Exporting Economic Freedom with Brian Armstrong of Coinbase

Brian Armstrong is one of the crypto ecosystem’s most influential pioneers. As the Co-Founder and CEO of Coinbase, one of the world’s leading crypto exchanges, Brian has seen – and helped drive – the growth of blockchain-based networks from obscurity to widespread adoption.

In their Money Movement conversation, Brian and Jeremy discussed how the crypto economy can extend global financial inclusion, economic freedom, and opportunity to millions who’ve been excluded. To take just one example, Brian shared how mortgages to buy homes are very difficult to obtain in Argentina. The result? Only the richest citizens own homes; the rest are limited to renting, shutting off one of the great sources of wealth creation. Brian believes crypto markets can vastly expand economic freedom and access to credit in places like Argentina, empowering a new culture of ownership and helping to dissolve decades of inequality.

But to get there, Jeremy and Brian agreed, we must face what’s holding crypto back. One big “unlock,” in their view, is regulatory clarity. Another is the scalability of blockchains. They noted what the jump from dial-up to broadband made possible online. A third factor is usability. Much of the current crypto interface, they said, is too difficult to use. 

Brian and Jeremy discussed the regulatory impulse to restrict open networks, fundamental rights that shouldn’t compromise in the name of fighting bad actors, and the importance of educating people about crypto’s enormous potential beyond the transfer of financial value.

*Circle and Coinbase are co-founders of the Centre Consortium, a joint venture aimed at establishing a standard for fiat on the internet and providing a governance framework and network for the global, mainstream adoption of fiat stablecoins.

Jeremy Allaire: Hello, I'm Jeremy Allaire, and welcome to this episode of the Money Movement. I'm here in Singapore for the Singapore FinTech Festival and I'm really thrilled to be joined today by Coinbase founder, Brian Armstrong. Welcome.

Brian Armstrong: Thanks for having me, Jeremy, appreciate it.

Jeremy: Yes, this is awesome. We don't get to be together in person very often, and being able to do it all the way around the world here is cool.

Brian: I agree. We do almost all our meetings over video, but this is like-- I always joke with people, this is the highest resolution video call we're going to do for a while.

Jeremy: Yes, it is. It's really good. Obviously there's just tons we can talk about and themes. I actually want to start with just a very high level theme, which is moving from the speculative value phase to the utility value phase of crypto. I actually remember, I don't know if it was after your series B or after your fundraising, you had a document you published, which was, I think, like, here are these different phases and where are we in these--

Brian: The secret master plan.

Jeremy: The secret master plan. That's right. Yes. Where are we in these phases? You don't necessarily have to reference that particular thing, but I think right now is a really interesting moment because so much infrastructure has been built, there's just so much there, stepping back 10 years, I think as we look and say, "Wow, look how far this has come. It's amazing," but we're still really early, and we have maybe a few hundred million people who are touching this. It's still a small part of the world. Obviously we all believe it's going to be everyone in the world eventually, but what do you think are the most important problems to be solving for moving to more utility value in crypto today?

Brian: Well, you're right. We always thought about it as crypto going through these three phases of, it would start off as primarily an investment use case and then it would move to different types of financial services, borrowing and lending, remittance and earning money, and commerce and then it would move to even non-financial service things like Web3 and the decentralized apps. We're seeing that now with decentralized identity in social and gaming and all these DAOs, new types of things.

Jeremy: Experiments and all these things, yes.

Brian: Yes, I think the things that are the big unlocks to help that happen even faster, it's already happening today as you've mentioned, and we actually track some of that internally at Coinbase. What percent of our active users are doing something other than trading? It's now more than 50%. It's not just one thing that they're doing, it's a bunch of little things. They're using their Coinbase card. They're earning money with crypto doing peer to peer payments like commerce. Staking and yield and all these things have become bigger and bigger.

We're seeing that transition already happen. It's more than 50% of our active users, and I think the way we get it to be even bigger or the next big unlocks, it's got to be regulatory clarity. That's one I know you've worked super hard on all over the world. A lot of the institutional investors I talk to, for instance, they all say, "We've got 1% of our portfolio in crypto," and I say, "What would it take to get it to 20% or 30%?" They say, "Regulatory clarity. Regulatory clarity." The whole ball game is regulatory clarity.

