Bankless - Coinbase Moving Offshore?! with Tom Duff Gordon VP, International Policy, Coinbase

Episode Date: May 4, 2023

Ryan and David bring on Coinbase’s VP of International Policy, Tom Duff Gordon VP to discuss Coinbase’s exploration out of the United States. Are they 4D chess? How does the crypto regulation in the U.S. shape up to overseas competition? Why is the U.S. driving crypto innovation abroad? Does the U.S. have any hope?  ------ ✨Stake with Swell https://bankless.cc/Swell  ------ 🚀 Airdrop Alpha is waiting for you on Bankless.com  https://bankless.cc/Alpha   ------ BANKLESS SPONSOR TOOLS:  ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum  🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2  🦄UNISWAP | ON-CHAIN MARKETPLACE https://bankless.cc/uniswap  🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask  ------ TIMESTAMPS:  0:00 Intro 8:23 Is Coinbase Moving Offshore? 10:00 Coinbase’s International Plan 11:34 Will Coinbase Stay & Fight?  17:38 Is Ether a Security in the EU? 19:30 Ranking Crypto by Geography 24:03 The U.S.’s Crypto Friendliness Ranking 25:30 Coinbase International?  28:28 Coinbase’s Chessboard 32:46 Coinbase’s International Strategy  35:05 What U.S. Retail is Missing Out On 37:05 Coinbase’s Frustration  39:33 Coinbase’s Constraints 45:48 Crypto Game Theory  50:03 Timeline 50:35 Closing & Disclaimers ------ RESOURCES: Tom Duff Gordon https://twitter.com/tomduffgordon   Coinbase Moving Offshore?  https://www.bankless.com/coinbase-offensive-sec-united-states   ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures 

Bankless Nation, we have a special bonus episode for you. Is Coinbase moving offshore? That is the question. Has the regulatory climate in the U.S. become so bad that it has caused one of America's largest exchanges to actually relocate to another jurisdiction? That is the question we pose on today's episode. We're going to be talking about Coinbase's digital asset business license from the Bermuda Monetary Authority and what's going on over there. David, who do we have on? We're talking to Tom Gordon, who is the vice president of international policy at Coinbase. And this really got on our radar when Tom and his coworker release a blog post that talked about this license that Coinbase has gotten in Bermuda, which has raised the question is, is Coinbase moving offshore? And are they doing one of those offshore derivatives exchanges, which we all know about? We've seen these before. Is Coinbase doing one? So these are the big questions. And that's the questions that we start with asking Tom about, but then it spirals.

into a much longer conversation about the global chess board of international rules and regulations and how that makes some areas easier for Coinbase to operate in and harder for the Coinbase operate in. And how will this landscape change and adapt moving forward? And overall, what is Coinbase's plan for navigating this changing chess board? So that's the episode. Before we get into that episode, Bankless Nation, we got a message from our friends and sponsors over at Swell Network. Really cool, decentralized staking protocol. David, What does Swell want bankless listeners to know? The Swell staking as a service DAO is life, so you can now go stake with Swell.

No minimums, lower fees, higher yields because Swell is both a staking as a service Dow like Rocket Pool or like Lido, but it's also a DeFi yield optimizer, kind of like Yerne. So multiple sources of yield, brand new product. There's a link in the show notes to join the community if you want to get in on the bottom floor of something that's brand new into the Ethereum staking and DFI yield marketplace. Don't just hold your eath, guys. Stake your eth as well as a fantastic protocol to do that. Linkin and share notes. Ryan, before we get into this episode, I want to just like bring up this era in crypto is marked by regulatory. We're talking about Gary Gensler every step of the way. And it's so frustrated.

Regulatory season. And it's regulatory season, which is not a fun season to be in. And I remember going through just lessons from cycles of past back in 2018, which was 2020, 2020, so like it was down only. And then it was 2019, which was the year of both building and also frustration. And so understanding the landscape, and I was newer at the time, but understanding the landscape because there was also regulatory conversations back then, too. China was banning crypto for some of the first times. We were finally seeing crypto have a glimmer of relevancy in Congress, although I'll be it briefly, but it was still similar. Now these conversations have moved forward one cycle. Bigger.

crypto's one cycle bigger. And so as we have these much bigger conversations, I just want to remind listeners that this was always inevitable and this is part of the plan. And just because we are in the pain part of the cycle, that means that the better horizons are on the way. And this is what Coinbase is saying. This is why they are doing their international strategy. And I think it's going to force the hand of the United States eventually once we are done gritting our teeth and getting through 23 regulatory season. Yeah, I think that's a great point. What I would add to that is the problem,

we're still in a bear market, obviously, and this is kind of a regulatory bear. The last bear market, David, back to 2018, you know what kind of bear that was? It wasn't a regulatory bear so much. I know there's some fun in China. That was minor in comparison. We didn't have product market fit, okay?

We had nothing. We would be begging at that time. Please talk about us in front of Congress. Mika regulation in Europe, that would be a direct. Like, oh my God, crypto is actually important enough to pass European regulation on. That would be incredible. And so, even though some of you might be thinking about this regulatory season is it's bearish.

Let me tell you, this is the most bullish. This is a win condition. This is a problem that a winning industry actually has where, okay, now it's big enough. We have product market fit. It's established enough. We're at $1 trillion. And now the worldwide regulators have to figure out. about how to handle this asset class.

