Coinbase Generated $2 Billion in Revenues from Transactions Since 2012

Co-founder and CEO of major US cryptocurrency exchange Coinbase Brian Armstrong has revealed that the firm has been profitable since 2017 and has generated close to $2 billion in transaction fees revenue since its launch in 2012.

Speaking at Vanity Fair’s New Establishment Summit on October 23rd, Armstrong has stated that the exchange has generated more operating profits than the funds it raised from venture capitals.

He further noted that the exchange has turned a profit the last three years, including during the 2018 bear market, and has earned more operating profit than venture capital raised so far, estimated at nearly $550 million in nine funding rounds, according to CrunchBase.

“We were profitable in 2018 and in 2017,” and as well as this year, he stated. However, instead of paying out to the investors, the exchange is focusing on putting the profits in its expansion.

 “Most of these profits we’re plowing back into the business to create new products. […] I sort of think of us as the anti-unicorn unicorn… I want Coinbase to be a company of repeatable innovation.”

Armstrong further added that it’s due to technology, which has always been the focus of Coinbase that the exchange has managed to remain profitable.

The San Francisco-based exchange is continuously adding digital coins to offer more options to its crypto traders. Moreover, as a way to boost the crypto ecosystem, the exchange is also heavily investing in startups that work in the development of blockchain technology.

Coinbase was founded in 2012 and is now one of the eight blockchain unicorns globally. The exchange offer a wide range of crypto-based services for both retail and institutional traders. Coinbase was valued at $8 billion in its last funding round, raising money from investors which include Andreessen Horowitz, Y Combinator, and Polychain Capital.

Meanwhile, Coinbase is currently part of Facebook’s cryptocurrency initiative – Libra. When asked about the future of the project, CEO Armstrong replied that he doesn’t know why regulators’ response to the project were preponderantly negative, adding:

“I’d really like to see the U.S. embrace this area of innovation. […] My hope is the U.S. embraces this kind of innovation, even if it comes from a company like Facebook that they’re not necessarily very happy with.”

Coinbase is currently one of the 21 remaining companies included in the Libra Association. The association has been under scrutiny by lawmakers across the world for its potential to put at risk user privacy as well as diregard regulatory rules. Most recently, Libra has lost seven high-profile contributors such as Visa, eBay, Mastercard, PayPal and others.

Earlier this month, Coinbase acquired an Irish e-money license from the Central Bank of Ireland, effectively expanding its European operations. Following this, the cryptocurrency exchange is certified to offer money and banking services throughout the European Economic Area and the EU.

Coinbase Receives E-Money License in the EU

Cryptocurrency exchange Coinbase has been granted an e-money license by the Central Bank of Ireland.

The news was published via a company blog, Coinbase UK CEO Zeeshan Feroz stating that the exchange is one of the very first firms to be granted the license from the central bank, following a Dublin office opening a year ago. He further stated that the license will enable Coinbase to process payments, issue e-money, and handle electronic money wallets.

In addition to that, the new license will help Coinbase expand its Irish operations, as well as help open up European Union (EU) and European Economic Area (EEA) markets for Coinbase customers. The development will also allow the San Francisco-based exchange to operate under their legal entity name.

According to a company statement:

“Europe represents a huge opportunity for Coinbase and today’s announcement is another positive step for us in the region. The approval from the Central Bank of Ireland will now enable us to expand our Irish operation and deliver a better product to customers across some of our fastest-growing markets. It will also allow us to secure passporting for our customers across the EU and EEA. “

Following the news, state-sponsored business development agency IDA Ireland – whose aim is to attract foreign investment to Ireland – asserted that this development is a net positive for the local financial industry.

CEO Mike Shanahan has explained that the exchange’s choice for a Dublin office reinforced the strength of Ireland as a hub for financial services companies, all the while providing a consistent, certain, pro-enterprise policy environment for businesses to grow and thrive.

The cryptocurrency exchange was granted a U.K. e-money license by the Financial Conduct Authority in March 2018, allowing the exchange to operate as a money service in the country.

Although the U.K. is still an EU member state, due to the impending Brexit it could affect Coinbase’s market reach. If it goes ahead, the separation would render Coinbase’s local license of limited benefit.

Earlier this month, Coinbase gained access to the UK’s Faster Payment Scheme via ClearBank following a separation with banking partner Barclays, which at that time temporarily caused deposit and withdrawal issues for users.

