Coinbase is one of the biggest names in crypto.
If Brian Armstrong gets his way, it will become one of the largest entities in the financial world. The CEO is setting his sights on the banking industry, looking to update an archaic system that rewards the gatekeepers a lot more than the users.
This is something long promised by crypto. Of course, turning to another Wall Street firm to replace essentially Wall Street companies isn't exactly what many envisioned.
Nevertheless, this is something worthy of discussion and, perhaps, modeling.
In this article we will look at what Armstrong is doing and how it will affect the future.
What do banks provide?
As stated in the past, for most people, they provide a place for people to send, receive, and store money. It is really that simple. Thus, for 90% of the needs, only a digital wallet is required.
Of course, this is not the end of the services the banking industry offers. There are a plethora of products that enhance the financial system, providing users with many options.
This is what Armstrong seeks to disrupt.
Speaking during a recent interview with Fox Business, Armstrong confirmed the company’s plans to offer a full suite of financial services, from payments to credit cards and rewards, all powered by crypto rails.
The passage of the GENIUS Act has opened the doors to other entities entering the space. FinTech has been nipping at the market share of the banks for decades. This time, however, we are looking at a tsunami.
In response, the banks are fighting back. They want to hold their monopoly. The government is now seeking feedback from the community to determine whether loopholes in the act, such as 3rd party lending providing yield to stablecoins should be allowed.
The banks maintain this will drain it of deposits. Armstrong disagrees.
Coinbase dismissed these criticisms, stating that stablecoins aren’t a threat to lending but a modern alternative to outdated banking revenue models.
Few will deny the power of the banks. At this point, I would surmise the industry losses, with the regulators siding with the banks. However, this will not stop this train.
What is the true power of DeFi?
At this point, we can only speculate. There is a pushback from the establishment (government and banks) to control DeFi. We are seeing legislation pushed that requires AML and KYC. These work counter to DeFi.
That said, the infrastructure of these protocols is growing. Developers are working hard to push out services which leads to other platforms building on top. The production of interfaces is just beginning.
At the core of this is the decentralized exchange (DEX).
Hyperliquidi just made news with its recent ascent in the perpetual futures market. What is hyperliquid? According to Grok:
Hyperliquid is a decentralized perpetual futures exchange that has gained significant attention and popularity in the cryptocurrency space. It is designed to provide a high-performance trading platform with a focus on speed, low fees, and deep liquidity for trading perpetual futures contracts.
To give a comparison, for all of 2024, NASDAQ tallied $1.12B in revenue. On an annualized basis, in early September, Hyperliquid hit $1.24B, the majority in perp trading.
This is simply an example of how the tech world can swoop in and gobble up market share very quickly. In response, CZ of Binance fame, recently announced that platform will release a decentralized perp platform.
Armstrong is not off the mark here. These entities have the power to completely disrupt the existing financial system. By entering the market with lower fees, faster service, and more options, users are growing monthly. This means these entities have more resources which to push even greater innovation.
Money is not longer financial; it is technical. We are looking at the digital realm, hence the laws of success apply there. This is where FinTech can outpace the existing banks. They simply do not innovate in the same manner.
Will Armstrong succeed? This is something to watch. The challenge he has is his primary business is under threats as the banks start to offering crypto swapping themselves.
Ultimately, the users will end up benefiting. It is simply going to take some time for the race to heat up.
