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Crypto Update | Crypto Under a New Administration: Regulatory Outlook From Coinbase's Paul Grewal
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- [00:00]
Jen Sanasi
Hey prime members, have you heard? You can listen to your favorite podcasts ad free. Good news. With Amazon Music, you have access to the largest catalog of ad free top podcasts included with your prime membership. To start listening, download the Amazon Music app for free or go to Amazon.com adfreepodcast that's Amazon.com adfreepodcast to catch up on the latest episodes without the ads. My dad works in B2B marketing. He came by my school for career Day and said he was a big roas man. Then he told everyone how much he loved calculating his return on ad spend. My friends still laugh at me to this day.
- [00:39]
Paul Grewal
Not everyone gets B2B, but with LinkedIn you'll be able to reach people who do get a $100 credit on your next ad campaign. Go to LinkedIn.com results to claim your credit. That's LinkedIn.com results. Terms and conditions apply. LinkedIn the place to be, to Be Regardless of who wins in the presidential election or in any of the congressional races, it's become very clear crypto wins regardless.
- [01:10]
Jen Sanasi
It's Tuesday, November 5th, and this is Markets Daily, hosted by me, Jen Sanasi. On this show, we navigate the currents shaping the crypto markets, providing insights against the broader financial landscape. So whether you're actively trading or simply fascinated by the volatility that is the crypto markets, the show is your compass to understanding where we were, where we are, and where we are going. Good day, everyone. It is Election Day in the United States. Bitcoin broke above $70,000 this morning, but dipped just below at time of recording. Crypto has played a major part in the narrative leading up to the election, which some are saying could be the closest U.S. election in modern history. Many are pondering today, could crypto voters decide the outcome? Joining the show is Coinbase Chief Legal Officer Paul Grewal to weigh in. Welcome.
- [01:58]
Paul Grewal
Thank you, Jen. Good to see you.
- [02:01]
Jen Sanasi
Good to see you too. Now we're talking all about the election and I just want to start here. Are there any fears you have about the outcome of the upcoming election as it relates to crypto? How are you feeling? What are you thinking about today as Americans go to the polls?
- [02:19]
Paul Grewal
I don't have any fears at all and I'm actually feeling quite good about this election, even though a lot remains to be seen over the next 24 hours and perhaps beyond. And the reason, Jen, is that regardless of who wins in the presidential election or in any of the congressional races, it's become very clear crypto wins regardless. And I say that because 52 million Americans now own digital assets. And in this campaign and in this election season, 1.8 million Americans have signed up as crypto advocates at stand with crypto. And more than 500,000, nearly 600,000, have actually taken steps to register to vote or learn about crypto candidates through that, through their particular engagement with Stan with crypto. So we're seeing the crypto voter emerge as an important voice in the conversation. And Democrats and Republicans alike have come to understand that if they want to continue to serve in office, if they want to continue to meet their voters and constituents needs, they need to be thinking about how they can provide legislation and regulation that provides certainty and stability for crypto. And we're very excited about that.
- [03:23]
Jen Sanasi
You're not the first person who's come on the show and said that crypto's already won the election. You brought up a stat there. 52 million Americans own crypto. This is something that's come up again and again in the narrative leading up to the election and even the broader narrative when we talk about the crypto ecosystem just for our audience. Talk to me about where that number comes from.
- [03:44]
Paul Grewal
Well, there has been a whole lot of polling in crypto, just as there's been a whole lot of polling regarding the candidates in the election. Morning Consult has developed this particular figure as part of their survey and research into who owns digital assets. But if you look at other sources, for example, the Federal Reserve of Philadelphia has done important work in this area and other third parties, the numbers are clear. Tens of millions of Americans, whether it's 50 million, 60 million, 40 million, it's clear. Tens of millions of Americans have owned digital assets. And they all want to see crypto in their financial future and in the broader economic future. And that's why we think the crypto voter is so important to the results that we're going to see after today and in the months and years ahead.
