How many wallets do you want?
It’s a simple question, and for the vast majority of people, the answer is “one.”
In the last two days, two of crypto’s biggest names, Coinbase CEO Brian Armstrong and Kraken CEO Jesse Powell, talked about turning their U.S.-based exchange wallets into something bigger, expanding beyond just digital assets into stocks — and even payments.
But if you dig down, it doesn’t seem like either is really thinking big enough.
Powell said the idea was to create “a sort of super wallet, omni-product app with NFTs, spot trading, FX, maybe even stock trading,” on a Decrypt podcast.
It’s something he believes many bigger exchanges are moving towards, he said, adding that expanding into stock trading is “something that we’re exploring, and I think makes sense to do.”
But he didn’t mention anything about payments — probably the largest part of people’s day-to-day financial lives. Armstrong, on the other hand, has made very clear that he wants the Coinbase Wallet to be hub of customers’ financial lives.
The Coinbase wallet is already more than a crypto holder. The company has already set itself up to make its wallet into a consumer payments tool. Aside from its Visa-branded Coinbase debit card allowing users to spend their crypto at tens of millions of merchants, customers can also set up direct deposit, sending paychecks directly to Coinbase to be deposited in whatever mix of crypto and cash they prefer.
So it’s a little strange that when asked about rumors that the company wants to buy stock- and crypto-trading platform Robinhood during its first-quarter earnings call on Tuesday (May 10), Coinbase President and Chief Operating Officer Emilie Choi poured cold water on the idea:
“We are a crypto company,” she said when asked about the strategic advantage of moving into stocks. “Everything we do is in service of building the crypto economy and increasing economic freedom. So we don’t plan to offer traditional securities unless this somehow would help us massively accelerate crypto adoption.”
This all points to a bit of a myopia in the crypto world, which believes cryptocurrencies can and will supplant all other forms of finance, from payments to investments. It’s an idea Armstrong talked up when discussing the company’s very underwhelming quarterly earnings report.
Waxing philosophical, he said crypto is capable of creating a “good financial infrastructure for people all over the world and to enable this new, more internet-native, global, fair and free economy for the world.”
In the meantime, people have checking accounts, credit cards and 401(k)s to manage — and more than a few of them don’t want to put all of their investments into the very volatile and relatively unproven crypto market.
A year ago, just after Coinbase made its appearance on the Nasdaq with an industry-first direct listing — with a now-diminished market cap of a staggering $64 billion — PYMNTS’ Karen Webster wrote that for the company to ignite the nascent crypto economy in the way that the world-changing but short-lived Netscape browser did the web more than two decades ago, cryptocurrencies would have to “transition from being a digital asset that people trade for speculation, to currencies that become the basis for how consumers and businesses transact.”
Which is to say, Coinbase’s wallet would have to become THE WALLET for everything — for people — not just crypto.
That means, she said, it would have to be “not just a way to buy and sell goods and services, but the way — or at least a major way — that people do business because that is how merchants and other businesses want to be paid for what they sell.”
In the meantime, however, both consumers and merchant are far more comfortable making transactions with the likes of Mastercard, Visa and PayPal, she pointed out.
“Consumers who would want to use cryptocurrencies to transact would want to use a crypto-only wallet, instead of having crypto as part of a digital wallet that has other payment credentials,” she wrote. “Or Coinbase would have to open its wallet to non-crypto methods of payment.”
That’s something Armstrong, whose Nasdaq-listed firm is widely seen as the top U.S. crypto exchange, seems to get, for the most part.
Making Coinbase’s Wallet more useful is something the company’s C-Suite went back to over and over on the investor and analyst call, with both Armstrong and finance chief Alesia Haas calling it one of the firm’s top two investment priorities for the coming year.
More than half of Coinbase’s users are doing more than trading crypto with their wallets, Armstrong said.
“What are they doing?” he asked. “It’s all the things you would use money for and more. They’re earning money with crypto, they’re spending it with merchants using Coinbase [Visa debit] Card.”
But not, apparently, trading stocks — which between personal investments, IRAs and 401(k)s make up the vast majority of most people’s capital outside of homeownership.
And yet a day later, Coinbase announced that it had registered with the Securities and Exchange Commission (SEC), another first for the crypto industry’s first public company.
The goal, Coinbase said in a release, is to “have better access to capital markets quickly and efficiently when needed,” and “be able to offer and sell securities in the future.”
It’s worth remembering that SEC Commissioner Gary Gensler has said virtually all cryptocurrencies are securities, and last year blocked Coinbase from offering interest bearing accounts to customers who would lock funds into Coinbase Lend, used to offer crypto-backed loans. Which is roughly what banks do with deposits.
So, they want to offer cryptocurrency securities in a variety of ways, but not touch the stock market — which Nasdaq-listed COIN is itself part of.