Source: Cheeky Pint, compiled by Golden Finance. Recently, Stripe co-founder John Collison hosted a podcast called Cheeky Pint, where he had an in-depth conversation with Coinbase CEO Brian Armstrong. Brian Armstrong discussed many behind-the-scenes stories at Coinbase: from how to succeed in the US competition, to some of Coinbase's most critical moments, to the offensive and defensive game with North Korean hackers; from the influence of crypto behind the US election and the GENIUS Act, to the trend of banks embracing crypto; from the CEO's vote against USDC, which nearly cost the company its USDC, to the successful development of L2Base, to Coinbase's research into prediction markets. Armstrong also predicted that BTC could reach $1 million by 2030. This optimistic outlook is based on the gradual clarification of US regulations (such as the passage of the GENIUS Act) and the influx of global institutional capital. He stated that in five to ten years, most wealth management firms or sovereign funds will hold 1%-10% of their portfolios in crypto assets. He also pointed out that only five to ten top fiat currencies will survive, with a long tail of approximately 150 other government fiat currencies being replaced by BTC and USDC. The US dollar's status as a reserve currency is facing challenges—if the US fiscal deficit continues to spiral out of control (the debt-to-GDP ratio approaches historically dangerous thresholds), the dollar will lose its reserve currency status. Below are ten key takeaways, followed by the full, abridged interview. Ten Key Takeaways: 1. Coinbase's success in the US stems from its compliance approach—we worked with the US government to obtain a money transmission license. This made us the only crypto company in the US at the time with a bank partner, allowing users to purchase Bitcoin directly through their bank accounts. 2. North Korean hackers graduate 500 new employees every quarter, and their full-time job is attack—we must be the toughest nut to crack. 3. Banks are like newspapers of the past: some will disappear, while the smartest will embrace cryptocurrency. Visa and Mastercard are already experimenting with stablecoins, and ultimately, customer demand will determine everything. 4. Coinbase will not apply for a banking license. The core function of a banking license is to allow for holding less than all funds. Coinbase does not want to be a bank. Coinbase prefers full reserves, not fractional reserves. 5. BTC will reach $1 million by 2030. In five to ten years, most wealth management firms or sovereign funds will hold 1%-10% of their portfolios in crypto assets. 6. I voted against the USDC project because it wasn't decentralized enough. USDC likely added $800 million in revenue to Coinbase last year, something I never imagined, but fortunately, the rest of the team supported USDC. 7. Avoid the 'embrace-suffocation' of large companies that stifles innovation—Base succeeds because we protect it, not over-interfere. A CEO's job isn't so much to come up with the next big idea as it is to create the right environment for good ideas to emerge and thrive. 8. I'm more inclined toward the free market than most. The best consumer protection is sometimes competition. If a company is terrible, the best solution is for another one to compete and offer a better alternative. 9. The world will have five to ten top fiat currencies that will survive, but the other 150 or so government fiat currencies in the long tail will be replaced by BTC and USDC. 10. If discipline is completely lost, the US dollar will lose its reserve currency status. When the UK or the Netherlands lost their reserve currency status, their debt/GDP ratio was in the 200-250 range. The US is at a very dangerous threshold. Full article: How Coinbase Succeeded in the US John Collison: Brian Armstrong is co-founder and CEO of Coinbase, one of the world's largest cryptocurrency exchanges, founded in 2012. Stripe launched in 2011. We grew up together. Coinbase was just included in the S&P 500 index, and the GENIUS Act was just passed. This is a good moment to step back and take stock. Around 2014-2015, the crypto space was a sea of competitors, with so many competitors, and you guys beat so many of them. When you look back, how did Coinbase win? Brian Armstrong: It's been a long journey. I remember seeing you guys get accepted into Y Combinator, and it was so inspiring to me. "Maybe there's a fintech company in this space." So, partly because of what Stripe had done, I was really eager to get into Y Combinator. In the early days, crypto was really the Wild West. I would go to early Bitcoin meetups, and there were brilliant cryptography PhDs and anarchists there. At one of my first Bitcoin meetups in San Francisco, someone told me he was starting his own religion. So, we came from those early days that were reminiscent of the Chaos Computer Club. I think Coinbase made several decisions at the time that helped us navigate this difficult time. One was our decision to pursue compliance, which meant working with the US government and obtaining an MTL (money transmitter license). Another was our efforts to build as many credibility indicators as possible. One of these was getting accepted into Y Combinator. This allowed us to establish banking relationships in the US, which was very difficult at the time, with Silicon Valley Bank, and then obtaining an MTL (money transmitter license). For a while, we were the only US crypto company with a banking partnership, allowing users to easily connect their bank accounts to buy Bitcoin. This really gave us a head start in a way that no one else could catch up. John Collison: Who were your competitors at the time? Was it Mt. Gox? Who were you competing against for consumer share? Brian Armstrong: Mt. Gox was in Japan, and of course it collapsed. There was a company called Tradehill in San Francisco that could have been a major exchange, but it failed to reach some key milestones. There were so many companies along the way, I can't even name them all. In 2012, there was a Bitcoin conference in San Jose, California, which, looking back, was a landmark event. The Winklevoss twins showed up, and I met Vitalik Buterin there for the first time. He hadn't invented Ethereum yet. I remember people looking around the conference and it felt very niche. Some of the talks only had five people in attendance. We had a small booth and sold T-shirts. John Collison: What was Vitalik doing before Ethereum? Brian Armstrong: He was a contributor to Bitcoin Magazine. He's actually a very good writer. I don't know if there's a lesson to be learned from this, but I think it's important to be early in these tech trends—you don't want to be the 42nd AI company when everyone else is jumping in. You want to jump in when you think it's cool but no one else thinks it's cool. I guess it's like what Paul Graham said, you'd rather have a thousand people who really love your product than a whole bunch who don't care. That was kind of the situation for us. No one took what we were doing seriously, not Coinbase, not the industry at large. John Collison: Can you describe what it was like to be a more "legitimate" player? With the money transmission licenses, the banking partnerships, did that help you win because you could build a product that no one else could? Or was it because you built a brand and trust with consumers, and that led them to choose you? Brian Armstrong: I think it was a bit of both. It allowed us to launch products that others couldn't, and it also kept us from getting shut down. John Collison: Did anyone else get shut down? Brian Armstrong: Yes, others either received cease-and-desist letters and couldn't afford legal fees, or were essentially hacked and shut down. There