Brian Armstrong​
Image: TechCrunch / Protocol

You can’t escape digital currency now

Protocol Fintech

Hello and welcome to Protocol | Fintech! This Friday: Coinbase pulled the trigger, the Fed's plan for a digital dollar, and Affirm has a new debit card.

(Was this email forwarded to you? Sign up here.)

The Big Story

The week digital money became unescapable

Well, Coinbase finally pulled the trigger. And the Fed seems to be getting ready to do so in its own way, too.

The crypto exchange's plan to go public via a direct listing sets the stage for the most anticipated public offering this year. It's also just the latest event to legitimize what has become a highly controversial area of fintech -- but one which the U.S. government appears to be getting ready to embrace.

The crypto craze has been propelled largely by the rapid and unpredictable rise of Bitcoin. But crypto's rising popularity goes beyond that: Coinbase, with a reported valuation of $100 billion, has been tapping into what experts agree is a broader and steadily-growing trend. And many — even the Fed — are starting to feel cautiously optimistic about parts of it.

What's behind the current crypto excitement? Cryptocurrencies are hot, obviously, but more broadly the technology has promised peer-to-peer financial markets that don't rely on big banks and financial institutions. Just as the GameStop drama showed retail investors mistrust Wall Street, crypto has long held the promise of individuals creating their own financial markets.

  • Potential use cases that are now emerging include using crypto and the blockchain for cheap and fast transfers of capital across borders, new ways of lending, holding escrow and making payments, and peer-to-peer sharing of digital files and computing power. Consumers are even using blockchain and crypto for digital collectibles.
  • Stablecoins are also having a moment at a time when trust in fiat currencies is weakening, Constellation Research analyst Ray Wang said. "Cryptocurrencies and stablecoins are playing a role to absorb all the money, all the sidelines," he told Protocol. "Folks are speculating on stablecoins because they don't trust their currencies and their central banks."
  • The popularity of stablecoins is also a measure of the explosion in crypto trading — and speculation — since they offer stability compared to other volatile cryptocurrencies. To wit, a huge chunk of Coinbase's revenue — 96% in 2020 — come from transactions.
  • Coinbase is actually pushing to become more than just a place for buying and selling crypto. It's also building subscription services to help people manage their crypto when they're not buying and selling it. These include products to securely store cryptocurrencies in custody or to create or validate part of a blockchain.
  • But it's the Coinbase marketplace that is the company's main growth driver. Its revenue soared 136% to $1.1 billion last year, and recorded a 142% jump in trading volume from 2019 to 2020. "Being the exchange is where the action is," Wang said. "As they say in Vegas, the house always wins."

The act of Coinbase going public makes some experts nervous. Access to the public markets will strengthen the marketplace's position -- and that worries Santa Clara University law professor Stephen Diamond, a longtime observer of Silicon Valley.

  • "Coinbase reminds me of the quip about the California Gold Rush: the only people who made any real money were the people selling the miners their picks and shovels," he told Protocol. "Coinbase operates a market for an asset of illusory value, and unlike gold, it has no utility whatsoever. Their risk factors are as long as 'War and Peace' but far less entertaining. Again and again they warn against the fundamental fragility of crypto assets."
  • Much of the concern is focused on Bitcoin. Bill Pearce, assistant dean and chief marketing officer of the University of California, Berkeley's Haas School of Business, spoke of an "irrational exuberance in this market aided by a high-value stock market and low-yield and inflationary fears" that made Bitcoin attractive "as an inflation hedge."
  • "The crypto-coin rush is just another tulip craze," Endpoint Technologies Associates analyst Roger Kay told Protocol. "But at least tulips had some intrinsic value. These coins are just an illusion of value. The timing of this craze probably relates to the U.S. population's general inability to make a living the old-fashioned way."

So maybe think of Coinbase's listing as part of a broader growing legitimacy. It's going public at a time when crypto and digital currencies are actually gaining more acceptance, said R.A. Farrokhnia, a Columbia Business School professor and executive director of the Columbia Fintech Initiative.

