Big Banks vs. Big Crypto

**Ryan Knutson** (0:05)
In January, the CEO of Coinbase, Brian Armstrong, went to Davos, the famous conference in Switzerland, where bigwigs schmooze and give talks. But at least one person there was not happy to see him.

**Amrith Ramkumar** (0:20)
At one point, when Armstrong was sitting in a lounge, having coffee with former British Prime Minister Tony Blair, Jamie Dimon walked over and interrupted, and he said, you are full of shit, and he pointed his finger in his face and told him he needed to stop lying on TV.

**Ryan Knutson** (0:39)
That is just like not something you see every day. The CEO of JP Morgan Chase, the biggest bank in America, getting in somebody's face like that.

**Amrith Ramkumar** (0:48)
It was a unique scene in a public setting also, where lots of people witnessed this encounter because it was out in the open in Davos, and it spoke to how the gloves have totally come off between both sides.

**Ryan Knutson** (1:01)
How did Brian Armstrong respond?

**Amrith Ramkumar** (1:04)
We're told Brian Armstrong sort of kept his cool largely.

**Ryan Knutson** (1:08)
That's our colleague Amrith Ramkumar. He covers tech and regulation. He says that the Jamie Dimon-Brian Armstrong confrontation was about how Armstrong had been saying publicly that banks were trying to sabotage some crypto legislation, legislation that has banks and crypto firms pitted against each other.

**Amrith Ramkumar** (1:27)
This fight is really about the future of finance in a lot of ways. It's about how quickly the crypto economy will be embedded in our financial systems.
So the future of these discussions will probably shape how every single crypto product will be regulated. And that will have a massive impact on the financial system of the future.

**Ryan Knutson** (1:51)
Welcome to The Journal, our show about money, business and power. I'm Ryan Knutson. It's Tuesday, March 17th. Coming up on the show, the showdown between the crypto and banking industries.

**SPEAKER_3** (2:21)
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**Ryan Knutson** (2:55)
The tension between banks and crypto comes down to regulation. Specifically, regulation about a reward that crypto companies like to offer their customers. A reward that, to banks, looks a lot like paying interest on savings accounts.
For banks, paying interest is a core part of their business model. You give a bank your savings, it pays you a little interest, and then the bank loans your money out to other people at a higher interest rate. Everybody wins. You earn some cash, the bank makes some money, and someone gets a loan. In the past decade, crypto companies have started doing something similar with stable coins, which are pegged to real-world currencies like US dollars. Companies that offered stable coins started paying interest-like rewards to people who bought them. In 2018, Coinbase, the largest US-based crypto company, started doing that too.

**Amrith Ramkumar** (3:48)
So Coinbase has a partnership with the stable coin issuers Circle, where Coinbase shares a lot of the revenue with Circle and gets to offer Circle's stable coin on the Coinbase platform. And as part of that, Coinbase offers holders essentially yields annual payments, steady rewards payments that translate to about 3 to 4% a year.

**Ryan Knutson** (4:14)
Coinbase CEO Brian Armstrong has made no secret that he wants to give banks a run for their money.

**Amrith Ramkumar** (4:19)
Armstrong is open about this and has talked about it in interviews. He has said, we want to compete with the banks and we want to eventually replace them essentially. So it's sort of their stated mission.

**Ryan Knutson** (4:29)
Here he is on Fox Business last year.

**Brian Armstrong** (4:32)
Ultimately, we want to be a bank replacement for people. We want to be their primary financial account, and we can offer better financial service products across the board.

**Ryan Knutson** (4:40)
To compete with banks, Coinbase has been adding more and more services over the years.

**Amrith Ramkumar** (4:45)
They began offering trading and other types of cryptocurrency, they've begun offering payments, they've also started letting people trade stocks. So their idea is really to become this super app that you can do any type of financial transaction, essentially, and that is the way they've said they want to rival them in a lot of these businesses.

**Ryan Knutson** (5:04)
One way to compete with banks is by offering higher returns on people's cash. A lot of banks pay almost no interest on standard checking and savings accounts. It's often only around a tenth of a percent. But with these stablecoin accounts, crypto companies can offer a lot more, even without lending money out the way banks do.