"This acquisition aligns closely with Coinbase's mission, as we are committed to creating more economic freedom for the world."
Compiled & Edited by: Deep Tide TechFlow
Guest: Shan Aggarwal, Coinbase CBO
Host: Yano
Podcast Source: Empire
Original Title: Inside Coinbase’s $375m Acquisition of Echo | Shan Aggarwal
Broadcast Date: October 21, 2025
Key Points Summary
Coinbase Chief Business Officer Shan Aggarwal interprets the acquisition of Echo. This episode of the podcast features Coinbase's Chief Business Officer Shan Aggarwal, discussing the details surrounding Coinbase's acquisition of Echo. The content delves into Coinbase's strategy to move capital markets on-chain, Echo's role in compliant on-chain financing, the integration of the acquisition team, tokenized stocks, prediction markets, and Coinbase's grand goal of becoming a comprehensive financial platform.
Highlights of Insights
Coinbase's ultimate goal is to fully migrate capital markets on-chain.
When seeking partnerships, Coinbase takes the initiative and directly expresses interest. Overall, I believe about 75% is proactive outreach, and 25% is passive contact.
Although Echo is currently not profitable, we are more focused on future potential rather than current performance. Many times, acquisitions are primarily for technology and teams, and we look at these deals in a forward-looking manner.
In the future, once tokens are issued, they can be listed for trading directly on the Coinbase exchange or launched on the Base platform and traded on blockchain infrastructure. This effectively fills the missing "pre-IPO" segment in the existing capital markets.
If you ask me which agreements I regret not acquiring, Phantom is a great example. They are very successful now, and the team is excellent. We were very interested in acquiring Phantom at the time, but ultimately did not reach an agreement.
We were also early investors in Polymarket and simultaneously invested in both Polymarket and Calcium, both of which are outstanding companies but have taken different strategies. Polymarket focuses more on international markets and has been operating on-chain from the start, while Calcium focuses on the U.S. market and strives to achieve breakthroughs in regulatory compliance.
Choosing both on-chain and traditional IPOs may be a better strategy, like Galaxy. This can satisfy on-chain users while also covering mainstream audiences interested in crypto assets.
Coinbase aims to provide users with comprehensive asset services, whether it's cryptocurrencies, stocks, prediction markets, or potentially tokenized private securities and presale tokens in the future.
As for whether another bear market will occur in the future, I think it's possible, but compared to the bear markets of 2018 or 2022, the next bear market may not be as severe or painful.
Shan's Background
Yano: Many people may know Coinbase's executive team, such as Emily, Paul, or Brian, but I feel you, as a behind-the-scenes contributor, have led many important efforts regarding venture capital, mergers and acquisitions (M&A), and corporate development. Today, I particularly want to understand your career background and your experiences over the past few years.
Shan:
I joined Coinbase in May 2018 when the company was still small, with about 150 employees, and the office was quite simple, located in San Francisco. I had been very interested in the cryptocurrency space before joining Coinbase. At that time, I was working at an early-stage growth venture capital firm called Greycroft, primarily focused on investments in fintech and media. I have always been sensitive to emerging technologies, and in early 2017, I read the Ethereum white paper for the first time, which opened my eyes because it reminded me of the early App Store era—when developers could leverage a brand new platform to create various innovative applications. Ethereum coincidentally opened the ICO era, so I spent a lot of time participating in related community activities.
In 2018, I decided to fully immerse myself in the cryptocurrency industry, so I joined Coinbase. At that time, the company did not have a dedicated corporate development team; Emily had just joined and was starting to build our M&A capabilities. I helped launch the Coinbase Ventures project and gradually expanded its scale.
The first significant event I was involved in was leading the Series E funding round in 2018. We successfully raised funds at an $8 billion valuation. This was my first real experience with the volatility of the cryptocurrency market—during the fundraising, Bitcoin's price was around $20,000, but soon after, it plummeted to about $3,000. I saw many investors trying to retract their commitments; this experience was very special for me, but we ultimately completed the fundraising successfully. After that, I was responsible for investor relations until the company's IPO. I was directly involved in writing most of our S1 document and experienced the entire process of going public. Interestingly, at the time of the IPO, we attempted to tokenize Coinbase's stock and designed a dual-track plan, but due to regulatory hurdles, we ultimately had to abandon that plan to ensure the smooth progress of the traditional listing process. This experience was very special because we became the first publicly listed cryptocurrency company and completed the S1 document writing before the AI era.
