Brian Armstrong. Brian Armstrong is the co-founder and CEO of Coinbase, which is the largest exchange here in the United States. And according to Bill Gurley, he's hoping for more regulation so he can pull up the ladder behind him. So let's start there. We're here for Bill Gurley's. Generally speaking, your reaction?

I thought that was such an amazing talk. I was like cheering backstage when I heard that. I think we need more of that. I haven't seen somebody laid out that clearly in a while. He's totally right. I mean, regulatory capture is a huge drain on innovation. And the incentives are set up in kind of a bad way.

If you take our company, for instance, if you ask me just personally, I think there should be less regulation around this. I think it would create more innovation. Society would have to tolerate greater variance. There'd be more scams. There'd be more highs. There'd be more lows. But the truth of the matter is a lot of times you have regulation and it ends up having the opposite of the intended effect.

So we don't live in that world where people are going to say, "Let's just be hands-off and do nothing." So when I go to D.C., the Overton window of discussion is basically we're going to do the regulation for you or you can engage and have a say. And so of course we're going to take the other side and say, "Okay, let's try to help craft that regulation." But if you ask me just personally as a citizen, there should be less regulation, I think.

What do you think the regulation should be as we kind of get through the boom-bust cycle, all the scams and fraud that occurred? And now it seems like the enforcement has gotten particularly intense. What would be a balance that would protect us from going, protect us going forward and eliminate the massive amount of grift, the massive amount of crime and stealing and fraud that happened in crypto that we all witnessed and is undisputable, but then also would allow us to innovate and not have it all go offshore?

Because you said, "Listen, if you don't want us here, you opened, I think, on some foreign islands, some entities, you're ready to walk out of America, I understand, if they don't make great regulations." But we're not leaving America, that's for sure. I mean, this is our biggest market. I'm an American.

We started here. Well, if they delisted everything but Bitcoin and Ethereum, what would you do then? The thing is, I don't think that's in the realm of possibility because that's not what the law says. So we can start with what I think regulation could be or should be, and then let's talk about what the regulators are actually doing because it's a little bit different.

So the actual regulation that would allow this industry to be built here in a safe way, but also protect the innovation, it would do things that are actually kind of similar to the traditional financial services industry. So you would have some basic rules in place around, "Okay, you need to get these audits complete.

Washed trading is illegal. Let's make an actual process for somebody who wants to register a crypto security, and it could trade on a broker-dealer or these kinds of things." So these are actually not rocket science. They're just kind of copying a lot of the best practices like AML, KYC, those kind of things from the traditional financial services industry, and centralized players in crypto should have to follow those.

Now, if you're doing a decentralized thing, I don't think that's a financial service business. You're never taking possession of customer funds like these decentralized protocols or self-custodial wallets. I think that should be treated more like the software industry, and the centralized players should be more regulated. Now, you can also do things like have a sandbox for innovation and say, "Okay, if you're a startup and you can't afford $20 million a year in legal bills, you're under a certain amount, then you can operate in this sandbox." And there's other things other countries have done.

What's actually happened is not quite that, although there are some good bills going through Congress. Unfortunately, we have a regulator, the chair of the SEC, who's kind of weaponized the agency for his own political purposes. Gary Gensler. Right, along with Elizabeth Warren, who they just don't want crypto to exist in the United States.

Isn't their argument, "Well, just register like we all do when we sell securities?" And what's your best argument for why crypto shouldn't just do what we all do every day, which is register securities? I'm all for that, yeah. I mean, there should be a robust, healthy market to trade crypto securities in the US.

There is not currently a way to register. And so they've been sort of talking out of both sides of their mouth and then saying, "Hey, just come in and register," and then you see these exchanges come in that have never traded a single coin as the ones that are propped up as the ones that are following the rules.

So I think what their true intention or belief is behind the scenes, and I'm speculating a little bit here, is they just don't want it to exist. And so they're trying to cast a shadow over the whole industry to make it difficult. They're just sending subpoenas and well-known notices.

