Coinbase could see fee compression in long term, CEO expects

Coinbase could see fee compression in long term, CEO expects

Coinbase could see fee compression in long term, CEO expects

Coinbase CEO Brian Armstrong spoke about the platform’s transaction costs when the company listed its shares on the Nasdaq today.

In an interview Wednesday with CNBC’s Squawk Box, Armstrong addressed public concerns about Coinbase’s massive profits from transaction fees. As previously reported, nearly 96% of Coinbase’s total revenue in 2020 came from transaction fees charged to users.

Asked about the potential impact of increased competition on Coinbase’s transaction costs, Armstrong said the platform could see a slight decrease in costs in the long run:

We haven’t seen any margin compression yet and I don’t expect any in the short to medium term. Long term, yes, I think there could be a tightening of fees, as with all other asset classes.

According to Armstrong, most fees for cryptocurrencies come from storage fees, which are already included in the transaction fees.

The CEO said Coinbase plans to gradually focus on other revenue streams, with products such as debit cards, courses, the Coinbase Earn educational program and custody business for institutional customers.

We have started to invest in revenues that are starting to yield these green revenue streams…They provide more stable and predictable revenue streams, and I think in five or 10 years we could see up to 50 percent or more of our revenues, Armstrong said.

As previously reported by Cointelegraph, professional platform Coinbase Pro has made a major update to its fee structure in 2019, increasing the producers’ share of fees to 233%. Following the update, Coinbase generated $1.1 billion in direct revenue in 2020, up significantly from $482 million in 2019.

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