coinbase CEO Brian Armstrong Coinbase Exchange CEO says exchange platform has ongoing plans to cut costs


As Cryptocurrency Exchange platform Coinbase Exchange faces industry hardships and economic headwinds, the exchange platform is taking a close look at where it can cut variable costs, CEO Brian Armstrong told CNBC reporter.


Coinbase Exchange shares have lost more than 70% of their value this year as the exchange platform has grappled with a “Crypto Winter” tied to the plunging of Bitcoin and Ethereum. Brian Armstrong said the downturn is not unusual, as Coinbase Exchange has been through four down market cycles in the 10 years since he started the exchange platform.


Coinbase Exchange is facing inflationary pressures and a potential U.S. recession, but Brian Armstrong said that the macroeconomic scenario is evocative of what the exchange platform has dealt with in the past.


“We have this saying internally in the company, which I like to repeat a lot, that is you know, its never as good as it seems, its never as bad as it seems,” he said. “I think one of the reasons Coinbase Exchange has been so successful in the last 10 years is we just we try not to get focused on near-term ups and downs.”


Coinbase Exchange cut 18% of its total workforce in June this year, and Brian Armstrong previously attributed the layoffs to a possible U.S. recession and a need to manage the exchange platform is burn rate and increase efficiency.


Also Read: Coinbase Exchange Is Rapid Rise Left It Exposed In Crypto Winter


Brian Armstrong said the layoffs were meant to be a one-time thing, but that “anything could happen.”


“I can not tell you what the world is going to be like a year from now,” he said. Brian Armstrong said that the exchange platform is looking closely at reducing variable expenses related to marketing, external vendors and Amazon Web Services.


He further added that the exchange platform is looking to convert as many fixed expenses into variable expenses as possible. That could mean that the Coinbase Exchange Super Bowl ads are a thing of the past, though Brian Armstrong said there will still be a “variety of Coinbase Exchange ads out there.”


Also Read: Insider Trading Was Common At Coinbase Exchange, A New Study Argues


The down-market scenario for Coinbase Exchange has been around potential pressure on transactional fees, which accounted for more than 80% of sales in the second quarter. Noted short seller Jim Chanos is amongst those betting against Coinbase Exchange, claiming that it over earns on fees and as “competition increases amongst the Crypto Exchanges, you are going to see fee compression.”


Brian Armstrong said transactional fees will eventually erode as they have in the stock brokerage industry. But Coinbase Exchange is not yet seeing price sensitivity.


“I do think there is going to be margin compression, eventually it has to happen at some point because everything that we are building, you know, others, eventually you are going to build it and it will become a little bit more commoditized,” Brian Armstrong said. “I had like to get to a place where more than 50% of our revenue is subscription and services.”


Also Read: Institutional Staking Will Not Take Off Unless Asset Lock-Up Solved: Coinbase CFO


That part of the operation, subscription and services, has grown to roughly 18% of revenue from 4% a year earlier. It includes interest income, Coinbase Exchange is premium membership, Blockchain Technology rewards and transactional fees for storing cryptocurrency on the platform on behalf of their users.


Coinbase and the SEC


Coinbase Exchange has also dealt with SEC scrutiny in recent months. The federal agency charged an ex-Coinbase exchange product manager with scam and launched a probe into whether the exchange platform is illegally allowing customers to trade Digital Currencies and assets that have not been registered as securities.


Determining how to classify Cryptocurrency tokens is controversial, and Brian Armstrong said he expects the exchange platform will receive some regulatory clarity after the midterm elections. If digital currencies are considered commodities like other kinds of currency, they would be governed by the Commodity Futures Trading Commission (CFTC). But many cryptocurrency projects are funded by the sale of speculative tokens.


SEC Chair Gary Gensler has said that “many of these underlying coins have the attributes of securities” and need to be regulated as such to protect investors.


Brian Armstrong said he is happy to be working with the SEC.


Also Read: Coinbase Stock Rebound Obscures Market Share Loss To Peers


“You know, we have been in actually engaging with regulatory bodies and I actually think its a good thing,” Armstrong said. “And our overall goal is really to help drive regulatory clarity on a global scale.”


Company culture and remote work


Though the Coinbase Exchange was started in San Francisco, it has no official headquarters and none of its employees are required to work in an office.


Brian Armstrong said that he thinks the remote-first organization structure has been positive for the exchange is recruiting but that it has eroded some of the learning and development, creativity and trust. As a result, he said that the exchange platform is trying to get employees together with some of their teammates in person at least once a quarter.


Coinbase Exchange is mission statement says that the firm strives to be a “refuge from division” and does not “engage in social or political activism.” Brian Armstrong gained a lot of attention from CEOs in Silicon Valley and beyond for a blog post he wrote in 2020, declaring that political debates about candidates are off limits.


Brian Armstrong said he was “shocked” by the types of leaders who were reaching out to talk to him about it, but that he thinks the exchange platform has become almost too well known for its mission statement.


Also Read: Three Arrows Founders Break Silence Over Collapse Of Crypto Hedge Fund


“I kind of want to just turn the page on it,” Brian Armstrong said. “I had rather be better known for our products and all the innovation and technologies that we are doing, but, you know, in a way it was good that other firms found something interesting in it.”


“I think its net positive,” he said. “Its given us access to a wealth of talent in small towns in various nations.”


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