Coinbase Users Will Start Earning Interest on USDC Holdings

San Francisco-based cryptocurrency exchange Coinbase has announced that from now clients will be able to earn interest for holding the stablecoin USD Coin (USDC) in its crypto wallet. Coinbase users will receive a 1.25% on their USDC holdings per year.

The news had been shared through a blog post on the exchange’s website, stating that Coinbase will pay rewards on literally any amount of USDC held, which will be distributed each month automatically.

Users with at least one dollar’s worth of USDC in their accounts will automatically begin to accumulate rewards on their holdings, with no additional cost or fees. USDC is a stablecoin, whose value is pegged to the U.S. dollar at a 1:1 ratio. It was launched last year by CENTRE, a consortium co-founded by Coinbase and Circle.

Currently, the Coinbase Rewards is only available to eligible U.S. customers, however New York State based users will not have access to this reward system. Furthermore, it will only be available on Coinbase and not Coinbase Pro – Coinbase’s sister exchange for professional traders.

Coinbase product manager Paul Katsen has explained that the exchange is trying to build more ways for customers to grow their wealth on Coinbase.

He further added:

“One of the things we know is a bad customer experience is having to move your money back and forth from Coinbase to a bank account [to] earn a little bit of interest in the bank account. We’re trying to bring some of these experiences together but make them crypto-first and on Coinbase.”

According to Max Branzburg – director of product at Coinbase – the user experience is very simple and smooth. He explained that as soon as a client has USDC in their wallets, they can start earning rewards. All rewards earned on the exchange can be tracked in real-time and used immediately to buy other cryptocurrencies listed on the exchange.

He further stated that the reward system will be financed by the exchange itself, by using pre-existing revenue streams.

“We can pull from the profits we generate as a business to reward our customers for storing their assets on the platform,” Branzburg said, adding:

“We’re fortunate to be able to do that as a profitable business.”

This is an attractive proposal for anyone that trades on Coinbase, as it is more advantageous than moving fiat from a bank to Coinbase and vice versa. Indeed, at 1.25 percent, the interest rate offered by many federally-insured bank accounts trump that of Coinbase. Although it is still higher than the apparent U.S. national average of 0.9 percent, NerdWallet lists a total of 14 savings accounts that offer more than two percent APY.

Meanwhile, Coinbase’s news follows competitor Binance’s launch of a staking platform yesterday, which rewards users keeping coins, including Algorand’s Algo and Stellar’s XLM, on the exchange. Whilst this makes it much easier for users to grow their supply of stake-able coins, it does mean that the exchanges will have sizeable influence over such proof-of-stake blockchains, which is a worrying sign.

Coinbase Completes Acquisition of Crypto Custodian Xapo

Coinbase, one of the largest cryptocurrency exchanges, has just acquired the custody business of Xapo, an institutional business service best known for storing Bitcoins (BTC) in a vault under a Swiss mountain. The acquisition follows Coinbase’s plans to expand its custody services, and could eventually lead to the San Francisco – based exchange storing over 5% of all Bitcoins in circulation.

According to an announcement made on Thursday, Xapo has been acquired for $55 million which was enough to outbid another strong contender – custody giant Fidelity. The firm stated that the new acquisition will help expand the company’s custody business as well as increase the assets under custody up to more than $7 billion.

The news follows weeks of speculation over the exchange’s intentions with Xapo, seeing as Coinbase Custody had acquired in early August Xapo’s largest client – crypto-asset manager Grayscale Investments who at the time reported having $2.7 billion under management. This is considered to be one of the largest crypto transactions in history.

Xapo, which launched in 2013, is known for its wallet services including physical storage vaults for Bitcoin, based in Switzerland, which are used to store customers’ crypto assets in an offline environment to ensure the safety of private keys. Prior to Grayscale being acquired by Coinbase, the firm reportedly held $5.5 billion worth of cryptocurrency.

Following the acquisition, Xapo will hold onto its exchange business, which lets ordinary consumers buy and sell Bitcoin. Xapo founder, Wences Casares, has stated that he will maintain his long-time role of CEO. In addition to that, Xapo will keep possession of the vault and use it to store Bitcoins on behalf of its retail customers.

