Coinbase Enters a New Crypto Era With Perks—and Risks
**Coinbase Enters a New Crypto Era With Perks—and Risks**
The crypto giant can finally breathe after years of regulatory headaches under Biden. Now it has to figure out how far into memecoins and other untamed corners of crypto it wants to venture.
By Yueqi Yang
On the Friday before Donald Trump's inauguration as president in January, Brian Armstrong, CEO of Coinbase, joined his top executives in Washington at the Crypto Ball, where the tech elite celebrated the imminent arrival of the country's first crypto-friendly president.
Soon, though, there was an interruption in the revelry for Paul Grewal, Coinbase's chief legal officer, after Trump unexpectedly posted on X that he had launched a memecoin called $Trump. Memecoins are a divisive subject among many crypto enthusiasts—seen by some as fun, collectible forms of digital currencies that capitalize on viral trends and by others as dubious blemishes on the crypto category as a whole.
As Grewal tucked into a chicken lettuce wrap, he overheard other attendees at the gala mentioning some kind of token launch, so he pulled out his phone to check X. "To be honest, my first reaction is—is this real?" Grewal said. "Because I've never experienced a launch of a token by as important a political figure as Mr. Trump."
**The Takeaway**
The biggest U.S. crypto exchange moved out of its regulatory shadow in the first month of Trump. Now it has to balance how aggressive it wants to be while holding off the rivals nipping at its heels.
By the next day, some crypto exchanges had opened trading for the presidential memecoin, among them Kraken, Bitget, and KuCoin. But Grewal instead spent Saturday deliberating with his team at Coinbase—a publicly traded company that has traditionally been more cautious about listing memecoins and other new tokens—about what they should do with $Trump.
In the end, Coinbase listed it on the following Tuesday, but by then it was too late for most of its customers to benefit from the fleeting hype around the memecoin's launch over the weekend: The token finished the day down about 40% from its peak.
For Coinbase, the episode was a sign of the balancing act the largest U.S. crypto exchange will have to perform amid a carnival of deregulation and other crypto-friendly policies the Trump administration has begun to roll out. While Coinbase stands to benefit more from those moves than practically any other company, it still faces decisions about whether to plunge headfirst into the more speculative corners of crypto or play it safe in the interest of protecting its customers and its reputation.
It's far too soon to say exactly what the election of the most crypto-positive president in U.S. history will mean for Coinbase. Since Trump's inauguration on Jan. 20, the price of bitcoin, the most widely held cryptocurrency, has fallen 14%, compared to a 4% and 7% decline for the S&P 500 and Nasdaq Composite Index, respectively.
Even Trump's announcement on Sunday about his plans for a strategic national reserve of bitcoin, solana, and other cryptocurrencies succeeded in giving those tokens only a temporary lift. Coinbase's stock is down nearly 30% since Trump's inauguration.
That's in spite of the fact that the second Trump administration has otherwise been an unending series of victories for Coinbase and CEO Armstrong. Before the election, the company poured more than $75 million into political action committee FairShake and its affiliates during 2024, which helped elect nearly 300 pro-crypto lawmakers.
After the election, Armstrong met personally with Trump to discuss crypto issues. Armstrong has become a leading tech voice calling for a shake-up of the federal government, including advocating for the closure of the Consumer Financial Protection Bureau and praising the cost-cutting efforts of Elon Musk's Department of Government Efficiency. On Friday, Armstrong will attend the first-ever White House Crypto Summit.
In late February, the Securities and Exchange Commission dropped its long-running lawsuit against Coinbase, which had accused the company of running an unregistered securities exchange, brokerage, and clearinghouse. That eliminated the biggest regulatory threat looming over Coinbase. Other crypto platforms, including Robinhood, Kraken, Gemini, and OpenSea, said the SEC had also dropped similar investigations or lawsuits against them.
Not everyone is thrilled with the commission's actions. "The crypto industry got what it wanted in terms of the SEC abandoning its enforcement actions," said Corey Frayer, director of the Consumer Federation of America, a nonprofit consumer advocacy group. "I think we're moving into a time where crypto scams are going to proliferate, and I'm very worried about the investors who go to this market—trusting their hard-earned savings in this market—are going to get ripped off, because they've been left on their own," he continued. Frayer advised former SEC chair Gary Gensler—whom crypto executives regarded as their chief antagonist in government—on crypto issues.
The personal involvement of President Trump and his family in various crypto projects has also raised concerns about the possibility that donors could use them as tools to anonymously funnel money to the Trump family.
**Memecoin Mania**
For Coinbase, the most immediate impact of the new Trump era is the exchange's listing of tokens, which it scaled back on after the SEC filed its lawsuit in 2023. According to data from analytics firm Kaiko, Coinbase added 10 new tokens in February, compared to an average of 2.3 new token listings per month in 2023 and 3.4 new tokens per month in 2024.
Memecoins are a driver of the new listings, making up nine out of 20 new tokens Coinbase has listed since the election. But memecoins also have a checkered history. The tokens have no underlying value and trade based entirely on sentiment. They also tend to attract many retail investors who dream of getting rich quickly—and dubious figures eager to separate them from their money.
