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Coinbase’s Alesia Haas explains why Ethereum is not a security and the crypto industry is rebuilding trust after FTX ‘parody’
Welcome to Future of Finance, where Fortune interviews leading business figures about their role in this vast, ever-changing ecosystem and what it all means for how we use money.
Coinbase is the largest centralized crypto exchange in the United States, publishing $273 million in net profit for the fourth quarter of 2023, bringing the company’s net profitability for all of 2023 to $95 million.
“Coinbase has always taken a long-term approach focused on building compliantly, even though it wasn’t the popular choice,” CEO Brian Armstrong said during an earnings conference call in February. “Many of our competitors cut corners And break the laws get big fast, and we’ve seen how that strategy played out.
Alesia Haas joined the firm in April 2018. She was previously CFO of Sculptor Capital Management (formerly Och-Ziff Capital Management Group), a global institutional alternative asset manager. She also served as Chief Financial Officer and Head of Strategy for OneWest Bank.
In a conversation with Fortune, Haas shared his thoughts on Bitcoin hits record highthe latest crypto bull market, the SEC’s take on Ethereum, Sentencing of Sam Bankman-Friedand what attracted her to the world of crypto from traditional finance.
(This interview has been edited for length and clarity.)
Earlier this month, Bitcoin hit an all-time high above $72,000. Can you give us an overview of what this means in a broader sense?
I think it’s important with crypto to zoom out and look at what’s happened since the Bitcoin white paper and crypto first appeared. You have seen four price cycles. What I like about watching these price cycles is that each peak is higher than its last peak. And each trough is higher than the last.
If you look at that, you have a lot of volatility, but there’s this constant upward curve. When you look at the one, three, five, and ten year performance of Bitcoin compared to all other assets, it is one of the best performing assets compared to any other comparable asset.
Much of this is due to Bitcoin ETFs. What I think is important to note is that ETFs are driving new demand for this asset class. Previously, many investment advisors were unable to access Bitcoin due to their investment mandates. They can now buy Bitcoin in an ETF package, thereby opening up new capital availability.
What does Bitcoin’s rise mean for other cryptocurrencies, especially Ethereum?
I think we’re starting to see a differentiation between different cryptocurrencies and Bitcoin, where Bitcoin is a store of value asset, and people are putting it in their wallets as an important store of value in wealth creation.
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Ethereum has become the protocol that developers are increasingly choosing to build decentralized applications. Although Bitcoin is the largest asset, we generally see a “rising tide lifts all ships” effect where crypto appears next. But you’re starting to see differentiation because people are choosing Ethereum, and that’s going to change more and more based on developer activity and user activity on that platform. Stablecoins and NFTs are built on Ethereum. There are many new use cases based on this protocol.
Speaking of Ethereum, what’s the latest with this SEC now trying to define it as a security?
Ethereum is not a security. Historically, the SEC has repeatedly stated that Ether is not a security. The CFTC [Commodity Futures Trading Commission] said that Ether is not a security. The central problem here we still don’t have comprehensive crypto regulation at the federal level in the United States. And it’s something we’re passionate about. It is essential to get clear regulation so that we can have a clear, fair and enforced regulatory framework that will protect consumers and ensure responsible markets – and also protect companies like Coinbase, so that we know how to bring products to market compliant and pursue innovation. here in America.
What can we learn from the latest cryptocurrency bull market?
In general, what we see is similar to past bull markets, as cryptocurrency prices rise, you see an increase in volatility and then an increase in engagement. As we shared during our fourth quarter earnings conference call in February, we saw high engagement, net inflows across all sectors of the institutional retail sector and higher trading volumes.
With almost $12 billion in net inflows into ETFs, we saw a market capitalization of over $2.5 trillion. This has the effect of putting cryptography back in the headlines. It has become a topic of conversation in homes. And we’re seeing really great engagement from clients who have been a little bit asleep in 2021, and they’re saying, “Oh, this asset class is back.”
The crypto sector plunged after the implosion of FTX and the arrest of co-founder Sam Bankman-Fried. It was I just condemned has 25 years in prison. Has the industry finally turned a page?
Well, fraud is fraud. And I’m happy to see the process followed in cases of market fraud. This is a parody that has happened. But I think we’ve evolved, and I think the market has largely evolved. Coinbase has always been focused on compliance. We are excited to build and regain the trust of our customers. But there has been a flight to quality. We have seen this flight to quality over the past year. And we’re happy to see that people continue to focus and grow on the good businesses here.
Before joining Coinbase, you worked in asset management, as a CFO, and held senior management positions at Merrill Lynch and General Electric. What attracted you most to your current company?
I’m old enough to have grown up in the early days of the Internet age, and I’ve just watched the transformation of how technology creates new use cases. When I discovered blockchain, I could see that if you tokenized real-world assets – and sent value between peers – it would create a more inclusive, faster and cheaper financial system. And it was so exciting to participate.
I’ve worked for banks and asset managers, and I’ve seen how many people touch the transaction just to move money from me to you, and how many different steps and market participants this takes. I saw the cost. I saw the friction. And I said, “If technology solves this problem, it will be adopted.” The question is when, not if. »I wanted to be part of this excitement in the journey to create reliable products in this ecosystem.
Coming from traditional finance, I knew that if you hold your clients’ assets, their wealth, their investments, you must become a trusted brand. I thought I could really bring value to Coinbase.
How would you describe the role of digital assets in the future of finance?
Well, first of all, it’s already there: 52 million Americans own cryptocurrencies. We now offer ETFs that allow anyone with a retirement account to own cryptocurrencies. You can now send a US dollar in the form of a stablecoin to anyone in the world, anywhere, anytime, cheaply and instantly. It’s amazing that we’re already here.
I think we will see an increasing number of transactions on the blockchain. We will tokenize more real-world assets. Last week, BlackRock announced they symbolize a money market fund. We now have money market funds where you can get high returns, but in token form.
These are new ways of bringing the global world together in a peer-to-peer way (fewer middlemen, lower costs) and tokenizing real-world assets, making those assets more accessible to more people on more markets. I think it’s really exciting.
This story was originally featured on Fortune.com