Jeremy: We can come back to that theme. Obviously it's a big theme.

Brian: That's a big one. Then the other one is scalability of the blockchains.

Jeremy: Totally.

Brian: Depends who you talk to. Some people feel like the blockchains are scalable now and we need the apps and I--

Jeremy: Like DSL.

Brian: Or it's like, when the internet first got going and had all this fiber optic infrastructure, anyway, I feel like getting another order of magnitude of scalability in the blockchains would just unlock all these use cases.

Jeremy: I use the example of-- sorry to interrupt. The example of going from dial-up to broadband. Yes, these third generation chains that are out there now, they have X thousand TPS, et cetera, but when you think about Web3 and the kinds of apps and the kinds of things that people want to do, we don't have the pipes. I think broadband is an interesting analogy because it is about throughput basically, at the end of the day and how many bits you can move, but this is about how much shared state can exist on these compute platforms, but we're still--

When broadband came, it was originally just DSL, it was like, not really. It was five times faster than dial-up modem. Then eventually yes, enough got there where almost any app could happen over that. Sorry, that was one infrastructure of scaling.

Brian: Yes. To me those are the two big ones. I don't know, if I had to pick a third one, it's probably just the usability. Right now, today, with Web3 and all these use cases, it's actually amazing how much adoption Web3 has gotten, given how difficult it is to use, but a lot of times people, they'll buy crypto on an exchange, then they'll move it to a self custodial wallet, which is often a Chrome extension. Right there, you've lost most of the [crosstalk]

Jeremy: The funnel. You think about the funnel.

Brian: Yes. Most people in the world don't use Chrome extensions, except nerds like us. Then you've got to figure out how to [crosstalk] connect your wallet, you might lose the funds. Oftentimes you have to bridge your funds to another layer too. We've just got to make it way, way, way simpler. The usability, I think, it's got to just be like, you want to buy that? You click a buy button, and it all magically works somehow.

Jeremy: Yes. A lot of people often say crypto reaches mainstream when people don't know they're using crypto. I'm not exactly sure what that means, but clearly, that user experience layer, I agree about that. It's such a huge hurdle for people. Going back to early iterations on the internet, my last company was digital media. Media was browser plugins. It was, you wanted to stream a video, you had to go get either the Windows Media Player, the RealPlayer, or the QuickTime Player, and it was all these different codecs, and they're constantly upgrading.

It was awful. It was truly awful, but people were really excited about it, and there was actually a lot of streaming, but eventually you needed either common standards that then all the clients could implement that then made that work. We're not quite there, but maybe we'll get there if Apple and Google and people who control the client operating systems actually build some of the crypto primitives into their OSs. That can help.

Brian: Yes, that would help.

Jeremy: Yes. Maybe we'll get there on that in the next few years.

Brian: Yes. That'd be a very interesting question, if crypto companies actually need to go build their own hardware, like phones, laptops, and VR headsets, or if the current generation of those companies will actually embrace it. I think they're all a little bit-- There's people inside all these big companies that are thinking about crypto, and are very pro crypto, but sometimes the leadership is ambivalent, or it's just not their highest priority, and so you get waffling. It'll be interesting to see if a dedicated crypto phone can actually push that whole situation forward.

Jeremy: Yes, definitely. We're seeing experiments like that. If you look at what Apple is doing, and Google and others, but yes, they have their wallet, and it has identity and entitlements, and they're trying to layer in these other things that are close looped to their environment. You can see NFTs as entitlement mechanisms and crypto primitives as mechanisms for identity. All those could be standardized on an open infrastructure. It's like the pre-internet standards era that is in some of these spaces, but crypto is finding its way.

I like to think once it's clearly a whole set of use cases that go beyond, say if I'm an Apple product lead, beyond this is just about Bitcoin, or in people's minds it's super simplistic, and this is actually important internet infrastructure. One of the things I'm interested to hear your take on is, over the medium to long-term, this shift from entities that exist in real life, to entities that exist on chain. It's one of the things I'm most excited about in terms of long-term growth, is the idea that labor and capital can construct mechanisms to work together that are truly global, that are transparent, auditable, and can exist entirely on chain.

