Coinbase is currently testing a beta version of its Coinbase One subscription service, which offers zero-fee trading, $1 million account protection, and automated tax services. A subscription to the service costs $29.99 per month.
In the long run, Coinbase plans to grow revenue from subscriptions to combat potential profit margin compression.
In a wide-ranging interview with CNBC’s Crypto World on Tuesday, Brian Armstrong, the founder and CEO of Coinbase, discussed the long-term prospects of the American cryptocurrency exchange. How the company plans to preempt the possibility of lower revenue from fees was a key issue.
Jim Armstrong believes that profit margin compression is inevitable in the future as more exchanges and competitors offer similar products and services, competing for market share:
According to Armstrong, Netflix has been preparing for this change for the past three years, which has resulted in subscriptions and services accounting for 18% of the company’s revenue. This figure was up from the 4% contribution to revenue in 2020, according to Armstrong.
“This is why we’re investing today in so much subscription and services revenue and we’re realizing that trading fees will still be a major part of our business in 10 or 20 years from now. But I’d like to get to a place where more than 50% of our revenue is from subscriptions and services.”
As per the Coinbase CEO, staking offerings and USDCCustody services were the main drivers of subscription and services revenue, and the development of Coinbase Cloud and other future projects would further boost these revenue streams.
According to Armstrong, the scaling of Coinbase’s staking product is also dependent on the blockchains on which it operates, and the upcoming switch from Ethereum’s proof-of-work consensus algorithm to a proof-of-stake one will address this issue.
In addition to discussing the nonfungible token (NFT) space, Coinbase’s proprietary NFT marketplace was also discussed. Nonfungible tokens were a hot topic, and the CEO assured the audience that the company was still committed to them and believed they would be a big business:
“It’s still super early in the NFT space. We saw a big run-up last year with people trading Bored Apes and all sorts of different things that got traction. But I think that’s just the first step in a long journey of what NFTs are going to become.”
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. Natively integrating Coinbase NFTs into various platforms people use daily was another avenue that Armstrong explored.