  • On Tuesday, for instance, Federal Reserve Chairman Jerome Powell told Congress that developing a digital dollar will be a "high-priority project."
  • "This was talked about a number of years ago but it was purely theoretical," Farrokhnia said. "There were detractors who said, 'Oh that would never happen.' And lo and behold, we have the Federal Reserve talking about it."
  • "The timing I think was quite interesting," he said, citing the Federal Reserve statement on the digital dollar and Coinbase filing directly. Clearly, Farrokhnia said, when it comes to digital currency, "the train already left the station."

You might not like Bitcoin, or even Coinbase, but this week's news show they're here to stay. Of course, the heated debate on the future of digital currencies and cryptocurrencies will rage on, rising and falling in intensity -- just like the value of a Bitcoin.



The future is positively digital. Ready? Consumers, investors and shareholders are savvier than ever. Everyone needs to create more engaging experiences that keep pace with today's new expectations. See how you can stay ahead with next-gen technologies that deliver on what matters most.We can help.

More from Protocol | Fintech

Niche banking is growing. Many fintechs are looking to address the banking needs of specific groups, including the LGBTQ community, African Americans, Latinx people and those with disabilities. But standing out in a crowded field can be challenging.

Banking-as-a-service: the next frontier. A race is on to supply non-fintechs with backend financial technology to help improve their customer experience, and the potential rewards are huge. But plenty of obstacles still lie in the way.


  • "The Coinbase direct listing will either confirm direct listings as a reasonable on-ramp for companies or kill it all together by making retail the true bag holders." Investor Chamath Palihapitiya on what the crypto marketplace's decision to go public via direct listing means more broadly for listings.
  • "[E]ven after people can safely return to offices, the executive team has no plans to be 'in-office' on a regular basis, and none of them currently live in San Francisco."Brian Armstrong, Coinbase CEO and co-founder, on the company's distributed, no-headquarters policy.
  • "I have seen many friends and colleagues negotiate a $500 salary increase but completely disregard their stock options package, from lack of knowledge due to the whole field of startup stock options being opaque." —EquityBee CEO and co-founder Oren Barzilai thinks there's plenty of room to be more savvy about compensation.

3 Questions With...

Konrad Alt, co-founder and partner, Klaros Group

What are you most excited about in fintech?

Our regulatory system hasn't really evolved to keep up with this shift in financial services, but as the fintech sector becomes increasingly central in all of our lives, it will have to, and I think that day is getting closer. I'm excited by the opportunity to bring better protections to consumers, greater efficiency to our financial markets and greater stability to our system. Not incidentally, I'm optimistic that the quality of financial regulation will improve when regulators have a broader understanding of the financial system as a whole.

What fintech trend are you most worried about?

Too often, fintech leaders not only don't understand the public policy issues that underlie regulatory perspectives and requirements, but also don't see gaining that understanding as a priority. And the result is that fintechs and regulators talk past each other far more frequently than you would see, for example, in the banking sector. Those disconnects become increasingly worrisome to me as the fintech sector becomes increasingly central to the provision of financial services in our country. I think there's a lot of opportunity to address this issue through reform of our regulatory system, but I worry about the things that can go wrong if that reform doesn't occur.

What in fintech do you think needs to be fixed?

The fintech label is broad. You'll see different issues that need to be fixed if you look at lending versus payments, for example. But as a whole, the fintech sector needs to become more conversant with its own obligations to society, to understand that it doesn't operate in a vacuum; that its business decisions and scale have the ability to impact consumers and communities, and the financial system broadly. It's not that the sector lacks that awareness altogether, but the need is growing as the sector grows in scale and centrality.

Need to know

Making Moves

  • Michael Nelson is now chief revenue officer at BehavioSec, the behavioral biometrics company whose technology is used to safeguard financial transactions. He joined from Mitek Systems.
  • hired Charlie Kroll as chief revenue officer to head up its business providing card-processing technology for companies to issue cards.
  • Moneycorp named Velizar Tarashev as its new CFO. Before joining he was chief financial officer at Barclays Private Bank.
  • Coinbase hired Anthony DeMartino, former HSBC managing director, as its new director of institutional trading.



The future is positively digital. Ready? Consumers, investors and shareholders are savvier than ever. Everyone needs to create more engaging experiences that keep pace with today's new expectations. See how you can stay ahead with next-gen technologies that deliver on what matters most. We can help.

Thanks for reading! We'll be back with Protocol | Fintech on Tuesday.

Recent Issues