very helpful product for people to get exposure to the asset class. It helps them with their hedging strategies, et cetera. So we want to be in that asset class, but we have to do that in a compliant way. And the best way of doing that is-

• 37:06Ryan Sean Adams?

  I guess part of what I'm just disappointed with, Tom, is because why can't we have that in the US too? How come because I'm an American, I don't have access to those- Same products and what's actually happening is it's not to your point. You said it was 75% of the actual demand was for purpose products. Right. It's not like the US not allowing this. You know, makes the demand dry up suddenly. It just shifts the demand to other jurisdictions and other locations. And what was actually happening with FTX, they were receiving a lot of that demand. A lot of people, by the way, were Americans who are actually using this in an unsafe way.

• 37:47Ryan Sean Adams?

  So I'm just expressing the frustration that what it seems like American regulators and legislators don't understand is if they don't provide clear guidelines, if they don't allow the demand to be expressed in a safe, effective way in the United States. They're not like, they're like the ostrich with their head in the sand. Like they're imagining the demand is suddenly going to evaporate. It's not evaporating, it's just going somewhere else, guys. And not in your economy, it's not adding jobs to the American system. And retail, Americans don't get access to these products when they actually want it. So that's a frustrating place to be, I imagine for Coinbase. It's also frustrating as someone who currently lives in the United States.

• 38:29Speaker 03

  Agreed. We made this point, it's a great point. We made this point to, you know, a lot of different policymakers around the world, which is if you don't create onshore regimes, you're not going to stop people from accessing these products necessarily. They're just going to do it, they're just going to do it in a less protected way. And you're going to force them offshore and you're going to force them to providers, right? That are not doing things in the way that you want them to do. You know, even jurisdictions like India and other places where, you know, there was a lot of hesitancy around the kind of crypto market. I think they, you know, everybody's realized now that we can't ban, we can't ban crypto. We can't put it away. It's a kind of a global market. It's a real asset class. And the best thing to do is actually to create kind of guardrails and rules around which you can actually incentivize people to engage.

• 39:14Speaker 03

  But you can kind of do so in a safe way. Otherwise, to kind of, you know, put as the ostrich putting the head in the sand, you effectively, you ignore the problem. You don't get rid of the problem and effectively you kind of create more risk for your, for your own consumers without, without any guardrails. And that's something, that's a point we've been making consistently across a number of years.

• 39:34Speaker 00

  We've used the metaphor in Bankless a number of times. We live in a financial prison inside of the United States, right? Like, we can't access our airdrops. The IRS looks at our $600 Venmo transactions. We can't do fun, cool financial toys. We can't have those fun toys, which I know are for sometimes professionals, but toys nonetheless. So, yeah, we live in a financial prison. And I'm, one thing I'm actually bullish on, at least to really just drive this point home to a lot of the, the average Americans who only understand a little bit of this, is that there's going to be Coinbase United States and Coinbase International. And I will rename these, just for the air of illustration, of Coinbase Neutered

• 40:17Speaker 00

  and Coinbase Fun Zone, right? One's going to be the constrained version of Coinbase that has to, that lives in the side of the financial prison and only has certain products that can only be accessed by Americans. And it's going to be like sterile, not fun Coinbase. And then there's going to be Coinbase International, which has all of the products that are actually in demand as shown by the market. And that is where Coinbase is going to be able to serve the customers who want those products. And so it, it fits into this model that we've had of the United States of kind of being this empire that's kind of rolling over and like it's closing down the capital controls. It's raising up the walls and is preventing its citizens from being able to, to access

• 41:02Speaker 00

  financial tools that are also freedom tools. And so like, I don't really have a question here, but like the idea is like, I'm kind of interested in that discrepancy between Coinbase International and Coinbase United States being crystal clear to average Coinbase users. And hopefully that can start to, hopefully like turn the tide of winning hearts and minds to actually being able to open up some of these more, more vibrant products on the domestic US, United States landscape.

• 41:34Speaker 03

  Yeah, I guess I would only say Coinbase Fund is still going to be Coinbase Safe. So I just want to make, you know, I just want to make that clear that, you know.

