Inside Influence with Faryar Shirzad of Coinbase

Thanks, David. Thanks for having me on.

Well, maybe I'm in your room and we're just fooling the listeners.

Yeah, no, thank you for the question. My father was an Iranian diplomat under the Shah, you know, before the Iranian revolution. And so I kind of grew up at a home where we talked a lot about politics and global affairs and stuff like that. And so the revolution happened. My family started a sandwich shop in Bethesda and life took a much more modest turn. But I always had this kind of interest in somehow figuring out if I could, in my new home in the United States as a naturalized American, if I could find a way to marry my interest in policy, politics, global stuff and business. So as you know David, I became a trade lawyer for a number of years. Then I was on the Senate Finance Committee as trade counsel. I was in the Bush administration in a couple roles. And then I went to Goldman Sachs right before the financial crisis. Spent 15 years there. I co-headed government affairs and saw the company through the financial crisis, Dodd-Frank and all the global regulatory stuff. And then about four and a half years ago, I got approached by Coinbase. Which, you know, I confess I actually didn't know what Coinbase was. But I very quickly kind of understood what the whole thesis of crypto was and I kind of drank the Kool-Aid super fast. And I joked that I came to Coinbase because it was like an opportunity to go back to 1997 and be the guy who gets to explain the internet. And I feel like that way about crypto.

You know, I don't follow it as closely as I used to, but that's the impression I have very much, that it's a kind of an anomaly in a period where everything's hyper-politicized as one of the few committees that's not. I remember I worked for Bill Roth, you know, Roth IRA fame, who was the chairman of the committee at the time, the Republican chairman. The ranking member was Daniel Patrick Moynihan, you know, legend. So it was like the last two of the greatest generation kind of heading that committee. And I worked on international trade issues. And I remember the Moynihan staff and our staff would literally have to sit down and kind of invent things to disagree on so that we wouldn't kind of totally embarrass ourselves with our respective sides of the aisle so we could have something we would fight over. But no, we got along really really well and I think the committee has kept a lot of that. And I've seen it on the tax side actually on crypto. We're trying to get a few tax clarifications and thankfully it hasn't been partisan at all. Same way in the Ways and Means Committee. So I don't know if there's something about the power of the committee that kind of sobers people up and they stop fighting over scraps and focus on the big picture.

Well, back in the day, I remember I worked for a guy named John Duncan who was Bill Roth's chief of staff in the personal office. Amazing, amazing guy. I think you guys know him. One of the great senior staffers on the Hill, one of the great legislative minds. And I remember he explained to me, he said, you know, the Democrats are the opposition, but the Ways and Means Committee is the enemy.

No, I love this question. It's my favorite question when I do things like this because so many people, there's so many manifestations of crypto and the reason there are so many manifestations is that crypto is just software. But it's useful to kind of go back a little bit. You know, the breakthrough of the internet, the reason the internet was such a gigantic breakthrough is that it was a technology breakthrough that allowed you to send data on a peer-to-peer basis without going through an intermediary. So, you know, we all first experienced the internet through email. And I remember when I first sent my first email, I just say it took a long time to get my mind around it. But I quickly understood that the fact that I could send a letter, a correspondence, digitally was much faster, more efficient than paper correspondence. And so the internet, the ability of individuals to transfer data back and forth without going through an intermediary resulted in all sorts of things, emails, texts, but also video, and eventually, you know, commerce, and then eventually artificial intelligence. So all of that's enabled by the fact that you're able to move data seamlessly through these software protocols. What the internet wasn't able to do is to figure out how to send unique digital tokens or things of value digitally. And this was actually something the early developers of the internet expected would happen at some point. In fact, they created an error code called X42 which relates to efforts to transfer value. So on the internet, if I want to send Brody, you or David a dollar, I can send a picture of a check. I could send you a picture of a dollar, but there's no way for me to control your ability to infinitely copy it or anybody to know that I actually had the dollar, that you received the dollar. And all that got solved with the Satoshi white paper when Bitcoin got invented. And what they were able to do is to create a mechanism for people to send unique digital tokens on a peer-to-peer basis without an intermediary. So the internet solved the data dilemma. How do you transfer data peer-to-peer? And crypto has solved the value dilemma. How do you send value peer-to-peer? And when it broke through, most of the people who really became early, early understood the value of the Bitcoin breakthrough immediately thought it would solve payments, that this is the breakthrough in payments because right now you can't do payments digitally. You have to go through a bank and crypto solves that. But what ended up happening is you had eight, nine years of people just speculating on crypto tokens. People would build networks, they'd have these tokens or the governance instruments of the network and then people started buying and selling them. And so this whole ethos of speculative investment built around the governance tokens around these different blockchain networks. But now you're seeing the use cases finally go back to where people thought it would start, which is on payments. Congress passed the Genius Act and now all the banks, all the payment processors, the credit card companies, corporates are all integrating blockchain-based, crypto-based payments because rather than doing a wire transfer that takes four or five days, costs X amount of money, you can now use blockchain-based payments to send a dollar in token form in under a second and under a fraction of a penny. And so that is what crypto is. It's a technology that allows you to transfer tokenized versions of things of value on a peer-to-peer basis. And Coinbase, just to go back to your question, is the company that essentially builds that infrastructure. And so you'll see a lot of people who want to get into crypto, corporates and whatever, whether as an investment or as a financial infrastructure will partner with Coinbase. And we're typically the partner of choice for companies.

