WBD244 Audio Transcription

Coinbase CEO Brian Armstrong on Bitcoin

Interview date: Thursday 23rd July 2020

Note: the following is a transcription of my interview with Brian Armstrong from Coinbase. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk to Brian Armstrong, CEO and Co-Founder of Coinbase. We discuss the difficulties in running a large startup, regulations, the Neutrino acquisition & providing analytics to government agencies with Coinbase Analytics.

“There is really no excuse I can give you, so all I can tell you is we make mistakes as well, and a lot of building a company is trying to learn from mistakes and just get better over time.”

— Brian Armstrong

Interview Transcription

Peter McCormack: Brian, how you doing?

Brian Armstrong: Doing great! Thanks for having me on the podcast and great to finally meet you as well.

Peter McCormack: And you as well. So I was saying to you that I didn't know if I'd ever get this interview. I've prided myself on getting everyone. I got Szabo on, I went out to Japan and interviewed Mark Karpeles. I never thought I'd get this one, but I've always wanted it, and it kind of felt like you didn't do a lot of podcasts interviews. So firstly, thank you for agreeing to do this, and how come you decided to do this? Because you obviously know there's going to be some tough questions coming.

Brian Armstrong: Yeah, no, that's totally fine. The first thing people should probably know about me is that I'm a bit of an introvert. That might sound strange as the CEO of a company, but I've never really loved doing a ton of external facing stuff. But what I've done over the years is I've tried to find a way to make it work for me. So over the years of Coinbase, I did some kind of traditional media interviews, some of those were okay, but they often times you end up doing an interview and you get like one or two lines quoted or something in an article that's otherwise not the message you want to get out there in the world.

I really appreciate this new form of media that's happening. I just decided a few months ago, I was like, "You know what? I want to go do a bunch of podcasts and like more YouTube." The channels where our audience is and our customer base is now listening to those things. You were one of the people that got recommended to me on Twitter and I've been listening to your stuff over the years, by the way, as well. I know that your audience probably is mixed in their views and everything like that, but I think that just makes it a better discussion. So happy to do it.

Peter McCormack: Great! Well there is a lot of pressure on this interview and there'll be a lot of people watching. There's been pressure on me that I ask the right questions, in the right way, and there'll be pressure on your answers, and there'll be a lot of eyeballs on this. One of the things I did going into this and preparing is I'm not one of the most hardcore Bitcoiners out there. Quite a few of them have me blocked as well. I don't tweet out "Delete Coinbase", I was a Coinbase customer very early on, I bought a lot of Bitcoin with Coinbase and it has the best user experience out there.

Obviously for transparency, Kraken's a sponsor now and I use them, but I'm historically a fan of Coinbase and the company's not going to go away. It's a huge company, one of the biggest in Bitcoin, but there is this kind of gap between you, Coinbase, and let's say more of the influential Bitcoiners in the community and I felt like if we could start this conversation, we can have this, maybe it'll be one interview, maybe it will be two, but we can start building that kind of relationship and start addressing some of the issues.

I can put some questions to you, you can put the responses back, people will maybe understand some of your decisions. Maybe there'll be some compromises, maybe there'll be some concessions, but I felt like this would be a good platform to start that conversation.

Brian Armstrong: For sure! Yeah, I'm happy to do it. I've always been happy to engage with people over the years. I think it's one of those things about the internet, which is that it's really easy to question someone's motives or think they're kind of a jerk, you read their stuff online and then usually you meet them in person and you're like, "Okay, they're just like a reasonable person." So I'll tell you, I can't think of a single time anybody's ever in person been mean to me or rude to me.

I think it's the vast majority of people out there in the world, they recognize that we have the same ideals, but there's different ways to get there and you've got to try to build a company and the company is trying to have one foot in the regulated world and one foot in the crypto world. So most people are very reasonable and they understand that, but there's a small minority on Twitter who gets their voices amplified.

Peter McCormack: Yeah I know. I've met some people who have given me a hard time on Twitter, in person and usually it starts with an apology or, "Sorry I was so rude" and that's why I agree with you, these kind of long form interviews are a lot better format for working through things. Also look, whatever people think of Coinbase, firstly, congratulations! You've built a multibillion dollar business, that must come with a lot of pressure and it must've been a lot of hard work. One of the things I noticed in preparation, I put out... Actually, can I tell you something funny? You know I put up the banner of the interview?

Brian Armstrong: Sorry, the banner on what?

Peter McCormack: Of the interview, like I would let people know you were coming.

Brian Armstrong: Oh yeah, I saw that.

Peter McCormack: Yeah, so I spelled your name wrong in it and nobody noticed! I noticed and I felt terrible! But what I noticed, there was a lot of feedback, a lot of questions, and then I went through your Twitter and almost every time you tweet, it's just full of negative responses. I guess one of the starting points is I wanted to ask you, does that get to you?

Brian Armstrong: Yes, it does get to me. Although, I think every year it gets to me a little bit less and I don't think this is unique to me. I probably get more than the average person, but if you look at almost every account on Twitter, it has all kinds of negativity happening. I think that's just an issue that Twitter is trying to work through and make sure that it doesn't become a bullying platform. Reddit, for instance, the replies have up votes and Hacker News and Stack Overflow and things like that. So the comment threads can hopefully be sorted by some kind of wisdom of the crowds, but that's not true on Twitter today.

I try not to get too bent out of shape about the comments. I will say a couple of interesting anecdotes about that. One is that nobody really told me when I went out to start a company, they were like, "A lot of people are going to hate you for it, or be irritated at you, or something like that" and I remember that always came as a surprise. This is the beauty of a company, but it also has this negative side effect, which is that there is a decision maker, whether it's me or somebody down in the organization and so things get resolved.

If 50% of people think it should go one way, 50% it should go other way, someone in the company will make a decision and it will move forward. So sometimes your job as CEO is like, "Well, who do I want to disappoint the least today?" But in other forums, like in our government or something, there's checks and balances in different... It's a three party system. So if there's massive disagreement, it's actually in gridlock, just indefinitely and that's kind of a feature because you don't want to have a dictator take over your country or something, but in a company, there's multiple companies competing.

So actually, you do have forward progress, even if people don't agree. If you're not having some people disagree with your decisions, you're actually not doing the job as CEO. That was kind of a difficult thing for me to process over time was like, "Okay, that's just the world I live in. Some people are going to be unhappy with me and the decisions that I make." I'll tell you one other funny story. So Coinbase, obviously we have a lot of connections into [inaudible] and we try to make it easier for people to get fiat currency into crypto and we also have a lot of connections into the crypto ecosystem, we go talk with all of the asset issuers and everything.

I remember there was one early Bitcoin meetup that I went to, and during the day I had I put on like, not a suit and tie, but just like I dressed up a little bit to go to this bank meeting because we were trying to get our account limits raised or something, so they would let more people buy crypto. I remember at the meeting with the banks, they gave me a hard time and they were like, "Well, why are you doing all this crazy crypto stuff? Is it safe? What's your compliance program?"

And then I went to a Bitcoin meetup that night and I was wearing the same outfit, and some of them were like really kind of, "Oh, gee." Crypto anarchists were coming up to me like, "Why are you dressed like a banker? You even talk like a banker." So I was getting a little bit of shit from both of them and I felt like that's fine.

I guess we're kind of right in the middle, where we need to be, if we're building this bridge between the two ecosystems, I guess I'm going to expect to get a little bit of heat from both sides. But like I said, most people, they understand what we're doing. If we want Bitcoin to succeed, we need to get all the fiat money in the world to move over into Bitcoin and that's going to require us to have some companies like Coinbase.

Peter McCormack: Yeah, we'll start digging into a lot of that. This is a Bitcoin show, you know this is primarily a Bitcoin show, I don't really talk about alt coins, but I don't really feel a need to even address the alt coins versus Bitcoin thing, it doesn't bother me too much. My sponsor has alt coins, I'm just not interested in it too much myself, so that's not really an area I'm really going to go into. But I definitely think we'll cover a lot of the regulatory stuff.

I've got a few like leading questions as well, I want to get into. You obviously recognize there's this gap between yourselves and the influential Bitcoiners, and over some of the decisions maybe you've made, maybe there's a misunderstanding, but do you have a desire to bridge that gap? Do you ever desire to rebuild those relationships and have a closer relationship with some of the more influential Bitcoiners?

Brian Armstrong: Well, let's see, my general philosophy in life is like, just yes, be kind to everybody and try to see what you can learn from them, even if you disagree. So I would say as a general rule, yes, I'm interested in having positive relationships with everybody. Of course, the job is busy, so there's a finite amount of time of every day and I've got to think about how to allocate that.

If I feel like a conversation is not moving forward or something, I might try to have somebody on the team go do that. We have a whole team by the way, who does nothing but need interface with the community out there and so I try to think about how to balance, where can I add the most value? And I always make those trade offs appropriately.

Peter McCormack: What is your day like? Like what is a normal Brian Armstrong day like?

Brian Armstrong: So over the years I've tried to change the things that I'm focused on. In the early days of Coinbase, I was building the actual product itself. I was writing code and then it evolved over time, "Okay, let me think about how to run a leadership team or even hire a leadership team". I'd say the three things that I focus on, number one, is hiring in top talent. So if there's executives that we need to get hired or board members, I try to focus on that. The second one is around product strategy. I love product, I think about that a lot.

There's usually five or six things in any given quarter that I care a lot about, and I want to attend those product meetings and try to help shape where they're going. Then the third one is I try to just think about creating a great culture at the company and being a voice or a direction about how we're all going to act, how we're going to hire people, things like that. So I kind of break up my week, like on Mondays, we have our executive meeting. We usually do some deep dive discussions into difficult decisions we need to make. Tuesday and Wednesday, I'll often interview candidates, try to recruit candidates. 

Thursday, I'll do a bunch of product meetings and we also do a weekly Q and A in front of the whole company. So we try to answer any questions that people have submitted and Friday I'll probably do a mix of things, like try to learn, try to read, try to interview a few more candidates, interface with the board, stuff like that. So those are all how my week typically is divided up and then it's a full time job, so there's usually some stuff on the weekend too, a few calls here and there.

