Coinbase Global Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2025
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Operator

Good afternoon. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coinbase First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Anil Gupta, Vice President, Investor Relations, you may begin your conference.

Anil Gupta
Anil Gupta
Vice President, Investor Relations at Coinbase Global

Good afternoon, and welcome to the Coinbase First Quarter twenty twenty five Earnings Call. Joining me on today's call are Brian Armstrong, Co Founder and CEO Emily Choi, President and COO Alicia Haas, CFO and Paul Greywall, Chief Legal Officer. I hope you've all had the opportunity to read our shareholder letter, which was published on our Investor Relations website earlier today. Before we get started, I'd like to remind you that during today's call, we may make forward looking statements, which may vary materially from actual results. Information concerning risks, uncertainties and other factors that could cause these results to differ is included in our SEC filings.

Anil Gupta
Anil Gupta
Vice President, Investor Relations at Coinbase Global

Our discussion today will also include certain non GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in our shareholder letter on our Investor Relations website. Non GAAP financial measures should be considered in addition to, not as a substitute for, GAAP measures. We'll start today's call with opening comments from Brian and Alicia and then take questions from retail shareholders and our research analysts. And with that, I'll turn it over to Brian for opening comments.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Thanks, Anil. Coinbase delivered across the board in Q1. We posted strong financials, rolled out product innovations at a rapid pace and continued to grow global market share. Financially, we're better positioned than ever to capitalize on the opportunities ahead of us in 2025. As just one example, our Q1 revenue was $2,000,000,000 with 930,000,000 in adjusted EBITDA, demonstrating how resilient our business is even in an uncertain macro environment.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Before I dive into the product updates, I wanna remind everybody about why Coinbase exists. Coinbase was founded to increase economic freedom in the world. We think cryptocurrency is the most important technology to update the financial system and create that economic freedom for people all over the world. Many people today don't have access to good financial services, and it's holding back progress. Everyone deserves access to basic financial infrastructure, good proper sound money, free from high inflation, the ability to get a loan, make payments without high fees and delays, and to choose what to do with their own money.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Greater economic freedom is correlated with all sorts of outcomes we want in society, like higher GDP per capita, self reported happiness, and income for the bottom 10%. It's foundational to all progress. Now this ties into all the products we build across multiple customer groups, including regional businesses, institutions and developers. And serving these multiple customer groups has the potential to create synergies in our business over time. For instance, our emerging payments business drives volume on our exchange.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Or by serving retail, pro, and institutional traders all in one platform, we get more liquidity and order flow on our exchange. We have retail customers who want to spend crypto. We also have businesses who want to accept crypto. That's sparking economic activity. So our goal is to be the number one financial services platform in the world across each of the customer groups we serve with crypto rails eventually powering the majority of global GDP.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Now let's take a minute to go through some of our product updates in q one in service of this broader mission. I'll talk about it in three parts. The first one's gonna be about driving revenue in our core businesses. The second is gonna be creating or driving utility for the next wave of crypto adoption, some of our emerging products. And third is gonna be scaling our foundations, primarily around policy and, legal outcomes.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

So for this first one, we're driving more revenue in our core businesses. Let's start with trading. We're continuing to gain share in q one in spot and derivatives. We drove over $800,000,000,000 in global derivatives trading volume. While still early, this is a significant market share increase driven by our international exchange where we saw our perps market share increase by over 60%.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

This morning, we announced the acquisition of Derivat, the world's leading crypto options exchange with over $30,000,000,000 of open interest and $1,000,000,000,000 in trading volume outside The U. S. Last year. This makes Coinbase the number one crypto derivatives platform globally by open interest. And it's our biggest move yet to accelerate our international roadmap and build out this comprehensive trading platform.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

The traders benefit from having spot, futures and now options together under one roof. So DeraVid is a very important piece of the puzzle for us to bring this together all at Coinbase. We also launched portfolio margin two point zero, expanding access to long short capabilities and increasing leverage for our institutional traders. And we made great strides across our stretch goal to make USDC the number 1 dollar stablecoin as well. In fact, USDC hit a market cap all time high of $60,000,000,000 in Q1 and the average USDC held in Coinbase products increased 49% quarter over quarter to 12,000,000,000 And given our partnership with Circle, which is indefinitely renewable, increased USDC balances on our platform result in durable revenue for Coinbase.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Base stablecoin balances reached $4,000,000,000 in Q1, up 12% quarter over quarter. This was also largely driven by USDC. Next up, we accelerated our international expansion for our core businesses. We continued to repeat our successful international playbook driven by obtaining new licenses. So we secured a vast registration in Argentina.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