- [04:32]
Jen Sanasi
Well, Paul, that leads me to my next question. Could crypto voters really impact this election? I know that's a question you've been asked from other outlets, but it's election day. Talk to me about the crypto voter. Are they really going to have an impact? Are there really single issue voters out there?
- [04:48]
Paul Grewal
Well, it's absolutely clear that if you, if you consider that the 1.8 million Americans have signed up as crypto advocates, that crypto is on the minds of many American voters. And while not all of them may view crypto as their sole issue, it's clear that it is one important issue as they weigh which candidate to vote for in any particular race. I think what's critically important is that in several battleground states, states which could be decided by a few thousand votes going to one candidate or another, there are tens of thousands of people who have signed up as one of these crypto advocates and made it very clear that they will be considering the candidates views on market structure, legislation, legislation concerning stablecoins, the way that the SEC has gone about regulating this market by enforcement rather than by rulemaking, all of that tells us that crypto will play an important part in the outcome of these various races. And that even if no single person is only focused on crypto in each and every race, collectively, we're going to see crypto emerge as an important consideration for these results.
- [05:55]
Jen Sanasi
Talk to me about the key races that you're watching.
- [05:58]
Paul Grewal
Well, obviously everyone is focused on the presidential race and for good reason. Our new president will have a significant impact on the state of crypto, whether it's appointments to chair the securities and Exchange Commission, the Commodity Futures Trading Commission and other important federal agencies, whether it's signing legislation that will ultimately make its way to the House and more generally setting the tone for crypto and making it clear that crypto will be welcome in the United States. I think the presidential race is certainly at the top of the list for good reason. But we shouldn't ignore that important races are taking place all over the country for the House, for the Senate. And the reason why those races matter is that the party which will control the House and the Senate will be determined as a result of each of these individual races. And so it's important to pay attention for that reason. And whichever party controls, for example, the House or the Senate will also have a say in who serves as the chair of the House Financial Services Committee, the Senate Banking Committee. These are important institutions within the Congress that are going to have an outsized role in setting crypto policy and the years ahead.
- [07:10]
Jen Sanasi
Let's talk about the presidential race, the first one you brought up for good reason. I, I know that Coinbase has met with folks from both the Trump and Harris camp. Can you give us some insight into the conversations that were had and let's start with, with the Trump camp.
- [07:27]
Paul Grewal
Well, President Trump, I think it's no exaggeration, has bear hugged crypto in a way that very few of us could have imagined even six months ago, let alone a year ago. The former president has made it very clear that he sees crypto as an important national security issue for the United States. He sees tremendous economic opportunity in the development of crypto products and services here in the US and he personally has taken a great interest in crypto by virtue of his personal involvement in crypto projects and his insistence that pro crypto stances be included in the Republican National Convention platform. For example, for her part, Vice President Harris, I think, has been more measured in how she has approached crypto. She has been very clear that she sees crypto as a part of a pro innovation agenda and has made several statements that recognize that protecting the innovation of crypto is just as important as protecting investors and protecting consumers who may be involved in these markets. And so, in their own way, with their own style, each of the candidates, I think, has recognized that again, the 52 million Americans who, who own digital assets are expecting them to take take the responsibility of protecting these markets seriously and to support legislation which will bring clarity to these markets. How they go about that, which personnel they will put in these important appointed positions remains to be seen. But we're optimistic that regardless of who wins, as I said earlier, crypto is going to win either way.
- [09:03]
Jen Sanasi
You know, some folks who have come on this show have questioned the authenticity of some of the comments that have come out about crypto from the Trump camp. Having been involved with discussions with folks who are thinking about what crypto policy could look like under a Trump presidency, did those discussions have substance? Did they feel real? Did they feel like more than just lip service?
