Okay, our next session is with Coinbase. First of all, thank you everyone for joining this session. For those of you who don't know me, my name is Owen Lau. I cover Information Services, Exchanges, and Blockchain at Oppenheimer. Before we get started, I have a safe harbor statement for Coinbase. I would like to remind you that during today's call, the company may make forward-looking statements. Actual results may vary materially from today's statements. Information concerning risks, uncertainties, and other facts that could cause these results to differ is included in Coinbase's SEC filings. Our discussion today will also include references to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on the company's investor relations website. Non-GAAP financial measures should be considered in addition to, but not as a substitute for the GAAP measures. All right, let's talk about Coinbase. Coinbase is well known to be a crypto exchange, but actually about 40% of the revenue comes from non-trading such as stablecoin, interest income, staking, and custody. Coinbase has also been launching new products such as the Base App, perpetual futures, tokenized securities, prediction markets, and payments. The company is about to close a Deribit deal, which will further expand the product offering internationally. Today we are excited to have CF O Alesia Haas to talk about all these. Thank you very much for your time, Alesia. Thank you, Owen. Delighted to be here. Great. To kick things off, lots of things happening across the crypto space, within Coinbase as well, and you reported earnings around two weeks ago. There's a steady drumbeat of regulatory and product news flow. Can we maybe start by just having you outline what's top of mind for you today? Can you frame your priorities for investors here who may be less familiar with your story? Absolutely. I just think it's so interesting to look back at what a difference it has been over the last year since I was with you last in this forum. The biggest change has been that we are now sitting in the most pro-crypto Congress and President White House administration that we've ever had. This has led to great strides towards regulatory clarity, including recently enacted stablecoin legislation, which was the Genius Act. With this regulatory backdrop, our focus is on building. As Brian shared in our most recent earnings call, we're really focused on driving growth in our core businesses. First, we're growth in trading. As Owen said, about 40% of our revenue comes from subscription services and about 60% in the last recent quarter with our trading businesses. We've long believed that every asset class will move on chain, i.e., will become a tokenized asset. We believe the time is now. Now we're at this point where our customers are asking for this. The regulatory environment is ready to have these talks about what does it mean to bring assets on chain, and the technology is ready. We have now seen scaling in the technology that we can do fast, cheap global transactions. The time is now. Our long-term vision has always been to build the everything exchange where people can trade all different types of assets in one place on crypto rails. We started this journey with spot trading, crypto commodity spot trading. We started to be the simplest place to buy Bitcoin. As of Q2, we offered over 300 assets for spot trading. Just last week, we began to expand access now to millions of crypto assets. You can come on the Coinbase main app and get access to the entire universe of crypto spot trading. We did this by integrating DEX trading into the Coinbase app. In the last year, we started to build beyond spot trading, where we now offer a growing suite of derivatives products. We can talk more about those. In the coming quarters, our goal is to broaden out that asset class to more asset types available on Coinbase. Crypto spot, we now have derivatives, and then we'll move on and on. Beyond trading then, our goals are to grow a payments stack. We see payments as the next big use case in crypto and see opportunities ahead since stablecoin payments are faster, cheaper, and global. The last focused area of ours is to be a trusted partner of the ecosystem. We are leveraging our deep experience in building crypto infrastructure to power the next wave of businesses. Over 240 businesses are using crypto as a service capabilities to power their own crypto needs. We'd announced in the quarter companies like PNC, previously we've talked about BlackRock, Stripe, PayPal, and more are building on our infrastructure layers to offer their own crypto services to their clients. I think it's important to note here that many of these initiatives, like payments, bringing more assets on chain, these are net new. These could take us many quarters. This is the vision that we're working hard to realize and the potential that we see. Got it. I do want to talk about the dynamics between trading volume and revenue. I got some questions about that. Maybe there's some confusion. I think Coinbase raised fees for some stablecoin pairs earlier this year. It looks like it impacted your trading volume since then. Could you please talk about the decision for that move and the trade-off? I think more importantly, the trade-off between volume and revenue so that investors understand your decision. Absolutely. Previously, prior in Q1, for example, we had very low or no fees at all on stable pair trades. As a result, what we saw was some traders were bringing large amounts of Tether to our platform, converting it to USD C, and then converting it to fiat. Effectively, we were becoming the off-ramp back into fiat for Tether. They were using our infrastructure for free and taking advantage of this arbitrage opportunity. Ultimately, we decided to optimize here for trading revenue over volume. That led us to