DAOs is the word people use for a lot of these, but not all of these are going to be autonomous, nor totally decentralized, but let's just call them DAOs for now, but on-chain entities, in a sense. I know you guys have experimented a little bit with that in terms of stuff out in the ecosystem, but interested to hear your take on how significant you think that can be and how much of a growth driver that can be to the crypto economy over the long run.

Brian: Yes. Well, I like how you framed it as better organization of capital and labor. We're here in Singapore, which is-- Well, I'm really passionate about this idea of economic freedom, and the mission of Coinbase is to increase economic freedom. Singapore, if you look at the rankings of the world, is actually the number one highest economic freedom country in the world right now, if you look at the 2022 rankings on Wikipedia, but based on various organizations that rank these things. That was what made this place so prosperous, was property rights, rule of law, free trade, and all these things that allowed capital and labor to come together in unison and just make better high-quality products at cheaper prices.

Even with very few natural resources, they became this incredibly wealthy country. In a way, it's like crypto is trying to bring that prosperity story to more and more countries around the world. I do think DAOs are a really big deal. They're a huge part of this puzzle. I love DAOs, I'm super bullish on it. It's a very broad term and people go through various ups and downs, just like in any new innovation in crypto, where DeFi will take off, and then it'll have a winter, whatever. DAOs have gone through some of these as well. Look, the bugs need to get worked out in smart contracts. It'd be nice if we had better tools around, anybody could go and create a DAO, manage to do governance through voting and all this stuff should get super simple.

Jeremy: Functions of an organization and make that more like a SaaS product, but all executed safely on chain.

Brian: Even payroll and people-- There's another weird thing which I think people need to figure out with DAOs and we probably need to do our part on this too, but some DAOs I've seen, actually, they turn into collectives, which is almost designed by committee or whatever. I don't think that's the right model. Companies always are thinking about this too. In theory, you have--

Jeremy: Flat hierarchy divisions, P&Ls.

Brian: Generally, the standard model is, you have one CEO who can make the call and move forward. You don't have just endless deadlock and debate and everything, but maybe you have a board that creates governance over that. Anyway, I think the good news about DAOs is there's going to be a lot of variance in different models that people experiment with. DAOs are not just one thing. I do think there's some projects that have default made the DAO like this committee or commune thing, and I think that's probably not going to work if I had to guess.

Jeremy: It's pretty challenging.

Brian: Who knows? I could be wrong.

Jeremy: I look at it as this is the first time-- if you go back to the 1800s and you had joint stock corporations, is this thing that gets a common pattern. Then in some ways, banking and capital markets laddered off of that in some ways, but now, we have this creative surface of, you have an entity, you have participants, and you can have contractual interactions and economic coordination and all those things can start to happen. It's a space for radical experimentation. I'm interested in just seeing, ideally, a lot of different ways people try and organize these things, and hopefully, there's a legal binding. There's enough that they can pay taxes or whatever, or can connect to labor laws if there are labor laws that they need to connect to.

There's that hybrid thing, like a stablecoin. It's this real world thing that's connected to an on-chain thing. Imagine a lot of experimentation, and I think corporate forums, yes, there's been a lot of work on corporate forums, but these new global internet native corporate forums, it's really a new thing, and distributed work and everything else plays into that. I'm likewise super bullish about it and just curious to hear how you were thinking about it too.

Brian: I'm curious. There's certain jurisdictions I think have tried to lean into this, like Wyoming did something, which I think is really smart. Most C corps in the US are in Delaware. I feel like Wyoming made this really smart move. I talked to some of the leaders in Wyoming and I was like, "By the way, how did that come about?" They were like, "Honestly, it was this one guy and he had this crazy idea and we all didn't really quite understand it, but we were like, "Sure, try it out."" Sometimes it's the funniest ways that these things happen, but I don't know.

