Author: Amrith Ramkumar, Dylan Tokar, Gina Heeb, The Wall Street Journal
Compiled by: Luffy, Foresight News
Original title: Coinbase CEO Becomes Wall Street's Public Enemy No. 1
During last week's World Economic Forum in Davos, Brian Armstrong, CEO of the largest U.S. cryptocurrency platform Coinbase, was having coffee with former British Prime Minister Tony Blair when JPMorgan Chase CEO Jamie Dimon suddenly interrupted their conversation.
"You're talking nonsense," Jamie Dimon said, pointing his finger at Brian Armstrong's face. The long-time cryptocurrency-skeptic banker had previously called Bitcoin a fraud.
According to people familiar with the matter, Jamie Dimon's core message was to demand that Brian Armstrong stop spreading false statements on television. Earlier that week, Brian Armstrong had publicly accused the banking industry of trying to block a legislative process to establish a new regulatory framework for digital assets on several business TV programs.
This direct confrontation was at odds with the Davos Forum's original intention of promoting cooperation among global leaders.
As cryptocurrency rapidly integrates into the American financial mainstream, a host of Wall Street giants have finally realized the threat posed by this field. Although banking institutions have embraced some application scenarios of cryptocurrency, such as providing services for clients' Bitcoin investments and using digital assets to improve the efficiency of fund transfers, they have drawn a clear red line when cryptocurrency touches their core business: personal deposit services.
Currently, the banking industry and Coinbase have a fundamental disagreement on a core issue: whether cryptocurrency exchanges have the right to pay regular yields to users holding digital tokens. These so-called yield rewards refer to the payment of ongoing fees to stablecoin holders, with an interest rate of about 3.5%.
Bank of America CEO Brian Moynihan, JPMorgan Chase CEO Jamie Dimon
The banking industry believes that such yields paid by cryptocurrency exchanges to users are essentially no different from bank deposit interest. The interest rate on bank demand deposits is usually less than 0.1%, far lower than the yield level of cryptocurrency. Therefore, the banking industry worries that consumers will move funds into the cryptocurrency market on a large scale. They say this trend will severely hit community banks and affect the development of corporate lending business. Brian Armstrong and other practitioners in the cryptocurrency industry believe that the market should follow the principle of free competition. If the banking industry wants to counter stablecoins, it can simply raise deposit interest rates or directly enter the stablecoin business.
This legislation, called the "Clarity Act," may reshape the future landscape of daily financial services, covering core areas such as bank deposits and electronic payments.
According to people familiar with the matter, to promote a compromise between the two sides, the White House plans to convene a meeting this Monday with relevant groups from the banking and cryptocurrency industries. David Sacks, the Trump administration's commissioner for artificial intelligence and cryptocurrency affairs, is expected to attend. Some informed sources said that Coinbase's head of U.S. policy, Kara Calvert, is also on the list of attendees.
Brian Armstrong, 43, co-founded Coinbase in 2012 and has for years led the cryptocurrency industry in seeking legitimization and mainstream recognition. As the helm of this enterprise with a market value of about $55 billion, Brian Armstrong has significant say in policy debates related to the industry, and the current legislative game in Washington is one of them. "It's better to have no bill than a bad bill." A Senate committee was originally scheduled to vote on a draft bill. If passed, it would essentially prohibit companies like Coinbase from paying yields to customers, potentially costing Coinbase billions of dollars. Brian Armstrong posted on social platform X the day before the vote. Just a few hours later, the vote was suddenly postponed, causing an uproar throughout the financial world.
"The current situation is interpreted more as a confrontation between Coinbase and the banking industry, rather than the entire cryptocurrency industry versus the banking industry," said Ron Hammond, policy and advocacy director of well-known crypto market maker Wintermute.
Brian Armstrong's counterattack did not stop at the post on platform X on January 14. He reiterated his views in subsequent television interviews, telling Bloomberg that bank lobbyists are "running around trying to kill competitors" and accusing the banking industry of "using customer deposits for lending without the substantive consent of customers." According to people familiar with the matter, these remarks also led to several awkward direct encounters with multiple bank CEOs at the Davos Forum.