According to Casares the retail exchange business has always been Xapo’s main focus, and the custody business had been established as a side business at a time when wealthy Bitcoin investors needed a secure place to park their digital wealth.

 “In choosing Coinbase, we are confident that the Institutional Custody Business is going to a company that can provide great insurance, borrowing and investment alternatives,” said Casares. “We believe that Coinbase will take this opportunity to prove to our customers that they deserve their business.”

Meanwhile, the majority of Xapo’s largest clients have agreed to transfer their assets to Coinbase, giving the company control of over 514,000 BTC, currently worth $5.3 billion. If Coinbase manages to sign the remaining clients, then its custody service will have more than 860,000 bitcoin in total under custody, worth over $8 billion.

Coinbase CEO Brian Armstrong, has stated that ”custody is a critical step toward the institutionalization of crypto economy. It’s likely to start off small—maybe a few billion under custody—but it will grow quickly to a point that it’s a meaningful piece of stable, recurring revenue for the company.”

Prior to the acquisition in July this year, Coinbase Custody claimed to hold more than $2.5 billion worth of crypto from roughly 100 institutional clients.

Coinbase’s new custody services will include regulatory support and insurance, as well as staking, which extends to a sort of proxy voting service for cryptocurrencies that have built-in voting mechanisms.

“Fundamentally, we have to help our investors earn a return on their assets. You can imagine lending out Bitcoin and earning interest on that,” said Coinbase Custody CEO Sam McIngvale.

In the meantime, Coinbase isn’t the only company trying to get into the custody space. Earlier this year, startup Anchorage announced $40 million in backing from finance giant Visa as it seeks to lure in more institutional clients. Meanwhile, Palo Alto-based BitGo is also said to be competing to be a player in the custody space.

Coinbase Switches Banks from Barclays to ClearBank in the UK

Barclays – the British multinational investment bank and financial services company – has reportedly ended their relationship with U.S. cryptocurrency exchange platform Coinbase.

According to industry sources, the London – based bank, is no longer providing banking services to Coinbase ending a relationship that started in March last year as the exchange expanded in Europe.

The news has caused unwarranted disruption, such as Coinbase users having reportedly been indirectly affected. The rare deal between the exchange and the bank gave its UK customers access to the Faster Payments Scheme (FPS) which allowed users to directly deposit and withdraw pounds into their exchange accounts.

However, the news of the split up has already slowed UK deposits and withdrawals, which now take days to process. The US exchange platform has already found a replacement UK banking partner in ClearBank.

ClearBank is one of the U.K. challenger banks that have come up on the radar in recent years to compete with market incumbents. ClearBank is expected to restore Coinbase’s FPS access by the end of the third quarter.

The reasons for the separation of Barclays and Coinbase are not clear. Currently, Barclays, ClearBank and Coinbase have all declined to comment on the matter.

However, one unnamed source claimed that the Barclays-Coinbase relationship was simply a pilot program that had run its course. The source further added that Barclays has probably held Coinbase back, preventing it from listing certain coins and tokens.

A CEO of a U.K. crypto company who chose to remain nameless has also voiced his opinion on the saying, citing:

“It is my understanding that Barclays’ risk appetite has contracted a little – I’m not sure exactly why or what’s been driving that, maybe there has been some activity they are not happy with. But it’s about Barclays’ comfort level with crypto as a whole.”

Coinbase first secured a bank account with Barclays in early 2018 and by August it already began rolling out support to let UK customers buy and sell cryptocurrency in Pounds sterling. The exchange had also been granted an e-money license by the U.K. Financial Conduct Authority (FCA), making it to be the first crypto platform to gain access to FPS.

Meanwhile, earlier this week, Coinbase delisted Zcash – a privacy-centric cryptocurrency, which uses a technology called zero-knowledge proofs to hide details of transactions from blockchain watchers. According to sources, the decision was made in accordance with Clearbank’s wishes, as it was uncomfortable indirectly supporting a currency with features that make law enforcement’s job harder.

ClearBank is also working with FCA-regulated crypto broker BCB Group. Most recently, the broker announced a deal to bring Luxembourg-based exchange BitStamp onto Faster Payments for the sterling pound.

Although, Barclays has taken the decision to take less risks when it comes to crypto, the global bank still provides operational banking services to Blockchain, the U.K. wallet provider which recently announced plans to move into the exchange space with its super-fast PIT trading service.