We also registered with India's financial intelligence unit, FIU, unlocking access to one of the fastest growing crypto markets. It's really great to see this product execution at a rapid pace in our core businesses. The second, as I mentioned, we're also focused on driving utility for the next wave of crypto adoption and some more emerging products. So first, under this section, stablecoin payments have seen enormous growth lately, and we've started to build a business account for Coinbase, which includes B2B payment features for startups and SMBs. In Q2, we'll be onboarding the first businesses to our pilot, enabling them to make stablecoin pay ins and payouts.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Given Coinbase's long history building crypto infrastructure, custody, trading and our network of bank partners around the world, we think we're well positioned to power stablecoin payments for many businesses. This quarter, we also expanded our on chain lending products powered by BASE. We launched Bitcoin backed USDC borrowing. This is giving users instant liquidity without having to sell their Bitcoin. In the first one hundred days, we saw over $100,000,000 in loans.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

It's now up to $160,000,000 in loans. Since January, it's growing at a really incredible pace. So we have found a lot of success with that product. We're also continuing to focus on empowering builders on base. We think this is a big opportunity for the next wave of adoption.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

So we made two acquisitions that completed in q one to enhance the utility of base. The first one, Spindle, is an on chain ad platform. This helps apps get distribution. It could be a big business over time. And we also acquired a company called IronFish, which is helping create private transactions on base.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

We think this is a big missing feature for people to send private transactions. So finally, we are scaling our foundations, and our world class policy and legal teams had big wins in q one, both in DC and in the courts. So we saw a new executive order come out that directed the establishment of a strategic Bitcoin reserve and digital asset stockpile. This is a huge step with The United States Of America now officially recognizing Bitcoin as a strategic asset. I believe other countries will follow that lead.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

We also saw bipartisan legislation advance in congress, building clearer frameworks for both stablecoins and crypto market structure. We've been meeting regularly with members on both sides of the aisle in the house and the senate to help progress stablecoin market structure legislation. And, even the the vote that happened earlier today, we think, is good progress. It's all part of the negotiation. We think there'll be another vote next week on stablecoin, and so we're very excited about that progress.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

The dismissal of the SEC lawsuit against Coinbase also marked a major judicial win for the balanced innovation friendly regulation that we've been advocating for. It's really that was a really important milestone, not just for us, but for the entire industry in protecting our customers' rights. So in closing, it's important to realize that crypto is eating financial services, and Coinbase is 100% focused on crypto. We're building better financial infrastructure for the world, which will enable more economic freedom. We've been focused on crypto since the beginning twelve years ago, and we continue to be focused there executing at a rapid pace.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

With growing regulatory clarity, we believe crypto rails are poised to power an increasing share of global GDP and update every aspect of the financial system over time. Now I'll turn it over to Alicia.

Alesia Haas
CFO at Coinbase Global

Thanks, Brian, and good afternoon, everyone. As typical, all comparisons I share are on a quarter over quarter basis unless I note otherwise. We made progress in a variety of initiatives in q one, as Brian articulated, and these contributed to over 2,000,000,000 in total revenue. I wanna start with our transaction revenue, which was $1,300,000,000 down 19% quarter over quarter. However, we grew our trading market share across both spot and derivatives trading.

Alesia Haas
CFO at Coinbase Global

Total global spot trading was down 13% with Coinbase outperforming at down 10%. Our consumer trading volume was $78,000,000,000, down 17%. Consumer transaction revenue declined 19%, and our volume mix was similar in q one as compared to q four. Institutional trading volume was $315,000,000,000, down 9%. Institutional transaction revenue was down 30%.

Alesia Haas
CFO at Coinbase Global

There are two factors which drove the discrepancy between the revenue decline and the volume decline. The first is the growth in our derivatives trading business. As we build this business, we are offering trading rebates and incentives to build liquidity and acquire customers. Our focus on growth is causing a decline in the transaction revenue that we get from derivatives trading as these are contra revenue and recorded in the institutional transaction revenue line item. Second, we saw a spot volume mix shift, which was more concentrated amongst market makers and liquidity providers, which tend to have lower fee rates.

Alesia Haas
CFO at Coinbase Global

Our subscription and services revenue grew 9%, and we saw an all time high of $698,000,000, nearly $700,000,000 in revenue. Two drivers of this growth. First, stablecoin revenue grew 32% quarter over quarter to $298,000,000. Over the last two years, we have seen MTU's holding USDC double, And the average balance of USDC per holder has tripled. Coinbase one also continued to add new subscribers as we extended new benefits.

Alesia Haas
CFO at Coinbase Global

Now turning to our expenses. Our total operating expenses were 1,300,000,000 up 7%, primarily driven by higher variable expenses resulting from elevated market maker activity earlier in the quarter as well as losses on our crypto assets for operations. Adjusted EBITDA was 930,000,000, and net income was $66,000,000. Beginning this quarter, we are introducing a new profitability metric, adjusted net income. Adjusted net income is our GAAP net income, excluding the tax adjusted impact of crypto investment portfolio gains or losses.

Alesia Haas
CFO at Coinbase Global

In q one, our adjusted net income was $527,000,000. We provided a reconciliation in our shareholder letter. Last, our q two outlook. Macro uncertainty, including around global trade policy, may contribute to softer crypto trading markets and lower asset prices as we enter the second quarter. We have navigated choppy markets before, and we are confident in our ability to maintain our long term product road map and remain financially disciplined.