So that's the wider context of, you could look at the short run, you could be like, bearish, well, you know, Gary Gensler and the U.S. doesn't get it, and you're falling behind. No, this is incredibly bullish. We have major international communities and geographies actually talking about crypto,

passing regulation about crypto. It's entered the conversation. There's hearings in Congress about this. So that is the wider context, I think, where we bring on this guest today. Yeah, and it's also important to know that, like, Oh, don't be bearish, bankless nation. The only reason why we're saying that is because Ryan and I are from the United States.

This is only bearish for the United States. Crypto's fine. It's just going to be better elsewhere. Sorry to the United States citizens. But this is just a bullish crypto conversation for the rest of the world. The United States is a very wealthy and very large market. And eventually we need the full weight of the United States behind crypto. But Ryan brings up a very important point of this episode

is that when other jurisdictions entice crypto, it forces the United States hand. So this is our dose of opium that you didn't know that you needed. Not that you even did need it. But first, before we talk to Tom, we have to talk to our fantastic sponsors who make this show possible. Especially Cracken, a preferred crypto exchange for 2023. If you haven't set up an account with Cracken, there's a link in the show notes. So you can go do that right now. Cracken Pro has easily become the best crypto trading platform in the industry.

The place I used to check the charts and the crypto prices, even when I'm not looking to place a trade. On Cracken Pro, you'll have access to advanced charting tools, real-time market data, and lightning-fast trade execution, all inside their spiffy new modular interface. Cracken's new customizable modular layout lets you tailor your trading experience to suit your needs. Pick and choose your favorite modules and place them anywhere you want in your screen. With Cracken Pro, you have that power. Whether you are a seasoned pro or just starting out, join thousands of traders who trust Cracken Pro for their crypto trading needs. Visit pro.crakhan.com to get started today.

Bankless is launching the bankless token hub. At bankless, we've been studying the crypto markets ever since 2017, and all of our research has led us to this. The token hub. You're a one-stop shop for Alpha to help you navigate through the crypto markets. Have you ever wished for a trusted resource that would share their thoughts, ratings, and their opinions about tokens? Boy, do we have the product for you.

The Bankless Token Hub is where we provide bankless citizens with the Alpha on the hottest tokens in crypto. We do the research so you don't have to. The Bankless Token Hub includes the token rating. where our team shares their research and outlook on the hottest tokens in crypto. Also, the token hub includes bankless bags, our own internal investment club. Bankless bags is where we put our money where our mouth is. And for the bankless power user out there, you can access the analyst team 24-7 inside the Bankless Nation Discord. You can ask them questions and learn from a group of people deep in the weeds of crypto investing.

The last feature of the token hub is the ability to up vote or downvote token ratings. The Bankless Token Hub lets you learn from your fellow citizens to raise these tokens yourselves. The bankless token hub is launching right now and has already been beta tested by your fellow bankless citizens. So stay tuned in the bankless discord for updates. And if you're not a bankless citizen, well, you better sign up if you want access because this corner of bankless is available for citizens only. I'll see you in the discord. If you haven't yet experienced the superpowers that a smart contract wallet gives you, check out ambire. Ambire works with all the EVM chains. The layer two is like Arbitrum, Optimism, and Polygon, but also the non-Etherium

ecosystems like avalanche and phantom. Ambire lets you pay for gas and stable coins, meaning you'll never have to spend your precious eth again. And if you like self-custody, but you still want training wheels, you can recover a lost Ambire wallet with an email and password, but without giving the Ambire team control over your funds. The Ambire wallet is coming soon for both iOS and Android. And if you want to be a beta tester, Ambire is airdropping their wallet token for simply just using the wallet. You can sign up at ambire.com, and while you're there, sign up for the web app wallet experience as well. So thank you, Ambire, for pushing the frontier.

of smart contract wallets on Ethereum. Bankless Nation, we are here with Tom Duff Gordon, the vice president of international policy at Coinbase. Tom, welcome to the show. Great to be with you. So the big news here that I think a lot of people are focusing on is that Coinbase has received a digital asset business license from the Bermuda Monetary Authority,

which has led to people wonder, is Coinbase moving offshore? Are you guys abandoning the U.S.? because understanding the current regulatory environment in the United States, I don't think anyone could really blame you. But that's a question that everyone has. Is Coinbase moving offshore?

It's a good question. The simple answer is no. We're proudly U.S. We're going to stay a U.S. company. I think some of you saw the response to the Wells notice that we put out yesterday where Brian and Paul talked about, you know, the reasons for setting up in the U.S. We think the U.S. has an awesome opportunity here to kind of lead

because of the strength in tech and in finance. But clearly, you know, we've been struggling with a lack of regular clarity. So we've been amping up our kind of mission to kind of, you know, spread economic freedom globally. We want to bring a billion people into the crypto economy. We can't just do that in the U.S. So international is a big part of what we're trying to do here. And part of that is trying to light up the map. We go broad and we go deep. And we've announced a number of really exciting developments, including the Bermuda license over the last few weeks. So we're going to, we're going to continue to push for regulatory clarity in the U.S. as much as possible, but

equally we're going to be expanding overseas as well. So I think I really want to know what that looks like and what that means. And so is Bermuda like a big area of emphasis? Is it like one question? There's also another question of like UK also seems to be an area of emphasis. But maybe you can just, we can just zoom out and start at the high level, just the broad scope of international. What is, can you. Can you just kind of explain the calculus of like what is Coinbase's plans at a high level to expand internationally? What does that look like? What should people know? Happy to do that. So we tend to look at international in two ways. One is the go deep markets