It was entirely a traditional process starting from scratch. Recently, I have mainly been responsible for the company's partnerships, investments, as well as business operations and strategic work. Overall, my role is to help set the strategic direction of the company and ensure that we can execute efficiently.
Yano: You mentioned trying to tokenize Coinbase's stock, which I wasn't aware of before. Can you elaborate on that?
Shan:
Yes, we did attempt it. Internally, we had a project called Clementine. Our goal was to hope that Coinbase could achieve a digital version (i.e., "digital twin") while going public on Nasdaq, allowing stocks to be traded on the Coinbase platform on-chain. However, the regulatory environment and market education level at that time were vastly different from now. We had many in-depth discussions and healthy debates to push this project forward, but ultimately we couldn't find a viable regulatory path. To avoid delaying the traditional direct listing process, we ultimately chose to go public in April 2021 through traditional means.
Acquisition of Echo
Yano: You are acquiring Echo; can you provide details about this transaction?
Shan:
We are very pleased to complete the acquisition of Echo, and the core goal of this transaction is to make capital markets more open and accessible. Through Echo, we can provide a complete solution for developers, blockchain protocols, and asset issuers to offer compliant on-chain financing services, with funds coming directly from their most loyal and active user base—those who actually use their products, rather than relying solely on traditional institutional investors.
I believe this acquisition aligns closely with Coinbase's mission, as we are committed to creating more economic freedom for the world. We believe that blockchain and cryptocurrency can provide more open and inclusive financial services, and Echo provides us with the key tools to achieve compliant on-chain financing, helping capital better connect with investment opportunities.
Yano: How was this transaction facilitated? Echo was founded by Cobie; did he reach out to you, or did you approach him? What was the process of this transaction?
Shan:
This was actually the result of long-term interaction between both parties. We have collaborated with Echo for a long time; their project was initially launched on the Base platform. Earlier this year, we supported the development of Echo Group through the Base ecosystem fund. The fund's investors wanted to support the companies we invested in while helping the Base ecosystem grow further. Many companies in the Base ecosystem were also seeking more financing opportunities. This collaboration was a great starting point, and as we gained a deeper understanding of Echo, we realized it was a bigger opportunity to help projects in the ecosystem conduct community sales and public token sales, driving the development of the entire ecosystem.
The total value of this transaction is not yet fully determined, estimated to be between $350 million and $400 million, with the specific amount depending on Coinbase's stock price. This is a mixed transaction of cash and stock, and due to stock price volatility, the specific amount may vary, but it generally falls within this range.
Yano: I remember when you previously acquired Deribit, the initial valuation was $2 billion, but a week later it rose to $3 billion, and then to $4 billion. Clearly, the founders chose Coinbase's stock, which was a good choice for them. So as the acquirer, how do you reach these deals? I believe many entrepreneurs hope to be acquired by Coinbase one day. Can you share some experiences?
Shan:
That's a great question. Since I joined Coinbase, we have completed 40 acquisitions, and we can say we are very active in M&A; this acquisition of Echo is our eighth transaction this year. When considering acquisitions, we typically develop plans based on product strategy and long-term priorities. These directions are based on customer feedback as well as the needs of investors and developers. Once we have clear goals, we evaluate the best ways to achieve the strategy. While we could build a team to develop products from scratch, this often faces delays and a lack of expertise.
Therefore, we scan the market for outstanding companies that have already made progress in relevant fields. If we find a company that not only excels in technology and product but also has a team culture that aligns closely with ours, we will not hesitate to choose to acquire them, bringing them into Coinbase and providing them with greater opportunities for development on a larger platform.
The initial starting point is still the strategic goals we want to achieve. Many entrepreneurs actively reach out to me, hoping to sell their companies, but Coinbase has already established a presence in multiple areas of the market, so we must focus our efforts to ensure that every acquisition investment and integration work aligns with our long-term direction. If the goals are unclear, it can lead to resource dispersion, making things complex and difficult to manage.
Yano: How do you determine the acquisition price? The valuation of this acquisition is between $3 million and $4 million, which is clearly related to Coinbase's stock price. But how did you arrive at this price? I guess it’s not based on revenue multiples since Echo is likely not profitable at the moment.
Shan:
It really depends on the specific situation. For mature companies like Deribit with stable revenue and profits, we can assess their valuation through traditional financial analysis. But for companies like Echo, we focus more on future potential rather than current performance. Many times, we acquire primarily for technology and teams because we believe these resources can help us achieve faster growth and greater success. We look at these deals in a forward-looking manner, evaluating potential outcomes over the next 12 to 24 months and the revenue growth they can ultimately bring, and we determine the acquisition price accordingly.
