'Bloomberg Technology' Full Show (06/07/2023)

I WILL HAND YOU OVER TO "BLOOMBERG TECHNOLOGY."

THAT STARTS NOW. ♪

ANNOUNCER: THIS IS "BLOOMBERG TECHNOLOGY"

WITH CAROLINE HYDE AND ED LUDLOW. ♪

ED: WELCOME TO BLOOMBERG "TECHNOLOGY."

WE ARE STANDING BY FOR A SPECIAL CONVERSATION WITH THE

COINBASE CEO BRIAN ARMSTRONG. HAVE A LISTEN.

>> HOW FAR DO YOU THINK YOU'RE GOING TO HAVE TO GO HERE?

>> THIS WAS NOT UNEXPECTED. WE HAVE BEEN IN DISCUSSION WITH

THE SEC FOR A LONG TIME. EVEN GOING BACK TO BEFORE WE

WERE A PUBLIC COMPANY. WE START SHARING WITH THEM HOW

WE OPERATE OUR BUSINESS, HOW WE LIST ASSETS ON THE PLATFORM,

HOW WE THINK ABOUT OUR STAKING PROGRAM.

AND THROUGH A LARGE NUMBER OF DIALOGS BACK AND FORTH, THEY

ALLOWED US TO BECOME A PUBLIC COMPANY.

WE HAD MANY DISCUSSIONS WITH THEM IN THE LAST YEAR, WHEN

THEIR TONE STARTED TO CHANGE. THEY STARTED TO COME TO US WITH

MORE QUESTIONS ABOUT THE BUSINESS.

WE WERE VERY FORTHCOMING. WE MET WITH THEM PROBABLY 30

TIMES OVER THE LAST YEAR. WE STARTED TO ASK THEM FOR

FEEDBACK. WE SAID WE WOULD LIKE THERE TO

BE A ROBUST MARKET IN THE U.S. TO TRADE CRYPTO SECURITIES OF

THE 1000 PLUS ASSETS WE HAVE REVIEWED TODAY.

WE HAVE REJECTED 90% OF THEM. THE ONES WE HAVE TRADED, WE

BELIEVE ARC COMMODITIES. HOW CAN WE REGISTER AND WORK

TOGETHER? UNFORTUNATELY, WE WERE MET WITH

SILENCE. WE GOT NO FEEDBACK IN THOSE 30

MEETINGS. THE FIRST MEETING WHERE THEY

WERE SCHEDULED TO COME AND GIVE US FEEDBACK, THEY CANCEL IT A

FEW DAYS AFTER THAT. IT IS REALLY UNFORTUNATE.

WE WORK WITH REGULATORS ALL OVER THE WORLD, OTHER

REGULATORS HERE IN THE U.S. I THINK I'M A REASONABLE PERSON

TO GET ALONG WITH.

UNFORTUNATELY, THE SEC UNDER THIS CHAIR HAS TAKEN A

REGULATION BY ENFORCEMENT APPROACH, INSTEAD OF CREATING A

CLEAR RULEBOOK THAT CAN ALLOW THIS INDUSTRY TO BE BUILT IN A

SAFE AND TRUSTED WAY.

>> WHEN WAS THE LAST TIME YOU PERSONALLY MET WITH GARY

GENSLER AND WHAT DID YOU SAY? BRIAN:

WHEN HE FIRST CAME IN AS THE CHAIR, I FLEW OUT TO NEW YORK.

I REACHED OUT TO HIM, OUR TEAM REACHED OUT.

I MADE AN EFFORT TO CONNECT WITH HIM IN-PERSON, BECAUSE

THAT'S WHAT I TRY TO DO WHENEVER A NEW REGULATOR COMES

IN. UNFORTUNATELY, WE WERE NOT ABLE

TO CONNECT AT THAT TIME. I'M NOT SURE WHY WE COULD NOT

GET ON HIS CALENDAR. WE FOLLOWED UP A FEW TIMES IN

THE YEAR AFTER THAT. WE EVENTUALLY GOT A MEETING

THAT WAS VIRTUAL. IT MAY HAVE BEEN COVID-RELATED

OR SOMETHING LIKE THAT. BUT WE WERE ABLE TO GET A

VIRTUAL MEETING. UNFORTUNATELY, IT WAS FRANKLY A

PRETTY ICY RECEPTION, I WOULD SAY. WE CAME IN HAT IN HAND AND

SAID, CHAIR GENSLER, YOU HAVE ASKED PEOPLE TO COME IN AND

REGISTER. WE ARE HERE TO REGISTER.

WHAT WOULD YOU LIKE US TO DO, WHAT PROCESS WOULD YOU LIKE US

TO GO THROUGH?

HIS WORDS WERE, TALK TO YOUR LAWYER.

I'M NOT HERE TO ADVISE YOU. STARTED.

AT THAT POINT WE REALIZED THERE WAS A GAP.

WE FELT THIS WAS AN IMPORTANT TECHNOLOGY WE FELT NEEDED TO BE

BUILT AND DOES -- NEEDED TO BE BUILT IN A SAFE AND TRUSTED WAY

IN THE U.S.. I DO NOT KNOW WHAT HIS PERSONAL

VIEWS WERE BUT IT DID NOT SEEM LIKE HE WAS ON THE SAME PAGE.

SONALI: WHAT DOES THIS MEAN FOR YOU IF

THE GOVERNMENT CRACKS DOWN SO HARD ON CRYPTO, ON COINBASE,

THE SEC, DOES COINBASE EXIST IN FIVE YEARS? BRIAN:

ABSOLUTELY WE DO. THE SEC CHAIR MAY HAVE A

CERTAIN POINT OF VIEW BUT THAT IS NOT REPRESENTATIVE OF THE

U.S. GOVERNMENT. QUITE THE OPPOSITE.

I WOULD SAY THE SE -- THE SEC CHAIR IS AN OUTLIER IN THE U.S.

GOVERNMENT. WHEN I MEET WITH MEMBERS OF

CONGRESS THE BROAD CONSENSUS AMONGST 80% OF PEOPLE I TALKED

TO IS A PRETTY REASONABLE VIEW THAT IS WE DO NOT KNOW WHAT

THIS TECHNOLOGY WILL BECOME BUT WE ARE SEEING EVERY OTHER MAJOR

FINANCIAL HUB IN THE WORLD MOVE TOWARDS CLEAR LEGISLATION.

WE NEED TO MAKE SURE THIS INNOVATION HAPPENS IN THE U.S..

LET'S PROTECT CONSUMERS AND APPLY BASIC GOOD IDEAS AND

MODERN FINANCIAL STATEMENTS AND MAKE SURE THERE IS NO TRADING.

LET'S CREATE A CLEAR MARKET STRUCTURE WHERE BUSINESSES CAN

UNDERSTAND SEC, WHO SHOULD THEY TALK TO.

CONGRESS IS RECOGNIZING THIS IN THE WHITE HOUSE IS AS WELL.

THE BIDEN ADMINISTRATION PUT OUT AN EXECUTIVE ORDER ASKING

ALL THE BRANCHES OF GOVERNMENT TO GET YOUR ACT TOGETHER ON

CRYPTO. THERE ARE RISKS BUT THERE

IMPORTANT OPPORTUNITIES. LET'S CREATE A REGULATORY

FRAMEWORK. SONALI: WILL YOU FIGHT THIS TO THE

SUPREME COURT. DO YOU HAVE THE FINANCIAL

RESOURCES TO DO THAT? BRIAN: EVEN IF THIS TAKES SOME TIME,

THAT IS OK.

IN Q1 WE ADJUSTED POSITIVE AS A COMPANY, EVEN IN THE DEPTHS OF

THE CRYPTO BEAR MARKET. WE HAVE $5 BILLION ON THE

BALANCE SHEET. EVEN THOUGH THIS COMPLAINT CAME

IN FROM THE SEC IT IS BUSINESS AS USUAL TODAY.

WE ARE CONTINUING TO TRADE THE ASSETS WE HAVE ON OUR PLATFORM.

WE TRADE OVER 200 ASSETS. THE SEC COMPLAINT MENTIONED

JUST 13. WE ALSO HAVE BUSINESS OVERSEAS

AND OTHER COUNTRIES AND A LOT OF REVENUE FROM OTHER SOURCES.

COINBASE IS WELL-CAPITALIZED AND ADJUSTED EBITDA POSITIVE IN

Q1 WE WILL BE POSITIVE GOING TO COURT.