and the other are the go broad markets. And we know we set that out in a blog about a year ago. We have more or less 10 international markets where we want to go deep. So if you look at the kind of in Europe, UK is our biggest international market. And then we have five other kind of European markets, you know, the big ones that you would expect, you know, France, Germany, Italy, Spain, Netherlands, and Ireland. And then in APAC, we're kind of going deep, we're onshore in places like Australia and Singapore. And in the Americas, you know, we've just announced some kind of exciting new developments in Canada and in Brazil as well. So these are kind of the markets that we're very focused on. We're equally going broad. Bermuda is going to be part of that kind of

go broad push where we cover other markets kind of, you know, from a single location. And we're also, you know, we have interesting conversations with regulators in the Middle East. I'm sure we'll get onto that and places like India, Indonesia as well. But, you know, stepping back 10 kind of major kind of go deep kind of markets internationally and then some other markets that we're going to cover more from a kind of go broad perspective. And that's how we kind of carve the world up at the moment. I know, Tom, you said that Coinbase is not a moving offshore outside of the bounds of the US, though it does have an international strategy.

Let me ask you the question, though. Are there conditions under which they? that might change. I think some of the quotes that we saw circulating from Brian Armstrong, basically that it's not off the table, right? And it seems like very much now Coinbase has decided to double down, dig in, and fight in the U.S., basically, suing the SEC for more rulemaking, responding to the Wells notice very publicly. Brian keeps tweeting out pictures in Washington, D.C., where Coinbase is, presumably speaking to folks that are in Capitol Hill. So it seems very much like the current

posture is to actually fight. But if things got bad in the United States, are there other avenues where Coinbase might consider actually moving offshore or at least relocating its headquarters somewhere other than the United States? Well, for the time being, we're staying and fighting. You know, when Brian set up Coinbase 12 years ago, there were, you know, there were a number of other kind of crypto companies setting up offshore immediately, but we deliberately decided to establish kind of Coinbase in the US. We've been fighting for that regulatory clarity. I think, as you know well, over the last few years. Last year, we petitioned the SEC for kind of clear rules. Part of the, you know, the recent kind of writ and court process we're going through with the SEC

is to get them to respond to that petition, not telling them how to respond to it, just asking them to respond and to create those clear rules. We want to see the development of a securities kind of market for crypto in the US. We think it's a huge opportunity. So we're not going to, we're not kind of running away. We want to continue to fight the good fight. But equally, we are seeing an extraordinarily exciting amount of kind of, you know, regulatory development happening internationally where clarity is forthcoming, right? And, you know, there are normally three steps in generating that kind of clarity. First of all, geographies tend to kind of focus on money laundering, terrorist financing. It's kind of step one, travel rule type stuff. Step two is they then think about stable coins.

because they could become super systemic very quickly, types of kind of licensing and custody rules. And then the third step is kind of technical rules and implementation. We're seeing a huge number of GEOs move forward now into kind of stage two and potentially stage three. Europe, for example, with MECA is arguably at stage three. So we have to be engaged in those processes. You know, we want to spread, you know, economic freedom.

We want to bring a billion people into the crypto economy. And we've got to be part of those conversations. Brian said in London, nothing is off. table. And I think what he means by that is we will, you know, we'll continue to stay and fight in the US. But equally, our mission is broader. And we will be very present and we'll make sure that we're, you know, involved and engaged in all of those conversations in those other markets. As that regulatory clarity, we'll bring more users into into the ecosystem. So for bank lists, listeners, doing the math, obviously Coinbase needs to be broader, other than

the 350 or so million Americans who live in this country who wants to get a billion. Of course, there are a lot more people that live outside of the U.S. if that indeed is the mission. Tom, since you've got some of this exposure, you mentioned a few markets already. You also mentioned Mika. I'm curious if you could kind of rank order the different geographies

in terms of how high quality and friendly their crypto regulation regime is. And I know everyone is somewhat still early to this game, of course, because this is a brand new industry, a brand new technology. But I'm trying to get a flavor. I mean, like the Middle East, for instance, or areas in Asia or the UK or Europe, for example, and then the United States and Canada, where does everyone stack up if you were to do sort of a top 10 list?

Yes, it's a great question. Maybe I can start by answering that by saying the debate in the U.S., which I see a little bit from the inside and the outside, around, you know, what is a security and what's a commodity, should, you know, should this market kind of belong under the SEC or under the CFTC. This is not a debate that I see kind of pronounced in any shape or fashion happening outside of the U.S., right? Really? Yeah.

So this is sometimes what I think is kind of gets lost and is missing a little bit in the debate in the U.S. Like, genuinely what happens outside is that we do a token mapping exercise. And this is happening across multiple different kind of geo, so not just kind of Europe, but also parts of, you know, the major parts of the Middle East and APEC, where the first thing the regulators and policymakers are doing is trying to figure out, is crypto an existing financial instrument, and should we apply existing financial instrument laws, or is it something new, or is it something in between? And I think where the UK is coming out, where Europe is coming out, where Australia

and others are coming out, where Japan is, etc. is quite simply to say there are kind of Bitcoin, Ethereum, all these kind of main unbacked kind of tokens, these are not existing financial instruments. So therefore, they're going to need a new set of tailored rules where some of the regulatory risks are the same and some of the underlying activities are a bit similar. We're going to take existing rulebooks for financial instruments, slightly modify them and apply to the crypto economy. We'll develop new rules for things like stable coins. But where we've got tokenized securities, tokenized commodities, tokenized financial instruments,

clearly those are financial instruments, right? And you just apply the existing financial services law. So it's kind of interesting that, you know, the kind of distinction between what's a security and a commodity is mainly only relevant in the US because you have separate regulators with jurisdiction. The distinction that we care about outside of the US is are these things existing financial instruments or not? And that's been a much easier question for everybody to get to grips with. So I feel like answering your question, you just have to kind of start by. level setting to say that the conversations and discussions are very different, you know, internationally outside. Well, let me just dig in that to make sure that that point lands completely.