were some close calls at Coinbase in the early days, when we weren't the mature company we are today, when people tried to hack into our systems. I can tell you about some of those close calls. Because of those reputation metrics, we were able to recruit a lot of great talent. By the way, some other companies at the time were completely anonymous. People told me, "I don't want my name on this site because it goes against the spirit of crypto." It seemed to me that if we were going to raise money and be regulated, how could we possibly remain anonymous forever? If we got big enough, someone would always be knocking on our door. I'm not afraid to put my name on it and say, "I'm a US citizen, I live in the US. I'm doing this for the right reasons, and I'm in this for the long term." Companies are reflections of their founders. Stripe is very much a reflection of you and Patrick in many ways, in little details you might not realize. Coinbase is the same for Fred Ehrsam and me. It's really a derivative of our DNA—which is a lot of things—but one of them is that we're legitimate, we're trustworthy, and we're doing this for the right reasons, for the long term. That's really important. Some of Coinbase's life-or-death moments John Collison: Fred worked in finance before. You were at Airbnb before. Did you work in finance before? Brian Armstrong: No. I studied computer science and economics. I've been a software engineer pretty much my whole life. I tried another startup, but it didn't work out. Fred also had a computer science and economics degree from Duke, but he went on to work at Goldman Sachs trading foreign exchange. When I first met him, I thought, "This guy can code, he has a computer science degree, but he also knows a little bit about finance." Within the first few weeks of our partnership, he came up to me and said, "I'm pretty sure every time someone buys Bitcoin, we're losing money." I was like, how is that even possible? Then he walked me through it on a whiteboard, and he was right. Complementary skill sets. John Collison: The first version of the business model doesn't work. You need to do some optimization. You mentioned some close calls. What were some of those close calls? Brian Armstrong: Let me give you a few examples. For the first version of the app, I created a simple hot wallet and deployed it on a server. I told people, since it was still in alpha, not to store anything you couldn't afford to lose. At the time, Coinbase had raised about $150,000 from Y Combinator. As early users continued to pour in, they deposited more and more money, and despite the warnings everywhere on the app, the total deposits kept getting closer and closer to $150,000. I figured if we lost all the money, I wanted to be able to repay it, otherwise the company would go bankrupt. John Collison: You don't want users to deposit more than Coinbase has. Brian Armstrong: Exactly. I calculated the rate of deposit growth and the amount of money we had. I said, "We have about eight weeks to migrate this system to a new one." I had a vague idea that we needed to move money off the internet and into cold storage. I had no idea how to design one. I'd studied computer science, taken security classes, and had a basic understanding of cryptography, but I'd never built a real key storage solution or anything like that. So I called two of my friends and said, "I need a crash course—tell me how to do this." I asked one of them, "How long do you think it would take to build this thing?" He said, "A team of ten would probably need years to really validate it and everything." I said, "We only have eight weeks." He said, "Then you're in trouble." I grabbed another engineer from our team, and we essentially started writing the first generation of Coinbase's cold storage architecture. We were sleep-deprived, and we made some trade-offs we thought were reasonable to meet the deadline. But it worked, and it was one of those make-or-break moments. If we had waited any longer and the company had been hacked, Coinbase wouldn't exist today. Another similar example: one day we were having lunch in San Francisco, and an employee noticed a lot of withdrawals were happening on his computer. We quickly realized someone had hacked into our account and was withdrawing funds to themselves as fast as they could. I remember we took down the entire site, figured out how they got into that account, managed to block it, and about 12 or 24 hours later the site was back online. We fixed the vulnerability, got back online, and then I realized if we'd been asleep when that hacker started, we'd have been broke by morning. We only lost about $50,000 that time. But that was pure luck, because we were in Pacific Time—San Francisco—where they started their operation, and we noticed it. Looking back, there were a lot of those moments that were really scary. It was like a coin flip, and there were three or four of those coin flip moments, not all of them related to cybersecurity. Once the company really started to take off, there were other challenges about keeping up. One of them was the influx of customer support tickets, and we didn't have a customer support team at the time. So we would answer all the support tickets on weekday evenings and weekends, from 9 PM to midnight, after finishing other work. At some point, the unread support tickets reached 10,000, 20,000, 30,000, and people were getting really angry and frustrated with us. We realized, "We have to hyperscale here. How are we going to build a customer support team in the next seven days?" Our team created a ten-question quiz because we couldn't interview all those people that quickly. We had people apply online and take this quiz, which was a really hard one about encryption knowledge and other things. We interviewed a lot of them for five minutes, hired them, and we started to catch up. There were a lot of similar questions along the way, and we just sort of figured it out by trial and error. North Korean Hackers John Collison: What's something the general public doesn't know about the cybercrime world? Brian Armstrong: One is that there were a lot of North Korean operatives trying to work at these companies. John Collison: Are they based in the US or working remotely from North Korea? Brian Armstrong: From what we know, most of them are remote. This does open up another attack vector. North Korea is very interested in stealing cryptocurrency. You might think we could work with law enforcement—we do receive some dossiers like, "Okay, this is a known actor," and we sometimes share them with other companies. But it felt like every quarter, 500 new people graduated from some school where hacking was their entire job. In many cases, they were also victims, but they were still interviewing for these positions. We had to take some measures. First, when these people were interviewed on camera, someone was coaching them offline. So we forced them to turn on their cameras to prove they were not AI. We also started requiring everyone to come to the US for an onboarding training before they could access any sensitive systems. Fingerprint them, make sure anyone with sensitive clearances has US citizenship and family in the country, because you don't want someone to feel like they can get away without fear of extradition or anything like that. Another thing that's been surprising to me is the willingness of these threat actors to try to bribe our customer support agents. Our customer support agents work in fairly closed facilities with a heavily locked-down Chromebook. In some cases, they've been offered hundreds of thousands of dollars to sneak in personal phones and take pictures of the screens and things like that. We have to really restrict the access that these