Coinbase Might Soon Offer Banking-Like Services, Claims Ripple Board Member
May 07 2023 - 2:40AM
NEWSBTC
The second-largest crypto exchange, Coinbase, is still progressing
despite the US Securities and Exchange Commission’s enforcement
action against it. As such, a Ripple board member and an
angel investor at PartyDAO, Asheesh Birla, predict it might offer
crypto-enabled banking services. Coinbase Is Transitioning
From Crypto Exchange In a Twitter thread, Birla recounted
Coinbase’s mission, vision, and value proposition in the crypto
industry, concluding that it might offer banking-like services
backed by crypto. Related Reading: PEPE Market Cap Crosses $1
Billion As Gemini Listing Rumors Spread According to the angel
investor, the second largest exchange aims at building the crypto
economy. This financial system will be accessible, efficient,
transparent, powered by crypto, and fair to all users. Birla
further revealed that Coinbase’s 2023 quarter-one report showed
that more of the exchange’s revenues came from deposits through
interest income, custodial fees, and blockchain rewards. These
revenue streams were classified under subscription and
services. Based on the quarterly report, Birla pointed
out USDC deposits interest at $199 million, representing 18% of all
Coinbase revenue. Also, the exchange’s revenue gradually
moves from consumer transactions to institutional consumers with
high margins. Institutional trading revenue spiked by 67% from its
2022 Q4 amount. The Ripple board member also noted that
Coinbase now benefits from banking-like revenues not entirely
dependent on the crypto market. Banking Crisis Might Push
Alternative Services While concluding his post, Birla wondered if
the time has come for consumers and institutions to turn to
alternative services. Notably, the recent banking crisis that led
to the crash of Silvergate, Silicon Valley, and Signature Bank has
reduced people’s trust in the traditional financial system.
Birla cited a recent Bloomberg Opinion piece by Matt Levine titled;
“Nobody Trusts Banks Now,” asking if the timing is right for
everyone to move on to alternatives. In the piece, Levine described
banking operations strategies in two ways. First, banks borrow
short to lend long. Secondly, they borrow long to lend long. In the
first strategy, banks use customers’ deposits subject to fast
withdrawals to buy bonds and fund loans. In the second strategy,
banks use customers’ deposits which could also be withdrawn in the
short-term, although not always to buy bonds and fund loans.
Related Reading: Bitcoin Miners Reap Profits As Mining Difficulty
Hits 3-Month Low Considering these strategies purely dependent on
customers’ deposits, Levine concluded that the banking business is
inherently risky. The reason is that if all depositors wake
up to withdraw their money simultaneously, the banks will crash.
Also, the banks are in trouble if the interest on customers’
deposits spikes. That’s why research by Amit Seru disclosed
that 200 more banks in the US face the same risks that crashed
Silicon Valley Bank. As it stands now, only the future will tell if
Birla’s musings will play out. -Featured image from Pexels and
chart from Tradingview
Ripple (COIN:XRPUSD)
Historical Stock Chart
From Jun 2024 to Jul 2024
Ripple (COIN:XRPUSD)
Historical Stock Chart
From Jul 2023 to Jul 2024