Why don't they want it to exist? Why? I believe it's because--and again, this is just me speculating a little bit. I think it's because they don't want to lose power. They think the government should run financial services. They have their hooks into the big banks. They can pressure the big banks to close accounts on--you know, if you have the wrong political opinion or you're in the wrong industry, you're in oil and gas or whatever the flavor of the day is.

They want to be able to pressure companies. Because they can't get it done through Congress, they want to pressure it through the big banks. And crypto--in America, people should be free to have control of their own money, to use new technologies. It's fundamentally anti-American what they're doing, and I think next year in the elections, we need to make sure that all voters and people who are pro-innovation, pro-technology, vote people out of office who are trying to curtail our freedoms around crypto.

Their counterargument would be that your industry, which you're the largest player in, stole a bunch of money from consumers and perpetrated tens of billions at a minimum of crimes. And so they would not say they're doing it to control. They would say they're doing it--I'm not saying this is my opinion, but they said they would be doing it to protect customers.

So you've had tons of fraud. You had issues inside your own company with people pre-trading coins before they were listed. Yeah. Well, that wasn't us. That was an employee who got convicted. Yep. So the space, you would agree, is rife with crime. So if they want to--and that's their counter.

So respond to their counter. What's true about what they say? Well, they're absolutely correct that this industry has attracted some really bad people. I will admit that. If you look at the beginnings of any new technology, the Internet, there were lots of scams. Even in traditional financial services, we have Bernie Madoff and Exxon periodically.

So what you should do in a free society is if somebody commits fraud, absolutely that's what the justice system should do is go after them, create a deterrent, put them in jail. Sam Bankman Freed should go to jail. It does not mean that the industry should be outlawed. And one of the really dangerous things that's happening is that the Constitution says that Congress creates the laws.

What's happened is that we've created these agencies, and because they can just send subpoenas to everybody or publish these guidance letters-- this is kind of the administrative state, if you will--they are de facto creating laws. Other industries, like in the FDA, if the FDA puts out a guidance letter and you don't like it, what are you going to do?

It's a de facto law. So there's an interesting constitutional argument around this of like, is the administrative state overreaching? And I think we've seen that in this example with the SEC. Well said. But isn't one of the fundamental premises of Bitcoin, blockchain technology, that we can wrestle away control from the government, and so you are de facto putting yourself in this kind of opposing position to the government, because you live in a country that the government has the laws and the ability to create new laws and enforce those laws upon you.

And ultimately, crypto is going to be challenged by the fact that it is a challenge to centralized governments. Yeah, I mean, that's exactly right. Anytime you create a startup and you go up against some big incumbent, there's going to be a shift of power. And in the U.S., the government enjoys this monopoly on issuing the currency.

In the U.S., our banks are more privatized than, say, China or most other countries, but they're quasi-nationalized in the U.S. I mean, we talked about the revolving door and all the kind of oversight, and like a bank cannot launch a new product without government approval, so how really private market is it?

I think Bill Gurley showed that graph of like, there haven't been any new banks really created since Dodd-Frank. So it's a quasi-nationalized industry. Of course, some people are going to be upset about losing the power of that, but in America, this is a free country, and American citizens should be free to use any technology that they want.

They should be free to use cryptocurrency. And as long as you're not hurting somebody else, that should be protected as a freedom here. So what's the path, Brian? Because it seems like what you guys have had to do, you and others, basically use the courts to beat back the administrative state.

Do you want to talk about that process? And one example is this Bitcoin futures thing that just-- I'm not even sure if it was resolved in the last few weeks or not. There was a pretty important ruling. Do you want to just update people about that kind of stuff?

Yeah, well, so that is one of the great things about America that makes me bullish on it, is that we do have these different branches of government that are such a great check and balance. And you're right, the judicial branch has been kind of my favorite branch of government in the last few months.

