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Coinbase CFO: the world is going to all digital assets

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Yahoo Finance’s Brian Sozzi, Julie Hyman, and Myles Udland speak with Coinbase CFO Alesia Haas about crypto prices, volatility, outlook, and much more.

Video Transcript

BRIAN SOZZI: It has been an important week for investors in Coinbase, with shares being under pressure due to the correction in crypto prices. Goldman Sachs and JP Morgan have come out and defended the company with bullish ratings and price targets. Let's chat more about Coinbase with its CFO, Alesia Haas. Alesia, good to speak with you here this morning. Help investors understand what you're seeing on the platform now so far this quarter, compared to what you saw in the first quarter. I mean, crypto prices have been under a lot of pressure. And volatility has certainly picked up.

ALESIA HAAS: Brian, thanks so much for having me today. So, welcome to crypto. I think that those who were new to this space may have underestimated the volatility that we can see in this market. But crypto is volatile. It's been volatile since its coming. And we just have to remember this is a really young industry and a very nascent asset class. So while we haven't seen a lot of volatility, we've been dealing with this since the very beginning.

And the momentum that we're seeing continues. There's a lot of interest in crypto. We shared on our first earnings call just recently that the momentum we saw in Q1 had continued into Q2 and that we're optimistic at this point that we're going to see similar levels of excitement on volume on our platform that we saw in the first quarter.

JULIE HYMAN: Hi, Alesia, it's Julie here. So let's say that the volatility continues, and there are still a lot of users on your platform. But I wonder, from a financial perspective, how that affects your planning-- if you need to raise cash by selling shares, for example. And it's difficult to predict the trajectory of the shares because they track with crypto, for example. So how do you sort of manage around those issues?

ALESIA HAAS: We've talked a little bit about this before. We think about running scenarios because our business is inherently difficult to forecast. As you've mentioned, there is a lot of volatility. And so the way that we plan is that we look at ranges of possibilities, ranges of outcomes, and how many MTUs are going to transact on the platform. What is their typical volume going to look like? And we plan for scenarios that are up. We plan for scenarios that are down. We look at past performance as a good indicator of what could happen, although we obviously don't have a crystal ball and we can't tell you exactly what will happen. And then based on those scenarios, we plan our expenses.

We are planning to grow our business for the long term. And we are going to invest in our people and our technology, regardless of what the revenue cycle is. But when we're making those long-term investments, we're looking at what is the resources that we have on our balance sheet, and can we ensure that we can grow cycle to cycle and not be caught in any potential downturn in a crypto winter that we would not have the resources to continue to grow?

BRIAN SOZZI: Alesia, a lot of focus at the company on institutions. Where are you at in gaining institutional business on the platform?

ALESIA HAAS: Institutions has been a new trend really starting in 2020. So retail was the initial driver of crypto. And back in the time the company was founded, we really started as a retail platform for users to come on and buy and sell Bitcoin. We've seen huge growth in retail. But then more recently, we've seen huge momentum in institutional. Over the last 12 months, we now have seen large asset managers, increasingly corporate treasuries, but also pensions and endowments and insurance companies, all start to explore how crypto belongs in their investment allocation.

And what I would say to you is, it's all quarters of the institutional market. And they're coming to Coinbase for our custody offering, that we are one of the largest crypto custodians with over $200 billion in total assets on the platform with over $100 billion devoted to institutions at this time. But we also offer a deep order book in terms of liquidity and the ability to have best X. And so now with the fragmentation of assets trading on so many exchanges and so many market makers, we can find that best price for our users, and more effectively, their outsourced Treasury Department to ensure they can find the best pricing in the pairs that they're trading on. And we're really excited about the growth that we're seeing on the institutional side.

MYLES UDLAND: You know, Alesia, you kind of referenced towards it there, but I wanted to ask how you guys are thinking about, really, the boom in DeFi. At least, from my vantage point, it seems like the crypto space right now is mostly talking about the opportunity for DeFi exchanges. And I think you guys have said comments, too, look, if the space is growing, we're happy to see that growth as well. What are those conversations like with your institutional clients and just internally, as a strategy team?

ALESIA HAAS: So DeFi is such an exciting space. As you alluded to, it's grown over the last year to now close to $90 billion in the DeFi markets. Obviously, it's come off a little bit over the last week or so. And for those who are unfamiliar with DeFi, DeFi is decentralized finance. These are peer-to-peer applications like lending or insurance with no intermediaries. They are 24 hours a day, seven days a week, essentially, banks, providing some of the same financial services that you got from a traditional financial institution, but through a smart contract, through pure technology.

We're really excited about this growth. And we think first and foremost, it's going to open up new doors to consumers. And we think that because these are smaller ticket transaction sizes right now, and so we're not quite at this size at our serving institutions. But it's such early days that I think that we'll see a lot of growth here. And over time, institutions will come to the DeFi market as well. So Coinbase is trying to make it easier to access Defi. We're trying to more closely integrate those experiences into the Coinbase platform, so users can quickly go from centralized finance to decentralized finance and explore this entire new economy that's developing.

MYLES UDLAND: And Alesia, the DeFi is kind of sometimes contrasted with CrowdFi, which now makes us here at Yahoo Finance feel like boomers for talking about stocks. Do you guys think about that-- do you think about that distinction that way or to use it just sort of, well, the world is going towards more digital assets, call them whatever you'd like?

ALESIA HAAS: That's how we think about it. We think the world is going so that all forms of value-- I mean, we're seeing it with NFTs with art and with other real world assets, but all forms of value now have the opportunity to be represented digitally through a crypto token. And we want to be the marketplace that you come to explore all of those exciting digital assets.

BRIAN SOZZI: Alesia, before we let you go, on a personal note, you have extensive board experience. You've worked at a lot of large financial institutions. What is it like trying to build a business such as crypto, which is now a publicly traded business in Coinbase?

ALESIA HAAS: It's fun. It's a lot of fun. It moves at a pace that I've never seen in my career. There are more opportunities, more things that you have to conceive out of thin air to basically bring to reality. And I love the challenge. I love the talent that I'm surrounded by. These are some of the smartest people I've had a chance to work with in my career. And I'm really overjoyed that I came over to Coinbase when I did.

BRIAN SOZZI: Good deal. Well, we look forward to staying in touch with you. Coinbase CFO Alesia Haas, good to see you. Have a great Memorial Day weekend.

ALESIA HAAS: Thank you so much.