US cryptocurrency exchange Coinbase aims to increase revenue from subscriptions in the long run to combat potential profit margin pressure.
Company founder and CEO Brian Armstrong discussed the long-term prospects of a US cryptocurrency exchange in a wide-ranging interview with Crypto World on CNBC on Tuesday. The main talking point was the potential for lower fee revenue in the future and how the company plans to anticipate that possibility.
Armstrong highlighted his belief that profit margin pressure is bound to occur in the future as more exchanges and competitors launch similar products and services that can compete for market share:
“That’s why today we invest in a lot of subscription revenue and services, and we know that trading fees are going to be a major part of our business 10 or 20 years from now. But I want to get to a place where more than 50% of our revenue comes from subscriptions. and services.”
Armstrong said the company has focused on this transformation over the past three years, resulting in subscriptions and services that account for 18% of the company’s revenue stream. This was above the 4% contribution to revenue in 2020, according to Armstrong.
Coinbase’s CEO noted that its offerings of contributory and USDC custody services have been key drivers of subscription and service revenue, while the development of Coinbase Cloud and other projects in the pipeline will add to the growth of these revenue streams.
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Coinbase’s staking product growth also depends on the scalability of the underlying blockchains that power the service, with Ethereum’s upcoming move to a Proof of Stake consensus algorithm to address this issue, Armstrong explained.
The burgeoning non-fungible token (NFT) space and Coinbase’s NFT market have also been a topic of discussion. After launching a beta for the NFT market in April 2022, the CEO said the company remains committed to NFTs and believes it will be a great company:
“It’s still very early days in the NFT space. We’ve had a huge uptick in the last year with people trading Bored Apes and all kinds of different things gaining traction. But I think this is just the first step in the long journey of what will become the NFT.”
Armstrong highlighted his belief that NFTs will change how people use social media, how the music industry operates and how creative talent interacts with audiences. Incorporating Coinbase NFTs into many of the platforms people use every day was another avenue that Armstrong discovered.
“We’re aggregating all the different places people can bid and order on NFTs in one place. If we can put together there really isn’t any downside to using it there rather than going anywhere else.”
The exchange is currently trialling a subscription product Coinbase One that gives members access to fee-free trading, $1 million account protection, and automated tax services. The monthly subscription for the service is $29.99.