increase fees on these large volume stablecoin pair trades. It effectively ended that arbitrage activity on the Coinbase platform. It was a very specific problem that we were seeing that we added these fees for to create some friction in that trading pattern. Got it. Maybe move on to derivative volume for both U.S. and also internationally for Coinbase. I think the number was pretty strong in the second quarter, even though the spot volume came down. Could you please talk about the driver of that strength in derivatives? Absolutely. As I mentioned in my opening comments, derivatives have been a key focus area for us. We've been investing a lot over the last year to grow our market share in this space. In addition to just growing share, because this is 75% of global trading volume and it is a well-established market outside the U.S., we've also been a pioneer for new products here in the United States. For example, we became the first U.S.-regulated futures exchange to offer 24/7 futures for Bitcoin, Ethereum, Solana, and XRP. We launched a perpetual-style future contract to U.S. retail customers, the first of its kind. Globally, perpetual futures are what dominates global crypto derivatives trading. As far as the second quarter, you're right. We saw nice performance in Q2. We saw $1 trillion of total notional volume trade in, which was up from $800 billion in Q1. It was growth quarter- over- quarter, where we did see a decline in spot volumes. We also reached an all-time high in open interest, which is over $1 billion as of the end of Q2. Our focus is on growth right now. We are providing incentives for select customers. This is important to attract sustainable capital to the platform and to really build into that global share. We are also expanding the product. We're offering more contracts, more collateral types. This is going to be the focus of us over the next period of time. I think it's really important to note that we are paying incentive and rebates for a lot of the derivatives platform. These offset revenue, but are largely also booked to our transaction expenses. As a result, we don't see material revenue from derivatives yet, but we're really pleased to see the market share growth and think that over time, this could be a much larger part of our financial picture. Got it. I want to echo what you just said, Alesia, because I remember over the last few years, we keep talking about regulations and policy. It's not like we don't care right now. We will dive into these questions, but at least we can talk more about product launches. Let's talk about regulation and policy. President Trump just signed the Genius Act into law last month. I think it's a long overdue clarity that the industry is asking for. The next one is the Clarity Act, which passed the House during the crypto week. I think it's more important for Coinbase and the whole industry for this act. What do you think about the timeline of it getting passed in the Senate and getting into law? Absolutely. Just to touch on Genius briefly, it was a monumental achievement. It's the first crypto law in the United States being passed into law. We're really excited because we saw major bipartisan support for this bill. It's the first step on the road to make the U.S. the crypto capital of the world. As you know, the job isn't finished. We're really excited for the progress that we're seeing with Clarity. The Senate now needs to work through their own process. We expect the two committees, banking and agriculture, to mark up these bills in September. We hear that Chairman Scott wants to go to the floor in October. This is where this is outside of our control. It's difficult to predict certainty about when it comes to floor time. We do see the president seeking this moving forward quickly. He has asked for this to come to the floor for a vote. He has asked this to come to his desk for a bill. We remain optimistic that we'll see Clarity pass into law by the end of the year, but the timing is uncertain at this time. Got it. Okay. Another question about regulatory clarity is, it looks like it is also emerging outside the U.S. as well. Could you please give us an update on your international expansion because of that? Like you listed, I think you listed international expansion as one of your key priorities this year. How is that going? Any notable milestone that we should be aware of? We remain very focused on international expansion as a strategic priority, and we have been making good progress. In this spirit of regulatory clarity, you're right, much of our focus this year had been to secure a MiCA license, which we're pleased to announce that we have secured a MiCA license in Luxembourg. This provides the foundation to build in a regulatory window in Europe. This will provide efficiency as we no longer need to get country-by-country registration. Previously, we had to go secure VASP licenses, Virtual Asset Service Provider licenses, in each of the EU markets. Now, post MiCA, we can market and grow our products with one regulatory regime. This has been a large focus of us at this time, laying the foundations, complying with the new regulations, getting prepared for 2026 when this goes into effect. Similarly, we've been planting seeds for the next cohort of countries. We've really built a successful playbook now for international expansion. For example, the 2023 market launches where we went into Singapore, Brazil, Canada, Australia, we now see each of those countries generating revenue in excess of their direct operating costs. We're starting to plant the seeds for the 2025 cohort, and the first step is securing the requisite licenses in those markets. We're pleased to have secured a license in Argentina, and we're now busy focusing on the next step, which is securing bank partnerships and building localized product. Similarly, we