agents have. We've started moving more of our work to the US and Europe. We just opened a new customer support facility in Charlotte, North Carolina, and we're really starting to build deterrence, meaning that when we catch someone doing this kind of thing—and we do red team exercises all the time—we don't just walk them out—they go to jail. We're trying to make it clear that if you accept this money, you're ruining the rest of your life, and even if you think it's life-changing money, it's not worth going to jail. These are the things we have to deal with now, and I'm sure the stakes are only going to get higher. John Collison: More verification of physical presence, more segregation and decentralization, and increased deterrence through aggressive prosecution. It feels like in a world full of AI and deepfakes, proof of physical presence is going to become increasingly important. Brian Armstrong: Yeah. By the way, as you might have seen, we're also now going after threat actors in reverse. We're offering a $20 million reward for information leading to the arrest or conviction of the criminals who recently attacked our clients. We've fully reimbursed those clients. We've received a lot of tips from that, and it's been fun working with law enforcement to track down these individuals. The ultimate deterrent isn't going after insiders, it's going after the threat actors themselves. We have to be a tough target. Crypto Trends: Everything Exchange and Asset Tokenization John Collison: I'd like to take stock of everything happening in crypto that might help inform this discussion. Store of value is certainly a very important function; 24/7 trading of assets—I'd include memecoins in this. We've also seen some success in payments so far, and both our companies are seeing rapid growth there. We're also optimistic about the volume of cryptocurrency payments, especially stablecoins, over the next five years. Global access to the US dollar is also a big deal. What else would you add to that list? Brian Armstrong: You've already mentioned a few of the most important ones. Prediction markets, which entered the mainstream during the last election and continue to grow in trading volume, and there are some new things on the horizon that we could discuss. But I think you've hit the nail on the head. John Collison: Cryptocurrency is arguably the foundation for prediction markets. Before cryptocurrencies, we didn't have these. Brian Armstrong: Yes and no. Prediction markets existed before cryptocurrencies, and there's an open question in US law: if you build them entirely on-chain with a self-hosted wallet, do they no longer qualify as financial services? If so, they can be created in a more permissionless manner—and this applies to self-hosted wallets and other areas. Another cool thing about the trading use case is that every asset class is now coming to blockchain. People aren't just trading cryptocurrencies on-chain; soon they'll be trading stocks too. There's private company capital formation, commodities, foreign exchange markets, debt instruments, treasuries—every asset class is coming to blockchain, and we're trying to capitalize on this trend. We coined the term "everything exchange." Coinbase is striving to become a global, liquid marketplace for all asset classes. This is exciting in many ways. One aspect is the broader international reach; there's a lot of demand for US assets from people in many countries. They want to invest in companies like Nvidia, but unless you're a wealthy individual in the market, it's hard to open a US brokerage account. Then there's trading, fractional shares, and you can start doing some perpetual futures and other interesting things. John Collison: So you think, for example, with stocks—now there are American Depositary Receipts (ADRs)—if Americans want to buy German or Canadian stocks, it's incredibly complicated, and they end up having to buy derivatives. And do you think on-chain tokenization is a better form of derivative? Brian Armstrong: Yes, I think a lot of assets will be tokenized, and to some extent it's already happening, including private company capital formation—even individual fundraising, like real estate projects or film productions. In the future, people will also be able to innovate governance mechanisms, such as requiring long-term stockholders to have voting rights. This could be done through smart contracts, requiring holding for at least a year to be eligible to vote. There's a lot of room for innovation in this area. John Collison: What will be the next big use case for asset tokenization? Do you think this is the primary direction? Or are there other, more important application areas? Brian Armstrong: The core application right now is transactions and payments. I believe Bitcoin's inflation-resistant store of value cannot be underestimated. This is a $20 trillion market opportunity—compared to gold, but Bitcoin is superior. I believe Bitcoin will ultimately surpass gold. We are starting to see the beginnings of lending services and capital formation. Decentralized social media is also very interesting. We just launched the beta version of the Base app. Currently, each piece of content published by users is associated with a unique token. Creators own their own tokens, and their value accumulates. Users can purchase tokens, and if they like a piece of content, they can repost it and share in the economic benefits. They can also recreate it, much like memes online, with all the value ultimately returning to the content creator. This primitive ecosystem is fostering interesting innovation. While the specific form is still unclear, the Base app is already showing signs of vitality. The user waitlist is long. These are all emerging use cases. Stablecoins for Mass Adoption John Collison: We both agree that payments themselves can be a significant new application—one that has largely been limited to cryptocurrency enthusiasts for the past decade but is now gradually moving into the mainstream. Brian Armstrong: I'm particularly excited about Stripe's entry into this space because it significantly boosts the industry's credibility. The technology is maturing, but there are scalability issues: users are faced with jumbled payment addresses instead of readable names, and the wallet experience needs to be optimized. Crypto payments should be the most convenient way to pay. Brian Armstrong: What are your current thoughts on the next hurdle to stablecoin adoption? John Collison: I believe building user familiarity will be the key breakthrough. Currently, one of Bitcoin's most valuable use cases remains cross-border capital flows—it truly solves a real problem. If you want to transfer $2 from the US to Turkey, there are almost no products in the traditional financial system that can accomplish this. Crypto makes this easy. We've also seen a surge in demand within the creator economy. Interestingly, app experience and user behavior can form a virtuous cycle. Take QR code technology, for example: this decades-old technology required two triggers: first, Apple natively integrated it into the iPhone camera app, allowing users to automatically identify the QR code by simply pointing their camera at it (this happened in the late 2010s); and second, the COVID-19 pandemic fueled demand for contactless experiences, making QR codes truly familiar to American users. Similarly, stablecoin applications also need to meet these two conditions: first, consumer app support (which is still a work in progress), and second, the formation of user habits. To promote stablecoins, we've even set up a crypto payment experience at the coffee station on the first floor. It's still very unstable and constantly encounters glitches. But once the app experience