Amidst an intense battle against the formidable U.S. securities regulator, Coinbase (COIN) finds itself in a whirlwind of activity. While grappling with significant legal costs, the leading publicly traded cryptocurrency company recently unveiled a new blockchain, Base, which has surprisingly gained considerable traction due to the popularity of a few viral applications. Adding to its latest initiatives, Coinbase has now officially introduced Stand With Crypto, an independent nonprofit organization dedicated to advancing pro-crypto legislation.
In a period marked by low crypto trading volumes, resulting in diminished revenue from trading fees, Coinbase has taken the opportunity to discuss the future landscape of crypto adoption. CEO Brian Armstrong addressed these issues during the company’s recent public earnings call, outlining three key pillars for adoption: blockchain scalability, utility beyond financial applications, and rectifying the convoluted crypto regulation situation in the U.S.
What makes Coinbase’s insights particularly compelling is its unique position as one of the few entities to successfully bridge the trust and knowledge gaps that often deter individuals from entering the crypto space. Armstrong emphasized that these pillars aren’t isolated; rather, they are interconnected approaches to address related challenges.
The first two pillars – scalability and utility – tackle technical challenges. Armstrong expressed optimism about existing scaling solutions, citing Bitcoin’s Lightning Network and Coinbase’s Ethereum scaler Base. While this may not come as a surprise, given the company’s previous indications of integrating Lightning Network after Bitcoin NFT congestion, the attention it received underscored its significance.
Blockchain scalability and utility represent technological problems, and historically, the crypto industry has leaned heavily towards infrastructure-related solutions. However, non-financial use cases for cryptocurrencies have been somewhat elusive due to the unpredictability of transaction fees and pricing. Layer 2 solutions like Arbitrum and Optimism for Ethereum have gained momentum over the past six months, potentially transforming this landscape. These solutions could facilitate broader adoption by accommodating more users without causing immediate spikes in transaction costs. As user numbers increase, demand for services like messaging and social media on blockchain networks could grow as well.
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While Armstrong initially cited financial use cases such as stablecoins for payments, DeFi, and NFTs as examples of substantial traction, he also highlighted the potential for these applications to expand significantly with the advent of Layer 2 solutions. Improved utility, faster and cheaper cross-border payments, and enhanced daily usability could indirectly boost the growth of Coinbase’s business.
Nevertheless, the final and perhaps most critical pillar is regulation. Armstrong frequently referred to the Stand With Crypto working group during the earnings call. This initiative, similar to other blockchain lobbying groups, aims to influence the direction of U.S. legislation pertaining to cryptocurrencies. This is especially crucial for two reasons. Firstly, there are two live bills – FIT21 (crypto market structure bill) and the “stablecoin bill” – that, if passed, could reshape the industry. These bills have garnered bipartisan support in the House Financial Services Committee and the House Ag Committee and are now headed to the Senate.
Secondly, a growing sentiment within the crypto community suggests that the existing lobbying network in Washington D.C. has fallen short of adequately representing the industry’s interests. Coinbase’s proactive approach through Stand With Crypto seeks to rectify this gap and exert a meaningful influence on the legislative trajectory of the cryptocurrency sector.