IT IS A SMALL PORTION OF OUR COMPANY.

WE HAVE A GREAT LEGAL TEAM THAT IS WORKING ON THIS.

WHAT I WANT 95% OF THE COMPANY TO BE FOCUSED ON IS BUILDING

GREAT PRODUCTS FOR OUR CUSTOMERS AND MAKING SURE WE DO

NOT LOSE SIGHT OF THAT. THIS IS A SERIOUS MATTER I WILL

WORK ON WITH OUR EXECUTIVES. THE VAST MAJORITY OF THE

COMPANY NEEDS TO KEEP BUILDING BECAUSE THAT IS HOW THIS

COMPANY WILL BENEFIT PEOPLE, HOPEFULLY. SONALI:

HOW LONG DOES THE REGULATORY OVERHANG LAST?

THIS COULD TAKE MANY MONTHS. YOU THINK YOUR INVESTORS OR

YOUR CUSTOMERS MIGHT LOSE FAVOR? BRIAN:

THIS IS NOT A NEW CONCEPT. THE SEC HAS HAD RHETORIC AROUND

THIS FOR SEVERAL YEARS. THE INVESTORS IN COINBASE ARE

COMFORTABLE WITH THAT. IT IS ALL PUBLIC AND IT IS NOT

SOME SECRET THING BEING REVEALED .

I THINK THEY ARE TAKING A LONG-TERM VIEW THAT COINBASE IS

A DIFFERENT COMPANY. WE ARE THE ONLY COMPANY THAT

WAS BASED IN THE U.S. THAT WENT PUBLIC AND HAS

AUDITED FINANCIAL STATEMENTS THAT HAS TAKEN THE CLIENTS

FIRST APPROACH EVEN IN THIS RECENT SEC COMPLAINT.

IT IS UNFORTUNATE THEY GET IT BACK TO BACK WITH ANOTHER

COMPLAINT. THAT MAY HAVE BEEN INTENTIONAL.

THEY RECOGNIZE THIS COMPLAINT AGAINST COINBASE, THERE WERE NO

ALLEGATIONS OF MISAPPROPRIATION OF CUSTOMER FUNDS, OF TRADING.

MYSELF AND THE EXECUTIVE TEAM WERE NOT NAMED PERSONALLY.

IT IS DEBATING THIS TECHNICAL LEGAL QUESTIONS IS ARE SOME OF

THESE ASSETS COMMODITIES OR ARE THEY SECURITIES?

THAT IS SOMETHING THE COURT WILL HAVE TO DECIDE TO GET CASE

LAW OUT THERE, WHICH WILL BENEFIT US BECAUSE THAT IS WHAT

WE'VE BEEN ASKING THE SEC FOR A LONG TIME IS HOW DO WE GET MORE

CLARITY? IF WE NEED TO GO TO THE COURTS

TO DO IT, IT IS NOT OUR FIRST CHOICE.

IF THEY ARE NOT GOING TO DO THAT THE COURTS ARE THERE IN

THE U.S. TO AVAIL OURSELVES OF. SONALI:

PART OF THIS WAS ABOUT SECURITIES BEING REGISTERED OR

NOT IN TERMS OF HOW THEY ARE LISTED ON YOUR EXCHANGE.

PART OF THIS WAS ABOUT STAKING. STAKING IS BECOMING MORE

IMPORTANT FOR THE CRYPTO ECOSYSTEM.

DO YOU PLAN TO WIND DOWN YOUR STAKING SERVICE? BRIAN:

WILL NOT WIND DOWN OUR STAKING SERVICE.

IT IS BUSINESS AS USUAL. STAKING ONLY REPRESENTS 3% OF

OUR NET REVENUE AND IS A VERY IMPORTANT FUNCTION IN THE

CRYPTO COMMUNITY AND IT SERVES AN IMPORTANT PART OF THESE

BLOCKCHAIN'S. I SHOULD MENTION THAT

COINBASE'S STAKING PRODUCT IS BUILT IN A WAY TO BE COMPLIANT

AND IS MATERIALLY DIFFERENT IN SOME OF THE WAYS WHICH HAVE

BEEN CALLED STAKING. WE WILL CONTINUE TO OPERATE OUR

STAKING BUSINESS. SONALI: IF USERS WANTED THEIR FUNDS

BACK IN THE STAKING SERVICE, DOES COINBASE HAVE THE ABILITY

TO SERVICE THAT ON SCALE IN CASE THERE IS A LARGER RUN IN

THE STAKING BUSINESS? BRIAN: STAKING IS SOMETHING THAT IS

PART OF THE DECENTRALIZED PROTOCOLS.

COINBASE IS A PASS-THROUGH MECHANISM WHERE WE ARE HELPING

PEOPLE ACCESS THESE PROTOCOLS. SOME OF THE PROTOCOLS HAVE A

LOCKUP PERIOD, SOME NUMBER OF DAYS WHERE YOU INITIATE THE

WITHDRAWAL REQUEST. WE ARE MAKING THAT INFORMATION

AVAILABLE TO THE CUSTOMER.

THE FUNDS ARE THERE. WHEN YOU'RE STAKING SOMETHING

IT IS BEING PLEDGED INTO THESE DECENTRALIZED PROTOCOLS AND WE

DO NOT HAVE THE ABILITY TO MOVE IT SOMEWHERE ELSE.

WE'RE JUST GIVING PEOPLE ACCESS TO THESE DECENTRALIZED

PROTOCOLS. SONALI:

THE WITHDRAWALS, TO THEY HAVE A MATERIAL IMPACT ON THE THEORY

HIM'S PRICE AND HOW DOES COINBASE PREPARE FOR SOMETHING

LIKE THAT? BRIAN: WHAT YOU MEAN? SONALI:

IS THERE A BROADER RUN YOU HAVE TO BE PREPARED FOR? BRIAN:

WE ARE NOT A BANK. WE DO NOT DO FRACTION RESERVE.

THERE IS NOT THIS CONCEPT OF A RUN. ALL OF THE FUNDS ARE THERE.

HE DID NOT HAVE TO TAKE OUR WORD FOR IT.

WE HAVE AUDITORS THAT HAVE VERIFIED ALL OF THAT.

YOU CAN CONFIRM IT IN OUR FINANCIAL STATEMENT.

IF PEOPLE WANT TO WITHDRAW FUNDS , 100% OF IT IS THERE.

THERE IS NO SUCH THING AS A RUN. SONALI:

HOW YOU ANSWER THE QUESTION THAT ON ONE HAND THERE IS THE

SEC THAT IS CAUSING BIG OVERHANG IN TERMS OF YOU GUYS

AND THE INDUSTRY. ON THE OTHER HAND, FINANCIALLY,

RATES ARE HIGHER IN THE UNITED STATES.

WHY SHOULD THEY KEEP THEIR MONEY WITH YOU? BRIAN:

IN CRYPTO THERE IS BEEN THE EVOLUTION OF SOMETHING CALLED

STABLECOIN. WE ARE IN CONSORTIUM WITH

ANOTHER COMPANY. WE'VE HAVE CREATED A USD CORING

WHICH IS THE SECOND LARGEST STABLECOIN.

AS YOU MENTIONED INTEREST RATES IN THIS ENVIRONMENT HAS BEEN A

GOOD SOURCE OF REVENUE FOR US, BUT IT IS ALSO SOMETHING WE

HAVE PASSED ALONG TO CUSTOMERS. CUSTOMERS CAN REWARDS ON USDC

AND GET ACCESS TO SOME OF THESE HIGHER INTEREST RATE

ENVIRONMENTS. SONALI: A BROADER QUESTION NOT JUST

ABOUT COINBASE BUT ABOUT THE INDUSTRY.

AS MORE REGULATORY ENFORCEMENT ACTIONS COME TO THE FOREFRONT,

HOW MUCH OF AN OVERHANG TO THINK THAT WILL HAVE ON PRICE?

BRIAN: BRIAN: IT IS HARD FOR ME TO SAY.

IT WAS SURPRISING YESTERDAY WITH THIS COMPLAINT THAT CAME

OUT, CRYPTO WAS UP, WHICH I WOULD NOT HAVE EXPECTED.

I DO NOT KNOW WHAT TO MAKE OF THAT.

