Brian Armstrong

is coin Base and what does it do? So coin Base is the primary financial account for many people participating in the crypto economy. So we help people buy and sell crypto. We also help them use it in a variety of ways. They can use it to send money to commerce far and lend or yield on their assets. So we think of ourselves as the primary financial account

for people in that crypto economy. Okay, so I know you're different than another company I'll mention, but is this what f t X more or less did as well theoretically for its clients was to enable them to trade. So f t X did one piece of what I just mentioned, which is the trading aspect. That's correct. What do you think actually happened to f t ACTS. You've been quoted as saying you think there was more than just occasional bad bookkeeping. You think there was more to

it than that. Is that right? That's right? And you know, obviously I'm sitting here as an outsider, but it seems pretty clear to me that it's not just a run on the bank or you know, poor management of funds. It appears that they took customer funds from their exchange and actually commingled them or moved them into their hedge fund and then ended up in a very underwater position. And that was, I believe, against their terms of service and against the law. And so from my point of view,

it looks like a massive fraud. And we know that because they turned off withdrawals and the customer funds which should have been held there one to one we're not able to be withdrawn. Um, so that appears to be a fraud from my point of view. So in your view, will the ft X bankruptcy hurt the industry and maybe produce enormous amount of regulation that you may not want, Well, I do think the f t X downfall is a

bit of a black mark for the industry. And it's not representative of the whole industry of course though, and you know we in traditional financial services occasionally you see dad actors as well, like Bernie made Off or what happened at en Roun. Now, in terms of regulation, you know, I do think that it won't be a bad thing. We We've actually coin based has been calling for clear regulation and trying to work with policymakers for quite a while.

We've made some progress on that across various G twenty countries. But I think it will serve as a wake up call in sort of a moment of catalyst where we'll get more clear regulation in the United States. And I think that will actually be a really a good thing

for both coin based and the whole industry. So for your company of people who are clients of coin base, you are reassured them I assume regularly or they can find out for sure if their account is managed the way it's supposed to, it's not being used for some additional purposes. That right, That's right. So I mean we actually are very different than what happened with f t X. So for one thing, coin base is based right here in the United States. We didn't incorp rate in an

offshore jurisdiction like the Bahamas. Um, we're also a public company, which means we meet we need to meet all of the audit requirements of a public company, and so we show in our publicly audited financial statements that you know, corporate cash is separate from customer funds, and you don't have to take our word for it, you know. UM, you know, a Big four accounting firm has come in and proven that in these cases. So there's there's other

differences as well. You know, we're we have we operate an exchange, but we've never created an exchange token like the way f t X did. We never operated our own market maker or hedge fund in the way that that ft X did because we believe that that would

be a conflict of interest. So the difference between the two firms, I think cannot be overstated, and it's really a validation of the approach that we've taken at coin based over the last ten years to sort of build this this business and entrusted and compliant way as opposed to what happened with f t X. So for people who may not be that familiar with what your services, let's Suppose, um, I wanted to buy a stock, I would call a stockbroker or somebody that's a market maker,

say I want to buy a certain share. They would say, okay, you pay a commission. Um. If somebody wants to trade a cryptocurrency, they in effect have an account with you, I assume, and they pay some kind of fee for the exchange. Is that right? That's right. Trading fees is one of our major sources of revenue, and yeah, we've we've begun to diversify that as well, so we we have a different category of revenue we call subscription and services,

which is has started to grow. So that's about thirty six percent of our revenue in our last in Q three of this year. But today people have accounts with you, they have it clear that you you if they want to pull their account out, they can get the money, I guess, because you are not subject to a run on the bank on effect, that's correct. All customer funds are clearly segregated and help assets are held one to

one for customers. So there's really no such thing as a run on the bank in coin bases world, because well, number one, we're not regulated as a bank, so we don't do fraction reserve lending. UM. But also UM, you know a h of custo were funds are stored one to one. So if if a hundred percent of people want to come withdraw, they can do that and we'll

