Hey, folks, I've got Brett tach Paul, who's the head of coinbas Institutional with me. Brett, great to see you. Great, see you too, Tony.
I gotta tell you I owe you a giant gread of dat of gratitude. The last time we were together was five years ago. It was in the depths of COVID. Yeah. I'd just taken my job at Coinbase. I had never done a podcast before. Yeah, you had a jinky setup at home, so did I. I hadn't practice. And I got to tell you, you were very kind to me in the interview. And I can't tell you the amount
of constructive feedback I got. I'm tightening up my answers and maybe maybe let's see if I can do a better job this time.
Well, Brett, we've both gone into this incredible journey of being better at interviews, right because to your point, I was in a dark room you were. Yeah. But Brett, amazing growth on Coinbass front, both on the retail and institutional side. It's amazing to see how this company has grown. Uh, you know, what are some of the things that you're most excited about from an institutional adoption standpoint.
I mean this is a great interview for us to go then and now. When I first joined coinbase, we had a team of about five people. The only product we really had that was up for institutional grade was custody, and so you could you could store it safely, but you couldn't really buy it at a great price. And so if you if you fast forward, we made a couple acquisitions to Gomi was the first one that helped
us build. It was the foundational layer for Prime. But today, if I tell you what our product scope is, you can think about it in three main verticals. So the vertical one is really marketplaces. And so when I think about marketplaces, the first thing that'll jump to your mind is the is our US spot marketplace.
So we run that.
We have the CFTC regulated Futures Exchange, so we've made progress there in terms of amplifying you know, volumes. We have the Bermudian International Exchange, which has been around for about two years now and it's gone from zero percent market share and it's you know, peaked at maybe twenty and we're doing you know, tens of billions a day, So that's been great. That's been our foray into the international PERP market, so it's been fantastic, also does Spot.
And then I'm sure as you know, we announced the Derbit you know acquisition, which is based principally in envarn now but has an amazing eighty five percent you know market share and options and so for us, we maybe come back to that later, but that was a very important strategic sort of last piece of the puzzle for the completion of the of the derivative product and platform. So that's that's pillar one. Pillar two is what I spent most of my time on. Pillar two is the
prime platform, and that's grown. Like I said, we just had that core custody product, but now we added on smarter order route, then we added stacking, then we added a very comprehensive financing. So now we call that a prime brokerage platform. And really that's the single place that you can go to do all the things that you need to do with crypto and so that for me
has been super exciting. That is the place that all the ETF business that we wont is on that same platform is the platform that services are high net worth clients, and so I just want to make the distinction. Once you're on that platform, all the clients have the opportunity to get all the features. You can consume as much as you want or as little as you want, as robust security, as detailed as you'd like on complex workflows or simplified ones, and so Prime is the main platform
that people on board to. Now the interesting thing about that platform is, and you're going to hear more about it today at the conference, is we're trying to expose all the infrastructure that we've built and calling it as a service. So I now we're going to talk about that in a second, but think about everything we do is a so custody as a service, wallet as a service, trading as a service, and I have great, great hopes for that business to probably one day eclipse actually the
size and skill what we've got now. So that's the that's the main pillar. And then the third pillar is coin based asset management, which is still in its i would say beginning stages. We bought a business called One River Digital and rebranded it SEBAM. It's in the process
of raising funds for things like bitcoin yield. They have multi straft, they have credit opportunities, so they have a suite of services which comes at a really good time because that business was purchased you know post you know, call two years ago, when we had a lot of headwinds from a regulatory and other standpoint, and now with everything that we're seeing, that business has a lot of momentum. So those are the three the three pillars that's exciting.
It's amazing the growth that coinbas has had on that institutional front with the acquisitions and much more given the change in the regulatory environment towards crypto in the US. Are you seeing a lot of demand from big banks and institutions and things like that.
You know, I've been through a couple of phases now where sometimes it's big cooin price, sometimes it's other things. Right now, I would say it's it's all the above. So it's the the staying power, the establishment of the asset class, the building of demand for the investment case. It's you're gonna hear a lot today about utility. So we've talked about it for years, but you know, is the stable coin payment moment finally here? And I think
it is. I think having Jeremy on stage earlier and with Circle going public, I think is a great testament to that. And then thirdly, it's regulation, and so never have I seen I mean I've been I've been in you know, call it regulated financial services for a long period of time through bull markets, bear markets, Dodd Frank.
You know, I've never seen, ever, ever seen, and administration turned so quickly from an anti to a pro with the acceleration of real regulation that I'll propel the industry forward. So now if you ask me if I'm seeing demand, I mean, holy cow. So we managed if you think about it in a world where it seemed like everything was against us, in a world where everything was against us. Stable coin volumes, We're able to grow in volume, Institutional adoption grew in volume. ETFs came to market in an
unfriendly regime with record success. You had, I would say, a tiering of the very largest financial players, thinking through the fact that they must have a strategy, so they've been building for years. I can name a few names there. But then the second tier of players, there's a little bit of a am I in this thing or not in this thing? If I don't have the resources to build it, what am I going to do? All of a sudden, Now FOMO is kicked in like you've never
seen before. So every large financial services firm, venture firm, uh, competing bank, upstart, brokerage, you name it is now interested in finding what the accelerated path to getting involved is.
That's great to hear. Now, obviously you support issuers ETF issuers like black Rock. Are you seeing more demand on the ETF side or stable coins or for tokenized assets or just simply trading crypto in different ways?