I DO NOT KNOW THAT MEANS PEOPLE KNEW SOMETHING WAS COMING BUT

THEY EXPECTED IT TO BE WORSE, OR IF THEY JUST FELT THEY ARE

STILL A BELIEVER IN AT. I DO NOT TRY TO PREDICT WHAT

WILL HAPPEN IN THESE MARKETS. WE DO NOT OPERATE A HEDGE FUND.

WE WANT TO PROVIDE GOOD SERVICE TO OUR CUSTOMERS. SONALI:

BEFORE I LET YOU GO I WANT TO ASK ABOUT ARTIFICIAL

INTELLIGENCE. YOU'VE HAVE BEEN TALKING ABOUT

IT ALL DAY. HOW DO YOU CAI -- DO YOU SEE IT

AS A COMPETING FACTOR IN TERMS OF DOLLARS GOING TOWARDS

TECHNOLOGY, DO YOU SEE IT DOVETAILING WITH YOUR INDUSTRY?

BRIAN: AI IS ONE OF THOSE REALLY IMPORTANT TECHNOLOGY TRENDS THE

U.S. NEEDS TO GET RIGHT, ALONG WITH

CRYPTO. WE ARE SEEING A SIMILAR

QUESTION IN CONGRESS ALONG WITH CRYPTO, HOW SHOULD THIS BE

REGULATED? I THINK THERE IS A COUPLE OF

INTERESTING INTERSECTIONS BETWEEN AI AND CRYPTO.

ONE OF THEM IS IN THE WORLD OF AI, IT IS SO EASY TO MASS

GENERATE THINGS, WHETHER IT IS A NEWS ARTICLE OR IMAGES.

THE PROFIT ON'S OF THOSE IN THE AUTHENTICITY -- THE PROVIDENCE

OF THOSE IN THE AUTHENTICITY CAN BE HARD TO FIGURE OUT.

IN THE WORLD OF CRYPTO YOU CAN HAVE A DIGITAL SIGNATURE THAT

PROVES THIS WAS ISSUED BY BLOOMBERG FOR BY BRIAN

ARMSTRONG OR WHOEVER. I THINK IT COULD BE USEFUL TO

TRACK THE PROVIDENCE OF CREATED WORKS, WHETHER THAT IS TEXT,

AUDIO, VIDEO.

A LOT OF THESE BOTS OR AUTONOMOUS AGENTS, THEY WILL

NEED TO GET THINGS DONE IN THE WORLD.

PEOPLE ARE USING THEM TO SAY ORDER MY GROCERIES OR BUILD

THIS WEBSITE. THEY ARE GOING TO NEED

FINANCIAL MONEY. THEY WILL NEED MONEY TO DO

THINGS IN THE WORLD. I THINK IN THE FUTURE YOU WILL

SEE A LOT OF CRYPTO TRANSACTION HAPPENING BETWEEN AI AGENTS OR

AI IN VARIOUS BUSINESSES AROUND THE WORLD.

CRYPTO IS THE NATIVE MONEY OF THE INTERNET.

EVERYONE CAN PARTICIPATE. IT WOULD NOT MAKE SENSE TO USE

THE DOLLAR WHERE THE EURO IN A GLOBAL CONTEXT IF YOU WANT TO

BE COUNTRY AGNOSTIC. I THINK AI WILL USE CRYPTO MORE.

SONALI: HOW MUCH ARE YOU WORKING ON

THAT FUTURE? BRIAN: WE ARE NOT TRYING TO BUILD

SOMETHING THAT IS ALLOWING BOTS TO TRANSACT IN CRYPTO.

WE ARE BUILDING GOOD INFRASTRUCTURE.

WITH COINBASE CLOUD WE ARE MAKING OUR API'S AROUND HOW

CRYPTO IS STORED AND TRANSACTED. ANY BUSINESS THAT WANTS TO

INTEGRATE, I SUSPECT MORE BUSINESSES WILL INTEGRATE THAT

OVER TIME. WE ARE ALSO USING AI IN A FEW

OTHER WAYS. WE USE IT A LOT FOR FRAUD

PREVENTION. UNFORTUNATELY WE GET PEOPLE

PUTTING IN STOLEN CREDENTIALS AND THINGS LIKE THAT.

WE HAVE DEVELOPED A LOT OF GOOD MACHINE LEARNING TO DETECT THAT.

WE ARE TESTING IT IN A FEW OTHER AREAS, OUR DESIGN TEAMS

WILL SOMETIMES LOOK AT MID JOURNEY AND TO GENERATE AN

INTERFACE USING AI. SHOW ME FIVE IDEAS FOR WHAT AN

INTERFACE MIGHT LOOK LIKE TO DO REMITTANCE IN CRYPTO OR FOR

CONTENT CREATORS TO HAVE A DIRECT RELATIONSHIP WITH THEIR

AUDIENCE. AI IS A GREAT ASSISTANT.

I DO NOT THINK IT IS TAKING PEOPLE'S JOBS.

IT IS TAKING TASKS OFF THEIR PLATES TO MAKE THEIR JOBS MORE

EFFICIENT.

HAVING A RESEARCH ASSISTANT, A MENTOR, A THERAPIST. EVERYONE

CAN HAVE ONE OF THESE PAIRED WITH THEM AND IT WILL MAKE

HUMANS MORE PRODUCTIVE. SONALI: WE ARE OUT OF TIME BUT THANK

YOU SO MUCH FOR YOUR TIME AND FOR TAKING OUR QUESTIONS.

[APPLAUSE] ED:

YOU'RE WATCHING BLOOMBERG TECHNOLOGY.

THAT WAS A CONVERSATION WITH THE COINBASE CEO BRIAN

ARMSTRONG AT BLOOMBERG INVEST IN NEW YORK.

LET'S BRING IN BLOOMBERG'S KATIE GREIFELD OUT OF NEW YORK

TO WRAP SOME OF THE HEADLINES OUT OF THAT CONVERSATION.

WHAT WERE THE KEY TAKEAWAYS? KATIE:

IT WAS INTERESTING TO HEAR MORE INSIGHT ABOUT WHAT COINBASE

COMMUNICATION, WHAT THEIR RELATIONSHIP WITH THE SEC HAS

BEEN. IT WAS INTERESTING TO HEAR THAT

THE SEC'S TONE HAS CHANGED AND COINBASE WENT TO THE AGENCY

MULTIPLE TIMES AND WAS MET WITH SILENCE AND AS A RESULT HERE WE

ARE TODAY. WE KNEW THEY HAVE BEEN CRITICAL

OF THE SEC APPROACH. WE GOT THAT STATEMENT YESTERDAY

CRITICIZING WHAT THEY CALL JUST RELIANCE ON ENFORCEMENT.

REGULATION BY ENFORCEMENT. WE HEARD MORE THAN TODAY FROM

ARMSTRONG HIMSELF. ED:

THE SEC SUED BOTH COINBASE AND BINANCE U.S.

OPERATIONS THIS WEEK, ESSENTIALLY ACCUSING THEM OF

PEDDLING UNREGISTERED SECURITIES.

WHAT WAS INTERESTING, ONSTAGE, BRIAN ARMSTRONG REFERENCE TO

THAT OTHER SUIT AWAY FROM COINBASE WITHOUT NAMING IT AND

SAID TO HIS MIND PERHAPS THE SEC WAS TRYING TO CONFLATE THE

TWO. WHAT DID YOU MAKE OF THAT? SONALI:

-- KATIE: HE TRIED TO DRAW THE LINE

BETWEEN THE CASES. WE HAVE BEEN TALKING ABOUT THEM

IN THE SAME BREATH SINCE THE LESS THAN 24 HOURS THAT

SEPARATED THE LAWSUITS. ARMSTRONG SAID IN COINBASE'S

CASE THERE WERE NO ALLEGATIONS OF MISAPPROPRIATION OF FUNDS.

THERE WERE NOT ANY EXECUTIVES NAMED.

IT IS A LAWSUIT AGAINST BINANCE AND AGAINST THE CEO OF BINANCE.

THAT IS NOT THE CASE WHEN IT COMES TO COINBASE.

THIS IS ABOUT A LEGAL DEFINITION OF SECURITIES.

THAT IS THE COMMON THREAD BETWEEN THESE LAWSUITS.

WHAT IS A SECURITY. IN TERMS OF THE BINANCE

ALLEGATIONS THEY GO MUCH DEEPER. ED: SMALL HEADLINES CROSSING THE

BLOOMBERG TERMINAL IN THAT WIDE-RANGING CONVERSATION.

