Coinbase is focused on controlling what can be controlled and contingency planning for what can’t.
This, as a year full of idiosyncratic events, battered the crypto sector with countless credit-related bankruptcies, and the fall of FTX acted as both a regulatory catalyst and a cherry on top for the industry’s naysayers.
Still, Coinbase’s CEO Brian Armstrong told the company’s investors on today’s (Feb. 21) fourth-quarter 2022 earnings call that he wants to grow crypto’s global user base to one billion strong.
The company lost around 200,000 users in the fourth quarter 2022 compared to the fiscal period prior.
“We do not operate as a market maker that trades against our customers, and we do not issue exchange tokens. We do not believe we have violated any securities laws: Coinbase staking products are not securities, USD Coin (USDC) is not a security. The list goes on. We expect 2023 to be a year of regulatory focus and we believe our strong foundation will make us a net beneficiary of this new environment … our business decisions are intended to maximize safety for customers, legitimacy for the cryptoeconomy, and longevity for Coinbase,” Armstrong said.
“We are proud of our ability to position our business as a regulated and legitimate market leader,” added Armstrong. “We proved to be largely resilient in 2022 despite major shocks to the system.”
Read More: Crypto’s Lapses Hold Big Industry Lessons
“Policy is my top priority for this year … Coinbase has an important role to play around crypto education, advocacy, and policy,” Armstrong said, telling investors on the call that he’s been spending a lot of time in D.C. working alongside lawmakers.
“There’s a lot of excitement about the potential and desire to have this built here in America by people who realize the U.S. is a little bit behind right now. The EU has already passed comprehensive legislation, and policymakers are seeing others that are moving in that direction. There’s a lot of bipartisan support for getting legislation passed,” he said.
But what’s more important than that, he added, is for the 50 million people in the U.S. using crypto to tell their representatives that they want regulation for the industry so they can use it safely.
Crypto Policy Is in Transition
When asked what would constitute a regulatory “win” for Coinbase by an investor on the earnings call, Armstrong listed two things.
“Bringing stablecoins into the regulatory perimeter would be one,” he said. “The other one is around how to carve up the territory between CFTC and SEC, what is a commodity, what is a security and what is something else entirely.”
Coinbase’s General Counsel Paul Grewal added that Coinbase has “a decade-plus history of compliant operations, we are in constant conversation with all of these regulators and policymakers and in those conversations, our agenda is very clear: undertake public rulemaking that will give clarity to the industry and to consumers.”
The company frequently referenced its comprehensive petition letter for Securities and Exchange Commission rulemaking, sent to the agency last July, that called for the agency to solicit input from the public regarding regulatory guardrails for the digital asset industry.
See also: Kraken Ends U.S. Crypto Staking After $30M Settlement With SEC
“We’re very hopeful,” Grewal told investors.
“There’s a lot we can do here and it’s a major focus for myself and for the company,” said Armstrong.
Coinbase indicated it had no short-term plans to expand to stock trading. Still, executives expressed interest in the possibility of one day creating a product that “tokenizes” equities pending a more favorable regulatory environment in the U.S.
Armstrong highlighted “decentralized identity” solutions as a Web3 area he was excited about.
“We’re going to build, buy, and invest — we are excited by the [Web3] industry and its technology,” he told investors on the earnings call.
According to crypto market researcher CryptoCompare, Coinbase, which is the biggest U.S. cryptocurrency exchange, has been losing market share, dropping from 5.9% last November to 4.1% this February. Rival exchange Binance has gained share in the meantime and now accounts for nearly 60% of the market despite being dogged by ongoing operational and regulatory questions.
After trading in the $30 range this recent December, Coinbase’s stock price has since doubled to the $60 range, with better-than-expected fourth-quarter earnings giving the crypto company a boost.
When Coinbase IPO’d in 2021, trading of its public shares opened at $381 and a reference point of $250 was set by Nasdaq.
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