Paul S. Grewal has gone from an intellectual property litigator to a federal magistrate judge to an in-house counsel at Facebook Inc. Now he’s taking on another challenge, grappling with legal issues in the new world of cryptocurrencies.
Coinbase is an exchange where investors and traders can trade Bitcoin and other cryptocurrencies using an app on a smartphone. Grewal started in September as the company’s chief legal officer, chief compliance officer and a member of the executive team.
A graduate of the University of Chicago Law School, Grewal supervises a legal and compliance group that includes more than 10% of Coinbase’s 1,200 employees. The company declined to reveal how many in-house attorneys it employs.
The San Francisco-based private company stirred controversy after Coinbase co-founder and CEO Brian Armstrong wrote a blog post in late September saying the company would steer clear of societal issues and workplace political discussions in the wake of the Black Lives Matter protests. Coinbase offered a buyout to employees who didn’t want to remain, and 5% of them took it.
Grewal discussed his responsibilities in dealing with government regulators, the employee walkout and its aftermath, as well as how he plans to deal with outside counsel. The following transcript has been edited:
Daily Journal: A lot of your responsibility involves dealing with government regulators. What are the biggest challenges you have at Coinbase?
Grewal: I think the biggest challenge we have is that we need to make sure our regulators and all of the entities that oversee Coinbase’s activities fundamentally understand what cryptocurrency is and, equally importantly, what it isn’t, so when they are making regulations and exercising oversight they are addressing the real risks that are inherent in any system like crypto and not imaginary risks or risks that are misunderstood that lead to negative outcomes no one intended. People tend to focus on things like the market for Bitcoin and price swings and, of course, those are important issues for Coinbase. But trading is just one of the areas of responsibility we have, even if it is an important one. Just to give you an example, we are fundamentally a platform like other technology platforms and we are committed to protecting our users’ privacy. As one further example, that’s why — shortly after I joined Coinbase — we issued our first transparency report, which outlines the formal demands we received from government investigators and law enforcement agencies. We expect that set of issues will continue to grow in the years ahead.
DJ: Has it become more common for larger financial institutions, such as hedge funds and private equity funds, to buy and sell cryptocurrencies?
Grewal: Yes, we have seen a lot of welcome interest from institutions even in the last six months, let alone going back over the last several years. These institutions, initially like many others, were skeptical or ignorant of what cryptocurrency is and how it can be an important part of their financial portfolio. Their eyes opened to the potential and they want to be part of something that fundamentally will change how our financial system works. And so we’re seeing a lot of sustained interest from larger and more traditional institutions and we expect that to continue to grow in the future.
DJ: Earlier this year, there was a well-publicized employee walkout at Coinbase over CEO Brian Armstrong’s decision that the company would remain apolitical on all issues except those affecting cryptocurrencies and then a subsequent offer of an exit package accepted by 5% of employees. What role did you play in those decisions and what legal issues were involved?
Grewal: One of the biggest priorities we have here at Coinbase, and this predates my tenure and certainly has continued since I joined earlier this year, has been to take care of our employees, to make sure we have a workplace and a culture that employees not only are comfortable in but are proud of. We know that Coinbase employees are going to have to deal with challenging issues at times. Our perspective, and certainly my perspective, is that when they do, we are going to provide them with the focus and support and infrastructure that they need during challenging times and when they’re having to make tough decisions and persevere through tough times. As the chief legal officer, I am intimately involved in those decisions and making sure that people understand not only how we think about issues like this but the rationale for it and also — to the extent there may be legal issues implicated — the right way to proceed so that everyone’s rights are respected.
DJ: Coinbase isn’t the only company in Silicon Valley and San Francisco that has had to grapple with what employees can speak out on or should be speaking out on. What were the issues that were weighed and what were the considerations of the pluses and minuses of employees speaking out about issues that may not be directly related to what a company is doing?