becomes smooth and users become familiar with it, we believe stablecoin usage will explode. Brian Armstrong: Absolutely. I think you're right. It will be interesting to see whether the ultimate solution will rely on QR codes or tap-to-pay NFC. John Collison: I'm using QR codes as a metaphor for this wave of technology adoption. NFC tap-to-pay does seem like a very likely solution, especially as operating system support increases. Now that iOS has relaxed restrictions on NFC usage, perhaps the Coinbase app will be able to access NFC interfaces? Brian Armstrong: We've seen a lot of excellent tap-to-pay demos, and this area is opening up. However, the on-device Secure Enclave is another matter, not yet accessible, and we'll continue to work on it. We've even discussed testing by mailing payment stickers across entire cities to see which merchants are willing to accept crypto payments. Currently, most use cases are concentrated in cross-border payments and internet-native sectors, where crypto payments are the only viable option. This is because when a global community gathers, using a single national currency can seem strange. My guess is that physical retail stores may be late adopters. Merchants want to save 2%-3% on payment processing fees and are willing to pass some of this savings on to consumers. How Banks Are Embracing Cryptocurrency: John Collison: I agree. It feels like digital use cases will be the first to take off, and we're increasingly rolling out Stripe Checkout experiences that offer cryptocurrency payments as an option. There are a lot of brick-and-mortar retail stores that accept Alipay or JCB. Obviously, accepting the Japanese bank card brand JCB in the US is a fairly niche market. But it's a large enough group of people that it's worth doing. It feels similar here: once you get past a certain minimum penetration rate, not everyone uses it, but not accepting it becomes unprofitable. What are your thoughts on all the banks embracing cryptocurrency? Jamie Dimon said, "Bitcoin is a scam, worse than the tulip bubble. If I were the government, I'd shut it down right now." And now, of course, they're launching their tokenized dollar, JPMD. It's an interesting thing. I'm curious what you think of this widespread trend among major banks. Brian Armstrong: Ultimately, they're responding to customer needs. They'll provide support as long as customers need it. I think there's this constant back-and-forth between banks and cryptocurrencies. They'll say, "We're not sure we like Bitcoin, but we like blockchain technology. Maybe we could build a closed network for interbank settlements." Maybe they don't like paying SWIFT fees, are excited about the concept, and have been running a lot of projects around it, but I haven't seen them fully support it yet. It's like what Clay Christensen calls the "innovator's dilemma." Culturally, it's very difficult for an organization that's profited so much from the legacy system to change. They're probably only partially involved in anything they're doing in crypto, but with all the risks and complexities that come with it. Not many people in their companies come in with that mindset. There's not a lot of DNA within their companies that wants to build crypto products. Just like The New York Times did with the internet, some local newspapers won't be able to adapt to the new system and will disappear, but some of the best newspapers will adapt. Just like media companies now have websites. Banks will embrace cryptocurrencies. Payment companies like Visa and Mastercard are doing great experimental projects with stablecoins. Obviously, I think Stripe has jumped in, which is very smart, and you've also inspired a lot of other people to wake up and do something about it. I think the smartest ones will adapt. From Coinbase's perspective, we increasingly want Coinbase to become people's primary financial account. As crypto eats up financial services, for some of our customers, Coinbase can become a bank replacement, managing their transactions, payments, direct deposits, credit cards, loans, and, by the way, many people won't even really care if it's crypto. They just want the best financial services. If it's the cheapest way to send money to their family overseas, or if they can get the best rewards on this card, or whatever, that's what we ultimately want to offer them. Banks will have to compete in this new environment. Either banks become the infrastructure layer that powers new fintech applications that become the primary financial account for the next generation of young people, or they adapt to this new world, building their own apps or embracing cryptocurrencies. As I said, the smartest banks will do this, and many will be left behind. That's free market competition. John Collison: Companies don't innovate; consumers innovate by voting with their feet. Who in the banking industry has impressed you? Brian Armstrong: Yes, several. I think Jamie Dimon is a great leader—very smart, even though I don't agree with his comments on Bitcoin, but he's a great guy, and we've worked with them a lot. Santander has been great. There are also banks that have really embraced cryptocurrencies, like Citizens Bank, CrossRiver, and Silicon Valley Bank. Will Coinbase become people's primary financial account? John Collison: What if Coinbase became people's primary financial account? Brian Armstrong: This means we take on a greater responsibility and share of people's financial lives. This goes beyond just trading cryptocurrencies. It could mean taking out loans secured by crypto assets, or using a Bitcoin credit card that earns 4% Bitcoin cashback on purchases, or instantly sending money overseas for less than a penny. Therefore, we need to be good at leveraging the benefits of cryptocurrency to update the financial system, not just crypto for its own sake. Coinbase's early adopters were just die-hard cryptocurrency fans. Right now, about 6 or 7% of the world's population has used cryptocurrency—much like the internet did in the early 2000s. We need to reach about a billion people, or half the world's population, to ultimately use it to truly increase economic freedom globally. It has to be something more than just the technology itself. It has to be faster, cheaper, better, and help me do what I want to do. Coinbase won't apply for a banking license and wants 100% reserves. John Collison: I ask this because I've been observing the growth of neobanks outside the US. Nubank is dominant in Brazil, and Revolut is the fastest-growing bank in Europe. Meanwhile, in the US, the largest consumer banks are still largely the same. They're a very similar, recognizable group of players compared to the 1970s. Maybe that's still the case in ten years, or maybe things will completely change. I'm very curious what the neobank revolution in the US will look like. Brian Armstrong: That's a great term, and that's probably how I should describe it. Some people call them stablecoin neobanks or superapps. You could come up with a lot of terms. I think this is our opportunity. By the way, technically, I don't think we'll apply for a banking charter. A core function of a banking charter is the ability to hold less than all funds, known as fractional reserve banking. It's an interesting business model, but it comes with extremely burdensome regulations, making it very difficult to truly innovate and iterate quickly on our products. We don't want to be a bank. Coinbase wants to be fully reserved, not fractional reserve. 