Coinbase eyes long-term subscription revenue growth, NFTs remain focus

US cryptocurrency exchange Coinbase is aiming to increase subscription revenue in the long term to combat potential profit margin compression.

The firm’s founder and CEO Brian Armstrong delved into the long-term outlook for the US cryptocurrency exchange in a wide-ranging interview with CNBC’s Crypto World on Tuesday. A key talking point was the potential for lower income from fees in the future and how the company plans to anticipate this possibility.

Armstrong emphasized his belief that profit margin compression is certain to occur in the future as more exchanges and competitors launch similar products and services to compete for market share:

“This is why we’re investing so much in subscription and service revenue today, and we realize that merchant fees will still be a big part of our business 10 or 20 years from now. But I’d like to get to a place where more than 50% of our revenue comes from subscriptions and services.”

Armstrong said the company had been focused on this shift for the past three years, which has resulted in subscriptions and services accounting for 18% of the company’s revenue stream. This was up from the 4% contribution to earnings in 2020, according to Armstrong.

The Coinbase CEO noted that its staking offering and USDC custody services were primary drivers of subscription and service revenue, while the development of Coinbase Cloud and other projects in the pipeline will further contribute to the growth of these revenue streams.

Related: Coinbase Introduces Wrapped ETH Asset Ahead of Merger

The growth of Coinbase’s staking product also relies on the scalability of the underlying blockchains that power the service, with Ethereum’s upcoming move to a proof-of-stake consensus algorithm poised to solve this problem as Armstrong explained.

The burgeoning nonfungible token (NFT) space and Coinbase’s proprietary NFT marketplace were also a topic of discussion. After launching a beta version of its NFT marketplace in April 2022, the CEO said the company remains committed to NFTs and believes it will be a big business:

“It’s still very early in the NFT space. We saw a big run up last year with people doing Bored Apes and all sorts of different things getting traction. But I think it’s just the first step in a long journey for what NFTs going to be.”

Armstrong highlighted his belief that NFTs will change how people use social media, how the music industry works and how creative talent interacts with audiences. Natively integrating Coinbase NFTs into various platforms people use daily was another avenue that Armstrong explored.

“We are in the process of bringing together all the different places people can bid and ask for NFTs in one place. If we can collect it there’s really no downside to using it there instead of going somewhere else.”

The exchange is currently testing a beta version of its Coinbase One subscription product that gives members access to fee-free trading, $1 million account protection and automated tax services. The monthly subscription to the service is $29.99.