Alesia Haas
CFO at Coinbase Global

In April, we generated approximately $240,000,000 of transaction revenue. Our spot transaction volume declined approximately 12% month over month in April, and this was similar to global spot volume, which was down approximately 13% over that same time period. With regards to our institutional transaction revenue, as I mentioned before, we are focused on growing derivatives trading market share. And we plan to continue our investments in trading incentives. We anticipate a 30,000,000 to $40,000,000 quarter over quarter impact in q two.

Alesia Haas
CFO at Coinbase Global

I share all this, but I also need to remind you that trading markets can evolve quickly. And we do caution extrapolating monthly results. We expect subscription and services revenue to be between 600 and $680,000,000 We expect to see stablecoin revenue growth. However, the main driver of the expected sequential decline is due to Ethereum and Solana prices, which are down approximately 3625% respectively so far in q two compared to their q one averages. These price declines impact our blockchain rewards and other subscription and services revenue lines.

Alesia Haas
CFO at Coinbase Global

We expect technology and development and general and administrative expenses to be in the range of 700 to $750,000,000. The quarter over quarter decline is mostly driven from lower variable expenses like infrastructure, customer support, and seasonally lower payroll taxes. Lastly, we expect sales and marketing to be in the range of 215 to $350,000,000. Where we fall in this range will depend on whether we continue to see attractive performance marketing opportunities and on the total USDC balances in Coinbase products, which drives USDC rewards. I'd like to close by touching on this morning's milestone acquisition of Derabit.

Alesia Haas
CFO at Coinbase Global

We are acquiring Derabit for approximately $2,900,000,000 This is comprised of $700,000,000 of cash from our balance sheet and 11,000,000 shares of our class a common stock that we will issue. This is subject to customary purchase adjustments. Derabit has a consistent track record of generating positive adjusted EBITDA, which we believe will be able to grow as a combined entity. They are a leader in options with 75% global market share, and they've consistently been in a strong position across market cycles with 30,000,000,000 of open interest, and they saw 1,000,000,000,000 of volume in 2024. We expect the deal to close by the end of the year.

Alesia Haas
CFO at Coinbase Global

And upon closing, we expect Derabit to immediately enhance our profitability and add diversity and durability to our trading revenues. With that, Anil, why don't we go to questions?

Anil Gupta
Anil Gupta
Vice President, Investor Relations at Coinbase Global

All right. Thank you both. So we'll take the top three retail questions and then open it up to the analysts. So the first one is any plans on share buybacks? Alicia?

Alesia Haas
CFO at Coinbase Global

Thanks for that. So last year, our board did authorize a $1,000,000,000 share repurchase program with no expiration date. As we shared on the last call, this is an opportunistic way for us to deploy capital to reduce the overall number of shares that we see. However, we opportunistically look at m and a, and we opportunistically look at many things And so the acquisition that we announced this morning, for example, is using $700,000,000 of cash from our balance sheet.

Alesia Haas
CFO at Coinbase Global

And that will have the effect of that we will not issue those as shares. Another thing that we did in the first quarter is we used about a hundred million dollars from our balance sheet to withhold approximately 390,000,000 RSUs from being issued to our employees as part of their compensation and paying the taxes on those shares. So that also had the effect of reducing overall dilution. So the share repurchase program is an opportunistic lever for us to manage the overall number of shares, but we balance that with other uses of cash and other ways we can reduce the number of shares we issue into the market through other business activities.

Anil Gupta
Anil Gupta
Vice President, Investor Relations at Coinbase Global

Alright. Question number two. What are Coinbase's future plans similar to strategy regarding diluting or levering to accrue hard crypto reserve assets for its equity? Alicia?

Alesia Haas
CFO at Coinbase Global

So we absolutely do invest in crypto and have a long term investment portfolio. We have done this for many, many years. And the way that we approach it is that we allocate a percent of our net income to strategic investments, specifically to crypto assets. This quarter, we bought about a hundred and $50,000,000 of new crypto investments, predominantly Bitcoin. The fair market value of this investment portfolio as of the March was about 1,300,000,000.0 or 25% of our net cash, our total cash less the debt that we hold on our balance sheet.

Alesia Haas
CFO at Coinbase Global

So to be clear, we're an operating company, but we do invest alongside the space. And we do think that we will continue to do this and look look for additional opportunities to do so.

Anil Gupta
Anil Gupta
Vice President, Investor Relations at Coinbase Global

Okay. And final retail question. You've said that you welcome new entrants into the crypto space and that you view it as a positive for Coinbase. At times, it sounded complacent. Can you elaborate on what opportunities you see from a growing TAM perspective and why you have confidence it will offset pressure from competition?

Anil Gupta
Anil Gupta
Vice President, Investor Relations at Coinbase Global

Brian?