Well, initially I think that most people had the view of just like stay away from Washington like a lot of tech people had sort of concluded was the right answer. Coinbase and Brian Armstrong, the founder, to his credit, understood that early on that you needed to build a regulated platform even if the regulations were unclear. You sort of cobble it together. I think about four and a half years ago when I was hired, they realized they needed to ramp up their Washington operations, that really you couldn't scale this business without having clear rules and that required legislation in the US and also globally and that required hiring people who have some experience doing this. And so that's how they found me and I came in and brought my experience to the table. And a lot of other companies similar things over the course of the years that followed. So you're right, Brody, the industry's gone through huge maturation in terms of its policy expertise and experience.

Well, we work through trade associations, but Coinbase did a lot of it on our own. So, we helped start one trade association, the Crypto Council for Innovation, and we work through something called the Blockchain Association, but we belong to the Consumer Technology Association and the Chamber of Commerce and any number of organizations that do good work in DC. But we really built a lot of this capacity on our own. And we did this kind of as a product of the attack we were under by the Biden administration. I mean the Biden administration for reasons that are still a little mysterious decided to turn the screws on the crypto industry and there became this concerted effort to drive the industry off, either out of business or offshore. And so when I was hired, it was very much to do kind of a very earnest but very ambitious policy operation where we would kind of explain crypto and talk about what good policy would look like. And then after a while we began to understand that this was not a policy fight. This was a political fight. And so we ended up building a very very significant political operation to survive. You know, we joke that we built the largest kind of political operation any industry's ever built to take the politics out of crypto. And we had a lot of success in the 24, in the 24 elections and we're still at it. And it's nothing that I expected that we would do when I got here, even though Brian, the CEO, had some inkling that we would need to do some version of this. But it's a really, I'm happy to tell you more about it. It's a really interesting story about both on the grassroots side and then building kind of the traditional super PAC and things like that on top of a very solid foundation of hard-nosed policy analysis, studies, all those sorts of things that have to be the foundation of a good advocacy effort.

Because it was an existential issue for us. We realized in late, mid 2023 we realized that the Biden administration was trying to destroy the industry. You know, it's hard to really measure it, but at the beginning of the Biden administration, there was something like approaching 30% of all open source code software developer activity was occurring in the United States and they had been able to drive it down to the low 20s and they were going to keep going. And you had Gary Gensler at the SEC on the one side and then the bank regulators on the other doing some of the most disgraceful things I've ever seen in this town. I mean, you know, there's a lot of damage an SEC chairman, if he's determined, can do to a public company, and he was doing every bit of it. They would sue us. I remember they sued us on the morning we were testifying in front of the House Financial Services Committee. In fact, they sort of timed lawsuits against crypto companies, the SEC did, around public events. So if there was a hearing on a committee, they would sue a company beforehand so they could own the news cycle. But then what the bank regulators did is they put extraordinary pressure on banks to debank the industry. And by debank the industry, I mean simple treasury services, corporate banking services, which are the lifeblood of any company to be able to survive. Even members of my own team, I have folks on my team who couldn't get home equity loans, who had their bank accounts closed simply because they had a connection to the crypto sector. This is not for like speculative crypto activity. This is just to have your family bank account or get a home equity loan or get a mortgage or what have you. And so we decided it was sort of game on. And so we sort of sat around a virtual table and just decided we needed to come up with a super PAC. And it was a lot harder than it sounds because I mean you guys know this town, typically industry groups if they're going to play they either play in open races or in places where or in primaries where it doesn't really matter in terms of the outcome. And it's hard to find professionals to run a super PAC who are willing to go nonpartisan. And then once you do find the people, and we were lucky we found two of the best in the business who were not very well-known but have proven themselves to be extraordinary, you then have to, they have to make decisions about are you willing to take on races that are potentially going to be determinative of the Senate majority, like the Ohio Sherrod Brown race being an example of that. All of that is uncharted territory, but we sort of felt like we had to go all-in because it was an existential moment for us and we either did that or we were going to lose. And so that's how kind of we made the call. Now, we lucked out. A lot of our bets went the right way. But people kind of look back and thought, 'Oh, yeah, the crypto people wrote a big check and then, you know, bang bang, the outcome kind of is foreordained and there you go.' But it's a way more complicated story and we were lucky that it kind of came together.