SONALI BASAK ALSO ASKING ABOUT AI AND ARMSTRONG SAYING

COINBASE IS USING AI IN FRAUD PREVENTION.

HE PUT A LOT OF EMPHASIS ON THIS IDEA THAT COINBASE IS A

PUBLIC COMPANY AND THEREFORE IT IS AUDITED.

THE SEC, IF IT WANTED TO, COULD LOOK UNDER THE HOOD. KATIE:

THAT IS THE INTERESTING THING.

BINANCE DOES NOT HAVE HEADQUARTERS, A MUCH DIFFERENT

CASE THAN COINBASE WHICH IS A U.S. PUBLIC COMPANY.

IT LISTED IN 2021. A PUBLIC COMPANY.

THE FACT WE ARE SEEING THIS LAWSUIT AGAINST THEM AFTER IT

WAS ALLOWED TO GO PUBLIC HAS RAISED A FEW EYEBROWS AMONG MY

SOURCES. WRAPPING IT INTO THE AI CONVERSATION, VERY INTERESTING

TO HEAR THAT THEY DO SEE OPPORTUNITY.

I WOULD IMAGINE COINBASE IS BUSY WITH THIS LEGAL FIGHT BUT

SEES OPPORTUNITY THERE AS WELL. ED:

I DO NOT WANT TO DRAW A CAUSAL LINK, BUT INTERESTING TO LOOK

AT THE CHAIRS. WE ARE OFF SESSION HIGHS BUT

PUSHED HIGHER THROUGHOUT THAT CONVERSATION.

ON THE BLOOMBERG THERE ARE BUYERS FOR THIS NAME.

CATHIE WOOD BEING ONE OF THEM. KATIE: THE USUAL SUSPECTS.

CATHIE WOOD ADDING TO HER COINBASE FUND. THIS IS HER AMMO.

-- THIS IS HER M.O. BUY HER FAVORITE NAMES WHEN

THEY ARE DIPPING. UNSURPRISING TO SEE THAT UPDATE

OVERNIGHT. THEY ALSO ADDED YESTERDAY ON A

20% DRAWDOWN. IT MAKES SENSE WHEN YOU FOLLOW

HER STRATEGY. CAROLINE: I WANT TO GO BROADER.

DIGITAL TALKING ABOUT THE SEC IS GOING TO TAKE SOME TIME.

THE LEGAL OVERHANG REMAINS. THREE QUARTERS OF THE CRYPTO

MARKET IS STILL FOR PLAY IN THE U.S..

HE IS SAYING THE SEC IS NOT MENTIONING BITCOIN OR

STABLECOIN. WHAT IS THIS DOING TO SENTIMENT?

KATIE: THE QUESTION I KEEP GETTING IS

WHY ISN'T BITCOIN REACTING MORE? IT IS STILL HANGING AROUND

LEVELS AND HAS BEEN HANGING AROUND FOR THE LAST SEVERAL

WEEKS. THE TWO LARGEST EXCHANGES HAVE

BEEN SUED. IT COMES DOWN TO WHO IS LEFT?

WE KNOW THE MARGINAL RETAIL PLAYER WAS FLUSHED OUT A WHILE

AGO. YOU'RE LEFT WITH THESE TRUE BELIEVERS WHO HAVE BEEN HOLDING

IT FOR A LONG TIME AND THAT CONTINUES TO BE THE CASE.

I TRACKED ETF'S CLOSELY BOTH GLOBALLY AND IN THE U.S..

GLOBALLY WHEN YOU LOOK AT THESE ETP'S THAT CAN PHYSICALLY HOLD

BITCOIN THERE IS NOT MUCH MOVEMENT IN OR OUT BECAUSE THE

MARGINAL PLAYER HAS ALREADY BEEN FLUSHED OUT. CAROLINE:

I LIKE THAT YOU SAY GLOBAL BECAUSE THIS ENDS UP BECOMING A

GLOBAL ARBITRAGE STORY IN TERMS OF WHERE YOU BASE COMPANIES.

ARE YOU HEARING ABOUT OF LOSS OF TALENT IN THE U.S.

TO MIDDLE EAST? DO BY GETTING ITS REGULATORY

ACT TOGETHER? KATIE: THAT'S THE THING.

YOU LISTEN TO CRYPTO ADVOCATES IN THE U.S.

AND THAT IS THE ARGUMENT THEY MAKE, THAT THE AGENCIES ARE

SCARING AWAY TALENT AND INNOVATION OVERSEAS.

CERTAIN COUNTRIES HAVE BEEN TRYING TO ATTRACT THAT TALENT.

WHETHER THAT ACTUALLY HAPPENS REMAINS TO BE SEEN.

MAYBE SOME OF THE PEOPLE WHO WERE IN CRYPTO PIVOT BUT THAT

IS AN OPEN QUESTION AND IT IS A BIG QUESTION IN THE INDUSTRY.

CAROLINE: KATIE GREIFELD, GREAT TO HAVE

YOU FOR INSTANT ANALYSIS. LET'S CHECK IN ON THE MARKETS.

WE WANT TO GO CROSS ASSET FOR A MOMENT.

OVERALL WE HAVE SEEN A LITTLE BUT OF SENTIMENT SHIFT.

TECH DOWN. WE'RE WORRIED ABOUT INTEREST

RATES, WE WERE WORRIED ABOUT WHERE THE FED GOES.

CANADA A SURPRISE RATE HIKE. NOTABLE WE STILL HAVE TO LOOK

TO THE FED AND THE ECB NEXT WEEK TO SEE WHAT THEY WILL DO

IN TERMS OF TRYING TO DO THIS AWKWARD BALANCING ACT.

GROWTH ON ONE HAND AND INFLATION ON THE OTHER.

THE TWO YEAR YIELD GOES UP 11 BASIS POINTS.

SURE THERE MIGHT BE A PAUSE IN JUNE BUT WHAT ABOUT JULY, AND

WHAT IS HAPPENING IN TERMS OF BITCOIN?

IT IS OUR RISK ASSET OF CHOICE AND WE ARE CURRENTLY OFF 2%

EVEN THOUGH OVERALL THE DOLLAR HAD NOT BEEN SHOWING SO MUCH

STRENGTH TODAY. ED: THERE ARE OTHER NEWS ITEMS IN

THE WORLD OF TECHNOLOGY MAKING MOVES.

KEEPING A CLOSE EYE ON TESLA.

LONGEST STREAK OF GAINS SINCE FEBRUARY 2021. THE U.S.

TREASURY DEPARTMENT ST. PAUL MODEL THREE VARIANCE ARE

ELIGIBLE FOR THE TAX CREDIT. NETFLIX HAD BEEN UP AS MUCH AS

5%. TWO NAMES RAISING PRICE TARGETS

ON THE STOCK, TOUCHING ITS HIGHEST LEVEL SINCE 2022.

ORDER BROTHERS DISCOVERY TACKLING THE DEBT ISSUE BY

OFFERING A $500 MILLION TENT. SHARES OF COINBASE HAVE BEEN

HIGHER. THE CONVERSATION BETWEEN SONALI

BASAK AND BRIAN ARMSTRONG, ONE OF MANY INTERVIEWS HE HAS DONE

RESPONDING TO THE SEC SUIT AGAINST THEM. HIGHER 2.7%.

INTERESTING THE PUSHBACK HE GAVE DURING THAT INTERVIEW.

WE WILL RECAP LATER IN THE HOUR. CAROLINE:

SO MUCH MORE COMING UP. THE PRIVATE WORLD OF

TECHNOLOGY, REDDIT REDUCING ITS WORKFORCE AS A PLAN TO

RESTRUCTURE OPERATIONS. WE WILL HAVE THE DETAILS WHEN

WE RETURN. THIS IS BLOOMBERG.

♪

CAROLINE: TIME FOR TALKING TECH. THE CEO OF MICHAEL DELL'S

FAMILY OFFICE SAYS SHE IS LOOKING TO DIVERSIFY HER

PORTFOLIO.

I SAT DOWN AT THE BLOOMBERG NEW VOICES EVENT WHERE SHE SHARED

HER THOUGHT PROCESS BEHIND HER INVESTMENT.

>> WHAT I HAVE BEEN GRAPPLING WITH IS WE HAVE THIS IMPENDING

LIQUIDITY EVENT. HOW SHOULD WE BE COMMITTING

CAPITAL TODAY? HOW DO WE SIZE OUR INVESTMENTS

TODAY? CAROLINE:

DELL HAS A 36% SHAKE IN VMWARE.