I'm still trying to think about-- [unintelligible 00:13:58] your thoughts, DAOs are supposed to handle the court system or whatever is supposed to be handled on chain, and we've seen some of them that have resolved that successfully with votes, but I'm still trying to think about what is the tie in back to the real world? If you need to go to some Wyoming court or something, what's the situation? I don't know. How do you think about that?

Jeremy: I think clearly, a couple of things. These entities need to be able to contract with other legal entities. I think that's a really key thing because that's not going to be viable that they are-- it's so self-contained that all products and services are entirely in that on-chain world. I feel like there is that root connectivity that has to be there. LLCs or other corporate structures can exist or can be bound like this. Wyoming DAO is like that, but I think other governments are saying, "Hey, you can have an on-chain entity that does these things. I think the contracts that they enter into that are off-chain contracts, then you have dispute resolution through that.

Then I think there's interesting work that can be done in terms of on-chain dispute resolution. There's Kleros, I don't know if you've looked at that, which is a decentralized arbitration system that exists entirely on-chain. It's fairly early in its development. There was the Aragon court, which attempted to do something like this as well. I feel like those kinds of experiments could continue, and you could actually see durable arbitration mechanisms to deal with what are provable on-chain activities and contracts and things like that.

Brian: That's cool. It makes sense. You need that at least in the intermediate stage, you need that connectivity back into the legacy system of paper, records, and whatever. It's this interface with non-DAO entities. You're right, more and more of it could go on-chain with these arbitration courts. That'd be super cool.

Jeremy: It's an interesting one. Maybe I want to pivot to talk about lending, and in particular, this concept of, maybe stepping back, I have this theory and it relates to stablecoins, actually, which is the total addressable market for stablecoins full reserve type stablecoins that we're looking at. I think of it as just M2 electronic money. That's like $100 trillion. It's a big market.

When you actually break that down, the vast majority of that M2 money is actually leveraged capital, meaning, it's deposits that then there's a money multiplier, and that's the fractional reserve system that is basically playing out loans on the deposit base. If you really want to compete with M2 money, you have to create credit intermediation. Credit intermediation, today, there's ways that that happens, and we have credit intermediation on-chain, but it's mostly leveraged capital, meaning it's margin borrowing and things like that. I think the really interesting problem becomes, when can on-chain methods provide unsecured forms of credit intermediation or different levels of security?

Again, there's DeFi projects that are experimenting with this today that are interesting. It ties into DAOs, and if there's an organization that actually has its treasury on-chain, well, then you can actually see a lot about its financial health, and then you could underwrite it. [unintelligible 00:17:52] data is another way to do that. I'm curious, as you think about the future of lending on blockchains, what do you think in terms of the role that blockchains play in broader credit facilitation?

Brian: Well, I hadn't thought about it in terms of the M2 money supply and how that can expand, and they're maybe-- I bet you've thought about that actually a lot more than I have. I'd be curious to get your thoughts. The main thing I've just been thinking about in terms of credit, in terms of what these on-chain protocols can unlock, and lending, is that today, a lot of these lending marketplaces are just so constrained into one country or to one type of person.

Look, inside each of these, I'm sure there were reasonable reasons why these things were created, but the net effect of it is that there's not equal access to credit globally at all. I remember I spent a year living in Argentina, and I was surprised to learn there that people can't get mortgages for their house. The credit market is just not developed there, and so the net effect of it is that wealthy people who can pay cash for a house, they own property, and then 99% of people don't own property, they can only rent for their whole life.

It's basically keeping them more in poverty. Real estate is a big way that people build their wealth. It's the same thing, if you wanted to build a global lending marketplace, you'd have to go not only to all states in the US, but all these 200 countries around the world. It's silly. Why can't I make a loan to someone in India or in Brazil or whatever? It's very silly to me. I think that just in terms of human potential and economic growth and everything, a global credit marketplace would completely unlock that and that's part of what DeFi is trying to do.

