Brian Armstrong founded Coinbase in 2012. Since then, he has built his company into a dominant crypto brand with products that range from wallets to stablecoins to a Bitcoin-themed credit card. Now, Armstrong’s firm is pushing into a decidedly different market: Stocks, where it will compete with the likes of Schwab, Fidelity and arch-rival Robinhood.
The decision to add stocks is part of Coinbase’s plan to be an “everything exchange” where users can invest in stocks, prediction markets and more. The move makes strategic sense for Coinbase as a way to diversify its revenue streams and build a broader base of customers—provided it can pull it off. And that’s far from certain. A recent report pointed out that the share price of Robinhood, which has been blending stock and crypto offerings for years, has significantly outperformed Coinbase in recent years.
Is it too late for Coinbase to catch up? Armstrong doesn’t think so. In a recent interview, he said the company is playing a long game and that, in an era where assets of all sorts are moving to the blockchain, Coinbase will be a cornerstone of the next era of mainstream finance.
“We have deep crypto expertise. We have the most trusted brand in crypto. We’re storing more crypto assets than any other company,” he said. “So I think what we’ll be good at is being the bridge between traditional finance and crypto, and then getting tokenized equities to really take off.”
This notion of tokenized stock is still a novel one for most investors. A handful of firms, including Robinhood and Kraken, have offered a smattering of digital tokens that represent a claim on real world shares in companies like Apple and Tesla.
Such tokens come with some of the advantages inherent to a blockchain. They can be traded across exchanges and settlement is instant, which frees up capital. At the same time, the current offerings amount to a type of derivative—rather than a stock issued directly on a blockchain—and companies have complained they did not grant permission to sell their shares in this way.
Armstrong says that, for now, Coinbase will sell stock in a conventional manner but that he also anticipates a time when stocks are issued natively on a blockchain.
“I think the most interesting [offering] is a tokenized asset, where it’s truly one-to-one represented underneath, and it gives you the rights of that asset, whether it’s dividends or voting,” he said, adding that “There’s a lot of work to be done to go figure out the details of that with the SEC and other people. It’s record keeping, rules.”
Those details are likely to take time. Congress is currently debating a piece of legislation known as the Clarity Act aimed at creating a regulatory framework that would help integrate crypto into the broader financial system. The process, however, became bogged down amid a squabble between the crypto industry and the banking sector that escalated when Armstrong said on Wednesday that Coinbase would pull its support for the bill in response to last minute changes, before sounding a more conciliatory tone the next day.
The upshot is that Coinbase is likely to focus for now on offering stocks in a conventional fashion, relying on a firm called Apex Fintech Solutions to handle the backend operations. Currently, stocks are available only to a small group of users, but the company plans to expand the offering to all customers in the coming weeks.
It remains unclear how many Coinbase customers, who signed up to get access to crypto, will also be willing to trade stocks on the platform, or if the company can gain any significant market share from Robinhood and other incumbents.
“All global markets and tradable assets will move onchain, and no one is better positioned to lead that transition than Coinbase,” said a company spokesperson.
As for when that transition will take place, Armstrong predicts it will begin to occur in the next two years or so, and that it will be newer companies that will be the first to issue stock this way. In the long run, he predicts that every firm will recognize blockchain as a superior technology for managing their shares.
Armstrong added that he liked the idea of Coinbase one day being the first company to pay shareholder dividends in the form of Bitcoin.