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Yeah. Sure. Let me clarify. So the lack of regulatory clarity that we had in the past, this was not a moat for Coinbase. It was a barrier to the entire industry growing.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

So I'd much rather be in a situation we're in today with regulatory clarity emerging and more companies coming into crypto. But make no mistake about it, we're playing to win here. And there's a number of advantages that we have. So I'll just try to go through them first. You know, we're a % focused on crypto.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Right? I've seen enough cycles now where companies get interested in crypto, then they get less interested or maybe when their core business comes under threat, they defund their crypto efforts. For us, crypto is our core business. It's a % of what we do, which means we do it better than anyone else. Now second, we had to solve a lot of hard problems along the way to build crypto infrastructure, which is pretty difficult to replicate.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

So everything from how do you custody crypto securely with data centers around the world, how do you integrate all the different blockchains and handle their upgrades and airdrops, how do you build an exchange around this and have derivatives and have a network of banks around the world for on and off ramps that are comfortable with crypto or getting licenses all over the world with people, you know, the regulators allowing crypto with permitted activity. Even even just the transaction processing and handling the scale of it, making that timely staking rewards, etcetera, etcetera. So these are all hard problems to solve across engineering, security, compliance, and it's taken us a long time to build that. We're adding more at a very rapid pace. I don't see others catching up.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Now third, this is maybe the most important point, is that for many of these new interns to crypto, we will power some or all of their infrastructure for them. So whether it's trading, custody, payments, wallet infrastructure, we've signed a number of large deals here to run on our infrastructure, and we're gonna capture part of the value chain for every new entrant that comes into the space, which is why I say it's it's a TAM expansion. So a great example of that, by the way, is when the ETFs got approved, you know, we powered custody and trading for the majority of them while it also grew our trading business in our retail app. Right? So it was it was additive, and we got to participate in this new value chain.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

So the other part of your question was asking about new opportunities that exist with this increased regulatory clarity, and there's a bunch that are emerging now. You know, perpetual futures coming to The US is a big opportunity. Having millions of assets available for trading on our platform via decentralized exchanges, tokenizing securities and other asset classes that should probably happen over time. You know, how do you just rethink capital formation entirely on chain? These are all emerging opportunities.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

And so with increased regulatory clarity, it's gonna be a huge win for Coinbase. We want every business to come into the space so we can partner with them and sell them our products.

Anil Gupta
Anil Gupta
Vice President, Investor Relations at Coinbase Global

All right. Thanks, Brian. So with that, Eric, let's open it up and take the first question from the analysts.

Operator

Your first question comes from the line of Ken Worthington with JPMorgan.

Ken Worthington
Ken Worthington
Financial Analyst at JP Morgan

Hi, good afternoon. Thanks for taking the question. Wanted to just start with the Durbot acquisition. Can you talk about the cross sell opportunity and how the transaction strengthens Coinbase's existing franchise? And Alicia, you said it immediately enhances profitability.

Ken Worthington
Ken Worthington
Financial Analyst at JP Morgan

I take that to mean it's immediately accretive. Am I thinking about that correctly?

Emilie Choi
Emilie Choi
President & COO at Coinbase Global

Thanks, Ken. I'll start, and then I'll hand it over to Alicia for the accretion. So, Trinity, it's offering options alongside our existing SPOT and PERPS business. We believe that this allows us to, one, command greater share of trading volume from shared institutional customers two, provide greater capital efficiency to clients, which is differentiated from competitive platforms, I. E, attract new customers and three, offer traders more options play the markets in either rising or falling conditions.

Emilie Choi
Emilie Choi
President & COO at Coinbase Global

Derabit operates ex US and is adapted at competing with the ex US derivatives markets. And this is very complementary to our US futures business and supercharges our international derivatives franchise, the international exchange. And from a traction standpoint, DeraVit is the global leader in options with more than 75% market share. It's been consistently profitable. It strengthens our business by giving us market leadership within options, which we expect to grow and enhances the profitability.

Emilie Choi
Emilie Choi
President & COO at Coinbase Global

And, Alicia, do you wanna take the accretion question?

Alesia Haas
CFO at Coinbase Global

Terabit has a history of positive adjusted EBITDA, and we believe it will be adjusted EBITDA positive on an accretion basis. However, I caution this is before we complete our purchase accounting adjustments.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Yeah. And, Ken, I'll just add real quick on your cross selling point. I think this is really important. So a trader can actually go in and hedge futures position with options without having to switch platforms. So that's why we think that there's a cross selling opportunity, and this is improves the efficiency, but also in improves trading volume if they can do that all in one platform.

Operator

Your next question comes from the line of James Yarrow with Goldman Sachs.

James Yaro
James Yaro
Analyst at Goldman Sachs

Good afternoon and thanks for taking the question. So USCC comprises an increasing percentage of overall stable client market cap. Perhaps you could just speak to some of the logic behind Binance being added into the USDC partnership along with Circle and what this means for the USDC TAM? And then perhaps could you also update us on the economics and how that split has changed as a percentage of USDC interest revenue now that finance is part of the partnership?