Peter McCormack: What's it like been doing all this during this weird, COVID lockdown period. How have you guys adapted to that?

Brian Armstrong: Yeah. I always like to... What is the silver lining in any difficult situation? I always try to think about that. With COVID, obviously really difficult situation for the world, but for us, I realized, okay, if we're forced to all go do this experiment where we work from home, we work remotely, how can we turn that into an advantage? So what I did was I wrote up some of my thinking on that and published it.

We talked about Coinbase as a remote first company, and what that means is that even if some of us are eventually able to return to the offices, and of course you're going to have to be socially distanced in the office, our offices probably only be able to get 40% to 50% capacity, anyway. But once we have a few people back in the office, we all need to keep operating as if we're remote so that there's no advantage to being in the office or out of the office and I think what it's going to do is actually be a huge advantage for us because we're able to hire now people from many different areas, you no longer have to be within commuting distance of one of our offices in the world and we can get people all over the world. 

There's some drawbacks too, it's a little bit more difficult to get that spontaneous creativity that happens when you walk by someone at the lunch table or keeping everybody aligned towards what is the mission, what are our goals this quarter etc. You have to really invest in that stuff. Just the relationship building too, like the friendships that happen at work, we're working on ways to recreate that in a remote first environment. So I don't mean to say that it's all better, but I think on net it's going to actually be a big advantage for us.

Peter McCormack: It feels like it's going to be a big shift change for San Francisco itself as a tech hub.

Brian Armstrong: Yeah, I agree.

Peter McCormack: I've already seen some reports in the changes in the geography of the city, the change in rents and the change in property prices. Whilst the innovation has led in Silicon Valley, it feels like it will also be the first place to really push this kind of remote working and a huge change for the city.

Brian Armstrong: I think that's right. The rents were getting a little crazy in SF and there wasn't more housing being built and so it was getting more and more difficult for people to earn a living wage and actually live within commuting distance of offices in major cities in general, but SF was probably the worst in the US, in that regard. S

So I think you're right. A lot of the employees we've talked to, they're thinking about moving out more permanently, either it's more rural areas or just other lower cost cities. I think it'll be sort of an evening out, like probably rents and wages in really the most dense metro areas will come down a bit and the rest of areas will come up with it. It'll be interesting.

Peter McCormack: All right, man. Well listen, let's get into the Bitcoin stuff and I want to do a bit of history with you because I haven't heard it myself. I've got to know other people very well, Charlie Lee especially, I was hanging out with him in Hong Kong and he was telling me about all the early meetups and such. But it'd be great to hear from you actually, because it was only recently I found out actually that you worked at Airbnb, right?

Brian Armstrong: Yeah, that's right.

Peter McCormack: Were you a coder?

Brian Armstrong: Yeah, I was a software engineer there.

Peter McCormack: Do you still write production code?

Brian Armstrong: Not at Coinbase. No, I haven't written any production code in a while. But once in a while, we do a hackathon and I try to see if I can still code something.

Peter McCormack: Can you tell me about that journey then from Airbnb to discovering Bitcoin, to starting Coinbase? It'd be great to hear that from you.

Brian Armstrong: Yeah, sure. Actually the story happens... I'll start a little bit earlier than Airbnb, which is that I studied computer science and economics in college and so I was always interested in the intersection of both of those. I also did something after college, which was a little bit unique, which is I went to go live in Buenos Aires, Argentina, for about a year and I did that just to work on a start-up idea and have some adventure and try living in another country. That was the first time I had seen a hyperinflation country that had gone through that and that was something unique, to me at least.

Then I eventually did end up working at Airbnb, as you mentioned. A couple of things that I noticed, one was that they were trying to move money to 190 countries, both collecting payments from customers and paying out payments to the hosts, the people listing their homes on Airbnb. It was a massive headache, and we were working on a lot of those issues at Airbnb while I was there. Some of the issues we ran into was fraud issues, so people were putting in all kinds of stolen payments, very high fees and slow payments, globally.

I remember one time we were trying to integrate with this payment provider in Uruguay, and we'd read all their documentation and it was like, we could not figure out if put a hundred dollars into this thing how much money was going to come out the other side for the host who had listed their home. We called them on the phone and we realized they didn't know either. The rates were crazy high, exchange rates, they might've been stealing from us, who knows and we eventually just had to send some money through and ask somebody on the other side how much money showed up because the company doing the payment transfers itself couldn't even tell us.

I had this visceral sense that the global financial system is actually a patchwork quilt of these local proprietary systems, and it's a huge barrier to innovation that's happening. Only the biggest companies like Airbnb and Uber, at great expense, were able to invest in expanding country by country, by country and of course the easiest countries to expand into, from a financial services point of view, are the most developed countries. So the countries that maybe need this kind of income and economic development the most are the last on the list to integrate because it's very difficult to find any legal way to integrate with the local payment system in Zimbabwe, for instance.

So from that lens I then read the Bitcoin whitepaper. This was in, I think, December of 2010, and I was just at home for Christmas, or it might've been Thanksgiving I think, at my parents' house in the Bay Area, in San Jose and I just read the Bitcoin whitepaper. I saw it on Hacker News and I remember reading it and thinking, "This might be the most important thing I've read in like five years." I didn't fully understand it the first time I read it, but I was like, "This sounds kind of like the internet" and the internet, I always felt like, was this huge deal where I wish I had been born maybe 5 or 10 years earlier, so I could have kind of tried to create one of the early internet companies or something and I was like, "Wow, maybe this is like the next internet that's going to happen!"

So over the coming months, I re-read the paper a couple of times, tried to wrap my head around it and I was like, what are all the ways that this could not work, or that it could fail? Eventually I started going to some of the early Bitcoin meetups in San Francisco, as well and that was like a really unique experience. This is all while I was at Airbnb. This was Trade Hill, if you remember them, and they were hosting some of the early Bitcoin meetups in San Francisco, in the mission district and it was a really funny, Motley Crew of people.

Some of the people that were like these kind of computer science PhD people, and some of them were like just completely crazy people too, who were there and sometimes you couldn't really tell the difference. In hindsight, I reflect back on it, it reminds me of the homebrew computer club. If you look at like the early days of Apple and the people working on PCs, they all looked kind of shaggy. So it was a little bit of that crew and I remember thinking this is kind of a weird crew, do I really want to be the Bitcoin person if I'm going to start to build something in this space?

Because I talked to a lot of my friends about it at that time and they were all like, "I don't really get it. What is this Bitcoin thing you're getting into? It seems kind of scammy." So my friends didn't understand it, and I had a lot of self-doubt about it at that time actually, because I was like, "I think I want to create something in this space to try to help this thing grow and just to play around with the technology, but all my friends think it's kind of silly." So I started working on a prototype basically nights and weekends, just on my laptop and I was thinking, my whole mental model at that time was, SMTP is the protocol that powers email, but most people don't want to run their own email server.

They want to use Gmail, or something like that, for the security and backups and the mobile device, the cloud storage and everything and same thing with Git. I was like, Git was a really cool decentralized protocol, but people wanted GitHub to make it easier to use and it was hosted and everything. So I was like, "All right, well, if Bitcoin is this new protocol, I'm going to make the host of the Gmail or the GitHub of this new protocol" and I eventually called it Coinbase. It had some working titles at that time. I remember going to those early Bitcoin meetups and some of the people, I told them, I was like, "Yeah, I'm working on this hosted Bitcoin wallet, trying to make it easier to use and stuff" and they were like, "Why would you make a hosted Bitcoin wallet? It's just going to get hacked.

Everybody is trying to hack into these things." I was like, "That's true, but I think there's going to have to be some company that gets built in this space because otherwise the average person is not going to be able to use Bitcoin if they have to run it locally on their device." So I was sort of almost trying to talk myself out of it. Like, man, if I get like really into this thing, this could just be all consuming. But a stroke of luck happened, which is that, and I was afraid to quit my job too, by the way.

I was like, Airbnb is doing really well, do I really want to do this? I'm not sure. What I did was I applied to Y Combinator, which is a start-up incubator and the team there, and Paul Graham were the first people who wrote me a check for $150,000 and they're like, "Okay, maybe you're not crazy. This is kind of a cool idea." I really looked up to them, and so if they thought I was not crazy, that's what gave me the confidence to quit my job and try to build something full time. So that's a little bit of the origin story.

Peter McCormack: Wow, okay. What was it like doing Y Combinator?

Brian Armstrong: I'm a big fan of YCombinator, I think it was a really great experience. It's a three month program, it's pretty short, it's pretty intense and you basically just get a bunch of mentors and a bunch of other entrepreneurs at the same time and you just work, work, work, and you build up to demo day, which is where they introduce you to a bunch of investors. It's a very selective program, I think maybe only 1% of people were accepted or something like that. By the way, I didn't mention, I actually applied to Y Combinator a couple of times before I got accepted. So at demo day, I then had...

In that three month period, I basically had quit Airbnb, I was coding full time on this thing and I submitted a prototype, I think, just to Reddit and got a hundred people to come sign up and that was the very early beginnings of Coinbase. At demo day, I then gave a pitch and I went around and just tried to collect as many intros as I could to these investors and I remember a lot of them were really skeptical, like Coinbase was not one of the hot companies at demo day, even though we ended up being probably, along with Instacart, one of the most valuable companies out of that batch, out of the hundred or so that were in there.

But at demo day, not that many investors were interested in it and I was trying to raise a $1 million after that, because I wanted to go hire some people and really build up the team and I was barely able to get $600,000. So I raised less than the goal that I had, but I just decided to go back to work and that's where I eventually met Fred Ehrsam, who ended up co-founding Coinbase with me. Coinbase probably would not exist without Fred Ehrsam. He was an amazing compliment and just brought such energy and force and enthusiasm. We eventually got a little bit of a team together and figured out the killer feature, which was people actually want to buy Bitcoin on Coinbase, not just have a hosted wallet and that was kind of an interesting moment, as well.