registered with FIU in India and are making good progress there. Don't expect these to be material contributions to our revenue for a few years. Got it. Another hot topic is stablecoin. It seems to be the biggest near-term beneficiary from the regulatory clarity we are seeing emerging in the U.S. and also overseas. I mean, we know Coinbase has a deep relationship with Circle. How should we think about the opportunity and potential for stablecoin market cap growth that's been unlocked following Genius and MiCA? We're really pleased that USD C is going to be a compliant, recognized payment stablecoin under Genius and was the first stablecoin and the largest stablecoin to be MiCA compliant as well. This gives it an opportunity in each of those markets, as you said. We just applaud lawmakers for outlining clear frameworks. This will bring transparency, safety, clarity to this rapidly growing market. This is what many participants have been waiting for. They're waiting for comfort that these payment stablecoins are assets that they can transact with, that they can use for commerce. It is hard to proceed with growth in commerce when you're dealing with an intangible asset, which is what stablecoins and crypto have largely been classified as up until this point. The opportunity is now here. What we've seen, though, is significant market cap growth, over $250 billion, despite the lack of clarity. Now, with this in place, we anticipate seeing broader adoption for use cases like payments, collateral, and settlement in the broader financial ecosystem and w e're excited to support that growth. Got it. Another narrative coming up because of the conversation is, in fact, many well-known companies are expressing interest in this space and creating their own stablecoin, et cetera, and things like that. What do you think? Why can or how does USD C can win in this space versus many other alternatives out there? I think you've seen this commonly over time with new technologies. You first see fragmentation, and then you see consolidation. I think that USD C was built for this moment of regulatory clarity. It stands apart today as the only scaled, broadly adopted U.S. dollar stablecoin that operates at the highest standards for regulatory compliance, reserve management, and transparency. You've seen that it's been embedded in many DeFi protocols. It is widely used by global market makers to enable their trading strategies at various exchanges. What I think is important here is that network effects are important. The first use case for stablecoins were within the crypto markets as the stablecoin matched the 24/7 markets that crypto trades in. That was the use case. Now we can move on to new use cases, payments, collateral, et cetera. I think that what we will need to see here is the network effects, the distribution partners. I think what many new entrants underestimate is the compliance lift, the interoperability requirements, and the distribution that's needed to get to stablecoins at scale. USD C is supported natively across 24 blockchains and growing. It is the stablecoin of choice for on-chain activity, notably DeFi, and it is one of the primary stablecoins embedded in crypto trading flows. We are excited that it can make its next tentacle into the payment space. Going back to your partnership, maybe related to payment space, you signed a partnership recently with both JPMorgan Chase and PNC, very large banks in the U.S. Do you expect to sign more similar deals with other banks going forward? How should we think about that? I think this speaks to our platform being the trusted partner. We have more than a decade of experience building these tools. We have more than a decade of experience in safely storing bearer instruments. We've invested in custody, in trading and financing stablecoins, Base as a protocol, staking, and more. We have the underlying infrastructure. We have a full stack infrastructure. As a result, and the investments that we've made in compliance and security, we've been selected by more than 240 institutions that utilize our Coinbase infrastructure in some way today. Think of this as an a la carte menu of use. You can come to us to sub-custody. You can trade on our platform, on our deeply liquid exchange. We can be a staking sub-provider for you. We can do these products and augment many other financial institutions as they want to create crypto products and services for their customers. I think this is so important because customers are asking for access to crypto. You can see that in other companies' decisions to then partner with us. The partnerships that we've announced, JPMorgan, PNC that you cited, they're just great examples of providing more access to more people to enable them to trade, to secure, to hold crypto. That is our goal. These are one step to just continue to build bridges to more and more people, build out the market, build out the product offerings, because we believe over time, you'll see just the transition of transactions moving on chain. We look to be an important part of that. Yeah, I like that. Just one step to build the bridges and more to come, more to come. Another announcement was related to Shopify, another great relationship, another large merchant out there. Is Coinbase actively signing merchant partners to drive USDC adoption? Will you partner with a merchant acquirer to do it, or Coinbase will do it on its own? Thematically, it's the same answer that I just said with regards to JPMorgan and PNC. This ladders up to us being a trusted partner for the next wave of businesses getting into crypto. Whether companies are getting into crypto because they want to enable their customers to trade or they want their customers to enable payments on crypto rails, we are a platform of choice. This is an opportunity, just like we're signing up new partnerships on