American cryptocurrency exchange Coinbase intends to increase revenue from long-term subscriptions to combat potential profit margin compression.
Company founder and CEO Brian Armstrong delved into the long-term prospects of the US cryptocurrency exchange in a wide-ranging interview with CNBC’s Crypto World show on Aug. 23. One of the key points of the conversation was the possibility that fee income will decrease in the future and how the company plans to anticipate this possibility.
Armstrong highlighted his belief that profit margin compression was bound to happen in the future as more exchanges and competitors launch similar products and services that could compete for market share:
“That’s why we’re investing in so much subscription and service revenue today, and we realize that trading fees will still be an important part of our business 10 to 20 years from now. But I’d like to get to a point where more than 50% of our income comes from subscriptions and services.”
Armstrong said the company had been focused on this change for the past three years, which has resulted in subscriptions and services accounting for 18% of the company’s revenue stream. According to Armstrong, this percentage has increased from the 4% contribution to revenue in 2020.
The CEO of Coinbase noted that its USDC staking offerings and custody services were the main drivers of subscription and service revenue, while the development of the Coinbase Cloud and other ongoing projects would add to the growth of these revenue streams. .
The growth of Coinbase’s staking product also depends on the scalability of the underlying blockchains that power the service, and Ethereum’s upcoming transition to a proof-of-stake consensus algorithm is poised to solve this problem, as Armstrong explained.
The burgeoning non-fungible token (NFT) space and Coinbase’s own NFT market was also a topic of discussion. Having launched a beta version of its NFT marketplace in April 2022, the CEO said the company remains committed to NFTs and believes it will be a big deal:
“It’s still very early days in the NFT space. Last year we saw a huge boom with people trading Bored Apes and all sorts of different things getting traction. But I think that’s just the first step in a long journey of what What are NFTs going to be?
Armstrong highlighted his belief that NFTs will change the way people use social media, how the music industry works, and how creative talent interacts with audiences. Native integration of Coinbase NFTs into various platforms that people use on a daily basis was another avenue that Armstrong explored.
“We’re trying to bring together all the places where you can bid and request NFT in one place. If we can add that, there’s really no downside to using it there instead of going anywhere else.”
The exchange is currently testing a beta version of its Coinbase One subscription product, which gives members access to fee-free trading, $1 million account protection, and automated tax services. The monthly subscription to the service is USD 29.99.
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