It's about financial inclusion, right? There's something like 80% of Americans feel that the current financial system is not working for them. And crypto is this great democratizing force in terms of access to financial services.
Hello, hello, and welcome to the conversation. I'm Dasha Burns, and every week on this show, I talk to the most compelling and sometimes unexpected power players in Washington and beyond. And this week, I sat down with Brian Armstrong, co-founder and CEO of Coinbase. Coinbase is the largest cryptocurrency exchange in the world. And Armstrong has become the top crypto lobbyist in Washington. With that, he's been vocal with his thoughts on how the government should approach regulation.
I think Americans should be able to earn more money on their money. Banks should have to compete on a level playing field. And if the American people feel like the banks are not paying high enough interest rates and stable coin rewards can offer them more, then maybe the banks should have to pay higher interest rates to compete.
So, as the cryptocurrency regulation debate rages on with legislation like the Clarity Act, I pressed Armstrong on how he sees this fight in his industry playing out. And folks, it is a fight. The Clarity Act asks legislators to answer the question, should crypto and classical banking be regulated in the same way? And it represents the new battle in the world of finance. As crypto comes to Washington looking to compete with the political power of traditional banking. But before we dig into the world of crypto, please take a moment to make sure you're subscribed wherever you're watching or listening. And now, Brian Armstrong joins the conversation. Brian Armstrong, thank you so much for joining the conversation.
Yeah, thanks for having me.
I want to get right into it because you are really shaking up this town here. You're at the center of this big fight happening in Washington that could determine the future of cryptocurrency in this country and really the future of banking in a way. It's put you at odds with traditional banks like JP Morgan whose CEO Jamie Dimon recently called you quote full of I am quoting there.
It will be fought. This will not be no one's going to bow down to this guy, okay? With that company and but he's the only one and he's spending hundreds of millions of dollars in Washington in this thing.
He said he's representing the whole he's full of How do you respond to him?
Well, you know, I've got a lot of respect for Jamie Dimon, so it was kind of sad to hear that. JP Morgan's a great company that he's put up incredible numbers there. I feel like I've learned a lot from him as a CEO. And ultimately, this isn't really about Jamie Dimon or me, even though people like to focus on that. It's just about how we get clear rules in America so that this industry can get built here and benefit everyone. I think that would be good for American consumers. I think it'd be good for the banks. There's a whole set of new provisions and benefits that banks get in this draft legislation. It would be great for crypto companies as well. Most importantly, it's good for America. So hopefully we can get past the absolutisms and just, you know, see if we can get this bill over the finish line.
Yeah. And I hear your point on the policy piece. I think one of the reasons this has drawn so much attention is just because it's not very often that you hear one of the biggest CEOs in America talk like that about somebody else. I wonder why you think that you've sort of drawn so much personal animosity from Dimon especially as you say when you have so much respect for him.
Yeah. You know honestly I'm like a little perplexed by that. I think in general when people communicate through the media nuance gets lost. Same thing with social media. Well, there's not a ton of nuance and full of I have to say. [laughter] I agree. I mean, yeah, I think it's better just in general to get in a room and chat one-on-one with people. That usually solves it. I've had opportunities to do that with Jamie and other people on his team who are great in the past. And so, yeah, I don't know exactly what that's all about. Like, crypto, you have to remember, is the most bipartisan issue right now in DC in my view. And just there's a lot of people on both sides of the aisle, not to mention 50 million Americans who've used crypto. There's about three million advocates who've signed up to stand with crypto.org who, you know, wanted to elect pro crypto candidates. So, there's a big movement behind this of people who just want to see clear rules on the books. And we saw Senators Tillis and also Brooks. I thought they did a really great job of trying to bring both sides together, the bank lobby and the crypto lobby, and say, 'Hey, you guys got to work out a deal. A compromise means that both sides are going to leave feeling a bit unhappy.' We didn't love aspects of it of where it landed. You know, I imagined that they wouldn't either, but I thought we could both live with it. And so, at this point, I think the banks got really a lot of what they asked for in that they said they didn't want any rewards paid on idle balances. You know, they got that. They wanted additional rulemaking. They wanted an anti-evasion language. They wanted disclosures on stable coins, marketing restrictions. They really got all those things. So, I think at this point, I'm hoping that we can move forward and go with what the Senate Banking Committee drafted as a compromise.