And they've really kind of--the SEC has gone zero for three in the courts. The courts kind of keep upholding rule of law, which has been really great. So there's been a handful of cases. There was the Ripple one, there was the Terraform one, which agreed on this idea that the underlying cryptoassets themselves were not securities.

That's a very important fact, by the way, in our case with the SEC. And then just recently there was this Grace Jail Trust ETF, and the judge ruled that the SEC was arbitrary and capricious and unlawful in not approving their application. This is what you mean when you say they're just de facto passing laws where they don't necessarily have the rights to do it.

They're blocking free enterprise. They're blocking the ability for you guys to just do business. Yeah, and unless you're a big company like Coinbase, you don't have the legal budget to kind of go to court and fight these things out. And I can tell you as a public company, I talked to a number of other people, and they were like, "Oh my gosh, you can't sue the SEC or engage in litigation with them.

You're a public company. You have to settle. You have to settle." And I was sort of--the settlement option on the table was to essentially delist everything other than Bitcoin. And so that would have been the end of the industry in the U.S. It was an easy choice. Of course, if we think the law doesn't say that, we're going to go to court.

So--oh, go ahead, David. Yeah, so I want to ask you about use cases, Brian. So I think we've had Bitcoin now for over a decade. I think it's been volatile but I think proven very robust. No one's been able to double spend a Bitcoin. I think for store of value, I think that use case is pretty much proven.

Then we had the rise of Ethereum and this idea of a world computer, and there was a lot of talk for a while, especially during the very frothy, sort of bubbly period, that there'd be all these use cases that would be built on the world computer. People might even be running social networks on them, stuff like that.

I think there's sort of been a correction from that. I mean, I think people now sort of realize there's certain-- there's a lot of applications where it just makes sense to use a centralized database. Blockchains wouldn't be efficient enough for that. I'm kind of wondering at this point, where do we stand in terms of use cases being proven out beyond the original Bitcoin store of value?

Like, what are the other big applications that have either been validated or that we should expect to be built on top of all this infrastructure? Yeah, so I'll run through a couple of them that are there already today and then there's a couple on the horizon. Obviously, trading was this first use case.

Then we saw things like stablecoins have actually gotten quite a bit of adoption. There's about $150 billion or so locked up in stablecoins, useful for payments, cross-border stuff, all kinds of things. DeFi obviously got to--I think it's probably at about $50 billion total value locked up in that, which is meaningful.

I wouldn't say it's been mainstream by any stretch, but it's certainly material. Even NFTs got to a pretty--I think it came down like 90% plus, but it's still--it's in the tens of billions. So those are things I'd say are--they worked, and I think they'll grow over time. I'll talk about what I think could unlock that next wave of growth too.

But there's a couple others that are on the horizon. So decentralized identity, ENS is probably the most popular one. There's only been about 3 million or so people have used ENS so far, but you see it show up a lot. Explain what that is. Well, ENS is the Ethereum name system, so it's a decentralized identity, so you can control your own information online.

It's not like using Google or Apple or a big company. So my Twitter ex-profile, my Facebook profile, this is who I am. I can prove it. Yeah, and this is kind of the vision of Web3 is that if everybody has their decentralized identity, then you can now create a follower graph.

You could make posts associated with that, like text, video, audio, to make a decentralized social network. Artists could have a direct relationship with their fans and have provenance. If you're CNN and you want to publish an article, it can be cryptographically proven that it came from that account. It's not like a fake GPT.

To build on Sax's question, why has crypto as an industry and the entrepreneurs there done such a terrible job at making it easy for consumers to use the product? I know that's something you've really spent a lot of time on making this easier and trustworthy, but we're in the second decade here.

If you ask somebody to do what you just said, create a decentralized identity, they would not even know where to start. Can you talk about why that blocker exists? Yeah, so I do think there's a few things that can help unlock this next wave of adoption. UX is one of them.