So there's this, this famous, not famous, but like a clip, viral clip back and forth, Patrick and Henry asking Gary Gensler, is Ether a security? I repeat, is Ether a security or a commodity? Again and again and again, he asked this question. And Gary Gensler would not answer the question, basically. If I went to a governance body in Europe, let's say, and I asked legislators that same question, is ether security? What would the answer be? Would they answer be, or is it a commodity? Would they answer be, that's not the right question.

That's not the question. That's not how we do things. That's not how we do things. Or would they very clearly be like, oh, this is a new financial instrument. Clearly it resembles somewhat of a commodity. What would the return answer be to a question like that? Yeah, it's a great question. They would basically say, what we look at is slightly different.

We want to know, is this a number. existing financial instrument or is this something new? And so in kind of European terms, you would say, is this a MIFID instrument? And MIFID is the markets and financial instruments directive, which is the existing kind of corpus of financial regulation. So is it an existing financial instrument that fits in there or is it a MECA instrument, right, for which we've got new rules, right? For ARTs and asset reference tokens and stable coins, etc. The direction of travel, If you ask this question, Ryan, in Europe, I think is very clear. Ether would not be an existing financial instrument.

It would be an other financial token to which the rules under MECA apply, not MIFID. Now, that has not been 100% finalized. The ink is not quite yet dry because there are some technical rules that have to be made after the vote in Parliament that we've just recently kind of seen. But that is the direction of travel, which is very clear. And I think that's the same in the UK. and we're going to see that the same across Asia as well. So, Tom, the difference is whether it's MIFIT or Mika,

and that's almost like traditional finance versus digital finance, let's say. And that would be the kind of the axis of conversation. And clearly something like Ether is Mika. It's digital finance. It's not traditional finance. Rather than commodity versus security, it's old versus new. Yeah. And a new set of rules and kind of thinking, like that seems smart.

and like, healthy and like normal and build up from first principles. I don't know why we're having such trouble in the United States with this, Tom. But anyway, I don't want to delay this. So thank you for digging in.

So give us the stack ranking here. Who's on top? Who's got the best regulation? Who's got kind of the worst? Good question. So I won't go through all the countries. Look, I think Mika is good. We support it.

there's a lot of level two technical rules that have to come out, but for centralized actors like ourselves, the rules came out in a pretty good place. If we had a small criticism, it would be around the treatment of stable coins, which we think is a little bit harsh under MECA, but more or less I think that's a very good framework. I think Mika will also be influential at the global level, because we haven't talked about this either, but whilst we're kind of waiting to see what happens in the US, no one else is kind of standing still. And the global stand setters are also kind of moving and we're going to get, you know, principles from the FSB and IOSCO and kind of others kind of later on this year. But, you know, MECA is good. I think

it's going to be influential for those global rules. The UK have just started consulting. That framework seems to look a lot like MECA, but it's kind of more flexible in certain areas. So we're quite pleased with the way that that is trending. I would say that there are some markets that I would group as a little bit more cautious on the retail side. And some of that has changed post-FTX. So places like Hong Kong, which is opening up, which is super interesting, right, because China obviously banned crypto, but Hong Kong is now opening up. And the recent consultation paper from the SFC was kind of really interesting for everyone to see. But I will say when you dig into that a bit more, the pivot is fantastic, but they are very cautious on the retail side. So only a limited

number of tokens can be traded by kind of retail users. And a similar kind of hesitancy we see somewhat in some other geos in APEC like Singapore, for example, where, you know, a huge amount of excitement overall in the space and the technology, but again, concerns around consumer access on the retail side and consumer detriment. And we see that a number of markets. So I would say, you know, the themes post-FDX, where some jurisdictions are beginning to tighten up and reduce kind of flexibility tend to be around conflicts of interest and consumer access, right? And these are things which kind of crystallized, you know, over the last few months. But, you know, look, I think we're positive more or less about what's happening in the Middle East, what's happening

in Europe, in the UK. Australia kind of one step behind, but their token mapping exercise was very thoughtful and they're moving ahead nicely. Singapore and Hong Kong have good regimes. Looks like they're developing good regimes, but perhaps more cautious on the retail side. And And then, you know, Japan, you know, we found that a market which was very exciting, a big early mover, but one in which they had quite a lot of localization requirements, particularly on the custody side, so that was a bit harder. But it, you know, without wanting to give you a kind of a full stack ranking, I think we would see from a comprehensive kind of perspective, Mika really being right up there, but kind of fast

follows from a number of other GOs and the G20 rules will probably pick up a lot of what Mika says and allow everybody to generate a bit of consensus. Because here's the thing, guys, at the end of 2023, it could well be that a lot of international jurisdictions or the ones that kind of really matter are in stage two or stage three of this process, and there are global principles. And it could just be the US,

it just finds itself increasingly kind of, you know, standing alone in the room without, you know, being on this journey. And that's something that concerns us. And again, we're not pleased about that and we're doing everything we can to try and push the U.S. along. But, you know, particularly from my perspective, focusing on the international markets, this is a pivotal key year. There's a heck of a lot happening.

