Coinbase CEO becomes Wall Street's public enemy number one

Brian Armstrong is engaged in a fierce debate with banking giants such as Jamie Dimon about the future of finance.

By Amrith Ramkumar, Dylan Tokar, and Gina Heeb, The Wall Street Journal

Compiled by: Luffy, Foresight News

During the World Economic Forum in Davos last week, Brian Armstrong, CEO of Coinbase, the largest cryptocurrency platform in the United States, was having coffee with former British Prime Minister Tony Blair when Jamie Dimon, CEO of JPMorgan Chase, suddenly stepped in and interrupted their conversation.

“You’re talking nonsense,” Jamie Dimon said, pointing directly at Brian Armstrong’s face. The banker, a longtime skeptic of cryptocurrencies, had previously called Bitcoin a scam.

According to sources familiar with the matter, Jamie Dimon's core message was a demand for Brian Armstrong to stop spreading misinformation on television. Earlier that week, Armstrong publicly accused the banking industry on several business television programs of attempting to obstruct legislation establishing a new regulatory framework for digital assets.

This direct confrontation is at odds with the Davos Forum's original intention to promote cooperation among global leaders.

As cryptocurrencies rapidly integrate into the mainstream of US finance, Wall Street giants have finally recognized the threat posed by this sector. Although banking institutions have embraced some applications of cryptocurrencies, such as providing services for customers' Bitcoin investments and using digital assets to improve the efficiency of fund transfers, the banking industry has drawn a clear red line when cryptocurrencies infringe upon its core business of personal deposits.

Currently, the banking industry and Coinbase have a fundamental disagreement on a core issue: whether cryptocurrency exchanges have the right to pay regular returns to users who hold digital tokens. These so-called return rewards refer to recurring fees paid to stablecoin holders at an interest rate of approximately 3.5%.

The banking industry argues that the returns paid to users by cryptocurrency exchanges are essentially no different from bank deposit interest rates. Since bank demand deposit rates are typically less than 0.1%, far lower than cryptocurrency returns, the industry fears consumers will massively shift funds into the cryptocurrency market. They claim this trend will severely impact community banks and hinder business lending. Brian Armstrong and other cryptocurrency industry players, however, believe the market should follow free competition. They argue that if banks want to compete with stablecoins, they can raise deposit rates or directly enter the stablecoin business.

This legislation, known as the Clarity Act, may reshape the future landscape of everyday financial services, covering core areas such as bank deposits and electronic payments.

According to sources, in an effort to reach a compromise, the White House plans to convene a meeting this Monday with representatives from the banking and cryptocurrency industries. David Sacks, the Trump administration's Special Representative for Artificial Intelligence and Cryptocurrency Affairs, is expected to attend. Some sources also indicate that Kara Calvert, Coinbase's Head of U.S. Policy, is on the guest list.

Brian Armstrong, 43, co-founded Coinbase in 2012 and has been leading the cryptocurrency industry toward legalization and mainstream acceptance for years. As the head of this company with a market capitalization of approximately $55 billion, Armstrong wields significant influence in industry-related policy debates, including the current legislative battle in Washington. "It's better to have no bill than a bad one," Armstrong stated on social media platform X the day before a Senate committee was scheduled to vote on a draft bill that, if passed, would effectively prohibit companies like Coinbase from paying revenue to customers, potentially costing Coinbase billions of dollars. Just hours later, the vote was abruptly postponed, causing an uproar throughout the financial world.

"The current situation is interpreted more as a confrontation between Coinbase and the banking industry than a clash between the entire cryptocurrency industry and the banking industry," said Ron Hammond, head of policy and advocacy at the well-known crypto market maker Wintermute.

Brian Armstrong's counterattack didn't stop with his January 14th post on the X platform. In a subsequent television interview, he reiterated his views, telling Bloomberg that bank lobbyists were "lobbying around trying to shut down competitors," and accusing the banking industry of "using customers' deposits for lending without their substantive permission." According to sources, these remarks led to several awkward encounters with bank CEOs at the Davos Forum.

"If you want to do banking business, just get a banking license," Brian Moynihan said last week during a 30-minute meeting between Bank of America CEO Brian Moynihan and Brian Armstrong at the Davos Convention Center. The meeting was generally friendly, but the exchange remained somewhat stiff.

Citigroup CEO Jane Fraser gave Brian Armstrong less than a minute to speak. Coinbase is a client of Citigroup and JPMorgan Chase, and also has business relationships with several other banks.

Wells Fargo CEO Charlie Scharf wouldn't even give him a minute. When Brian Armstrong approached him, Scharf bluntly stated there was nothing to discuss. Jamie Dimon, Scharf's former boss, was nearby during this exchange.

Aiming to "replace traditional banks"

Brian Armstrong graduated from Rice University in Houston with a major in economics and computer science. He is an early advocate of digital currency and underlying blockchain technology. He studied the original Bitcoin white paper published in 2008 by the enigmatic Satoshi Nakamoto. In 2011, while working at Airbnb, he encountered numerous inconveniences when transferring money to South America.

These experiences laid the groundwork for his founding of Coinbase. At the time, many investors were eager to enter the cryptocurrency market but faced a core problem: the lack of a dedicated platform for storing digital assets. Coinbase was founded to solve this problem, and when some customers wanted to trade Bitcoin rather than just have their assets held in custody, Coinbase naturally transformed into a cryptocurrency exchange.

Coinbase started in a small apartment in San Francisco, which also served as the company's first office. In 2017, after another co-founder left, Brian Armstrong became the undisputed leader.