Jeremy: Yes, totally. 100% agree. I often use the concept of long tail capital markets, and the internet is really good at that long tail markets, long tail advertising with- Google AdWords and long tail transportation coordination with Uber and long tail e-commerce. Anyone who has a product that they make in any part of the world can find a buyer and there's a logistics platform and it's the specialization and so on, but we don't have long tail capital markets. We have the Russell 2000, which is not quite a long-- That's on the equity side, but clearly, that's the promise.

I think one of the challenges with DeFi today, at least in its current incarnation, is so much of that credit market that's there, it's really still tied to people who want to borrow long or go short or borrow long on an investment, which is an important form of funding and everything else. When we get to the use cases that you're talking about, where there's people with property or people who have needs and ultimately getting to a place where there's long tail underwriting, in a sense, where you can have that be surfaced to on-chain systems that can provide the right kind of decisioning.

Brian: One thing I've thought about a little bit is just, now that decentralized identity is becoming bigger with ENS and these other protocols, there should be probably some kind of FICO score equivalent for an ENS. Especially, if you can look at attestations on that account, the history of that account, maybe it's received payroll from a DAO or you and I have sent and you have a reputation, it's basically like a Google PageRank type algorithm on the graph structure of the transactions. Actually, I haven't looked into this too deeply, but I'm a little surprised we haven't seen a reputation score or FICO score or decentralized protocol emerge. That's probably something that needs to get built.

Jeremy: Yes, there's definitely projects that are experimenting with that. Again, I have this idea of these hybrids that there's a pure on-chain version of things and then there's the off-chain thing that you need to link to, and identity is one of those. We need proof that I am who I say I am. You guys do that for a living with people. These are root elements that there's a trusted intermediary or a statutory obligation at least or whatever it is that society has said, "Yes, I'm going to trust the government to issue an ID," or, "I'm going to trust a financial institution as an intermediary to verify these IDs and the credentialing," those root credentials can come, but then when you attach that to things like on-chain, then you can decorate it with a lot of other data that then makes richer forms of decisioning really possible.

I know you guys have recently done Coinbase ID and built on ENS and you're starting to progress into that. What do you envision over the next couple of years becoming possible at scale?

Brian: Well, I'm very excited about ENS and decentralized identity, generally, not just that standard, there's a variety of them. We wanted to make it easy, first of all, for people to get one for free, so you didn't have to go and buy it. We basically made jeremy.cv.id. Anybody can basically claim a username.cv.id because it has-- I don't know what you'd call it, a prefix on it.

We were able to get the cv.id root name or whatever. We wanted to make that easy for anybody to claim, but of course, people want to have customized names too. We want to make it possible for them to buy those easily. Right now, I think they can just transfer it in if they want. There should be a marketplace for those, and people should auction them off. I think there's going to be a variety of decentralized identity standards too and maybe more we can work on there over time.

Jeremy: For sure.

Brian: Look, that's a very foundational piece for so many reasons. Today, we're sending money to a random string of characters. It's like an IP.

Jeremy: Back to the UX issue.

Brian: Yes. Is it human-readable or machine-readable? These are all machine-readable just like IP addresses, but then we got domain names and we got email addresses. That feels like a foundational thing. I should be sending it always to a human-readable name. It should have a reputation score decentralized thing attached to it. I should probably be able to go to look at that profile page for that name, maybe even see things that the person wants to be public. Ideally, you wouldn't want to have everything public right now.

That's another issue that some private, some public, but you should be able to go there and see maybe decentralized social media posts you've made or NFTs that you own, attestations like credentials, degrees that you've gotten, endorsements, whatever, even pull-ups like the proof of attendance, where we could both-- Jeremy went to the Singapore FinTech Festival, whatever.

Jeremy: It feels like this is one of those-- It's like the internet wanted a standard for money and the internet wanted a standard for identity. I think crypto infrastructure is finally giving us the ability to create those and I think it just-- it also feels to me like one of these spaces where standards are going to be super important, because identity, unless it's really broadly interoperable, and everybody says yes, and this is like a chicken and egg problem. It's like, how many people have had ideas for digital identity that are just-- they're stovepipes? They're stuck but feels like we have a shot now in a way that hasn't existed ever before, at least on the internet to potentially solve this.

