The leading U.S. crypto exchange saw a drop in transactions and steep losses, but CEO Brian Armstrong said a growing regulatory push in Congress will ultimately benefit the company.
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Coinbase ended 2022 with mixed results, bringing in more revenue than expected despite a substantial drop in transactions.
In its Q4 earning report, Coinbase beat analysts's revenue expectations by pulling in $605 million — $16 million above predictions — despite a 12% decrease in transaction volumes.
From a business perspective, the top U.S. exchange met an important goal of increasing the amount of money it makes from subscription services as opposed to straight transaction fees, which rise and fall with the market.
Overall, 2022 was an unsurprisingly bad year, with net revenue of $3.15 billion less than half of 2021's $7.35 billion. And Coinbase saw a net loss of $2.6 billion.
The Outlook is Good
Despite that, CEO Brian Armstrong said he believed the outlook was bright for the company, arguing that "it's really easy to look at the headlines and assume that increased regulatory activity is bad for crypto, but I really don't agree with that."
Companies like Coinbase that "prioritize trust and compliance from the beginning, I believe, will be beneficiaries," he said.
In a comment during the company's Q4 earning call that was hard not to see as a swipe at the collapsed FTX exchange, Armstrong added:
"We were going to do things the right way even if it was more difficult. And I knew that there were going to be companies that would come in and try to cut corners. They might even grow really quickly because it's easier to move fast when you don't have to follow the rules. But they would inevitably come crashing down because regulators don't always act quickly, but they do eventually act."
That has left the company "really well positioned in this type of environment," Armstrong said.
Not perfectly, however, as the company did pay a $50 million fine to settle charges by the New York Department of Financial Services that its anti-money laundering compliance was insufficient in the past. It also agreed to spend $50 million beefing up those controls.
Regulation is Good
While Armstrong has had well-covered problems with the Securities and Exchange Commission over what he (and many others in the crypto industry) have called its embrace of regulation by enforcement, he said the regulatory outlook was good.
Calling policy his "top priority" for 2023, Armstrong said "I've been spending a lot of time in D.C. I was just there last week, actually… [and] met with a number of relevant senators that are working on different crypto bills."
He added that he's seeing plenty of bipartisan support for getting a comprehensive regulatory framework passed, he said, "there's a recognition that in the wake of FTX, we need stronger consumer protection.
At the same time, Armstrong said, there's "a lot of excitement just about the potential of this technology, "and there's a lot of desire for people to have this built here in America ... for all kinds of reasons: Economic growth, national security, etc."
Lobbying is Vital
One thing that crypto users and supporters can and should do in 2023, Armstrong said, is to contact their representatives and say "we want this industry to be built in America with strong consumer protection and preserving innovation potential."
If the industry can "activate the roughly 50 million people or so who have used crypto in the United States" it will become "a pretty powerful lobby and a constituent."
That is a field that took a huge black eye with the collapse of FTX and arrest of CEO Sam Bnakman-Fried on massive fraud charges, as he was the de facto leader of the crypto lobbying effort, pouring many millions of dollars into it.
Paul Grewal, Coinbase's chief legal officer, added that the company's overarching policy goal is to get regulators to "follow the standard course and undertake public rule-making that will give clarity not just to the industry and to consumers but, of course, investors as well."
"The bottom line is this," Grewal said. "Not everything in crypto is a security. Securities laws don't exist in order to turn everything of value in our economy, whether it's baseball cards or sneakers or digital assets like crypto, into a security that only a small number of people or the elite are able to buy or trade."
He added, "that's why we have to get these lines right. It's not just about crypto."