- [09:28]
Paul Grewal
I've had the privilege of speaking with the former president on several occasions about crypto policy. And I am absolutely certain that crypto is going to receive fair consideration if former President Trump is returned to office. If you stood in the crowd at the Bitcoin conference in Nashville, if you heard the President speak directly of the need to protect self custody, it's very clear that he and his campaign and his advisors understand that we need a reset in crypto from the last three and a half years. That said, I'm just as confident that we're going to get a fair consideration by Vice President Harris. Again, her language has been much more measured, but she's only had, I think it's fair to say, a very limited period of time within which to develop economic policies on a whole range of issues. And so it's quite natural that her embrace of crypto would be more limited. Either way, I think it's clear that the approach of the current administration and the approach led by Sec Chair Gensler will be rejected. This, this notion that somehow lawsuits are the way to bring certainty and clarity to the market, clearly has not worked, and the courts have pushed back on that. And the markets themselves, I think, have made it clear that rulemaking legislation is the long term, durable solution to providing certainty and clarity, not lawsuits.
- [10:52]
Jen Sanasi
Yeah, let's talk about the sec. I mean, many are wondering how the results of the election will impact the sec. Talk us through each scenario we talked about. We started with Trump last time, so let's start with Harris. I keep referencing other people who have come on the show, but a lot of people think that if Harris does take the presidency, we will see some change in the sec, but maybe not as quickly as if Trump were to take the seat. What do you think? What's your stance there?
- [11:20]
Paul Grewal
Well, Vice President Harris would certainly have the prerogative of selecting a new chair of the sec and obviously having a significant input into the heads of each of the different components of the SEC that are responsible for ultimately making policy and crypto policy in particular. Whether she chooses to replace SEC Chair Gensler or not remains to be seen. She would certainly have that authority. But I think regardless of how quickly she might move to bring in new leadership, it's clear that any new administration is going to expect there to be a review of the pending cases, a reconsideration of whether this approach of lawsuits and enforcement over rulemaking is the right way to bring clarity and certainty to this important market. All that's going to take place no matter how she approaches the leadership of the SEC in particular. And now, the other thing, Jen, I think it's important to recognize is that we tend to focus on the sec, and for good reason. But there are other important federal agencies that have an outsized say over crypto and crypto policy. It will be just as critical for the new president to select a new chair of the CFTC and leadership within the treasury, for example, that also recognizes that we need to see sensible policy enacted in order to protect these markets. And that if the US Continues to waffle and dither, the rest of the world's gonna continue to race ahead. And I don't think either Vice President Harris or President Trump wants to see that happen.
- [12:52]
Jen Sanasi
Hey, everyone. Did you know 52 million Americans own cryptocurrencies? That's not just the number. It's a movement. Economic, social, and political. Decentralized finance, blockchain and digital currencies are more than buzzwords. They are the future. This November, it's on us to show up and step up. We need to protect crypto to ensure it continues to fuel innovation and freedom for our families and businesses. Don't let this opportunity slip by. The future of crypto is on the line. Make your voice heard this November and pledge to vote now@standwithcrypto.org pledge. In the conversations you've had, any mention of who could take the chair at the SEC who might replace Gary Gensler?
- [13:36]
Paul Grewal
Well, speculating about personnel is always part of the fun of a campaign and a consideration of any new administration. I think it's fair to say that if President Trump is elected, we will see new leadership very quickly. There's a challenge, though, because the statutes which govern who can serve as SEC chair are somewhat ambiguous about the president's authority to remove a commissioner, whether as chair or as simply a regular commissioner, for any reason whatsoever. And so I do think there are some ambiguities about, for example, whether President Trump can simply fire Gary Gensler on day one, as opposed to demote him from his chair status and replace him with a new chair. If he were to take the latter course and simply demote Chair Gensler, the most straightforward course in order to play for a new chair to take his or her seat would be to promote one of the current chairs, for example, Commissioner Ueda or Commissioner Peirce. Again, these are all details that will have to be sorted out in the aftermath of the results of today's election. I think it's safe to say that over the next 24 hours, both of these campaigns are going to be much more focused on whether or not they're going to be serving in a new administration as opposed to the details of crypto policy. But time will tell.