100% reserve, rather than fractional reserve, is actually safer for customers because you can't have a bank run. You can even invest assets, especially stablecoin reserves, in bankruptcy-remote assets like U.S. Treasuries. You can build in very strong protections that will allow us to continue to innovate and provide the best customer experience. I think for many people, it could be a bank replacement... or, to use your terminology, the US needs a new bank, as these institutions seem to be popping up all the time in other parts of the world. There's a lot of capital waiting to be deployed in BTC. BTC price will hit $1 million. John Collison: What's your average annual growth forecast for Bitcoin over the next decade? Brian Armstrong: My rough estimate is $1 million by 2030, though of course, there's a wide margin of error for these kinds of predictions. Here are a few data points: Regulatory clarity is starting to emerge in the US, which I think will be a bellwether for other G20 countries. The GENIUS Act has passed for stablecoins, and the market structure bill is currently being debated in the Senate. Hopefully, there's some progress by the end of the year; that would be a huge milestone. The US government now has a strategic Bitcoin reserve. If you'd said that five years ago, people would have thought you were crazy, believing the US government couldn't officially hold Bitcoin. If the US did so (and there's already an executive order requiring it), many other countries would follow suit. We've already seen significant interest from sovereign nations. Coinbase provides crypto services to approximately 140 government entities (including federal, state, local, and international agencies). Governments are increasingly involved. You can imagine the massive pool of global capital. I don't think the regulatory risk will go away, but the significant risk of the government shutting down the crypto industry has been significantly reduced. As for whether the Bitcoin protocol has flaws, I believe it's been thoroughly vetted. We need to ensure it's upgraded to post-quantum cryptography. Bitcoin Core, Ethereum, Solana, and others are all working on upgrades to post-quantum cryptography. The risk list is shrinking, while demand and the amount of institutional money sitting on the sidelines awaiting the next bill are increasing. I've spoken to large institutions that have 1% of their portfolios allocated to Bitcoin, and I ask them, "What would it take to increase that to 5%-10%?" They respond, "Regulatory clarity, that's all." I think we'll continue to see significant capital inflows. The impact of ETFs has been enormous. John Collison: When people talk about institutional money on the sidelines, I think the analogy with gold is very apt, as it's a non-productive storehold of wealth—and I mean that in a positive way, not a negative way. But specifically speaking about institutions, I don't think major sovereign wealth funds, mutual funds, etc. currently hold a significant amount of gold. Isn't buying BTC a bit like buying a gold substitute? But it seems unusual for large institutions to buy non-cash flow assets. Brian Armstrong: It depends on their strategy. There's a theory that suggests a diversified portfolio should have 5%-10% allocated to assets like commodities. BlackRock has actually published several reports and studies arguing that crypto assets should be part of every healthy, diversified portfolio right now, given their interesting inverse correlation with other assets—a relationship that evolves over time. I believe that in five to ten years, most wealth managers or sovereign funds will hold 1%-10% of crypto assets in a traditional, diversified portfolio. How should the average person allocate to crypto? John Collison: If you don't want to allocate a portion of your portfolio to crypto, should you dollar-cost average into Bitcoin or even other major tokens (not meme coins), weighted by market capitalization? If you want to put some money into crypto, what's the right investment strategy? Brian Armstrong: Disclaimer required: I do not provide investment advice. For people just learning about anything new, whether it's crypto or anything else, a reasonable approach is: if you're interested, invest 1% of your net worth (an amount you're willing to lose to learn). John Collison: Within crypto, what should be your allocation? Brian Armstrong: Bitcoin is a good starting point. We have an index called COIN50, which includes the top 50 tokens weighted by market capitalization. I won't name specific tokens, but I think you should hold Bitcoin. If you want to have it as a portfolio, you can also hold index funds. What you should do is experiment and use crypto: spend at Stripe merchants, use the Coinbase credit card, publish content on the Base app and start earning crypto, shop at stores that accept crypto, and so on. People should use crypto, and part of that is investing. Eventually, as stocks are tokenized, people will unknowingly use crypto when they want to get loans. Just like people may not understand how electricity works, but they can turn on a light switch. What does the GENIUS Act mean? John Collison: Now that we have the GENIUS Act, what does it mean specifically? What can we do now with the GENIUS Act that we couldn't do before? Brian Armstrong: I'll start with stablecoins and then move on to the GENIUS Act. Stablecoins are essentially fast, cheap, and global payment tools. We can now make payments anywhere in the world in under a second for a fraction of a cent. This is unique; no other payment network can be fast, cheap, and global all at once. The GENIUS Act mandates that if you want to issue and operate a stablecoin in the United States, you must meet certain requirements to make it safer and more reliable. One of these requirements is that 100% of reserves must be backed by U.S. dollars or short-term U.S. Treasury securities, no other high-risk assets can be held, and regular audits must be conducted to demonstrate compliance. That's the basic regulatory requirement. But the more significant significance is that it's codified into federal law, giving it the seal of approval, signaling that "this will be a trusted, legal, and permitted technology in the United States." This has triggered a massive demand from every company involved in payments—that's everyone. They realize they need to develop a stablecoin strategy and figure out how to navigate this because the US government has endorsed it and it's going to become a trend. John Collison: I've noticed an incredible surge in interest over the past two or three months. Brian Armstrong: It's like a gold rush. Everyone's rushing in to try to figure out what this is all about and how to save their companies money. Many companies are trying to pay developers in markets around the world. In the US, Europe, and some other countries, the existing system works well. But there's a long tail of countries where people don't have access to good financial services. Payment rails are like black boxes, with no clear understanding of the final amount being sent, and they're being charged exorbitant fees. If there were a fast, cheap global payments network, it would democratize financial services, giving anyone with a smartphone access to a more level playing field, where their wealth wouldn't be eroded by inflation. It's a powerful tool for progress, property rights, sound money, and economic freedom. That's the opportunity that stablecoins present. Now we need to finalize the market structure bill, covering non-stablecoin crypto assets and the question of what are and aren't securities. How Crypto Influenced US Elections John Collison: You must have some interesting stories about the tortuous process of getting the GENIUS Act passed? Brian Armstrong: I realized that for a long time, we were trying to make progress in Washington, pushing legislation, and nothing was happening. Someone told me, “Congress is good at two things: doing nothing and overreacting in times of crisis.”
