00:00Given the backdrop on the cryptocurrency outlook and the ongoing, of course, gains that we're seeing in the market, how does all of this factor into your business plans, especially when it comes to perhaps expansion overseas here in Asia right now?
00:17Yeah, thanks so much for having me.
00:19We are very excited about the momentum in the crypto space, and we've always viewed Coinbase to be a global platform.
00:26We were obviously founded in the U.S., but we're early to move internationally, and I think token really represents a lot of the momentum in Asia, and it's great to see the excitement here.
00:37But we're excited to double down and really invest in our business here in Singapore, Australia, and then very recently we announced our expansion into India as well.
00:47Can you give us a picture of your U.S. business in terms of profits and, of course, also how that mix works with what you're expecting to do in Asia and if there's a target as well?
01:00Yeah, our business primarily consists of two revenue streams.
01:08We generate transaction revenue from trading activity, whether that's through trading spot assets like Bitcoin and Ethereum or futures.
01:18And very recently we added options through the acquisition of Deribit, which is the world's largest crypto options exchange.
01:25That's the predominant source of our revenue and profits.
01:28And then increasingly we've been investing in what we call subscription and services revenue.
01:33These are more sticky recurring revenue streams that include things like interest income from stable coins, custodial service fees, staking revenue, and others.
01:43And we expect a roughly similar split between the U.S. and Asia as a lot of our core features and functionality are global in nature.
01:52What about for inorganic growth?
01:56What are the top five markets in your mind, Sean?
02:03Yeah, you know, when we think about international expansion, both organic and inorganic, our top level goal is that we want to bring a billion users on chain and provide that bridge from the traditional financial world into the crypto financial world.
02:18And the reason for that is we believe that blockchains enable better, more efficient and global financial services and a financial system.
02:28And so, like I mentioned, we recently announced the launch of our business in India.
02:34We also were recently licensed in Argentina.
02:37And so, we're looking for markets that we feel like can really catapult us towards reaching that goal of getting a billion users on chain.
02:46So, India, Argentina, where else would you say are the possible target areas?
02:52Both for an inorganic and organic perspective, we're looking at expanding our business in countries, like I mentioned, India and Argentina, but then also growing our existing businesses in Singapore, Australia and across the EU.
03:11So, you mentioned, you mentioned two revenue streams, almost $3 billion.
03:18Go ahead, Sherry.
03:21No, because, Sean, you mentioned those two revenue streams.
03:24I was wondering if there is a preference on where you really want to strengthen those gains.
03:30Yeah, we really want to see a mixed shift.
03:36So, you know, when Coinbase went public, the vast majority of our revenue, over 90%, was from transaction revenue, which is great, especially during periods of high volatility and activity.
03:48Like you mentioned, in Q4, we historically have seen high demand and activity in the crypto markets, but it can be volatile.
03:57And so, over time, we have diversified those revenue streams and supplemented them with more stable and recurring subscription and services revenue.
04:07And I think for us, looking forward, we want to maintain a healthy balance of the two so that we have a steady base to cover our costs.
04:13And, you know, we've committed Coinbase to be a profitable company on an adjusted EBITDA basis across both up markets and down markets, but then also benefit from the volatility that we naturally will see in the crypto space, which can be a huge benefit to the business as well.
04:32There's also a proposed native token for BASE.
04:36What would the use case for this be?
04:39Yeah, we recently announced that we are exploring a network token for BASE, and I'm really excited about this because, you know, from day one, our plan with BASE was to incubate it, but to progressively decentralize the network so that it is truly open and decentralized.
05:00And I think that this could be a really great step on that path.
05:05We're super early in terms of exploring this, and so we're just in the very early days and really looking to get feedback from our community, our users, our developers on what they would like to see before we are prescriptive about any specific use cases for the actual token.
05:22Would you be able to give us ballpark figures on how big the fully diluted valuation in dollar terms might be?
05:34We don't have any preliminary guidance on valuation or terms at this point, no.
05:40Right.
05:43Shan, we are also watching out for the crypto industry in terms of regulatory clarity.
05:52A lot of headway has already been made this year, but given the U.S. shutdown, to what extent might this derail the progress?
06:01Yeah, we have seen a tremendous amount of momentum in the U.S. on the regulatory front.
06:10You know, I think the hallmark or sort of the big milestone from earlier this year was the passage of the Genius Act, which formally set out a regulatory framework for stablecoins in the U.S.
06:20And I think despite any partisan disagreements around government funding, we continue to see tremendous momentum behind the scenes where both parties are working collaboratively
06:34and in earnest towards what we believe will be a really, really critical piece of legislation for the crypto industry, both in the U.S.
06:43and abroad that covers the market structure for crypto assets and determines how various crypto assets will be classified in terms of being securities, commodities or otherwise, as well as the appropriate regulatory bodies.
06:57So I think despite any of the recent tensions around government funding, that momentum and those conversations have continued on strongly because crypto is truly a bipartisan issue at this point.
07:12Yeah, I was going to ask if you are seeing any impact or expecting any impact from the U.S.
07:17government shutdown and whether you have seen also that shift in tone and narrative coming from the new Trump administration and its sort of more supportive stance when it comes to the crypto markets.
07:27We've certainly seen a more supportive stance, I think, over the last year since President Trump was elected into office.
07:37And I think that has trickled down all the way from the executive office to the various regulatory bodies that are relevant to covering crypto.
07:47And so just in the last year, we've made a tremendous amount of progress.
07:50And I think you're starting to see the industry now go from a stance that historically has been very defensive and closed because, you know, we were living under this environment where there was a fear of regulation by enforcement to one that's really pushing forward on new product innovation.
08:07And I think that's creating a lot of excitement from institutional customers, retail customers, etc.
08:13around trends like stable coins and tokenization and the like.
08:19Yeah. And what role do you think central banks will play in all of this as well?
08:25Yeah, we see the banks playing a critical role.
08:29Fundamentally, you know, we think about blockchains as an upgrade to the existing financial system, not a replacement in any way.
08:38And, you know, we think about the magic of blockchains as effectively bringing Internet scale to financial assets.
08:46So improved portability and accessibility of these assets globally.
08:51So, you know, fundamentally, I think a lot of banks are learning and adapting their businesses to this new technology.
08:58And they're seeing a lot of tremendous efficiency gains in terms of how they manage various financial transactions.
09:05And they're seeing a lot of industries.
09:06We are seeing a lot of business people in hand��マ out of the way.
09:07So, you know, we've got a lot of business owners as individuals.
09:08We want a team to run towards the vis高 products and have perhaps a lot of businesses in the same way.
09:11So, I think that we're on the basis.
09:11We're going to be around, what's going on?
09:12We're pushing along with the same luck sandbox.
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