- [15:05]
Jen Sanasi
I want to talk about Coinbase's involvement through donations. I know Coinbase has donated over $50 million this election cycle and plans to donate another 25 million next year via the Pro Crypto Super PAC affair shake. And I think we learned this morning that A16Z is also going to be donating $23 million to a fair shake for the 2026 midterms. Talk to me a little bit about this, a little bit about Coinbase's involvement and strategy and what that says, I guess, about the convergence of crypto and politics in the United States as we head into 2025 and the 2026 midterm.
- [15:42]
Paul Grewal
I think what, what would Coinbase and other support for efforts like those of Fairshake and Stan with crypto say more than anything else is that the crypto industry recognizes that good policy, good regulation is going to be critical to the continued growth and development of this technology and of this industry. And what we have Already seen is that through the efforts of Fair Shake and Stand with crypto and others, the crypto voters voice has emerged as an important consideration. Again, I think it's remarkable that just a short while ago no one could have imagined that you would have both major presidential candidates discussing repeatedly and in detail their views on crypto policy. No one could have imagined that you would have, for example, 130 or more candidates for the House and Senate completing questionnaires with Stan with crypto in order to be rated for their positions on crypto policy. You now have hundreds and hundreds of candidates all over the country putting out very pro crypto messaging and positions in order to make clear their views to their, to their voters. And so all of this I think just speaks to the significance of this industry and the recognition by this industry that in order to make progress it's important to be involved. And while unfortunately in the United States today, involvement often means significant financial contributions and participation, that's just the way politics works in the current moment. And so Coinbase and others have stepped up in that regard as well. But all of this ultimately is in service of the crypto voter and we take that responsibility very, very seriously.
- [17:26]
Jen Sanasi
All right, and make sense of this for our audience. What happens from here? We of course are sitting here, it's November 5th, it is election day. We are soon going to know who the new President of the United States is. What happens from here when it comes to crypto policy? Do all of the woes that have weighed on this industry get solved from here? What does the path look like? What are you prepping for?
- [17:51]
Paul Grewal
Well, I think that we're going to see tremendous change, but I don't know that that change will come tomorrow morning or next week or even this year. Patience in the crypto industry and among the crypto community is not necessarily one of our strengths. And yet, quite reasonably, people want to see change come and come quickly. Considering that for the last three and a half years this industry has taken a body blow after body blow from a government that and an administration that frankly has shown very little interest in engaging productively with it. And on behalf of the crypto voter, I think what you're going to see in due course is first and foremost consideration of who will lead these different agencies and be responsible for carrying out the crypto policy set by the Congress. I think Congress itself will take up in short order legislation on market structure that's the fit 21 bill, as well as legislation concerning stablecoins that has both made their way through the House in different ways and to different degrees and are now currently being considered by the Senate. I'm very optimistic, Jen, that perhaps even as soon as the lame duck session this year, but certainly in 2025, we're going to see legislation passed that covers market structure, stablecoins and perhaps other issues in ways that will unleash innovation in this industry to a degree we haven't seen.
- [19:12]
Jen Sanasi
I think everyone listening is just looking forward to that. And I appreciate you bringing that optimism to the show here today. Paul, while you're here, while we're talking about policy, while we're talking about blows that the industry has endured over the past years, I want to talk to you about some documents that you recently revealed that exposed the FDIC asking banks to pause or refrain from providing crypto related bank services. Talk to me about this. Well, let's talk to me about the documents and what they revealed for you, what you want people to take away from seeing them.
