Conversation with Paul Grewal: Crypto Regulatory Landscape and What it Means for Base

Hey, thanks Jesse. Super excited that we're here together. I know there's a ton of builders who are tuning in who are really interested in where we're at from a regulatory perspective and how that's shifting, how onchain builders build, and how this onchain economy grows. I want to start with a little bit of the high-level context. From your perspective, I know that Trump issued this executive order announcing a crypto working group with a mandate to create a formal digital asset market structure and to define how securities and commodities and more come together. How big is this announcement and how do these moves kind of impact Coinbase and the ongoing regulatory battles that we've been working through?

The announcement is huge, and the moves are going to have a huge impact on how we think about regulation in the United States going forward. I'm not prone to exaggeration, Jesse, but I would say it's nothing short of the dawn of a new era for crypto and for America's leadership in crypto.

To take a half step back and recall how we got here in the previous administration, there was an unwillingness, even a hostility, to engage with crypto on what sensible rules and sensible regulation could look like. Instead, we had an administration, and in particular an SEC led by Gary Gensler, who basically thought the way to bring crypto to heel was to regulate through arbitrary enforcement actions and as much ambiguity as possible. Over the course of case after case, lawsuit after lawsuit launched against crypto, the courts pushed back. The courts were deeply skeptical of the argument that anything and everything related to crypto falls to the jurisdiction of the SEC and that clear rules were already in place. As we think about the future, during the run-up to last fall's election, we focused as an industry, and certainly here at Coinbase, on what legislation, what laws passed by Congress, could ensure sensible rules are put in place. Coming back to the executive order, it's remarkable that President Trump issued the EO on crypto within 24 or 48 hours of taking the oath of office. It did so much to set a very different tone and direction for the country. The executive order established a working group for the president on digital assets, chaired by President Trump's crypto czar David Sacks, including leaders from across federal agencies, the economy as a whole, and a number of experts from inside crypto. It also set out a goal of a federal regulatory framework for digital asset regulation and a plan and schedule to make that happen. This says that for the very first time in the United States, there will be real collaboration between the crypto community and the federal government to get to the right rules that balance promoting innovation with protecting investors and consumers. This makes a good deal of sense because we've seen what unclear rules and unclear regulation can lead to. It's been a minefield for crypto users and especially for crypto builders who have wondered whether by simply working on their projects they would be subjected to a subpoena, a visit from the SEC, or a lawsuit. We're excited about this. We're going to continue to be a resource for the new administration as they get their legs and move forward. As much leadership as has been shown by the Trump administration so far, to get to sensible legislation we're going to need Republicans and Democrats alike to come together on crypto. Coinbase is eager to play whatever part we can to make that happen.

I say this as a lawyer, Jesse. In many ways, the last four years have been a golden age for those of us who practice law and practice crypto. But as good as that's been for guys like me, I'm not sure it's been very good for America, and certainly for American builders.

Happy to do that, Jesse. I agree there have been a lot of questions and maybe even concerns about the process. We start from a place focused on Coinbase's mission, which is to bring the world onchain and bring at least a billion people all around the world into the crypto economy. We hold that mission close as we think about what assets to list when. We ask what will help us advance that mission. With that in mind, we follow a very defined process and set of standards for listing a particular asset. It starts with the work of something at Coinbase we refer to as the Digital Asset Support Group, which I happen to be a part of. This team is foundational to the process by which we make decisions on which assets get listed and how we apply our standards. Assets are picked based on a vetting and review process that looks at a number of issues across legal, compliance, and technical security standards. We also apply a number of signals for each asset that are qualitative as well as quantitative. Once an asset gets approved, we have to take further steps before the listing becomes effective. We prioritize certain assets based on what makes good sense for our community and customers, and also in light of metrics and engineering capacity that limit our ability to list all assets immediately. Once we list an asset, we always monitor its performance throughout its lifecycle on the exchange. There are occasions where we have to delist an asset if it no longer meets our standards.

There are hard and fast rules we follow regarding our review of assets for legal and compliance purposes. For example, we always look at whether the asset represents an undue securities law risk. Are there explicit pledges, promises, or contracts proposed by the promoters to people who purchased the contract that are relevant to the Howey test the Supreme Court laid out for deciding whether a transaction qualifies as an investment contract, a type of security? We look at whether contractual undertakings would push the representations surrounding a digital asset from a commodity into something plainly in securities land. The securities law issues we focus on in this phase are exactly the issues we've been battling with the SEC in court, trying to get consensus and rules so we can make this process smoother, easier, and more transparent and consistent across assets.

Think about it this way, Jesse. In these court cases the SEC has launched, you've got judges all across the country disagreeing with one another on what the test is, let alone how to apply it to a particular asset. It takes millions of dollars to litigate and months or even years to resolve. What we're doing in the process we're talking about is bringing all that work forward and trying to get to clarity on what the outcome would be in one of those court cases many years in the future. It's no small challenge.

When we talk about compliance reviews, we focus on other issues that matter to Coinbase and our community, like sanctions risk. Is there a concern that listing this asset would violate laws passed by Congress that sanction entities and actors all over the world? We also have concerns about tokens or projects that might be accused of supporting illicit finance or money laundering. We're always worried about protecting consumers and making sure that if we list a token, our customers are safe from rug pulls and other attempts to take their money and run. We look at all of those things. We assess the backgrounds of the project teams themselves to the extent we can identify who they are and what online footprint they may have. We look at onchain holdings, how centralized the asset is, and ensure the controls within our compliance program are capable of covering the new listing. We also have transaction monitoring systems and blockchain analytics. All of these things matter because if we can't keep the community safe once we've listed an asset, we're not going to list it in the first place. Sometimes we fall short, but that's how we set the bar for ourselves.

This is super important, Jesse. Brian Armstrong, our CEO, has been very clear. Our goal, our dream even, is to one day be able to list every asset we are legally eligible to list immediately, comprehensively, and in a way that makes it accessible all over the world. We're not quite there yet, so we have to prioritize because we only have so many engineers and resources to do this safely and effectively. Some factors we consider: community demand for the token, whether there's an active and engaged user base, broad adoption, and the strength of the developer ecosystem. We also look at whether there's a clear use case and real-world utility. Does the token or project solve a problem, power a unique protocol, or offer meaningful innovation? We think about long-term sustainability and tokenomics. Are there clearly defined plans for fair distribution? Are there incentives for long-term holding, or is centralization excessive? Is there a risk of extreme inflation or unsustainable yields? We also can't ignore technical compatibility and complexity. Any new token has to be compatible with Coinbase's infrastructure, and there needs to be support for existing standards.

Nope. Coinbase never charges a fee, and we don't accept payments for listing or applying to list a token. Period.