It starts with what we started with at the beginning. Pretty much every crypto startup is just getting a subpoena right now, and that's not fun, especially if you're two kids with a laptop and a dream, and your parents are worried you're going to go to jail or something. The regulatory apparatus has been quite bad, and I think that will hopefully shift here in the next few years as we get Congress to act, or a new SEC chair, or CFTC, or someone.

But put that aside. The other big blocker has been the scalability of the blockchains. So every transaction on-chain is still--if you do it on layer one, it's anywhere from $5 to $25. It takes anywhere from a few minutes to an hour to confirm. So that's not going to work to really build decentralized applications where every upvote or like or post has to happen on-chain.

So we're getting now to layer two solutions, which is sort of like the internet going from dial-up to broadband, and Coinbase is trying to help that. We launched our own layer two solution called Base recently, and it gets the cost and the speed down by about an order of magnitude.

The metric I've been tracking internally and I kind of push our team on is we need every transaction to get under one cent in one second. That feels like a threshold where we'd see an explosion of new use cases. The last one is the UX, as you put it, and today it's kind of remarkable actually how many people have used these things like DeFi and NFTs because the process to actually use it is crazy.

It's like you buy the crypto on Coinbase. Sometimes you'll move it to a Chrome extension. You have to connect your wallet into this thing. You have to know what private keys are. And so if we can just make that where it's sort of like a WeChat app or something where you're instantly connected in your wallet and your identity when you load it up in your browser or equivalent self-custodial wallet and it's just one click and it's done, that's what we need to get to as an industry.

Scalability, UX, regulatory improvement. At the core, and this is where you and I, you've been on this week at StartupSaving three times and we've had deep discussions about this, the core of financial regulation in the United States is based on accredited investors, qualified purchasers, which are 6% of the country, and 94% of people in the country are not allowed to participate in the wealth creation that everybody on this stage has benefited from, many people in the audience have benefited from, which is the formation of companies.

It sounds crazy that we have not evolved this since the 1930s. Would this entire problem be solved if we could have an accreditation test, a sophistication test, where if you passed it, like a driver's license, you could get in the car and drive it knowing the responsibility it takes?

We could simply give people a test and make them sophisticated investors and then if you wanted to buy cryptocurrency or startups or real estate, you would be allowed to do it. Yeah, I know you're hot on this idea and I think the key part about what you said is it's not based on your net worth, it's based on passing the test.

I think that's a good idea. By the way, I think accredited investor laws are sort of an example of what I was saying earlier about regulation that had an unintended effect where it was trying to protect people, but it actually made it illegal to get rich unless you were already rich.

It was like this incredibly exclusionary thing. So anyway, a version of it that was not based on net worth I think could be good. I'm not opposed to that. An economics professor making $150,000 a year would not be able to participate in startups or crypto or whatever, whereas somebody who inherited a million dollars would.

It's crazy to think that that law exists. I agree. One of the things that you need for a vibrant ecosystem is a lot of practical thinking sometimes. And just having been around crypto since 2011, my observation, I just want your reaction, is too many people are caught up in the philosophy of being unplugged from the system and being unavailable to the man and all of this bullshit.

And all it does is actually create shitty products actually because people don't think about wanting to get to 500 million people. People like it when it's used by 5,000 people because there's this weird culture of like, "Let me just build for myself and my nine other friends who want to live off the grid." I really believe that crypto struggles with that.

There are a few people like you who are like, "I'm just a practical, ambitious person who wants to take it to every single person." And I just want your reaction. Do you see that? Did you see it before? Is it changing? It's an interesting point. I mean, there are a lot of people that are the early-- it's just like crossing the chasm or that book, right?

The early people who joined these things, they really don't like the existing system. They're a little quirky. They have higher risk tolerance. And you do need to get into bigger concentric circles to cross the chasm, right? And the internet was the same way. I mean, the early internet was weird, right?

