Good morning, everybody. Thank you so much for joining at this year's JPMorgan TMC Conference for the Fireside Chat with Coinbase. I'm excited to host Emilie Choi, President and Chief Operating Officer, and Alesia Haas, Chief Financial Officer at Coinbase. Coinbase is a $50 billion crypto market platform that facilitates trading, staking, and custody of crypto tokens, as well as other broader engagement with the crypto ecosystem. Before we begin, I'm going to read the Safe Harbor Statement. I'd like to remind you that during our chat today, Emilie and Alesia may make forward-looking statements. Actual results may vary materially from today's statements due to risks, uncertainty, and other factors that are described in their SEC filings. Our discussion today may include references to non-GAAP financial measures, and a reconciliation of non-GAAP financial measures is available on the company's latest shareholder letter.
I've heard that speech so much, I probably should have had it memorized by this point. Thank you both for joining us here today. As a place to begin, let's talk about the state of the crypto ecosystem. Maybe for Alesia, cryptocurrency markets peaked about six months ago following the reelection of Donald Trump from both a market cap and volume perspective. Maybe start with a mark-to-market of where we are in the crypto cycle and what you're observing from sort of an industry perspective in terms of what's relevant for Coinbase service and activities.
Thank you, Kenneth. Thanks for having us here today. I was sort of giggling with your opener about $50 billion market cap because we had wonderful news this week about being admitted to the S&P 500 effective Monday. I think we jumped to $65 billion yesterday.
Yeah, that's.
It's been a big week. That sort of dovetails into my comments about a mark-to-market of where we are. Crypto moves quickly. I have never been good at calling where we are in a cycle. I've never been good at saying, today we're here, next week we'll be here. What we are really good at doing is zooming out and looking at how our company builds through cycles, through events. We are really great at just putting our heads down and executing. Where we are, when we look at our platform and what we reported in Q1, we've seen stablecoins really have their moment with product-market fit. When we look over a two-year basis, we've seen the number of our MTUs that are holding USDC, for example, on our platform double. The balances that they are holding in their accounts have tripled.
We've seen our market share grow. We've seen new native units staked. And staking is a really important one that we've seen growth in native units staked despite many states saying we couldn't grow staking, despite it being, at the time, under litigation with the SEC as to whether staking was a permitted product or whether it was a security. We can grow through all of that. Where we are right now, though, is the product innovation summer. The clouds have cleared. We are seeing new capital come into the space. We are seeing focus on product, focus on innovation, focus on utility. We're seeing corporates add dollars to our platform. It feels like a wonderful place to be, but I can't call the cycle.
Yep. If we think about the crypto markets, we've seen a number of catalysts over the last one, three, five, probably longer, 10 years. If we think about maybe more recent catalysts, ETFs turned out to be an enormous one last year. The Trump election, late in 2024, has been an enormous catalyst. If we look out into the horizon, maybe, Emilie, for you, what do you see as catalysts for the next step in the build-out of the crypto ecosystem and maybe for Coinbase?
Sure. One is definitely going to be regulatory tailwinds. We've spent the better part of the last two years working feverishly to elect crypto-friendly politicians. We hope this year that we will get a couple of bills passed, the stablecoin bill and the market structure bill. I think that will unleash a lot more demand. You mentioned the ETFs. Institutions have been a big story here, but I think they're going to be a bigger and bigger story. I think governments and institutions are going to continue to accumulate Bitcoin and other crypto for their balance sheets. I run the ventures portfolio as well at Coinbase, and I can't overstate how hampered the whole ecosystem has been by regulation, by enforcement over the past couple of years.
We've had all these developers, builders on the sidelines who haven't built the way that they wanted to because of this situation. I think that's going to be a major catalyst for new startups and innovation in the space, just the best products. I think just generally utility is going to be a catalyst. We're seeing incredibly fast payments, instant settlement, programmable money, 24/7 global, like all the things that make crypto so unique. I think all of this is going to be driving more demand in the space.