Things are moving fast. And we have to be part of those conversations, even as we kind of struggle to get off the ground in the U.S. So the U.S. has its own unique problems, you know, and its own unique systems. I mean, it's just not adopted the metric system yet and the, you know, the rest of the world is ahead. And so you're saying that the U.S., you'd place them at the bottom in terms of, of closer to the bottom, lower quartile anyway, in terms of crypto-friendlyness? I would just say that they are, they're just behind where everybody else is, right, on this process, because we want to have clear rules, not regulation by enforcement, and that's

unfortunately what we've been seeing. So I think they would certainly be, you know, behind the rest of the pack in the sense that we have not seen, you know, white papers, we have not seen open consultation papers that hasn't been transparent rulemaking that the industry has been invited to engage in. But we have not seen. have seen that in the UK, we have seen that in Europe, we've seen that in Japan, we've seen it in Brazil, we've seen it in Singapore, we've seen it in the Middle East, we've seen it in Australia, we've seen it in Canada, the list goes on, right? But we have not seen that on the US side. So I think from that perspective, you know, they are lagging. We hope they can catch up.

It can be faster. But, you know, think again about Europe. 27 countries came together to agree hundreds of pages of very complicated text, multiple different languages, but they managed it. And they started three years ago. But in the next year and a half, a lot of these regimes are going to enter into kind of application. And, you know, I hope that the US will be kind of part of that journey. Seeing this like global landscape kind of like play like a chessboard when different parts of this landscape are becoming more difficult to play on and other parts of this landscape are becoming easier to play on is, I think, a useful mental model. There's two parts of this conversation that I think are worth separating. And one is like,

how easy does parts of this chess board make it easy to play on? And then what are the values of those locations, right? So the United States makes it very, very difficult to play on that part of the board, but it's a very valuable part of the board because the United States market is huge and wealthy. And it's always shifting, right? The global relationships to the crypto industry is always shifting. And I would think just like in the moments of at post-2020, this is just a big conversation of like, how is this board shifting?

I think, and that's like one side of the calculus. I think once, the big question that, that I think users are primarily interested in and like what just the gut reflex is, is like, is there going to be a Coinbase international, right? And we've seen this model before. There's Binance U.S. versus Binance. There's FTX, FFTX, FTX, and then also FTX, right? Is that kind of the mental model that we should be thinking, is there going to be a Coinbase U.S. and Coinbase International. Is that how we should think of this? Or how should users and consumers of Coinbase think about this?

So maybe we can come back to the Bermuda announcement. So we are going to have Coinbase International Exchange. That's the new thing. So that's the new thing. We're really excited about that. So we have a full license kind of now there. And we're

just starting effectively new product. So perpetual futures. It's going to start with just Bitcoin and Ethereum kind of contract. with kind of wholesale institutional kind of clients, moderate kind of leverage to kind of kick off. But, you know, that will then kind of like scale and proceed and we'll bring kind of, you know, our retail users into that

and we'll make that available in select markets across the world. So kind of we're excited by that. We've moved, I think, sensibly into that space. We haven't rushed. We choose high bar regulatory jurisdictions. To your point, we kind of almost seek out the parts of the chess board where it's a little bit harder because we know that if we're able to do that, that's a badge and people will then trust us.

And, you know, our brand is about being safe and trusted and easy to use. And we don't necessarily want to rush into things and do them wrong. We want to take our time and do them right. So that's why we've taken a bit of time to launch this new product. But we're very excited about it. And I think that will, you know, that will kind of scale, you know, over time. So we will have a U.S. exchange. We will then have a non-U.S. international exchange.

And then Coinbase will have a localized exchange. experienced kind of banking rails in the go deep markets that I described kind of, you know, beforehand. And we'll continue to announce kind of exciting developments as we as we kind of continue conversations in other parts of the world, the Middle East and other places. Okay. So there's U.S. Coinbase, which we all know, like that's the known quantity. The new thing is Coinbase International, which is going to accept certain jurisdictions, certain citizens from certain jurisdictions that get approved to access the international. national exchange. And then there's also kind of like one-off more, call it proprietary, I guess,

just like more niche coverage of the rest of the world in one in more one-off particular fashions. And then you add all of those things together and that's Coinbase, right? That's right. That's right. And, you know, and going back to the, and going back to the kind of the chessboard analogy, as different GOs move through that, through those three phases of kind of figuring out, you know, the ML, KYC travel rules first and then the licensed custody and stable coins and then the implementation. And by the way, there are other steps around kind of defy and other things, but we kind of hope they come later. It gets harder and harder, right, to operate in those jurisdictions. But in some ways, you know, that's a good thing,

because it means that there's, you know, there are more compliance requirements. Okay, that's difficult, but we're hoping that that is just going to bring more people into the crypto economy because there'll be more trust in the system. And there'll be incentives for people to be onshore and in those high bar regulatory jurisdictions. And, you know, some of those situations, the FDX events and others that we saw where effectively we had exchanges in offshore, more lightly regulated jurisdictions getting into trouble. I mean, hopefully that will be, that will be lessened as we kind of move forward. But that puts a lot of onus and burden on centralized exchanges like ourselves.

