Welcome back. Future of crypto regulation is a big topic here at the World Liberty Forum in Mara Lago. Joining me now is Coinbase CEO Brian Armstrong and Senator Bernie Mareno.Republican from Ohio. Senator Mareno is one of the leaders of the negotiations in Washington and a former crypto entrepreneur himself. Gentlemen, it's good to have you both. >> Kind of rare to have you together.Um I I like it. So, so Brian, what is the what is the status of the market structure regulation that that you famously blocke ...

Core Viewpoint - The cryptocurrency market has experienced significant volatility at the start of the year, impacting both retail and institutional investors, but institutions remain optimistic about future opportunities in tokenization and on-chain financial applications [1][2][5][6]. Institutional Focus - Institutional investors are more insulated from market volatility due to advanced trading strategies and a long-term focus on building businesses on-chain, despite the current market challenges [2][3][5]. - Major traditional financial players, including commercial banks and asset managers, are actively entering the market, indicating a sustained interest in cryptocurrency despite short-term price fluctuations [3][4]. Retail vs. Institutional Trading - Retail trading has seen a significant decline, with volumes dropping sharply since October, while institutional involvement in crypto continues to rise [8]. - The retail side has been characterized by high leverage and speculative investments, leading to increased price swings, contrasting with the more stable approach of institutional players [3][8]. Tokenization and Stablecoins - There is a growing enthusiasm for the tokenization of major global financial asset classes, such as equities and fixed income, which is expected to be a long-term trend over the next 20 years [4][7]. - Stablecoins have maintained their market share and are seen as a successful example of tokenization, demonstrating resilience even as overall market participation has decreased [11][12]. Market Dynamics - Despite a challenging market environment, there is optimism among crypto sector leaders regarding the future of cryptocurrency, with a clear distinction between different asset types, including Bitcoin, stablecoins, and high-utility on-chain applications [6][10]. - The ongoing development of on-chain financial applications and the tokenization of real-world assets, such as US equities, is already underway, with expectations for further growth in the coming years [12][13].

Core Viewpoint - The ongoing discussions around cryptocurrency regulation in the U.S. highlight the need for clarity and harmonization between the SEC and CFTC to foster innovation and protect investors in the digital asset space [2][14]. Group 1: Cryptocurrency Legislation - Treasury Secretary Scott Bessent is urging Congress to pass the Digital Asset Market Clarity Act to resolve the current regulatory limbo surrounding cryptocurrencies [2]. - A Senate panel has advanced a version of legislation that would place most non-security crypto assets under CFTC oversight, but a White House meeting aimed at breaking the legislative stalemate ended without a deal [3][4]. Group 2: Regulatory Clarity - The SEC Chairman Paul Atkins emphasized the need for clarity in distinguishing between securities and commodities, particularly in the context of tokenized assets and stable coins [6][12]. - The Genius Act has been recognized for clearly defining stable coins and establishing their regulatory framework, separating them from securities [11][12]. Group 3: Tokenization and Market Participation - Tokenization is seen as a significant opportunity to enhance market participation, potentially allowing smaller investors to engage more easily in various markets [15][16]. - The concept of tokenization involves using smart contracts to create digital representations of underlying assets, which could streamline transaction processes and reduce risks in financial services [17][18]. Group 4: IPOs and Market Dynamics - The SEC is focused on making it easier for U.S. companies to go public, addressing the decline in the number of publicly traded companies, which has decreased by approximately 30-40% over the last 30 years [34][35]. - Efforts are being made to reduce regulatory burdens and litigation risks associated with public offerings, aiming to revitalize the IPO market [37][39]. Group 5: Cross-Border Fraud and Regulatory Actions - The SEC has launched a task force to address cross-border fraud, particularly targeting pump and dump schemes involving foreign-based companies listed in U.S. markets [41][42]. - Recent actions include halting trading on certain companies suspected of manipulative activities, demonstrating the SEC's commitment to investor protection [43][44].

Group 1: Crypto Legislation - Treasury Secretary Scott Bassant is urging the passage of a stalled crypto market bill during Senate banking hearings, emphasizing the need for clear regulatory frameworks in the U.S. crypto industry [2][5] - The major impasse in the legislation revolves around whether crypto exchanges should be allowed to offer customer rewards on stable coins held on their platforms [5][10] - Senator Dave McCormack highlights the importance of a regulatory framework to ensure consumer confidence and prevent fraudulent activities, while also balancing the interests of local banks and the crypto industry [7][8][9] Group 2: Market Impact and Innovation - The crypto blockchain industry is seen as a significant area of innovation with potential for job creation and investment opportunities, particularly in Pennsylvania [7] - There is a concern that allowing crypto platforms to pay customer rewards could disadvantage traditional banks, which face stricter regulations [10][12] - The discussion includes the implications of stable coins on lending ratios and the capacity of community banks to provide loans to small businesses [13] Group 3: Legislative Process and Negotiations - Senator McCormack expresses optimism that the crypto legislation will move forward in the spring, indicating ongoing negotiations [18] - The White House is actively involved in discussions with crypto industry executives and banking associations to resolve the legislative stalemate [5][14] - The urgency of passing the legislation is underscored by the potential for significant innovation in the financial sector [18]