OK. You mentioned development summer. What was the phrasing you used on that?
We call it crypto summers and winters.
OK. Oh, I got it. OK.
Yeah.
Understood.
Yeah, we can weather any storm.
Maybe pressing on the ETF theme, some had thought, Alicia, that ETFs might be competing with Coinbase in the trading of Bitcoin and Ethereum. It looks like the opposite may have played out. Sort of what is the outlook for crypto ETFs from here and the impact that you think they will have on Coinbase?
ETFs were the storm that raised all ships. I mean, there was a flood of capital that came into the ETF market. We saw over $20 billion come in even in the first quarter. We are benefiting from that through our custody products as we are securely storing the underlying crypto for the majority of the ETF funds in the market today. I do think that what ETFs provided was a wrapper to spot that enabled more institutional capital to come into this asset class in ways that they could not directly participate in spot. I think we are going to see the growth of both. People that can participate in spot have and will. We continue to see our volumes grow despite ETF growth. Everything was growing. I think that you are going to see more and more demand for more asset classes.
Today there's just the Bitcoin and Ethereum ETFs. Those are the biggest spot markets. I do think those will continue to dominate in terms of size. We're seeing other growth assets within the crypto commodity space that I think will naturally want wrappers to bring more capital into those as well. I think we'll see growth in ETFs. What we're seeing, Ken, is the broad innovation doors continue to open, as we talked about. This is just demonstrating that more institutional capital wants to come into crypto. This is also demonstrating, though, that I think you're going to see trends of more crypto rails supporting more asset classes. More things will move 24/7. More things will move on-chain.
I think we'll just see the general growth of structured products, spot products, security products, currency products, and more and more investors, more and more market participants participating in a broader financial system supported by crypto.
OK. So a number of Easter eggs in your comments there, and I'm definitely going to dig into them. Let's start with legislation. There continues to be optimism that Trump will sign crypto legislation, ideally stablecoin and market structure bills later this year, and that a more lenient and more rational regulator is definitely intuitively preferable. What have you already seen from your clients sort of in anticipation of a more thoughtful, more defined regulatory outlook here in the U.S.?
Emilie touched on this with regard to developers. When you can build without fear of enforcement, you build. You start having conversations with regulators. What we've seen is engagement with regulators. We've seen roundtables. We've seen task forces come together. We've seen discussion of how we adhere to the best principles of securities law, consumer protection, efficient markets, but do them in a more technically native way on-chain that can provide the efficiency, the reduction of settlement risk. We are engaging in conversations, first and foremost. We could not do that before. Our clients could not do that before. We could not dream, quite candidly, about the technology before and hope that those dreams would come to reality. That is happening. More tangibly, more capital is moving in.
There was, I forget the source of it, but the chart came out last week that the institutionals were the net buyers of Bitcoin over the last period of time. That is where most of the capital has come into the market. We're seeing more corporates. We're seeing countries. We're seeing the U.S. set up a strategic Bitcoin reserve. We're seeing definite demand and buying of this asset class in spot as well as ETFs. I think what we're also starting to see is a pickup in M&A. There's been a very active crypto M&A market that I don't think we would have seen six months ago or we didn't see six months ago, where people are now realizing, like, this trend is moving. I need to think about how to integrate crypto into my products and services.
Emilie, what are the base expectations for cryptocurrency and stablecoin regulation as we look out to later this year and then maybe going forward? Are there areas that seem more contested and debated than others in terms of where there's broad-based support?
Yeah. First of all, we have been able to operate in, I would argue, one of the most prohibitive environments that I think virtually any industry has ever operated in. I think we know how to navigate through these different moments. It's interesting. Maybe like a week ago, I would have been more optimistic about the stablecoin bill passing sooner rather than later. What I think we're finding in DC is this perpetual obsession with politicking and special interest groups. I really am hopeful that we can move forward and push through this because one of the things that we learned during these moments is that crypto is truly a bipartisan issue. That's one of the reasons that we got so involved in policy over the past couple of years. There are two major pieces of legislation that we contemplate.