We realized we had to generate the political will to make this happen. 50 million people in the United States had used crypto, and we said, “Let’s try to organize.” We funded a 501(c)(4) nonprofit called standwithcrypto.org, and got 2 million Americans to raise their hands to say they wanted to elect pro-crypto candidates.
I remember talking to the policy team and I said, “Let’s give every politician a grade from A to F for how they would perform in the November 2024 election.” The policy team’s job was to build relationships with politicians, and they suggested a list of crypto supporters. I said, “No, I want to give crypto enemies an F. Who got an F?” I could see them sweating. We need some people to win elections because of crypto votes, and some to lose elections because of crypto votes. John Collison: Crypto is known for being more combative in Washington than the tech industry has historically been. We have friends and we have enemies. That's why we launched the Scorecard and the "Stand with Crypto" campaign—Fairshake has been more relevant in some of the recent battles. Did you lead that? We're not being so timid and are taking a clear stance? Brian Armstrong: A lot of people are involved, and I can't take all the credit, but I've seen a shift in the crypto industry. The traditional policy advice we get from people in the tech industry is, "You need to go out there and build relationships and be the good guys. Then you should form a trade organization and have them play the bad guys, fight and write pointed op-eds, and so on." But somehow, the people we find in these trade organizations just want to be the good guys. I keep wondering: Who's going to get involved in political fights on platform X and attack people who are doing bad things? They just want to have a polite conversation behind closed doors. As the election approached, I realized that if no one was being the bad guy, maybe we should. I don't think we did anything too crazy, but by Washington standards, it was pretty crazy. We made it clear that we were unequivocally pro-cryptocurrency, regardless of left or right. We wanted to elect pro-crypto candidates and get those who were anti-crypto out of office. This really shocked people in Washington, where everything is so partisan. There was a huge debate right before the election, and I got angry calls from both sides: "How can you donate to this person?" We said, "Because they support crypto." Then the other side called: "How can you donate to that person?" I said, "Because they support crypto." We are essentially single-issue voters. On the one hand, I think we may have irritated both sides and won't be friends after the election. But on the other hand, if you're attacked, you've hit your mark. We're clearly a non-political company, but we're unabashedly pro-crypto. I have to remind many people that "apolitical" doesn't mean 50/50. It means we will support pro-crypto candidates, regardless of party affiliation. Not every election is necessarily 50/50; it might be 60/40 this time and 60/40 the other way around. This was a huge shift in mindset, a bit of a contrarian approach, and it helped elect the most pro-crypto Congress. The work we and many others did—I don't want to take all the credit; other firms were involved, too—laid the groundwork for passing this legislation. We showed people in Washington that there was no constituency against crypto, that Americans wanted crypto, and that supporting it would get elected. It was just good politics. Accredited investor standards, US Districts, etc. John Collison: Once the market structure bill passes and the GENIUS Act takes effect, do you have any questions for Washington? Brian Armstrong: The previous administration did try to stifle the industry—but now that we've gained some knowledge about policy, that complacency can be dangerous—after all, things are unpredictable, and outcomes can be both good and bad. Hopefully, we can get the market structure bill done. It's made me think about what else we can do to help update the financial system. Our mission is to increase economic freedom. One example is that I think accredited investor laws are somewhat unfair. It seems backwards to say that only the wealthy can invest to get richer. Perhaps a financial literacy test could replace accredited investor standards based on net worth or income. I'm excited about the idea of special economic zones. They've worked well in places like Shenzhen, China, and the UAE. We have so much regulation, so why not set up a sandbox in one area to test new ideas? Perhaps around crypto assets, biotech, drones, or supersonic aircraft? It would be great if we could set up 10 federal lands in the US as different special economic zones. A company called PROSPERA (in which we invested) built a prototype in South America and is now trying to roll it out in the US. There are many other areas. Brian Armstrong: Do you have a favorite policy issue you'd like to promote in Washington? John Collison: Probably aviation. I'm super excited about the new MOSAIC rules (modernization of special airworthiness certification)—in general, the current administration has a deregulatory agenda, but they need to actually do it and pass new rules. They just did this in aviation: you can't just build an airplane and sell it to the public; you have to go through a series of FAA approvals, which is a very cumbersome process that takes years and has very rigid regulations. For example, electric airplanes can't be certified because the regulations require "the aircraft's engine burns gasoline, etc." Last month, U.S. Transportation Secretary Sean Duffy announced a new aircraft certification system that significantly streamlines the process. I believe this will lead to more bottom-up innovation in the sector. This was originally on my policy wish list, and now it's a reality. I believe there will be even more breakthroughs in light aviation—a sector where the United States once held a clear lead but has stagnated for decades. By the way, you're also aware of the current administration's executive order directing the Federal Aviation Administration to allow supersonic aircraft that don't produce a perceptible sonic boom (meeting certain decibel standards) to fly in U.S. airspace. Brian Armstrong: That's really exciting. I'm really looking forward to getting to my destination even faster. Another worthwhile reform: Currently, the FDA takes an average of 10 years and $2 billion to get a drug to market, requiring three phases of clinical trials to verify safety and efficacy. But if a drug has passed Phase 1 safety trials, why shouldn't doctors prescribe it? Especially for terminally ill patients who have no other options? You know it's safe, you just don't know if it works, and let doctors make that decision. This will get the data to market faster. A lot of people die every year. There are a lot of things like this that could be improved with a reasonable deregulation movement. John Collison: I think everyone agrees that accredited investor rules are a bit silly. They're both exclusionary (if you don't meet the minimum net worth test), and as we've seen, wealthy people aren't necessarily savvy when it comes to investing. Theranos' investor list is a who's who of wealthy and accredited investors. At the same time, if it were completely liberalized, a whole host of scams and fraud would emerge. The United States has some of the best capital markets in the world. When I look at some of the more liberal areas of crypto, I think rugging and people seeking zero-sum behavior are some of the worst things that we shouldn't allow to continue. When you think about alternatives to accredited investor rules, what's the framework for liberalizing investment while maintaining the best qualities we have today: high integrity and strict rules of honest and fair dealing? Brian Armstrong: That's a great question. Fraud should be prosecuted to the fullest extent of the law. You can require disclosure: if