Why Coinbase’s Strategy Chief is ‘relentlessly optimistic’ on crypto and the Clarity Act

00:00 Scott Melker

The Clarity Act debate is coming to a head. The White House has proposed ethics language and Democrats are predictably pushing back, and we are on a tight timeline to get it passed. We’re going to discuss that and a lot more today with a very special guest from Coinbase, John Dagastino. Let’s go.

00:27 Scott Melker

What is up everybody? Welcome to the Daily Wolf on Yahoo Finance. I’m your host Scott Melker, also known as The Wolf of all Streets and we’ve got 15 minutes to dive into the big stories of the day. And we’re going to get some great insight today from Coinbase’s head of strategy and institutional, Mr. John Dagastino here, we’re here live. We don’t usually do this, you know, on on uh on site.

00:53 John Dagastino

Good to see you, Scott. It’s always good to see you. Love Yahoo. Happy to be here.

00:57 Scott Melker

Yeah, man. So we’ve got a lot to dig into today. We’ve got to start with the big elephant in the room, which is clarity, as I kind of mentioned there in the intro intro. The White House uh proposed some ethics language, which I think came as a surprise to many. Democrats predictably pushing back. Right now, the reporting is that they’re pushing back on whether it’s the state attorney or the DOJ who’s able to to prosecute, which actually seems like we’re getting down to some real nuance here.

01:21 John Dagastino

Look, I’ve been relentlessly optimistic about this and just to be clear, I’m I’m not in policy at Coinbase, so I have no uh good inside intel if you will. Uh but I have noticed that uh the the spread between sort of I called the internal consensus, the folks who are actually talking to the lobbyists and involved in the conversation versus say general sentiment has kind of flipped. Like uh six months ago uh internally everyone was very optimistic and uh externally people were pessimistic and now it’s kind of neutral. So I think we’re still at a coin flip.

01:53 John Dagastino

The reason I’m relentlessly optimistic is I think we’ve seen this before. So genius, everybody remembers genius passing flawlessly, but it was argued until the very very last minute and it was up in the air. Um I I I really do believe that ultimately these five or six hold outs that are the pivotal votes will do what’s right for the American consumer. We know that people want cheaper, faster payments. We know stable coins work. Um we know that once genius passed, even though it’s not even in effect yet, we saw stable coin usage just explode.

02:18 John Dagastino

It’s better for the American consumer. So when all the horse trading is over, I do think they’ll do the right thing.

02:22 Scott Melker

I mean, do you think right now the challenge is more the language or the timeline because we really are getting right up to the August recess and after that, we know that everybody’s just raising money and trying to get reelected.

02:30 John Dagastino

I think it’s the political brinkmanship. I mean, they’re all aware of the timeline, they know what’s going on. Everyone understands the clock. They’re just trying to see what they can get into the last possible minute. But I I think look, everyone I know who knows what’s going on has said that genuine concession has has existed on both sides. There’s been worked on both sides, crypto’s given in, the banks have given in. I think I think last time since I spoke to you, I got invited down uh by KPMG to speak to 20 community banks, private session, no press.

03:00 John Dagastino

Behind closed doors, these community banks are aware it’s not crypto that’s stealing their customers. They’re not losing customers to crypto. And so they most of those banks reached out to me to partner with us, to help them offer that next generation uh tool. So because that’s the reality behind all of the BS, that’s why I’m confident.

03:22 Scott Melker

So why is the prevailing narrative that stable coin yield would cause capital flight from banks? You see Jamie Diamond getting uh even emotional on TV and specifically emotional about Brian at Coinbase, right?

03:41 John Dagastino

Because it’s a good argument. I get it. It’s an emotional argument. It’s a tough argument to disprove who else has the data that we have. The average person doesn’t have the data showing but just I would ask your your viewers to just say intuitively. My my mother’s a great example. My mother’s 84 years old. She was with her community bank for almost 40 years because she hates online banking. Finally, her community bank even said, Isabel, we love you but you gotta go online. And so she said, well, I might as well be with another big bank then.

