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Coinbase, the US-listed cryptocurrency exchange, is to cut a fifth of its workforce as the crisis sweeping through the digital assets market triggers another round of job cuts in the industry.
Chief executive Brian Armstrong said on Tuesday Coinbase would cut 950 jobs and shut down several riskier projects to ensure it could “weather downturns in the crypto market”.
Its move comes as the industry’s biggest players are buffeted by a prolonged downturn in the prices of popular coins such as bitcoin while consumer confidence has been further rocked by the implosion of the FTX derivatives exchange in November.
The cuts at Coinbase follow extensive job losses already announced this year at rival exchange Huobi, crypto-focused US bank Silvergate and digital asset lender Genesis.
It is the second extensive round of cutbacks at Coinbase, which thinned its workforce by about a fifth, or about 1100 employees, last summer. Other exchanges also cut jobs six months ago to combat the severe downturn in trading volumes as token values dropped sharply.
Armstrong said the decision to cut more jobs was based on its planning for projected annual revenues. “As we examined our 2023 scenarios, it became clear that we would need to reduce expenses to increase our chances of doing well in every scenario,” he wrote on a corporate blog.
Coinbase added that earnings before interest, taxes, depreciation and amortisation for 2022 would be in line with its previous guidance for a loss of no more than $500mn. However, it will incur $149mn to $163mn in restructuring expenses for its latest job cuts, of which $58mn to $68mn would be cash charges. Coinbase shares were 7 per cent higher in New York after rising 15 per cent on Monday.
“While this creates a near-term filler for Coinbase’s dwindling operating leverage, it does not help fix the number-one problem: deteriorating volumes amid retail crypto trading fatigue,” said analysts at Mizuho Securities.
“Conservatively assuming take rates and volumes stay at current levels, we still see over 30 per cent downside to 2023 consensus sales.”
The announcement adds another layer to Coinbase’s difficult start to 2023. Last week, it reached a US$100m settlement with New York regulators over anti-money laundering failures, including a backlog of unreviewed transactions and a reliance on social media profiles for customer identification. The exchange said these failures were “historic” and added that it had taken “substantial measures” to address them.
Coinbase’s announcement comes as the collapse of FTX and the arrest of founder Sam Bankman-Fried continue to ripple across the crypto industry. FTX’s implosion has prompted regulators to intensify their scrutiny across the sector, and triggered mass withdrawals from platforms by investors anxious about the financial health of crypto companies.
“Dark times also weed out bad companies, as we’re seeing right now,” Armstrong said, adding that Coinbase was “well capitalised” and that cryptocurrencies were not “going anywhere”.
Written by: Nikou Asgari and Scott Chipolina
© Financial Times