Coinbase CEO Says Retail Investors Remain Committed to Crypto

Coinbase, as a stand-in for the U.S. crypto sector, is undoubtedly facing an existential crisis.

Still, the U.S.-listed cryptocurrency exchange and self-described “most trusted brand” was able to stop a four-quarters-long slide where its business missed analyst estimates for either revenue or earnings — and often both — by finally beating most Wall Street projections for its most recent fiscal quarter.

Coinbase’s CEO Brian Armstrong told investors on the company’s first quarter 2023 earnings call Thursday (May 4) that “this quarter represented a turning point in our drive towards building a company that is more efficient and financially disciplined … revenue was up and costs were down.”

“We saw revenue growth across the board,” added Coinbase CFO Alesia Haas.

The exchange’s interest income rose 32% to $240 million, above estimates of $205 million. The bulk of that interest income, or just under $200 million ($199 million), was derived from Coinbase’s USDC stablecoin.

Both Coinbase’s revenue and shares have tumbled since earlier peaks of crypto mania, sliding around 86% from their closing high in early November 2021.

“It’s time to update the system. The majority of financial systems were built over 100 years ago. The rules are outdated, the technology has been slow to catch up, and all over the world people are paying the price with their time, money and opportunities,” Armstrong said to shareholders.

See also: Hearings on Crypto’s Regulatory Gaps Do Little to Fill Them

Shifting to Operate in a Down Market

Coinbase reported that its first-quarter 2023 revenue was up 22% as cost-cutting measures, including real estate reductions, headcount optimizations, and vendor concentration all paid off.

“We have a more nimble team and we are well-positioned to build in the down market,” Armstrong told investors.

The company’s filings show that its recurring expenses collectively declined 37% quarter over quarter (QoQ), reflecting Coinbase’s lower headcount and more prudent expense management.

Still, Haas noted to investors that the exchange did expect its legal expenses to rise going forward.

The exchange’s total consumer trading volume grew 5% QoQ, which the company noted was largely in line with total U.S. spot market volume growth.

In its shareholder letter, Coinbase highlighted, “Retail customers continued to ‘hodl’ their crypto assets on Coinbase at levels similar to Q4, which we believe indicates that retail customers, on average, maintain long-term conviction in crypto.”

Despite losing two bank partners as a result of March’s banking collapses, Coinbase also let investors know that it has onboarded new partners and rebuilt redundancy layers, as well as restored access to 24/7 instant settlement capabilities, a critical piece of infrastructure.

Read more: Coinbase Says It’s Ready for Litigation With SEC, but Prefers Dialogue

Elephant in the Room

“We are 100% committed to the U.S. because rule of law prevails here,” Armstrong said during the earnings Q&A, emphasizing that it is “really important for America to get this [crypto regulation] right.”

During its previous fourth quarter 2022 earnings call, Coinbase leadership frequently referenced the company’s comprehensive petition letter for Securities and Exchange Commission (SEC) rulemaking, that was sent to the agency last July, and which called for the agency to solicit input from the public regarding regulatory guardrails for the digital asset industry.

As reported by PYMNTS, Coinbase recently (April 24) asked a judge to compel the SEC to release its response to that petition.

“It is unreasonable for the SEC — an agency with over 4,500 employees — to take nine months (and counting) to complete that simple task,” Coinbase said in the federal court filing.

In a bit of good news for the exchange, the SEC was Wednesday (May 3) ordered by a U.S. court to file its response to Coinbase within 10 days.

While SEC Chair Gary Gensler has frequently said he believes “everything else other than bitcoin is a security,” the SEC itself hasn’t codified this position.

“I want to remind everyone bitcoin and ethereum represent the majority of our business, 25% of which is international. We have many different revenue streams and feel very confident in our ability to operate through any adverse scenarios,” Coinbase told investors during Thursday’s Q&A.

The exchange’s executives underscored repeatedly that they see any regulatory and legal uncertainty as an opportunity to continue pushing for a “clear rule book in the U.S.” for crypto regulations.

“The U.S. can’t afford to fall behind on this important technology that can update the financial system and keep 1 million jobs in America,” Armstrong said. “Our preferred path would be for Congress to take action to provide clear rules of the road for the industry, including giving authority to the SEC, CFTC, and other regulators to regulate our industry as part of a cohesive regulatory framework.”

Still, while the U.S. legal battle is playing out, Coinbase does appear to be hedging its bets with ongoing overseas expansion plans.