Well, we can all see the ETF itms are going up day by day, and so really what that is? And you know, personally, I love this because I hate going around and trying to promote buying things. It's it's it's not, that's not really what I do. What I what really what I do is I build the tools and services and to help people make smart decisions on
behalf of their clients. But there's no better, uh, there's no better data point of demand than when what you see from ets right, and so so I would say it still feels like predominantly retailed them for the most part is coming in. Institutional demand is building on top of it, and so ETFs has been an enormous catalyst.
I would say, in a again, in an unfriendly regime, to be the first building block for what comes next, and so stable coin is now coming after with regulations, so you need the same core infrastructure to do things like send receive right, and so that's that's building the demand picture on top, I would say the less imaginative institutions that are still a little bit on the sidelines, not sure if opening are brokerage to investment cases in bitcoin is the thing they are interested in, things like
collateral management and the speed with which money moves around the world, and so so stable coins is that is another source of gravitational pull. And then tokenization is much talked about. It's still a very eclectic list of things. We're going to talk a little bit more later. That's going to be feature in my conversation with with Blackrock later so so so stay tuned there. But there's a long list of things I think, some of which I
think are interesting to be tokenized. But I would say a lot of the the the each of the each of the issuers think of it that way that is thinking about tokenization is thinking about it slightly differently. I'd say, one one compelling value cases an asset manager who wants to find new distribution channels, you know, just simply trading tokenized stock could be interesting for you know, certain firms to do follow on issuances. I'll leave that as a
glimmer in the eye. But you know, running full service firms and doing cost reduction, there's a lot in there. So I'd say it's an eclectic mix of motivations to pursue tokenization. The one thing that I find is interesting is that it seems that a lot of the leaderships of these firms all believe that they should have some sort of strategy towards tokenization.
So do you see these exchanges seeing excuse me, these institutions seeing this as the next big macro trade, but also technology that they need to build on to stay relevant given that it's going to be the rails they're going to power the financial markets.
Do you know I found Felipe Lafont was just on stage earlier and he was talking about just the size of the different types of asset classes and one of the things, and Jeremy was on stage. He was talking like his big picture of you. Jeremy's was interesting. He was talking about how maybe disintermediation at banks would one day really come to light and so if on the
topic of tokenization. I feel like maybe disintermediation and efficiency of If you're a banker or someone that follows how assets get created and distributed, there's a lot of friction in the process, and so it's good for issuers and good for investors both to have lower friction and lower cost in a process. And so I see that as really being an engine of growth for tokenization. That's where I think actually the market will coalesce sure.
So Brett, obviously you guys have been doing an amazing job. You've been growing at a rapid pace. What's on your roadmap that you can share?
So now that we've got so the dearbit transaction we talked about earlier was really important. So our high level company objectives are going to be grow internationally, grow and in derovatives. I want to capture the next wave of institutional adoption. So the customer experience has to be a great one across all those things. One of the things that's really powerful and important about our platform is being
able to do all the things in one place. But then just not the convenience of that and the operational safety of that, but the efficiency of capital. Right, So think about having cross margin across you know, purpse, options, futures,
spot and different things. And now that we have I don't want to get too technical, but now that we have options and we've longer dated markets, we have a long list of take that in combination with the long list of ETF products that would like to come to market, you now have actually all the ingredients to do things
like structured products. So if you want new capital, institutional capital to invest money in a marketplace that's still volatile, right but with bitcoin adder near you know, all time highs, what would you like to have You'd like to have an investable product, or you keep things safe, you buy at the right price, but also you have some assurance that you're not going to lose everything, right, so you want to be able to cap your downside, maybe give
up a little bit of upside. And so once you have a full suite of financial instruments that allows you to put these these pieces together, it allows new types of new types of capital formation to come into crypto. That may be a little bit of a tratfy you know, reference, but it's a really important one because if you want sovereign wealth funds and people that don't just you know, buy pitcoin and hold and close their eyes and hope
for the best. You're going to have more sophisticated people that want to have more tailored risk profiles, volatility profiles.
Et cetera. That's great. I know. One of the things that has been talked about a lot is yield on crypto assets. And folks have a long term view. They'll buy their bitcoins and the ether and so forth, but if once it's sitting there, they want to be able to earn on it. So I think you may have touched on it being able to create products around that and for them to earn over time.
Yeah, So one of the things I heard coming out of Bitcoin Vegas was yield. I mean, I guess at this one everyone's decided to own pitcoin, So that's good. Yeah, but now what do you do with it? And how do you make you yield from it? And so our asset manager CBM actually has a bitcoin yield product. They're in the in the international market and raising money in and around that, and so there's ways you can do it more aggressively, less aggressively. But you can do covered calls,
you can do you can do basis trades. But what I would like to see come into the marketplace. I'm the sort of person that likes to have safe things come in, have have the expected return meet the realized return. So like I got the thing that I thought I bought, and so I think bitcoin yield with you know, four to eight percent targets feels like a reasonable way to
begin to offer that product. And so there'll be I think a myriad of ways that people can do it, and DeFi in all sorts of different ways, but it's definitely thematic.
Oh that's exciting, Brett. We're gonna have to do a longer conversation about this. So maybe it's a five year anniversary when we do a longer podcast. Yeah, thank you so much.
All right, great to see it's gone.