Yano: One of the most impressive aspects of Coinbase's M&A is your performance in integration, especially in retaining founders after their earn-out periods end. Your custody business comes from Zapo, your main brokerage business comes from Tagomi, your derivatives business comes from FedEx, your staking business transformed into Bison Trails, and your asset management business comes from One River. This list seems to be continuously growing.
How do you integrate these businesses while retaining the founders and teams? Can you talk about the integration process?
Shan:
This is something I am very proud of. In fact, three key members of our management team joined Coinbase through acquisitions. For example, Greg Tusar, the founder of Tagomi, now leads our institutional business; Rob Witoff is an early engineering leader at Coinbase who was involved in the development of Unit 410; and Jesse Pollak, who currently leads the Base project, also joined through an acquisition.
In our integration process, we focus not only on the combination of products and technologies but, more importantly, on the cultural integration and team fit. We want the teams to embrace Coinbase's mission and become true "evangelists," rather than just "mercenaries" seeking short-term gains. In traditional M&A, many teams only care about the earn-out period and compensation, which, while not wrong, can affect long-term retention and the achievement of goals.
We place great emphasis on long-term cultural fit during the selection process. If a team aligns with our culture, they are more likely to choose to stay long-term and grow with us. Because of this, we can achieve the effect you mentioned, where team members often work at Coinbase for three, five, or even longer years after joining. Therefore, we invest a lot of energy to ensure cultural integration and team collaboration, which I believe is key to successful acquisitions.
Coinbase's Ultimate Goal
Yano: Recently, you acquired a company that may not be very well-known—Liquifi. With this acquisition completed, it seems you are working to build the company's capital structure? Over the past decade, Coinbase's main business has been focused on traders and investors, but now it seems you are moving into the corporate financial services space. Can you talk about the combination of Liquifi and Echo? What is your ultimate goal? What specific actions are you taking?
Shan:
Our ultimate goal is to fully migrate capital markets on-chain. Currently, Coinbase's primary role is as a secondary trading market for crypto tokens, and through Liquifi and Echo, we can provide a complete end-to-end solution for token issuers, helping them complete the entire process from company creation, token management to financing, ultimately driving project launch and growth. While our initial focus is on crypto tokens and blockchain projects, from a broader perspective, we see a gradual convergence between traditional finance and crypto technology, and tokenization is the bridge. Through tokenization, traditional assets can be digitized and migrated to the blockchain. The infrastructure provided by Liquifi and Echo can support not only crypto tokens but also other types of assets. Therefore, these modular components allow us to rebuild the architecture of capital markets from the ground up and integrate these capabilities into Coinbase's product system.
Yano: So what is the core goal of Echo? Is it the scale of project financing? Is it attracting more issuers to join? Or is it enhancing liquidity in the secondary market and community participation? How do you evaluate these?
Shan:
Currently, our focus is on driving capital flow through project financing. This not only provides a source of funding for companies in need of financing but also allows ordinary investors to participate in investment opportunities that were previously out of reach.
Yano: So your vision is that my Coinbase account will not only have Bitcoin, Ethereum, and Solana but also a new option, such as participating in a company's Series A financing or directly joining a public token sale project. Users can invest directly from their dollar balance in the account, is that correct?
Shan:
In the future, once these tokens are issued, they can be listed for trading directly on the Coinbase exchange or launched on the Base platform and traded on blockchain infrastructure. This effectively fills the missing "pre-IPO" segment in the existing capital markets.
Yano: In this capital structure, what else do you need? For example, Liquifi provides cap table management, Echo provides financing support, what else is currently missing?
Shan:
I think the next key module is the regulatory compliance part. The on-chain infrastructure provided by Liquifi and Echo can support any type of token, but the question is, which tokens can be legally issued? Are they commodity tokens or security tokens? What are the differences between the two? These questions need our time to clarify in order to make this vision a reality.
Additionally, we need to consider the trading venues for these tokens. While they can be traded on Coinbase's centralized exchange, we believe that over time, they should also be able to circulate on decentralized exchanges (DEX) on-chain. Ensuring permission management and compliance in these trades is also an important challenge.
