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Monday, Jan 30, 2023

'It appears massive fraud was committed': Here are the 7 best quotes from Coinbase CEO Brian Armstrong's interview on crypto, FTX, and the future of digital assets.

'It appears massive fraud was committed': Here are the 7 best quotes from Coinbase CEO Brian Armstrong's interview on crypto, FTX, and the future of digital assets.

"I do think we have to admit as an industry that crypto has attracted more fraudsters than we'd like," Brian Armstrong told Stratechery.
The swift collapse of FTX last month has shaken the cryptocurrency industry to its core, as token prices continue to fall and investor trust drops to a new low.

Coinbase hasn't been immune to the tumult, with the crypto exchange forecasting a 50% revenue decline in 2022 and its stock falling 84% year-to-date.

CEO Brian Armstrong spoke with the Stratechery newsletter on Thursday, addressing the future of crypto as well as the implosion of FTX and its impact going forward.

Here are the seven best quotes:

1. On the prevalent fraud in crypto

"I do think we have to admit as an industry that crypto has attracted more fraudsters than we'd like. It probably is getting too many people like that into this industry, which does frustrate me. I still think 95% of the people who I meet in crypto are legitimate people trying to do really good work. They don't really get the lion share of the attention, because everybody loves the salacious story."

2. On the downfall of FTX

"It appears that a massive fraud was committed. I think that customer funds appear to have been moved over to his hedge fund that he owned 90% of, and that those customer funds were lost. This is a violation not only of the terms of service as it's written as far as I understand it, but it's also probably just against the law and outright fraud."

3. On the media's response to the FTX implosion

"It's been pretty bizarre to kind of watch the whole thing unfold, primarily because I do feel like mainstream media has given a lot of softball interviews. And even this tweet back and forth with Maxine Waters very politely asking him to attend a hearing, and him politely deferring, it was bizarre. This guy just committed a $10 billion fraud, and why is he getting treated with kid gloves?"

4. On the future of crypto

"There are enough great people working in crypto that I think this industry is going to do really well. We do have a responsibility as an industry and policymakers and regulators to get a bunch of regulatory clarity, especially for the centralized pieces of crypto."

5. On the decentralization of crypto

"And then the decentralized pieces of crypto, which Coinbase also plays in that space, those are the ones that are going to actually, I think, provide consumer protections and things using something even better, even more powerful, which is open-source code, self-custody. Anybody can go in there and audit these smart contracts to see if they're doing what they claim to be doing. So there's even a better system we can create in the future."

6. On the lack of crypto regulation and its harm to US consumers

"What happened as a result of this lack of regulatory clarity in the US is that it became more profitable for companies to incorporate offshore and try to serve the world from these kind of favorable havens. And so that didn't really benefit customers or investors in the US. In fact, it caused them more harm. They were pushed into these offshore things that were not regulated. It didn't benefit American companies because, again, it harmed our ability to build our companies in the US."

7. On the benefits of crypto

"First it's a new form of money, and that's actually a really important thing. Many places in the world, people don't have stable currency, and there's all kinds of wealth that's eroded from the poorest people in society. It's just a foundational part that we take for granted in the US, given that we have 8 or 9% inflation, which we think is extreme. In many places in the world, you get 25% in a month or something."
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