Brian: Yes, well, to me, the key unlock is that, I don't want to have a digital identity managed by one company. I want to have an identity that operates in some decentralized manner that I control it, but I know that no one person could shut me off. There's all these issues with censorship and everything.

Jeremy: Needs to be self-sovereign, even if some of the credentials that you bring to it are given from someone else.

Brian: Yes, it's funny. The state of the art of identity verification today for Coinbase in all these different countries and most companies is literally taking photos of pieces of paper the government gave you, and it's so crazy. Places like India have done a really good job with India Stack and UPI and actually turned a lot of these into APIs with biometrics. Somehow that happened in India, which is an incredible achievement, but every other country in the world basically is nowhere near that, and so I think crypto can help just advance this whole state forward.

Okay, we'll have some connections to the legacy stuff, but I think eventually, your DID will be more important, not because you linked some government piece of paper to it, but because it's been participating in all these transactions, and it has an online reputation and that's almost more important. I think it's probably better for the world if every human could have multiple of these. You might have multiple different accounts on different services. The government wants you to have one ID per person, but I think if there's a world that's probably better for humanity, where you have your one for public stuff, and you have your one for if you're an activist or dissident or whatever, you need to have different profiles.

Jeremy: The kind of productivity experience, productivity is maybe the wrong word, but the UX around how to do that clearly hasn't been solved yet, but clearly will be. That's cool. Identity is like there are these multisided coins, no pun intended, but identity and privacy have an interplay with each other. Then identity, privacy, and regulation, all have a play against each other. We see guidelines that come through around things like self-custody wallets, and what level of identification is necessary for people to make transfers to those and what's the perimeter of privacy preserved transactions and so policy, identity, privacy are three sides of the same coin, I don't know if that works, but there's this interplay there and I know you've been really passionate about these topics.

I know we've both-- when the [unintelligible 00:28:57] tried to do what he did, we were all ready to sue the government, but unpack that a little bit, that interplay on those issues and coming back to your core mission of economic freedom. A lot of times there's a looking back, this is how it works, but now there's looking forward, there's new possibilities, what are those new possibilities, in particular around identity, privacy, and economic freedom? Then how do we convince policymakers to enable that world? That's a big question.

Brian: Yes, very big question. Let's see. I think there's this fundamental tension, is like, nobody wants to see a technology used by bad people to do bad things, but you also don't want to-- my mental model is 1% of the people in the world are doing bad things and 99% of people are basically good people trying to do the right thing. So you don't want to harm the 99% even a little bit, just to get a leg up on the 1%. I think it was at the IMF or the World Bank, someone like that put out a report on AML efforts globally, and it was not great. There's an enormous cost to society.

Jeremy: 99% goes undetected.

Brian: Yes. It was like 1% or 2% of illicit funds were actually frozen due to all AML efforts globally. At enormous cost, not just to innovation, but literally--

Jeremy: To Society, to real economies, to people.

Brian: You and I, we have large portions of our employee bases are working on these things. I think that's something really serious that people need to look at. Look, I think a lot of the work, the literal practical thing to do is-- you've done a great job of this, is basically show up and talk to policymakers. It's not like on Twitter, the debate can lose all nuance. In my experience, 95% of them are well-intentioned, smart people who want to do the right thing for society. Their mind is split across 100 different things. This is just one thing they're trying to grapple with. It takes people showing up and just talking through the issues explaining it.

I do think 95% of the time, our default stance is to work with the government on good solutions, but 5% of the time, if we see something bad coming down that's being proposed, that's misguided or we think is a line that would be terrible for the industry, then we are going to stand up and we're not afraid to fund lawsuits. It's not like a hostile thing or whatever. [crosstalk]

Jeremy: The stakes are high for society and the economy and what the future world is. [unintelligible 00:31:42] have high conviction about it.

Brian: That's what the courts are there to help us resolve. Anyway, I think just to take Singapore as one example. I think they've been very welcoming. They're actually some of the most sophisticated financial regulators in the world, I think.

Jeremy: Totally.