One is the stablecoin bill, and one is the market structure bill. The stablecoin bill is being discussed very actively right now. I think the stablecoin bill is not a stablecoin bill. It is a dollar dominance bill. It is about if you want to keep the dollar the center of activity and dominance in the world, a stablecoin bill is a no-brainer. I do think that in terms of what you were asking about kind of special interest groups, there are a lot of cooks in the kitchen, right? People try to add on different things. I think in particular, community banks and banks have been talking about the potential disruption of stablecoins to their businesses. We absolutely do not see it that way.
We believe that when you meet the customer where they are, when you offer the products and services that they are looking for, your market will expand, not contract. We really hope that all of the different constituencies who are involved in this take heed of that. The market structure bill, while more complex, I think is a really interesting one because even in the last administration, 71 Democrats voted for a market structure bill. That was like a huge, I mean, it passed the House. We have to redo this and come up with a better market structure bill this time. We proved that we can pass something through the House in a bipartisan manner, and that it makes a lot of sense. The market structure bill is largely oriented around things like CFTC having spot authority.
How do you divide up the world between the CFTC and SEC so there are not these crazy turf wars, which we saw constantly over the past couple of years? How do you define what a digital security versus commodity is, things like the decentralization test? I think there is a lot of work to do. I think these are absolute no-brainers in terms of moving the U.S. forward in terms of crypto innovation. We are relentlessly working on how to get these pushed through.
Just to press forward, you mentioned special interest groups. What sort of resistance are you getting from different special interest groups? Like, for example, the financial system works for the financial services companies like JPMorgan that sort of dominate today. Are you seeing traditional finance really push back against changes in the lobbying efforts? Is that where the special interest sort of comes in?
I think, like I said, there's a lot of cooks in the kitchen. I think that you hear out of certain parties like that in TradFi, on the one hand, they will tell you that stablecoins are not necessarily a better instrument than exist today. Then out of the other side, they're saying, but it could be highly disruptive to their model. I don't know how to square that.
I'm going to offer a spicier take, Ken. I think that sophisticated, well-funded companies that have great business models always figure out how to innovate and always work to disrupt themselves and meet customers where they are and drive forward. There are companies and financial services companies that I would put in there that are looking at this new technology and being like, I see an opportunity here. I figure out how I'm going to transform my business model to meet this next technology generation. There's a wide spectrum of market participants in this. There are also slower, less technically adept businesses out there that then look at this as a threat to say, I never can hope to advance. This is going to jeopardize my future. What do I do? They're the loudest voices in the fighting back to protect the status quo and their incumbent status.
Yep. How effective can they be? Maybe how long can this resistance remain effective? It looks like Congress is pretty crypto-friendly. Is this a minor inconvenience, or can it be bigger than that?
We get a lot of spicy, Alesia, today. I think that politics is messy. I think that this is all around whose voice is being heard, how consistent the voices of the constituents are being heard, and who they're talking to. There are a lot of votes that we need to get to things passing through Congress. This is where consumers and businesses who are impacted by this technology need to make their voices count. We do not have special interest groups outweigh the voice of the constituents and the end consumers who benefit from product innovation.
We do not take anything for granted. Stand With Crypto is in DC this week. That is our grassroots organization that helps drive crypto innovation in DC. Brian Armstrong is in DC this week. We are all in. We will get something as an industry. It is just going to be challenging.
OK. So let's dream the dream. If Congress snapped its fingers and we got crypto-friendly rules and regulations implemented tomorrow, what are the one, two, or three things that Coinbase would immediately expect, change, or pursue?
On the stablecoin front, essentially this idea that a stablecoin is viewed as a cash or cash equivalent is incredibly important. You can envision a lot of different things, like the idea that we currently separate a checking and a savings account and all these different things, and we have all these little boxes that we have created with the current system. I think a lot of those go away when you have this freer, more transparent system that works. I think that is part of the virtue of a stablecoin bill. On the market structure bill, it is really about safe harbor rules.