Grewal: The main issue, maybe even the only issue we focused on in the end, is what kind of company we want to be and where do we want to focus our talents and energies. Brian Armstrong, our CEO, took a lot of input from leadership and gave a lot of thought and care to articulating the type of workplace that he saw as the right one for the company but also that all employees could be a part of. The number one focus at all times was on, “How do we allow people’s talents to shine?” and “How do we clear the workplace from distractions that really take our eyes off our mission?” — which is fundamentally to build the platform for the future for conducting commerce worldwide. The process that we underwent of rolling that out and affirming it for our employees was challenging. But the transparency of the decision-making, the fact that we laid out in writing not only to our employees but to the world how we thought about this issue — the conversation that we prompted — I think is something that has been very useful so that everyone has a clear and consistent understanding of what we are trying to achieve. In choosing to not only work at Coinbase but really double down or triple down on the work at hand, people have affirmed that the mission Brian and others and the company have articulated is one they want to be a part of. I think that response has been gratifying and ultimately serves everyone involved so that we can focus on what we all came to Coinbase to do — to provide a much more open, more accessible financial system for everyone, no matter who they are.
DJ: What are the regulatory agencies in the United States and in other countries that Coinbase has to deal with?
Grewal: Like many others in our industry, we are regulated both at the state and federal level. For example, we are regulated under New York law. We engage with regulators at the New York Department of Financial Services. We also have money transmitter licenses in a number of other states in which we do business. We also have oversight at the federal level, such as agencies like the SEC. Many of the millions of users on Coinbase are located outside of the United States so we also have regulatory oversight in jurisdictions in Europe as well as in Asia.
DJ: Does Coinbase hire outside counsel for any legal work and how do you go about choosing them?
Grewal: We do. Our partnerships with our outside counsel are very important. Even though in a business like Coinbase’s, it’s critical that the bulk of the expertise on legal, regulatory and compliance issues resides inside the company and on the legal team itself. We have faced so many complicated questions in dealing with our regulators and in litigation and other matters that we do turn to outside counsel from time to time. The most important thing for me and for our team is that we have outside counsel who fundamentally understand the business that Coinbase is engaged in. It’s a very technical business. This is an engineering-focused and engineering-centric culture and company and so it’s important our outside counsel be very comfortable and skilled in navigating that type of environment. And we also look for outside counsel who bring unique expertise on topics that we may not have as much experience with inside the company.
DJ: Can you name any firms or any particular attorneys you’ve been working with?
Grewal: I can’t say we work with any particular firm more than any other, especially since I’ve only been on the job for a few months. I’m in that evaluation or dating phase of the relationship with my outside counsel. One of the lessons I learned elsewhere and earlier in my career was that relationships with outside counsel are a two-way street. If you want to have a true partnership, if you want to have [outside counsel] who are in it for the long haul with you, you have to show that same type of commitment in return. I’m looking at my roster of outside firms and trying to figure out who really is the right set of firms for us for the long haul. If and when we find those groups of lawyers, we will invest in those relationships in turn.
DJ: You’ve had a career as an intellectual property litigator, a magistrate judge, and an in-house counsel at Facebook. What have you learned at those jobs that you’re applying now in this new position?
Grewal: No one at Coinbase refers to me as, ‘Your honor.’ No one is standing up when I walk into a room like in the old days. I’ve had a tremendously fun career and I’ve been lucky to have the different types of jobs that you mention. And those different opportunities have taught me a lot that’s extremely useful in my day-to-day job here at Coinbase. The lessons are pretty straightforward. Focus on doing what’s right. Hire the best talent for your teams from your community, school, or life experience they may come from. And when you make a mistake, fess up to it and admit that you were wrong. Sometimes you have to admit you don’t know the answer to a tough question that an executive or a regulator is posing. But I think the most important lesson I’ve learned from my different professional experiences is that we should all be grateful, and I am certainly grateful, for the privilege of having a real voice in the work that I do when most of the people in the world still don’t. My grandfather was a farmer in the Depression and he had a fourth grade education. I never try to forget that when I’m having a tough day.