04:13 John Dagastino

Do you think my mother who has trouble still controlling her Alexa went to Coinbase? No, she went to a G sub. So the notion that we’re the reason that there’s this flight is just is just kind of nonsensical and I think people understand that.

04:31 Scott Melker

So, we’re obviously waiting on what will happen with clarity over the next few weeks, but we’re not the only country in the world that’s legislating or regulating crypto. We forget that sometimes, I think because the conversations are so heavily focused on our government and our institutions. You just got back from Japan. Maybe talk about what’s happening there and why that’s exciting.

04:55 John Dagastino

Yeah, I mean I’ve I’ve been to Japan, uh Japan, Singapore, Hong Kong and Dubai all in the last three months. Um so what seems to be happening is what I’ll call global regulatory harmonization, but not in the way everybody wants. Everybody thinks that harmonization means everyone follows the same rules or people copy the same rules. That’s not what’s that’s not what’s happening. What’s happening is a harmonization of direction. Everything is moving towards opened and permissioned.

05:27 John Dagastino

What I mean by that specifically is I just got back from Japan, uh they’re dramatically redoing their tax laws. So Bitcoin’s going to go from being taxed at close to 60% to being long-term capital gain 20%. We’re seeing shockingly thoughtful policy coming out of the UAE around decentralized finance. Like who would ever think put yourself back five years and say which country, the US, um uh China or UAE would move fastest on allowing people the freedom to choose their financial direction.

06:04 John Dagastino

I think most of us would say, well, of course, the US would lead with that. We’ve actually been the last there. So we’ve had, you know, we’re doing equity tokenization effort. Um we’ve had enormously productive conversations with offshore jurisdictions about allowing a bridge between um centralized trading and decentralized trading of tokenized equities. That is I’m I’m I’m I’m glad to hear it. I’m depressed that we are not a leader in this country. It is happening. I will say the CFTC’s no action letter has been fantastic. So this new administration we’re moving fast, but we’re still playing catchup.

06:44 Scott Melker

Talk about the future of tokenized equities and what that looked like here because as you said, a lot of countries are moving faster, even the UK is seemingly moving in a positive direction which came out of which came out of left field, you know, really backing off a lot of contentious, ridiculous policies and coming up with some sensible things. So, it seems like tokenized equities are going to happen, but we still don’t know how they’re going to happen here or who’s going to have access to them.

07:05 John Dagastino

Just a quick point what you said just now because I think it’s really really important. A lot of countries that took these very rigid stances are backing off now. And I think like in fairness to them, we’ve seen that before. Like in 2001 when Napster came around, uh the initial reaction was to sue them out of existence and they they were successful in doing that. And then eventually all the companies backed off because they realized the technology was overwhelming the uh the the partisan case, the civil case. So I think that’s what we’re seeing there.

07:37 John Dagastino

Now, on tokenized equities, I think this is fascinating. So, if you think about kind of the value stack of a company, right? You have you have private companies that um it’s very, very challenging for the average person to get access to. Um and so what we’ve seen a lot of is tokenized funds, tokenized venture capital funds. And that that’s wonderful, that’s great. Um but when I hear the term democratization of finance, that’s not exactly it for me.

08:04 John Dagastino

What true democratization of of capital is is the the allowing people to make their own choices about which companies they’re betting on pre IPO. And so you have pre IPO perps, which Coinbase is doing and others are doing. Um so that provides that angle. Then you’ve got um uh post post uh uh IPO and again for most American citizens accessing public company stocks is not is not challenging, a Schwab account, but there’s a lot of people around this world and we know this because the US equity tokenization numbers are growing at the rate of stable coins.

08:44 John Dagastino

So we know we have the proof. There is a rabid desire for access to US capital markets. This is a good thing for everyone. It’s especially a good thing for us as Americans. Why do we not want everyone in the world with a with a smartphone to be able to buy cheaply and simply access to the economic miracle that is the US capital market.