you want to raise money for something, you have to provide certain information. If you get something material wrong, especially if you intentionally defraud investors, you should go to jail for it. But that doesn't mean only wealthy people should be allowed to do that. We also don't want to create the misconception that government approval means it's a good investment. Many public companies—theoretically approved by the SEC and others—have lost 85% to 90% of their value over the past few years, like some biotech companies (I won't name any names). You can lose all your money in the public markets. We need to foster personal responsibility: without risk, there's no reward. The government isn't there to tell you what a good investment is; you still have to make your own judgment. But they can help by ensuring that the information this person is giving you is true. If they lie to you, tort law allows you to recover damages. I'm probably more inclined toward the free market than most in this regard. Sometimes the best consumer protection is competition. If you have a car company that makes terrible cars that break down frequently and are expensive, the best solution is for another company to compete and offer a better alternative. A lot of people, even if they don't have financial literacy, have street smarts and know when a scam is happening. They know when three friends tell them it's bad. John Collison: Are you taking any action on Coinbase regarding some of the token hype scams? Or are people adults supposed to evaluate their investments for themselves? Brian Armstrong: We debate this a lot because it's a bit like the App Store or even Amazon. Let's say someone tries to sell a fraudulent product on Amazon, Amazon might want to remove it. But let's say it's a two-star or three-star product—some people like it, a lot of people don't, but it's not a fraud. You should allow people to make their own choices and see it has two stars, but if they want to buy it, they can. Perhaps vendors can improve it. We're trying to adopt a similar philosophy: we want to list all legitimate products (fraudulent ones are illegal) and provide customers with information to help them make better decisions. We've tried various approaches, but we haven't quite nailed it yet. I've considered on-chain review systems or reputation scores. We've released an API that allows anyone to query a crypto address (which could be an asset or a person) and get an on-chain reputation score. This is an early prototype. Eventually, you'll have something like a FICO score (note: a credit score created by the Fair Isaac Corporation that lenders use to assess a borrower's creditworthiness), Amazon, or Yelp rating. You need to ensure that if I'm trying to send some USDC to John Collison to buy a beer, I need to be sure it's the real John Collison and not an imposter. These tools built by the private market will help with this, allowing governments to go after fraudsters. 150 fiat currencies will be replaced by Bitcoin and digital dollars. John Collison: You mentioned product-market fit for crypto assets in emerging markets, and there's very strong product-market fit there. In markets with historically high inflation, people have traditionally tried to move their money out, trying to convert it into something they perceive as a better store of value, like the US dollar. This behavior has been going on for decades. Perhaps the existence of black market exchange rates in countries is an indicator that demand exists. Many of these governments don't always approve of this, preferring that all funds remain in their national currency. There's a gap between what the government wants and what the people want. How will this play out? Who will win? Brian Armstrong: You're right. We often walk a fine line when entering a new country. We really try to work within the existing system, typically obtaining licenses and establishing local entities for regulated financial services products. I'll talk more about self-custodial wallets later. We talk to different parts of government and hear different voices. Often there are parts of the government that are hesitant about crypto assets, sometimes the central bank. Other parts of the government are actually very supportive—they want to digitize the country and create economic opportunity. But the people clearly want crypto assets. In many parts of the world, Coinbase is able to work within the system and provide what people want. But in other parts of the world, it's difficult or impossible for us to enter and establish a regulated financial services business because these countries don't have a clear regulatory framework, or they only give banking licenses to their cousins and bribed friends, which is illegal for US companies to do. You can't operate effectively in many of these places. So we also have a self-custodial wallet, which isn't regulated as a financial services business because we never take possession of customer funds. It's regulated more like a software product, like a messaging app, and you can just launch it. Just like storing your keys in 1Password, it's essentially a software product. This allows us to enter some other markets. You asked where the future is headed. In some markets, I think the top five or ten government fiat currencies are likely to remain. I don't think they'll disappear. But the other 150 government fiat currencies in the long tail should be replaced. They've underperformed, are often abused, and erode people's rights. I think there's a strong case for replacing them with currencies like Bitcoin and USDC. For example, Ecuador has done something similar—they've pegged their currency to the dollar. Honestly, it's almost like an act of civil disobedience in all of these countries. In places like Venezuela, introducing self-hosted wallets that allow people to hold dollars might technically violate the law. I think I can accept that. It's a form of civil disobedience—because people are in a really dire situation because their government is stealing wealth through inflation. And that's a good thing. A digital dollar would clearly be very beneficial for the United States, maintaining its reserve currency status and demand for Treasury bonds. Bitcoin's use in the United States is also a good thing, as democracies around the world are currently facing a problem with deficit spending. To get elected, you promise more free stuff, which drives up costs. How can you balance the budget with discipline? Bitcoin is part of the answer. It acts as a check and balance on deficit spending. If it gets out of control too much, people will flee to Bitcoin in times of uncertainty. If deficit spending is brought under control, people will continue to use fiat currency. I don't want to overstate this, but I think Bitcoin is, in some ways, an extension of Western civilization or the American experiment. But if we completely lose discipline, the dollar will lose its reserve currency status. I hope not, because I'm American and I believe America is good for the world. I'd rather people turn to Bitcoin than the Chinese yuan. Thankfully, in this new economy, we have Bitcoin as a check and balance. Will the US dollar lose its reserve currency status? John Collison: How can the US avoid losing its reserve currency status? Brian Armstrong: Don't inflate the dollar. The debt-to-GDP ratio is generally the one to watch. We're currently around 150 or 170. Historically, when the UK or the Netherlands lost their reserve currency status, they were in the 200-250 range. The US is in a historically dangerous range. It's hard to see where the political will would come from to do this. I hope Bitcoin can be part of the solution. We'll see. The Success of US Dollar Stablecoins John Collison: Why haven't non-US dollar stablecoins succeeded? The dollar's share of global stablecoins is over 95%, far higher than the dollar's share of global currencies. Why is that? Will it last? Brian Armstrong: If you can access anything