"If you want to do banking business, then get a banking license directly." Last week, during a 30-minute meeting between Bank of America CEO Brian Moynihan and Brian Armstrong at the Davos main convention center, Brian Moynihan said. The atmosphere of this meeting was relatively friendly, but the exchange was always slightly stiff.
Citigroup CEO Jane Fraser gave Brian Armstrong even less than a minute to talk. Coinbase is a client of Citigroup and JPMorgan Chase and has also established business cooperation relationships with many other banks.
And Wells Fargo CEO Charlie Scharf was unwilling to give even a minute. When Brian Armstrong proactively approached to talk, Charlie Scharf bluntly said there was nothing to discuss between them. This conversation happened while Charlie Scharf's former boss, Jamie Dimon, was not far away.
Aspiring to "Replace Traditional Banks"
Brian Armstrong graduated from Rice University in Houston, majoring in economics and computer science, and was an early adherent of the concept of digital currency and the underlying blockchain technology. He studied the original Bitcoin white paper published by the mysterious Satoshi Nakamoto in 2008. In 2011, while working at Airbnb, he encountered many difficulties in transferring money to South America.
These experiences laid the groundwork for him to found Coinbase. At that time, many investors were eager to enter the cryptocurrency market but faced a core problem: there was no dedicated platform to store digital assets. The creation of Coinbase was precisely to solve this problem. When some customers wanted to trade Bitcoin rather than just custody assets, Coinbase顺势 transitioned into a cryptocurrency exchange.
Coinbase's starting point was a small apartment in San Francisco, which was also the company's first office. In 2017, after the other co-founder left, Brian Armstrong became the undisputed helm.
Several former colleagues interviewed by The Wall Street Journal previously said that Brian Armstrong is shy and sometimes even has difficulty communicating smoothly with some employees, appearing awkward when reprimanding subordinates. Some former employees described his style as very much like the Vulcans in "Star Trek," an alien race known for their calm restraint and rejection of emotion.
2014, Coinbase CEO Brian Armstrong speaking on stage at the TechCrunch Disrupt Europe conference (London stop)
But regarding Coinbase's development vision, Brian Armstrong has never retreated half a step. He positioned Coinbase as a benchmark enterprise promoting the integration of cryptocurrency into the American mainstream market. Today, Coinbase's business scope covers electronic payments, stock trading, commodity trading, prediction markets, and other fields.
"Our ultimate goal is to become an alternative to traditional banks in people's eyes," he said in an interview with Fox Business last year. "We want to create a super financial application to provide users with various financial services."
As the business territory continues to expand, Brian Armstrong invested millions of dollars to build the largest lobbying team in the cryptocurrency industry. After experiencing several booms and busts in the cryptocurrency industry, Coinbase officially went public in April 2021, with its market value once exceeding $100 billion, and Brian Armstrong's personal shareholding value reached about $13 billion.
2021, Coinbase employees opening champagne to celebrate the company's listing outside the NASDAQ exchange in New York
After surviving the industry collapse crisis in 2022 and withstanding the regulatory crackdown by the Biden administration in 2023, Brian Armstrong began to fight back and gradually found his voice. This manager who once preferred to wear headphones and write code in the office and was reluctant to speak publicly has now become a staunch spokesman for the cryptocurrency industry in Washington, and Washington's attitude towards cryptocurrency is about to undergo a翻天覆地的 change.
Through a series of super PACs (Political Action Committees), Coinbase has invested about $75 million in the 2024 U.S. election, aiming to oppose candidates skeptical of cryptocurrency. It also established grassroots organizations to gain public support for cryptocurrency-related bills. The super PAC said this Wednesday that its current funding规模 has reached $193 million.