Core Insights - The cryptocurrency market has reached a mainstream status, with significant adoption by financial advisors and institutional investors [4][6][12] - The introduction of spot ETFs has simplified access to cryptocurrencies, allowing investors to buy them similarly to traditional stocks [2][3] - Regulatory improvements under the new administration have increased confidence among financial advisors and investors, facilitating greater participation in the crypto market [16][17] Financial Advisors' Perspective - Approximately 30 to 40 percent of financial advisors are now incorporating cryptocurrencies into client portfolios, indicating a shift from niche to mainstream investment [7] - A survey revealed that 99 percent of advisors who currently hold crypto plan to either maintain or increase their exposure in the coming years, despite a challenging market in 2025 [9][11] - Advisors are adopting a long-term investment strategy, with many holding cryptocurrencies rather than engaging in short-term trading [8] Market Trends and Future Outlook - The cryptocurrency industry is expected to continue its rapid growth, driven by institutional adoption and regulatory clarity, with significant developments anticipated in 2026 [21][19] - The Clarity Act, currently under congressional debate, could provide a stable regulatory framework for the crypto industry, further enhancing its legitimacy [19] - The normalization of cryptocurrencies as a standard asset class alongside stocks and bonds is becoming evident, suggesting a lasting impact on the financial landscape [22][23]

Core Insights - The cryptocurrency market has faced challenges in the past year, but a broader perspective shows that Bitcoin has increased by approximately 26% since the day before the 2024 election, while the NASDAQ has risen by about 28% [2]. - Over a two-year period, Bitcoin's value has doubled, compared to a 50% increase in the NASDAQ [2]. - The long-term outlook for cryptocurrencies, particularly Bitcoin and Ethereum, remains positive, with expectations of continued momentum and adoption of tokenized assets [6]. Market Trends - The adoption of stablecoins is expected to grow significantly, with McKenzie reporting that 3% of all cross-border payments currently occur in stablecoins, up from virtually 0% a year ago, with a projected tenfold increase [6]. - Prediction markets are anticipated to grow tenfold as well, indicating a substantial market opportunity [8]. - Poly Market's trading volume has surged from $50 million per month in early 2024 to an expected $4 billion, with only about 35% of that volume related to sports betting [11]. Blockchain Ecosystem - Both Ethereum and Solana are seen as vital players in the blockchain space, with Ethereum currently hosting most stablecoins and economic activity, while Solana is recognized for its optimized transaction flow and lower costs [14][15]. - The belief is that multiple blockchains will coexist, as no single blockchain can scale sufficiently to handle all economic activity [16]. - New blockchain technologies, such as Monad, are emerging, aiming to compete with existing platforms like Solana [18]. Investment Focus - The investment strategy encompasses a wide range of sectors within the cryptocurrency ecosystem, including stablecoins, DeFi, and various tokenized assets [4]. - The company is not ideologically bound to any specific cryptocurrency but focuses on innovation and future financial market developments [5]. - There is a recognition of the potential for consolidation within the prediction market space, as it may merge with sports betting platforms [9].

Core Viewpoint - Bitcoin prices are experiencing significant volatility, currently down 30% from their highs, and there is uncertainty regarding future interest rate cuts which may impact market sentiment [1][2]. Company Insights - Coinbase aims to become an "everything exchange," allowing users to trade public stocks, cryptocurrencies, and prediction markets on a single platform, competing with Robinhood, which has a brokerage background [3][4]. - Coinbase has a competitive advantage with over 100 million users and a crypto-friendly approach, while traditional financial players are also entering the crypto space with substantial resources [6][7]. Industry Trends - The integration of artificial intelligence and tokenization is seen as pivotal for the future of finance, with companies vying for dominance in these areas [5][17]. - The competition among financial firms is expected to benefit individual investors through lower prices and improved market access [8]. Market Performance - Bitcoin has shown a compound annual growth rate of 70% over the last decade, despite recent disappointments regarding price expectations [10]. - The volatility of Bitcoin has been decreasing, which may lead to smaller drawdowns compared to historical trends, suggesting a more stable price environment moving forward [11][15]. Future Outlook - The potential for Bitcoin and cryptocurrencies to serve as a defensive asset on corporate balance sheets is highlighted, with firms likely to invest in crypto to protect purchasing power [18][19]. - The lack of regulatory clarity remains a concern, with no significant legislative developments on the horizon that could impact the market [16].