Peter McCormack: It's a real battle that Bitcoin companies have and still have now. Every founder I've spoken to has talked about all the difficulties and they're quite unique as well. Firstly security, you have the honeypot that people want to attack. I've spoken to many exchange owners about the challenges of constantly defending yourself of all different types of attacks and we saw the Twitter attacks, recently.

You have difficulties with banking difficulties with fundraising, convincing people that Bitcoin is something, difficulties with regulations, there's so many challenges! Is this all tech companies? Or do you think this Bitcoin world is just even harder? Just like it's a much harder beast to crack?

Brian Armstrong:          Well look, there's no start-up out there that I've heard of that's easy, or that was easy to start. I think there's this narrative that people apply when they see something that's just really starting to work, and they don't see the 5 or 10 years of failure that proceeded that. There's almost no company that I'm aware of... Like the Airbnb story, those guys were crazy to have continued working on that. They were in tons of credit card debt, every setback you can imagine, the thing was not working.

They were three years into it and broke, and they should have given up and they didn't, and it eventually worked. Pretty much every start-up, if you look at it, there's some kind of heroic feat/stroke of good luck that manages to make it work and I think crypto companies are no exception. I would say that was true for us as well, at Coinbase. We had a stroke of good luck in the sense that the timing was right.

We had started working on it and then we rode a couple of those waves when things really got crazy and people wanted a place to buy it, and we were it, but there was also some moments that it could have gone the other way. I look back and the very earliest Coinbase, there was a couple coin flips where if it had gone the other way, maybe we wouldn't exist now.

Peter McCormack: Can you think of any of those?

Brian Armstrong: Well some of them were either fundraising events, that was like, if we hadn't gotten that one person to say yes, we probably would have not been able to hire and we would have shut down. Some of them were bank partners that we landed, that were helping keep that revenue coming in. Security is a huge one. The early days of Coinbase, there was all kinds of people attacking, and we were a lot less probably thoughtful and had all the systems in place that we do today.

Over time, we got more and more layers of security in place and teams and everything like that. But in those early days, one of our customer support accounts got taken over, and it could have been a really bad outcome, but we managed to save the day. So there were some kind of crazy moments like that for sure.

Peter McCormack: Have you felt a lot of pressure during it? Have there have been times when it's almost got overwhelming?

Brian Armstrong: Yeah, for sure. I think one of the key skills of being entrepreneur is actually this resilience or determination. Some people have commented to me that I'm a pretty even keeled person, so I do feel the stress and I feel highs and lows, but I think there's something weird about my personality, where I don't feel the highs as high as everybody else, but I also don't feel the lows as low as anybody else, so I'm able to just keep going. Part of that is a cultivated mindset and I think part of it is just the way I am naturally.

But there were some really dark days there where I remember we'd have some bug on the website and thousands of customers would be angry and then my Head of Engineering would quit and we'd get some lawsuit in the mail from someone trying to sue us for a million dollars and all these things happen at the same time. A lot of days, I'd say the first four years of Coinbase, Fred Ehrsam and I were working 12 hour days, 6 days a week, trying to just will this thing into existence and it often felt like if we... We were answering customer support queries until 2 in the morning and trying to go home and get 4 hours of sleep.

We'd get woken up in the middle of the night, "The website's down." I was on pager duty for many years and there was a lot of sleep deprivation and there was a lot of just grit to see if we could try to will this thing into existence. But I would say over the years, it's gotten a little easier. There's always some new thing that comes and sideswipes you, so there's always something new to learn as a CEO, but yeah, there's been a lot of dark days.

Peter McCormack: I think one of the key things was securing the banking agreement with Silicon Valley Bank and that seemed to be a pivotal moment for the company, because I know a lot of companies struggled with banking. I've spoken to a lot of people who have run exchanges have talked about that. I spoke to Jed very early on about what he was doing, where he was having to use his own private bank account with Mt. Gox. You seemed to almost have a two year monopoly on that relationship with that bank, how helpful was that? How did that all come about?

Brian Armstrong: So I think that was really important for Coinbase's success. You're right, there was a period there where I think we were the only kind of viable way to probably buy cryptocurrency in the US, and we gained a lot of traction during that time. The way that that came about is that once we realized people wanted to actually buy crypto on the site, I realized we needed to get a partnership with banks, so people could add a bank account or eventually credit cards and debit cards and things.

So actually Y Combinator made an intro to Silicon Valley Bank and we talked with them, and I remember calling them up and saying, "Hey, I'd love to get like an ACH access", which is the banking rails in the US and they said, "Okay, well, what's your AML policy?" I was Googling, live on the call, "What is an AML policy?" I was skimming the Wikipedia article, so I realized that a certain point, I was like, "We need to get some of these systems and controls in place and that's the only way we're going to get these features live." So we went out and hired a Chief Compliance Officer, we spoke with a couple of law firms that helped us think about money transmission licenses and all these kinds of things and you're always in this weird place as a start-up, because you're not going to have time and resources to go build the systems the way that a large company would.

If we had waited to get all 50 money transmitter licenses or whatever, it would have been three years and millions of dollars, and we had only raised $300,000. So we needed to get started with something and we were able to get some legal opinion letters written, things like that and enough of a controlled environment in place that the bank felt comfortable starting us with something. We then went through some growth spurts, which were honestly very uncomfortable for them. I remember we'd get these calls from the bank and they'd be like, "You have $500,000 in the bank account and you did $500,000 in volume yesterday of Bitcoin buys.

So if you have one mistake, one day, somehow you can't collect the money, you're insolvent as a company" and we were like, "Yes, that's true." Their response was "You need to get some more money in this bank account, or we're going to turn off your access in 30 days." Those kinds of conversations. So Fred Ehrsam and I, at that point, we were like, "All right, let's go raise a Series A" and we went out there and it was a good story to tell investors like, "Hey, we're growing so fast we need capital or the bank's going to turn off our accounts" and we were able to get that initial Series A raised with $5 million and there was many moments like that, where we had a lot of working capital challenges of just trying to keep the Bitcoin buys on during that time.

But ultimately working with Silicon Valley Bank did help us get off the ground and it put a lot of strain on their systems too. I think they were getting a lot of people internally saying, "What the hell is this Bitcoin company that's growing like a weed? Do we even want to be involved in this? What are the compliance risks?" I know when their auditors were coming to audit their bank, they were leaning on them, like, "What the hell is this client you have?" So ultimately, we had to get moved to other banks and eventually worked with some of the biggest banks out there in the world. But that took seven years of trying to build a team and the relationships and the rigour around these systems that would get the bank partners comfortable.

Peter McCormack: Am I right that you've raised about half a billion in total now?

Brian Armstrong: Yeah, that's about right!

Peter McCormack: So one of the first questions I had written down for you, actually I think it might have been the first one I wrote down is, what kind of pressure does that come with? Because I think that's a really interesting point, because a lot of people will look at the business and for example, one of the criticisms is, why list alt coins?

As I said, it doesn't bother me too much. I'm not a fan of them, but I understand there's that competitive pressure. Your customers want them, it is a revenue stream, I get it. Perhaps that's one of the pressures that comes with raising half a billion dollars, in that you have a fiduciary duty to grow your company, right? But for you personally, what kind of pressures come with raising that kind of money? Because I've got no idea!

Brian Armstrong: Yeah, it's an interesting question. So look, I think sometimes people maybe envision it as, you have this Board and once you take their money, they're going to pressure you and I think there are companies where that's true because there are a lot of examples of VCs that have come into companies and just exited the founders or leaned really hard on them. One thing we've been fortunate at Coinbase is that Fred Ehrsam and I were able to maintain a lot of founder control over the company and so there was never a dynamic that we felt where we were being pressured by the board. The kind of people we brought onto the Board, they wouldn't have done that anyway.

So it wasn't like they were leaning on us, like, "You better do this or you're out" or anything like that. But at the same time, when you raise venture capital, you're doing it because you're trying to grow a big company and Fred Ehrsam and I wanted to grow a big company, that was what we set out to do. So I believe that all those decisions to add new coins really came from us. I don't recall anybody on the Board ever coming to us and saying, "Hey, you have to do this" or, "What are you guys thinking?"

We just wanted to provide what our customers wanted and what they were asking for and that's mainly how it's done. So I would say if somebody wants to build more a lifestyle business, that's not under some pressure to eventually get big, venture capital may not be the right thing. But in our case, we wanted to build a big company and we wanted to grow faster and we wanted to throw fuel on the fire.

Peter McCormack: But does it come with any other pressures? Do you feel a pressure of having to achieve some kind of goal or target because you've raised so much money?

Brian Armstrong: Let's see, there is some pressure in the sense that people start to watch your valuation and the employees that you have joining the company as well, they're owners in the business, they're getting options with a strike price, so they want to know, "If I join and the strike price is this, what is it going to be in two years? What it's going to be in four years when these options vest?" So I think there's some pressure from that point of view. Also, I do feel some obligation as a steward of people's capital.

If you're going to raise that fiduciary duty, if you're going to raise money from other people, they're doing that because you have a mutual agreement that we're going to try to make this thing big, and not only returning the money to you, but hopefully grow something much bigger beyond that. So if you don't have a goal of trying to become a bigger company, you probably shouldn't raise money from VCs, that just wouldn't be in integrity I don't think.

Peter McCormack: Yeah and I guess it's interesting you say like a steward and the obligations that come with that, because you're building a business in this weird world where you're also building on top of this weird new decentralized money, and specifically towards Bitcoin, people are very passionate about it. Do you feel like you're a steward of Bitcoin? Do you feel obligations toward Bitcoin?

Brian Armstrong: Yeah, I've built this company off of this protocol, which I didn't invent. Satoshi Nakamoto, whoever that is, or the group of people, they are the ones who created this amazing innovation in the world. I think I'm helping by giving more people access to it, but I definitely don't feel like we're shaping Bitcoin or something like that.

We're more in service to the customers and the community of people who want to use it and I think, obviously, for us, it's broader too, it's a cryptocurrency thing. We're trying to be agnostic since our customers want all kinds of different things, but we definitely have some sense of responsibility there.