permissionlessly, you'd use the most trusted reserve currency. That's probably why. Europe deserves credit for putting in place—sometimes Europe is a leader in regulation, but that's not necessarily where you want to lead. They did put in place a regulatory framework before the US. There is a euro stablecoin, but it's very small and hasn't gained much traction. I think the dollar is filling a need. Another smaller but potentially interesting thing is called a flatcoin. I don't know if you've seen these, but rather than being backed one-to-one by the dollar (which of course has some inflation, about 2% to 5% per year), they try to track the CPI (Consumer Price Index) to maintain its purchasing power. So if a Big Mac is worth one dollar today, ideally a stablecoin should be able to buy it for one dollar in 10 years. There's a company called Ampleforth that built a token called SPOT that has been tracking the 2019 dollar since 2019 and is now worth about $1.26. It's had its ups and downs, but it's actually been pretty stable. Economists often debate whether you want 2%-3% inflation every year to incentivize people to spend money. It's nice to have something that preserves purchasing power for contracts and pricing; you want the price to remain constant in the future. Inside Coinbase Ventures: The Birth of USDC and Base John Collison: Coinbase has institutional products, the USDC stablecoin, brokerage, L2 Base—you're everywhere. This can be effective in this rapidly evolving industry. How do you focus? How do you allocate resources? How do you decide what to cut? Brian Armstrong: It depends on how you calculate it. Stripe has many products in the payments space. A lot of this comes down to the founders. Sometimes I can't help but have a lot of ideas. In fact, companies often push back against me, saying we need more focus. I say, "Well, you're right, we should focus." Focus has its advantages. Having multiple revenue streams has its advantages. When one goes up, another goes down. Having smaller teams working on various things has its advantages. USDC and Base started with teams of three to five people, and USDC probably added $800 million in revenue to our portfolio over the past year. I never imagined it. John Collison: You actually didn't imagine it? Wasn't it obvious? Brian Armstrong: No, it wasn't obvious. We have a system internally where employees can come in twice a year and pitch venture bets they want to make internally. The model we're trying to build for internal venture capital is one where unanimous consent isn't required. At most companies, you need your boss, your boss's boss, all the way up to the CEO to approve something. That means one "no" and you're out. At Coinbase, venture capital is like going to any product leader, a handful of hand-picked smart engineers, and me and a few others. If you get a "yes" from any of us and funding from their budget, you're greenlit. It's like pitching to a group of internal VCs. This means Coinbase has a much more risk-taking culture. We try a lot of ideas, some don't work, and we have to shut them down. It's hard; how do you have the courage to cut back on projects? At a startup, you run out of money and can't raise the next round. So we have to simulate these investment rounds. Occasionally, they completely exceed expectations. I'll tell you a secret: I actually voted against the USDC project. Because I read it and said, "Ah, it's not as decentralized as I'd like." I had some rationalizations in my head, and thankfully someone else on the team voted yes and funded it from their budget. I was completely wrong. I often use this as an example of how the best ideas don't have to come from me; they can come from everyone in the company. We have to try bolder ideas. John Collison: What about Base? Brian Armstrong: Base is another example of a venture bet. It started as a small thing. Jesse came to me and said he wanted to start a Layer 2. I didn't have any specific ideas about how to do it. All we did was fund it and protect it. New ideas can sometimes be fragile inside large companies. I remember you saying something really insightful about avoiding the "embrace suffocation" of large companies that stifles innovation. The only thing I did well was probably protecting it, but most of the time I had no idea what Jesse was working on. He iterated on three or four ideas, and Base was the fourth thing he came up with. It finally started to take off, becoming the number one Layer 2 solution on Ethereum. And now here's the newly launched Base app. As CEO, my job isn't so much about coming up with the next big idea as it is about creating the right environment so that good ideas can happen and be nurtured, and bad ones can eventually be shut down. We have some discipline in that regard. The most difficult times for new venture bets are when the core business is threatened or in a downturn. The core business is always under threat. John Collison: So that's why it's the core. It's a successful business, and others want it. Brian Armstrong: That makes our decision-making very healthy, but it's a healthy tension in the organization. Often people say the core is underfunded and threatened. How can I allocate more? I want to divert resources away from that thing that's not generating revenue yet. But sometimes I'm on the other side, saying I want to fund the core, but we should also allocate 10% of our resources to these venture bets. Because five to ten years from now, we need the next chapter. Sometimes there's a distinction between founders and operators. If you have too much founder energy, they sometimes blow the place up. If you have too much operator energy, they're just bored and don't do anything innovative anymore, but they run it very efficiently. John Collison: It's like a series of layered S-curves. Brian Armstrong: I'm very lucky at Coinbase to have Emilie Choi as President and COO. She and I make a great team. I think we both do things naturally in any way. I try to be more founder-oriented, providing risk tolerance, and venture bets. She's made Coinbase a well-run company, and she's been saying things like, "Brian, if we just focused on our core business in Europe, we could probably generate another billion dollars in revenue." So, it's a great combination. Coinbase is researching prediction markets. John Collison: Do you use prediction markets internally? Brian Armstrong: Not yet. John Collison: If you're a believer in crypto, shouldn't you? Brian Armstrong: Yes. We're integrating and researching prediction markets. We don't have complete clarity yet, and the new CFTC chairman hasn't been confirmed. US citizens aren't allowed to use on-chain prediction markets yet. Every market that's allowed to operate in the US must be approved by the CFTC. So if there are some interesting internal bet projects, we don't have the resources to acquire everything. But hopefully it will become easier at some point.
John Collison: Once they're approved, will I see prediction markets on projects like that?
Brian Armstrong: That's a great idea.
AI and Beyond
John Collison: What other ways are we, as crypto believers and AI believers, operating differently than companies founded 10 or 20 years ago?
Brian Armstrong: Like many companies, we're diving into AI as deeply as we can. We're implementing a lot of best practices. I've made it mandatory for every engineer to use Cursor and Copilot. Coinbase is now about 33% of its code written by AI, and the goal is to get to 50% by the end of this quarter.
John Collison: As we start to get more into the crypto world and crypto becomes more relevant to payments, what advice do you have?
Brian Armstrong: The crypto space is never as good as it seems, and it's never as bad as it seems. You have to stick with it for the long haul and go through the ups and downs. It's very cyclical.
Coinbase really wants to develop more open standards, and there's a trade-off. Because
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