Hello everyone and thanks for joining us live on X. I am Alesia Haas, CFO of Coinbase and I'm here today with our CEO and co-founder Brian Armstrong and a very special guest. Our special guest today is Greg Tusar, the head of our institutional product team. And Greg recently led the Deribit deal, which you may have seen yesterday. And we thought that some people may have questions about that exciting deal since it's the largest ever crypto deal announced and so we invited him to join us. We are so excited to connect with you all directly, our customers, our community, our shareholders to talk about our quarter, answer questions. As a reminder, this is a live conversation and we're going to cover both presubmitted and then taking questions in real time. Just as a reminder, we don't take questions around specific customer support cases, about when we'll list XYZ token, regulatory questions that we've covered in depth on earnings day, or any personal questions. So, let's just steer clear of those and we'll answer anything else you have on your mind. So, if there is something, drop the question in the replies to our most recent tweet and we'll try to get to as many as we can. So, I have to do our legal disclaimer before I get started. I now need to remind you that during today's call, we may make forward-looking statements, which may vary materially from the actual results. Information concerning risks, uncertainties, and other factors that could cause these results to differ is included in our SEC filings. All right, let's kick off, Brian. First question for you, and thank you, CBDuck.
All right, cryptovolatility. It isn't new to us that who have been with Coinbase journey for the past few years, and once again, this demonstrates to the public the importance of diversifying revenue streams. So the specific question, any plan to add more revenue streams such as credit cards, small loans for retail besides the Bitcoin loan, crypto ETF offerings and charging a small percent expense fees like other ETF providers.
So you're absolutely right. Volatility is part of our existence. We consider it a feature, not a bug as this nascent asset class has grown. But we have been investing in diversifying revenue streams. We have been trying to bring a more stable revenue future. And we've been doing this for years and you've heard us talk about this for years. So, I'll let Brian talk about where we are and what's on the horizon.
Yeah, thanks for the question and all the great posts on X, by the way. So you're right. We've grown up in volatility over the last 12 years. We're very comfortable with it. One of the best things that's happened to Coinbase over the last five years is we moved from being like 95% trading fee to having this balance between trading fees and subscription and services. And in a higher interest rate environment, we see more revenue from subscription and services. In a lower interest rate environment, we see more revenue from trading fees. So, they're actually inversely correlated, which has made the business much easier to be predictable and how to operate day-to-day. Now, to your point, there's a lot of new opportunities on the horizon. We were really impressed with the speed of adoption of these Bitcoin backed loans that we put out. I think it did 100 million in volume or 100 million loans outstanding in the first 100 days and that's making us wonder what other categories of lending could be useful. I mean we also do trade financing in our institutional business that Greg Tusar runs. But there's a lot of other big categories of lending out there and we think that all these asset classes are going to come on chain, right? And so how might we create a decentralized credit score to do non-collateralized lending, right? Or I guess the big categories would be mortgages and things. Is there some way that in the future people might be able to tokenize real estate and bring it on chain and do lending that way? So that's in the lending space. We think there's big revenue opportunities around of course stablecoin and payments which has found product market fit. You know, there we even launched some pretty innovative things like X42 which was this feature that came out of our Coinbase developer platform business which is still very nascent, you know, but these are things that we're experimenting with more like venture bets while continuing to invest in our core business as well which has a ton of growth potential so lots of opportunities on the horizon.
Thanks for that. Just before we get to the next question I realize you two failed to tell me that it was blur day and that I had to have a blurred background and it's also a black day and I wore non-black. So, next time can we coordinate on blurs and blacks and I will get on the same page.
Well, everybody wants to check out what you're reading on your bookshelf collection.
I have a cookbook collection behind me. We are avid weekend cooks. So, but I digress. That's personal. All right. Next question. God, you recently said that you prefer every legitimate company enter the crypto market as regulations become more friendly to participants even if it means more competition for us at Coinbase since it would 100x crypto's TAM. How will Coinbase continue to differentiate and lead in the space as the regulatory environment becomes less of a moat against competitors?
Yeah. So, I think it's really important to note that the regulatory environment in the past, it wasn't a moat for Coinbase. I thought of it as a blocker to the entire industry. And so, I'd much rather be in the situation we're in today with regulatory clarity emerging and lots more companies coming into the space. And I think maybe people didn't like my answer to that last time. It felt a little too positive some. Maybe they want us to be a little more competitive. But maybe let me make this very clear. You know, we're playing to win. And the reason why I want all these companies to come into the space is so that we can sell them our products and services. We've become best-in-class over the last 12 years of building out a lot of really difficult pieces of crypto infrastructure, right? Everything from how to store it securely with data centers all over the world, how to build, you know, high performing exchanges for high frequency traders. You know, how to do high performance or real-time payments that can be processed at high scale on some of these new blockchains. Just getting licensing and bank partners all over the world that are comfortable with crypto activity. And so we can actually now go sell some of these services to other clients. And I think Alesia mentioned on the earnings call, we have something like 200 clients that closed. Now the ETFs are a really good example of this, right? When the ETFs got approved, we powered custody and trading for the majority of them. So we got a piece of the revenue share from these new entrants coming in the market but it also increased the volume on our own products and so regulatory clarity is unapologetically a good thing. We are not worried about new people coming in the space we want to sell them all of our products and services and that's why I say it's TAM expansion.
