Coinbase to Cut Workforce by 20% Amid Crypto Market Volatility

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Coinbase, one of the world’s largest cryptocurrency platforms, will cut 20% of its workforce and cut operating expenses by a quarter amid ongoing turmoil in the industry, its chief executive has said. general.

The move, which will affect 950 employees, is the result of the chain of negative events that hit the crypto sector last year, affecting the results of the San Francisco-based company, Brian Armstrong said in a statement released. on the Coinbase website.

This will be the third job cut made by Coinbase in eight months.

It cut 1,100 jobs last June, about 18% of its workforce at the time, then followed up with another round of more than 60 cuts in November.

Among the areas of Coinbase that will be affected are sales and marketing, technology and development, and general and administrative matters, the company said in a filing with the U.S. Securities and Exchange Commission on Tuesday.

The company expects to incur between $149 million and $163 million in restructuring charges, including about $58 million to $68 million for severance and other severance payments, according to the filing.

Coinbase shares plunged 2.7% in premarket trading after rising more than 5%, before rallying to gain 1% as of 9:15 a.m. PT. Its stock lost about 86% last year.

Mr. Armstrong acknowledged that the crypto industry is difficult to predict and that the decision is part of a larger plan to ensure we can succeed as a business in multiple potential outcomes.

In 2022, the crypto market trended downward along with the broader macroeconomics. We have also seen the fallout from unscrupulous actors in the industry, Mr. Armstrong said, warning of potential further contagion.

Consequently, I have made the difficult decision to reduce our operating expenses by approximately 25% quarter-over-quarter, which includes the layoff of approximately 950 people.

The cryptocurrency industry has gone through a difficult year in 2022, marked by corporate collapses and cybercrimes, leading to a drop in digital asset prices and investor interest.

Brian Armstrong, CEO and co-founder of Coinbase, said “there is no way we can reduce our expenses enough, without considering staffing changes.” Reuters

The most recent and notable incident was the dramatic collapse of FTX, which filed for bankruptcy on November 11.

The exchange’s tumble, once valued at $32 billion, has rattled the entire industry, dealing a blow to arguments for the viability of digital currencies and drawing closer scrutiny from regulators over the how they manage user assets.

FTX founder Sam Bankman-Fried faces criminal charges in the United States.

The FTX crash also came at a time when the collapse of big business Celsius Network and Three Arrows Capital following massive losses was still fresh in investors’ minds.

The collapse of cryptocurrency Luna and its associated stablecoin Terra in May, along with job losses, also added to the industry’s woes.

In addition, the sector has become the target of cybercriminals. Crypto-based crime has reached its highest level in 2021, blockchain platform Chainalysis said in a recent report.

Illicit addresses received $14 billion during the year, nearly double the $7.8 billion recorded in 2020, the New York-based company said.

The crypto market has trended lower along with the broader macro economy. We’ve also seen the fallout from unscrupulous players in the industry, and there could still be further contagion.

Brian Armstrong, CEO and Co-Founder of Coinbase

In March, over $600 million was stolen from Ronin Network, a sidechain designed for play-to-earn game Axie Infinity. More than $30 million has been recovered, we learned in September.

Last month, more than $8 million worth of cryptocurrency was stolen from the wallets of BitKeep users in an apparent cyberattack.

All in all, it’s hard to say the worst is behind us in crypto and all the bad actors have been flushed out and regulation is where it should be, Naeem Aslam, chief analyst at Avatrade, in a note.

Mr. Armstrong, however, expressed confidence in the recovery of the cryptocurrency sector, saying that Coinbase has survived several bear markets over the years using this process.

We also reduced headcount last year as the market began to correct, and in hindsight we could have reduced more at that time, he said.

However, he cautioned that the current bear market is the first time society has seen a crypto cycle coincide with a broader economic downturn, but otherwise it’s similar.

As we reviewed our 2023 scenarios, it became clear that we needed to cut spending to increase our chances of doing well in each scenario, Armstrong said.

There was no way to reduce our expenses sufficiently without taking into account staffing changes.

All affected employees will be notified on Tuesday, Armstrong said.

Updated: January 10, 2023, 3:49 p.m.

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