The traditional financial system is dead.
This is the outlook of Coinbase CEO Brian Armstrong. He feels that crypto is going to eat all financial services.
Obviously, we could say he is a bit biased. Operating a publicly trading crypto firm means he is going to lean towards that outcome. However, he is far from the only person holding this opinion.
Millions within the crypto world believe something similar. Armstrong views DeFi as the future albeit one where a centralized entity such as Coinbase is the gatekeeper.
He might be right.
Then we have the naysayers. This comes mostly from the established financial system. Nevertheless, even that is waning as firms start to integrate (or at least plan for) crypto services.
Coinbase: Crypto Will Eat Most Of Financial Services
Armstrong's logic is simple
Our thesis: crypto is going to eat most of financial services, and Coinbase is 100% focused on crypto.
We are dealing with one of the best known crypto firms, at least in the West. Coinbase was an early entrant into the arena, making itself a target of Gensler's SEC.
The key is the move from simply coin swapping. That is something that the DeFi world has also been focusing upon. It is a baseline to operate from yet is still only a smidgen of what is required.
When we look at the financial system, it evolved into a complex system of layers. This has its drawbacks, especially when it comes to extraction and gatekeepers. That said, we cannot dispute the financial innovation which took place over the last 100 years.
Crypto is still in the stone ages when it comes to this. We acknowledge it is still early but also that the wagons are circling. Wall Street is knocking at the door.
As an aside, Coinbase might fit into that category. It is publicly traded, with its ownership apt to come under control of major institutions. Many of its services are geared towards other institutions, making it akin to Goldman Sachs or JPMorgan, only with a crypto focus.
His remarks came as Coinbase rolled out a series of updates across its lending services, particularly involving USDC loans and bitcoin-backed credit products.
Max Branzburg, head of consumer products at Coinbase, revealed on X that adoption of USDC-based loans through the decentralized lending protocol Morpho Labs is accelerating. He said loan volume rose sharply to $120 million in May, up from $45 million in April, $14 million in March, $2 million in February, and none in January. Branzburg noted that only $265 million in bitcoin is currently being used as collateral, while over 100 times more remains idle, indicating what he sees as substantial untapped potential. Coinbase announced on April 30 that its bitcoin-backed loan service is now fully available to all U.S. users except those in New York.
Again, we have to realize this is a drop in the bucket. When it comes to the traditional financial sector, volumes are often into the hundreds of billions (if not trillions) of dollars.
It is important to start somewhere.
The End Of Banks?
Are we looking at the end of banks?
This is something that was forecast by the crypto industry. Here is where we have a problem.
Is Coinbase considered a bank?
It was birthed outside the existing system. As stated, it is now under the regulations of the SEC, FINRA, and other regulators. While it is willing to utilize decentralized infrastructure, it is a centralized entity.
That means, the answer to this question, could cloud things. If Coinbase is one of the big winners, yet it is a bank, then what changed? Ultimately, only the name on the door.
Another issue is we have the banks starting to get involved. When Bank of America, Morgan Stanley, and Charles Schwab start offering services related to crypto, how is Coinbase going to distinguish itself? Also, isn't that just the same gatekeepers retaining power?
This is a possibility that has to be considered.
Armstrong is probably right in his assessment of things:
Credit markets are moving onchain. We eventually want to power small business loans, home loans, car loans, uncollateralized loans, etc. Many people in the world don’t have access to credit. We can make it a more efficient (and global) market onchain.
I would agree this is the future. However, does this go through the same centralized entities as before? Or do we see a hybrid system eventually evolving into something different (decentralized)?
Those who are amassing cryptocurrency will likely find they have more options in the future. Learning to leverage one's holdings is going to be key. While Coinbase is looking to expand its offerings, the DeFi world is building more infrastructure. This could be a boon in the medium term, as open source development tends to outpace closed over time.
For the moment, Brian Armstrong believes his company will be one of the leaders when this all unfolds. He is going to have a lot of competition as many are about to enter.
It could be a boom for coin and token holders.