Asheesh Birla, a Ripple board member, has suggested that Coinbase, the second-largest crypto exchange, may migrate into crypto-enabled financial services as the cryptocurrency industry continues to evolve and mature.
In a Twitter thread, Birla stated that Coinbase’s updated mission includes establishing the crypto economy, which is a more equitable, accessible, efficient, and transparent financial system enabled by cryptocurrency.
Birla Backs His Opinion
According to Birla, his opinion is hinged on the fact Coinbase’s 2023 first quarter report reveals a larger portion of the exchange’s earnings came from deposits in the form of interest payments, custodial fees, and blockchain awards. Markedly, these sources of income were categorized as subscription-based and service-based.
Additionally, he added that Coinbase’s revenue is gradually shifting away from consumers and toward high-margin institutional clients. According to the details provided, Institutional trading revenue grew 67% from the previous quarter.
Furthermore, Birla highlighted that interest on USDC deposits is generating $199 million alone, or about 18% of all Coinbase revenue.
Is Coinbase Considering Regulatory Compliance
As the cryptocurrency industry continues to face increased regulatory scrutiny, offering banking-like services could help Coinbase comply with financial regulations more effectively by providing conventional banking services, Coinbase might establish itself as a more established financial organization and strengthen its credibility with authorities.
Recall that the exchange currently has regulatory issues with the Securities and Exchange Commission(SEC) and the exchange has even filed a lawsuit against the regulatory over regulatory obscurity.
Reactions from the Online Community
Following Birla’s update, the Twitter community has expressed optimism, establishing that Coinbase might position itself in the industry. However, some users have highlighted some challenges that the firm might face if it decides to transition to offering banking services.
Accordingly, a Twitter user @Mickey_B_Fresh that the project might take years to accomplish for it to establish the infrastructure and integrations to all those blockchains and markets.
Financial Crisis Encourages Alternative Services
Although it is unlikely that the current financial crisis in the United States would be the key motivator for Coinbase to offer banking services.
The current banking crisis, which led to the failures of Silicon Valley, Silvergate, and Signature Bank, has weakened public trust in the traditional financial system. Ultimately this lack of trust may make it easy for crypto corporations to consider shifting to alternatives.