Coinbase CEO Brian Armstrong: "Crypto is Eating Financial Services"

“Crypto is eating financial services.”

Coinbase (NASDAQ:COIN) shares rose on Thursday after the company swung to a first-quarter net loss that was smaller than analysts' estimates, and the company's executives highlighted several milestones in the company's U.S. regulatory journey.

Coinbase revenue for the quarter slipped 10% from the prior quarter to $2.03 billion, and adjusted EBITDA came in at $930 million, while net income fell sharply to $66 million. The bottom line was largely impacted by a $597 million pretax loss on its crypto investment portfolio, primarily unrealized.

But arguably the most transformational part of Coinbase’s Q1 wasn’t financial – it was political. After years of regulatory uncertainty in the U.S., executives expressed optimism that the tide was turning, noting that the company was among the few crypto firms invited to the first-ever White House-hosted crypto summit.

"We are excited about progress on stablecoin [regulations], there will be another vote next week," Coinbase CEO Brian Armstrong said. "With greater regulatory clarity, we believe crypto rails will update financial infrastructure around the world."

Coinbase also won a courtroom victory with the dismissal, with prejudice, of the SEC's lawsuit alleging unregistered securities offerings.

"We are excited about the … new chapter in the U.S.," said Coinbase CFO Alesia Haas.

And on the "crypto is eating financial services" topic, Coinbase on Thursday also agreed to acquire Deribit, the world’s biggest trading platform, for roughly $2.9 billion, which will be paid in 11 million shares of Coinbase stock and $700 million in cash.

It is also at least the fourth crypto deal valued at more than $1 billion to be announced in the last month and a half. In April, Ripple (NYSE:PYPL) said it was acquiring prime broker Hidden Road for $1.25 billion. And Kraken reached a $1.5 billion deal for futures broker NinjaTrader in March.

Coinbase said the acquisition would establish it as the “premier global platform for crypto derivatives,” a segment it believes will offer enhanced revenue stability and margins.

Coinbase Is Acquiring Deribit in All-Stock DealCoinbase is acquiring Deribit in an all-stock deal that values the crypto exchange at about $2.9 billion, the companies announced Thursday. The deal will see Deribit’s shareholders receive 11 million shares of Coinbase stock and $700 million in cash.

The acquisition will bring together two major players in the crypto derivatives market. Coinbase is a leading cryptocurrency exchange in the U.S., while Deribit is one of the world’s largest derivatives exchanges.

Coinbase has been expanding its derivatives offerings in recent months. It launched its own options exchange in December and began offering futures contracts earlier this year. The company is also planning to launch a new institutional-grade derivatives platform later this year.

Deribit is a privately held company that was founded in 2015. The exchange offers a wide range of derivatives products, including futures, options, and perpetuals, on several underlying cryptocurrencies. Deribit also provides a liquidity management service to other crypto exchanges.

Coinbase said the acquisition will complement its existing efforts to expand internationally and into new product categories. The deal is expected to close in the second half of 2024, subject to customary closing conditions.

Coinbase’s revenue fell 10% quarter over quarter to $2.03 billion, and adjusted EBITDA came in at $930 million, while net income dropped sharply to $66 million. The bottom line was largely impacted by a $597 million pretax loss on its crypto investment portfolio, which was largely unrealized.

Coinbase’s revenue was impacted by a slowdown in trading activity in the first quarter, as evidenced by a 19% decrease in consumer and institutional transaction revenue to $1.3 billion. However, this performance outpaced the 13% decline in global spot trading volume during the same period.

On the other hand, subscription and services revenue saw a 9% quarter over quarter increase to $698 million, driven by surging stablecoin activity. Revenue from stablecoins reached $298 million in Q1, marking a 32% rise quarter over quarter.

Coinbase has effectively turned USDC into a financial engine, integrating it into product offerings across loans, rewards and decentralized applications. One example is the launch of bitcoin-backed USDC loans inside the Coinbase app, powered by Morpho’s open-source protocol. Since launch, the platform has seen over $160 million in loan originations.

As trading revenue becomes more cyclical, Coinbase is leaning into more durable income streams. USDC, the second-largest dollar-backed stablecoin, emerged as a star performer. Its market cap surpassed $60 billion for the