It's about having sandboxes for the different companies to be able to experiment with digital technology and for CFTC spot authority, which is incredibly important because there has been a huge turf war over the past couple of years between the SEC and CFTC about who owns what, how you define a digital security versus commodity. Having clear rules of the road will allow us and other companies in the space to just operate freely and to be able to ship things more quickly and with more innovation.
OK. So favorite topic here, tokenization. One of your, I think, Alesia, one of your Easter eggs. We're seeing more assets make their way onto blockchains. We started with art and music, but it's evolving into contracts, hard assets, and even more recently, financial assets. For this audience, maybe--and this is for both of you--start by talking about the benefits of tokenization just to sort of set the stage. The real question is, tie this back to Coinbase. What is Coinbase's role in an increasingly tokenized world, and how do shareholders in the audience and humble research analysts benefit from tokenization at Coinbase?
From tokenization at Coinbase or tokenization at Coinbase?
At Coinbase.
Yeah.
OK. All right, tokenization. Putting assets on-chain is the same opportunity when we put data online. The benefits of putting data online is we move data across the world quickly, cheaply, more data, more access to information. Putting value on-chain is moving value across the world quickly, cheaply, more accessible. The added benefit is these on-chain tokens, they are programmable. We have barely scratched the surface of programmable money. We have definitely proven, for example, with stablecoins, they are faster, cheaper, global. You can send money peer-to-peer, business-to-peer, anywhere around the world, under a penny, under a second, 24/7, any country, any country. That is an incredibly powerful rail.
Then when you add this opportunity for programmability on top of it, when you add the possibility of using these assets in verified pools, for example, where it is an all-KYC population, you just start to build infrastructure that really changes the nature of how transactions settle and any asset. One of the stories I like to say, and we are not there yet from a product perspective, so this is in the dreaming phase, but I worked at a bank during the mortgage crisis in the 2008, 2009 period. Mortgage servicing rights are like the messiest things in the world. You originate a mortgage, it gets sold and distributed into MBS, and then you sell the servicing rights. The amount of data errors that occurred during that time period was tremendous.
Then you think about putting a mortgage or the contract on-chain or the rights on-chain, and it is immutable, and you can track every single data. It just transforms how we have data accuracy and transforms back office functions around the world and brings down cost, makes things cheaper, brings more assets in. All right, I digressed a little bit. Now Coinbase, what are we doing? We have been deep in building the technology to make this world possible. We built custody. Safely storing bearer instruments is the heart and soul of our company. We store about 12% of the world's crypto. We have unique capabilities to safely protect customer assets on-chain. This is different than holding other instruments. It is different than even holding other bearer instruments. I mean, gold is a bearer instrument. You lose your diamonds, you lose your gold, you lose the money.
You lose your keys, you lose the money. The other thing you need to be able to do is immediately move those keys into a hot wallet and send them so you can meet this 24/7 global. We have unique capabilities of storing assets, which is why we won the custody mandates of so many of these ETF providers. On top of safely storing assets and providing wallet products, we now have built a rail with Base, which is a layer two that moves money quickly and easily. We then are putting assets on Base. Developers are developing on Base. We have USDC on Base, which is the stablecoin partnership that we have with Circle. We now have a stable currency to be able to offer payments through that tech stack. We have been building up the tech stack.
These are the tools, these are the instruments that then make this entire ecosystem work. There are many front-end consumer applications that we want to build, many more experiences, and we are slowly building up that stack to be able to offer those. We can also offer those through partnerships with other businesses that they can build on our tech stack. That is where Coinbase really comes in, the infrastructure and the bedrock to enable this new on-chain economy.