Peter McCormack: Yeah, because one of the areas I did want to get into with you is talking about what happened with S2X, because that I think that's an example of a scenario where even though you didn't build it, you can become influential about the direction it goes. Just for transparency, S2X came around not too long after I really got into Bitcoin. Whilst I discovered it in 2013, I wasn't really using it, and I didn't probably pay attention to really end of '16, start of '17. When I was first getting into it and I heard all the arguments to me, full transparency, I was like, "Well, bigger blocks makes sense, of course you want more transactions. Why wouldn't you want more transactions?"

I didn't fully understand decentralization. I think in time what happened is, I've only really become aware that that person I now disagree with, with scaling, the idea about scaling Bitcoin to 2MB during that time, in hindsight, I can't ever claim at the time, I was all knowing, because I wasn't. But it'd be interesting to hear from your perspective what that experience was like, because you obviously did support S2X, and you supported Bitcoin Classic before that. People call them contentious forks, but you also are sat there the other side, having this pressure of trying to build a business. So it would be interesting for you to tell me what happened then and how that went down for you.

Brian Armstrong: Yeah, there's a lot of history there and I'm curious to hear your point of view too, how you've evolved on that over time. Let's see, there's a lot of history there! I think the general way I looked at it was, everything we were doing at that time was Bitcoin, and I felt like Bitcoin is like TCP/IP for the internet, it's the one that everybody's building on. There's a lot of little other side projects, but we need to make sure that we keep growing this thing, because that's where all the current mind share is and people have all heard of something. They were like, "Bitcoin", that was like the brand recognition.

So my thought was, "Well, if we want this thing to not just be store value, but also medium of exchange, we're going to have to think about scalability and then not just scalability, we're going to have to think about any of these other features that might come along. Maybe we can have a protocol that evolves, so if there's better privacy features or smart contract stuff, or whatever that comes along, we should probably keep trying to upgrade this protocol so that it keeps growing and continues to have the most mind share.

Now there's a very valid argument on the other side of that, which is twofold, in my mind. One is, there is a trade off in terms of decentralization. If you keep growing the blockchain and the number of transactions per second, that are being stored there, well it's harder and harder for individuals to run a full node. Then the other thing is that it's dangerous to evolve a protocol. If you mess up and you don't understand the game theory or whatever, these things are really complicated. You could put the whole thing at risk. So there was a lot of debate in the community at that time and my view going into it was, that's not uncommon.

There's debate in every community about what the right path is to go forward, including the United States or a company or any kind of organization, certainly open source projects that have come before that, like Git, or the HTDP protocol or whatever kind of example you want to come up with, there's always debate. But I always felt like we're a bunch of reasonable people and there can be some kind of consensus that happens and we can make reasonable improvements to the protocol over time that are done in a really safe way.

What I guess happened at a certain point was, I felt like the communities were becoming so divided that I realized, "Wow, there might not actually be a path for us to move forward together as one group" and I was really trying to avoid that happening, because I felt like, if the whole crypto community, which was 95% Bitcoin at that time, if it started to fracture at this early stage, it could set back the whole industry. So I was trying to create unity and so it might sound silly in hindsight, but my thing was S2X or SegWit2x was, let's just give everybody what they want. If you want SegWit, you want larger blocks, let's just get everybody what they want so we can stay together as one community and keep building this thing.

But I guess that was perceived as hostile too and so there really wasn't much thought that went into it other than that, to be honest with you. There was a bunch of people in the community talking, I'd get random phone calls, I'd get random text messages and stuff. I was like, "Can everybody just get what they want and we can all move forward?" That sounds good, but it didn't work out that way. So in hindsight, you never really know. We don't get to run the experiment twice. I think the positive story to tell about it is that, well, Bitcoin has not...

We haven't taken any unnecessary risks with it and we've ensured that it is going to probably survive the test of time, as the gold standard and we may find other solutions for scalability with layer two or whatever. I guess the other way to look at it is, what would have happened if we had found a way to safely scale it? Maybe we wouldn't have had a need for some of these other chains that have come up and divided focus. I do think it has harmed the usability of cryptocurrency a little bit, that even when people come to Coinbase and there's so many different coins, or they got to think about, "Well if I want to use DeFi, I got to find this other protocol and learn about it."

So it's increased the learning curve, I would say, for new people to get into cryptocurrency and one of my big beliefs is that we need to actually make it dramatically easier to use before it'll get to a billion people and I really want it to get to a billion people. It's kind of like the internet, if you need it to understand IP addresses and DNS to even use the internet, probably not that many people would have. They needed to get it so simple where it's just like, click a link on a web browser. So those are some of my thoughts.

Peter McCormack: Yeah, I agree with you on the usability. It's funny actually though, I did hear a good counter argument on if you make it too easy for people, you might lead people to not taking enough responsibility for their own personal security because you are self-sovereign. But I do generally agree with the usability side of things. I'm not sure though, that not being able to do certain things on Bitcoin because people want scalability is the reason these other coins have existed. I think the game theory, or the incentives, sorry, were there for people just to create other cryptocurrencies, the chance to...

A lot of people have made all the money by creating these cryptocurrencies. Just sticking with S2X for bit though and I'll tell you where my view changed. So my view changed at the time, I think it was the New York agreement happened, and the developers didn't turn up. I heard about this, and that's where I just dug a bit deeper. Why were the developers not wanting to be part of this? Then what happened, I think, is post the fork, when it turned out that there was a bug in Garzik's code, I started to realize, actually there are a lot of risks here and that's when I spent a bit more time...

Look, people know I'm not very technical Brian, I'm the least technical person. But I spent a lot of time looking at hard forks, and I realized how dangerous they can be for Bitcoin and how risky. I'd be interested to know on your view on hard forks now, and add to that a second question: in hindsight, do you think the way it went down is good, in that we stayed at 1MB and we didn't fork off? Or would you still prefer it would have happened?

Brian Armstrong: Let's see, so I do think hard forks are pretty risky. That's actually one thing I will say I was totally wrong on. I put out this post, way back, probably 2014 or something, where I actually believed, at that time, that if there was a fork of a chain, it would actually eventually consolidate down to one because the incentives of the hashing power and everything like that and I was completely wrong on that. Bitcoin Cash and Ethereum Classic, all these things that's forked off, they've continued to persist, which I totally did not predict.

So to your question about whether it's good the way it ended up, with this faction forking off, I really don't know, because we never get to run the experiment twice. There's a version of history where we had tried to do SegWit2x and maybe other changes in the future and it had actually put the whole thing at risk and the thing imploded because there was a bug in the code and crypto just dead ended or maybe it had to be rebooted in some next generation or something.

That would have been a huge setback and maybe we avoided that fate. But maybe we also avoided an outcome where people had started to use Bitcoin earlier on for more things, or more as a medium of exchange or something like that, it's really hard to say.

Peter McCormack: Yeah, see the conclusion I came to is that I don't think Bitcoin on the base chain will ever be a medium of exchange unless it's big ticket items. I came to that conclusion, and one of the things I've always struggled with, with Ethereum is when people talk about decentralization. I say, directionally, it's becoming more centralized, so it doesn't matter if it is decentralized. Directionally, it's becoming more centralized. Whereas with Bitcoin, it seems to be directionally, always focused on increasing decentralization, every aspect as much as possible.

So I have always been a fan of that, but I guess, do you have any regrets with it? Like Wences came out and said he was wrong, you seem to be still on the fence, maybe, we don't really know. But do you have any regrets through that process? Because a lot of people have hung their hat on standard by their original choices and taken a lot of criticism for it.

Brian Armstrong: Yeah, well I think one of my regrets about it is that I was probably more strident than I should have been. So at that point I felt like, "Hey, I have an opinion on this, I really got to make it known." I did a trip to China, we met with a number of the miners there, I'd wrote some blog posts and I think just in general, I wish I'd probably had a little bit more humility about it and just said, "Look, this is complicated stuff. I don't actually know." Maybe I have a thought and I want to share that with people, but I probably should have been a little less strident and probably just a little nicer to people too.

I think I probably came across as like a little bit arrogant or just hubris and I felt like I was so busy trying to keep the company alive, I didn't have a lot of time to go engage with people and so I probably came across as kind of a jerk people. That's my guess. I think it definitely... For many years, and still to this day, people have this negative view of, "Oh, Brian hates Bitcoin." Something like that, which doesn't make sense because I've committed the last eight years of my life to it, basically. But I think that's something I regret.

Peter McCormack: Do you think if it came up again, if there was another fight to scale it to 2MBs, do you think you would be supportive of that? Or do you think now you think it's good where it is?

Brian Armstrong: I think that ship has sailed. It's one of those things about human nature. Tribalism, I think, is very inherently ingrained in human nature and I don't want to go fight that fight. I'm not even sure it's the right thing and it just feels like it's a perilous thing. It reminds me a little bit of that... You ever see that Monte Python film, Life of Brian, where there's like, "Are you the People's Front of Judea or the Judea's People Front?" I feel like we all should basically...

We want the same thing, we all want more freedom in the world, we want sound money, we want an open financial system, we want this technology to unlock a bunch of innovations, so my whole thing is, I don't know, how can we all try to help make that happen together? Look, I'm the first one to admit, I probably could have been more inclusive, collaborative, with a bunch of people out there, so that's my fault. But hopefully we can work together as an industry just to make progress.

Peter McCormack: Yeah, that's another interesting point you make with regards to, "We all want the same thing", because I actually think it's kind of interesting. There's a spectrum of things that people want with Bitcoin. So some people want, let's say, fast and frictionless payments, and adoption, kind of like a better PayPal as people say. But other people, I think, sometimes say they want a better world, which is a more uplifting one, less oppressive one, the technologies that can help people and I think sometimes there is a conflict between those.

So for example, maybe you have to work a little bit more with the regulators, or perhaps you do some things which are considered anti-privacy, which you may say supports adoption and supports growth, but it comes at the risk of reducing freedoms. Do you understand the contradiction I'm pointing towards?