Core Insights - The discussion highlights the potential role of stable coins in addressing debt issues and their comparison to the global savings glut experienced 20-25 years ago [3][4][7] - The anticipated growth in stable coins is expected to come primarily from international markets, which could lead to significant inflows into US dollar savings vehicles, thereby exerting downward pressure on interest rates [5][7] Stable Coins and Economic Impact - Stable coins may provide access to US dollar savings vehicles for individuals in countries with capital controls or limited banking services, offering a significant advantage in those regions [6] - The potential inflow from stable coins could mimic the effects of the past global savings glut, with estimates suggesting it could account for about a third of the global savings influx, leading to material downward pressure on interest rates [7] Supply-Side Incentives and Economic Growth - The company expresses confidence in supply-side incentives, such as full expensing in tax legislation, which are expected to enhance capital accumulation and labor productivity, ultimately raising wages without causing inflation [9] - The overall economic outlook is influenced by various factors, including tax legislation and Federal Reserve policies aimed at improving affordability and managing stable prices and maximum employment [10]

Financial Sector Performance - The financial sector has shown strong performance in 2025, with the XLF gaining 13% this year and over 65% in the last three years [1] - Major banks such as JP Morgan, Bank of America, Wells Fargo, and Goldman Sachs have reached new all-time highs in December [1] Outlook for 2026 - There is optimism that the strength in financials could continue into 2026, particularly if the Federal Reserve maintains an accommodative rate policy [2][3] - Lower interest rates are expected to stimulate mortgage activity, benefiting both large and regional banks [3][4] Impact of Interest Rates - Lower rates are anticipated to increase mortgage refinancing and purchasing activity, which in turn supports ancillary businesses related to home ownership [4][5] - The current environment may not encourage savings in money markets, but there remains a significant amount of capital in money markets that could rotate back into equities [6] Regional vs. Large Banks - Regional banks are more vulnerable to issues in commercial real estate, which is a significant concern due to the resetting of loans issued before 2020 at higher rates [7][8] - Large banks are better positioned to withstand potential challenges in 2026 compared to regional banks [9] Technological Adaptation - There is a call for banks to invest in decentralized finance technologies, such as blockchain and stable coins, to remain competitive in the future [10][11] - The shift towards decentralized finance is seen as a long-term trend that banks need to prepare for now [11]

Core Insights - Bitcoin has climbed back above $93,000, reaching its highest level in two weeks, although it has faced challenges since its all-time high in October, with regulatory factors being a key concern heading into the new year [1] Group 1: Regulatory Developments - The Clarity Act, which has passed the House, aims to establish a true market structure for crypto in the U.S., providing clarity and certainty for digital assets [3] - The Senate is expected to vote on the Clarity Act soon, which is essential for completing the regulatory framework for the crypto industry [2][3] - The passage of the Clarity Act would define which assets are subject to U.S. securities laws, addressing concerns regarding leverage and other issues [9] Group 2: Adoption of Stablecoins - Traditional financial institutions, including banks, are recognizing the potential of stablecoins to transform the financial services industry, leading to greater adoption and efficiency [5] - The recent passage of the Genius Act has prompted banks to explore stablecoins, indicating a shift towards innovation in financial transactions [4] Group 3: Market Dynamics and Leverage - The influence of leverage players on Bitcoin remains significant, and Coinbase is adapting to this evolving market by providing access to Bitcoin for millions [7][8] - The introduction of new options for consumers to participate in the Bitcoin market necessitates new standards and safeguards [8] Group 4: Institutional Engagement - Vanguard's decision to allow crypto ETFs on its platform signals a growing acceptance of crypto as an asset class, reflecting a shift in perspective among initial skeptics [10][11] Group 5: Transparency and Compliance - Coinbase's transparency report revealed a nearly 20% increase in government information requests, with over half coming from outside the U.S., indicating a global trend in law enforcement's interest in digital assets [12][14] - The report highlights the importance of lawful processes while maintaining customer privacy, as the demand for compliance with legal requests grows [15] Group 6: Metrics for Crypto Adoption - The focus on the use of digital assets and blockchain networks to solve real-world problems is becoming more prominent, beyond just price metrics [17][18] - The acceleration of adoption in various applications, such as DeFi for credit and alternative payment methods, is a key area of interest for the industry [18]