09:12 John Dagastino

Why do we not want, why were not we not actively pushing people betting their futures on the viability of our capital markets and country. That is a the the best, I’m not a marketing guy, but that is the best marketing for the US, the United States, I could possibly imagine.

09:33 Scott Melker

That’s also how we can grow our way out of our problems. I mean, listen, it’s not like the scent doesn’t understand this. We know that stable coin issuers are some of the largest holders of treasuries right now and effectively we’re exporting hyperdollarization to the world through stable coins, places that uh people could not access dollars now they can do it simply, fast, cheap, easily in their wallet. So, when you think about how broadly that applies to our capital markets and not just our dollar.

10:00 John Dagastino

Yes.

10:01 Scott Melker

Right.

10:02 John Dagastino

And you hit a valid point. Like everybody’s look, I I’ve heard I’ve heard talk of dedollarization for decades. And and I don’t dismiss it because it is true. We’re starting to see more oil trades priced in non-US dollars, but I’ve seen this these attempts many, many years, but eventually that could be successful. And so when you when you when this when when your product, when people having when you’re worried about people not buying your product, one of the things you want to do is make your product easier for people to buy.

10:37 John Dagastino

And so we should be making it easier for people to hold the US dollar. Stable coins accomplish that. We should be making it easier for people to invest in vibrant US companies, tokenized securities accomplish that.

10:51 Scott Melker

So, I want to ask you because you’ve been in markets exchanges for a very, very long time. What do you make of the market broadly right now? The price of Bitcoin, the situation with all coins? I I’ve I share your internal optimism about everything all the time. It’s kind of my life view and I I think I think we’ve been bottoming since February. But I would love your take.

11:13 John Dagastino

Sure. I’ll gloss over the fact that you said very, very, very long. I didn’t like that last very, but um but we’ll go past that. Um so what I what I love, what I love is irrational pessimism. I personally love that. Like I love I because that that I’m always a nervous bottom. I I never want to tick the bottom. I just I worked for too many brilliant investors who told me flat out, you can never predict the top or bottom, so don’t even try. Um and so I I hate trying to do that except when I see prolonged

11:53 John Dagastino

um irrational pessimism. And for me irrational pessimism is fairly simple. It’s it’s pessimism in the absence of any evidence to be pessimistic. If I just look at where we are now structurally, internationally, from six months ago, there’s nothing structurally worse about this asset class. And arguably, lots of things are structurally better. So the fact that you continue to trade this thing down makes me very happy because I don’t want to try to bottom tick, I’d rather dollar cost average into a low.

12:28 Scott Melker

You made a really interesting point when we were talking before, we were on camera and you said we’ve moved from sort of pessimism to apathy. And and I think that’s always interesting when you start to get this period and it happens every time of time- based capitulation rather than capitulating because prices is low.

12:47 John Dagastino

Time-based capitulation, I really like that. Yeah, I think some of the apathy is, you know, we we’ve talked we’ve talked about this, this we’ve talked about ad nauseum. There’s a component of I don’t think it’s the majority or even close to the majority of crypto investors who are sort of trend chasing, they’ve moved on to uh, you know, some penny stocks and and uh AI stocks. Uh that’s fine. That that that element by the way exists in every asset class. They exist in junk bonds, pennies, wherever. Um they’ll come back eventually, but but I don’t I don’t

13:21 John Dagastino

cater to them with Coinbase doesn’t cater to that that market. Um so I’m not worried about that. Um the apathy in some ways is good because I do think in some in some sense crypto could we could do well by maybe taking up less air. Um you know, we still are an asset class that represents less than 5% of global US equities. Maybe we shouldn’t be on the front page of the news all the time. I think AI to some degree is getting that is getting those arrows flung at them now because they’re they’re seeing what it means when you’re on the front page of of every media every day.

13:56 John Dagastino

So it’s not the worst thing in the world for us to quietly build. And that’s what most people I respect in the industry are doing.