Brian Armstrong: Yeah, I think so. There's certainly some challenges around that, like if you want to get easy payment methods hooked into crypto, well, at least on those platforms, you're probably going to have to give up some privacy, if those things are going to follow the law and stick around. So I see some trade-offs around that. I think for me, the way I think about this is that cryptocurrency is going to evolve over time. It might be that the early things that people wanted to do was just buy a little bit of Bitcoin because they wanted to hold onto it, hoped it would go up and to me, that's great to get an initial group of people into the system.

But to me, the long term potential is much bigger than that. I actually want to see an entire economy come up around cryptocurrency. We call it the crypto economy internally, but what that means is that, now that more and more people actually hold a little bit of cryptocurrency, maybe we can opt into more of a crypto-to-crypto world instead of crypto-fiat world where a lot of those legacy issues are still on the table. So one way we think about this is that today, the most common action people take in the crypto economy is trade, but that's not going to be true for long.

We're actually seeing a lot of adoption of other actions in the crypto economy. People are doing RLN, they're doing spending with merchants, they're doing earning, they're doing staking, they're doing voting, they're doing peer-to-peer payments, remittance, so I think it's this idea where initially cryptocurrency was kind of a solo activity. Even if none of your friends knew about crypto or whatever, you could go trade some and hold it in your personal account.

But now that we've gotten enough people who have cryptocurrency, we're starting to see transactions happen, a real network effect and that's how we're eventually going to have a more free world. I'm really big on this idea of economic freedom, which is a concept you can study about; are property rights enforced? Is there a free trade? Could people join the companies they want to join? Can they have a stable currency? All those things.

So I think the ultimate potential of cryptocurrency is we're actually going to create or inject economic freedom into a bunch of countries around the world, and build a new alternative economy that's more free and fair and efficient. So it's where I want to get it to go and that is going to require at least some way for us to do medium of exchange in addition to a whole bunch of other stuff, like smart contracts and borrowing lending, decentralized exchanges and things like that.

Peter McCormack: So a lot of people would argue with you against providing that through alt coins. I'm not going to dive into that today, but sticking to the Bitcoin side of things, you custody close to 1 million Bitcoin, I think that it's like 950,000 Bitcoins. Firstly, that must be quite stressful! But so I think a lot of responsibility does come with that.

Actually one of the questions I wanted to ask you first is there's been a lot of talk recently about sponsoring open-source developers, a lot of companies starting to put money in that. I haven't seen anything with regards to Coinbase on that. Is that something you're intending to do in joining the likes of the other companies have been committing to that, because it is a really obviously important thing for Bitcoin.

Brian Armstrong: Yeah, so we've tried this a couple of times in the past that we haven't had a lot of success with it. Not because of anything with the community, just that we failed internally. We briefly launched a protocol team, we had one of our early Coinbase engineers who found that. He was working on some Lightning protocol stuff and some of the clients and we also briefly launched this open-source initiative where we made some small donations, it was just a very small way to get started.

But ultimately that founding engineer who was on protocol team ended up leaving, so the team disbanded at that point. I think the way I think about this is it would certainly build a lot of goodwill in the community and it's just really important for the ecosystem for us to sponsor open-source development because again, we are a company that's built on these open-source protocols.

Peter McCormack: I think it would build a lot of goodwill. Maybe we should do it now. Let's agree Brian, let's sponsor a couple of developers.

Brian Armstrong: Yeah, well I would love to make that happen. Let me tell you, just honestly, behind the scenes, the kind of things I'm thinking about. So one is that I think we're also, by the way, helping Bitcoin by making it easier for people to buy it in a bunch of countries and all the kind of infrastructure we're doing and I'll tell you, there always seems to be some fire burning right inside the company. It's like, "Hey, our onboarding stopped working in this country. This payment provider isn't stop working. We need to make these financial things work, otherwise we're not going to be in business."

So I do feel like there's always some fire burning, that's almost like existential to the company. So it's hard to get enough resources together, but we did just hire this new Head of Engineering and I'm really hoping he's going to help us increase our engineering hiring. So I think one of the tasks that he can think about over the rest of this year is should we actually spin up that team again and have a small team doing it?

Certainly at Google scale and things like that, they have teams who work on Open SSL and that kind of stuff, which these kind of foundational layers of the internet, which I think is really good. So I'd be very surprised if we do not end up in a very similar place eventually, but we're not Google scale yet, we're 1,000 people and we seem to keep having these fires burning all the time. So that's the main count.

Peter McCormack: Perhaps externalize it might be a better way than. I think I just saw BitMEX sponsored Jeremy Rubin, I think is about a $50,000 and I kind of estimate your trading fees around... Look, I'm not telling you how to run your business, but say it's a $100,000 a day. I think if you've just sponsored two external developers, you wouldn't even have to worry about it. I think that would build a lot of goodwill in the community.

Brian Armstrong: That's a good point.

Peter McCormack: I think if you did that for a couple of people, you'd get so many applications as well, but you won't even have to worry about them. You wouldn't have to worry about them, your own burning fires internally and that's a really good start because we need these open-source developers on Bitcoin, it is really important. The more we have, the better. I've spoken to somebody and it is a real struggle sometimes to get funding, so I might ask you about that again in a few weeks and see how that's going then. Would you mind?

Brian Armstrong: Yeah, I think it's a great point. It doesn't have to be internal at Coinbase. So I'll tell you what, I'll make a note right now. I'll talk with our new Head of Eng about it and we'd be happy to follow up.

Peter McCormack: Good! I can't add any value there because I don't know what the people are. Just following on from that, like you know, I talk about you as a company being intrinsically linked to Bitcoin. We've got to get into the there's one really difficult area of this interview with some tough questions, which I think you know what's going to be about. So I want to talk a little bit about privacy and I had Cameron and Tyler Winklevoss on the podcast recently and I talked to them and I'll just ask you the same question. What is your personal views on privacy?

Brian Armstrong: Just in general?

Peter McCormack: Yeah, just in general. It's a leading question, but...

Brian Armstrong: Yeah, sure. Look, I would prefer that we live in a world where everybody has way more privacy. I think it's a unfortunate system that we have where there's very little financial privacy in the world. You're swiping your credit card, the actual number ends up in these databases all over the internet. I think that it's unethical actually that these records can be subpoenaed from companies. Companies essentially have been deputized as arms of law enforcement to spy on their customers and we have these obligations and financial services to report on all the things that are happening.

I understand the history of it. I think as far as I know, it started with the War on Drugs and then with terrorism, it escalated and things like that. So look, whenever something bad happens, people have this natural response. They're like, "Well, we have to do something about it. How are we going to?" So the theory behind these anti-money laundering laws and things, make sense to me. It's like, if it's harder to profit from crime, there'll be less crime. Well the data out there doesn't necessarily indicate that it's been a success. There's been reports by the World Bank and others that look at those laws and they've kind of said, "Okay, of all the illicit activity happening in the world, what percentage of it is captured or frozen by these AML laws?"

The data that I've seen is that it's like, it's about 1% or something, maybe one or 2%. At what cost? Not enormous cost to these financial institutions, but the bigger cost is probably in the barriers to innovation that happened, because it just makes it that much harder for a new start-up to be created and everything like that. So I'm definitely like a libertarian at heart. I believe that you should be able to do whatever you want, as long as you're not hurting other people. If you do hurt other people, well, there's a court system to help go solve that, but that's not the prevailing view in the world.

So we certainly try to operate and we've tried to work practically with regulators and even if every law or regulation out there isn't perfect and has some unintended consequences, they do some good and we have to follow the law to stay in business. So we've tried to work with them.

Peter McCormack: What do people not understand about the relationship that you have with regulators? Has it been an ongoing constant relationship? Are they always on the phone to you? You're always calling them or are you essentially having to fight on behalf of Bitcoin with the regulators? How does that all work in the background?

Brian Armstrong: Yeah, so from the very early days of Coinbase, as you mentioned, I think another one of the exchanges where people were trying to run it out of their personal bank account. Now that was surprisingly common back then. Problem with that is the minute you get over a certain amount of volume, they're going to come investigate and shut it down. So I realized early on, if we're going to have any chance of becoming a big company, a sustainable company, we've got to be pro-active and tell them what we're doing, and we've got to be an educational resource to them.

So there's this amazing thing that happens, if they read about, "Hey, there's some Bitcoin company doing X", they're immediately skeptical, especially in the early days, now it's better. But if you show up in person and you appear relatively normal and they can tell you're a good person, it's just like you and I doing this podcast, it helps build a relationship. So with regulators and business and everything, relationships matter. So we tried to just show up a lot in early days.

We would suit up and go to these meetings, meet with the state money transmitter licenses, FinCEN and the CFTC and SEC and everything and over the years, we ended up getting a lot of those licenses. So we still do that to this very day. Somebody on the team at Coinbase every week is interacting with NYDFS, SEC, CFTC. We have 50 money transmitter licenses in the US, so every quarter we get a handful of them that come audit us and that's just the United States.

We have equivalent regulators in the UK with the FCA, we have in Singapore, the MAS, we have a bunch in Europe, so the regulatory burden on the company is actually pretty high. I would say about, I think it's like 35% or so of the company is working in some form of legal and compliance, so it's incredibly expensive. Yes, we do a lot of educational resource work with them to get them comfortable with how this is being used and there's a ton of detail there.

Peter McCormack: Have there been any times during this development of Coinbase and growth of Coinbase, when you've been working with the regulators and you've ever felt like "Shit, they might actually try and ban this!"

Brian Armstrong: There's been some scary moments. I remember when Charlie Shrem got arrested and everything, I was like, "Oh my gosh, is this like a crackdown on all crypto companies?" I remember calling our lawyer and I was like, "What do I do if I get arrested?" He's like, "Oh, just give them my phone number and tell me that you want to talk to me." But that was kind of early days stuff. There was fears at a certain point that Trump had tweeted about Bitcoin, right?

We went and met with the Treasury and Mnuchin and people like that and they're actually quite thoughtful about this and they seem to believe in the potential for it to create some innovation in the United States and to help companies grow. So they may have many other flaws, but I think so far in our interactions with SEC, CFTC, IRS etc, they seem to believe that this is an area of potential growth for the U.S. economy. I do try to make it over to D.C. about once every year or two to build relationships, which is just one of those things in business that tends to help in the long-term, if we want to make sure Bitcoin makes it to the mainstream.