We have already laid the groundwork in many areas, such as the Coinbase Verifications project you may have heard of. This project allows users to tokenize their KYC information and store it in their wallets, so we can verify who is trading on the DEX. Through these underlying tools, we hope to operate securities and capital markets efficiently on-chain, providing users with more open and transparent financial services.
Coinbase's Listing Strategy
Yano: How do you view the final form of these token listings? What do you think the future of token listings will look like? Additionally, I noticed you initiated "The Blue Carpet" campaign; can you talk about your understanding of the final state of token listings?
Shan:
I believe many tokens will be created. Historically, listings have typically been very large marketing events, and we believe that as many crypto tokens as possible should be listed and supported. I think the real question is how to filter or curate quality. We don’t want to impose our judgment and tell everyone what is a good asset and what is a bad asset, as that would be like a big brother watching over. So, we prefer to provide comprehensive disclosures and in-depth research, allowing people to find accurate information, trust and rely on it, so they can make their own decisions.
In this field, there is indeed a lot of misinformation and misleading content. Therefore, I think institutions like Blockworks play a very important role in enhancing industry transparency and authenticity. Additionally, we are exploring whether we can introduce some prediction market mechanisms to further enhance the accuracy and credibility of information.
In the future, you will see more and more tokens available for users to choose from. We are also continuously working to provide better education and information support to help them make informed investment decisions.
Yano: Let’s talk about launchpads. You acquired Echo, and another major player is Legion. I know Legion has a partnership with Kraken and may also collaborate with other exchanges. How do you see the development of this field? Will every exchange launch its own launchpad and ICO services? Will this become a standard product for exchanges?
Shan:
I cannot speak for other exchanges, but for us, this is indeed a logical strategic choice. I think other exchanges may adopt similar strategies. We are very optimistic about Echo because we believe they are leading in the field of on-chain capital formation. To date, Echo has helped projects raise over $200 million, involving more than 300 investment cases, including some very well-known and successful projects like Plasma and MegaETH. We believe Echo has a clear competitive advantage in attracting high-quality issuers and supporting protocol development, and they also have a very broad investor base.
Yano: Is there any acquisition you regret passing on?
Shan:
That's a good question; Phantom is a great example. They are very successful now, and the team is excellent. We were very interested in acquiring Phantom at the time, but ultimately did not reach an agreement. They seized market opportunities and rose rapidly, and it’s truly admirable to see their achievements since then.
Coinbase Ventures
Yano: Next, let’s talk about Coinbase's venture capital layout. The Coinbase Ventures team has clearly performed exceptionally well; I believe you are one of the most active venture capital firms in the industry, possibly even one of the companies with the most completed transactions. Are you currently ranked first or in the top three in the industry? I believe you must have this data. Can you talk about your venture capital strategy and how it integrates with marketing and advertising (MMA)?
Shan:
That's a good question. Since 2018, we have completed over 500 investments in the crypto space, making us one of the most active venture capital firms in the industry. Our portfolio is also continuously expanding, especially with the launch of the Base ecosystem fund. We have always adhered to maintaining investment continuity across different market cycles. For instance, during market booms, many people rush in and actively participate, but during bear markets, capital acquisition often becomes more challenging.
The initial motivation for launching our venture capital was that we observed many excellent developers wanting to build protocols and applications outside of Coinbase, while there was a lack of investors focused on the crypto space at that time. So we thought, can Coinbase support the growth of the entire ecosystem in some way? This was the starting point for the ecosystem fund. Initially, we supported some promising founders through small investments, especially those working in areas we believed had great potential. Over time, this fund gradually expanded and is now more focused on investing in the best companies in the industry, while also hoping to achieve substantial financial returns through these investments.
This not only allows us to support innovation in the industry but also provides us with an excellent opportunity to observe the development of the entire ecosystem. In the crypto industry, predicting future trends is often very difficult, but I have always believed that observing what the best people in the industry are doing is usually a good way to anticipate trends. For example, in certain areas (such as social applications or stablecoin issuance), we often find two or three companies launching almost simultaneously, where one may be a leader and the other a fast follower. These phenomena often signal future industry trends. Through such observations, we can provide references for Coinbase's long-term strategic direction. Once the direction is clear, we decide whether to develop in-house, acquire, or collaborate with suitable partners. In the past, we have had successful attempts in all these areas.
Yano: So what is the core goal of Coinbase Ventures? Is it purely to pursue financial returns, or do you hope to bring strategic value to Coinbase through these investments?
Shan:
Currently, our main goal is to pursue financial returns. Of course, we also hope to build good relationships with top founders in the industry through our investments.
