Brian Armstrong, Coinbase CEO, has addressed the platform’s transaction fees as the firm’s shares list on Nasdaq. The CEO expects that other revenue streams will take the lead in five or 10 years.
While speaking in a CNBC Squawk Box interview, Armstrong discussed public fears associated with Coinbase’s massive returns arising from transaction fees. Based on previous reports, just 96% of Coinbase’s whole revenue in 2021 was generated from transaction fees charged to the users.
When asked about the possible impact of greater competition on the transaction fees on Coinbase, the CEO said that the platform might experience some fee reduction in the long term:
“We haven’t seen any margin compression yet, and I actually wouldn’t expect to see it in the short and the midterm. Longer-term, yes I do think there could be fee compression just like in every other asset class out there.”
Armstrong also said that a huge segment of the crypto transaction fees arises from a custody fee that is already integrated into the transaction fee. Moreover, the CEO said that Coinbase expects to slowly move its focus to the other revenue streams with products like staking, debit card, custody business for institutional customers, and educational program Coinbase Earn.
“We’ve started to invest in revenue streams that are starting to provide these green shoots of revenue […] These are providing more steady predictable streams of revenue, and I guess that in five or ten years we will see that be maybe even 50% or more of our revenue.”
Based on previous reports, Coinbase’s professional platform, Coinbase Pro, completed a major fee structure update in 2019. That move increased some maker fees to as high as 233%. Following that update, Coinbase made $1.1 billion in direct revenue in 2021, a considerable surge from $482 million in 2019.