So we need to be thoughtful and judicious about, you know, where we go deep and, you know, making sure that we get that right. Learning about crypto is hard. Until now, introducing Metamask Learn, an open. an educational platform about crypto, Web3, self-custity, wallet management, and all the other topics needed to onboard people into this crazy world of crypto. Metamask Learn is an interactive platform with each lesson offering a simulation for the task at hand, giving you actual, practical experience for navigating Web3. The purpose of Metamask Learn is to teach people the basics of

self-custity and wallet security in a safe environment, and while Metamask Learn always takes the time to define Web3 specific vocabulary, it is still a jargon-free experience. for the CryptoCurious user. Friendly, not scary. Metamask Learn is available in 10 languages, with more to be added soon, and it's meant to cater to a global Web3 audience. So, are you tired of having to explain crypto concepts to your friends? Go to learn.menomask.io and add Metamask learn to your guides to get onboarded into the world of Web3. Arbitrum 1 is pioneering the world of secure Ethereum scalability, and is continuing to accelerate the Web3 landscape. Hundreds of projects have already deployed on Arbitrum 1, producing flourishing defy and NFT ecosystems.

With the recent addition of Arbitrum Nova, gaming and social daps like Reddit are also now calling Arbitrum home. Both Arbitrum 1 and Nova leverage the security and decentralization of Ethereum and provide a builder experience that's intuitive, familiar, and fully EVM-compatible. On Arbitrum, both builders and users will experience faster transaction speeds with significantly lower gas fees. With Arbitrum's recent migration to Arbitram Nitro, it's all. also now 10 times faster than before. Visit arbitram.io where you can join the community, dive

into the developer docs, bridge your assets, and start building your first app. With Arbitrum, experience Web3 development the way it was meant to be. Secure, fast, cheap, and friction-free. You know Uniswap. It's the world's largest decentralized exchange with over $1.4 trillion in trading volume. You know this because we talk about it endlessly on bank lists. It's Uniswap. But Uniswop is becoming so much more. Uniswap Labs just released the Uniswop Mobile Wallet for iOS. The newest, easiest way to trade tokens on the go. With the Uniswap wallet, you can easily create or import a new wallet, buy crypto on any available exchange with your debit card, with extremely low Fiat on-ramp fees, and you can seamlessly swap on main net, polygon, arbitram,

and optimism. On the Uniswap mobile wallet, you can store and display your beautiful NFTs, and you can also explore Web3 with the in-app search features, market leaderboards, and price charts, or use Wallet Connect to connect to any Web3 application. So you can now go directly to D5 with the Uniswop mobile wallet. simple custody from the most trusted team in Defy. Download the Uniswap wallet today on iOS. There is a link in the show notes. So I think this is actually kind of a dumb question,

but I'm going to ask it anyways. The other offshore derivative exchanges that is now Coinbase is like adding into themselves into the category of are Binance and Bitmex and FTX and maybe a few other ones that I can't remember. But just like it's not necessarily a great list to be on. And so like what's coinnex? basis international's, like strategy around that? What are the thoughts about that?

Sure. Look, we, we only seek kind of high-barred kind of jurisdictions and, you know, just to spend just one second on Bermuda. Bermuda is being hugely impressive right to us. They have one of the first kind of digital asset kind of legislative frameworks, the Daba, they call it, the Digital Assets Business Act, which came out in 2018. The current Premier, who is extraordinarily articulate and sophisticated, who speaks a consensus and others, Premier, but he was the finance minister that I think took that bill through Parliament, so he understands this very well. The BMA, which is the Bermuda Monetary Authority, they also look after kind of a global financial center for reinsurance.

So they only wanted to attract, you know, high quality digital asset kind of exchanges and players. They have an ecosystem of about 17 VASPs, I think, at the moment. So they have experience. They have expertise. I think they are well connected to kind of, you know, other regulators globally and international standard centers through the kind of the insurance play. So it's a very different place to some of those other more likely regulated jurisdictions

that other exchanges have decided to kind of place themselves in. So we feel very good about Bermuda, about, you know, the robustness with which they post through that licensing process. And we're exciting to be kind of, you know, kicking off our new kind of perps offering in that jurisdiction. So the list that you cited is an interesting one. We hope that that's not going to be, you know, we hope that we're not going to add to, you know, to that list. Certainly, Bermuda, I think, has been cautious about, you know, finding the right kind of partners.

And we are, you know, our reputation for being, you know, trusted and easy to use and compliant forward is incredibly important for us, which is why we're going to take this step by step and incrementally kind of build the product to make sure that, you know, everybody comes along on this journey with us. So two versions of Coinbase, one Coinbase International, the other is kind of the Coinbase that maybe many retail investors in the U.S. sort of use. I just want to emphasize or get clarity. There will be a different set of products in Coinbase International. Those derivatives that you mentioned for Bitcoin and ETH a little bit earlier, to be clear, they are not available for U.S. consumers. Like, you can't actually – we don't have the regulatory – framework? Like, what's preventing you from getting those products onto Coinbase in the US? Because I'm

betting you would have had them already if you had the ability to do that. So what is US retail missing out on? So I think about 75% of kind of daily trading volume is in the kind of the perps market rather than the spot market. So it's a product that is extremely sought after by kind of clients. That's where a lot of the volume is. But we want to make sure that we want to make sure that we we do this in a regulatory compliant way. And so you need to have very clear rules of the road. And in the US right now, that framework doesn't exist, which is why those products will not be available to kind of US retail users, which is why the exchange is an offshore,

highly regulated exchange. And we'll make those products available to select kind of geos, but outside of the US. So again, we are hoping very much that the US will kind of catch up. We've petitioned them to kind of create the clear rules, both for, the spot market, but also on the derivative side as well. And we're hopeful that we'll get there, but we're not right now. And so, you know, we have to kind of adapt. But equally, we have to kind of follow market demand and clients want trusted counterparties in this kind of perps market. And so we're kind of stepping into that role. It's a very helpful product for people to get exposure to the