Yano: Is there anything particularly unique about your venture capital approach? For example, do others directly contact you saying, "Hey, Sean, this company has great potential; should we consider acquiring it?"
Shan:
Such situations do occur, and I usually participate in these discussions, which allows me to clearly understand how our portfolio is performing, which companies are doing well, and which may be facing challenges. However, more often, we start from Coinbase's strategic needs, focusing on the best companies in the industry to see who is doing something truly interesting. For me, this approach gives me confidence because our success rate in venture capital is quite good. Many companies that ultimately make it onto our acquisition target list were actually our investment subjects. Of course, this is not a hard rule; we have also acquired some companies that we did not invest in. But if we have already established a trust relationship with the founders, it indeed makes the entire acquisition process smoother.
Advice for Entrepreneurs
Yano: We know many founders in the crypto industry, and I feel that at least half of them are thinking, "One day, I will sell my company to Coinbase." This seems to have become an exit plan for many founders. If you were to give direct advice to these people, what would you say?
Shan:
First, I think it is very important to understand Coinbase and build key connections. Whether through Coinbase's venture capital department or business development team, establishing contact with us early on can be very helpful in the future.
Second, I advise founders to seriously consider the strategic alignment with Coinbase in the future. Many founders might say, "This is the product we developed" or "This is what we have achieved." While these are certainly important, from our perspective, the more critical question is: "If we were to proceed with an acquisition, what value could our collaboration create?" In other words, can the combination of both parties' resources and capabilities unlock new opportunities?
History and past achievements are important, but our most successful acquisition cases often involve integrating external innovations with Coinbase's resources to create entirely new value. For example, Tagomi, which you mentioned earlier, is a great case. Tagomi is a company focused on institutional trading; they developed top-tier trading infrastructure and successfully established an independent high-quality crypto brokerage business. Meanwhile, Coinbase was expanding its asset custody business, and we had a strong asset base and balance sheet.
To truly scale a high-quality brokerage business, several conditions must be met: top-notch trading infrastructure, a balance sheet capable of supporting loans and large transactions, and reliable custody services to ensure the safe storage and efficient trading of funds.
Therefore, integrating Tagomi's technology with Coinbase's resources was a logical choice. After the integration, we found that there was a huge demand in the market for such services. For instance, in 2021, many companies approached us wanting to purchase billions of dollars' worth of Bitcoin, but at that time, there were no other solutions in the market that could meet such large transaction needs. Through Tagomi's trading technology and Coinbase's brand strength and custody capabilities, we created Coinbase Prime, which has become a leading high-quality brokerage platform in the crypto industry. This is a typical case of achieving success through strategic integration.
Acquisition Process
Yano: You have completed 40 transactions. What is the ratio of proactive to reactive contacts in these transactions? In other words, how many were initiated by the other party, and how many were you proactive in reaching out?
Shan:
That's a good question; I haven't specifically tracked this kind of data. Sometimes it's hard to define because the relationship between both parties is often built over time, making it difficult to distinguish who initiated contact first. It's like a "long-term two-way interaction."
Yano: For example, in the investment in Echo, you have already established contact with the team. But there will always be a clear moment when someone asks, "Are you interested in acquiring us?" or "Would you consider collaborating?"
Shan:
In most cases, we are the ones who take the initiative and directly express our interest in the other party. Because we are very clear about Coinbase's long-term development plans, when we decide to seek collaboration in a certain area, we usually reach out to leading companies in that field. Of course, there are some exceptions, such as when we stumble upon an opportunity and realize its importance, even if it may not have been our primary target at the time. Overall, I would say about 75% of the time we take the initiative, and 25% is reactive contact.
Yano: There is an old saying: "Companies are bought, not sold." When it comes to investment banking, in acquiring companies like Tagomi, Zapo, Liquifi, and Echo, do you rely on traditional investment banks, crypto-focused investment banks, or do you not need investment banks at all?
Shan:
We do appreciate the professionalism of investment banks, but in most cases, we find that not going through banks is more efficient and preferred. Our transactions are usually completed through direct conversations with the founders. You could say that the number of transactions involving investment banks is very few, almost countable on one hand. As for buy-side advisors, we have never used them because Coinbase has already established a professional team capable of handling this work. However, in recent years, some high-quality investment banking services focused on the crypto space have indeed emerged in the market.
