Jan 11, 2024

The U.S. Securities and Exchange Commission (SEC) approved 11 spot bitcoin ETFs on Wednesday with Coinbase serving as custodian for the majority of issuers.

Video transcript

This spot. Bitcoin ETF update is presented by Gray Scale. The world's largest crypto asset manager, the SEC approved 11 spot Bitcoin ETF S yesterday with Coinbase serving as custodian for the majority of issuers. Joining me now to discuss is Coinbase Chief Policy Officer Faryar Shirzad Faryar. Welcome to the show. Thanks Jan. Thanks for having me on. I think congratulations is in order are folks popping champagne bottles over at Coinbase? How's everyone feeling this morning? We're obviously really happy about the decision yesterday. It was a long time in coming, probably took a lot longer than it needed to, but we're really excited about a whole new class of investors coming into the crypto markets. Uh And the fact that we've taken a small step towards regulatory clarity and um we're glad to be a part of history now, like I mentioned, Coinbase is a major part of these approvals serving as custodian for the majority of issuers. Let's just zoom out a little bit for our audience. What does it mean to be a custodian? So an ETF is a um exchange traded product that's offered uh under the auspices of the securities regulations and basically the way it works is that there's an under lier, in this case, Bitcoin, that the consumer buys when they buy an ETF. And so that Bitcoin that, uh, is issued in an ETF is, has to be held somewhere and it's held by a custodian and we're the custodian for the, uh, that the overwhelming majority of the, uh, proved ETF S that are now out, out in the market. And so we play an important role in the facilitation of this new market. And uh we're pleased to, to be a part of that. I'm not gonna ask you to pick any favorites, but I kind of am do you think any of these issuers have a competitive advantage over the other? I think the consumer is gonna ultimately decide who's got the competitive advantage. We're just proud to be a part of it. And uh we look forward to seeing how the market reacts and how consumers react. Now, I want to talk about the price action we saw this morning, you know, immediately when we got the approval news yesterday, Bitcoin didn't really do anything. We started to see a little rally with Ether this morning when I checked, uh Bitcoin was up just about 6%. Ether up almost 12%. Are you surprised at the price action this morning? I'll leave it to others to comment on how the markets are moving. But there's been a lot of anticipation that's been priced into the markets for this approval uh to happen. Uh I guess there's some people that are looking at whether Ether with also potentially is in line for an ETF uh We'll see whether that happens or not. I don't really have a view one way or the other, but uh the attention and the excitement is great for all of us and we're proud to be a part of it. All right. Some more news that came out with the approval of these ETF S was how the S ECs decision was split. The approval was a 3 to 2 vote with Gary Gansler joining Commissioner Ester Purse and Mark Gua in the Yes camp. While commissioners Caroline Crenshaw and Jamie Lizarraga voted against it. What do you make of that? Does that tell you anything about how the regulator is? Uh viewing Bitcoin is viewing crypto heading into 2024? Uh Just the fact that it's taken as long as it has is probably tells you a lot of what we uh saw in terms of the breakdown of the vote. Uh the US Court of Appeals for the DC Circuit pretty definitively went through all the reasons why the SEC had previously denied Grays Scale's application. And it was one of the most comprehensive and detailed um recitations of, of, of the courts going through why the an agency's decision was in this case, arbitrary capricious and an abuse of power. Um So it's hard for me to see how, in light of how carefully the courts went through. Any reasoning that the SEC may have had to deny the applications and refuted every bit of it, uh, that you still had a couple of commissioners who, uh, found some basis to deny the applications. But in the end, you know, we've gotten the ETF S through and, uh, I think that's what ultimately matters if we zoom out a bit again now and just look at 2024 in your view, what has to happen in the United States when it comes to crypto policy? Well, as big a deal as the decision was yesterday, we're still where we always were, which is, we need Congress to act. We need a federal framework for the trading of both crypto commodities and cryptos securities. We also need a framework around stable coin issuance. Um I think we'll take some important steps in 2024. So I'm excited about that. Congress um has Democrats and Republicans conservative, uh progressive, liberal, all sort of working with uncommon cause to get legislation done. We have big votes that came out of the house ag and Financial Services Committee. We'll probably see a floor vote in the first quarter of this year and get uh the