asset class. It helps them with their hedging strategies, et cetera. So we want to be in that asset class, but we have to do that in a compliant way and the best way of doing that is part of what I'm just disappointed with Tom is because why can't we have that in the US too? How come because I'm an American, I don't have access to those same products? And what's actually happening is it's not at your point, you said it was 75% of the actual demand was for purpose products, right? It's not like the US not allowing this, you know, makes the demand dry up suddenly. it just shifts the demand to other jurisdictions and other locations. And what was actually happening with FTX,

they were receiving a lot of that demand. A lot of people, by the way, were Americans who were actually using this in an unsafe way. So I'm just expressing the frustration that what it seems like American regulators and legislators don't understand is if they don't provide clear guidelines, if they don't allow the demand to be expressed in a safe, effective way in the United States,

they're not like, they're like the ostrich with their head in the sand. Like they're imagining the demand is suddenly going to evaporate. It's not evaporating. It's just going somewhere else, guys, and not in your economy. It's not adding jobs to the American system. And retail Americans don't get access to these products when they actually want it. So that's a frustrating place to be, I imagine, for Coinbase. It's also frustrating as someone who currently lives in the United States.

We made this point. It's a great point. we made this point to, you know, a lot of different policymakers around the world, which is if you don't create onshore regimes, you're not going to stop people from accessing these products necessarily. They're just going to do it in a less protected way and you're going to force them offshore and you're going to force them to providers, right, that are not doing things in the way that you want them to do. You know, even jurisdictions like India and other places where, you know, there was a lot of hesitancy around the kind of crypto market. I think they, you know, everybody's

realize now that we can't ban, we can't ban crypto, we can't put it away, it's a kind of a global market, it's a real asset class. And the best thing to do is actually to create kind of guardrails and rules around which you can actually incentivize people to engage, but you can kind of do so in a safe way. Otherwise, to kind of, you know, put, as the ostrich, putting the head in the sand, you effectively, you ignore the problem. You don't get rid of the problem. And effectively, you kind of create more risk for your own consumers without, without any guardrails. And And that's something, that's a point we've been making consistently across a number of years. We've used the metaphor in bankless a number of times.

We live in a financial prison inside of the United States, right? Like we can't access our airdrops. The IRS looks at our $600 Venmo transactions. We can't do fun, cool financial toys. We can't have those fun toys, which I know, or for sometimes professionals, but toys nonetheless. So yeah, we live in a financial prison. And one thing I'm actually bullish on, at least to really just drive this point home to a lot of the average Americans who only understand a little bit of this, is that there's going to be Coinbase United States and Coinbase International. And I will rename these just for the era of illustration of Coinbase neutered and Coinbase Fund Zone. One's going to be the constrained version of Coinbase that lives in the side of the financial prison and only has certain products that can only be access. by Americans, and it's going to be like sterile, not fun, Coinbase.

And then there's going to be Coinbase International, which has all of the products that are actually in demand as shown by the market. And that is where Coinbase is going to be able to serve the customers who want those products. And so it fits into this model that we've had of the United States of kind of being this empire that's kind of rolling over and like it's closing down the capital controls. It's raising up the walls. and is preventing its citizens from being able to access financial tools that are also freedom tools. And so, like, I don't really have a question here, but the idea is, like,

I'm kind of interested in that discrepancy between Coinbase International and Coinbase United States being crystal clear to average Coinbase users. And hopefully that can start to hopefully turn the tide of winning hearts and minds to actually being able to open up some of these more. more vibrant products on the domestic United States landscape. Yeah, I guess I would only say Coinbase Fund is still going to be Coinbase Safe. So I just want to make, you know, I just want to make that clear that, you know. Not Coin Miss Cancino.

Yeah, it's not, it's definitely not that. It's going to be, you know, it'll be Coinbase safe and constrained and Coinbase safe and less constrained in the sense of the kind of the products at the moment. But we heard that that is not where. things are going to remain. And again, I mean, hopefully it was useful to provide that international perspective on the U.S. domestic debate because, you know, I think if we can unlock that and this, you know, security, commodity concern, if we can kind of get through that and if we can make a few steps forward on the stable coin legislation and things, then we're kind of positive, right? And we're

optimistic and we're pushing and we continue to hope. But, you know, in the meantime, we're very focused on on international because, you know, there's a lot of growth there, a lot of excitement. And the regulatory clarity is forthcoming. And, you know, as I said, by the end of this year, I think we'll have global rules, we'll have Mika Dun, we'll have the UK on a clear path forward, we'll have, you know, Australia out there, we've got Japan, we've got Singapore, we've got the Middle East, we've got Canada, we've got Brazil, you know, all of these geos are kind of moving forward. And we really hope that, you know, the US can get on that bandwagon.

just to if coinbase had its way, it would just be one coinbase though, right? It wouldn't be coinbase US, Coinbase International, and then the bespoke more niche parts of the globe. It would just be coin base. And I mean, what we would need for that to, for us to be able to get there is a lot of nation states working together to make the regulations and rules more congruent with each other. But that is, that is what Coinbase would want, right? Just like one Coinbase, correct? Yeah. I mean, again, we want a billion people in the crypto economy. We want to increase economic freedom. So we want kind of, you know, the world to start adopting this technology. And we want to see a growing consensus around the rules. That's why we're very invested in the standard setting process at the G20 FSB IOSCO kind of level as well. Because that will create hopefully a framework within which multiple countries, hopefully including the U.S. can come together and they can adopt rules that are more or less the same. And that just kind of helps the whole market operate more efficiently.