Typically, we have a clear understanding of the needs and positioning of the target company and have already established a relationship with them. These transactions are more like brainstorming sessions between Coinbase and the founders, discussing how to create future value through collaboration. Additionally, we place great importance on cultural integration because these founders are likely to play significant leadership roles at Coinbase in the future, potentially for five to ten years. Therefore, ensuring cultural fit is a key aspect of our acquisition process.
Yano: Do you have a fixed pattern when handling transaction structures? For example, some are all-stock transactions, some are all-cash transactions, and others involve performance commitments or other metrics. How do you balance these factors?
Shan:
We do not have a fixed pattern or strict script; I think that is the art of the deal. The various tools and methods you mentioned are actually just means to achieve the goal. The key is that we need to clarify what we want to achieve, what aspects we are confident in, and how to assess the associated risks.
In most cases, we tend to avoid adding too many complex structures to the transaction. I do not want complicated performance commitments and multiple milestones, as this could lead to misaligned incentives between Coinbase and the acquired company. The acquired company may focus on meeting the committed metrics, while Coinbase needs to focus on larger strategic goals. Therefore, we prefer that both companies can collaborate and work towards a common direction rather than fighting their own battles. Of course, there are some special cases where performance commitments need to be set, but I believe the premise is to allow the team to maintain independence and autonomy so they can focus on driving their goals.
Yano: How long do you talk with founders before you can judge whether to acquire them?
Shan:
Generally speaking, I can quickly determine whether there are sufficient reasons to proceed with an acquisition. Of course, finalizing a deal requires the alignment of multiple conditions. The founders need to have the willingness to sell, and we also need enough motivation and urgency to facilitate the transaction. As you mentioned, it is indeed "companies are bought," not "companies are sold." Many factors need to be coordinated, and whether the deal can succeed often depends on timing.
Sometimes, I might feel that a certain company is an ideal acquisition target for Coinbase, but if the timing is not right, it can be difficult to finalize the deal. For example, if they have just completed a funding round and their valuation has exceeded what we can accept, then we can only regretfully miss the opportunity. Sometimes I think, "If only it had been six months earlier." But this is the reality of business; once you miss it, you can only look forward.
Yano: Has there ever been a situation where a deal went through due diligence, your team was very optimistic, and the higher-ups approved it, but it was ultimately rejected by Brian?
Shan:
That situation has not occurred. However, we have indeed encountered situations where issues were discovered during due diligence that overturned our previous judgments. This is precisely the purpose of due diligence. We hope everything goes smoothly, but after signing the term sheet, we conduct a thorough review of the company's core operations. This includes not only financials and the team but also compliance, legal risks, and how the company manages employees throughout its lifecycle.
In addition, the crypto market itself is highly volatile, making it difficult to accurately assess pricing, especially in the short term. We typically evaluate a company over a time span of three to five years, sometimes even longer, without focusing too much on the short-term performance of 12 months. However, 2022 was a typical example when the global market underwent drastic changes, and everyone had to adapt to the new reality.
Views on Prediction Markets
Yano: Let's talk about prediction markets. You recently invested in Calcium. What role do prediction markets play in Coinbase's strategy? How do you view Polymarket and Calcium?
Shan:
In fact, we were also early investors in Polymarket, and we are very interested in prediction markets. We have always believed that one of the core values of cryptocurrency is to inject liquidity into illiquid assets, thereby creating new markets. Prediction markets are a great example of this, as they show how people can bet on significant events in life, such as sports games or elections. From a broader trend perspective, the "financialization" of everyday life is accelerating, and people want to gain more engagement through these markets.
We believe that prediction markets have strong synergies with Coinbase's business, so we plan to integrate them into our products to provide relevant services to users. We invested in both Polymarket and Calcium, both of which are excellent companies but have taken different approaches. Polymarket focuses more on international markets and has been operating on-chain from the beginning, while Calcium focuses on the U.S. market and strives to make breakthroughs in regulatory compliance. Especially in the field of sports betting, there may be more legal rulings in the coming year to drive the development of this market, and we are very much looking forward to it.
Yano: Is it possible that in a year we could participate in sports betting through the Coinbase platform?**
Shan:
It's possible. We expect that within 12 months, users will be able to participate in sports betting through Coinbase.
Yano: Do you think Polymarket and Calcium will form a competitive relationship, or is the market large enough to accommodate both? Have you considered eventually acquiring one of them?
