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Coinbase Summit Highlights Recap: This is the first institutional cycle, RWA is a bad term

BlockBeats2024/06/16 03:37
By:BlockBeats
Original author: Yano, Blockworks
Original translation: Ismay, BlockBeats

Editor's note: At the Coinbase STATE OF CRYPTO SUMMIT, Blockworks founder Yano attended the meeting and shared some meeting notes on his social media. These financial OGs discussed topics including intergenerational wealth transfer, economic freedom, and the surge in institutional investment. In addition, the regulatory group analyzed the challenges and improvement directions of current regulations and emphasized the importance of interaction with the industry. The consumer group looked forward to the broad application prospects of cryptocurrencies. Special guest Mark Cuban spoke frankly about the unique regulatory dilemma facing US crypto companies. The specific content is compiled as follows:


After a day at Coinbase's Crypto Summit, many pension funds, endowment funds, brokerage firms, asset management companies, banks, etc. attended the event and left feeling very optimistic.


Took notes during some of the talks, sharing them here:


Brett Tejpaul (Head of Institutional Division) opened


· There is a massive generational wealth transfer going on ($70 trillion) from the old to the young. 90% of the young are disillusioned with the financial system.


· One third of the top 100 hedge funds in the world have joined Coinbase.


First panel with Alesia Haas (CFO of Coinbase) and Samara Cohen (CIO of ETF/Index Investing at Blackrock)


Great panel, probably my favorite. Took lots of notes.


Samara:


· Five years ago, they were recommended to do a Bitcoin ETF, and they said it was not needed. Now institutional demand for Bitcoin forces them to make this product.


· Today, 80% of their Bitcoin ETF is purchased by self-directed investors through self-directed brokerage accounts...but there is still a lot of institutional capital pouring in.


· Financial advisors remain cautious, but that’s their job.


· Can’t comment on Ethereum ETF as there are active applications.


· Also excited about tokenization…demand for tokenized funds (tokenized short-term Treasury funds) comes from crypto-native companies doing treasury management.


· We saw digitization of every asset. Now we will see tokenization of every asset, it’s obvious.


· Tokenized Treasuries should not compete with stablecoins. Stablecoins are for payments. Money market funds are a liquid investment strategy.


· A few years ago we thought private permissioned blockchains would lead, we now realize public blockchains are better so we don’t fragment liquidity.


· Cryptocurrencies have a branding problem. RWAs mean something completely different in the banking world, and also imply that cryptocurrencies are not real world assets, and the term “RWA” needs to be stopped.


Alesia:


· 40% of institutional clients adopted 3+ products in Q1.


· $12B in net inflows in 3 months, fastest growth in history.


· Both Coinbase and Blackrock have many clients waiting for regulatory clarity.


· Is Coinbase for Trump? We are here to support the 52 million Americans who hold crypto and can vote how they wish.


Regulatory Panel


@iampaulgrewal


A lot of Coinbase activity has been through litigation, and today finally saw some progress in Congress.


Simon O’Brien, Abu Dhabi Global Market (ADGM)


· We came into this market in 2018/2019 and our investor community would be angry if we got it wrong. We published the rules and not much has changed since then. It’s important for regulators not to always change the rules but to keep improving them.


· There are risks for regulators who change the rules every 12 months.


· The only way to make good regulation is to engage with the industry.


· The mistake regulators make is to make regulations but not have a good operating team and adequate funding.


@joshualipsky


· 4 billion people are heading into election season.


· Crypto is high on the agenda and will stay high.


· There is a new awareness that crypto will become part of the global economy.


Lisa Cameron


· Crypto helps those left behind by the financial system and is more important to politicians now than ever before.


Great conversation with @brian_armstrong and @CathieDWood


· This is the biggest economic revolution of my lifetime. It’s as big as AI, and there may be a convergence of crypto and AI.


· Economic freedom is fundamental to global progress. We want to increase economic freedom around the world.


· Our biggest obstacle is regulatory clarity.


Brian just got back from Washington, DC: Senate is keen to move forward on crypto legislation.


· Power struggle between CFTC and SEC, we believe investment contracts are securities and tokens are commodities. Congress needs to step in and act at this point.


· Retail led the industry, but now institutions are joining in.


· 56% of Fortune 500 companies are working on on-chain projects.


· Regulatory clarity will drive institutional investment from 1-2% to 5-10%.


· Cathie says ETF flows are mostly from retail as platforms are not approved yet (interestingly, this is the same as Blackrock).


· We haven’t seen real demand for ETFs yet as Morgan Stanley, UBS, etc. haven’t started pushing.


· Brian says the most exciting thing about the company is Base. Also exciting: derivatives and our smart wallet (easier to get started).


· Cryptocurrencies started as an asset class and are now moving to real-world utility.


· CEXs will be nice for a while, but they are a moment in time. Ultimately it will be one-to-one, no intermediaries, all on-chain.