I think more and more people are doing it. You hear headlines. I don't track it closely, but I see the headlines. I guess I have two reactions. One is it's very very hard to find people as good as the folks who run Fairshake, which is the super PAC we use. But I also think the thing that other industries don't have that crypto has is a massive massive grassroots army of very passionate users who are beyond passionate about being vocal about policy makers needing to do the right thing by the sector. And so when people look at crypto, they politically they come to a couple of conclusions. I've read 50 articles on this. 'Oh, the crypto people funded a super PAC. Elections went their way. What a, you know, it's all money this that and the other.' And I think that kind of misunderstands a big part of why crypto was successful. The big part we were successful is there are about 50 million Americans who've used crypto. And in 2023, we actually hired Joe Biden's pollster, John Anzalone, who's outstanding, and then Tony Fabrizio, Trump's pollster. We told them, we think there's a voter base out there in the public that will vote on crypto. Can you guys see if this is right? And sure enough, they found that there was a statistically significant percentage of the voter base that would vote on the crypto issue. And we took that to the Biden and the Trump campaigns and that was a reason, you know, I wasn't in the Trump campaign obviously, but I believe it was a very important reason why the president evolved on the crypto issue. Because he had a strategy that I think they were developing that we didn't know anything about. The sort of young male low propensity voter sort of strategy, the no tax on tip wages and some of the other things that they've done, they were doing and we fit very neatly into that without realizing that that was happening simultaneously. And the campaign turned on that. The president started campaigning very hard for it. And so right now, what we helped do when we started the super PAC is we also started a grassroots organization, Stand With Crypto, and by election day I think we had 1.3 million advocates who had signed up. Now it's up to 2.8 million people who've signed up. And for just to give you an example of how motivated these folks are, Stand With Crypto did an activation in the context of this fight we have with the banks on the rewards issue three weeks ago. Over the course of I think 72 hours, there was something like 500,000 emails and phone calls that went to Capitol Hill. And that's the part that nobody reports on. And they're now 50 chapters, I think they're going up to about 100 chapters. It's extraordinary. And we've started this internationally now too. So it's a real movement and the super PAC has an element of the thing but I think the other industries who do this, to the extent they don't have the grassroots, I think it'll be a different set of cards they'll be playing with.

Yeah, I mean look, Davos is funny because in a way it's very establishment and crypto is very countercultural or counter-establishment. But what it is is it's an extraordinary convening of business leaders and government leaders and kind of journalists all in one place. And so the way we look at it is it's a very very efficient way to meet with a lot of people that our CEO needs to meet with. And it's a really great action-forcing event in the company to kind of distill certain narratives that we want to get out and use the platform there and the fact that there's sort of thousands of journalists and all sorts of opinion leaders all in one place to tell the company's story. So there's a formal kind of agenda in the conference hall and our CEO spoke at one of the sessions there. But a lot of the value of Davos is just the fact that it's a convening of a lot of people. And so we took advantage of that and we did all sorts of meetings and things and it was really really valuable and it was very efficient and it saves the hassle of flying to 50 different places over the course of the year.

Oh yeah. That's my impression. I mean it's expensive and it's a hassle in the sense that it's in this small, beautiful mountain town but it makes logistics a little hard. I imagine there's always a value in getting face-to-face with decision makers. That's why the Munich Security Forum or Milken Conference or Davos, all these things have value. I think Davos is uniquely global and just the cross-section that it draws. And I think it was really important that President Trump was there and a lot of his senior team were there, a number of members of his cabinet. And so we actually flew all the way to Davos, did a lot of global things but we also did a lot of US things. And so it's a great one-stop shop I think.

