Coinbase Success Depends on Long-Term Outlook Says CEO

Coinbase CEO Brian Armstrong is confident that focusing on innovation instead of short-term market conditions will see the company through the next five to ten years.

With Coinbase’s $808 million Q2 revenue falling short of analysts’ $874 million estimate and regulators breathing down its neck, the company’s focus on broad trends in e-commerce and internet adoption has helped it keep perspective during a prolonged bear market that claimed lenders Celsius and Voyager Digital, Armstrong said.

Armstrong and COO Emilie Choi lauded the company’s risk management team for ensuring that the company did not suffer from the contagion sparked by the collapse of the TerraUSD stablecoin and highly-leveraged lending products that caused both Celsius and Voyager Digital to file for bankruptcy last month.

The company’s prognosis is good, despite headwinds

Despite many retail traders choosing to ‘hodl’ and dwindling trading revenue, the company has strengthened its balance sheet through subscription and services income that made up 18% of its revenue last quarter, a figure Armstrong hopes will grow to 50%. Its staking service is doing well, Armstrong said, without divulging numbers. It now holds a little over $6B on its balance sheet, with some mergers and acquisitions on the way.

The company claims to be committed to reducing marketing, external vendor, and cloud-provider costs, which could see less splurged for pricey Super Bowl airtime when the NFL season kicks off after the famous QR code advertisement at last year’s event. Coinbase ads will still be ubiquitous through other channels, Armstrong said.

The exchange is optimistic about its recently-launched NFT project, despite being relatively slow off the starting blocks, and sees the project, together with its self-custodial Coinbase Wallet, as critical components for the company’s push into web3. Coinbase Cloud, a product targeted at developers, is also gaining traction.

Coinbase faces a minefield of litigation

Regarding cooperation with U.S. regulators, Armstrong said that Coinbase staff meet regularly with various policymakers and that the company is happy to cooperate with any regulator. He added that any token identified as a security would be immediately delisted, referring to a probe recently undertaken by the Securities And Exchange Commission to investigate the possible listing of unregistered securities.

The company’s bigger play is to become the world’s most trusted crypto exchange through regulatory compliance, but it faces a minefield of litigation.

One group of plaintiffs filing a class action suit against the exchange claims that it locked them out of their accounts and transferred assets without their consent.

Another suit filed by Bragar Eagell & Squire PC, a law firm specializing in stockholder rights, alleges the exchange made misleading statements surrounding compliance policies, failing to timeously disclose that investors’ funds could be endangered should the company go bankrupt.

Coinbase famously slashed almost a fifth of its workforce earlier this year as the initial pressure on the industry after the TerraUSD debacle intensified quickly, prompting emergency cost-cutting at Coinbase and other firms, including BlockFi and Blockchain.com. Coinbase also came under criticism for rescinding job offers, and Armstrong has not ruled out further cuts.