Perfect. OK. Some entry-level investor questions on Coinbase. One, the competitive environment. CEO Brian Armstrong seems to be embracing competition. Every time this comes up, I think every other conference call, a competitive question comes up. He's embracing it. We talked about regulation becoming more friendly. It means more financial services firms like JPMorgan, Schwab, are announcing that they will be offering something in crypto in the not-so-distant future. Emilie, what are your thoughts here? Is traditional financial services getting into crypto a threat for Coinbase? Is it an opportunity for Coinbase? How should we think about the puts and takes of broader servicing in the crypto ecosystem?
Virtually every company I've ever worked at before Coinbase, I think there was like a mindset of zero-sum games. Like an MAU that you take from me, I can never have again, or it is literally one for one. I came to Coinbase, and we have a completely different way of looking at the world. We think that it's expansive. We think it's a prosperous world and that we have a huge opportunity to grow the pie. Just to be totally clear, we're here to win. We are playing to win, and we feel very confident in that ability to win. The reason we feel so confident is this week we turned 13 years old, and we have exclusively been operating in crypto for those 13 years. We're not tourists. We've been in this forever.
What that means is that when we look for great talent in the same way that AI companies have very unique talent, we have hired and retained the best crypto talent in the world. Our technology stack is incredibly proprietary. It has taken years and years of hard work to get to the place where you have the ability to custody assets in this way, to be able to add new blockchains to the platform in the ways that we do. We know for a fact that other companies cannot do this the way we do. We often talk to other companies who are saying, this is harder than we thought it was going to be. That creates an opportunity for us. Many of the different companies, firms who want to get into crypto in some way want to utilize our services.
We already have more than 200+ firms using our crypto services. We call it crypto as a service or CAS internally. We expect that to continue to grow as more and more companies around the world want to offer crypto services but do not necessarily have the technology chops. We are going to be there to be able to use that. We are very excited about the future, both as a principal as well as a partner to many of the folks in the space.
Yep. I think this is probably more of a statement than a question. But when we think about the competitive environment in traditional finance getting more into crypto, and Brian and Coinbase really being focused solely on crypto, I feel like the takeaway from this is there's so many opportunities to continue to grow in just crypto. You don't need to go the direction that other firms have taken. Is that a fair statement? Is that at least part of?
We have a wealth of opportunities to chase, and our focus is crypto. The only other thing I would note, Ken, is we have seen we have hundreds of banks in the U.S. We have new crypto startups. We have new fintech startups. There is a big, robust market, and the TAM just keeps growing. We have plenty of growth opportunities ahead of us.
OK. I'm going to skip to the final two topics I think I have time to hit, which is derivatives and then payments. Emilie, on derivatives. Coinbase just announced a $2.9 billion acquisition of Deribit, a crypto derivative platform. Maybe start by saying or by talking about what attracted you to Deribit.
Sure. This is the largest crypto acquisition, I believe, in history. We were attracted to the fact that Deribit is the largest options exchange in the world. This actually plugs a hole for us. Now we are able to offer the whole plethora of spot, futures, derivatives, perps, options on our platform, which is fantastic. The other thing is we are truly a global company, and Deribit is an international company. It helps us expand our international presence. Just felt like a no-brainer for us, and we loved also the aspects of its revenue and profitability picture.
Can I throw in some stats to just like punch that? 75% market share of global options trading, and they've had that through up and down markets. Incredibly sticky. They have $30 billion of open interest on the platform. They did over $1 trillion of trading volume last year. Emilie scored the key point, which is that it's durable, resilient revenue because people are hedging with options when the market's good or the market's bad. This provides durability to our revenue that spot trading doesn't have. We think that it has this incredibly attractive profile, as she noted, with strong history of a positive adjusted EBITDA. It will be immediately beneficial to our overall institutional business and growth trajectory, both in derivatives and then internationally.
OK. Digging in deeper, what ultimately is the derivative opportunity for Coinbase? Why have a more robust derivative business? Why purchase the leading provider? What is it about derivatives that is such an opportunity for Coinbase? You mentioned international.