• 41:43Speaker 00

  Not Coinbase Casino, yeah.

• 41:45Speaker 03

  Yeah, it's not, it's definitely not that. It's going to be, you know, it'll be Coinbase Safe and constrained and Coinbase Safe and less constrained in the sense of the kind of the products at the moment. But we hope that that is not where things are going to remain. And again, I mean, hopefully it was useful to provide that international perspective on the US domestic debate, because, you know, I think if we can unlock that and this, you know, security commodity concern, if we can kind of get through that and if we can make a few steps forward on the stablecoin legislation and things, then we're kind of positive, right? And we're optimistic and we're pushing and we continue to hope. But, you know, in the meantime, we were very focused on international because, you know,

• 42:30Speaker 03

  there's a lot of growth there, a lot of excitement and the regulatory clarity is forthcoming. And, you know, as I said, by the end of this year, I think we'll have global rules, we'll have Mika done, we'll have the UK on a clear path forward, we'll have, you know, Australia out there, we've got Japan, we've got Singapore, we've got the Middle East, we've got Canada, we've got Brazil, you know, all of these geos are kind of moving forward. And we really hope that, you know, the US can get on that bandwagon.

• 42:59Speaker 00

  Just to, if Coinbase had its way, it would just be one Coinbase though, right? It wouldn't be Coinbase US, Coinbase International, and then the bespoke, more niche parts of the globe. It would just be Coinbase. And I mean, what we would need for that to, for us to be able to get there is a lot of nation states working together to make the regulations and rules more congruent with each other. But that is, that is what Coinbase would want, right? Just like one Coinbase, correct?

• 43:28Speaker 03

  Yeah, yeah, no, I mean, you know, again, we want to, we want a billion people in the crypto economy, we want to increase economic freedom. So we want kind of, you know, the world to start adopting this technology and we want to see a growing consensus around the rules. That's why we're very. Invested in the standard setting process of the G20 FSB IOSCO kind of level as well. Because that will create hopefully a framework with within which multiple countries, hopefully including the US, can come together and they could adopt rules that are more or less the same. And that just kind of helps the whole market operate more efficiently. In traditional finance, derivative markets are global. And you know, whilst there are specificities in each different jurisdiction, you know, there are more or less kind of the same rules of the road.

• 44:12Speaker 03

  And that is where I think we kind of need to get to. I mean, look, no global player wants to fragment liquidity. None of us want to kind of duplicate our operations and infrastructure in every single different country. There will be an element of kind of necessary local governance and things like this. But ultimately, what you want to do is you want to be providing, you know, the best products and the best execution to your clients. And and that is done by having, you know, a regulatory framework, which is more or less consistent across all of the main kind of jurisdictions, such that you can then operate seamlessly between them and offer good prices, deep liquidity, et cetera. And we can focus on on building great new products and things like that and focusing less on on having to kind of spend, you know,

• 44:56Speaker 03

  so much time with policymakers trying to get us from zero to one.

• 45:01Ryan Sean Adams?

  One thing I'll note is that that idea of one Coinbase, of course, that can come to fruition hopefully easier and maybe easier in the non custodial side of things. So there is right now only one Coinbase wallet, for example, right? And hopefully we can maintain that moving forward because there is only kind of one Ethereum and one global network state sort of starts to. Yeah, one internet starts to dissolve some of the geographic boundaries and start with a blank slate. That's why David and I are also perpetually bullish on on DeFi, of course. And I know, Tom, that Coinbase kind of splits the world of centralized, you know, fiat to crypto sorts of services and also getting into DeFi too. So that's important.

• 45:44Ryan Sean Adams?

  I guess the last comment I would make and we can kind of close on this is here's the reason why I'm bullish and I want you to maybe test my logic is that. Of course, it was going to happen this way. Of course, there were going to be geographic jurisdictions that were going to push the envelope, others that would fall behind and see those that are pushing the envelope and aim to catch up. And it just seems like the US right now is falling behind, but it exists in a game theoretic ecosystem of competitors. And it looks across the ocean and it sees Mika and it sees Europe attracting more of the crypto economy and capital inflows and interest in growth from the space.