· Coinbase is moving our products on-chain.


· Payments are like water, they flow to the path of least resistance.


· We want to be adjusted EBITDA positive in any market, which means moving from transaction fees to subscriptions and services, which are more predictable.


· We are investing in innovation as we reduce costs.


· The last big piece of the puzzle is international expansion. 17% of revenue today. We picked 10 markets. “Go deep in the market.”


· International markets grew faster than the US in Q1.


· Then we have our "broad" strategy with self-hosted wallets.


· There is a group of people growing up today who will never have a bank account, their phone is their wallet.


· Coinbase as a company will not disrupt big companies like Visa. But the protocols we build and contribute to can do that.


Payments Panel Discussion


With St. Jude Hospital, PayPal, EY, Google, and OpenAI. Didn't take notes, sorry.


I had lunch with @RichJWidmann though and it was astounding, Google is taking crypto very seriously, something I feel like everyone is missing.


CIO Perspective


Another Contender for Best Panel


Sebastian (Coinbase Asset Management)


Coinbase: This is the first true institutional cycle


· As an industry we’ve already invested $50 billion in venture capital…hedge funds are next


· There is still no uniform valuation standard due to lack of regulatory standards. It’s still a very inefficient market so conversations about valuation are tough


· RWA is a terrible term


· Eventually you will have 100% exposure to crypto assets because crypto rails will operate underneath all assets


· Every pension has a DAWG (Digital Asset Working Group) that didn’t work well before and this is a second chance. It hasn’t gotten the green light for a second chance, but it’s close. People won’t be doing it in 2024, everyone will be doing it in 2025


Matt Halstead (Teachers Retirement System of Texas)


· There are many aspects to crypto, it’s just the format and standard in which transactions circulate


· Crypto is a fusion of communication networks and financial networks


· Allocating money to emerging technologies is not controversial, but people have concerns about crypto because of the brand


· The conversation about whether crypto will go to zero is not the right question. The question is if and when this happens, how much liquidity there is and how quickly it can happen. I have 10x upside potential, I can bet massively, and my downside is 25-50%. There is no such opportunity in the world. Institutions will realize this. This is a once in a lifetime trade


· Tokens are lumped in with cryptocurrencies, which are lumped in with Bitcoin, and people don’t like that because the industry has very bad branding


· The biggest challenge is that institutions divide their funds according to outdated advisors and portfolio structures from years ago


· The discussion about people using cryptocurrencies misses the point. All of this will be handled by AI agents. We’re building for a world we can’t predict


· 5% adoption in 5 years, 100% adoption in the long term


Blue Macellari (T Rowe Price)


· Bitcoin was the first thing people were exposed to, but it was also the hardest to understand, so we started with the hardest


· ETFs brought the conversation mainstream


· If you’re not buying crypto, you’re shorting the market


· The conversation has shifted from “why are we doing this” to “how are we doing this”


· Does a 1% allocation make sense? Not really. That’s an arbitrary number. It should be more than 1%. Maybe 3, maybe more. It’s a psychological shift that allows people to adjust, it’s a bit of a paradigm shift


· If someone says blockchain is great but the tokens are a scam, that’s cognitive dissonance


· We still have people internally saying it’s just a Ponzi scheme or just for illegal activities. Then there are people saying it’s interesting but there’s no cash flow so it doesn’t fit into a traditional framework


· When Soros shorted the pound and it collapsed, did we sit there and say that was the end of the pound? Of course not


@Matt_Hougan


· Institutions were over-allocated to risk and now the focus is on liquid assets


· Institutions are actually shorting cryptocurrencies because they can afford to buy, but they’re not taking action


· On how to value Bitcoin: Bitcoin provides a service. Wealth storage services that don’t rely on governments or existing institutions. No different than any company. It’s a service. The more people who need it, the more valuable it is


· We do 20k meetings a year. Our most used slide was “crypto not blockchain” and it hasn’t been used in years, that’s progress


· We used to talk about 1% allocations, now we’re talking about 3-5%


· Many people start in VC because of career risk or they don’t know how to do due diligence on tokens, illiquid and liquid returns will start to diverge


Consumer Panel


@benleventhal + @sid_coelho + @js_horne + @lay2000lbs


Didn’t take notes because I was too excited about Pleasr’s album launch, but this panel was great.


Special Guest Mark Cuban


@mcuban tells attendees at @coinbase's State of Crypto Summit that he's telling senators, governors, and representatives that the problem for US crypto companies is the @SECGov registration process.


Cuban calls it "a uniquely American @GaryGensler problem."


Last panel: @WileyNickel and @faryarshirzad


Only caught the end so no notes.


The End


It looks doom and gloom (on social media) and the mood is low. But I tell you, if you were at this event, you would realize that this is the time to regroup again and Phase 3 is just around the corner.


Thank you so much @CoinbaseInsto for hosting this great event. Hopefully my notes aren't too bad :)


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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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