EUROPEAN CHIPMAKER ST MICRO ARE PLANNING A $3.2 BILLION JOINT

VENTURE TO BUILD SHIPS AND SOUTHWEST CHINA'S POPULOUS CITY.

AS PART OF AN EFFORT TO TAP INTO CHINA'S MARKET FOR

VEHICLES. IT COUNTERS THE EU PUSH TO

LOCALIZE CHIP PRODUCTION. PRODUCTION IS EXPECTED TO BEGIN

IN 2025. REDDIT PLANNING TO CUT APPROXIMATELY 90 POSITIONS.

THE ONLINE DISCUSSION PLATFORM IS ALSO SCALING BACK ITS HIRING

PLANS. REDDIT JOINS A SLEW OF TECHNOLOGY COMPANIES THAT HAVE

TURNED TO LAYOFFS TO CUT COSTS AND BOOST PROFITABILITY.

THIS IS IMPORTANT TO THINK ABOUT BECAUSE THIS WAS EXPECTED

TO GO PUBLIC. MAYBE IT WILL REOPEN WHAT HAS

BEEN A FROZEN MARKET. THEY HAVE TO SHOW PROFITABILITY

OVERGROWTH AT ALL COSTS. ED:

WE REPORTED THE STORY 24 HOURS AGO AND WHEN I WAS READING THE

MEMO FROM STEVE HOFFMAN IT JUMPS OUT THIS IS NOT AN ACTION

TAKEN BECAUSE OF HARDSHIP, BUT BECAUSE THEY LOOKED AT IT AND

SAID WE CAN ACHIEVE BREAKEVEN NEXT YEAR.

THEY FILED FOR AN IPO IN LATE 2021.

WE HAVE NOT HEARD MUCH ABOUT THAT SINCE THEN.

A SMALLER COMPANY, 2000 PEOPLE. 5% IS 90 JOBS.

NEVER PLEASANT TO TALK ABOUT LAYOFFS IN THE TECHNOLOGY

INDUSTRY. CAROLINE: IT FEEL SMALL WHEN WE THINK

ABOUT THE HUNDREDS OF THOUSANDS OF PEOPLE THAT HAVE LOST THEIR

JOBS. ULTIMATELY IT IS ABOUT THE WAY

IN WHICH YOU MANAGE AND TELL PEOPLE THIS IS ONE AND DONE

WERE NOT SPRINKLING ON A CONTINUED BASIS.

OTHERWISE IT HITS MORE OUT. ED: IT HITS MORE OUT AND HOFFMAN

ADDRESS THAT IN THE MEMO SAYING THIS WILL IMPACT MANY PEOPLE

THAT HAVE BEEN AT THAT COMPANY FOR BEING A LONG TIME, BUT ONE

THAT SEEMS TO BE WEATHERING THE STORM.

AS WE WRITE THE STORY THEY WERE A HOLDOUT.

IT HAS TAKEN THEM UNTIL THIS POINT IN 2023 TO ENACT LAYOFFS

WHEN MANY DID THE DEPTH OF THEM AT THE END OF LAST YEAR.

CAROLINE: A LOT OF TALK ABOUT WHEN IT

COMES TO COMPANIES HAVE YOU THINK ABOUT PROFITABILITY

OVERGROWTH AND DOING TIEUPS TO INJECT MORE GROWTH WHEN IT

COMES TO AI. ED:

COMING UP, TWILIO AND GOOGLE CLOUT GET INTO GENERATIVE AI

TOGETHER.

MORE WITH TWILIO'S CEO JEFF LAWSON COMING UP ON BLOOMBERG

TECHNOLOGY. I WANT TO TAKE A LOOK AT

PALANTIR. THIS IS TRADING AT ITS HIGHEST

LEVEL SINCE JANUARY OF THIS YEAR.

THE NEWS WHICH IS DRIVING THIS PERFORMANCE, NOT SO MUCH NOW,

HAVE BEEN MUCH HIGHER EARLIER IN THE SESSION.

AFTER PALANTIR ANNOUNCED IT WAS OPERATIONALIZING DATA AND

INTRODUCING AUTOMATED EFFICIENCIES FOR THE PANASONIC

ENERGY NORTH AMERICA FACILITY IN NEVADA.

A KEY FACILITY FOR TESLA FOR WHICH IT SUPPLIES.

A MULTIYEAR AGREEMENT. THE STOCKS FLAT.

GIVING UP MOST OF ITS GAINS. ONE TO WATCH.

FROM NEW YORK AND SAN FRANCISCO, THIS IS BLOOMBERG.

♪

ED: WELCOME BACK. I AM ED LUDLOW IN SAN FRANCISCO.

CAROLINE: I AM CAROLINE HYDE IN NEW YORK.

WE ARE SEEING MORE RISK AVERSION WHEN IT COMES TO BIG

TECH. TODAY WE PULL BACK ALMOST 1% IN

THE NASDAQ. WE ARE HEADING FURTHER LOWS

ACROSS THE MAIN BENCHMARK. IT IS ABOUT WHERE THE FEDERAL

RESERVE GOES NEXT, ABOUT WHETHER WE HAVE ANOTHER HIKE IN

JULY. THE TWO YEAR OR FIVE YEAR, THE

BELLY OF THE CURVE MOVING HIGHER AS WE START TO PRICING

WITH THE FED COULD DO. THIS IS A GLOBAL PERSPECTIVE.

THE CANADIAN LOONIE GOING HIGHER VERSUS THE U.S. DOLLAR.

I AM LOOKING AT BITCOIN UNDER PRESSURE BY 2.4%.

A LOT OF REGULATORY OVERHANG. ED: LET'S GET TO HER NEXT STORY.

TWILIO AND GOOGLE CLOUT BRINGING GENERATIVE AI TO

TWILIO CUSTOMER ENGAGEMENT PROJECTS.

THAT NEWS AS TWILIO CEO JEFF LAWSON JOINS US NOW.

OVER THE HISTORY OF YOUR COMPANY YOU HAVE WORKED WITH

GOOGLE CLOUT CLOSELY. EXPLAIN WHAT ANY OF THAT

ACTUALLY MEANS IF YOU'RE A TWILIO CUSTOMER.

WHAT YOU GET ACCESS TO WITH THIS GENERATIVE AI TOOL?

JEFF: THIS GOOGLE PARTNERSHIP IS A

PARTNERSHIP TO HELP BRING GENERATIVE AI INTO THE CONTACT

CENTER. BY COMPLYING TWILIO'S FLEX

CONTACT CENTER WITH GOOGLES AI WE CAN AUTOMATE A WIDE VARIETY

OF INTERACTIONS IN OVER 30 LANGUAGES TO PROVIDE REAL-TIME

INTELLIGENT AUTOMATED INTERACTIONS TO CUSTOMERS.

TOYOTA CONNECTED AS ONE OF OUR CUSTOMERS.

THERE ARE MILLIONS OF TOYOTA AND LEXUS VEHICLES ON THE ROAD

WHERE IF YOU HIT THE BUTTON AND SAY WANT TO ASK FOR DIRECTIONS

THAT IS A COMPLETELY AUTOMATED EXPERIENCE POWERED BY TWILIO

FLEX INTEGRATED TO PROVIDE THAT AUTOMATION.

THIS IS JUST PART OF TWILIO'S NEWLY ANNOUNCED CUSTOMER AI

INITIATIVE WE ANNOUNCED YESTERDAY.

CUSTOMER AI IS THE INTERSECTION OF ALL OF THESE NEW

CAPABILITIES OF GENERATIVE AND PREDICTIVE AI.

COMBINING THAT WITH THE CUSTOMER JOURNEY.

EVERY COMPANY HAS THIS JOURNEY AS A CUSTOMER PROGRESSES

THROUGH SALES, MARKETING, SERVICE THAT COMPANIES ARE

TRYING TO CONNECT TOGETHER TO CREATE A COHESIVE AND RELATIVE

EXPERIENCE FOR THOSE CUSTOMERS. WHAT TWILIO CAN DO IS BRING

GENERATIVE AND PREDICTIVE AI TO THE TABLE TO HELP CONNECT EACH

OF THOSE EXPERIENCES BASED ON THE SEGMENT PROFILES WE HAVE

INSIDE OF TWILIO ABOUT EACH ONE OF THOSE CUSTOMERS.