Yeah. We've shared this before, but 75% of global crypto trading volume is in derivatives. We grew up as a spot platform. We started our business as the easiest place to buy and sell Bitcoin, spot. In the last two years, we've really made a foray into derivatives because that is a huge opportunity to grow into the 75% of the market that we historically did not play in. As we made this jump into derivatives, what our vision is, as Emilie said, we want to bring this all under one platform. Having a platform with spot, futures, and options under one umbrella gives our clients the ability to cross-margin across these platforms, gives them the ability to really get the benefit of everyone in one place, a flywheel of sticky growth.
Plugging options in gives us then the trading platform that will just continue to attract and grow traders on our platform.
There is a U.S. versus non-U.S. component as well.
Absolutely. Deribit is 100% non-U.S. We have Deribit as licenses in the U.S. The combination of our licenses, their product know-how gives us an opportunity with a roadmap to bring the skill sets and experience together to have a path to bringing options to U.S. customers. This is a path. This isn't we're going to show up day one with like we offer options in the U.S. when we close this acquisition. Our vision is this combined trading platform for spot, futures, options to our global customer base. We will build slowly to that vision over time.
This goes back to the market structure point. We are very excited to work with the new Chair of the CFTC on all of these different new offerings. I think there is going to be a lot of new things that we can think through, U.S. derivatives, prediction markets, everything that you can imagine. We need to work with him and his team on how this is all going to manifest in the U.S. as well.
Great. OK. Evolution in payments. This is for both of you. Many believe that payments is a logical, significant use case for cryptocurrencies in Coinbase. Coinbase is well positioned to really benefit from the evolution of payments. Without talking about Circle or USDC, talk about cryptocurrencies and how they can facilitate things like cross-border payments and maybe possibly make their way into retail payments over time.
Faster, cheaper, global. Those are the three keywords everyone needs to keep in mind. Pennies, seconds. This is the first opportunity that we have to create a global technology where you can send money transparently to any party. We have seen trillions of dollars now move into stablecoin volume over the last few years. The next piece of this, now that we have the technology that can do something, is to build the user interfaces, build the upfront products and apps to be able to offer this technology to make this payment utility available to businesses, merchants, consumers around the world. We believe that business will be the first beneficiary of this because most of the cost of transactions is borne by businesses, not by end consumers, at least in the U.S.
This is an area that we're continuing to invest in our product area to start building products towards business use cases for payments. Over time, we think retail will get there, but we think it'll be driven first on the business side.
Just to tie some of the themes together from before and hit this is I think this is why you're starting to see companies like Stripe, companies like Meta, and others start to get into stablecoins. There is true product-market fit. They clearly see what the benefits could be for their customers in terms of cost savings, instant settlement, 24/7 global. I think this is why we think of the world as such an expansive place right now with payments, with stablecoins, with crypto generally.
OK. The place we ended our chat last year was the question on use cases. I wanted to end today with this as well. For both of you, what do you see as the use cases that you're most excited about in the cryptocurrency ecosystem as we look out to 2025 and into 2026? What excites you and Coinbase most?
I think we just touched on them. I would say from my CFO seat, we are increasingly paying our vendors with USDC. That is a great use case, as we just talked about. I think also continuing to build out our trading platforms where we're providing first-class, better trading experiences to our users with new technology, speed, like all of the benefits of this asset class and all under one roof is going to provide a lot of utility and benefit to our traders and to our institutions who trade actively, which is a large percent of the revenue opportunity in the market today. I am excited about our venture spends. I always think it's exciting to see the dreams that are happening in crypto.
I think you're starting to see a couple of things come together with corporates innovating with wallets and how they will use those for more embedded digital payment activities over time, which I think are really interesting to focus on right now.
Plus one to all that. I think just on the high-beta venture bet side, we think that there's a lot of opportunity in decentralized social, or what we call DESO. We'll be relaunching our wallet app this year very much in that vein with this idea of a focus on content, a focus on tokenizing your content, and all the cool things that we can do uniquely with crypto and tokenization.
OK. Great. Emilie, Alicia, thank you both.
Thank you, Kenneth.
Thank you, everybody, for joining.
Thank you, audience.