 All right. Hi. Sit here. Sure. All right. Sam, welcome to Japan. Thank you very much. When did you fly in? Just a few days ago. All right, all right. And I heard that you're going to enjoy the cherry blossoms. That's the hope. We need the weather to warm up a little bit. All right. So first and foremost, everybody, thank you so much for coming to Slush Tokyo. I hope you're having a great time. We're all enjoying it. So I think, hey, I think we only have 18, 17 minutes, so maybe we should start first introducing ourselves. You want to do a quick intro of yourself first? Sure. Yeah. My name is Sam Rosenblum. I'm director of global business development at a company called Coinbase, or digital currency platform in exchange, the largest institutional holder of digital currency today with over a billion dollars in assets under management. And today we're in 33 countries and very excited to add Japan to that list later this year. Wonderful. So to an extent, we're in similar industries. So my name is Mike Kiamori. I'm the co-founder of Coin. We've been around for about three and a half years. Not in 33 countries, but we're in seven countries. We do about 10 currency pairs. And I think one thing that's maybe a little different from Coinbase, which is one of the largest in the world as well, is we started out in Singapore, which is just on the equator. So it's neither north or south hemisphere, but we relocated to Japan. So the reason why is starting April 1st, Japan is going to be the first nationwide regulated nation for cryptocurrencies. So unless you are a regulated approved exchange, you will not be able to offer cryptocurrency exchange services to Japanese customers. And existing exchanges like ourselves, we have a six month grace period. So within that six months, we need to comply, or else we won't be able to offer it going forward. So the amazing thing is when you just look at it from a global perspective, Japan, which normally is a laggard on a lot of innovation and fintech, is actually one of the more progressive countries in the world when you come to cryptocurrencies. But I'm very keen to understand how things are in the U.S. since you guys have been one of the pioneers in this space in the U.S. And I think you guys started more from a payment to a wallet side. So if you can talk a little bit of what things are going on in the U.S., I think everybody is keen to understand. Absolutely. So yes, Coinbase is based in San Francisco, California. The U.S. was our first market. It's our home-based market today. I think we do like to think of ourselves as somewhat of pioneers for the U.S. market in the digital currency space. We have about 6 million users today, a near majority of which are from the U.S., and of course a very large amount of our trading volume takes place in the U.S. with the dollar and Bitcoin and dollar Ether pair. So one area that the U.S. really stands out in my mind in this industry is the amount of regulation from so early on. A lot of competitors of ours that operate in other markets have arbitrage some of the lack of regulation, and that's something that certainly in the U.S., now in Japan, will no longer be an opportunity. So I think for exchanges like ours that have very much emphasized the importance of regulation, consumer protection, anti-money laundering, it will be difficult for some of our other peer companies to try to continue operating without a lot more resource intensiveness of their business. So for our business today, we've seen again about half of our customer base is in the U.S., majority of our trading volume is there, and we've seen about 3X growth for each of the past three years in both our customer base and trading volume and then of course revenue as well. So from a regulatory perspective, is it all set? So for example, can you operate in all 50 states? Can you provide a full line of services? Is that possible right now or still not? It's a great question. So in the U.S., financial regulation takes place both on the federal and state basis. Every single one of the 50 states in the U.S. has their own state banking department. They issue these things called money transmission licenses, and without those, it's impossible to operate a regulatory-compliant exchange even if you've registered with the federal regulator, which is the U.S. Department of Treasury. So it's a lot of work to be compliant both in the federal and state-by-state, 50 times over. So this is something that has become a very core competency of Coinbase. As a company, we're about 140 employees. The largest group of those are engineers, and the second largest group are lawyers and compliance experts. So it's a very important part of operating and exchange in the U.S. You're also well-funded as well, right? Yes, yes. We've been very fortunate. We've raised about $120 million to date. Some of our investors include Andreessen Horowitz, Union Square Ventures, also financial institutions, even those here in Japan like Bank of Tokyo Mitsubishi, Mitsubishi Financial Group. So we've been fortunate in having the resources that have enabled us to hire all of those engineers and lawyers and compliance experts. Yeah, so I think the big difference between Japan and the U.S. is, obviously, as you