WE ARE EXCITED TO GET THIS OUT IN THE MARKET. CAROLINE:

HOW ARE YOU ENSURING PEOPLE FEEL COMFORTABLE WHEN THEY ARE

BEING SERVICED WITH SO MUCH MORE EFFECT.

PEOPLE WORRIED ABOUT THEIR DATA, WONDERING HOW COMPANIES

ARE OWNING IT? HOW ARE YOU ENSURING THIS WILL

NOT BRING PRODUCTIVITY BUT ALSO A LOT OF PUSHBACK AT THE SAME

TIME? JEFF:

PEOPLE SHOULD BE SECURED -- SHOULD BE CONCERNED ABOUT

PRIVACY AND DATA SECURITY. THAT IS WHY WE HAVE ONLY

PARTNERED WITH DATA AND AI COMPANIES, LANGUAGE MODEL

COMPANIES THAT WILL PRESERVE THE PRIVACY AND INTEGRITY OF

OUR CUSTOMERS DATA AND THEIR CUSTOMERS PRIVACY.

SECOND IS USING THAT DATA ONLY IN THE CONTEXT OF THAT ONE

CUSTOMER TO MAKE THAT EXPERIENCE BETTER.

WE ARE ACCUSTOMED TO THIS AS A NET POSITIVE AS CUSTOMERS OF

COMPANIES WHO DO IT WELL. THINK ABOUT AMAZON OR GOOGLE.

YOUR AND MY AMAZON HOMEPAGE ARE VERY DIFFERENT BECAUSE AMAZON

USES ALL OF THE DATA IT HAS ABOUT US TO MAKE THAT PRODUCT

BETTER. WHAT WE ARE SEEING IS EVERY

COMPANY OUT THERE, BECAUSE OF PRIVACY, NEEDS TO TAKE THEIR

OWN FIRST PARTY DATA, THAT STREAM OF DATA ABOUT WHAT DO

PEOPLE CLICK ON, WHAT TODAY BY, WHAT ARE THEY NOT BY, AND TURN

THEM INTO INNS -- INTO INSIGHTS ABOUT THE CUSTOMER.

THAT IS WHAT TWILIO IS PROVIDING. CAROLINE:

WHAT IS INTERESTING IS AMID A MACRO ENVIRONMENT THAT IS

CLOUDY A LOT OF COMPANIES ARE TALKING ABOUT AI EFFECTIVENESS

AND IT FEELS LIKE QUITE A BUSY SPACE. IT HAS TO BE ABOUT THE

UNDERLYING TECHNOLOGY. ED: THAT IS THE QUESTION I HAVE.

I GET THE GOOGLE CLOUT RELATIONSHIP.

WHEN YOU BUILD THE PRODUCT INTO YOUR EXISTING PLATFORM WHERE

DOES THE TECHNOLOGY COME FROM. IT IS THE FOUNDATION MODEL FROM

GOOGLE ITSELF AND WHAT THEY HAVE BEEN WORKING ON, WAS THERE

A TO GO TO OPENAI AND BUILD SOMETHING ON TOP OF GPT? JEFF:

GOOGLE IS THE FIRST OF SEVERAL PARTNERS WE ARE WORKING WITH

AND WE WILL BE ANNOUNCING MORE OVER TIME.

THEY'RE GOING TO BE THE RIGHT MODELS FOR THE RIGHT USE CASES.

WE WILL ONLY WORK WITH VENDORS AND MODELS WHERE WE CAN CONTROL

THE FLOW OF DATA AND WHERE WE CAN ENSURE DATA REMAINS

BELONGING TO OUR CUSTOMERS, WHICH IS THE MOST IMPORTANT

THING. I THINK EVERY LARGE LANGUAGE

MODEL VENDOR, EVERY AI MODEL VENDOR REALIZES BUSINESSES WILL

WANT TO CONTROL THIS. THEY NEED SAFETY AND SECURITY

AROUND THE MODELS AND THEY NEED A HUMAN IN THE LOOP TO MAKE

SURE THAT AS THE AI IS DOING GREATER AND GREATER WORKLOADS

WE HAVE TO HAVE GREAT CHECKS AND BALANCES ON THE WORK THEY

ARE DOING. THAT IS WHAT TWILIO AND MANY

OTHER SOFTWARE SERVICE COMPANIES ARE DOING TO CREATE

VIABLE PRODUCTS OUT OF THE CAPABILITIES.

CAROLINE: IN AMONGST ALL OF THESE

INNOVATIONS IS A MACRO ENVIRONMENT THAT IS TOUGHER.

IT HAS BEEN TOUGH TO YOUR COMPANY.

ULTIMATELY YOUR INVESTORS DO. I KNOW THERE IS SOMEONE

THINKING ABOUT ACTIVIST INVESTORS AS SOME OF THE

CONTROL YOU HAVE HAD IN VOTING RIGHTS SEEPS AWAY A LITTLE BIT.

HOW ARE YOU TACKLING THAT? JEFF: WE HAVE ALWAYS BEEN A COMPANY

THAT IS LOOKING AT THE INTEREST OF OUR SHAREHOLDERS AND

OPERATING THE COMPANY IN THE INTEREST OF OUR SHAREHOLDERS BY

TALKING TO THE SHAREHOLDERS. DURING THE ERA OF LOW COST OF

CAPITAL WE RAN THE COMPANY TO GROW THE TOP LINE AND BUILD OUR

MARKET SHARE AND I'M PROUD OF THE COMPANY WE HAVE BUILT IN

TERMS OF A $4 BILLION REVENUE COMPANY DURING THAT TIME.

NOW WE ARE IN A DIFFERENT ENVIRONMENT.

NOW WE ARE IN AN ENVIRONMENT WHERE WE TAKE THE MARKET

LEADERSHIP POSITION WE ARE IN AND TURN IT INTO A PROFIT

GENERATING MACHINE. THAT IS WHAT WE HAVE BEEN DOING.

I AM PROUD OF THE FACT THAT OVER THE LAST TWO QUARTERS WE

HAVE TAKEN A COMPANY THAT IS NEVER GENERATED CONSISTENT

PROFIT TO NOW GENERATING MORE THAN 10% OPERATING MARGIN IN Q1.

I THINK WE ARE LISTENING TO THOSE INVESTORS AND TAKING

SUBSTANTIVE ACTIONS TO RESPOND TO THE CHANGING NEEDS OF

INVESTORS BASED ON THE CHANGING NEEDS OF THE INTEREST RATES.

ED: THE STORY YOU'RE ARE TALKING TO

LEGION PARTNERS, WHAT IS THE UPDATE ON THAT?

THE FIRST FOUR SLIDES OUTLINED OF A STRUCTURE, EFFECTIVENESS,

AND TRACK RECORD OF THE MANAGEMENT.

THAT IS AN UNUSUAL THING TO DO. WHY DID YOU DO THAT?

JEFF: WE TALKED TO ALL OF OUR INVESTORS FREQUENTLY.

IT IS A REGULAR PART OF TALKING TO OUR INVESTORS.

REGARDING THE DISCLOSURES WE MAKE YESTERDAY, WE WANTED TO

FIGHT MISINFORMATION OR LACK OF UNDERSTANDING ABOUT HOW OUR

COMPENSATION MODEL WORKS. CAROLINE:

WE WANT TO THANK YOU SO MUCH FOR SPENDING TIME WITH US

TALKING US THROUGH THE BUSINESS MODEL APPLICATIONS AND FOCUS ON

AI. THE TWILIO CEO JEFF LAWSON. LET'S RETURN TO BLOOMBERG

INVESTOR DATE. BILLIONAIRE STAN TRUCK AND

MILLER SAYS HE EXPECTS AI IS HERE TO STAY AND HE ESTIMATES

OWNING NVIDIA SHARES FOR A WHILE LONGER.

HE SPOKE WITH SONALI BASAK AT THE SUMMIT IN NEW YORK EARLIER

TODAY. STAN: THE AI'S HAVE DOMINATED THE

LONG PORTFOLIO FOR FIVE OR SIX MONTHS.

IF IT AS BIG AS I THINK IT IS, NVIDIA IS SOMETHING WE WILL

WANT TO OWN FOR TWO OR THREE YEARS. MAYBE LONGER.

CAROLINE: MEANWHILE, A LITTLE BIT OF

BREAKING NEWS. AMAZON PLANNING AND ADD

TWO-YEAR FOR PRIME VIDEO STREAMING SERVICE.