have their funds for them. Okay, So you started the company in and you took a public I think in April, the I p O was enormous success, and I think at the end of that day, uh, your company was worth maybe seventy five billion or more. UH, and you were personally worth I think about ten billion dollars or more. The company's stock has come down about uh in recent times, in part because of the the ft X and other things

that happened in the crypto world. So how does it feel to be worth ten billion dollars one day and not too long after a lot less. Well, you know, it's obviously been a difficult market for not just crypto but also really all growth tech and biotech, I would say too, So you know, we're in good company. Netflix and Spotify and all these these companies have also come down similar amounts. We knew that going public would not be an easy path, especially with as a in a

new industry being a leader. We wanted to be the first crypto company to go out there and kind of assumed that it would take, you know, three or four years to go through a cycle, begin to educate, build trust in the public markets. And so that's the process we're going through now. And you know, my own personal um net worth is is not something that is particularly motivating to me in the sense of like driving personal

consumption or something like that. I'm I'm excited about building the things with technology and cryptocurrency is one of the most exciting areas out there right now. So um, you know, I'm gonna I'm gonna keep working in this company for the next hopefully decade or two, and um, I think it's an exciting road ahead. All right, let's go to talking about the time that you started the company and what we were doing around about the time you did started.

So you started in two thousand twelve. As I mentioned, what were you doing before you started? Did you know a lot about a cryptocurrencies, what we're Where were you working? Yeah, So before this, I was a software engineer and product manager at Airbnb, which you know, the travel home rental company. And you know, I'd studied computer science and economics and school.

I had tried creating a couple other startups that were not very successful at one one of them in the education s days, and so while I wasn't working at Airbnb, you know, I kind of got to see they had. They were trying to move money to a hundred ninety different countries all over the world, both collecting payments and

then paying out the people renting their homes. And I was one of the engineers kind of working on that, seeing how difficult it was to move money globally both you know, how opaque the fees were, how long the delays were, the chargebacks, all kinds of things like that. So, you know, at that time, I I this was around December of two thousand and ten, I believe I read the Bitcoin white Paper which came out, and I really

it captured my attention in a really profound way. I remember reading it and thinking this might be one of the most important things I've ever read, and it it was saying something. It was describing something kind of like the Internet, which was global and decentralized, a new protocol, but instead of for moving information around, this was for moving value around in different forms and I basically just couldn't stop thinking about this paper for the last For

the next six months. After that, I attended some meetups in San Francisco, um some early bitcoin meetups, and met some of the early people working on it, and eventually I just couldn't get this idea out of my head and I decided I had to go try to build a prototype that would make this this technology easier to use and trusted for the average person. So what was the valuation of your company for the first round from

the first investors? Oh? Well, um, you know, I think why Combinator probably got seven percent of the company for the one thousand, so, you know, not a not a very high valuation. And then I think the Series A was I think we raised five million a million post so um. You know obviously that those investors did well. So when their company went public, they return on the initial investments were staggering. I remember reading about it at the time, so I guess they were very happy with uh,

with you at that time. I don't know whether they've sold their shares or they still hold them, but still it's very profitable even at today's valuation. I sue, yeah, that's correct. I mean and they earned it, right. So that's that's the nature of these bets, is that if you can see something early on that most people are epical of in your contrarian but right, you know, occasionally you get these massive winds that come out of it.

And I think, you know, a thousands when point Base went public, a thousand people employees I believe, became millionaires. And you know, a lot of the early people wrote me incredible letters telling us how they you know, we had changed their life and all these things. So that was a really powerful moment. And as being a public a trading company CEO, I pleasurable experience or not. You know, I actually when I before we went public, I didn't really know much about what it would be like, and