the trading and custody side. We are looking to actively sign up partners on the payment side. Shopify is a great example of that. This is a major milestone because it will enable a million merchants in their network to accept USD C payments. We are partnering with them for merchant distribution here. We collaborated with them on a novel on-chain commerce payment protocol that Shopify offers that will enable their merchants to use USD directly. We're leveraging their existing distribution. This will be rolled out later this year. It is very early, early days, Owen. I want to just comment here that no single partnership is going to be a material growth driver. I think what we need to focus here is that we are the platform of choice. Each of these partnerships that we made will embed crypto more deeply in the overall ecosystem for trading, for payments, for global use cases. That growth of the overall market is what will drive Coinbase revenue growth over time. Got it. That's super helpful. Another hot topic is tokenization. I'm pretty sure you are being asked this question a million times already. It looks like Coinbase is interested to get into this. Could you please talk about Coinbase's ambition in tokenization? Which asset classes do you want to tokenize? How will Coinbase approach this? It has always been our vision that we will tokenize every asset possible and bring assets on chain. I think many of those who might be listening know that Coinbase tried very hard when we went public in 2021 to go public via a token. It wasn't ready yet. The infrastructure market structure was not there. This is what the door is opening now. We start to see regulatory clarity emerging such that we can bring more asset types on chain. As I said in my opening, we now think consumers, we think technology, we think the regulatory environment are all ready for this evolution. Tokenization will be the bridge that connects the global financial system and capital with blockchain rails. We believe we have a number of strengths that we will be able to bring these products to market. We have globally compliant distribution across retail institutions. We have experience building trusted infrastructure. We have a track record of innovation in markets, both on and off chain. We are building on the frontier here. This is important. This is going to be a multi-quarter journey because we are building this frontier where both technology needs to progress and the regulatory market structure environment needs to progress. We envision a role for tokenization of wrapped assets, real-world assets, some people might call them. That could be anything from real estate funds to other types of assets. We think that assets will also be natively issued on chain going forward. I envision a future. We just did a convert offering last week. Why couldn't that convert have been an on-chain asset? New assets, new tranches of single-class equities. We look forward to bringing the best of innovation that's already occurred on chain to traditional asset classes. We don't have the details ready to share yet. We are innovating. We are building. We are exploring and experimenting here. Think about a world where it's all on chain. Voting on chain, governance on chain, dividends on chain. That is a vision of the world that we see us moving to over time. It will take work. This is not a short-term vision. Bringing all of these assets on chain in a tokenized way to enable 24/7 global markets is a vision that we have. Got it. I know you're still in the early process. You don't want to talk about the detail too much at this point. From a philosophical standpoint, it looks like offering tokenized equities and bonds to non-U.S. investors 24/7 has a stronger value proposition. What do you think about offering this to U.S. investors? It's already very crowded space, convenient to trade U.S. equities within the existing ecosystem. What's the thought process for the management team? It's a great question. First, make no mistake, our ambition is for these products to grow global, as you said. I do agree there is more friction globally, and there's less friction in the U.S. We believe that tokenized securities offer a number of benefits to the global customer. One, international capital, so TAM expansion for U.S. listed equities. There's important liquidity and risk management opportunities here, instant settlement, 24-hour trading. The instant settlement can really reduce settlement risk in the system. There's also increased functionality, decentralized finance for traditional securities, for example. In the U.S. specifically, the benefits to risk management can be an unlock. When I look at the opportunity, I think that you're right. Many people, Owen, could say, gosh, there's no friction in the U.S. This is a problem solved. This isn't needed. We were first to market 24/7 futures and perpetuals to the U.S. for Bitcoin and Ethereum. I think this early example here illustrates the opportunity for traders in the U.S. because our weekend volumes have been stronger than expected. It's predominantly driven by retail trading. We have seen in the early days some weekends meet or exceed our weekly daily trading volumes. These are things that we think can be unlocked. I think people also were somewhat perplexed that stablecoins would see the adoption that they saw as well. People thought U.S. dollars were broadly available. There was no need for a 24/7 dollar. We've seen the growth of that as well. Sometimes with skepticism, there's still a huge opportunity. I think that we are going for that opportunity. Again, early days, early days. This is the direction of travel. I like that. Early days. There's still some skepticism, which presents opportunity. Another topic, which is actually my recent favorite topic, is the Base App, so-called the super app. That's