AS WE HAVE SEEN WITH DISNEY AND NETFLIX -- MORE TO COME ON

AMAZON AND GENERATIVE AI. WE HAVE SO MUCH MORE.

THIS IS BLOOMBERG.

CAROLINE: GUESS WHAT WE ARE TALKING ABOUT

NEXT? GENERATIVE AI. OF COURSE WE ARE.

MANY FEEL THIS IS TRULY A PLATFORM SHIFT.

OR MAYBE TAKE THE OTHER SIDE OF THE COIN, YOU THINK IS HYPE.

LET'S DISSECT IT WITH CATHY GAU AT SAPPHIRE VENTURES.

I CAN ONLY ESTIMATE HOW MANY INBOUNDS YOU HAVE SUGGESTING

THEY ARE AI. HOW ARE YOU DECIPHERING WHICH

COMPANY IS TRULY ARTIFICIAL INTELLIGENCE AMPLIFIED OR THOSE

THAT ARE GETTING ON THE BANDWAGON? CATHY:

THANKS SO MUCH FOR HAVING ME BACK. A GREAT QUESTION.

THIS IS A QUESTION WE THINK ABOUT CONSTANTLY.

THE FUNDAMENTAL PRINCIPLES OF INVESTING HAVE NOT CHANGED.

WE ARE STILL LOOKING FOR COMPANIES SOLVING A VERY

SPECIFIC PROBLEM AND HAVE A POINT OF VIEW ON THEIR RIGHT TO

WIN. THAT COULD MEAN OWNING A VERY

SPECIFIC AND VALUABLE WORKFLOW FOR THE END USER.

IT COULD ALSO MEAN HAVING ACCESS TO AND INTERACTING WITH

PROPRIETARY AND VALUABLE DATA. THE COMPANY SHOULD HAVE A POINT

OF VIEW. THERE ARE COMPANIES THAT HAVE A

THIN LAYER OF APPLICATION ON THE TOP OF COMMODITIZED

INFRASTRUCTURE. FOR US THOSE WOULD NOT BE

COMPANIES WE WOULD BE EXCITING TO INVEST IN.

ANOTHER INTERESTING THING WE HAVE TO THINK ABOUT AS

INVESTORS IS IN WHAT SITUATIONS DOES IT MAKE SENSE FOR EXISTING

COMPANIES TO ADD IN AI FEATURES IN THEIR PRODUCT AND PLATFORMS.

A GREAT EXAMPLE IS MANY OF US USE GMAIL OR OUTLOOK.

WE CAN POP UP IN OUR EMAIL AND USE AUTO COMPLETE OR AUTO

GENERATE TO HELP US RESPOND TO EMAILS. THAT IS AN EXAMPLE OF AN

EXISTING PLATFORM FOLDING IN AI TO THE PLATFORM. ED:

THAT IS TANGIBLE. I WAS AT GOOGLE I/O.

I SAW THE DEMO. YOU HAVE ALL OF THE STARTUPS IN

THE FIELD. HOW CONFIDENT ARE YOU ANY OF

THEM WILL EVER MAKE MONEY? ONE EXAMPLE IS CHARACTER AI.

IT KIND OF SEEMS LIKE AN AFTERTHOUGHT.

THAT IS ALARM BELLS FOR ABC, ISN'T IT? CATHY: ABSOLUTELY.

AT SAPPHIRE VENTURES WE ARE BUILDING OUR PREPAREDNESS TO BE

READY TO INVEST IN AI AND I THINK IT WILL BE A TRUE

MEDICINE OPPORTUNITY FOR VC'S AND THE NEXT THREE TO FIVE

YEARS. THAT BEING SAID IT IS VERY NEW.

WE WANT TO TAKE TIME TO SEE HOW THIS PLAYS OUT.

IF YOU THINK BACK TO PREVIOUS TECHNOLOGICAL FUNDAMENTAL

PLATFORM SHIFTS, THE ULTIMATE WINNERS MAY NOT HAVE BEEN THE

COMPANIES THAT CAME OUT OF THE FIRST WAVE.

I THINK OF GOOGLE AFTER ULTA VISA AND YAHOO!

AND FACEBOOK WHO CAME AFTER MYSPACE AND FRIENDS TO HER.

FOR US IS ABOUT LEARNING ABOUT THE CURRENT ENVIRONMENT IN THE

MARKET AND WATCHING WHAT WILL HAPPEN AND BEING PREPARED TO

INVEST WHEN THE TIMING FEELS RIGHT. ED:

EARLIER IN YOUR CAREER YOU ARE LOOKING AT CHINA.

HOW FIERCE IS THE COMPETITION BETWEEN THE ENTREPRENEURS IN

THE UNITED STATES AND WHAT ENTREPRENEURS IN CHINA ARE

DOING? AS ABC, HOW DO YOU NAVIGATE

THAT FIELD? CATHY: I WOULD SAY AI IS A VERY

COMPETITIVE FIELD. IT IS A MISTAKE TO ONLY LOOK AT

IT AS THE U.S. VERSUS CHINA. IT IS A GLOBAL DYNAMIC.

THE REASON COMPANIES ARE INVESTING IN AI IS BECAUSE THE

TREMENDOUS POTENTIAL FOR AI TO TRANSFORM EVERY INDUSTRY OUT

THERE. MAYBE THIS IS ME PUTTING ON MY

OPTIMISTIC HAT BUT I THINK GLOBAL SOLUTIONS, GLOBAL

COLLABORATION IS WHAT IS NEEDED. ULTIMATELY AI HAS THE POTENTIAL

TO SOLVE PROBLEMS IN HEALTH CARE AND CLIMATE CHANGE.

THESE ARE PROBLEMS THAT TRANSCEND NATIONAL BORDERS ED:.

ED:THE STORY OF THE WEEK WAS SEQUOIA

SPLITTING INTO THREE AND ONE OF THE RATIONALES WAS THEY CAN

HAVE A UNIT FOCUSED ON CHINA. THERE IS OPPORTUNITY IN CHINA.

THERE ENTREPRENEURS AND SUPPORT FROM THE GOVERNMENT. CAROLINE:

THEY CANNOT MANAGE TO DO THAT FROM A GLOBALLY COORDINATED

MANNER. TO THAT POINT, HOW GLOBAL CAN

YOU BE RIGHT NOW? HOW MUCH ARE YOU ABLE TO

NAVIGATE THE GEOPOLITICAL HEADWINDS? CATHY:

THAT IS A GREAT QUESTION. I AM CLOSELY WATCHING WHAT IS

HAPPENING WITH SEQUOIA. THE NEWS IS RELATIVELY NEW SO I

CANNOT SPECULATE WHAT IS HAPPENING, BUT THE MOVES THEY

HAVE MADE WILL IMPACT THE VENTURE CAPITAL INDUSTRY.

WHAT SEQUOIA HAS PUBLICLY SAID, WHICH IS MANAGING A GLOBAL

ORGANIZATION IS DIFFICULT. YOU HAVE TO CONSIDER PORTFOLIO

CONFLICTS, NOT JUST IN THE U.S. BUT MULTIPLE GEOGRAPHIES.

IT IS VERY DIFFICULT TO HANDLE.

SEQUOIA'S SOLUTION IS TO BREAK THE FIRM UP INTO THREE SEPARATE

ENTITIES IS JUST ONE SOLUTION. I'M CURIOUS TO SEE IF OTHER

LARGE GLOBAL VENTURE CAPITAL FIRMS ALSO INVESTING IN OTHER

COUNTRIES FOLLOW SUIT OR COME UP WITH OTHER CREATIVE

STRATEGIES. CAROLINE:

SAPPHIRE VENTURES CATHY GAU, SO GOOD TO HAVE YOU BACK ON THE

PROGRAM AFTER ALL OF THESE MONTHS. CAROLINE:

COMING UP WE SIT DOWN WITH THE CEO OF COINBASE FOR MORE ON THE

SEC CRACKDOWN. A DEEPER DIVE FOLLOWING HIS

REMARKS 30 MINUTES AGO. THAT IS NEXT. THIS IS BLOOMBERG.

STANLEY: I BELIEVE, UNLIKE CRYPTO, AI IS

REAL. IT COULD BE AS TRANSFORMATIVE

AS THE INTERNET. IT IS A HUGE THING.

