Future of Finance: Coinbase’s Alesia Haas on why Ethereum is not a security and the crypto industry rebuilds confidence after the FTX ‘travesty’

Coinbase is the largest centralized crypto exchange in the US, achieving $273 million in net revenue for the fourth quarter of 2023, which puts the firm’s net profitability for all of 2023 at $95 million.

“Coinbase has always taken a long-term approach that focuses on building in a compliant way, even if it hasn’t been the popular choice,” CEO Brian Armstrong said on a February earnings call. “Many of our competitors have cut corners and broken laws to get big fast, and we’ve seen that strategy play out.”

Alesia Haas joined the company in April 2018. She was previously CFO for Sculptor Capital Management (formerly Och-Ziff Capital Management Group), a global institutional alternative asset manager. She also served as CFO and Chief Strategy Officer for OneWest Bank.

In a conversation with Fortune, Haas shared insights on Bitcoin’s record high, the latest crypto bull market, the SEC’s view of Ethereum, Sam Bankman-Fried’s sentencing, and what drew her to the world of crypto from traditional finance.

(This interview has been edited for length and clarity.)

Earlier this month, Bitcoin hit a record high above $72,000. Can you share some insight into what this means in a larger sense?

I think it’s important with crypto to zoom out and look at what’s happened since the Bitcoin white paper and crypto first came on the scene. You have seen four price cycles. What I like about watching these price cycles is that each peak is higher than its last peak. And each trough is higher than the last trough.

If you look at this, you have a lot of volatility, but there is this steady up and in-the-right curve. When you look at the one-, three-, five- and 10-year returns of Bitcoin against every other asset, it has been one of the top performing assets over any other comparable.

Much of this has been driven by the Bitcoin ETFs. What I think is important to note is that ETFs unlock new demand for this asset class. Previously, many investment advisors were unable to access Bitcoin due to their investment mandates. Now they can buy Bitcoin in an ETF wrapper, and so it opens up new available capital.

What does Bitcoin’s rise mean for other cryptocurrencies, especially Ethereum?

I think that we’re starting to see differentiation between different cryptocurrencies and Bitcoin, where Bitcoin is an asset of value, and people are putting it in their portfolio as an important stock of value in wealth creation.

Ethereum has become the protocol that developers increasingly choose to build decentralized applications on top of. While Bitcoin is the largest asset, we generally see “a rising tide lifts all ships” effect where crypto then emerges. But you’re starting to see differentiation because people are choosing Ethereum, and that’s going to change increasingly depending on developer activity and user activity of that platform. Stablecoins and NFTs are built on Ethereum. There are just a lot of new use cases built on top of that protocol.

Speaking of Ethereum, what’s the latest with this SEC now trying to define it as a security?

Ethereum is not a security. Historically, the SEC has repeatedly stated that Ether is not a security. The CFTC [Commodity Futures Trading Commission] said that Ether is not a security. The core problem here is that we still don’t have comprehensive crypto regulation at the federal level in the United States. And it’s something we feel passionate about. It’s so critical to get regulatory clarity so we can have a clear, fair, enforced regulatory framework that will protect consumers and ensure responsible markets – and also protect businesses like Coinbase, so we know how our products that comply with the market can bring and continue innovation here in America.

What can we learn from the latest crypto bull market?

In general, what we see is similar to previous bull markets, as crypto prices rise, you see an increase in volatility, then you see an increase in engagement. As we shared on our Q4 earnings call in February, we saw increased engagement, net inflows across the board in retail institutional, and we saw higher trading volumes.

With nearly $12 billion in net inflows into ETFs, we’ve seen a market capitalization of more than $2.5 trillion. What this does is it puts crypto back in the news. It became a topic of conversation in households. And we’re seeing very big engagement from clients that went a little bit dormant in 2021, and they’re saying, “Oh, this asset class is back.”

The crypto sector plummeted after FTX imploded and co-founder Sam Bankman-Fried was arrested. He was just sentenced to 25 years in prison. Has the industry finally turned a page?

Well, cheating is cheating. And I’m glad to see the process followed when you have fraud in the markets. It is a travesty that has taken place. But I think we’ve moved on, and I think the market has moved on in a big way. Coinbase has always been focused on compliance. We are excited to build and regain the trust of our customers. But there was a flight to quality. We have seen the flight to quality now in the past year. And we’re happy to continue to see people’s focus and growth on good companies here.

Before joining Coinbase, you worked in asset management, as a CFO, and held senior roles at Merrill Lynch and General Electric. What attracted you most to your current company?

I’m old enough to have grown up in the early internet era and just watched the transformation of how technology creates new use cases. When I learned about blockchain, I could see that if you tokenized real assets – and sent value peer to peer – it would create a more inclusive, faster and cheaper financial system. And it was such an exciting thing to be a part of.

I’ve worked for banks and asset managers, and I’ve seen how many people touch the transaction just to move money from me to you, and how many different steps and different market participants it takes. I saw the cost. I saw the friction. And I said, “If technology solves it, it will be adopted. It’s a matter of when, not if.” I wanted to be a part of that excitement in the journey of building trusted products in this ecosystem.

Coming from traditional finance, I knew that if you hold clients’ assets, their wealth, their investments, you have to become a trusted brand. I thought I could really add value to Coinbase.

How would you describe the role of digital assets in the future of finance?

Well, first of all, it’s already here: 52 million Americans own crypto. We now have ETFs for anyone with a retirement account to own crypto. You can now send a US dollar in the form of a stablecoin to anyone in the world, anywhere, anytime, cheaply and instantly. It’s incredible that we’re already here.

I think what we will see is an increasing number of transactions taking place on the blockchain. We will tokenize more real assets. Just last week, BlackRock announced that they were signing a money market fund. Now we have money market funds where you can earn high returns, but in token form.

These are new ways we can bring the global world together in a peer-to-peer way – fewer intermediaries, lower costs – and sign real assets, making those assets more available to more people in more markets. I think it’s really exciting.