Brian: Both Circle and Coinbase have gotten these in-principle approvals for hopefully, a path to a license, which is great. I think they've done a really good job welcoming institutional business here. Stablecoin regulations seem to be making progress. Tell me if you feel otherwise. They haven't been as forthcoming, I think, on a couple areas. One is around self-custodial wallets. Then the retail market for trading. They seem to be hesitating on, we don't think retail should be trading this stuff. That's an area where I do think Singapore risks not having the right stance right now. We're seeing like Hong Kong, for instance, coming out and saying, actually, we're going to do retail. [crosstalk]

Retail users need access to these crypto assets, not just for trading, although that's one piece of it, it's to access all of Web3 and to be able to earn money and do [unintelligible 00:32:50] [crosstalk]

Jeremy: The internet. It's like saying you can't use the internet.

Brian: I think any kind of approach. If Singapore takes the approach of like, "All right, we're going to allow these pieces but not these pieces." That's not going to work, I don't think, in crypto, and it's not going to allow Singapore to be the financial hub it deserves to be as this leader in economic freedom. I think on self-custodial wallets, like just to touch on that one, for instance, my personal view is, if you're not storing customer money, you're not a financial service business and you shouldn't be regulated like one. Obviously, both of our companies, we do store customer funds, we are regulated like financial service businesses. I think that's a really dangerous place to get to.

If you're going to say, "All right, anybody just hosting a website or building the browser equivalent to whatever, now needs to get it tied up in financial services regulation." I think that's going to kill a lot of the innovation. The thing that some regulators, I think, don't realize is that it's not like the citizens in your country aren't going to use it, they're still going to do it, they're just going to go use overseas unregulated options. You're not protecting them by saying, "We're disallowing it," you're just pushing it offshore. Anyway, that's a tough one to grapple with.

Jeremy: It is. I think it gets even tougher when-- I was sitting down with a senior government official recently. The view of this technology is actually really colored by the presumption that a blockchain's only purpose is to transfer money. It's like, no. I had to step back and say, "These are basically general-purpose internet operating systems. They're solving a set of problems with data and transactions and software that the internet hasn't solved before." That's a whole new environment for a new class of problems that can be solved that are really important. Some of which are very consumer, some of which are very useful to the healthcare industry or whatever it is.

You have to really step back and realize that this isn't all just about regulating the storage and movement of funds. If you inadvertently put policies in place that cap what you're able to do with these internet operating systems, that's a real problem. It was a little bit of a light bulb moment, like, "Oh, God, this is way bigger than I realize." I liken it to during some of the growth phases, the prior phases of the internet where everyone got comfortable with the idea that there's an open internet, and there's these open networks, and if you have a piece of software and a computer that's connected to it, you can do whatever that software allows you to do.

People would build services that would enable free publishing, and people would build services to do peer to peer communications like messaging apps and communications apps, and all these things grew up. One instinct was, "Well that's a telecommunications service. It should have all the same things that happened with the telephone system," or, "That's actually a radio broadcast that you're doing. Well, you should have all the same licenses that you do to put up a radio tower," or whatever. The initial mapping of regulatory frameworks to open internet, it happened, but then it faded away because what happened is society was like, "No, this is way better. We really like this."

Then policy makers ultimately responded and were like, "Okay, we can live with the fact that people can have encrypted communications." There are parts of law enforcement that don't like that and fight that, but broadly, society is like, "Yes, this is a value." We want to preserve that, or they we're like, "Okay, there's YouTube and terrorists can put recruiting videos on YouTube." Yes, there's a process to find them and take them down, but we're not going to ban YouTube because people want freedom of publishing information and so--

Brian: I imagine if you had to get a license before you could put a video up or something. From who, what agency?

Jeremy: That was a joke that I remember because in the mid '90s, I was working on some of this stuff and it was-- the big proposal was, to build a website, you'd need an FCC license. It was like, "Okay, hold on." That was a legitimate discussion in Congress. I feel like we're in a similar place with this world of the internet of value, and in some ways, if we keep building this and we keep making the progress that's being made, then firms and households will say, "No, I don't want you to-- this is better. You can't take this away from me." That's at the end of the day, policy is the will of the people. We've got to make a lot of progress.