I went and did a bunch of research. But um, my research played out roughly how I expected. And I actually kind of enjoy being a public company CEO. UM. It's a good forcing function for us to get feedback from the market, UM, to get input from analysts and investors. I've found their their thoughts to be actually be quite helpful in terms of operating our business periodically. And then of course, you know, I spend the vast majority of my time really just working with the team on how

do we build better products for our customers. I don't want to lose sight of that as the primary objective. So let's talk about yourself for a moment. Earlier in your life. Where were you born? I was born in San Jose, California, in Silicon Valley. Um. Yeah, and where your parents technology people working at tech companies or something like that. Something like that. Yeah. So my mom was a programmer and a manager at IBM. So, um, we had a lot of the early IBM computers in our

home and things like that. My dad is a civil engineer and an environmental engineer. So yeah, we definitely had to focus on you know, STEM and math and science and education in my my household growing up. I would say, And when you were growing up, what did you want to be when you were in high school? Did you want to be an athlete or a private equity investor something important like that or what? Um, you know, I don't think I knew exactly what I wanted to be

in high school. I remember even in high school, I was learning programming and I was learning computers. Um. I was fascinated with that. I built some early websites. Even started a little business with a friend of mine in high school. We were reselling computer hardware. So I don't think I knew that I wanted to definitely be a tech entrepreneur, but looking back in hindsight, that's certainly where

my energy and enthusiasm was, and I was. I was often staying up till two am, you know, learning Linux and computers in my bedroom, whereas and then I'd be sleep deprived and too tired to pay attention in history class the next day at school. But yeah, those were my early interests for sure. Where did you go to college? I went to Rice University in Houston, Texas. And how long were you at Airbnb? And how did you get

that job? Now? Was that Airbnb for about a year and a half or so, and they I was employee number forty I think when they joined, when I joined, and they when I left, there was maybe six d people, so it had gone through this incredible period of growth. I learned a lot from them, actually, um just about how to run a great you know, product building process with engineers, how to raise money, how to operate in Silicon Valley, how to how to meet with people like

at y Combinator. So I learned quite a lot from that process. When you left to start your own company, did Brian Showsky, the one of the CEOs and wounders are there tell you that you're making a mistake. You should stay at a stable company like Airbnb. Well, my boss at that time was Nate Blecharzick, who was one of the other co founders at Airbnb and one the CTO, and I remember how he he was very supportive and obviously they tried to get me to stay a little bit.

But you know, generally there's a really incredible culture in Silicon Valley of how you know employees who who are joining these early startups that sometimes they go on to do their own startups, and it's it's very much a positive some environment. You know. One of the things I'm most proud of is actually a lot of early coint based employees have gone on to found other companies in crypto and um. That's been really positive and rewarding for us to see as well. So you told your parents

you're going to start at cryptocurrency Exchange. What did they say? Uh? I don't think they quite understood what it was at that moment um. And my mom, you know, asked me if I was gonna have health insurance, which you know I learned. You know, even if you're creating a new company, you can you can pay for your own health insurance. And there's little things like that that made her you

better at night. But I think ultimately they trusted me and they supported me, even if they didn't quite understand what it was. And they said, well, you know, if this doesn't work out, hopefully you can go get another job and help be fine. But they sort of knew I was always gonna try new things like this, and it wasn't worth trying to talk me out of it. At a certain points after coin based, when public, you decided to join the Giving Pledge was started by Bill

and Melinda Gates and Warren Buffett. So why did you decide as such a young age and you're going to give away so much of your money and that anybody say to you, why don't you to save the money and not give it away? Well, to be honest, um, yeah, I mean I was. I just wanted to learn about philanthropy. Um. I don't think I'm very far along that journey, especially you know, given the markets correcting and everything, like that.

It's not that I have, you know, as much money as I would like to give away, but I want to start to learn about it and just think about where where can you do well? Where can you do good in the world with capital? I think actually building private companies, and I've invested in some private companies with my wealth. I think those have potential to do a lot of good as well. There's there's some areas I'm passionate about in scientific research and things like that. UM,