And people would compare that to New York Times or watching cable TV, and they'd be like, "Oh my gosh, this is so illegitimate, like these silly blog posts and stuff." And it slowly became bigger than the traditional thing. You guys are an example of that. So I think crypto will get there, but yes, there has to be a willingness to bring in the next round of people and the next one, and maybe they're into art or maybe they're into just earning a living and paying their family overseas.

They're not even into crypto itself for some libertarian paradise. Yeah, and I think-- exactly right. I think this is sort of what explains the massive complexity. Only somebody who wants to minimize the market would create a nine-step process to be able to do something. Because the average smart person would say, "That should be two steps.

That should be one click." But doesn't a lot of that complexity arise from the sort of-- the substrate, which is you're building on top of blockchains, and people want that decentralized, like trustless sort of layer? I mean, isn't that-- I mean, I think all these companies could be doing a much better job with UI.

I agree it's a problem, but does it arise from the limitations of the tech stack? Yeah, well, remember, it's just like people used to only write desktop software, like Microsoft Office, and then Google came along and they're like, "Hey, what if we could do everything in a browser?" And Google Docs and Sheets was initially way worse than a desktop software.

It was always going to be slower because you're building on a web stack and all this. And the tools got better and JavaScript engines got better, and I think that's the-- broadband happened. I think that's the era that crypto is going through, and it's our responsibility as the companies in the space to make this happen.

No one's going to do it for us. There's all these competing protocols. There's big egos. There's personalities. We've got to come together, make the tools simpler, integrate them, make them interoperable. This is where I feel like I could have done so much more over the last five years. Same happened in hardware earlier.

What's that? Same happened in hardware early on. And one of the big things I always try to do-- I know we have these court cases going on and stuff like that, but I always try to make sure-- and I tell the team this too-- is we have great lawyers.

5% of our resources is going to go deal with that and make sure that's not an issue. 95% of us are here to build products. Let's never lose sight of that. Otherwise, we just become some lawsuit company. What is the product? I'm going to ask you a question before I ask you.

Does your mom use Coinbase? Yeah. But she's my mom. But she's your mom. Okay, yeah. But do you think if you weren't the founder and CEO, would your mom use it? Meaning not out of love, but out of necessity or need or interest? Yeah. We've had over 100 million people sign up globally.

A lot of them are-- the biggest demographic is-- excuse younger. It's people in the 25- to 35-year-old bracket. Initially, the users were often doing-- they wanted to just own a piece of the future, and it was some trading thing. Now about half our active customers do something other than trading.

And it runs the gamut. They're spending crypto with Coinbase Card. They're earning staking rewards. They're starting to engage in some of these dApps and doing payments with stable coins. But it's a wide range of things. Where I'm going with this is do you try to allocate resources inside your company to answer that use case, which is, all right, folks, we have this core, fervent, obvious demo, and we can always grow with that demo and wait for that demo to be 50 years old, but that's going to take 30 years.

Instead, we have to get that 50-year-old today. What is it that he or she actually wants or needs that they'll actually adopt? And then all of a sudden 100 million users can become 500, can become 2 billion. Absolutely. I do think that is our responsibility, and that's what I'm pushing people internally on.

And we need to drive the utility of crypto because if it's just the speculative thing, for what? I didn't get into this because of trading. I'm not really like a trader. I got into it because I wanted there to be a more open and fair and free financial system for the world that reduced friction, allowed new businesses, capital formation, all these things to happen, take out the middlemen who are just charging all these fees.

So that's what I want to get to. Are you tempted to then go outside the U.S.? Because then when you say that, I think most people would say, "Oh, go to India and sit on top of UPI, go to Africa." So how do you maintain that focus? Yeah, so we are definitely focused on international expansion.

I just wanted to make the point clear we're not giving up the home base. But, yeah, there's a lot. We just launched in Canada last month. We just launched an international exchange earlier this year, which I think will help us get to a wide range of markets. Our self-custodial wallet could do better in emerging markets.