Brian: I totally agree. Society went through that big shift with encryption was a scary word. Oh my gosh. If you're using encryption, you're a terrorist, whatever. Then now with WhatsApp and Signal, this thing is running the whole world.

Jeremy: The iPhone itself, this is my private device.

Brian: Encryption is not a bad word. It's more of like a fundamental. It's privacy that we want everyone to have. I agree. It seems like the same story playing out again and you always have to watch out for someone's fear-based instinct to restrict something and then you harm the 99% as much as the 1% of bad people.

Jeremy: Maybe last question, because we could go on forever and ever. It's actually related, which is public chains and things like stablecoins and Bitcoin itself, are expressions of money that exists at internet scale that are inherently global, but monetary systems are so rooted in territories and in fiscal policy and taxation and other things in these territories. Esther Dyson, one of the early thinkers on the internet coined the phrase, information wants to be free, which is behind the open source movement and all this, but does economic value exchange want to be free in the sense of inherently, it's like the world will tend towards that?

It really does challenge monetary sovereignty, and you're now starting to see major governments get really concerned about that. Wait a minute. They could see a world in a few years where it's like, what just happened? There is this monetary sovereignty discussion. How do you think some of that plays out?


Brian: Oh, man. Well, okay. Look, I think the most important near-term and medium-term thing is every major government pretty much is going to want to have a central bank digital currency, or I think, in the US's case, it's going to end up using USDC as like a de facto CDBC, they'll be a [crosstalk]

Jeremy: Regulated digital currency basically.

Brian: That's great. There should be clear regulatory frameworks, audits and all that stuff, and then boom, now we have a way to have a wrapper around fiat money and they still control the money supply and all that. First of all, let's just work with the current system, but I agree with you. I think as the crypto economy continues to grow, and today it's a small percentage of global GDP, but it's similar. Again, look at e-commerce.

E-commerce in 1999 was nothing and now it's 15% or almost 20% of global GDP, I think, during COVID it grew a lot. What happens if, in another 10 years, we go by and it's like the crypto economy is 20% of global GDP. It wouldn't be very inclusive to use the currency of one sovereign nation inside the global system, so I do think there could end up being a world where there is a more transnational currency that's being used and honestly that would probably be more fair in the sense that there's not some small number of people with their fingers on the dials who could change it too much.

What exactly that'll look like, I think Bitcoin is an incredible gold standard. Some economists would argue that for-- and I think it's really important to have a gold standard. Some economists would argue that you actually want to have a slight inflation rate to get something to encourage people to spend it. [crosstalk] I don't know, you could imagine a version of a coin out there that was more tied to CPI or just a flat 2% inflation rate or something like that. I think the crypto economy basically could come up with a better form of a transactional currency that's superseded or it might just be a basket of fiat currencies or things like that.

I don't know exactly how that's going to play out, but I do think that it would be a very good thing for the world. I don't know, what do you think?

Jeremy: I totally agree. I think it's a legit problem space, and I think the forces of this technology and this system growing are going to lead to the-- I think of it as synthetic forms of global digital currency that could actually have a meaningful peg against something like a Bitcoin as well or have a ratio that's there, so you have a sound money basis, but you also have something that is a more stable unit of account and that maybe has tie-ins to the biggest fiat currencies. Definitely a space to experiment.

Brian: It may end up being a little bit of an unbundling of the services that you really want from a government, and we talked about the court system in DAOs, and we talked about the monetary system and then I think this is where you eventually get to network states, which is-- I know you met with [unintelligible 00:43:01] here as well, but as usual [unintelligible 00:43:04] is 10 years to-- He's ahead of all of us, but I think that's a pretty plausible theory about where things will go, but that could take 20, 50 years. I don't know.

Jeremy: This has been a really great conversation. Thanks for joining.

Brian: Thank you for everything you're doing on the policy front especially, and just driving forward USDC.

Jeremy: Awesome. Appreciate it.
Jeremy Allaire
Co-Founder, CEO & Chairman at Circle
Brian Armstrong
Co-Founder & CEO, Coinbase

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