But I think philanthropy can also be helpful. It can also just like startups. You know, a large percentage of philthropic organizations are probably not well managed and not effective, and so you have to be, you know, good at finding the ones that are actually high impact and rewarding. How old are you now? Thirty nine, so you'll be forty presumably next year, and so you're still very very young by the standards of most CEOs that I know. So what do you do to UM relieve the pressure

to you? Are you a mountain climber, a bike rider? Do you do you have any other exercise or hobbies? You know? I think the thing I'm most passionate about in life it just broadly is how technology can be used to improve the world and improve the human condition. And I think that's been true going back to you know, the first time somebody invented fire, or you know, putting

shoes on their feet or whatever. Technology is a way that we can prove everything from healthcare to education to global economic freedom with cryptocurrency, and so I'm passionate about how we can accelerate that the pace of scientific and technological advancement. And so what do you say to some of the old line investors old line mean people my age or older or maybe slightly younger than me, who say that cryptocurrency really serves no useful social purpose and

ultimately all cryptocurrencies will go to zero. How do you respond to them? Yeah, well, look, I think there's a long history in technology of bubbles being created and then corrections, and you know, there's hype cycles and doom cycles. And this has been true obviously with the Internet in recent memory.

But even if you go back to the railroads and you know, the telephone and all these things, studying the history of this, you see that when a big technology innovation happens, early adopters come in, you see a bubble form, there's oftentimes a rational exuberance and then a correction happens, but ultimately there is a breakthrough there and it takes sometimes you know, a decade or more for these these

benefits to come to fruition. So that's exactly what's happening here with Cryptocurreny see, you know, one in four US households have now used cryptocurrency. It's not a niche thing.

It does tend to skew towards a younger audience and so sometimes people who grew up in their whole their whole career was in traditional financial services, it's hard for them to you know, this is the innovator's dilemma, right if you if you can, if people are familiar with the Clay Christensen book, it's hard for them to see this new thing coming along and seeing what the disruptive potential of it would be. And there's sometimes a little

bit of blindness that happens with that. But um nevertheless, the change is happening and more people are using crypto through every cycle that happens. Well before you started the company or while you were starting, uh your company coin base, did you buy some cryptocurrencies yourself just to sell show that you were a believer in it, or do you not want to have a conflict by owning some of these cryptocurrencies. I mean, I really didn't have much money

when I started coin base. You know, I had just left Airbnb. I had a little bit of money saved, but I had to I wanted to exercise my options and Airbnb when I left, and that actually almost cleaned

out my bank account. So I think I had maybe like like three or four thousand dollars or something like that when I left over when I started Point based, So you know, I certainly bought a little bit of bitcoin early on, but we're talking about like a thousand dollars or something in that range for the first you know, five years or actually I mean still to a large degree to this day. I mean not myself and other employees.

Early employees at Point based, we took our salary actually in bitcoins, so you can imagine that had some interesting appreciation value. You know, we had to sell a lot of it to sort of pay rent and things like that, so it wasn't um like we were able to hold all of it, but yeah, that there was definitely some appreciation there. But I wish I'd had more money in the early days for sure. Okay, So, um, how do you respond to the idea that many people don't know

what they're doing when they're buying cryptocurrencies. They're not that well informed, they're very young, and they're gonna wind up losing their money because they're just not experienced. How do you respond to that concern? Right? Well, I think that's a very valid concern across really any type of investment that people might make, not just in crypto, but um in stocks and in everything. So my person shin is that we actually do need more clear regulation that's crypto specific.

I mean crypto businesses like coin based were already regulated like a traditional financial service business. And you know, we have a CFDC license, and we have Finns were registered with finn Send, we have a New York bit license and various money money transmission licenses. That's that's just in

the US, UM. But I think we need more crypto specific regulation in the US, both around stable coins, how centralized exchanges and custodians are, you know, the best practices they should have in place around audits and you know, not commingling funds. Many of those things we're already doing, and then the big piece will be actually getting clarity around what's a commodity, what is the security, what's a

stable coin? And we need sort of an updated version of the Howie test, which is um something that the SEC uses two that applies more to cryptocurrency. So there's a lot of legislation being put through Congress now and coin based has been very active in DC working with policymakers. They're they're strong bipartisan support in the US to actually

get clear crypto regulation UM. The FTX situation created a little bit of a delay in in the legislation that I was hoping was going to be coming getting past in the next quarter or so, But I think within the next year we can hopefully get something there in the US and then go for the rest of the G twenty as well. So Sam Bankman Freed was well known for giving money to politicians as campaign contributions and