Trump's victory in the 2024 election opened a window of opportunity that Brian Armstrong had been waiting for for ten years to争取 policy breakthroughs. He praised Trump for ushering in a "new dawn for cryptocurrency" and attended the "Crypto Gala" featuring Snoop Dogg during Trump's inauguration. Nowadays, this executive至少 takes off his usual T-shirt and black jacket at least every two months, puts on formal attire, and visits Capitol Hill.
"In all matters related to cryptocurrency in the United States, Coinbase is at the forefront," said Anthony Scaramucci, founder of SkyBridge Capital and a long-term cryptocurrency investor.
Last summer, Trump signed the "Genius Act," which cleared the way for many companies to issue stablecoins and directly promoted the explosive growth of the stablecoin business. The act prohibits stablecoin issuers themselves from paying interest to users but does not impose restrictions on exchanges like Coinbase or third-party institutions. Banking groups see this omission as a legal loophole, which directly triggered the fierce game around the "Clarity Act."
The Long Road to Legislation
The U.S. House of Representatives passed its own version of the "Clarity Act" last year, but the bill's advancement in the Senate is considered extremely difficult, partly because lawmakers disagree on the regulatory rules that cryptocurrency companies should follow. The Senate Agriculture Committee, responsible for overseeing legislation related to the Commodity Futures Trading Commission, passed the committee's version of the draft bill this Thursday. Lawmakers ultimately need to push the full Senate to pass a version of the bill and then negotiate with the House of Representatives to resolve differences between the versions.
According to people familiar with the matter, the core point Brian Moynihan expressed to Brian Armstrong is: If cryptocurrency companies like Coinbase want to provide deposit-like services, the banking industry普遍 believes these companies should be subject to the same regulatory constraints as traditional banks. Regulatory agencies such as the U.S. Federal Reserve and the Office of the Comptroller of the Currency strictly review banks' risk profiles, regularly inspect their operations, and set clear rules for capital requirements for banks' lending and investment businesses.
"The current controversy over yield rewards is an exception in our cooperative relationship with the banking industry. We maintain close cooperation with many banks and have announced several cooperation plans," said Coinbase Chief Policy Officer Faryar Shirzad.
Coinbase has established a lucrative partnership with stablecoin issuer Circle. Relying on this exclusive cooperation, Coinbase can obtain huge revenue sharing from the business of the popular stablecoin USDC. Unlike other companies in the cryptocurrency industry, based on this exclusive cooperation, Coinbase pays a 3.5% yield reward to some USDC holders. The company says such incentives help attract users and provide consumers with more choices at a time when bank demand deposit interest rates are extremely low.
"There is no reason to prohibit paying interest to consumers," Brian Armstrong said in an interview with The Wall Street Journal last year.
Brian Armstrong speaking to the media on Capitol Hill
As the "Clarity Act" was about to enter the voting stage in Congress, the banking industry began intensive lobbying activities behind the scenes. They cited a government estimate to warn senators that about $6.6 trillion in deposits in the traditional financial system could be at risk of being diverted to the cryptocurrency market. This lobbying achieved significant results. The nearly 300-page draft bill contained several条款 and potential amendments that Brian Armstrong considered unfavorable to the cryptocurrency industry. He immediately withdrew his support for the bill. A few hours later, Senate Banking Committee Chairman, Republican Senator Tim Scott of South Carolina, announced the cancellation of the vote.
According to people familiar with the matter, Brian Armstrong has proposed his own solution to the current僵局. He told Brian Moynihan that a new category of stablecoin issuers could be established. If such issuers can meet stricter regulatory standards, they could be allowed to pay yield rewards to users. This solution could theoretically allow the banking industry and Coinbase to compete fairly in the stablecoin business. Others have suggested prohibiting most yield reward payments, only carving out extremely narrow exemption application scenarios for a few companies like Coinbase.
The advancement of any solution requires Brian Armstrong's support.
"Now, the life and death of this bill is perceived to be in Coinbase's hands," said Hilary Allen, a law professor at American University and securities law expert, who is also a cryptocurrency skeptic. "It's really shocking."
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