India is its own challenge. We launched and it got shut down three days later, and we're going to try to relaunch it again. So we need to get it there in emerging markets too. Brian, while we have a few minutes, can you share with us some of your work outside of Coinbase?

You've been making investments in projects like Research Hub. You started New Limit. Maybe share with us if there's a common thread to some of the work you're doing outside of Coinbase. Does it connect back or is it entirely distinct? Yeah, well, I mean, the thing I get excited about is how do we accelerate progress in the world?

And I think technology, innovation, some of the regulatory challenges, all the stuff you guys talk about, it's part of the reason why I love the pod is like this is a unique voice in the world that is pro-builder, pro-crypto. It's like we can change-- He legit listens to the pod, by the way.

You've been on--you're really the seventh bestie in terms of appearance. Frequency. Yeah, in terms of frequency. You've been on twice. Anyway, I think that voice is so missing in our society, and so I just love that you guys have taken the mantle on that. But, yeah, so anyway, my investments have followed along with that.

Research Hub is trying to make scientific research more like open-source software and make that more efficient. New Limit is doing research into longevity with epigenetic reprogramming. So I'm trying to use my own capital to further this and just accelerate progress in the world, get people to build more stuff.

And before we wrap, I want to mention one thing. Everybody clapped when I mentioned the voting situation next year with crypto and how important that is. And we created this website, standwithcrypto.org. Everybody should go check out. We're trying to get people to raise their hand and say that they want to stand up in our democracy and make sure that the right rules get put in place for crypto.

So if people can check out-- Which candidate is the most pro-crypto at this point? I mean, I know RFK seems to be, right? Yeah, I mean, it's been interesting-- and, by the way, Coinbase is apolitical, but if anything in service of our mission around crypto, it's fair game. But a lot of the challenger presidential candidates have all been pretty pro-crypto.

I mean, the Vake. I think Tim Scott is good on this. I think DeSantis is good on this. I think RFK. So I'm hoping this becomes a bigger issue in the presidential race. And, you know, the Biden administration with Warren and Gensler has not been good for Americans on this dimension, and it's pushed a lot of tech jobs overseas.

How much of a crater has Sam Bankman fraud put on the industry? It's definitely not good. I mean, it reminds me a little bit of Mt. Gox when that happened back in the day. And luckily, people turn the page on this thing, and they move on after about a year, and so I think we're coming up on that.

Have you met-- Did you meet with him? I know he wanted to do business with you. At what point did you realize this guy was a complete sociopathic fraud? You know, I wish I could have told you that I knew in advance. I had met him and spent time with him here and there periodically.

You didn't know, right? Sorry? Didn't get a sense when you met him? No, I got the sense that he was very smart and that he was perhaps a bit reckless and young, and I wondered at times, like, where is he getting all this liquidity to go write these huge checks and everything?

I knew what our budget was, and I was like, I don't know where he was getting the money. Customer accounts. Apparently. Everyone said the same thing about Bernie Madoff, by the way. No one knew when they met him. No one meets the guy and says, "I think that guy's a fraud." And what about CZ?

There's, like, every few months, there's something on Twitter that blows up about how Binance is just-- there's something amiss. Yeah. You know, I don't want to comment on that. I've met CZ a number of times, too, and I think he's done a lot of good things for crypto, but I don't have any inside information into what's going on inside their house, so we'll have to see.

Ryan, I just want to say, you know, it's very brave, I think, the work you're doing. Both in terms of-- and we talked about it on the pod. People can refer to the episode about, you know, the cancel culture and hysteria, you know, in people's Slack rooms, and you getting focused and being a mission-driven CEO that really wants to do good for people in the world who-- You and Toby, the two most seminal business CEO essays of the last two years.

Yeah, and I think you turned the tide and made people really focused on what matters, which is building products that help humanity, and for that, we thank you. Thank you.