Shan:
I believe the market space is large enough for both to succeed. Just like the futures and options markets in traditional finance, different exchanges have their own specialties. I expect prediction markets to exhibit a similar pattern, with some platforms focusing on live events while others delve into specific sports, providing specialized services for events like the NFL, NBA, or soccer. Although the market is still in its early stages, we believe there is tremendous growth potential in this area as the regulatory environment gradually clarifies.
Yano: At your recent executive meeting, how much discussion time was devoted to prediction markets?
Shan:
We have already listed it as one of our priorities for the end of this year and next year. We believe that prediction markets can attract a broader user base than traditional crypto trading, which is very meaningful for our business development. At the same time, this is also significant for crypto as an asset class. Prediction markets have the potential to draw many people who have never engaged with crypto into this space. For example, some people may feel that cryptocurrencies are too avant-garde or niche, but they are willing to bet on NFL games.
Yano: When I think of Coinbase and prediction markets, I associate it with your investment in Calcium. I wonder if there is indeed a viewpoint that the competition between every startup and established company ultimately comes down to whether the startup can gain distribution capabilities before the established company launches similar innovations. In this case, I feel Coinbase is the "established company," while companies like Polymarket and Calcium are the "startups."
**While you are investing in these companies and collaborating with them, why not directly develop a prediction market yourself? After all, as an established company, you have greater resource advantages to quickly launch your own prediction market and directly reach over 100 million users, rather than letting *startups* compete for this market.**
Shan:
You are right; we do have the capability to do so, but I believe that some of the core capabilities these companies have built are not so easily replicable. For example, Polymarket and Calcium have some key licenses that cannot be easily obtained in a short time. Additionally, they have a very unique ability to address market issues through a certain degree of discretion without real-time data sources. So, this is indeed an option we need to weigh.
We already have a designated contract market, which is a derivatives exchange regulated by the CFTC and was approved in 2022. In the future, we will choose between "build, acquire, or collaborate" with the aim of providing the highest quality products for our users while continuously optimizing our business.
Yano: Can we return to the topic of tokenized stocks and your equity tokenization? I would love to hear your views on this market, such as tokenizing your own equity, tokenizing stocks, and the possibility of putting them on-chain.
Shan:
I believe we are still in the early stages of this field. The biggest obstacle right now is regulatory issues, not technical ones. In fact, the technical conditions for tokenized stocks are already mature. I believe that in the future, most equity capital markets, and even the entire capital market, could potentially go on-chain. But all of this must be done in compliance with regulatory requirements. The traditional equity market is generally functioning well, although not everyone can participate fairly. For example, some regions do not have equal access to capital markets. Mechanisms like T+2 settlement, if implemented on-chain, could greatly enhance efficiency.
However, there is still much work to be done, such as enhancing market transparency and integrity, so that users have sufficient confidence in the safety of on-chain markets and their participants. I think some of the most promising companies right now are those that can connect traditional financial markets with on-chain capital markets. For example, Superstate is a very interesting company because it can achieve interchangeability between exchange-traded securities and on-chain securities. I am confident about the future and believe that such markets will definitely emerge.
But for now, the practical use of on-chain securities is still limited. For instance, questions like how to transfer them, where to trade them, and whether they can be used to establish lending markets have not yet been clearly answered.
Yano: **You can see that compared to **Galaxy's stock, this market is not really functioning at the moment. I hope it can open up, but the current results are not ideal.
Shan:
That is indeed the case, but I believe this is an important step forward. I appreciate their efforts; what they are doing is very similar to our attempts in 2021. They have set an example for many companies, and in the future, traditional markets and on-chain markets can coexist. I believe we will see more markets go on-chain, especially some innovative applications like perpetual contracts for stocks. Since the stock spot market does not trade around the clock, it is currently difficult to achieve 24/7 trading, but once assets are on-chain, it can support year-round market trading, thus launching perpetual contracts for stocks. Similar applications may also extend to private securities, although these securities may not be freely tradable. I noticed that Hyperliquid recently conducted interesting experiments in this area, especially after the launch of HIP 3, where their vision is to support perpetual contracts for all assets, which is very appealing. However, the premise is that the underlying assets must be tokenized and held on-chain to reduce market imbalances caused by price discrepancies.
Yano: I want to ask a hypothetical question. I think Blockworks is a traditional equity business without tokens and not based on-chain like protocols. So by traditional paths, we would choose to go public on Nasdaq, which has been the typical approach for startups over the past few decades. But our audience is mostly on-chain, and they hold a significant amount of capital on-chain.