• 46:26Ryan Sean Adams?

  And I know one thing about the US, at least this used to be true, I hope it's true in moving forward in the future. The US doesn't like to be second or third or fourth or fifth place, okay? America wants to be number one. And so it has work to do in order to catch up. And so this is why I think partially you're going back to Hong Kong, why maybe Hong Kong is starting to open up. It's China sort of seeing the pressures of, well, if we let this, if we outlaw this crypto thing, it's just going to go over to Europe and other places. I want you, maybe you could kind of reflect on that because to me that is the long-term game theory of this. And it's a hopeful scenario that all of these jurisdictions are actually competing for crypto long run.

• 47:09Ryan Sean Adams?

  Crypto is ultimately, it's a global phenomenon. It's unstoppable. It's not going to be squeezed out of one jurisdiction completely and be ended. It's going to leak into other jurisdictions and there's this competitive pressure that will ensure that all jurisdictions eventually pass the type of crypto regulation that we want. Is that too hopeful or do you think that we're on to something here?

• 47:35Speaker 03

  Well, I'm an optimist too, Ryan, so I'm going to subscribe to that. Look, there's a fear of missing out, right, which we kind of see everywhere, but equally risk and reward kind of has to be kind of balanced. But we should see GOs, whether it's Europe, whether it's going to be parts of APAC, the Middle East, but we'll see kind of jurisdictions move ahead with their own crypto kind of frameworks. And the ones that work and they balance risk and reward, so the ones that Help to kind of actually foster innovation, but at the same time, they make sure that we're protecting market integrity and financial stability and investor protection. But balance that kind of crucial thing about allowing, you know, innovation, but not stifling it, but making sure that we don't see too many crashes, et cetera.

• 48:19Speaker 03

  That is going to prove the concept, right? And it will happen like the, you know, the asset class is not going away. The technology is extremely exciting. We were just talking amongst a number of us here at Coinbase in the kind of leadership team about base. We're seeing a huge number of developers coming into the space. We're seeing, you know, despite what potentially is happening with kind of prices. We're just seeing masses of kind of activity. We're seeing a lot of work from policymakers. Some different approaches being kind of tested here, but one of them kind of will work and will emerge as kind of the right kind of way forward. And I think other countries will gravitate to that because they will see jobs. They'll see innovation. They'll see kind of growth. They'll see productivity move to those areas, right?

• 49:02Speaker 03

  Where that kind of the regulatory framework exists, it provides clarity, it provides security, but it's attracting investment and all of those good things. So I'm hopeful that we will kind of get there. Not everybody's moving at the same speed. But some of the global processes that are taking place this year that will culminate in September. I think will be a kind of a good signal post to to kind of, you know, where we're where we're going. And that consensus will start to emerge. So 2023, I'm optimistic. This is going to be an inflection point for what more or less the kind of version 1.0 global guardrails should look like for kind of crypto policy. Where innovation can excitingly take place, but with the the downside risks kind of sensibly kind of mitigated to the extent that that they can be.

• 49:48Speaker 03

  And once that concept has been proven, then let's hope that the the markets that are moving slower, the US and others can get on board, catch up. And we can kind of continue to to innovate and and take it from there.

• 50:02Speaker 00

  Tom, with the Coinbase International, was there like a timeline on that?

• 50:08Speaker 03

  On the international exchange, we are, so we've, we've launched and that is, you know, so that's up and running and, you know, we will then, we'll be kind of building and scaling that with different clients and different products, you know, through the, through this year, kind of moving forward, but no precise kind of timelines or anything to flag for you guys just at this moment. So, but a lot, a lot happening and more announcements to follow. So watch this space.

• 50:35Ryan Sean Adams?

  Tom, thank you so much for joining us. This has been very helpful and we're looking forward to big things from Coinbase International. Glad you're not abandoning the US just yet, though, and are keeping, fighting the fight because we definitely need the help. We appreciate what you're doing.

• 50:51Speaker 03

  Pleasure.

• 50:52Ryan Sean Adams?

  Recent disclaimers, of course, guys, got to let you know, none of this has been financial advice. Crypto is risky, so is DeFi. You could definitely lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.