Alesia Haas
CFO at Coinbase Global

Great. Great questions. So let me start with the latter, and then we'll talk about the growth. So the commercial arrangement that we have with Circle has been filed as an addendum to our 10 k. So you can see the collaboration agreement.

Alesia Haas
CFO at Coinbase Global

In short, what it does is it provides 100% of the underlying reserve income to Coinbase for all of the USDC that we hold in our eligible products. And we have a new disclosure in our shareholder letter where you can see that split. We also then receive a percentage of the off platform economics. So the waterfall is Circle receives some basis points for their issuer fees for just being the issuer of USDC, maintaining the reserves and for administrative tasks. We then get 100% on our platform.

Alesia Haas
CFO at Coinbase Global

We then agree with Circle if we are gonna share economics with other distribution partners. And in the case of INES, we did agree because we think that it grows the overall USDC market cap. We think this is beneficial to bring more distribution partners to the ecosystem. We then get 50% of the off platform or what is remaining in USDC. And you can see that again in the table that we share in our shareholder letter.

Alesia Haas
CFO at Coinbase Global

So that is the economic arrangement. The rationale for adding distribution partners is we believe that we need it drives liquidity. It drives global adoption. There are more and more places for customers to onboard and offboard to USDC and to engage in products and services. These network effects, larger market cap, deeper liquidity, more places for customers to exchange, we think, going to drive overall growth and opportunity for USDC.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Yeah. Maybe I'll just add in here for a minute. So the strategy for USDC to grow is really two things. It is, one, sharing economics with strong partners. And number two, it's following a compliant approach.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Right? So USDC is currently the only major stablecoin in Europe, for instance, that complies with MICA legislation. So if if they can share economics and they can follow a compliant approach, we feel that they're gonna continue to grow. And it's worth noting that USDC is the fastest growing major state US backed stablecoin right now. So we think they're on a great path.

Operator

Your next question comes from the line of Devin Ryan with Citizens.

Devin Ryan
Director of Financial Technology Research at Citizen JMP

Thanks so much. Hi, Brian. Hi, Alicia. Question just around momentum in allowing traditional banks to enter the industry in different capacities, obviously, moving towards that. And on one hand, some could be competitors in certain places, and that gets a fair amount of press.

Devin Ryan
Director of Financial Technology Research at Citizen JMP

But on the other side, it would seem like there's still a fair amount that Coinbase can do with this potential customer cohort or partner with and even potentially even through the partnership with Circle. So I'm curious if you're having conversations directly with this part of the market. And just more broadly, the view around kind of the opening up of traditional financial institutions into the space, how that could be a positive catalyst for Coinbase? Thanks.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Yeah. So I'll start off and then yeah. Emily, Alicia, others, feel free to jump in. So, yeah, we we think that every major bank is going to be integrating crypto. At some point, like I said, we think it's technology to update the financial system.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

And we've had conversations with a number of them. We've we've signed some deals actually, and, you know, we can power a variety of things for them. So some of them, it is a custodial solution. Right? Others are interested in in having a stablecoin solution.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Now there is we've seen some interest where banks and other companies will wanna create their own stablecoin. Our view is that that's not necessarily the best path because we think stablecoins have network effects. You want interoperability with other financial institutions to be able to settle payments and do all kinds of things. So especially if you can get shared economics, I don't see why we wouldn't have you know, we wouldn't see more of these banks kind of partnering with USDC. But regardless, we, at Coinbase, I think, can help power infrastructure for all these folks that are coming into the industry, and that's a big part of our plan.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

We call it crypto as a service, right, as as a service that we sell to these institutional clients, and we can, yeah, power custody, trading, stablecoin infrastructure, etcetera for them.

Alesia Haas
CFO at Coinbase Global

And it's important to note that we have over 200 institutions, BlackRock, Stripe, PayPal, others that already are relying on our rails for custody, liquidity. And Prime is the standard for institutional access. We've shared with you before that we won a number of the ETF mandates, and it shows the strength of our platform, our controls, and the operational rigor that we have built out to support large major institutions as they transact in crypto. So as TradFi moves on chain, we think we're the backbone beneath it.

Operator

Your next question comes from the line of Owen Lau with Oppenheimer.

Owen Lau
Executive Director & Senior Analyst at Oppenheimer & Co. Inc.

Good afternoon and thank you for taking my question. So first of all, congrats on the deal. I have a high level question. Could you please give us an update on what Coinbase aspires to be in five to ten years? I realize that a lot of things have changed over the past few years and great companies evolve with opportunities.

Owen Lau
Executive Director & Senior Analyst at Oppenheimer & Co. Inc.

And you just announced the DuraBit deal. You're also considering, I think, getting a federal bank charter. What will Coinbase look like longer term? Do you think Coinbase will be more like a tech provider, a full service on chain bank or a super app like WeChat? Also, are you interested to get into Trefly space such as such as equities and bond trading, given that you mentioned that you're % focused on crypto?

Owen Lau
Executive Director & Senior Analyst at Oppenheimer & Co. Inc.

