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Coinbase Plans to Spur ‘Commerce’-based Crypto Usage for Customers, Merchants

Tim Alper
Last updated: | 3 min read

US-headquartered major crypto exchange Coinbase has revealed that its plans for the future of the “crypto economy” include building upon its Coinbase Card debit card and bitcoin (BTC)-collateral loan service, building on a growing number of users who are choosing to stake their tokens.

Brian Armstrong. Source: a video screenshot, Youtube, a16z

The firm revealed more about its expansion plans in an earnings call for the second quarter of FY2021.

In the call, the exchange giant’s CEO Brian Armstrong stated:

“One of our goals long terms is how do we get more and more commerce transactions for goods and services in the everyday economy is happening with crypto. […] The other is that we need to get both a set of merchants and a set of consumers who both want to spend crypto.”

Armstrong was speaking about his plans for “forming” “a truly a crypto economy […] not just a trading platform.” Coinbase currently operates the Coinbase Borrow service, which allows retail clients to borrow up to USD 100,000 in fiat against their crypto holdings.

And with a reported 1.7 million users now staking their crypto, the exchange said that it was aiming to look for more ways to expand the horizons of its customers – moving beyond simple day trading and investment functions and expanding into new ways to use crypto in conjunction with more traditional financial services such as cards.

However, the Coinbase CEO noted that technical challenges still stood in the company’s way as it moves to expand into the world of retail commerce. He explained:

“There are a few things that need to get in place for that to happen. One is that you need to get the blockchain to be more scalable and so there’s some work we’re doing on that.”

Regulation may prove to be another stumbling block to expanded lending plans, but Armstrong appears to have anticipated this issue, remarking that he was “looking forward to engaging with regulators to drive more regulation, to provide clarity and to enable our product growth.”

Armstrong was also enthusiastic about institutional client base expansion, and revealed that Coinbase’s “institutional product” was “going super well.”

He claimed that the platform had “become the dominant institutional platform out there” and counted the likes of SpaceX, Tesla, PNC Bank, Third Point and WisdomTree among its customers.

The company noted that “10% of the top 100 hedge funds by assets under management (AUM)” had “now onboarded” its institutional product.

The CEO enthused:

“The asset managers, corporate treasuries are now using these products, pension funds.”

When it comes to tokens, the firm stated that bitcoin and ethereum (ETH) “still make up about 50% of our trading volume” – with the other 50% comprised of “the long tail of all the other assets that we support.”

Source: Coinbase

And although the company outperformed many financial analysts’ predictions for the quarter, Q3 is likely to see a reversal.

In a letter to investors, Coinbase revealed Q2 revenue of USD 2bn and saw trading volumes well by 38%. Bloomberg claimed that analysts it had spoken to had “expected USD 1.88bn,” with net income figures of USD 1.6bn, much higher than the analysts’ expected USD 683.3m.

But Coinbase added that it expects lower monthly transacting user numbers and smaller trading volumes in next quarter’s report.

The same media outlet quoted the Coinbase President and Chief Operating Officer Emilie Choi as stating that Q3 was “going to be bumpy,” adding:

“That’s actually the way that we built the business. We’re used to the volatility. We embrace the volatility.”

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