Sep 12, 2023

Coinbase Prime is debuting an institutional-grade Web3 Wallet, which includes features like managing NFT collections and voting on DAO governance.

Video transcript

Coin base prime is debuting an institutional grade web three wallet which includes features like managing NFT collections and voting on Dow governance. Joining us now to discuss is Coinbase is Vice President of Institutional Sales and Trading Kevin Johnson. Welcome to the show. Kevin. Thanks for having me. Thanks for being here. All right, let's talk about uh this web three wallet. Uh Why develop this? And is it a wallet or is it a wallet as a service? Yeah, that's a great question. So our prime web three wallet is really giving institutions a way for them to interact with on chain applications. As you mentioned, they're able to store things like tokens and NFTS, they're able to interact with D I with, with Dow vote on governance, really anything they need to do on chain. And it does that in a way that gives them self custody of their assets, but it goes beyond what normal wallets do because it actually integrates with the safety and security of their existing prime account. So if they have a multi user set up with different types of permissions and and configurations for how their users come together to approve transactions. All of those can be applied to that new web three wallet to ensure that that safety applies to their direct on chain transactions as well. So I, I thought crypto was supposed to democratize finance. How come institutions get a better wallet? Than, than me. I'm, I'm a poor schlub. I trade currencies. Why do the big boys get? Isn't this kind of like, didn't we occupy Wall Street for something? Come on. Well, we, we, we actually take a lot of the great technology that we use in our individual retail wallet that we provide to all of our coin based customers as well as anybody who wants to have access to that wallet. And we've just built on top of that adding the features that institutions really require. You know, if you have more than one person on your team or perhaps you have a, a complicated set up or one set of people need to propose transactions and other need need to approve them. This wallet allows you to do that with not only your custodial assets on prime as you can today, but now with all of your on chain assets, including things like NFTS or interacting with any type of uh smart contract on the chain. So really, we're just giving the institutions the features that they require to participate in on chain applications. So uh you know what, what, what qualifies as an institution that would get it. I mean, like uh being institutionalized, doesn't cut it. I assume. Uh what, what exactly is it that, that allows this to happen? Like how, how much money do I have to, how rich do I have to be? So, at coin based Prime, we focus on institutions that require multi user setups. They're almost always uh some kind of entity that we onboard. Uh they often are trading firms, hedge funds, venture capital firms, family offices, uh or corporate more and more we're seeing corporations uh come into coin based prime. So it's really people that have the specialized use cases that either require uh you know, larger amounts of assets in cold storage, smart order routing for their trading or now access to, you know, multi user on chain access. What kind of demand were you seeing for a product like this from institutions? I know in the blog, it says this product was born out of demand. But as we saw with the markets, the markets are kind of in a slump NFT trading volume is at all. Well, not all time lows but year long lows. Um what what are institutions really asking for? Yeah, we see a lot of demand for this kind of a product from trading firms that are interacting directly with D I applications. But as I mentioned before, more and more, we're seeing corporations who want to participate on chain in some way, whether that's by doing an NFT drop or in some cases, even voting, uh, voting in s or maybe it's holding an ENS for their brand. There's more and more firms that know they want to participate on chain, uh, but they need a safe way to do that. You know, when we talk to corporate treasurers or, you know, the lawyers that work for these firms, they're very concerned about not only the safety and security of their assets, but ensuring that they have the proper controls over who can access and who can make decisions with those assets. And so, you know, we've seen that demand from clients. We knew that this was critical in order to bring them on chain and, and now they have that product through, through coin based prime. So can you explain what this audit trail thing is? I assume that's not auditing tether because they don't like audits. But uh what kind of, what is this audit trail, uh uh feature that you offer on, uh, on, on Coin based Prime? Yeah. So it's really important for any corporation of any kind to have a record of the money they spend, uh, you know, what they buy, what they sell. If they're, you know, uh you know, for sure if they're a trading firm, they need to have records of everything that happens that goes into their, uh you know, their internal audits, it goes into their corporate filings. Um, you know, these are so in any kind of application they use needs to produce that kind of data in order for them to be able to use it. And what we saw early on was when these tools weren't available to corporations and institutions, they just weren't able to participate in, in the crypto economy. But now that coin based prime has brought those tools to their trading and custody and now to their direct on chain uh activities, we think more and more corporations will be able to come into this industry. What are your institutional clients? What are these corporations asking you about the crypto space right now, especially since the SEC has brought cases against Coinbase and Binance, there's been a recent um enforcement action against an NFT firm. What are, what are the questions you're being asked? I think people are asking us, you know, what is the safe and secure and regulated way to participate in this industry? And when they look around, they see that coin based prime is really able to provide them those tools that allow them to comply with, not only their internal requirements, but you know, any regulations that are imposed with whatever jurisdiction that they're operating in. Um you know, they ask all the right questions. They want to follow the rules, they want to be able to do things the right way. Um And they really need to partner with a provider that they trust uh and that can provide those tools to them. So we saw a bunch of uh crypto lenders get uh imploded uh if you will uh over the past uh few months, if not more. Um and, and, and, and, you know, including some that are owned by DC G our parent company. Uh So what exactly is it that uh you know, what kind of demand are you, you're seeing specifically, what kind of people, what kind of institutions are doing these kind of transactions that are requiring to borrow crypto? You know, we talk about institutions, institutions in crypto kind of isn't exactly what we think of as institutions in traditional finance. So can you explain the difference as to what you're defining institutions as uh at coin based and coin based prime and why? Uh and how it differs from traditional finance institutions, let's say percentage makeup, if you will uh the type of customers that you're dealing with that are dealing with borrowing and and how they're in need of a lender uh post block. So for many years now, we've seen uh adventurous traditional hedge funds move into this asset class as well as crypto native hedge funds who you know, were created uh with the purpose of specifically trading crypto assets. In, in both of those cases, those firms have a demand uh to borrow assets either to create leverage or to be able to put on short positions. You know, it's a normal part of any kind of sophisticated trading strategy. Uh larger institutional clients have been a little slower to come to this space. But as you've seen over the last uh couple of months, more and more are looking at this space and when they come into the space, they ask all the right questions around, you know, how can I safely interact with the lending counter party? Um How can I do that in a regulated way? And what kind of tools do I have available for uh to me in order to do that safely? Um So as those tools get provided and as they get answers to those questions, they can move into the space and we are seeing that continue to happen. Kevin, congratulations on the launch. We're gonna have to leave the conversation there. Thanks so much for joining us this morning. Thanks a lot for having me. That was Queen be Vice President of Institutional Sales and Trading. Kevin Johnson.

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