mentioned, in the U.S. you have federal. So this is nationwide, and then you go state-by-state. So that's very different in Japan, where you go to the Japan FSA, and when you're registered, you're done, right? And we can offer both spot and also margin, although there's a certain amount of limitations. Right now, can you offer both of those in the U.S.? Yes. Or only on a limited basis? Yes, exactly. So in the U.S. today, for basic, essentially, retail market price trading, that is one regulatory body on the federal side as well as many on the state, but for more complex features like margin trading, this is when you have securities law and all kinds of additional both state and federal laws come into play. So Coinbase and, more specifically, our institutional platform, GDAX, actually just launched margin trading a couple of weeks ago. And in order to do this in a regulatory compliant manner in the U.S., you have to only service customers that meet certain criteria. And so this is where the U.S. Securities Exchange Commission has not yet led very direct guidance for virtual currency exchangers, and we are being very conservative in our approach. Of course, of course. Do you see an uptake in volume? Do you see a lot of people saying, we were waiting for you, or how is it? Yes, how is it? Yes, definitely. So we did see reasonable uptake in volume, somewhere between 5% and 10%, given the very small pool of users that we're enabling to do this margin trading. Obviously, we'll scale that up over time and we'll allocate more capital to it over time. We're actually lending from our own equity dollars for this product. Of course, of course. That's very interesting because when you look at the forex industry, especially in Japan where retail forex is one of the largest in the world, there's a word called Mrs Watanabe, right, where the Japanese retail investors have influence over the global price of forex. But in our platform, despite offering full CFDs and margin trading, it's actually only about 30% of our trading volume. So it's still very much a spot-based trading. So maybe after April when you become registered and people feel more confident and safe about having their money and these exchanges, maybe it's going to change. But obviously, I think you guys started out more from a payments and a wallet perspective, but now you've shifted more towards an exchange. What was the background or reason behind that? We think that there will be a few distinct phases of development for our industry. Obviously companies like ours have been around for a few years with a technology that's only existed for eight years. We're the old timers of the industry. I think for our company's strategy and how that's evolved over time, we've tried to fill the needs that we see in the industry specifically from the infrastructure perspective. So when we first started, our first offering was a wallet and this was because there was a lack of consumer ability to securely store private key. You have the horror stories of people that bought Bitcoin when it was worth a penny per coin and then they wrote their private key on a piece of paper that got thrown out with the trash. So the wallet seemed to be the fundamental need initially. Over time we grew from there to the retail brokerage and now into the institutional exchange. All for the same story which is to fill the infrastructure need and ultimately I think we would agree the addressable market of digital currency will continue to grow by orders of magnitude and there will continue to be new needs from the infrastructure perspective and we will continue to grow alongside that. So here's a question to the audience who took the effort to be here right now. How many people have Bitcoin? Oh, I see a lot on the right side. Good, good, good. Excellent. I hope you guys bought it like maybe five, six years ago, then you're all millionaires. But that's wonderful, right? So do you guys buy it through exchanges? Is that how you guys buy it? Any users of coin or Coinbase in the audience. Ooh, I hope it's it. Do you offer in Japan for Japanese users? Not in Japan. I don't think these people are necessarily from Japan. Oh, they're not Japanese, they're not Japanese. No, but I think what's going to be, when you think about it, right, it's amazing where when you look at something like a store of value, right, it used to be something where it should be difficult to move, difficult to steal, difficult to like change or manipulate. But these are all becoming digital. It's becoming, when Bitcoin first started, there was a big hype in Silicon Valley talking about this is the future of money, the internet of money, and it's becoming, it's becoming an overlay. It's becoming cashless, borderless, right, branchless, and it's becoming a lot more digital. But what's amazing is when you think about your hard-earned cash, right, putting it in a, you trust an exchange that's not, still not regulated, your hard-earned cash in a non-regulated exchange where there's incidents like Mt. Gox, incidents like Bitfinex, and you still take that risk to buy Bitcoin, right? So I think those early days, the wild, wild West days are now over, right? It was a little bit, it started early in the U.S. where there was already