I do have to ask, I saw you posted an image of you and Dimon as the characters in Heated Rivalry. You do know that they were lovers in that show, right?
Really? Oh my gosh. Yeah.
Did somebody No, of course. I mean, it's a what can I say? It's a beautiful love story. They fall in love at the end. So, is that what you're hoping for with you and Jamie? [laughter]
Like I said, got a lot of respect for him.
Also, I do to your point about the actual policy, I want to dig more into the point that Dimon and some of the banks are making here because there are a lot of questions about the implications here. Basically, the traditional banks for those that haven't been following this closely, the legislation is called the Clarity Act. And traditional banks are concerned that this legislation could allow crypto companies like Coinbase to offer customers rewards that look and feel a lot like interest on a paid savings account without having to follow the same rules that banks do. I'm curious, what's your response to that? Like why shouldn't crypto companies have to submit to the same rules as banks and be backed up by similar protections?
Well, yeah. Okay. So, on the stable coin reward issue, in my view, like customers ideally would just be able to earn these rewards on any balance. That's actually what got passed into law by a bipartisan vote in Congress with the Genius Act just not that long ago. And I think that's a good thing. Why shouldn't Americans just be able to earn more money on their money? Stable coins under Genius Act are backed by short-term US Treasury. It's like it's quite low risk. It's 100% reserves. And that's what Congress kind of came to that as a decision. So going into the market structure legislation, I was sort of assuming that was a settled matter. Why would Congress reopen something that it had just passed into law 3 months ago? But the bank lobby kind of came back quite strongly and said actually we don't think that that's a good thing. It was a little unclear to me why they sort of made this argument about deposit flight even though there's been no evidence of any deposit flight as stable coins have grown. Actually the bank deposits have also grown. Maybe they have a conflict of interest on that. They're worried about something else. But that put that aside for a moment. The Senate Banking Committee sort of came to us and said, 'All right, see if you can go meet their ask. Find a way for you guys to solve this where idle balances cannot pay rewards, but we're not going to get rid of this entire concept of Americans being able to earn more rewards on their money.' And so that's exactly what we did. We conceded that point in our negotiation with them. We said, 'All right, if you don't want rewards paid on idle balances, I think that's something we don't like it. We don't think it's good for America, but if that's what gets this done, maybe we can live with it.' And for some of them, that wasn't enough. And all the other pieces that they got as well. So, yeah, that's where it landed. Ultimately the Senate came to this negotiated compromise and I think that's what we've got to stick with at this point.
But at sort of the high level bird's eye view, you know, last year you said you want Coinbase to be a bank replacement for people.
Ultimately, we want to be a bank replacement for people. We want to be their primary financial account. We do want to become a super app and provide all types of financial services. We want to become people's primary financial account.
Why should crypto firms get lighter rules than the banks do for offering similar services or how do you reconcile that?
So, we're not asking for lighter rules actually. When you build a financial services company, you can choose what kind of license you want to go get and that limits you on certain products that you can offer, right? So, for instance, if you want to get a bank license, you can do that. The thing that that allows you to do is fractional reserve lending. And that basically means that when you deposit funds at a bank, they don't have all of it there. They've lent it out to other people and they keep the margin for that. They don't necessarily pass along a huge percent of it to you, typically zero in your checking account. A couple basis points in your savings account. And they keep the what's called net interest margin, right? And there's all kinds of regulation that comes with that because it's dangerous to do fractional reserve lending, at least in my view. I mean, you can occasionally you get like a run on the bank and these kinds of things. And so if you don't want to do that, you can get other types of licenses. Like for instance, we have an OCC trust charter, which is another federal regulator, but we keep 100% of reserves. So that's a custodian license where we keep 100% of the reserves. There's no such thing as fractional reserve lending there. But you can still do payments. You can pay rewards to customers. You can allow customers to opt into certain products even around lending and things like that. We have other licenses we work with on the trading side of our business as well at the federal level and at the state level. So the CFTC and the SEC regulate those. So we have dozens of financial service regulators that we work with in the United States. We choose not to do fractional reserve lending, which is the part that would require a bank license. I don't think that's a necessary thing for us to do. So yeah, if banks wanted to get rid of their bank license and just operate the way we wanted to, then that's something they could do as well.
