Crypto exchange Coinbase exceeds revenue expectations in Q4 2022

• Coinbase shares rose by 78% in Q4 2022.
• However, its transaction volume continued to decline.

Cryptocurrency exchange Coinbase has exceeded revenue expectations for the fourth quarter of 2022, but its transaction volume continued to decline.

The exchange’s net revenue for the fourth quarter stood at $605 million, exceeding the $589 million estimates of the Wall Street Journal. This revenue is 5% higher than the revenue of the previous quarter of $590 million. The details have been shared in the Fourth Quarter and Full-Year 2022 shareholder letter released by Coinbase.

Transaction volumes fell 12% from the previous quarter. However, Coinbase attributed its 5% quarterly revenue growth to a 34% increase in subscription and service revenues.

Along with the rise in Bitcoin’s [BTC] prices, Coinbase shares have risen significantly by 78% in 2023, but are still down 67% year to date. Subscription and service revenues, a company priority, increased 34% quarter over quarter to $283 million in Q4. Subscriptions and services accounted for nearly half of total revenue in Q4, owing primarily to interest income of $162.2 million.

Though Coinbase has stated that its staking products are not securities, staking revenues fell compared to the previous quarter. This was because a drop in crypto prices outweighed an increase in staked balances across all crypto tokens.

Multiple exchanges being investigated by the SEC

At press time, Coinbase was being investigated by the Securities and Exchange Commission (SEC) for its staking products. This is similar to the probe that resulted in crypto exchange Kraken agreeing to a $30 million settlement with the regulator.

The SEC shutting down Kraken’s staking service in the United States as well as planning to sue Paxos for allegedly selling BUSD as an unregistered security has adversely impacted the prospects of other crypto exchanges. It has created uncertainty for Coinbase, which has its own retail staking business, as well as a stablecoin, USD Coin [USDC].

Coinbase also stated that it anticipates more crypto regulation in the coming year, both in the US and abroad. It cited the completion of the European Union’s MiCA framework as evidence of progress, as well as other countries such as Brazil, the United Kingdom, and India that have drafted specific and clear legislation for regulating cryptocurrency.

It chastised the US for its disjointed approach to cryptocurrency regulation, but stated that it would continue to work for a more consistent and clear crypto policy.