Coinbase seeks European licenses to expand development outside US
Coinbase reported a 27% drop in revenue in the first quarter due to a decline in platform usage.
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Coinbase is seeking licenses with various countries in Europe as part of an aggressive expansion in the region.
According to Coinbase’s international vice president Nana Murugesen, the exchange already has an active presence in the UK, Ireland and Germany, but is looking to establish operations in Spain, Italy, France, the Netherlands and Switzerland. He added that Coinbase recently hired its first employee in Switzerland.
The US crypto giant is looking to international markets to fuel growth amid fears of a “crypto winter”. Earlier this month, Coinbase announced it would lay off 18% of its workforce, while other firms including Gemini and BlockFi have taken similar steps amid plunging crypto prices.
Nevertheless, Murugesan says that Coinbase is planning to hire a regional manager to oversee its European operations. He said the firm is prioritizing “mission-critical roles” primarily in areas such as security and compliance after a period of rapid growth.
“When we entered the UK and Europe, it was actually during the last major bear market in 2015-2016,” said Murugesan, who joined Coinbase in January 2022.
“But then when you fast forward to 2017-2018, the UK is now a big part of our business, as is Europe,” he said. “We entered, we bet. I’m sure it was probably a tough time. But it has paid off, significantly.”
The company’s legal vice president, Catherine Minarik, said that Coinbase is in talks to gain approval under anti-money laundering regulations in several countries, including France.
The company is gearing up for MiCA, or Markets in Crypto-Assets, a landmark EU law aimed at harmonizing the regulation of crypto across the bloc.
Officials from the European Council and Parliament are due to meet on Thursday to reach an agreement on the rules. If everything goes smoothly, it is expected that Mica will be implemented by 2024.
Once approved, it will enable Coinbase to “passport” its services to all 27 EU member states, Minarik said.
slow and steady wins the race?
While Coinbase is the largest crypto exchange in the US, it is facing intense competition from new players such as Binance, FTX and Crypto.com. Binance’s US affiliate recently slashed fees for customers trading bitcoin, news that caused Coinbase’s shares to drop.
Coinbase is racing to keep pace with its rivals, which are gaining significant traction in regions outside the US.
For example, in the Middle East, Binance and FTX are both licensed in Dubai. Binance also received authorization in France and Italy and is seeking approval in additional European countries.
“Being a publicly traded company, the bar is very high,” Murugesan said. “Sometimes it can take a little longer to get something working. But we definitely want to stay.”
At the same time, major crypto players – Coinbase included – are grappling with a dramatic drop in digital currency prices, which some investors believe will be the start of a much longer recession known as the “crypto winter”. .
A confluence of factors is weighing on the market, including higher interest rates from the Federal Reserve and the collapse of the UST stablecoin. The drop in token prices has led to solvency issues at investment firms that are heavily leveraged, such as Three Arrows Capital.
Coinbase made an abrupt U-turn on its cost-cutting strategy this month, announcing plans to cut around 1,100 employees globally. Although the cuts affected 18% of Coinbase’s total workforce globally, Murugesan says the UK workforce was less impacted, with about 7% of roles cut locally.
Coinbase reported a 27% drop in revenue in the first quarter as overall usage of the platform declined. The business is currently heavily dependent on trading fees. But it is hoping to diversify into new products, including non-fungible tokens and interest-like rewards known as staking.
Murugesan said Coinbase has about 9.2 million monthly transacting users globally, but less than 50% of them are using the app.