- [19:44]
Paul Grewal
Well, this audience will certainly be familiar with the history of operation choke point 2.0. And this is a term Nick Carter and others have coined to describe the concerted effort of the current administration administration to deny basic banking services to people involved in crypto and to restrict or constrain banks from offering crypto related services in their own regard. We were quite concerned, as we came to learn more and more about this effort, that the FDIC in particular was exerting substantial, significant pressure on member institutions, on banks to deny their customers basic banking services and to refrain from offering crypto related services themselves. And so we filed a number of FOIA Freedom of Information requests to the FDIC that asked them to produce, among other things, the letters, the pause letters they may have sent to member institutions to carry out this directive. The FDIC unfortunately rejected those requests and cited what we thought were unjustified basis for withholding the documents that we were seeking. And so we went to court. We sued the FDIC in federal district court in Washington, D.C. and over the course of the last several days it has now been ordered that the FDIC produce the letters that we were seeking. And in the interim they have produced a log of those letters, something called a Vaughan Index, which makes very clear that in case after case, various examiners and others at the FDIC were telling their institutions to stand down from crypto. And that is in and of itself a remarkable, remarkable action in that crypto is a legal business, we operate in full compliance with the law in the United States. And it would set a remarkably dangerous precedent, Jen, for the FDIC or any regulator to pressure regulated institutions to deny their services, deny access to their products and and their business to lawful businesses here in the United States. So this is one to watch. We're going to keep at it because we think this is an important issue, not just for Coinbase but for the entire industry. And we're grateful that the court has seen fit to order the FDIC to produce these materials.
- [22:08]
Jen Sanasi
Well, I know that the FDIC has issued guidance to institutions on how to deal with crypto and it has oftentimes been unfavorable. Make that delineation here for me. How is what has happened going against the guidance that they've previously issued?
- [22:24]
Paul Grewal
Well, what's happened here is that the FDIC appears to have told institution after institution, just on our own efforts, we've identified several dozen examples of this to simply stand down from offering crypto related services or banking services to Crips institutions in spite of the fact that these crypto firms and banks themselves are operating in full compliance with the law. The guidance that you're talking about never once has suggested that lawful businesses be denied basic services or the right to offer basic services. And we think that sets a terrible precedent. It's Congress's job to decide what is lawful or what is not lawful. It is not for regulators to simply adopt policy preferences and then carry out those preferences or exert pressure based on those preferences in ways that are hidden from public view. That's what we're trying to shine a bright light on. And that's why we're so grateful that the court has seen fit to order these documents produced.
- [23:25]
Jen Sanasi
You mentioned something there in your last answer. You said you were doing this not just for Coinbase, but the industry at large. And I see that kind of coming through in Coinbase's battle with the SEC and Coinbase's donations to Fairshake. In this FDIC story that we're just talking about, talk to me about how Coinbase sees itself as an industry leader in forging the path forward, not just for the firm itself, but for the industry at large.
- [23:56]
Paul Grewal
Well, you know, Brian Armstrong, our CEO and our board have always been very clear. In a perfect world, coindese will be focused on building the great crypto products and services that our customers want and ultimately enabling more than a billion or more people all over the world to have access to the crypto economy. But unfortunately, in the present political climate, we've been drawn into several of these disputes where in the United States in particular, the government has carried out an anti crypto policy and critically done so without any legal authorization to do so. As one of the few publicly listed crypto firms and one of the most longstanding crypto companies, we accept that we have a unique responsibility to take actions that benefit not just our shareholders and our employees and our customers, but the industry as a whole. And so while we didn't seek out this responsibility, having it thrust upon us, we understand we need to carry it out in a way that ultimately serves everyone's interest. And that means pushing for new legislation from the Congress. That means fighting the good fight in court on occasion. And it also means just shining a bright light on all the activities of the government so that everyone can understand what policymakers and regulators are doing in their name. Because ultimately they work for us, not the other way around.
- [25:17]
Jen Sanasi
Paul, we're going to have to wrap it there. As always, it's been a pleasure having this conversation with you. Thanks for joining the show.
- [25:23]
Paul Grewal
Thank you, Jen. I enjoyed it.
- [25:25]
Jen Sanasi
And thank you to everyone who watched or listened to today's podcast episode. If you enjoy markets daily, subscribe to the Coindesk Podcast network that is available on all podcast platforms. If you prefer watching, subscribe to our YouTube channel. Happy election Day to all the Americans out there. Please get out to the polls and vote and we'll see you tomorrow.