Corporate America Moving On-Chain and Regulatory Clarity Propel Coinbase Earnings

The crypto industry is an unpredictable one. For years it has been defined by giant surges in value, as well as equally momentous drops.

And if Coinbase Global Inc.’s second-quarter 2024 earnings are any indication, that fact about the digital asset landscape is showing no signs of stabilizing.

While the crypto platform beat Wall St. estimates overall for the quarter, Coinbase’s income from transaction fees — the company’s biggest source of income — fell 27% quarter-over-quarter, with trading volumes falling 28%.

Total transaction revenue was $781 million, while Coinbase’s total revenue for the quarter came in at $1.4 billion.

“Q2 was a quarter of strong progress for Coinbase and the crypto industry. In addition to solid financial results and continuing to build trusted products to help drive crypto adoption, Coinbase and the crypto industry made great strides towards achieving regulatory clarity in the US, which we believe will be a major unlock for innovation in the industry,” said Coinbase CEO Brian Armstrong during Thursday’s (Aug. 1) investor call.

The broader crypto market has seen its fair share of ups and downs, with various factors influencing trading volumes and investor sentiment. Coinbase’s recent performance indicates a resilience amidst these challenges, but it also highlights the need for the company to adapt and innovate to maintain its growth trajectory.

“I want to note to you that our transaction revenue benefited from growth in derivatives and coin-based wallet trading fees where we do not report trading volume associated with these two revenue streams,” said Coinbase CFO Alesia Haas.

Read more: Bitcoin Jumps on Calls to Integrate Crypto Into US Asset Arsenal

Corporate America is Moving On-Chain

Coinbase’s businesses outside of taking fees from trading on the platform, including interest income related to the company’s USDC stablecoin, have become more important in driving growth.

“Coinbase is now an all-weather company with increasingly diversified revenue streams and I’m proud of our discipline managing expenses,” said Armstrong.

Per its financial materials. Coinbase is the crypto platform of choice for 8 of 9 Ethereum ETF (exchange traded fund) issuers.

Coinbase executives also stressed that there has been a 39% year over year increase in blockchain driven activities announced by Fortune 100 companies, with 56% of Fortune 500 executives saying their companies are working on on-chain projects.

As PYMNTS reported, Coinbase in July announced it is creating a tokenized money market fund under its Coinbase Asset Management arm. Tokenization of real-world assets has become a big trend in crypto, and Coinbase’s move comes after asset manager BlackRock introduced a tokenization of real-world assets: a fund called BUIDL that holds U.S. Treasurys and gained $500 million of assets following its launch in March.

The tokenization of real-world assets is a function of the blockchain landscape that has captured the imagination of various players across payments, finance and commerce, PYMNTS reported in April.

Read also: Coinbase Fined $4.5 Million Over ‘High Risk’ Customers

The shifting regulatory landscape surrounding crypto in the U.S. was a major topic during Thursday’s call, with Coinbase executives embracing a positive outlook.

“We are increasingly optimistic that the next administration, whether Democrat or Republican, will be constructive on crypto. The rhetoric has shifted … there is real energy within both the House and the Senate to pass meaningful legislation,” Armstrong said on Thursday’s post-earnings conference call.

“Since we went public, we have reiterated the need for regulatory clarity,” he added.

Executives noted that the approval and launch of the ETH ETFs was a “huge step forward” for regulatory clarity, as it confirmed that ETH is not a security. Outside the US, Coinbase saw USDC become the first stablecoin to achieve compliance with the European Union’s landmark Markets in Crypto-Assets (MiCA) regulatory framework.

PYMNTS Intelligence finds that blockchain has tremendous potential for use in regulated industries, such as finance and healthcare.