On Tuesday (8 November 2022), Coinbase Co-Founder and CEO Brian Armstrong did a decent job of reassuring the users of the exchange that what happened at troubled crypto exchange FTX was highly unlikely to happen at Coinbase.<\/p>\n
This Twitter thread by Jonathan Wu, who works at\u00a0Aztec\u00a0Network,\u00a0nicely summarizes the crazy events of the past couple of days as far as FTX, Alameda Research, and Binance are concerned:<\/p>\n
Here are the main highlights of the mega Twitter thread that the Coinbase CEO posted yesterday:<\/p>\n
\u201cCoinbase doesn\u2019t have any material exposure to FTX or FTT (and no exposure to Alameda)\u2026 This event appears to be the result of risky business practices, including conflicts of interest between deeply intertwined entities, and mis-use of customer funds (lending user assets)\u2026 we don\u2019t engage in this type of risky activity\u2026 <\/em><\/p>\n \u201cWe don\u2019t do anything with our customers\u2019 funds unless directed to by the customer. We hold all asset dollar for dollar, and users can withdraw their money at any time\u2026 We are incorporated in the US, and publicly listed in the US because we believe that transparency and trust are so important. Every investor and customer can see our public audited financials, which shows how we hold customer funds. We\u2019ve never issued an exchange token.<\/em>\u201c<\/p>\n Armstrong later appeared on YouTube series Bankless to comment further on yesterday\u2019s events:<\/p>\n https:\/\/youtube.com\/watch?v=LDtZyMcaaNY%3Ffeature%3Doembed<\/p>\n Also, yesterday, Coinbase CEO published a blog post (titled \u201cOur approach to transparency, risk management, and consumer protection\u201d) in which she said:<\/p>\n \u201cFirst, from day one Coinbase has sought to be the most secure and compliant crypto exchange. And today, Coinbase and our customers are not in any direct danger of liquidity or credit risk. Regardless of whether the Binance\/FTX transaction completes, we have very little exposure to FTX and we have no exposure to its token, FTT.\u00a0 Currently we have $15 million worth of deposits on FTX to facilitate business operations and client trades. We have no exposure to Alameda Research, and we have no loans to FTX.\u00a0<\/em><\/p>\n \u201cSecond, as a publicly traded company in the US, we\u2019ve also built our business in a way that allows us to be transparent about our track record, balance sheet strength, and effectively and prudently manage risk for our customers and ourselves.<\/em>\u201c<\/p>\n She went on to say:<\/p>\n On 3 November 2022, Coinbase Global, Inc. released it Q3 2022 financial results, and during the earnings call that followed the release of Coinbase\u2019s\u00a0Q3 2022 Shareholder Letter, Armstrong shared his predictions for the next five years.<\/p>\n According to the\u00a0transcript\u00a0of Coinbase\u2019s Q3 2022 Earnings Call provided by The Motley Fool, in the Q&A portion of the call, Armstrong was asked to give his predictions for the next five eyars.<\/p>\n Armstrong said:<\/p>\n \u201cYeah. Thanks, Anil. So of course, just to clarify, we always have to say we can\u2019t actually predict the future. I don\u2019t want to make the lawyers too nervous here on forward-looking statements.<\/em><\/p>\n \u201cBut I kind of like this quote, the best way to predict the future is to invent it. So we can certainly do our best to build some of the things that we think have potential, and that\u2019s \u2014 it\u2019s a great way that people can have an impact on the world. So I mean what\u2019s going to be different in crypto in five years? Well, look, as I addressed earlier, I think there\u2019s going to be more clear regulatory environments across the G20 and really around the world. That\u2019s going to unlock a lot more institutional capital.<\/em><\/p>\n \u201cWe\u2019re seeing that under the surface, even in this challenging market, we\u2019re seeing the adoption from [Inaudible] investors that are basically signing up to our Coinbase Prime platform. And I like the language that we used in the shareholder letter around the spring is coiling. I think there\u2019s a lot of people preparing for when the next upswings happen. I think the scalability of the blockchain will continue to improve.<\/em><\/p>\n \u201cWe saw this a little bit with Ethereum\u2019s merge this year, but they have a lot more updates there. We\u2019re seeing other blockchains continue to scale with Lightning Network and various Layer 2 solutions, which is really exciting. That will just unlock a whole bunch of new use cases and is similar to how the Internet moved from dial-up to broadband. I think decentralized trading with dexes, decentralized exchanges will continue to grow as a percentage of all global trading, and we\u2019re excited about that.<\/em><\/p>\n \u201cI think you\u2019ll see actually more countries in the world adopt cryptocurrency as legal tender, kind of in the way that El Salvador did with Bitcoin. I know that they were a very early adopter, and there\u2019s probably going to be \u2014 in the next five years, I wouldn\u2019t be surprised if we didn\u2019t see other countries continue to adopt cryptocurrency as their legal tender, similar to how some countries actually just peg their currency to the U.S. dollar. I think a lot of countries are also going to pursue Central Bank digital currencies and in the U.S., I think actually USD coin will end up being kind of a de facto central bank digital currency in the U.S.<\/em><\/p>\n \u201cIn other words, the policymakers in the U.S. will set the frameworks that need to be followed, but the private market will actually create the solutions and USD coin has been on a really rapid rise. And I think it will probably be the largest in the world at that point, ahead of Tether, if I had to guess. I think crypto will just start to have a really big impact on economic freedom.<\/em><\/p>\n \u201cThat\u2019s kind of what we believe is going to happen. That\u2019s the mission of Coinbase. And the market will recognize us for the long-term and thoughtful approach that we\u2019ve made around compliance, trust, security, ease of use. And hopefully, we have, at that time, 1 billion people using crypto.<\/em><\/p>\n Today, I think there\u2019s probably 200 million, 300 million people in the world who\u2019ve used crypto. And I think we could easily be at 1 billion people using crypto within five years. But again, we can\u2019t tell for sure and this is going to take a lot of hard work.<\/em>\u201c<\/p>\n As for safety of customer funds, Coinbase President and COO Emilie Choi had this to say:<\/p>\n \u201cSo we have invested over the history of the company and being the most trusted player in the space, and we take the responsibility of securing customer funds very seriously. I would add that we\u2019re proud that we\u2019ve never had an event where the systems have been materially compromised in any way. And this is because of all of the things that we have invested in since 2012.<\/em><\/p>\n \u201cWe have an industry-leading insurance policy for the hot wallet. We have $1 million account protection for our Coinbase One subscribers. We\u2019ve invested in best-in-class AI and machine learning fraud detection. We have a 200-plus person security team and live phone support and in-app chat and we\u2019ll continue to invest in these things and more.<\/em><\/p>\n \u201cSo it is important to know that crypto is a nascent technology. And like many new technologies, scammers will always seek to take advantage of users. So we also invest heavily in educating our users about how to keep their credentials and account safe, for example, using UVs and other things.<\/em>\u201c<\/p>\n Another question that Armstrong was involved in answering was about the \u201cbiggest opportunities\u201d for USD Coin ($USDC), about which he said:<\/p>\n \u201cI think your question touched on sort of the different use cases across different customer segments and USDC has applicability across many different customer segments. So obviously it\u2019s used in trading pairs quite a bit, right, both in DeFi and with centralized exchanges. So traders use it quite a bit.<\/em><\/p>\n \u201cIt\u2019s also used by businesses. We\u2019re seeing some businesses make intercompany payments that way or B2B payments. It\u2019s just faster than getting a wire, it\u2019ll arrive in a few seconds and with less fees than sending wires. So for B2B payments, I think it\u2019s useful.<\/em><\/p>\n\n