(Kitco News) -
Coinbase, the largest cryptocurrency exchange in the United States, announced on Tuesday morning that they will be cutting their staff by 20% effective immediately. The announcement was made by Coinbase co-founder and CEO Brian Armstrong in a blog post.
“We need to make sure we have the appropriate operational efficiency to weather downturns in the crypto market, and capture opportunities that may emerge,” Armstrong wrote. “Therefore, I've made the difficult decision to reduce our operating expenses by about 25% Q/Q, which includes letting go of about 950 people.”
This is the second round of layoffs at Coinbase in seven months, as the exchange already reduced staff by 18% in June. Armstrong wrote that “in hindsight, we could have cut further at that time.”
Armstrong wrote that U.S. workers would receive a minimum of 14 weeks of their base pay and would continue to receive their health insurance and other benefits during that period, and non-U.S. workers would receive “similar support” based on the employment laws of their country.
Armstrong said that the layoffs mean Coinbase will also shut down “several projects where we have a lower probability of success,” but he did not specify which projects world be affected. “Our other projects will continue to operate as normal, just with fewer people on the team.” He said the company would share more information when it submits a public 8-K filing with the Securities and Exchange Commission later on Tuesday.
Coinbase is the latest crypto exchange to announce significant staff reductions in the past week as digital asset firms fight to weather the crypto winter. Houbi Global announced they were laying off 20% of their staff on Jan. 6, and crypto lender Genesis cut 30% of their employees on Jan. 4.
On Jan. 4, Coinbase also agreed to pay a $100 million settlement to U.S. regulators for conducting inadequate background checks on their customers since 2018. The settlement included a $50 million fine to the New York State Department of Financial Services and an investment of $50 million over the next two years to enhance their compliance program to ensure that it meets regulatory requirements.
Coinbase processes $1.9 billion in trade volume every day, second only to Binance’s $7.9 billion, according to crypto data firm Messari. But this is far less than the over $5-7 billion they averaged per day in late 2021, and with Coinbase making approximately 90% of its revenue from trading fees, the exchange has had no choice but to reduce expenses accordingly.
Fears about the solvency of exchanges have also resulted in customers withdrawing their crypto and opting for self-custody instead. Data from CryptoQuant shows that the number of Bitcoin held on exchanges fell from 2.5 million on Nov. 5, a week before FTX declared bankruptcy, to 2.1 million as of Dec. 10, 2022.
Shares of Coinbase were up nearly 7% on the day, trading at $41.15 at the time of writing. The stock has lost 84% of its value over the past 12 months.