Peter McCormack: Can you push back on them? Are there times where they're pushing at you quite hard or you can push back on them and do they listen?

Brian Armstrong: It depends on the people, right? I would say there was one meeting I remember having with a Congressman where we went through our whole pitch about how this, the issues with the traditional financial system and what this can do to improve and everything. He said, "Well, after we're done with Facebook, we're going to come after you" and I was like, "Okay, that didn't go well!" But I would say, that's the exception.

Most people, even if they come in with sort of a skepticism, they're like, "Well, this is just used for like money laundering and dark net markets and stuff" and we show them the data and we're like, "Actually the best data we have is that about 1% of cryptocurrency transactions are for illicit use and here's the independent third parties who have done that research. By the way, cash in the U.S is like 3%-4% apparently is illicit use, so this is just a tool. It's like the internet or something, it can be used by good people, it can be used by bad people, but most people in the world are good." So most people are open to those kinds of facts when we talk to them about that.

Peter McCormack: So it's just about educating people then?

Brian Armstrong: Yeah I think just generally by the way, there's another thing in human nature which is, I think people are just afraid of new things. I love reading history and if you go read about the Wright brothers or something, I always assumed that when they demonstrated the first powered flight of an airplane, everybody would have been like, "Wow, what's the potential, we can totally use this?" It turns out that was not the case. For five or six years, they were trying to get people to even, number one, believe that it was real and number two, see any kind of potential in it. They tried to sell that technology to the U.S. military and the U.S. government, everything.

They wrote back and were like, "We have no interest in flight as a military tool." So it was kind of amazing if you study history, a lot of things are underestimated. They look like a toy when they're first created and eventually they have this enormous potential, but for some reason, most people in the world, they're not oriented to being excited about new things, they have some kind of a fear about it.

Peter McCormack:        Yeah, I accept that. I'm a bit like that myself personally. I didn't understand Bitcoin when I first saw it, so it took me a few years anyway. Okay, so look, I've got a couple of your quotes here. I just want to go back to privacy. So you talked about, I've got a quote from you, "enabling convenient payment methods requires digital currency companies to comply with existing laws, we can't have one without the other.

I think it's short-sighted for privacy advocates to oppose embracing compliance as they may be the ones to stand the most to gain from it." So is this a reluctant acceptance that you have to work with regulators? Because if you go back to when you had that battle with the, was it with the IRS over the accounts with over 20,000 in transactions. You really fought that, you fought that in the courts, but it seems now more recently you have a more...

It feels like you have more of a direct relationship with regulators and it feels like you are a little bit, I don't know how to exactly put this, but it seems like you've become more friendly with them. I'm trying to understand, is it because it's too expensive to fight? Is it better for you as a company? I don't expect you to give me the answer I expect here, but do you perhaps you sometimes compromise what may be best for Bitcoiners for the benefit of Coinbase?

Brian Armstrong: Well so I'd say we're always trying to reach out to regulators proactively to work with them, so that's not new. That was true from the earliest days of Coinbase. It's still true today, but if we get something from a regulator, like a subpoena that we think crosses the line and doesn't follow the law, we're not afraid to push back on it. By the way, it's very expensive for us as a company to do that. Not just in terms of some potential reputational risk with them, but just mark the money for these lawyers and everything is kind of crazy for a small company. 

That IRS situation that you mentioned, that was an example where we got what I would characterize as like a Dragnet subpoena, where they said, "Hey, we need the information on all customers over this time period" and that's not the intention behind subpoenas the way the law is written. There needs to be some reasonable expectation that the law has been violated. You can't just go to Google and say, "Give me the data on all your customers."

So we challenged that with them and that was expensive and we got it dialled back from, it would have been many, many millions of customers data that they wanted initially. I think we got it back to like 14,000 or something, or 20,000, so was that like five people? That's what I wish it had been, but we've got some kind of negotiated settlement with them.

Peter McCormack: You saw that as a win.

Brian Armstrong: Well it was a lot better than millions of people let's put it that way, but was the outcome I wanted? No. So it depends what kind of judge you get. It depends on all kinds of factors. So anyway, I think as we get to be a bigger company, we're going to have more and more tough questions and tough decisions to make like that. If you look at the big tech companies, Google, Apple, Facebook, Amazon, whatever, they're just in non-stop congressional testimony, like all kinds of legal efforts and not just in the U.S., globally.

So in some ways it's a high quality problem to have. If you become a big enough company, you're going to have 30, 50, 100 ongoing inquiries, lawsuits, class action stuff at all times, that's just the society we live in. I remember there was this one entrepreneur I was talking to and they seemed down, you know? They were like, "Man, I'm so upset. This person is suing us." It was derailing him from focusing on progress in the business. I was like, "Somebody might make you feel better.

Let me call our Head of Legal right now" and I was like, "Just out of curiosity, how many ongoing inquiries in lawsuits do we have?" He was like, "About 30 or so." I was like, "Okay, great." So at a certain point, like this is just a cost of doing business. You have to employ a team of hundreds of lawyers. It's an unfortunate situation, but that's the world we live in if you want to make anything new.

Peter McCormack: 30 lawsuits ongoing at any time! What's the size of the legal team?

Brian Armstrong: In Coinbase, it's probably about 75, 80 or so right now.

Peter McCormack: Wow, damn! Okay, so I'm going to get back to back into the privacy thing. So one of the things that I think has been concerning recently, and that's really challenged my... Because I've always defended Coinbase when people have been very critical, because I've always felt like you've been a good on-ramp for people. It's an easy place to go and buy your first Bitcoin, if you want to buy Bitcoin. But as I've gone down the rabbit hole of Bitcoin, I've become more concerned about privacy and human rights, oppressive regimes and I've come to understand more about how important privacy is.

I feel like Coinbase has been putting itself at odds with the industry and working against the cultures and the cultural value of Bitcoin by almost lobbying for fewer freedoms or working for fewer freedoms and specifically, I'm going to talk about Coinbase Analytics now. I've read your tweet-storm, I can fully understand how you rationalized it, but I still I'm surprised you didn't realize the backlash you would get for that. Or perhaps you did? Maybe you're going to say "Pete, I knew I was going to get backlash, I didn't care", but it felt to me like it was a move you as a business didn't need to make. Did you expect a backlash?

Brian Armstrong: You're talking about launching the Coinbase Analytics products and actually having government people pay for it, you're talking about?

Peter McCormack: Yes.

Brian Armstrong: I recognize that that would probably not be popular to some people in the crypto community or the Bitcoin community, absolutely. You've probably read the tweet-storm, but I can talk a little bit about the rationale there.

Peter McCormack: Yeah, please.

Brian Armstrong: Look, obviously I'm a big supporter of privacy. I think what we've seen with encrypted messaging is going to happen in finance eventually and there's a whole bunch of cool efforts happening around there, including not just people storing their own cryptocurrency, but privacy coins and all that stuff. I think in the same way, the internet moved from HTTP to HTTPS with SSL and all that, default encryption is a new thing on the internet. That should be the default in finance too, I believe that.

Now Coinbase, I think our primary function, the real thing that people come to use us for is that they need to be able to buy crypto and sometimes sell it too and we get all the money in the world into crypto. So if we lose on that front, that's not good for Bitcoin. Now, I think once people have some Bitcoin they bought on Coinbase, if they want to take it off Coinbase and stew their own self custody, I think that's awesome. In fact, a lot of people probably should do that. I don't know if everybody should do that because there's some people who there's probably a higher risk of losing it and all that stuff, but that's kind of a moot point.

I think there's going to be a large group of people who should self custody, a large group of people who should try something else if they're not tech savvy enough and we're unopinionated on that. If they want to take it off of Coinbase, that's great. Now in terms of keeping that reliable bridge up between fiat and crypto, again, one of these unfortunate realities of the world, like we didn't create it, is that the AML regulations out there are increasing inmate partners and everybody, they're increasingly expecting blockchain analytics. It's important to note that watching analytics companies, there's a bunch of them out there, Chainalysis and others, and they are essentially selling data that's publicly available. It's just, they're packaging it up.

They're looking at all the public blockchains and they're saying, "What kind of patterns do we see?" And they're selling that. So that's what Coinbase Analytics is doing too. The reason we brought that in house is that we didn't want to share, as you know, we always try to avoid sharing customer data with third parties. So they were always, like with Chainalysis, we had to say, "Well, what do we have on this address?" And they were inferring from that, that was some information about what customer might behind out or something.

So we decided that we wanted to keep that functionality in house and there's also a market out there for these products. We pay a lot of money in taxes to the IRS, I don't want to just be doing free work for them. They can go out and buy these kinds of washing analytics, softwares anywhere they want. So I feel like we should get some money back for it if we have to do it as a cost of doing business.

Peter McCormack: Yeah, so this is where I'm going to want to dig in a little bit. So one of the things I'm struggling with here is that if these blockchain analytics companies are only using information, which is publicly available, then I don't understand what the issue with sharing information... What information would you be sharing with say Chainalysis, if they're only using publicly available information?

Brian Armstrong: Well, I don't want to speak for third party blockchain analytics companies, I'd rather just speak for Coinbase. So for Coinbase Analytics, it's only looking at publicly available data, for instance. It's not mixing any of the data between customers and what they're getting off blockchains.

Peter McCormack: Yeah, because this is the difficulty that people are going to really have with this is that, you're a supporter of privacy, you are a libertarian, you're a sponsor of Bitcoin, but at the same time, you're also providing tools, sending it to the government, which is an invasion of privacy.

Your reasoning is, one of your reasons is that you want to recover costs for doing that work. But I saw that the deals was $124,950 with the IRS and the secret service, it's $183,000 over four years and potentially a DA deal of $250,000. But in the grand scheme of things, the amount of revenue Coinbase is doing, this isn't really very much.

Brian Armstrong: Agreed.

Peter McCormack: I would have thought scrapping that would be a small price to pay for protecting the privacy of your customers and not essentially lubricating what the government wants to do. Do you see what I'm getting at?