Thanks a lot.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Yeah. Great question. So today, we're primarily focused on trading and payments. We're doing that across our major customer groups, retail, small, medium sized businesses, institutions, and developers. But I think in five to ten years, our goal is to be the number one financial services app in the world across those customer segments Because we believe that crypto is eating financial services, and we are the number one crypto company.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Right? And so that's where we think things are going. You mentioned potentially integrating traditional financial services or TradFi services. I mean, our we really wanna skate to where the puck is going here and be the best company at building on chain. And so we think all these asset classes, money market funds, real estate, securities, debt.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

These are all coming on chain. And you heard you heard about some of those in our product updates. So we don't necessarily wanna look backwards. We wanna look forwards and get to where this opportunity is going.

Operator

Your next question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

Brett Knoblauch
Analyst at Cantor Fitzgerald

Hi guys. Thanks for taking my question. Maybe just on the recent rumor that there could be a change of control with Circle. Is there any change of control clause with Circle where that provides whoever would acquire Circle in out? Or what would happen in a scenario where Circle does get acquired?

Alesia Haas
CFO at Coinbase Global

Our contract would persist through an acquisition. There would be no change to our commercial arrangement.

Brett Knoblauch
Analyst at Cantor Fitzgerald

Perfect.

Operator

Your next question comes from the line of Pete Christiansen with Citi.

Peter Christiansen
Peter Christiansen
Director at Citi

Good evening. Thanks for the question. And congratulations on the Derivent acquisition. I want to expand a little bit on Owen's question actually. So we hear it a lot from our clients.

Peter Christiansen
Peter Christiansen
Director at Citi

And Brian, you touched upon all the things that Coinbase is doing currently and aspires to do. And there's some press article, last month that Coinbase is potentially seeking a banking license. I'm just curious how you juxtapose doing all these different services servicing all different sorts of customers against potential legislation down the line where you may be limited in certain functions. Curious on how you're thinking about how potential legislation could perhaps limit some of the functions that Coinbase aspires to do.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Yeah. Well, in the legislation draft that we've seen so far, we're not seeing any that would necessitate us having a banking license, and we don't have any current plans to do that. Obviously, if something were to change there, that's an option. But I don't see that as being very likely at this point. And the main thing you would need a banking license for is if you wanted to do fractional reserve and really kind of, you know, lend out the customers' funds.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

We we think that a a fully reserved model is actually better. It seems to be what our customers want. And then if they actually want to opt in and and choose to put their money into some investment vehicle, they can do that. But, the model where, you know, the bank lends it out kind of without you knowing about it, that's create it creates risk in the system. Right?

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

There's many good books on this. So actually kind of like the idea of not having the bank charter over time. And it actually it it limits your product velocity as well. Right? Like, if if you even if you have a sub that is a bank and the bank holding company act kind of requires supervision of not just the sub, but also the parent and down into other subs.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

And I think it can really slow down the product velocity. So yeah, no current plans to pursue a bank charter at this time.

Operator

Your next question comes from the line of Benjamin Buttig with Barclays Capital.

Ben Budish
Ben Budish
Director at Barclays

Hi, good evening and thanks for taking the question. Maybe a follow-up on Daravel bit. I'm kind of just curious if you could talk about options in crypto more broadly. It almost in a way looks like the futures market in TradFi where there's sort of incumbents, although obviously quite a bit different as most of the products traded there are different from the products in which options are written. So any kind of just curious about the history, like why is it that there's really only one crypto exchange that has such meaningful market share?

Ben Budish
Ben Budish
Director at Barclays

Is it a lack competitors? Is it you know, does crypto volatility make options more challenging to trade? And, you know, what what does that sort of say about the the user base of Derabit? Is it institutional customers who are similar to those trading on other, international futures exchanges? Is it ProTel?

Ben Budish
Ben Budish
Director at Barclays

Is it retail? But just just kinda curious your your thoughts on, you know, crypto options more broadly. Thank you.

Alesia Haas
CFO at Coinbase Global

I'll start here, and others can weigh in. What I would say is that these are relatively nascent products within crypto and that we've seen growth because people focus and built product expertise and really became the best player. And that is who Darebit is. They created unique and differentiated products and were able to win the majority of the market share in crypto options. I think that it looks very similar that these options are used to hedge future positions.

Alesia Haas
CFO at Coinbase Global

These are used similarly to traditional financial options and other products. And so I wouldn't say there's a difference in how these exist in the broader financial ecosystem. And the users of these are prosumers. They're more advanced traders, but they do have a diverse institutional and retail base of customers on their platform. All ex US, I would note.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Yeah. Only other thing I'll add is that you know, and it's really a credit to the Darebit team of how well they executed to get to that market share. The only thing I'll add is that when we talk to pro traders and institutional traders, they they often say they just really want a trusted counterparty. And if Coinbase had x or y, trading feature, they they would love to do that with us instead. Right?

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

And so they see us as the trusted counterparty by adding more products to trade in the store. They'll move more and more of the trading volume to us.

Operator

Your next question comes from the line of Patrick Molley with Piper Sandler.