my term, not your term. You announced the Base App last month. I listened to the call. Could you please talk about Coinbase's vision of this super app? Are you off the waitlist yet, Owen? Do you have the Base App? I am not off the waitlist, but I registered. I am still on the waitlist. You're on the waitlist. All right, soon. I am also very excited about the Base App. What is the Base App? I think it's important to start with we have the Base protocol on the chain. We've talked a lot about this with investors, that we are building a layer 2 solution to offer faster, cheaper transactions. Our goal was to have developers build applications on top of Base. Now what we've done is we've built an application on top of Base, which is the Base App. The Base App is an everything app. It brings together a social network, payments, trading, messaging, decentralized identity, and also app discovery. It's a place where you can gain access to other on-chain apps. You can get access to an AI bot that helps you with your crypto investment decisions. You can play games. There's an on-chain social, there's on-chain messaging. It puts it all in one place. What Brian shared on our earnings call was the magic moment that a lot of people experience and he experienced is you make your posts on Farcaster within the Base App. People can coin those and buy those. You can gain instant proceeds from the content that you provide. Those proceeds go directly into your wallet and then can be used to buy crypto, to make payments, to invest, to save. This is now global. As we roll this out for people, they are going to have this experience about the everything app to really deeply engage in the crypto ecosystem. You own your own content. You can earn money for posting, not just likes. You get paid as people engage with you. We're really excited. Again, early days, early days, p eople will get off the waitlist in the coming months and w e then will share updates in future earnings calls. Looking forward to it. I'm looking forward to it, Alesia. Maybe let's turn our focus to capital allocation. Coinbase has a very strong balance sheet. I think you have around $10 billion of USD resources. How should investors think about your capital allocation strategy? I mean, given your share price, would you mainly focus allocating capital to organic growth and M&A? We do have a strong balance sheet. You're right. In Q2, we had $9.3 billion of USD resources, and then we had $1.8 billion of crypto investments. Importantly, since earnings, we completed a $3 billion convertible bond offering. Half is due in 2029, and half is due in 2032. We do have a strong and an even stronger balance sheet since our Q2 earnings. It's important to note that we have a fair number of capital commitments. We have working capital that includes the regulatory capital requirements for our various legal entities around the world. We self-insure, and we have a bucket of risk capital to protect our balance sheet against risks and unknown unknowns. We also invest, so we have a prime financing book that we are lending money to institutional clients on a fully secured basis. As we shared in our Q2 call, we saw all-time highs where the average loan balance was over $1 billion in the second quarter, and we see increasing demand for that. Beyond these uses, we also see the opportunity to grow the business, both organically and inorganically. Because we're committed to generate a positive adjusted EBITDA in all operating environments, we believe our revenue will cover the majority of our organic costs. We do think our balance sheet can help drive inorganic or acquisitions for us. This will become a big focus of our capital allocation. However, that will be all opportunistic. I don't have anything to announce today. Got it. We're looking forward to it as well. To wrap up, we have covered a number of different products today, many of which are new. As we run out the rest of 2025 and going into 2026, we talk about payments, tokenization, and derivatives. Which of these opportunities has you the most excited about? Which one do you think could become a more material contributor to the business the soonest? We don't pick our favorite children at Coinbase. It goes back to the three priorities I outlined at the beginning. First, growing our trading business. This means spot, derivatives, and the long-term vision of becoming the everything exchange in the U.S. and globally. Second, our full stack payments product offering as we think payments is quickly emerging as the next big use case in crypto. We're thrilled to be at the forefront and driving innovation here. Lastly, just continuing to cement Coinbase as the trusted partner. From our ETF position to crypto as a service and the recent strategic partnership announcements, we believe that we can leverage our platform and help grow overall crypto adoption and become cemented as a key infrastructure provider. Our plate is quite full. I think it's important to note that we've always been a company that prioritizes product innovation. We make venture bets. We push forward. Not all of these products will succeed. We are okay to make bets and try things and then quickly make decisions to shut them down if we don't see growth. We are investing in a broad portfolio to continue to grow the diversity of our revenues, the stability of our revenues as we move away from speculative trading as one of the primary use cases in crypto. We're really excited to watch these products grow over time, even if it will take a few quarters to have the full potential of them in our P&L. Got it. I think we are about time. Again, thank you, Alesia, for your time. Always good to see you, by the way. It's just always good to see you. Thank you all for joining us today as well. Thanks, Owen, for having me. Thank you. All right, have a good day. Bye-bye.