**When we see Superstate's attempts, we wonder if Blockworks should choose an on-chain *IPO* instead of a traditional IPO? If we were to go public on-chain, would that mean we need to issue tokens? If you were us, how would you view this?**
Shan:
I think an on-chain IPO is a great option because it aligns more closely with your core audience. If you choose an on-chain IPO, you could use tools like Liquifi to manage your cap table and achieve on-chain financing through Echo or Sonar; this direction is definitely worth exploring. However, you need to weigh that while an on-chain IPO is more suitable for your audience, the scale of on-chain capital markets is still much smaller than traditional markets, especially from the perspective of capital pools and available capital. So while the on-chain market may fit your business better, its overall scale is smaller.
**I think during the transition phase, choosing both on-chain and traditional *IPOs* might be a better strategy, like Galaxy did. This way, you can cater to on-chain users while also covering mainstream audiences interested in crypto assets.**
Yano: That's a good idea; we should explore this further. So at the Coinbase executive meeting, what topics unexpectedly took up a lot of time? Besides prediction markets and perpetual contracts, what else is worth mentioning?
Shan:
Yes, we did spend a lot of time thinking about the speed of the transition from off-chain to on-chain, as this directly impacts our decision-making. You know, in the early days of Coinbase, we needed to apply for regulatory licenses in each market, open bank accounts, etc., to provide users with a bridge to crypto assets. This was a very cumbersome and complex task. But once assets are on-chain, they become more flexible and portable, making it easier to create new financial markets. We have invested a lot of energy in our future on-chain layout to ensure that there is a solid infrastructure to support this transition, such as Base and the Base application, and even integrating on-chain protocols into the Coinbase platform.
Based on our expectations for the speed of transition, if this change accelerates, we need to adjust our resource allocation strategy to prioritize the construction of on-chain markets; if the change is slower, we need to balance resources and continue to support the operation of off-chain markets. Therefore, when setting priorities and resource allocation plans, we are always looking for this balance point.
Yano: Shan, is there anything we haven't discussed? Especially regarding Coinbase's vision of becoming the "exchange for everything"?
Shan:
I feel that we have covered a lot of content. The concept of the "exchange for everything" can actually be seen as a summary of the tokenization process. In the past, people typically distinguished between crypto assets and traditional financial assets, but as financial assets become tokenized, these boundaries begin to blur. We aim to provide users with comprehensive asset services, whether it be cryptocurrencies, stocks, prediction markets, or potentially tokenized private securities and presale tokens in the future. The acquisition of Echo is an important step we have taken towards this goal. More broadly, it signifies that we have made significant progress in promoting the on-chain transition of capital markets.
Do Market Cycles Still Exist?
Yano: Before we wrap up, Shan, I would like to hear your thoughts on market cycles. What stage do you think we are currently in? Do market cycles still exist? I look forward to your latest insights.
Shan:
That's a great question and one of the topics we just discussed in depth at the executive meeting. I believe market cycles do still exist, but their volatility and extremity have diminished compared to the past. The cycles in the crypto market today are influenced not only by internal industry factors but also significantly by the macroeconomic environment.
**As for whether another *bear market* will occur in the future, I think it is possible, but compared to the bear markets of 2018 or 2022, the next bear market may not be as severe or painful.** The reason is that we are beginning to see some more stable real-world use cases developing, which are less correlated with the price fluctuations of crypto assets. For example, stablecoins are a typical case. It can be said that stablecoins are early representatives of tokenized assets. Since 2018, the market size of stablecoins has experienced astonishing growth, with a total market capitalization now exceeding $300 billion.
Additionally, we are witnessing a plethora of innovations surrounding stablecoins. Globally, many emerging stablecoin banks are rapidly rising, providing users with a more efficient and convenient financial service experience. These services often required significant capital and time to achieve in the past. Therefore, I believe these innovations are gradually reducing the overall volatility of the market and lessening the impact of crypto asset price fluctuations on the market.
Yano: **If you feel that the market is approaching the "top" of the cycle, would you choose to slow down your investment or *acquisition* pace?**
Shan:
We will not deliberately slow down our pace; our focus is always on finding the best investment opportunities that align closely with our company strategy. Of course, when assessing pricing and valuations, we will consider market trends over the next three to four years, which inevitably involves the influence of cycles. After all, most crypto businesses rely to some extent on the overall market performance.
However, we do not have a specific plan to adjust our investment pace based on market cycles. That said, when the market corrects, new investment opportunities typically tend to decrease naturally, which is a pattern we have observed in past cycles.
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