for lobbying members directly in Capitol Hill. Do you go to Capitol Hill very much the lobby directly for legislation and one type or another. Are you very involved in political contributions? So I go to d C. Historically I've gone to d C and maybe two or three times a year, and um, I imagine that may even be

more frequent now in the next year or two. Um, we've made small donations to certain candidates that are pro crypto and we you know, but just standard stuff like you know, five thousand hundred dollars or these kind of basic minimums. We don't actually we've never made any kind of donations on the scale that Sam Makman Freed was doing through through these large packs and things like that. And um, you know, part of it is like it's how the game is played. You need to sort of

make relevant donations. That's what all companies do, public companies do around policy issues. But it does seem like the way that Sam was doing it, where he was so visible in d C, there was such a large amount of money I think I think he was the second largest donor to the Democratic Party or something like that, it does seem like it was happening at a different scale.

And UM, you know, I think there's some really serious questions to be asked now about should should some of that money be clawed back because it appears that it was stolen from customers. So when you come to Washington, you meet with members of Congress, do they really understand cryptocurrencies or you have to educate. I'm a fair bit you know. When I first started going to d C maybe eight or nine years ago, I think many of them didn't understand crypto at all, and there was a

lot of very basic conversations. I think today probably of Congress maybe understands the basics, and they understand the potential of this technology that it has. It has a lot of innovation potential which we want to preserve, but it also has some risks, and unfortunately it's attracted some some bad actors to try to come into this industry to try to profit from it, and so they recognize the balance the need for both clear regulation and preserving that

innovation potential. There's still probably, i would say, of Congress where they're either just very hostile to it or or just ignorant of it. But it's not the majority view at this point. I've actually been very pleasantly surprised to see strong by bipartisan support to get clear regulation but

help this industry grow. You know here in the United States, in the financial center of the world, um as opposed to it being built, you know, in these havens or off offshore jurisdictions where we've seen that customers can get hurt, including U S citizens who may be attracted to to those kinds of products. I suppose I say, I listened to your interview and I like to buy some cryptocurrencies.

What would you recommend as somebody who doesn't know much about crypto about what they do to get educated and would you recommend to that. Suppose somebody is a young professional he or she has a modest amount of money in the bank, would you recommend they put pent in crypto? Five said, how what do you recommend to people that they do if they want to experiment investing in crypto? Right, so we're not a registered investment advisors. I have to

be a little carefully. I mean, we're not giving any investment advice to people. But what I would what I do personally and what I would you know, what I would tell people I should say personally is that, um, if this is something new, don't invest in anything that you don't understand. And if you want to learn about it, you know you can put one percent of your net worth into it or something like that that you would

be okay if if it all went to zero. But um, if if it's not, then it's a way for you to dip your your toe in the water and hopefully you know, own a little piece of this crypto economy that that's happening more and more on the Internet for the next five or ten years. So, UM, I'm more in the mindset of personally, I don't actively trade crypto or anything like that. I'm more of like a long term buying holder. And then I just try to help the company build good products and services. So I'm not

like an active trader of crypto personally. So for somebody that UM is a young person watching, I would say, I want to be Brian Armstrong. I want to be out of be a person who starts a comp a very successful leader in in his industry. What would you recommend as the skill set or the kind of things that somebody should do to become you. Well, it's odd question. I'm sure some people want to do that. Not everybody wants to do that, But for people who do, I

think number one is study engineering, science, math, STEM. I think that's that's the language of our future that you can have the most impact. UM, And then I would say try building companies. I think that building technology companies is probably one of the best levels we have to improve the world, regardless of what problem we're talking about, whether you know that's climate change or fixing educational healthcare,

anything like that. So, and you know, starting companies is hard. Um. I started a number of companies that didn't work or they were barely successful in some small way, and it was, you know, a coin basis probably the tenth idea that I had that I tried, and that one ended up working really really well. Um, But there's more. There's others that I hope to it in the future, and I'm maybe someone works, some won't. And so you have to be okay with resilience and failures and setbacks along the way.

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