According to Brian Armstrong, CEO of Coinbase, the exchange has been constructing subscription revenue streams for the past three years and will do so going forward.
To counteract potential profit margin compression, the American cryptocurrency exchange Coinbase wants to increase subscription revenue over time.
In a thorough interview with CNBC’s Crypto World on Tuesday, the company’s founder and CEO, Brian Armstrong, delved into the long-term prospects of the American cryptocurrency exchange. The potential for future fee revenues to decline and the company’s plans to address this possibility were major talking points.
Armstrong emphasized his conviction that profit margin compression was inevitable as more exchanges and rivals introduced comparable goods and services that might contend for market share in the future:
“This is why we’re investing today in so much subscription and services revenue and we’re realizing that trading fees will still be a major part of our business in 10 or 20 years from now. But I’d like to get to a place where more than 50% of our revenue is from subscriptions and services.”
According to Armstrong, the business has been concentrating on this change for the last three years, and as a result, subscriptions and services now make up 18% of the business’s revenue. According to Armstrong, this was an increase from the 4% contribution to revenue in 2020.
The development of Coinbase Cloud and other projects in the works will further contribute to the growth of these revenue streams, according to the CEO of Coinbase, who noted that the company’s staking offerings and USDC custody services were the main drivers of subscription and services revenue.
The expansion of Coinbase’s staking product is also reliant on the ability of the underlying blockchains that power the service to scale, though Armstrong noted that Ethereum’s upcoming switch to a proof-of-stake consensus algorithm is expected to solve this problem.
Another subject of discussion was the developing nonfungible token (NFT) market and Coinbase’s own NFT marketplace. The CEO stated that the company is still committed to NFTs and believes it will be a big business after launching a beta release of its NFT marketplace in April 2022:
“It’s still super early in the NFT space. We saw a big run-up last year with people trading Bored Apes and all sorts of different things that got traction. But I think that’s just the first step in a long journey of what NFTs are going to become.”
Armstrong emphasized his conviction that NFTs will alter social media usage, the music business, and the way that artists engage with audiences. Armstrong also looked into natively integrating Coinbase NFTs into various platforms that people use every day.
“We’re in the process of aggregating all the different places that people can bid and ask on NFTs in one place. If we can aggregate that there is really no downside to using it there instead of going anywhere else.”
A beta version of the exchange’s Coinbase One subscription service, which offers users free trading, $1 million in account protection, and automated tax services, is currently being tested. The cost of the service’s monthly subscription is $29.99.