You know, I think one of the other factors here that's raised some eyebrows in Washington is the power of the crypto lobby. Coinbase and other crypto companies have played a major role in shaping this legislation. You particularly have lobbied pretty aggressively and Coinbase does stand to make a good amount of money on stable coin yields. How do you convince the public that they'll be properly protected by these regulations and it isn't just about benefits to Coinbase and your profit margins?
Yeah. Well, that's exactly what we're advocating for here is just clear regulation and clear rules. I mean the biggest way that US customers have gotten harmed in the past say 5 10 years is that the lack of clarity in the US meant that many of these companies got built offshore. US citizens were using those, you know, you think about FTX and others and sometimes those would blow up and then US customers are really getting harmed, right? So we actually didn't in our conversations with lawmakers we didn't really go advocate for lighter regulation or heavier regulation we just said, 'Just tell us what the rules are.' You know, like that's all we were really asking for. And there's actually a lot of requirements in the draft bill that are not easy to comply with. They have a very high bar for regulation, but that's what creates trust in the ecosystem. And so we're totally fine with that. That's what allows us to be built within the US regulatory perimeter on shore protecting American consumers.
One of the other fights happening on the Hill over this bill is on the ethics language. Democrats have said that they will not support legislation without a provision that would prevent government officials from profiting off of crypto assets while in office. Do you support that provision?
You know, we've tried to stay out of that issue because it's so fraught politically. I've really just tried to stay focused on the crypto aspects of it and I think that one's above my pay grade.
I mean, do you think that any government official, president or anybody should be profiting from crypto while they're in office?
Well, you know, it's a complicated question for a number of reasons. You know, you don't want to accidentally create any disincentives for people to engage in public office. Like if I think a lot of people would believe that many parts of the financial system are getting tokenized now. And so, you know, if ownership of a token disqualifies you, that would be too far. That would be like owning having a bank account at some point, right? But if you're actively out there promoting it or something, I think there's a reasonable discussion to be had there. And I think we'll defer to the Senate on that.
I hear what you're saying. I think, you know, the reason I'm pushing on this is because the perception from some of the public is that one of the reasons President Trump, for example, is being so friendly to the industry is because he's gaining from it. Do you worry that that kind of thing undermines what you're doing and undermines the industry if people sort of see crypto as a grift for people in power?
Well, I think President Trump astutely recognized in the last election that it was politically, you know, it was an opportunity for him because there were people who felt underserved by it. But fundamentally, crypto is a bipartisan issue. I mean, there's people on both sides of the aisle who are very excited about it for different reasons and it would not be getting such a strong bipartisan vote, for instance, in the House already or in the Senate Banking Committee if it wasn't a bipartisan issue.
Politico reports that you met with Trump in March just before he wrote on Truth Social that banks need to make a good deal with the crypto industry. Your COO also said that Coinbase donated to the White House ballroom to keep good relations with the White House. What is your relationship like with the president? How closely have you been working with him on this bill?
Well, I know that he's interested in crypto. He's made no mistake about that. He's talked publicly about how he wants the US to be the crypto capital of the world. Obviously that aligns with our interest that he wants to get legislation passed. In general, that's been very positive and, you know, we try to work with whoever is in office at any given moment. It doesn't matter what party they belong to. And so, we've taken a very bipartisan approach on this from the beginning.
When was the last time you guys talked?
Um, I don't know. I mean, at least months, three, four months. I don't know. Something like that.
You don't get the 2 AM phone calls that his cabinet secretaries do?