regulation both in the state and the federal side. And now in Japan, it's going to start this Saturday. So the good thing is now your assets are going to be segregated. Your assets are going to be protected. So it's going to be important because in Japan there's already, I would say there's close to 20 exchanges, right? And it's going to be difficult for them to, all of them to comply and be registered. So one of the things I advise the audience is make sure that after this regulation takes effect that you select an exchange that is regulated, approved, and that's authorized in Japan. It will be the Japanese government because all, even if you're a foreigner, if you live in Japan, if you're a resident of Japan, you need to go and only buy through a regulated exchange. So things are, I think the market is going to evolve. Now this allows a lot of the traditional financial institutions to come in. And it's going to be a market that I think it's going to explode, right? So how do you look at it where you have a lot of financial institutions as investors, MUFJA as one of your investors as well? Do you work with financial institutions or how does it go? Yeah, so we have two distinct sides of our business, one on the retail, one institutional. On the retail side, of course, we want to make it easy for normal everyday consumers to interact with these digital assets and digital currencies. We think just like you don't know the magic behind the scenes, when you send an email or go to a website, you should be able to access a global open financial network without understanding necessarily what's happening behind the scenes. So the retail side of our business has been a big area of focus over the past five years. On the institutional side, this is a newer side of our business. We launched in January 2015. I think one of the big things that has been helpful for us in getting financial institution partners and clients, things like having state-of-the-art security and cold storage, having insurance on our customers' holdings, and these are the reasons why people are willing to hold over a billion dollars in aggregate with Coinbase because things like Mt. Gox where it's been proven over time how dangerous it can be depending on where you're holding your assets. So we're very fortunate to have MUFG, BTMU, among our financial institution partners, and we're very excited again to enter the Japanese market and continue collaborating with them. Wonderful. Well, I think one of the things for the audience here in Japan is from April, a lot of the traditional Japanese financial institutions will be coming in. But then, are they familiar with Bitcoin? Do they understand blockchain? Do they understand the most recent security around the wallet, multi-sig? They don't. So one of the things that we provide as Coin is our B2B business. So we provide a white label business to financial institutions where they already have a customer base because user acquisition is not easy. And when you try to get their loyalty in churn, it's not the most cost-efficient way. So we also have a B2C, a direct consumer, and also a B2B which is working with financial institutions. So it's going to be exciting times. So I think as a closing remark, where do you see this industry, and maybe five years, ten years, and where do you see your company within that? Yeah, so I absolutely think the addressable market of our industry will continue to grow, you know, step-function, order of magnitude, growth. I think in order for that to happen, there needs to be a mass market interface that, again, the everyday consumer or the sophisticated financial institution alike can both access the benefits of these technologies. I would imagine five years from now, the protocols themselves will continue to be abstracted behind the scenes, and I think top-of-the-line products and services will become more and more important. I think Coinbase will continue to evolve alongside this. So historically, we've focused on these infrastructure functions. I think five years from now, alongside the infrastructure we provide, there will also be mass market interface, things that make it easy for people to access. Wonderful. So I think from a Japan perspective, it's the first year of mass adoption. It's going to be a regulated market now, and a lot of people will feel safe investing their personal wealth in buying these cryptocurrencies. And it's not only going to be Bitcoin, there's going to be Ethereum, there's going to be other cryptocurrencies. Similar to many national fiat currencies, there's going to be many types of cryptocurrencies. And Japan is, I'm pretty sure that they are going to, the country is going to be one of the more progressive ones in the cryptocurrency space. When you talk with the government, when you talk with the banks, when you look at, when you talk with a lot of companies, they're all interested in embracing this. So it's going to be an amazing year, and we look forward to having everybody as our customers. Right? Wonderful. So Sam, thank you so much. Thank you. And I hope you guys can launch your service in Japan as well. And let's see if there's a partnership opportunity. Absolutely. Alright, thank you so much. Thank you. Alright, thank you.