Patrick Moley
Patrick Moley
Sr. Research Analyst at Piper Sandler Companies

Yes, good evening. Thanks for taking the question. Mine kind of relates to Ben's question, but in light of the Derivat acquisition, I was hoping you could update us on the go to market strategy for crypto derivatives broadly in The US? And then once you close the Derebit acquisition, how quickly do you think you'll be able to offer those products to US customers? If you go on their website today, The US is listed as a restricted jurisdiction.

Patrick Moley
Patrick Moley
Sr. Research Analyst at Piper Sandler Companies

So what are some of the regulatory considerations or hurdles that need to be crossed, before you are able to do so? Thanks.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Yeah. I don't know. I mean, I can I can share a little bit about some of the approvals that are that are coming up? I mean, we've been working very closely with the CFTC to try and get, perpetual futures live in The US. That's gonna take a little bit longer, but we are we have one step in the right direction.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

Actually, tomorrow, we're gonna be watching for seven trading of Bitcoin and ETH futures available in The US. So that starts to get a step closer to perpetual futures, not all the way there. But we're gonna keep working with them on that. A lot of the go to market piece of this is really about going and talking to the the top, you know, large volume traders. And they they trust Coinbase, but we don't historically, we haven't had the exact products that they've wanted to trade for various know, we've taken a compliance approach, compliance focused approach, and so it's taken a little bit longer.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

But I think if we can, if we can do that, we'll have a good chance to grow share, with them. And in in the short term, like Alicia mentioned, we are offering rebates and incentives to get people to come in and try it, and that's why we've seen our share grow in this last quarter. There's lots of new contracts we need to add. We added, I think, 39 new perpetual futures books on our international exchange in q one, four new books in The US. There's some features around improved capital efficiency, like the the you know, getting higher leverage, expanding the list of collateral that they can use.

Brian Armstrong
Brian Armstrong
Co-Founder, CEO & Chairman at Coinbase Global

And I think so far, it's working really well. As I mentioned, you know, we we've traded over $800,000,000,000 in derivatives volume in q one. So those are just a few thoughts on that.

Emilie Choi
Emilie Choi
President & COO at Coinbase Global

Yeah. And and to the question to to reiterate what Brian was saying, we're excited about the new CFTC chair, a new chapter in The US. We have to work with them on a path for The US options. But for now, we're really excited about the opportunity internationally for Derabit.

Operator

Your next question comes from the line of Joseph Baffi with Canaccord.

Joseph Vafi
Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets

Good afternoon. Thanks for the question. Just wanted to circle back on USDC. I know I think maybe Alicia or Brian mentioned the amount of USDC per monthly active has kind of doubled over the last year. Just wondering what that means from a P and L perspective.

Joseph Vafi
Managing Director, Equity Research at Canaccord Genuity - Global Capital Markets

I know there's incentives out there. I know that there's a rev share, but just kind of trying to get to what the bottom line on that means. And you know, if it's an investment, you know, what the implications are there? Thanks.

Alesia Haas
CFO at Coinbase Global

Thanks for the question. So in our shareholder letter that is on our IR site, we gave a new table that breaks down the USDC and products where we get 100% of the underlying reserve income. We also shared the market cap and the revenue that we get from the off platform USDC. So we generated $298,000,000 of USDC revenue in the first quarter. Against that, we paid out roughly a hundred million dollars in USDC rewards.

Alesia Haas
CFO at Coinbase Global

It's important to note that we only pay rewards on the USDC in Coinbase products. And so we have about 26,000,000 in net margin in USDC revenue on products in our platform and then full margin, a hundred and 71,000,000 that has no associated rewards that floats the bottom line in terms of margin. And you can see all of that within our disclosures that we've made this quarter.

Operator

The next question comes from the line of Dan Dolev with Mizuho.

Dan Dolev
Dan Dolev
Senior Analyst - FinTech Equity Research at Mizuho Financial Group

Thanks, guys. Really nice results and nice quarter. Just wanted to ask on the USDC rewards specifically in terms of the opportunity there. What you're seeing seems like a big opportunity for the long term. So any color there would be great.

Dan Dolev
Dan Dolev
Senior Analyst - FinTech Equity Research at Mizuho Financial Group

Thank you.

Alesia Haas
CFO at Coinbase Global

What we see is that when we pay rewards, customers are more engaged with products and services on our platform. So we grew balances nearly 50% this quarter. So we now have about 12,000,000,000 in, on average, USDC within our products. That's up 49% quarter over quarter. We are seeing, as I mentioned on my comments, over the last two years, the number of MTUs that hold USDC has doubled.

Alesia Haas
CFO at Coinbase Global

Their balance has tripled. And what we're seeing then is they those customers trade more often. They engage with other products and services. We've more deeply integrated USDC on our platform. So it is the match pair, for example, in our international derivatives exchange.

Alesia Haas
CFO at Coinbase Global

This is driving USDC in that platform with institutional customers. Base had 4,000,000,000 of USDC. So as we deeply integrate this, we are generating the flywheel of distribution of USDC and building those balances on our platform and driving growth of the overall ecosystem.

