Dec 28, 2023

CoinDesk's managing editor for Data & Tokens, Danny Nelson, discusses the road ahead for Coinbase in 2024 after other centralized exchanges, like Binance and FTX, faced major headwinds this year.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. All right, it's been a challenging year for centralized exchanges and Coinbase is navigating the competitive landscape for digital assets. So what could be on the horizon for the US based crypto exchange next year? Joining us now to discuss is Coin Desk's managing editor for data and Tokens. Danny Nelson Danny. Always a pleasure seeing you. Great to be here. All right, let's talk about this article you wrote for Coin Desk's most influential list for 2023. You profiled Coinbase, Ceo Brian Armstrong. Now talk to us about what's going on for him. We have CZ and Binance who have pled guilty to charges from the DOJ finance has agreed to pay a more than $4 billion fine. FTX. As we all know imploded in 2022 Sam B Fried has been found guilty of several charges related to fraud. What's going on with Brian Armstrong? How is he looking at 2024? Well, well, Brian Armstrong is ready to turn the page on this as he calls it chapter in crypto history and he's going into the next chapter as, uh, as I wrote my article, sort of the last big man standing, uh his counterparts and of course, FTX and, and, and B are now off uh out of the picture, uh because they through V for various reasons, were not playing by the rules, right. So, uh TX and SPF had a massive multibillion dollar fraud. Binance didn't exactly have fraud, but it did break a lot of flaws surrounding money laundering and compliance. And, you know, from the government's perspective, that's no good either. And then you have the third big big exchange in our, in this conversation we're having, which is Coinbase. It's been around longer than either of those other exchanges. Uh And it's also according to Brian Trump's statements and just how the company has uh carried itself, taken a much different route in being compliant from the start, taking the slow and sometimes a little bit more painful route because uh in his words, that's the right way to do it. Now. He is the last man standing. But back in June, the sec launched a major lawsuit against Coinbase, I believe we expect to get more information um on that and, and see it unfold in 2024. How is Brian Armstrong thinking about that case? Um Of course, since June, we've seen Coinbase launch a bunch of new products. It's, and it's only or two base. So it doesn't really look like Coinbase is faced from, from the outside. But how's, how's Armstrong looking at that? Well, I would say that Armstrong and Coinbase are viewing the S ECs action as an existential threat, right? So they're playing by the rules uh broadly speaking legally. However, when it comes to the SEC, they're taking the position that the SEC is either being overbroad in its interpretation of securities law and also just not living up to, um it needs to be as a regulator, be that through rule making or just enforcement. So with Coinbase, it's, it makes this money by letting people buy and sell various cryptocurrencies. Bitcoin being the largest, but of course, the whole, a lot of different alt coins, the companies really leaned into listing as many as it possibly could. And the SEC uh is taking the opinion that almost all of those other cryptocurrencies are unregistered securities which make Coinbase and unregistered securities exchange, which uh Coinbase does not think it is. So, Coinbase needs to fight this battle with the SEC because if it doesn't, if it, it'll just lose and basically have to rethink its entire business model or just shut down entirely. Uh So they Ryan and Armstrong and Coinbase really are trying to push the SEC toward what they think is a fairer future for the crypto industry. And you can see that not only in their lawsuits directly with the SEC, but also in their positioning more broadly in the political space, with a stand with crypto and other uh political initiatives that the exchange is undertaking. I guess it's almost bittersweet for, for Coinbase if they fight this fight with the SEC, which they said that they will do and will continue to do. Uh, and we end up getting some regulatory clarity out of it. It would have all been worth it. But I'm sure that maybe, maybe there was an easier way, Danny, but I don't know, maybe it's too late for that. Yeah. Uh I think that this is just the world that Coy Bain is living in. Right? The sec is very muscly G against her. Is it looks like willing to give up on his battle against crypto on some fronts, specifically the Bitcoin ETF which it looks like it will be approved in the, in the coming week. Um But the other on other points such as uh the industry being rife with securities fraud. G answer is not ping the me just yet some recent headlines that have come out on Coinbase. Uh They're planning to delist bunch of trading pairs. Correct me if I'm wrong. I think it's about 80 trading pairs that the exchange is planning to delist. Could we look at this as them, you know, buttoning up um, operations tying up all loose ends. They don't want any regulate regulator to come in and say, hm, this is a little bit questionable. Why are these delistings happening? Well, it's hard to say specifically for any, it's really a case by case basis. Um, but when, uh, recently when, uh, Corbe did a bunch of these delistings, um, it was less so I think because of securities regulation and more because, well, they were just looking at the bar and saying, how can we make things more efficient? Let's say that there's, um, let's say that there's this one alternate alt coin, um, let's just say it's, let's just say there's Danny coin. I want to pick anyone specifically. So let's say that Danny coin, the Danny coin trading pair between US DC, which is Coinbase and Circle stablecoin and Danny coin. That's very, there's a lot of activity there. But then between us TT tether and Danny coin, there's not much activity. So one way to just make things more efficient is to shut down the US DT trading pair, the tether trading pair because that one's not really seeing any activity. And because it's already in dollar form, most of those people who wanted to do that business anyway will move over to uh the other one. So I think that that is generally how you can think about many of the recent delistings. It's less sort of some big statement about what is and isn't Kosher. And more just saying, look, this is uh reflective of the market reality and it's a result of Coinbase uh active monitoring of the trading pairs that it has on the exchange. All right, Danny, I would buy Danny Quane any day. Just putting it out. There was a security. Uh Please invest, not financial advice. Uh All right, just before we wrap this up, staple coins is a big narrative. We're taking you from 2023 to 2024. Brian Armstrong recently made some comments about what he thinks the next iteration of stablecoins might look like. Uh tell us a little bit more about that. Yeah. Well, flat coins are this new idea in or newish idea in crypto and in the stablecoin sector, just thinking about how can we reshape these assets that currently are known as uh basically dollarized cryptos or cryptos that trade uh uh whose value is worth a dollar because it trades uh it's pegged to the dollar. And so a flat coin is, is a similar notion, but instead of a single um instead of a single asset, it may, maybe there's a basket of assets backing it. And so that might mean that it would go, uh it would, its value might be more stable over time than a currency which fluctuates. So Brian, in an interview with uh with Yahoo recently, he said that Coinbase isn't yet working on any of these flat coin projects, but it is definitely thinking about it and it might take more active steps in the future, basically seeing how these things shake out. And I guess I would assume that this work might be done with circle which is uh Coinbase partner company through the Center Consortium, the issuer of the C uh the, the issuer of the US DC stablecoin. So we'll see what happens. It could be a, just a new way to manage uh people's money. Uh I do wonder though with any new form of crypto, there, there are going to be the same regulatory questions right now. I think a lot of people are really accept accepting of uh US CC as sort of just Kosher. Um, I don't know if having a basket of assets backing it might actually change things. So that's just one of the many things we need to think about going forward. Yeah, we'll keep watching that. Danny, thank you very much for joining, for unpacking your story and taking a look at what might be in store for Coinbase and Brian Armstrong. We'll see you next time. All right. That was Coin Desk's managing editor for Data and Tokens. Danny Nelson.

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