14:05 Scott Melker

It’s funny. I feel like AI is getting the same contentious arguments that crypto got for all the years we’re boiling the oceans, the data centers, you know, like New York literally banned Greenage, you know, Bitcoin mining on Seneca Lake. And then they went ahead and did a pause on data centers in the exact same way. It’s cyclical narratives for a new technology.

14:26 John Dagastino

I have a lot of buddies uh deep in AI and my comment to them is the John Mclane quote, remember, welcome to the party pal. Like this is so unfortunately when you when you stick your head up like that, you know, you get shots taken at it. The good news is I think they’ll they they’re they saw the playbook crypto went through to push back against some of the more look there are some valid issues with crypto, there’s some valid issues with AI. I’m not dismissing all of it. uh but a lot of the stuff particularly around like water usage, like

14:58 John Dagastino

water doesn’t just disappear, right? It just flows through a system to cool it and then it goes back to where it came from. Uh a lot of this stuff is just kind of silly. And I think they saw the crypto playbook of how to be like thoughtful about it and it just takes time because because the the counter, the silly counter narrative is easy for people to grasp and it takes hold. Um and you can’t just rush in with facts. People don’t want to be dissuaded with facts. So you have to just it’s it’s a it’s an educational process and it will take time.

15:28 Scott Melker

I thought you were going to say Yippee Ki.

15:31 John Dagastino

Yeah. This is a high class establishment.

15:37 Scott Melker

Yeah, I know we got yeah, two two and a half ish minutes left. I I have to ask you one of the biggest stories last week, obviously was uh Trump social selling uh, you know, millisecond early access for 100,000 bucks a month to high frequency traders. I think it’s reignited the conversation around insider trading what that is, which I think has also been compounded by prediction markets being a bit of the wild west.

16:05 John Dagastino

Okay. So, so I’m not trying to hedge my answer, but I think this is fair. So I I was around the last time we had a national conversation about the impact of technology on market structure fairness. That was when the book Flash Boys came out. And and people just kind of learned about this this this this thing called low latency trading. So when you have these big advancements in technology, um you have to have a national conversation about what that means. And I think now with everything from like mentioned markets to 24-7 trading to nano latency, atomic latency,

16:40 John Dagastino

um it’s probably maybe time to have a conversation. So, let me ask you this question. So if Taylor Swift had said, I’m going to start selling time bifurcated access to my tweets, I don’t think we’d be like, oh, but a Taylor Swift tweet can move markets. Absolutely. So, so maybe it’s time that we had a conversation about this because now because this is the first time in my life, 10 years ago, someone writing something on their phone could not move markets. Now it can. So maybe this is a good way to open up that conversation.

17:15 Scott Melker

I mean, I think the people that support it say you gotta Bloomberg terminal, you pay tens of thousands of dollars for that and the reason people have a Bloomberg terminal is faster news.

17:25 John Dagastino

exchanges bifurcate data, Jane Street gets better access than you or me. And by the way, but there’s a reason for that. They provide liquidity, they provide a value added service. So if you if you look people I think intuitively understand, if you go to a store and spend $10,000 and you get a discount, you can’t expect it if you spend five, right? We understand that, nobody thinks that’s unfair. Um so I think it’s just time to have this conversation.

17:47 Scott Melker

I I agree. We got like 30 seconds left. What’s final thoughts?

17:51 John Dagastino

Uh just keep doing what you’re doing, man. because I think a big thing we need to do is sober, thoughtful, intelligent, entertaining education and you do it better than anyone.

18:02 Scott Melker

Well, I appreciate that John. It’s a pleasure to have you here out here at the Audi Summit, absolutely beautiful. The uh the the finish line is close for the clarity Act. The question is whether we’re going to actually uh stumble and fall on our faces or we’re going to get this thing done. Looking forward to seeing what happens with that and we’ll dig into that more obviously on the next episode of the Daily Wolf tomorrow. Peace.