Great. Thank you Ryabat. With crypto adoption growing, how is Coinbase simplifying the onboarding experience for first-time users in 2025?
Yeah, well, the onboarding is a big area of focus for us both in our, you know, our centralized products, the retail app, Coinbase Prime, but also in our self-custodial wallet. So, I'll touch on each one just briefly. In the main Coinbase app on the retail side for instance we're doing a lot of international expansion and we find that the onboarding rates are not as good in some other countries where we're launching as it is in the US and the reason for that is a variety of factors right it's you have to do to get someone really truly onboarded you not only do you need them to have an email and a password but you have to do identity verification you have to get them to connect some sort of payment method and then actually complete typically their first trade to buy some crypto and so you can imagine if you're sitting in Singapore or Australia and you need to make sure that scanning and verifying your identity actually works in those markets, connecting a local payment rail or in Brazil for instance with PIX. And so what we did was we actually hired local teams in each of these markets because we realized that people sitting in the United States or the UK or one of our main offices, they were not going to be able to adequately test those onboarding flows because they didn't have a local payment method, a local ID. Oftentimes there's translation localization issues too. So what we've done is we've actually hired local teams in these markets to improve onboarding and we just see the numbers steadily tick up every quarter. It's not like there's no silver bullet to it. It's like just tons of lead bullets. You have to go fix a thousand small things. And so that's on the centralized products. On our self-custodial wallet, one thing that we've done there to try to make onboarding easier is moving from this 12-word phrase, which is a little intimidating because if you forget it or you lose it, your money's gone, right? And I've always felt that that's going to be impossible to get a billion people on chain if in that state of affairs. So, we've been innovating with things like smart wallets, which uses biometrics, like Face ID and thumbprints to onboard users in just a few seconds. And then if you lose your phone, you get a new one, you can resign in and get your money back. So these kind of things are critical to getting crypto adopted by a billion people. Social recovery is by the one other area that I think you know we're interested in. Vitalik has talked a lot about that on blog posts where if you lose funds you can get three of your five friends to kind of certify you are who you really say you are. That's an interesting solution as well. But if we're going to get a billion people using this it can't be a 12-word phrase that you lose it and you lose all your money.
I agree because I can't remember 12 words any time of the day. All right, navigate AI is next. Coinbase has consistently advocated for clear crypto regulations. Which regulatory areas are you prioritizing to drive more mainstream adoption?
Maybe I'll start with this one. So, our policy efforts have four primary goals right now. Number one, stablecoins. Stablecoin legislation because we believe they're the on-ramp to crypto. They're critical for payments settlement and we believe that US legislation is essential to unlock the full utility and adoption. Second, tokenized equity. We sometimes say tokenized securities, tokenized equities, broad category. The SEC now is empowered to act. We don't need new laws from Congress. However, we need clear rules here. And Greg could give probably more color here, but the trading structure of a traditional security doesn't meet the technology of crypto. And so we care about the same risks. We care about the same first principles, but we want to be able to solve those risks with new technology, new solutions, and that needs new rules and clarity.
Number three, DeFi. The SEC should allow tokenized securities to be transacted in DeFi protocols via self-custody. We think this is critical. We think that you should be empowered to be able to trade your securities, give it to a friend, give it to your spouse, your kids, your parents. You know, in the old world, like if I had a certificate of like Disney stock back in the 1940s, I could sign the back of it and I could give it to Brian and he would then own my Disney stock like peer-to-peer paper. We want that to exist in the digital form. We've lost all that with intermediaries today and all of the market structural rules that we typically use today. But that used to be a power that we all as individuals had and we want to bring that power back into the digital world. Last but not least, digital commodities. We need market structure rules to enable non-security token offerings without triggering legacy security rules. So these are all of our favorite crypto commodities that we want clear regulations for. So those four categories that we're working on.
Yeah, not too much to add. I think you know the two bills going through Congress right now are stablecoin and market structure. We think both are important and both are making good progress. There was a vote earlier this week on the stablecoin legislation. It didn't pass yet, but that's I think of that as just kind of like the first round of negotiation. There's lots of changes being debated. Hopefully they'll meet again next week. So, it seems to be a lot of bipartisan momentum to get both of these pieces of legislation passed. And I think we've sent a, you know, collectively as an industry and the 52 million Americans who own crypto have sent a very clear message to DC that we want to see clarity for this industry that's treated on a level playing field with other financial services so that it can be built here in the US. And I know we have investors, people from all over the world, but you know, the US has been a little behind here historically. So, we've been pushing on that one. And we hope that that'll be a bellwether for other major economies to follow suit.
The only other thing I would add is that, you know, we participated in a hearing earlier this week and one of the points we tried to make is this is a once in a generational opportunity to really rethink from first principles the rules around securities and commodities to make them more efficient keeping the most important parts about investor protection and those sorts of things but to rethink market structure and importantly to really protect DeFi as the means by which a lot of that efficiency is going to be gained. Brian, to your point, to make sure that people have the property rights and so forth associated with the securities that we hope they have with their crypto assets also.
Yeah. Yeah. Check out Greg's congressional testimony there. It was good. So,
Excellent. All right. Next question. Perfy Gaming. Brian, do you find any problems or hurdles as the crypto and blockchain industry continues to grow? Will we see fragmentation of users across ever growing amounts of layer 1 chains? How can we separate use cases and refine the strengths of those use cases and their chains?