ED: STANLEY DRUCKENMILLER EARLIER

AT BLOOMBERG BEST. LET'S SEND IT OVER TO BLOOMBERG SONALI

BASAK AND CORN-BASED CEO BRIAN ARMSTRONG. SONALI:

THANK YOU FOR JOINING US . YOU HAVE HAD A VERY INTENSE 24

HOURS. WHEN YOU LOOK AT THE CHARGES

THE SEC HAS BROUGHT FORTH AGAINST COINBASE, HOW LONG DO

YOU THINK IT WILL TAKE TO FIGHT THEM WHEN YOU HAVE YOUR CHIEF

LEGAL OFFICER SAYING YOU WILL GO ALL THE WAY TO THE SUPREME

COURT? BRIAN: IF NECESSARY.

WE DO NOT KNOW HOW LONG THIS COURT CASE WILL TAKE BUT I

THINK IT IS AN IMPORTANT OPPORTUNITY FOR US AS A LEADER

IN THE U.S. TO GET CLARITY FOR THIS

INDUSTRY AND FOR AMERICA SO WE MAKE SURE THIS TECHNOLOGY IS

BUILT HERE AND DOES NOT GET PUSHED OFFSHORE WHERE CUSTOMERS

CAN GET HARMED. IF YOU GO BACK IN TIME TO 2021,

WE HAD A NUMBER OF DISCUSSIONS WITH THE SEC ABOUT BECOMING A

PUBLIC COMPANY AND THEY ALLOWED US TO BECOME A PUBLIC COMPANY

WITH FULL KNOWLEDGE OF HOW WE LIST ASSETS AND HOW WE OPERATE

OUR PROGRAM AND IT WAS NOT UNTIL A YEAR LATER OR SO THEY

STARTED TO HAVE MORE QUESTIONS. WE THOUGHTFULLY ENGAGED WITH

THEM. WE MET WITH THEM 30 TIMES OVER

THE LAST YEAR EXPLAINING OUR BUSINESS.

WE SAID WE WANT TO REGISTER. WE ACQUIRED A DEALER LICENSE

WHICH IS STILL DORMANT. WE FORMALLY PETITION THEM FOR

MORE CLARITY AROUND THE RULES. WE FRANKLY WERE MET WITH

SILENCE. UNFORTUNATELY THEY DECIDED TO

PURSUE THIS POLICY OF REGULATION BY ENFORCEMENT.

THE COMPLAINT IS OFFICIALLY HERE.

THIS IS A DIFFICULT MOMENT FOR

NOT ONLY THE INDUSTRY BUT ALSO AMERICA. SONALI:

IS THERE A POINT AT WHICH YOU CALL IT QUITS ON THE UNITED

STATES GIVEN HOW HARD RIG LEADERS ARE COMING DOWN ON THE

INDUSTRY? BRIAN: WE ARE NOT GOING ANYWHERE.

I STARTED THIS COMPANY IN THE U.S.

BECAUSE NOT ONLY IS IT A BIG MARKET, THERE IS THE RULE OF

LAW HERE. WE HAVE TO FOLLOW THE RULE OF

LAW AND SO DOES THE SEC. IF WE ARE NOT GETTING A CLEAR

RULEBOOK FROM THE SEC WE HAVE THE OPPORTUNITY TO AVAIL

OURSELVES OF THE COURT AND WE WILL GET CASE LAW CREATED,

REGARDLESS OF WHAT THE CASE IS. IT IS A STEP TOWARDS MORE

CLARITY. THE OTHER OPPORTUNITY IS FOR

CONGRESS TO ACT. WE SAW BILL LAST WEEK FROM

MCHENRY AND THOMPSON CLARIFYING THIS IS THE ROLE OF THE CFTC

AND THE SEC AND LET'S HAVE CONSUMER PROTECTIONS.

THERE IS A BROAD RECOGNITION WITHIN CONGRESS THAT THE U.S.

WILL GET LEFT BEHIND.

THE U.K., HONG KONG, SINGAPORE, THE UAE, THESE ARE SAYING WE

WANT TO BE CRYPTO AND WEB THREE HUBS. COME HERE AND BUILD YOUR

BUSINESS. THE U.S. IS AT RISK OF BEING LEFT BEHIND.

SONALI: IS THERE A CHANCE YOU START TO

USE CUSTOMERS AND BANKING PARTNERS?

YOU HAVE JP MORGAN AND CROSS RIVER AND THESE MORE

TRADITIONAL FINANCIAL INSTITUTIONS.

THEY START TO FREEZE UP WHEN THE GOVERNMENT DOES NOT HAVE

CLEAR ROLES? BRIAN: WE HAVE NOT SEEN ANY RISK OF

THAT HAPPENING. OUR PARTNERS HAVE BEEN HAPPY

WORKING WITH US. THEY ARE WAITING TO SEE WHAT

THE OUTCOME OF SOME OF THESE CASES ARE. HOW DOES THE U.S.

TO GET TO A PATH OF MORE CLARITY, WHETHER THAT IS WITH

THE CFTC STEPPING IN, CONGRESS, THE COURT CASE, MAYBE THE

ELECTIONS IN 2024 CHANGE THIS AS WELL.

OUR PARTNERS HAVE BEEN GREAT TO WORK WITH.

WE ARE NOT GOING ANYWHERE. SONALI:

DO SOME OF THESE POTENTIAL PRESSURES ON THE INDUSTRY GO

AWAY WITH THE POTENTIAL CHANGE IN ADMINISTRATION? BRIAN:

IT IS POSSIBLE. I THINK THE SEC CHAIR IS A BIT

OF AN OUTLIER IN THE U.S. GOVERNMENT.

CONGRESS SEEMS INTERESTED IN CRAFTING LEGISLATION.

THE BIDEN ADMINISTRATION PUT OUT AN EXECUTIVE ORDER SAYING

WE RECOGNIZE THE POTENTIAL OF THIS TECHNOLOGY AND WE WANT TO

MAKE SURE THE RISKS ARE MITIGATED.

THEY ASKED THE BRANCHES OF GOVERNMENT TO INTRODUCE THIS.

WE ARE SEEING SOME OF THE PRESIDENTIAL CANDIDATES FOR

NEXT YEAR STARTS TO TALK ABOUT THEIR STANCES ON CRYPTO AND HOW

IT SHOULD BE REGULATED. THERE IS A GOOD CHANCE THIS

BECOMES A RELEVANT ISSUE IN THE 2024 ELECTIONS. SONALI:

THIS COULD BE AN OVERHANG FOR A WHILE WHEN YOU LOOK AT HOW LONG

THIS COULD PLAY OUT, NOT JUST FOR YOU BUT THE INDUSTRY.

WHAT DOES THIS MEAN FOR CRYPTO PRICES OVERALL?

YOU THINK IT IS SPOOKING SOME INVESTORS AWAY? BRIAN:

YESTERDAY THIS NEWS CAME OUT AND IT SURPRISED ME THAT CRYPTO

WAS UP. WHAT I INTERPRET FROM THIS IS

THE SEC'S RHETORIC ON THIS HAS BEEN CLEAR AND THEY HAVE BEEN

MAKING LOTS OF STATEMENTS. IF THERE IS OVERHANG IT HAS

PROBABLY BEEN THERE FOR A WHILE AND I DO NOT THINK ANYBODY WAS

SURPRISED BY THIS NEWS. THE NOTICE CAME AND THE

RHETORIC WAS THERE BEFORE THAT. OUR INVESTORS ARE LONG-TERM

BELIEVERS IN THIS TECHNOLOGY AND LOOKING AT IT AS AN

OPPORTUNITY. IF OTHERS ARE FEARFUL IT IS

PROBABLY AN INTERESTING BUYING OPPORTUNITY.

THEY ARE EXCITED ABOUT THIS AS ONE OF THE MAJOR TECHNOLOGY

TRENDS HAPPENING IN THE WORLD AND THE SMART INVESTORS

RECOGNIZE THE U.S. IS NOT GOING TO SIT ON THE

SIDELINES. THIS IS TOO IMPORTANT. SONALI:

THANK YOU FOR YOUR TIME AND JOINING US ON THE BACK OF SUCH

IMPORTANT NEWS FOR THE INDUSTRY. ED: SONALI BASAK WITH BRIAN

ARMSTRONG, CEO OF COINBASE. THANK YOU SO MUCH. CAROLINE:

TIME HAS RUN OUT. THAT DOES IT FOR THIS EDITION

OF BLOOMBERG TECHNOLOGY. WHAT A WHIRLWIND. ED:

YOU CAN RECAP THAT WHIRLWIND WITH THE PODCAST THE POT.