Yeah, we started this thing called a Global Advisory Council I think two and a half years ago. We just asked George Osborne, the former UK Chancellor, to chair it. But we have really extraordinary folks on there. Bill Dudley, the former president of the New York Fed. Luis Alberto Moreno, the former head of the Inter-American Development Bank. Pat Toomey, the former ranking member of the Senate Banking Committee. Mark Esper, the former Defense Secretary. And so there's just a really great cross-section of folks and they've become kind of a sounding board for us as we kind of talk through what we're doing. They've all been around the block so many times. It's hard for us to do much of anything without them having some perspective to add and it's been really really valuable for us.

Yeah, for sure. Although, you know, obviously I was wearing my Coinbase hat, so you end up being quite busy, focused on what you're doing at hand. But part of my background is, as you know, I was deputy national security adviser for President Bush when I was in the Bush White House. And I was also the guy that did many of the international summits with President Bush. I was the G8 Sherpa, the US-EU, APEC, and all the sorts of things like that. There's definitely a reordering of kind of global dynamics. There's sort of been a long-standing post-World War II expectation that the US will carry the load as the residual market for the world, as the R&D engine for the world, as the economic driver for the world, as the security guarantor for the world. All of that's changed. I don't think it's just a product of the Trump administration. I think those dynamics have shifted anyway and at some point the body politic in the US would sort of expect a different deal from their perspective. So I think a lot of that is natural. I think where it ties back to crypto is our financial system is built on a very heavy infrastructure right now. You need to have big intermediaries that intermediate basic financial activity. Crypto is the technology that allows a lot of financial activity to be done without those same big intermediaries. And I think for smaller economies, even mid-majors who are thinking about their place in the future, you have virtually all the IPOs of consequence happen in the US in New York. This has kind of been a dilemma for London as to what their future looks like as a financial center. Europe has had a real struggle in creating a capital markets union in the version that they want. And one of the things we say to the Europeans, to the Brits, to the others is that the Americans actually to their credit under the Trump administration are updating the financial system and integrating this blockchain technology. It disintermediates a lot of the large financial intermediaries from a lot of financial activity. And if you're a mid-major or a smaller lesser developed financial market, it's kind of like you hear about how in Africa they went from, the continent wasn't wired and yet they became globally leading in wireless technology almost by necessity. So they skipped that whole wired stage and in a way you have a similar thing. The blockchain technology is almost like going from landlines to mobile for financial infrastructure. And I think a lot of countries understand that and that's why it's a conversation a lot of governments want to have with us because they understand that payments now are moving on-chain through, in stablecoin form, they're almost all dollar denominated. And the question for other countries is, is your currency going to be relevant in an on-chain future economy as the world moves on-chain just like the world moved onto the internet. And I think that's why the Prime Minister Carney for example in Canada moved quickly to issue a proposed framework for Canadian dollar stablecoins. The UK government's in the midst of doing something like that. Others are as well. So it's a really, I can't really speak to the big macro issues but this technology upgrade of the financial system is a really relevant thing as countries are trying to find their way in the future.

So, it was called Dokan. D-O-K-A-N. And Dokan in Persian means a little shop. And so, it was called Dokan Deli. And we sold sandwiches. And it was actually funny. It was a little store my parents had on Old Georgetown Road. David, you'll know where that is.

Okay. And we started selling herbs and spices. And all of a sudden this little obscure little shop became a magnet for a lot of international families who we also sold international magazines, you know, back in the day when they had to get boated over, like Der Spiegel or whatever, you could buy a two-week-old Le Monde or whatever. And it became this kind of hub of international people who would come and buy spices or their magazines. And not to belabor this, but it became a big hub for Iranians post-revolution. And my parents started selling Iranian books, people would leave books with them and they would sell them on consignment. It was this very funny, we sold cigarettes and gum and chicken salad sandwiches and pastrami and god knows what. And so they started selling more and more books. And when I went to college, they actually did something insane, which is they sold the sandwich shop and opened an Iranian bookstore. And they ended up becoming one of the largest Iranian book sellers in the world post-revolution. Because there's an embargo in Iran, but the embargo for First Amendment reasons doesn't apply to printed material. And so there were always these very mysterious large parcels of books coming in from Iran that my parents would pick up and sell. And it was, you don't really appreciate your parents until you're older and you kind of imagine yourselves at that moment in their lives. And I have so much affection and respect for what they did, kind of taking this very established life that they had which got turned upside down and then becoming entrepreneurs in their 40s and stuff. It was insane, but so impressive.

Exactly.

Oh, thanks for having me on, guys. I really appreciate it.