Coinbase (COIN, Financial), the largest cryptocurrency exchange in the U.S., is intensifying its efforts in the digital payments sector. The company recently acquired the team from the payments startup Utopia Labs and is considering further acquisitions to enhance its capabilities. Shan Aggarwal, Coinbase's VP of Corporate and Business Development, mentioned that they are exploring the possibility of charging fees for certain payment services within the Coinbase Wallet, such as subscription-based features.
Coinbase has been actively entering the payments arena over the past year, aiming to leverage stablecoins for low-cost and nearly instantaneous global payments. This approach is expected to offer more functionalities than competitors like Block's Cash App and Strike, as well as traditional remittance services. Aggarwal highlighted that conventional bank transfers for sending money from the U.S. to places like Africa can take days and cost up to 15% of the transfer amount, whereas stablecoin payments cost less than a cent and complete within seconds.
To support this vision, Coinbase launched the Base blockchain in August 2023, facilitating cheap and rapid payments. The company is also collaborating with major firms like PayPal to experiment with invoice payments through its Coinbase Prime product. For consumers, Coinbase is developing an all-in-one app for trading, holding cryptocurrencies, and making payments, with payments being a crucial part of the Coinbase Wallet promotion.
Oppenheimer analyst Owen Lau estimates that successful enterprise and consumer payments could account for 10% of Coinbase's revenue within five years. CEO Brian Armstrong has expressed the ambition for cryptocurrency payments to handle 20% of global GDP, emphasizing the advantages of crypto as faster, cheaper, and more global.
Interest in stablecoins has surged, with the U.S. expected to clarify regulations under the leadership of President Trump and a Republican Congress. Europe has already provided regulatory clarity, boosting stablecoin usage. Companies like Revolut and Robinhood Markets are considering issuing their own stablecoins, betting on stricter regulations outside the U.S. to reduce Tether Holdings' dominance. Coinbase currently has no plans to launch its own stablecoin but remains open to the possibility.
Coinbase profits from payments through sequencer fees on Base transactions and shares revenue from the USDC stablecoin with its issuer, Circle Internet Financial Ltd. In the third quarter, Coinbase reported $34 million in "other transaction revenue" and $246.9 million in stablecoin revenue.