legis the fit 21 legislation uh out of the house. And then we'll see what happens after that. Legislation is always hard. It's always hard to predict what exactly will happen. But I think we'll see a big important steps this year. Uh, and we're gonna do everything we can to, to make sure that the 52 million Americans who, um, own crypto are part of the, part of the debate in Washington. Let's talk about those 52 million Americans. You know, we talk about policy often in this industry. But if we're to think about the people who are using Coinbase or using other exchanges who are trading crypto on a retail level, how important is policy actually to them in the US? Oh, it's really important, you know, in the end of the day, the core of what we want with policy is consumer protection. You want a framework that essentially provides the rules of the road in a consistent manner across the entire United States. And we've seen that the failure of the SEC in particular to provide clarity to date has created a real vulnerability and you've had a lot of Americans access international exchanges that don't operate under any kind of clear legal requirement. Um And then all the problems that uh you know came out from that. And so I just think the need to address uh the lack of regulatory clarity to provide consumer protection uh has been vivid all along. There's nothing about yesterday's decision that changes that. Uh and I think once we uh we get it, we'll finally catch up to the rest of the G 20 economies who virtually without any exception, have taken huge steps forward in terms of providing clarity and integrating crypto into their markets and the United States will catch up. But it's just a matter of uh ho hopefully sooner rather than later, we have an election coming up this year. Do you think crypto is going to play a role in that election or an important role? Rather, I think it'll, it'll play a role. Uh you know, the last uh couple of elections were decided by raised within margins in a handful of states. Uh Right now, we have about 250,000 Americans who raised their hands to be crypto advocates uh and signed on to with stand with crypto, the independent grassroots organization given that in a lot of states, the margin of victory was 5000 votes, 6000 votes, 10,000 votes. Uh maybe a bit more than that, having 250,000 Americans. Um uh sign up to be ready to be advocates, probably tens of thousands, maybe 100 thousands more will join between now and the November election. Uh We're already seeing a lot of activity in places like Ohio, Montana, Pennsylvania, Georgia. Um I think crypto will be a factor and will be a decisive factor in some races. And, and I think that's exciting to see and uh and probably overdue far, you said a little bit earlier that we need congress to act. Do you think that they were going to act before the election or do you think that this is something that is going to take a much longer time? And the action can only really happen after the election is over. Well, you never know with, it's very hard to do anything. It's hard to pick a speaker. It's hard to pass a budget, you know, all the, it's hard to raise the limit. So by definition is a very hard thing to do. That's part of how the constitution was um or organized was to promote stability and resist change. All that said, um I think we'll take important steps. The fact that two committees passed crypto legislation by bipartisan majorities is a big, big deal and it's gonna be with us uh in terms of shaping future policy. I think once the House has a vote, which I think again will happen in the first quarter. Uh It'll be another very big important step. Each of these steps are indelible. They leave a mark on crypto policy and bring more and more policymakers uh onto the path towards constructive regulation. And I think that's great news and uh we're proud to be a part of that. Are you able to share any updates on the S ECs case against Coinbase? Now, the hearing on our motion to dismiss us next week, we'll see uh we'll see what happens. Uh We have an extraordinary legal team uh at Coinbase. Uh uh The be the best in the business. Um It's all represent us well and uh you know, we'll see what happens. Uh We'll see what happens next week. OK? And just before we wrap it is ETF launch day, what is this ETF approval mean for the industry moving forward? Well, that means two big things. One, it means that you'll have hundreds of thousands and billions of dollars, maybe more than that coming into the crypto markets, which is a big deal. Uh It also means a step towards regulatory clarity. Uh Now, you know, we still need legislation, but we took a big important step and that's great for the industry and it's even better for consumers. And uh I think that's great news. Ok, we're going to have to leave it there. Faryar. Thanks so much for joining first mover and congratulations again. Great. Thank you Chan. Thanks for having me on. That was coin based Chief Policy Officer Faryar Shirzad.

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