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Jo Ann Barefoot explores how to create fair and inclusive consumer financial services through innovative ideas for industry and regulators

Talking Cryptocurrency with Brian Brooks of Coinbase

Barefoot Innovation Podcast

Talking Cryptocurrency with Brian Brooks of Coinbase

Courtney Cole

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I have a real treat for you today. Brian Brooks is the Chief Legal Officer of Coinbase and is also one of the smartest and most thoughtful people anywhere in the financial world. His past roles include being General Counsel at Fannie Mae and Vice Chairman of OneWest Bank, where he worked with both now-Treasury Secretary Steve Mnuchin and now-Comptroller of the Currency Joseph Otting. If his name seems familiar, it may be because he was in headlines a while back as a short-list candidate to be Deputy Treasury Secretary, or Director of the Consumer Financial Protection Bureau, or White House Counsel.

Instead, Brian headed to the other coast, plunging into San Francisco’s crypto world at Coinbase, the world’s largest cryptocurrency exchange. That’s where we sat down for this talk. It showcases his gift for making the crypto world clear for those who don’t follow it closely, and also his gift for provoking really stimulating ideas among those who do.

In our conversation, Brian explains the distinct types of cryptocurrencies and crypto exchanges, in the US and globally. He describes the efforts underway to build infrastructure for the crypto world as an alternative payments channel in which crypto can function like an internet of value -- a universal, free, instant, decentralized payments system. Brian describes the scenario -- imagine if he could pay me with no bank involved, just sending me currency from his phone to my phone, with no one taking a cut, and no delay -- instantaneous payment. And imagine if he could attach features to the payment that a regular check or a wire transfer wouldn’t have. Again, it can be instant, and can reach anyone, and be essentially free -- like the internet.

Brian also shares thoughts on the regulatory challenges with this technology, which just doesn’t fit neatly into the old regulatory boxes. We discuss how, or even whether, to regulate crypto’s various forms, depending on whether it’s functioning like a security, a currency, or something else.  He talks about how regulators look at this world through their own lenses and all want a piece of it. He asks if it makes sense to try to address it using standards like the 60 year old Supreme Court ruling that produced the Howey test.

Brian points out that there will soon be a Treasury report on crypto and blockchain, which may be a breakthrough in this regulatory thinking. He also sees a breakthrough in the recent emergence of the “stable coin,” in which every unit is backed by a dollar so that its value doesn’t fluctuate. And he predicts that agencies are going to be using crypto to do their “day jobs.”

We also talk about the contrast in what’s happening in highly-regulated countries and those with few rules -- and the fact that crypto is available from places that are not regulated has risen from basically 0% market share a couple of years ago to roughly half today, which says something about the regulatory climate in the United States, for good or ill. We discuss how cryptocurrency could help solve inflationary crises and currency volatility in many economies. And we discuss how, contrary to conventional wisdom, it can also help fight money laundering, since it’s far more traceable than cash.

Brian argues that we can’t regulate cryptocurrency like we’ve regulated anything in the past -- that we need new models. This is an issue that is on my mind a lot these days -- whether to create regulatory or quasi-regulatory standards bodies that sit outside the regulatory agencies, maybe something like ICANN’s governance of internet domains. I think we’re going to need these, not just for crypto but for a lot of regulatory modernization. We’ll have more on that issue in future shows.

Here are two past episodes that also dealt with crypto -- one with Chris Larsen, chairman of Ripple, and one with Jeremy Allaire, CEO of Circle.

Brian reminds us that the internet looked like a small, niche activity in 1992...and then it changed everything about how we live. Cryptocurrency is small today, but it has huge potential. This is one of our shows that is just dense with high-value ideas. I predict many people will listen more than once!

Links

Link to full transcription

Coinbase.com

LinkedIn  

NY Times Article, America Could Lead the Transition to a Digital Currency

Barefoot Innovation Podcast: Transforming Payments: Circle CEO Jeremy Allaire

Barefoot Innovation Podcast:  Remaking the Financial Rails: Ripple CEO Chris Larsen

More on Brian Brooks

Brian is a noted financial services lawyer with a record of leadership in innovation and in crisis turnarounds. He has had senior roles at O'Melveny & Myers, where he chaired the firm's financial services practice; OneWest Bank, where he was Vice Chairman and worked with future Treasury Secretary Steven Mnuchin and future Comptroller of the Currency Joseph Otting to turn around the failed Indymac Bank platform; Fannie Mae, where he served as general counsel and helped create Fannie Mae's fintech platform; and Coinbase, where he is currently chief legal officer.  Brian also serves as a member of the board of directors of Avant Inc., a multibillion dollar marketplace lender; as an advisor of Spring Labs, a blockchain-based consumer loan registry and credit bureau platform; as a seed investor in Grasshopper Bancorp; and as a Series A investor in FlyHomes Inc. He is also a board member of FinRegLab and has been prominently mentioned as a shortlist candidate to be Deputy Treasury Secretary, Director of the Consumer Financial Protection Bureau, and White House Counsel.

More for our Listeners

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We have great episodes coming up. One is with Prince Michael of Liechtenstein, which we recorded at the roundtable he hosted in Vaduz on envisioning the financial services world of 2030. We’ll talk with MIT’s David Shrier. We’ll have a terrific discussion with the fascinating community bank, NBKC. We’ll have a show with  Counselor to the Secretary of the Treasury, Craig Phillips, and one with the Chairman of the CFTC, Chris Giancarlo, both of which will deal with crypto issues, among other things. We have a show coming up with futurist Brett King on his new book, Bank 4.0, for which I co-wrote the regulatory chapter. And we have a fascinating conversation with Gary Shiffman of Giant Oak.

Some of the places I’ll be this spring include:

UNC Law's Banking Institute, presenting the Clifford Lecture this week, in Charlotte, NC

Alliance for Financial Inclusion’s 17th Consumer Empowerment & Market Conduct (CEMC) and Digital Financial Services (DFS) Working Group Meeting  in Nassau, Bahamas (invitation only)

LendIt FinTech USA, April 9-10, San Francisco, CA

Santa Fe Group’s 12th Annual Shared Assessments Third Party Risk Summit, April 10-11, Washington, DC

The Innovate Finance Global Summit, April 29-20, London

Bank Director's Bank Audit & Risk Committees Conference, June 12, Chicago, IL

American Banker Association’s Regulatory Compliance Conference, June 9-12, New Orleans, LA


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The views and opinions expressed during the Barefoot Innovation podcast series are solely those of the individuals involved and do not necessarily represent those of Barefoot Innovation Group and its employees. Barefoot Innovation Group does not verify for accuracy the information contained in the podcast series. The primary purpose of this podcast series is to educate and inform.