With 1B users as its target, Coinbase turns its focus to regulation

Coinbase is focused on controlling what can be controlled and contingency planning for what cannot.

This, like a year full of idiosyncratic eventsbeat the crypto sector along countless credit related bankruptcyand fall of FTX functioned as both one regulatory catalyst and a cherry on top for the industry’s naysayers.

Still, Coinbase’s CEO Brian Armstrong told the company’s investors in today’s (February 21) fourth quarter 2022 earnings call that he wants to grow crypto’s global user base to one billion strong.

The company lost around 200,000 users in the fourth quarter of 2022 compared to the previous accounting period.

“We do not operate as a market maker trading against our clients, and we do not issue exchange tokens. We do not believe we have violated any securities laws: Coinbase stake products are not securities, USD Coin (USDC) is not a security. The list goes on. We expect 2023 to be a year of regulatory focus, and we believe our strong foundation will make us a net beneficiary of this new environment…our business decisions are intended to maximize the safety of customers, the legitimacy of the crypto-economy, and the longevity of Coinbase,” Armstrong so.

“We are proud of our ability to position our business as a regulated and legitimate market leader,” Armstrong added. “We proved largely resilient in 2022 despite major shocks to the system.”

Read more: Crypto’s demise offers big industry lessons

“Policy is my top priority for this year … Coinbase has an important role to play around crypto education, advocacy and policy,” Armstrong said, telling investors on the call that he has spent a lot of time in DC working with lawmakers.

“There’s a lot of excitement about the potential and the desire to have this built here in America by people who realize that the U.S. is a little behind right now. The European Union has already passed extensive legislation, and policymakers see others moving in that direction. There’s a lot bipartisan support to pass legislation, he said.

But what’s more important than that, he added, is for the 50 million people in the U.S. who use crypto to tell their representatives they want regulation of the industry so they can use it safely.

Cryptopolitics is in transition

Asked what would constitute a regulatory “win” for Coinbase by an investor on the earnings call, Armstrong listed two things.

“Bring stable coins into the regulatory perimeter would be one,” he said. “The second is about how cutting the territory between the CFTC and the SEC, what is a commodity, what is a Safety and what is something else entirely.”

Coinbase’s General Counsel Paul Grewal added that Coinbase has “a decade-plus history of compliant operations, we are in constant conversation with all of these regulators and policymakers, and in those conversations our agenda is very clear: make public rulemaking that will bring clarity to the industry and consumers.”

The company often referred to its comprehensive petition letter for the Securities and Exchange Commission rulemaking, sent to the agency last July, which asked the agency to solicit input from the public regarding regulatory barriers for the digital asset industry.

See also: Kraken exits US Crypto Staking after $30M settlement with SEC

“We are very hopeful,” Grewal told investors.

“There’s a lot we can do here, and that’s a big focus for myself and the company,” Armstrong said.

Coinbase indicated that it had no near-term plans to expand into stock trading. Still, executives expressed interest in the possibility of one day creating a product that “tokenizes” stocks pending a more favorable regulatory environment in the U.S.

Armstrong highlighted “decentralized identity” solutions as an area of ​​Web3 he was excited about.

“We’re going to build, buy and invest – we’re excited about it [Web3] industry and its technology,” he told investors on the earnings call.

According to crypto market researcher Crypto comparison, Coinbase, which is the largest US cryptocurrency exchange, has lost market share, falling from 5.9% last November to 4.1% in February. Rival exchange Binance has gained share in the meantime and now accounts for almost 60% of the market despite that persistent of ongoing operationally and regulatory questions.

After trading in the $30 range this past December, Coinbase’s share price has since doubled to the $60 range, with better-than-expected fourth-quarter earnings giving the crypto company a boost.

When Coinbase went public in 2021, its shares traded publicly opened to $381 and a reference point of $250 was set by Nasdaq.