In traditional finance, derivative markets are global. And, you know, whilst there are specificities in each different jurisdiction, you know, there are more or less kind of the same rules of the road. And that is where I think we kind of need to get to. I mean, look, no global payer wants to fragment liquidity. None of us want to kind of duplicate our operations and infrastructure in every single different country. There will be an element of kind of necessary local governance and things like this.

But ultimately what you want to do is you want to be providing, you know, the best products and the best execution to your clients. And that is done by having, you know, a regulatory framework, which is more or less consistent across all of the main kind of jurisdictions such that you can then operate seamlessly between them and offer good prices, deep liquidity, et cetera. And we can focus on building great new products and things like that and focusing less on on having to kind of spend, you know, so much. time with policymakers trying to get us from zero to one. One thing I'll note is that that idea of one coinbase, of course, that can come to fruition hopefully easier and maybe easier in the non-custodial side of things. So there is right now only one Coinbase wallet, for example, right? And hopefully we can maintain that moving forward because there is only kind of one

Ethereum and one global network state sort of starts to, yeah, one internet starts to dissolve some of the geographic boundaries and start with a blank slate. That's why David and I are also perpetually bullish on D5, of course. And I know Tom, that Coinbase kind of splits the world of centralized, you know, fiat to crypto sorts of services and also getting into DFI, too. So that's important. I guess the last comment I would make, and we can kind of close on this, is here's a reason why I'm bullish. And I want you to maybe test my logic is that, of course, it was going to happen this way. Of course, there were going to be geographic jurisdictions that were going to push the envelope, others that would fall behind and see those that are pushing the envelope and aim to catch up.

And it just seems like the U.S. right now is falling behind, but it exists in a game theoretic ecosystem of competitors. And it looks across the ocean, and it sees Mika, and it sees Europe attracting more of the crypto economy and capital inflows and interest in growth from the space. And I know one thing about the U.S., at least this used to be true. I hope it's true in moving forward in the future. The U.S. doesn't like to be second or third or fourth or fifth place, okay? America wants to be number one. And so it has work to do in order to catch up.

And so this is why I think partially you're going back to Hong Kong, why maybe Hong Kong is starting to open up. It's China's sort of seeing the pressures of, well, if we let this, if we outlaw this crypto thing, it's just going to go over to Europe and other places. I want you, maybe you could kind of reflect on that, because to me, that is the long-term game theory of this. And it's a hopeful scenario that all of these jurisdictions are actually competing for crypto long run. A crypto is ultimately, it's a global phenomenon. It's unstoppable. It's, you know, not going to be squeezed out of one jurisdiction. completely and be ended. It's going to leak into other jurisdictions, and there's this competitive

pressure that will ensure that all jurisdictions eventually pass the type of crypto regulation that we want. Is that too hopeful, or do you think that we're onto something here? Well, I'm an optimist too, Ryan, so I'm going to subscribe to that. I'm going to subscribe to that. Look, there's a fear of missing out, right, which we kind of see everywhere, but equally risk and reward kind of has to be kind of balanced. But, you know, we should see geos, whether it's Europe, whether it's going to be parts of APEC, the Middle East, but we'll see kind of jurisdictions move ahead with their own crypto kind of frameworks. And the ones that work and they balance risk and reward, so the ones that help to kind of actually foster innovation, but at the same time,

they make sure that we're protecting market integrity and financial stability and investor protection, but balance that kind of crucial thing about allowing, you know, innovation, but not stifling it, but making sure that we don't see too many crashes, et cetera. That is going to prove the concept, right? And it will happen. Like the, you know, the asset class is not going away. The technology is extremely exciting. We were just talking amongst a number of us here at Coinbase in the kind of leadership team about base. We're seeing a huge number of developers coming into the space. We're seeing, you know, despite what potentially is happening with kind of prices, we're just seeing masses of kind of activity. We're seeing a lot of work from policy makers.

some different approaches being kind of tested here. But one of them kind of will work and will emerge as kind of the right kind of way forward. And I think other countries will gravitate to that because they will see jobs. They'll see innovation. They'll see kind of growth. They'll see productivity. Move to those areas, right, where that kind of the regulatory framework exists. It provides clarity.

It provides security. But it's attracting investment and all of those good things. So I'm hopeful that we will kind of get there. Not everybody's moving at the same speed. But some of the global processes that are taking place this year that will culminate in September, I think will be a kind of a good signal post to kind of, you know, where we're going. And that consensus will start to emerge. So, 2023, I'm optimistic.

This is going to be an inflection point for what more or less the kind of version 1.0 global guardrails should look like for kind of crypto policy, where innovation can excitingly take place, but with the downside risk kind of sensibly kind of mitigating. to the extent that they can be. And once that concept has been proven, then let's hope that the markets that are moving slower, the US and others, can get on board, catch up, and we can kind of continue to innovate and take it from that. Tom, with the Coinbase International,

was there like a timeline on that? On the International Exchange. Yeah. We are, so we've launched. And that is, you know, so that's up and running. and we will then will be kind of building and scaling that with different clients and different products, you know, through this year kind of moving forward. But no precise kind of timelines or anything to flag for you guys just at this moment.

So a lot happening and more announcements to follow. So watch this space. Tom, thank you so much for joining us. This has been very helpful. And we're looking forward to big things from Coinbase International. Glad you're not abandoning the U.S. just yet, though, and are keeping fighting. the fight because we definitely need the help. We appreciate what you're doing. Pleasure. Recent disclaimers, of course, guys, got to let you know. None of this has been financial

advice. Crypto is risky. So is defy. You could definitely lose what you put in. But we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.