Coinbase Targets Long-Term Growth Of Subscription Revenue, NFTs Still A Focus

American crypto exchange Coinbase wants to increase revenue from subscriptions in the long term to fight possible profit margin compression.

The company’s founder and CEO Brian Armstrong delved into the mid-and long-term prospects of the American crypto exchange in a wide-ranging interview with CNBC’s Crypto World on August 23. A major talking point was the possibility of lower revenues from fees in the future and how the firm aims to anticipate that possibility.

Brian Armstrong said that Coinbase has been building significant subscription revenue streams for three years and will continue doing that in the long term.

Armstrong said he believes that profit margin compression was bound to happen in the future as more exchanges and competitors launch similar services and products that may compete for market share:

“This is why we’re investing today in so much subscription and services revenue and we’re realizing that trading fees will still be a major part of our business 10 or 20 years from now. But I’d like to get to a place where more than 50% of our revenue is from subscriptions and services.”

Armstrong stated that the firm had been focused on this shift for the last three years, which has resulted in subscriptions and services that account for 18% of the firm’s revenue stream. That amount was up from the 4% contribution to revenue in 2020, based on the statement by Armstrong.

The Coinbase top executive noted that its staking offerings coupled with USDC custody services were key drivers of subscription and services revenue, while the development of Coinbase Cloud and other projects in the pipeline would also add to the growth of the revenue streams.

Notably, the growth of Coinbase’s staking product is also majorly dependent on the scalability of the underlying blockchains that power the service, with Ethereum’s forthcoming transition to a proof-of-stake consensus algorithm that is expected to address the issue, as explained by Armstrong.

The budding nonfungible token (NFT) space and Coinbase’s in-house NFT marketplace was also a major topic of discussion. After launching a beta release of its NFT marketplace in April 2022, the CEO stated that the firm is still committed to NFTs and thinks it will be a huge business opportunity:

“It’s still super early in the NFT space. We saw a big run-up last year with people trading Bored Apes and all sorts of different things that got traction. But I think that’s just the first step in a long journey of what NFTs are going to become.”

Armstrong insisted on his belief that NFTs will change the way people use social media, how the music sector operates and how creative talent interacts with different audiences. Natively incorporating Coinbase NFTs into different platforms people use every day was another strategy that Armstrong explored.

“We’re in the process of aggregating all the different places that people can bid and ask on NFTs in one place. If we can aggregate that there is really no downside to using it there instead of going anywhere else.”

The exchange is now testing a beta version for its Coinbase One subscription product that provides members with access to zero-fee trading, $1 million account protection, and automated tax services. The monthly subscription to the service is $29.99.