Several former colleagues interviewed by The Wall Street Journal said that Brian Armstrong was shy and sometimes had difficulty communicating with some employees, and appeared uneasy when reprimanding subordinates. Some former employees described his style as being very similar to the Vulcans in Star Trek, an alien race known for their calm, restraint, and emotional detachment.

But Brian Armstrong has never wavered on Coinbase's vision. He positions Coinbase as a benchmark company driving the integration of cryptocurrency into the mainstream US market, and today Coinbase's business scope covers multiple areas including electronic payments, stock trading, commodity trading, and prediction markets.

"Our ultimate goal is to become the alternative to traditional banks in people's eyes," he said in an interview with Fox Business last year. "We hope to build a super financial app that provides users with all kinds of financial services."

As its business expanded, Brian Armstrong invested millions of dollars to build the largest lobbying team in the cryptocurrency industry. After several rounds of boom and bust in the cryptocurrency industry, Coinbase officially went public in April 2021, with its market capitalization once exceeding $100 billion, and Brian Armstrong's personal shareholding value reaching approximately $13 billion.

Having weathered the industry collapse in 2022 and withstood regulatory pressure from the Biden administration in 2023, Brian Armstrong began to fight back and gradually found his own way to speak out. This manager, who once preferred to write code in his office with headphones on and was reluctant to give public speeches, has now become a staunch advocate for the cryptocurrency industry in Washington, and Washington's attitude towards cryptocurrencies is about to undergo a dramatic change.

Coinbase has invested approximately $75 million in the 2024 US presidential election through a series of super PACs, aiming to counter candidates skeptical of cryptocurrencies and also establishing grassroots organizations to garner public support for cryptocurrency-related legislation. The super PACs stated this Wednesday that their current funding has reached $193 million.

Trump's victory in the 2024 election opened a window of opportunity for Brian Armstrong to secure policy breakthroughs after a decade's wait. He praised Trump for ushering in a "new era of cryptocurrency" and attended the "crypto gala" held during Trump's inauguration, featuring Snoop Dogg. Now, this executive sheds his usual T-shirt and black jacket at least every two months, donning a suit to visit the U.S. Capitol.

"In the United States, Coinbase is at the forefront of all cryptocurrency-related matters," said Anthony Scaramucci, founder of SkyBridge Capital and a long-time cryptocurrency investor.

Last summer, Trump signed the Genius Act, paving the way for numerous companies to issue stablecoins and directly fueling the explosive growth of the stablecoin business. The act prohibited stablecoin issuers from paying interest to users, but did not restrict exchanges like Coinbase or third-party institutions. Banking groups viewed this oversight as a legal loophole, directly triggering the intense debate surrounding the Clarity Act.

A long legislative journey

The U.S. House of Representatives passed its version of the Clarity Act last year, but its progress in the Senate is considered extremely difficult, partly due to disagreements among lawmakers regarding the regulatory rules that cryptocurrency companies should follow. The Senate Agriculture Committee, which oversees legislation related to the Commodity Futures Trading Commission, passed its own version of the bill this Thursday. Ultimately, lawmakers need to push for the full Senate to pass a version of the bill before negotiating with the House to resolve the differences between the versions.

According to sources familiar with the matter, Brian Moynihan's core message to Brian Armstrong was that if cryptocurrency companies like Coinbase want to offer deposit-like services, the banking industry generally believes these companies should be subject to the same regulatory constraints as traditional banks. Regulatory bodies such as the Federal Reserve and the Office of the Comptroller of the Currency rigorously review banks' risk profiles, regularly examine their operations, and establish clear rules for banks' capital requirements for lending and investment activities.

"This controversy surrounding earnings rewards is quite unusual in our relationship with the banking industry. We maintain close collaborations with many banks and have announced several partnership initiatives," said Faryar Shirzad, Chief Policy Officer of Coinbase.

Coinbase has established a lucrative partnership with stablecoin issuer Circle, allowing it to earn a significant share of revenue from its business with the popular stablecoin USDC. Unlike other companies in the cryptocurrency industry, this exclusive partnership allows Coinbase to pay a 3.5% commission on earnings to select USDC holders. The company states that such incentives help attract users and provide consumers with more options at a time when bank demand deposit rates are extremely low.

"There is no reason to prohibit paying interest to consumers," Brian Armstrong said in an interview with The Wall Street Journal last year.

As the Clarity Act nears its vote in Congress, the banking industry has launched an intensive lobbying campaign behind the scenes. Citing government estimates, they warned senators that approximately $6.6 trillion in deposits in the traditional financial system could be diverted to the cryptocurrency market. This lobbying effort was highly effective; the nearly 300-page draft bill included several provisions and potential amendments that Brian Armstrong considered detrimental to the cryptocurrency industry. He subsequently withdrew his support for the bill, and hours later, Senator Tim Scott, a Republican from South Carolina and chairman of the Senate Banking Committee, announced the cancellation of the vote.

According to sources familiar with the matter, Brian Armstrong has proposed a solution to the current impasse. He told Brian Moynihan that a new category of stablecoin issuers could be created, allowing those that meet stricter regulatory standards to pay yield rewards to users. This proposal would theoretically allow banks and Coinbase to compete on a level playing field in the stablecoin business. Others have suggested banning most yield reward payments, with only a very narrow range of exemptions granted to a few companies like Coinbase.

Brian Armstrong's support is indispensable for the advancement of any solution.

"Now, the power to decide the fate of this bill is believed to be in Coinbase's hands," said Hilary Allen, a law professor at an American university and an expert in securities law, who is also a cryptocurrency skeptic. "It's truly shocking."

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