Operator

Your next question comes from the line of Alex Markgraf with KeyBanc Capital Markets.

Alex Markgraff
Alex Markgraff
Vice President - Equity Research at KeyBanc Capital Markets

Hey, everyone. Thanks for taking my question. Maybe one for Emily or Brian. M and A, just are there any sort of other large deals that we should think about Coinbase pursuing in an effort to cement global leadership, maybe just categorically speaking? And then, you know, I think it'd be helpful to get thoughts there on the heels of the the Derivent announcement.

Alex Markgraff
Alex Markgraff
Vice President - Equity Research at KeyBanc Capital Markets

And then I do have a a quick follow-up on payments for for Brian if there's time. Thanks.

Emilie Choi
Emilie Choi
President & COO at Coinbase Global

Sure. So, obviously, today, we announced the largest crypto acquisition of all time. And I believe we've been the most active player in crypto m and a historically, period. So Darebit to me is a great proof point of how we use m and a to add to our market leading institutional platform. Platform.

Emilie Choi
Emilie Choi
President & COO at Coinbase Global

You'll recall we did Zappo in 2019 for custody, Tagomi in 2020 for prime, FairX in 2022 for the derivatives exchange, OneRiver in 2023 for asset management, and now we've got Derivent. So we think this is gonna dramatically accelerate the growth of our international footprint and our derivatives business. Looking ahead, I mean, I think we are in the best position we've ever been in to take advantage of additional opportunity and we think the market is ripe for some great m and a. We have an incredibly strong balance sheet. As Alicia mentioned before, we we've made a strategic decision to hold more cash because it enables us to make bigger bets.

Emilie Choi
Emilie Choi
President & COO at Coinbase Global

We also think regulatory clarity is gonna enable us to take larger swings with greater confidence, unlocking new products, utility cases, and geographies. We know every player in the space due to the fact that we've been in the space for so long, and we also have ventures. So we have, plays in a bunch of the different start ups in the space, know all the teams. So We're always looking at great businesses of scale to accelerate our growth in key areas, and we're ready to take advantage of those in the coming years. You can expect a lot more from us.

Anil Gupta
Anil Gupta
Vice President, Investor Relations at Coinbase Global

Eric, we have time for one more.

Operator

Your final question comes from the line of Bo Pei with U. S. Tiger Securities.

Bo Pei
Senior Equity Research Analyst at US Tiger Securities

Hi. Good afternoon. Thanks for taking my question. So have a high level question. So given the current macroeconomic uncertainty and volatility, the crypto asset price, how flexible is Coinbase strategy across different market environments?

Bo Pei
Senior Equity Research Analyst at US Tiger Securities

Are there specific strategy areas you plan to emphasize more in a bearish versus a bullish market? Thank you.

Alesia Haas
CFO at Coinbase Global

We've never been good at predicting where crypto markets are going. And now with the influence of broader macro trends, it becomes even more difficult to predict the impact on crypto markets. And so our strategy long has been to run scenarios and to be thoughtful about what is the worst that can happen, what is the best that can happen, and set forth every year with a wide range of potential outcomes. We plan to the worst. We plan our expense growth against what if we go into a bear market.

Alesia Haas
CFO at Coinbase Global

So we're really confident that we can invest in our strategy, invest in growing our employee base, products and services, and navigate through a bear market. So the answer is if we emerge into a bear market, it doesn't materially change our strategy. It would have to be two things added together, a bear market and then something else really bad happening for us to kind of pull back and say, okay. Maybe we need to revisit our our outlook on expenses, but we feel really good about what we've seen so far this year. We're well within our scenarios and feel confident in our go forward plan.

Anil Gupta
Anil Gupta
Vice President, Investor Relations at Coinbase Global

Okay. Thank you all for joining us. We look forward to speaking to you again on our next call.

Executives
Analysts
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Key Takeaways

  • Carved out Q1 with $2 billion revenue and $930 million adjusted EBITDA, underscoring resilience despite macro uncertainty.
  • Acquired Deribit for approximately $2.9 billion (cash + stock), making Coinbase the #1 global crypto derivatives platform by open interest and integrating options with spot and futures.
  • USDC hit an all-time high $60 billion market cap and average balances in Coinbase products rose 49% to $12 billion, boosting durable stablecoin revenue alongside $4 billion in Base stablecoin deposits.
  • Advanced emerging products with stablecoin payments pilots for SMBs, Bitcoin-backed USDC loans on Base now exceeding $160 million, and strategic acquisitions of Spindle (on-chain ads) and IronFish (private transactions).
  • Achieved major regulatory and legal milestones including a U.S. executive order naming Bitcoin a strategic asset, bipartisan stablecoin legislation progress, and dismissal of the SEC lawsuit against Coinbase.
A.I. generated. May contain errors.
Earnings Conference Call
Coinbase Global Q1 2025
00:00 / 00:00

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