Brian Armstrong: Yeah, well a couple thoughts on that. So yes, I agree. The amount of revenue is pretty negligible in the scheme of things. We thought about, even just, if there's some moral issue about charging money for it, we thought about what if we just did it for free, but apparently the government doesn't let you do that. I don't think that would actually even matter anyway. The main thing is that it's not lubricating anything in my mind because they have many options of where to get that information. There's three, four major blockchain analytics companies, they can even just, if they really wanted to build it themselves.

It's publicly available data, so they're going to do it one way or another. One of inside baseball things that people may not realize too, is that we get a lot of inquiries from various regulators and IRS and people like that and sometimes they'll say, "Hey, turn over all the information on this customer." Well, if we have a good relationship with them and they're using these tools that show publicly available data, we can tell them behind the scenes like, "This person isn't doing what you think they're doing" and they listen to us. So there's instances where we're actually able to protect customer information.

It's basically just like a goodwill thing. I know, you and I may feel like the world should be different in terms of privacy and everything, but the people who work at these agencies, obviously they have a different worldview and that's the law, so they're going to have to follow it and if we just tell them, "Hey, you know, F off! We don't want to help you", we're just going to develop a hostile relationship with them where they're just going to request even more customer data from us.

So it's one of these things just about is about life and a lot of life comes down to relationships, try to help people if you can, but we're going to push back if they try to go too far.

Peter McCormack: Yeah, so I read one quote about the software as well. It said "Coinbase Analytics data is fully sourced from online, publicly available data and does not include any personal identifying information for anyone regardless of whether or not they use Coinbase." So essentially there is very little difference between the data that you provide and someone like Chainalysis provides or Elliptic, I'm guessing. But has that code been publicly audited, would you allow external people to audit that code to verify that kind of statement because at least that might reassure people a little bit?

Brian Armstrong: For Coinbase Analytics?

Peter McCormack: Yeah.

Brian Armstrong: Interesting idea. I think, once companies get to a certain size, there's always this question about, are these things firewalled off. Like inside large financial service companies like Goldman Sachs they're always trying to figure out well, does the person who's trading on behalf of a client, is that information separate from the people who are trading corporate funds or something like that and you can imagine all kinds of issues. So let me look into that. I wouldn't be opposed to it. I'm not opposed to having... We have so many audits happening anyway, I'm happy to come and have another one. I don't know exactly what kind of firm would do that, but I'd be happy to look into. It

Peter McCormack: It might even just be a well-respected couple of independent Bitcoin developers, because what I'm thinking is if other exchanges can't get away from AML, KYC, there's no point giving Coinbase a hard time around this, because all exchanges are bound to these rules. If you're creating a software which does exactly the same as Chainalysis, which you would have to use if you weren't building your own, at least having that kind of publicly audited would be one step further.

I also think, I don't know if you've ever considered having like a public policy in terms of your work with agencies and including communications on your website, because there's certain people in the world, I guess who might be buying Bitcoin from you, who might not realize that the data may be being shared.

So specifically, I would think of perhaps American Venezuelans or American Iranians who might be using Bitcoin to send back to their family and if they're buying it from Coinbase and they're not aware that this is trackable, this could endanger their lives or certainly some of their freedoms or the freedoms of their families back home, if this is tracked. Have you ever considered the implications of how that data might be misused by oppressive regimes?

Brian Armstrong: Yeah, well first of all, I think that's probably a good idea. We have some internal policies about which clients we decide to work with and which ones we don't. There might be a way we can put out that more publicly, happy to look into that. And yes by the way, I do think the promise of an open financial system is that people everywhere in every country should have financial infrastructure and the ability to kind of participate in the global economy.

So obviously there's a number of rules in place for US companies around how they can move money to these sanctioned countries and I have kind of my own personal views on that, but that's the world we live in. I agree with you, I think there could be people who are caught off guard by that, and they're trying to just help their family in another country or something, and they accidentally run a foul of this. 

So I'll say here, if people are concerned about that and they need to use Coinbase as a place to buy cryptocurrency, well, they probably shouldn't do something that breaks the law because we are kind of a place where you're not going to be anonymous. But I'm hopeful that the cryptocurrency ecosystem more broadly and Bitcoin generally can help people like that, even if they can't do it through Coinbase, because to me, that's just an important part of freedom for everybody in the world.

Peter McCormack: Yeah, there was a quote by Andreas that really got me with this, he said, "You lose your privacy today and you're punished later." So one of the problems with privacy is that you lose your privacy every day, but you don't pay the price for that until perhaps a lot later and you can't immediately identify the moment at which your loss of privacy goes from something that is an inconvenience to a deadly risk. He specifically talked about countries that perhaps go from maybe a liberal democracy to something more authoritarian.

We've seen it in Hungary, we've seen it in Turkey and perhaps these pools of data could end up being used against you and I think that is the concern and therefore it feels like perhaps with someone like Coinbase, you've gone from somebody that supports privacy to perhaps just letting your guard down a little bit, maybe not fighting for the protection of privacy as much. I don't expect you to... Well no, you should answer that how you want.

Brian Armstrong: Yeah, I can totally understand that point of view. I have to say that where my head goes as an engineer is how can we make this a technology solution so that it just can't be traced? It's not like we have to rely on Coinbase to go fight every regulator out there and push back. The laws are going to change. We're trying to employ people in these are in countries. We're going to always have to make some decisions, a lot of tough decisions.

But if we can get to a world where it's HTTPS instead of HTTP, maybe that's with privacy coins, maybe something else, I feel like that is a technological solution, which you don't have to trust Coinbase at that point. It can't be tracked either way. In some ways that's the more crypto native solution, is I don't have to trust it. I can trust in the code not in the laws of man or something like that.

Peter McCormack: Yeah, that's fair. Perhaps, maybe if you sponsor a couple of developers, it could be those working on Bitcoin privacy. I think that would perhaps go down well.

Brian Armstrong: Yeah.

Peter McCormack: Interesting that you mentioned privacy coins, because obviously we've had with Zcash recently that a shielded transaction was traced. I think people kind of have weird issues with Zcash. Monero is one of those things that some maximalists will go, "Oh, I'm a maximalist, but I'm okay with Monero." Is there a reason you've never allowed for trading of Monero with Coinbase? Because obviously other exchanges do, Kraken does, Binance does, what's the reason perhaps? Because in some ways, in the world of Bitcoin versus alt coins, Monero's the most credible one that you could add to your listing.

Brian Armstrong: Yeah, well I would personally like to list it. This is an issue with regulators, where this is us going out and being an educational resource and I can tell you that where 6, 7, 8 years ago, we were going out there and telling them about Bitcoin. They were like, "Whoa, what is that? That's crazy and that's scary!" Now Bitcoin is like GE stock or something, it's like the most tried and true thing, "Oh yeah, we understand that."

But privacy coins is one of the next things on the horizon amongst many and they're very up in arms about that and they're very concerned about it. So we haven't been able to list that, at least in the way that we would like, because of those reasons. But I think with enough time and education, people will get comfortable with it and there'll be some even newer thing on the horizon that they're worried about. But privacy coins will become more mainstream over time, I hope and maybe privacy solutions on Bitcoin too.

Peter McCormack: What would the regulatory reason be for not listing Monero when say Kraken has? That's what I don't understand. Why can they do it and you can't? Because you're operating in the same jurisdiction.

Brian Armstrong: Yeah, so this gets again into inside baseball. So regulators are not going to come out and make an official law or declaration. Sometimes they'll say "This is allowed, this is not." A lot of it is behind the scenes conversations where they're kind of saying, "We very much don't think you should do this" and then we have the conversation, "Well, are you telling us that you don't like it? Or are you telling us that you are going to sue us if we do it?" Then we have to kind of go and do our own legal analysis and say, "If they do sue us, do we think we will win or not?" We're not opposed to engaging in some of that.

Financial service companies end up in lawsuits with regulators all the time and it's kind of just part of doing business. But it's expensive and it harms the relationship. So you need to kind of pick your battles. So it's a constant kind of negotiation along with the education, that's kind of saying, "Okay, this one we think is really important. You know what? I know that you're really unhappy with it, we respect that, but we are going to do it anyway because we believe it fits within the law and here's our legal analysis." Other times we say, "We don't know if this is a hill we want to die on" and we kind of have to make a lot of tough calls like that.

This is kind of the art of a lot of what legal and compliance profession does, is they go in there and they have to make risk based decisions all the time and I would say that for Coinbase, it probably it depends where you fall in the spectrum. Compared to Fidelity or something like that, we're way out here, we're taking way more risk.

But compared to some of the other exchanges out there that are probably being a bit more aggressive, we're probably taking a little bit more of a conservative approach and the calculus in my mind for that is that I want us to be a company that stands the test of time and doesn't get taken out by some kind of enforcement action or cascade of events or whatever. So I'm playing for the long term here. I know that this is going to take a long time to get people comfortable with this technology. I don't want to cut corners in the short term and certainly put the company or myself at risk.

Peter McCormack: No, it makes sense. It's your business you can make the decisions which suit you. You want to grow your business, I get it. It was just interesting to hear that. I've got a couple more tough questions and then we can get back onto some of the nicer ones. So I have to talk to you about Hacking Team. I know it's a tough one and you've taken a lot of, I think, well deserved criticism for this one.

This is a very hard one where I can't rationalize any of the decisions and mistakes, but it's good to get out in the open. Let's talk about what happened here. Obviously you wanted to buy some software and ended up purchasing Neutrino, which was obviously linked to the Hacking Team. Do you want to talk about what happened there? As candidly as you can.

Brian Armstrong: Yeah, sure. So I think that's definitely an area where we made a mistake. So like I talked about earlier, we wanted to build out some of our blockchain analytics capability in house and whenever you're doing that, you can kind of make a decision about do we want to build something ourselves? Do we want to try to buy something as a start to the team? Or invest in something maybe is a third option. So in this case, we have a team that does corporate development, M&A, they looked at the landscape and we did identify a couple of potential targets for acquisition. 

We went on and did some diligence on the team, but most of our diligence was around the technology itself and the team that we would get, like the engineers and things like that. What we failed to do was the diligence that was kind of more around our values and our culture and that kind of thing. So when we did make the acquisition, we started to see a lot of noise online about people saying, "Hey, do you know who you just acquired?" And that's where I started to look into it, along with the team, and we realized, okay, we might've hired some black hats here, or people who at least are grey and don't have... They probably drew the line where we would not have drawn the line about the kind of people they were working with.

So at that point, we kind of had to go make a tough decision and go talk with these people and say, "How much of this is true? What actually happened?" There was a lot of pressure I remember at that time, where people were saying, "You need to fire them! You need to fire them! You need to fire them!" Look, I was out of town, I needed to come back and fly back. I was like, "I'm not going to fire these people without talking to them first and actually understanding what really happened" because I think it's just kind of an unethical thing to like, because someone's angry on Twitter, you go and fire them without even talking to them. So we did go do some diligence, we talked to them and we said, "All right, this part, it's our mistake. We should have told you this before we acquired you."

We tried to create a win-win, just exit agreement with them that took our responsibility for it, "You can't work at Coinbase, but we do need to kind of pivot this team" and so we then had a tough job of sort of rebuilding that team with new people and getting it to a place where we had the technology working as described. So I think the main thing we learned from that is there's additional diligence steps we've got to do in M&A, and like a lot of things, like a lot of M&A deals, things are moving quick because of the competitive process. You've got to check everything as close as you can, but then you've got to make a decision. So we moved too quick on that one.

Peter McCormack: How involved is someone like yourself in the due diligence process? Is it just an external job and someone gives you a report? Are you yourself responsible for doing part of the due diligence?

Brian Armstrong: So at that size of company, I think we were probably doing, I don't know, we've probably done 5 or 6 M&A deals that year. At that size, I had not met with them prior to us signing the agreement, not personally at least. It wasn't until we realized there was a problem afterwards that I got involved. So we do a number of acquisitions every year and for every one that we do, we probably look at 10 deals. So there's a whole team that just does nothing but that and I typically don't meet with those teams before they come on board.

Peter McCormack: Right, okay, because this was the one... I mean there's a few things that make it really difficult to defend Coinbase at times and I think you see it in one way and people see it in another way. You're on the inside and people are on the outside. But this one is really, really tough to rationalize.

I'm just going to quote Reporters Without Borders, "For the first time compiled a list of five corporate enemies of the internet, five private sector companies that it regards as digital mercenaries because they sell products that are used by authoritarian governments to commit violations of human rights and freedom of information and almost certainly, Hacking Team, some of their work led to journalists being arrested and deaths of people."

Now you're not responsible for that. I'm not holding you responsible for that in any way at all, this is those people. But the important question to ask is that this information wasn't hard to find, it was a bit of Google work. I guess the question that I would put you and many would say, is that if your due diligence fails on this, how are people meant to trust you with the privacy related to their purchase of Bitcoin? I know that's a tough question, but I think it's one that needs asking.

Brian Armstrong: Yeah, it is a tough question. I'm not sure I have a great answer. This is an instance where we messed up, we should have done more diligence. Since that's happened, we've revamped our diligence process to include these reputational checks in the process. There's really no excuse I can give you. So all I can tell you is that we make mistakes as well and a lot of building a company is trying to learn from the mistakes and just get better over time.

Peter McCormack: Okay, I think that's fair. You can't do much more than apologize, but I'm glad you answered it. But I do have just another question relating to it. So you talked about spinning the team out and I don't know if you can, or if it's been publicly revealed who has been spun out and who's been left in, but I think people would want to know specifically. Can you talk about that?

Brian Armstrong: Yeah, so this was a tough decision, because I understand why people would want to know and there's also an issue of just, honestly, it's privacy and respect for these individual people. All kinds of situations that happen to the company where somebody may exit and I think it's just, nobody wants to work at a company where you throw people under the bus when they leave. So what I can tell you is that we met with everybody on the team and we said, "Okay, who was there a real question mark about, given this past, the examples that you just mentioned?"

Really, all of the key people where there was some kind of question mark or reputational or values issue, were exited from the company. There was a handful of engineers that were lower level folks that we felt like they were not the decision makers, they weren't as culpable and frankly we needed their help to transition some of the technology to actually be able to use it. So I feel good about the way we kind of cleanly exited that and did it with respect for those people, because it was our mistake. They were people who said, "Hey, I thought we were getting acquired and we were joining this company" and the minute later they're getting fired. That's a really bad experience for them too. So all around, we just messed up and we tried to do the best we could for everybody involved.

Peter McCormack: Great! I respect the fact that you can't talk about who it was, and who is still on the team and I guess I'd rather use this then as an opportunity to say, I would list four people, if any of those were still on the team and people knew about it, I think that would be a mistake. You don't have to answer this, but I would just say if Giancarlo Russo, Alberto Ornege, Marco Valleri or Lucas Guerra were still on the team, so I was going to ask if they are, as you can't answer it, because it becomes like a game of Sudoku.

So I've just kind of put it out there, that I think if any of those four were still in any way on the team, I would go and reconsider that and reflect on it. They might all be gone, which is great. But no, I appreciate you answering this and I will say to everyone listening to this, one of my things I said to the start with is that I don't want there to be any questions that I can't ask and you've agreed to do that, so I appreciate that. We're running out of time and I'm definitely going to want to do a follow up, because there's so much more I haven't talked to you about. But there's a couple of other things, let's finish on. So let's go, can you tell us anything about the IPO rumours?

Brian Armstrong: No, I can't really say anything about that and yeah, we don't want to comment on any rumours.

Peter McCormack: Okay, all right, we'll leave that one now! Okay, so a couple of other things then, just a couple of other questions people will probably want to ask. We're maybe heading to a another big bull run, there's been lots happening out there, what is Coinbase doing to prepare? Because you have one of those unique challenges of a different need of, say customer service and certain technology requirements for scaling based on very short periods of bull runs.

You had a lot of difficulty in 2017 and I think it's understandable. I think people don't understand how difficult it is to recruit the right people for customer service, onboard them and then deal with the fluctuations of staff requirements. So what did you learn about 2017? How are you taking that forward for scaling and will we ever get to a point where the Coinbase site doesn't go down when there's say, a big spike in buying and selling?

Brian Armstrong: Yeah, so 2017 was definitely a challenging time period for us and I think everybody in Bitcoin because of the scaling challenges. To give you a sense, I think trading volume grew 40x maybe or something like that, and it's kind of unprecedented. Most companies, even going through hyper-growth, they might grow 3x or 4x or 5x a year, I think Uber at its peak maybe grew 5x a year and at that time period, we grew 40x in a year!

So it was pretty harrowing there for a bit and what a lot of people I think, remember during that time period too, was it was really hard to get an answer from customer support because we had a 40x increase there as well.I remember one of the things we did was, in addition to bringing in a whole new leadership team, we spun up a new support facility. I think we hired 300 people in one quarter, something like that, contractors and they were all just trying to get trained up and it was madness.

So my hope is we don't go into anything quite that crazy again, but we have to be prepared if it does happen. So we have a project internally, it's called project Pamplona. Pamplona is the city in Spain where they do the running of the bulls.

Peter McCormack: The running of the bulls, yeah!

Brian Armstrong: So we're working a lot on scalability throughout the company in all aspects, both from an engineering architecture point of view and also from a customer support point of view and so we're trying to think about how to make those systems more horizontally scalable and remove single points of failure and how can we spin up an additional 500 customer support agents if we needed to in a very short time period.

So those are the kinds of things we're trying to do to prepare, if and when that happens, because the worst feeling in the world is the price starts moving all over the place and then people can't trade. That's the thing we've got to try to avoid.

Peter McCormack: Brilliant! All right Brian, we'll close out with a couple of other questions, what keeps you motivated? And do you want to do this forever or does there come a time where you think "I'll exit from Coinbase. I'll have earned my stripes. I can go and do something else" and what do you think you might go and do?

Brian Armstrong: Yeah, the thing that keeps me motivated is that I'm an engineer at heart, I love building things with technology. I think I'll always do that my whole life in some way, shape or form. Sometimes Coinbase is very stressful and I've had to always remind myself it's a marathon, not a sprint, and bring the executive team in who can help and take time off when you need it.

So I think my hope is that Coinbase over time can be a company that has repeatable innovation, it becomes a portfolio of products and we can keep launching new things and eventually, kind of like Alphabet or something, where we have a holding company that had a portfolio of a lot of different cool things we're building with technology in the world. That's my passion and I think Coinbase is going to be a really important vehicle to do that for many, many years to come and I hope I can be the CEO for decades or whatever, but hopefully I can also build other cool things on the side. I've helped create this charity, givecrypto.org, which is sending money to emerging markets.

There's a crypto start-up I'm trying to help on the side called Research Hub, which is kind of using crypto to sort of help bring the community together to accelerate scientific innovation or scientific research. So there are all kinds of things I'm interested in that I read a lot about on side and I hope that I can just be someone who helps accelerate the pace of progress and innovation in the world and I think financial services is one of the best ways to do that and economic freedom. So I'm excited to keep working on Coinbase!

Peter McCormack: Well, I want to thank you for coming on. I appreciate you giving me this time, being candid, being open to discuss anything. I think it's been useful! I hope you've enjoyed it. It's going to be tough, there's people who have already decided they won't like this interview and they're going to listen to it and they'll be very critical and there'll be people who I think are a little bit more open minded and I think there'll be people who just want to hear a little bit more from you and perhaps seeing a bit more of a closer relationship with the Coinbase community. 

I hope you do the externalized developer funding, I think that would be a great bit of goodwill and I hope you and I can keep this dialogue open. I've got more questions, I'd love to do this again sometime, but I just want to say thank you for coming on and doing this.

Brian Armstrong: Yeah, I'm happy to keep in touch and thank you for doing what you're doing too. You're helping get more information out there to the community and helping Bitcoin succeed, so I appreciate it!

Peter McCormack: Brilliant! Okay, well take care Brian, speak to you soon.

Brian Armstrong: Likewise, cheers!