In one high-profile example in 2021, scammers launched a token called squid, named after the Netflix show "Squid Game," which saw its price surge by over 40,000% in a matter of weeks. Ordinary investors later discovered that the people behind the token had created rules that allowed creators to sell their holdings but didn't let ordinary investors do so. The token's price collapsed as creators cashed out.
Last December, viral internet celebrity Hailey Welch launched a memecoin called hawk—named after her "hawk tuah" catchphrase—that briefly surged to nearly $500 million market cap. Within hours, its value plummeted by more than 90%, drawing backlash against Welch. (She denied that she or her team sold her holdings after it launched). Coinbase didn't list the squid or hawk coins.
Still, memecoins are captivating to a meaningful segment of the online population and can be an important way for exchanges like Coinbase to pull in new customers. They also got an important regulatory boost last month when the SEC issued a statement declaring that memecoins are not securities, which means issuers or promoters of memecoins don't need to register them with the agency. (That also means investors aren't protected by federal securities laws.)
Yet Coinbase clearly has some ambivalence about them. Last month, in a long post on X, Armstrong himself wrote that he doesn't personally trade memecoins, but said, "We should be open-minded about where memecoins are going, even if some are silly, offensive, or even fraudulent today."
"If our customers want it, and it's legal, we aim to let them make that choice for themselves," he added. "But it's our job to provide them with the best information we can find to make an informed choice. If a token is a scam or fraudulent, we'd want to remove it."
Inside the company, employees have debated how much to embrace memecoins, according to a former employee. The pro-memecoin camp sees them as an obvious way to boost Coinbase's trading volume, while skeptics worry they will distract Coinbase from building products with real-world utility, such as payments and loan products. Such discussions are healthy and mirror the "debate outside of Coinbase and across all of crypto," Grewal said. "It's very rare that we are able to actually accurately predict what tokens will have real utility and will ultimately impact the economy in meaningful ways."
Before listing new tokens, Coinbase performs a vetting process that evaluates the token based on the company's legal, compliance, and technical security standards. The goal is to root out coins that regulators could deem to be unregistered securities, scams, or prone to hacks.
In the past, Coinbase has had to walk back some of its characterizations of memecoins. In 2023, it published a newsletter noting that some considered Pepe the Frog—a cartoon frog that helped inspire a memecoin called pepe—a hate symbol popular with far-right groups. Supporters of pepe were outraged, prompting Grewal to apologize on X to its fans for oversimplifying the meme's history.
Coinbase eventually listed pepe in the fourth quarter of 2024. In a letter to Coinbase investors in February, the company credited its listing of pepe and wif—another memecoin based on a dog with a hat—for contributing to the growth of its consumer trading revenue.
But critics of memecoins believe Coinbase will regret its support for them, despite the consumer enthusiasm for the tokens. Frayer said listing $Trump was "shortsighted" if Coinbase wants to build a legitimate crypto market, because it erodes investor trust in the market. "Protecting investors that use your platform and maintaining the integrity of your business means that sometimes you don't offer products just because there's a demand for them," he said.
**Embracing Leverage**
As the regulatory obstacles to Coinbase's business ease in the U.S., the company is also looking to push deeper into other areas of crypto long dominated by freewheeling exchanges overseas. That includes a form of derivatives trading called perpetual futures, which dominates global crypto trading volume. The Commodity Futures Trading Commission categorizes them as a type of contract known as a swap that can only be legally offered by dealer firms registered with the regulator.
Perpetual futures have become a hit with both offshore retail and institutional investors, which helped fuel the rise of exchanges based outside the U.S., including Binance, Bybit, and FTX, the now-defunct exchange founded by Sam Bankman-Fried. Coinbase came to perpetual futures late, launching it only in 2023 after gaining a license in Bermuda, which allows it to cater to customers outside the U.S. It now has a small but growing market share in the business. But Coinbase is also taking a more cautious approach than its rivals: It provides only up to 20 times leverage on bitcoin perpetual futures, far less than the 100 or more times leverage offered on other exchanges.
"We have a conservative posture when it comes to levels of leverage," said Greg Tusar, head of institutional product for Coinbase. "We try to be competitive for retail users, but not overly risky."
Under the new administration in the U.S., Coinbase executives are hopeful they may be able to offer perpetual futures to domestic customers. That could bring a lot of trading volume to the U.S. market, Armstrong said during an earnings call last month. "We are excited about what a new regulatory outlook will enable in the U.S. in terms of innovation and bringing new products to the market," said Tusar.
**Hedging Bets**
By pushing deeper into some of the wilder terrain of the crypto market, Coinbase is protecting itself from the possibility that it could lose its grip on its relatively staid bread-and-butter business: offering small investors ways to buy and sell crypto, particularly bitcoin and ether.
The friendlier regulatory environment in the U.S. could introduce an onslaught of competition for Coinbase in its core business. Smaller U.S. crypto exchange rivals Kraken and Gemini are both gearing up for potential public listings, which could confer the same stamp of legitimacy that Coinbase has boasted. Meanwhile, overseas exchanges, such as Singapore-based Crypto.com, are also looking to grab U.S. market share now.
Top Wall Street firms are likewise looking to get in on the action. Charles Schwab and Morgan Stanley's E-Trade, two of the biggest U.S. retail brokerages, are among the stock trading giants planning to offer crypto trading, likely starting with bitcoin and ether. And Nasdaq recently petitioned the SEC to create a "level playing field" for traditional exchange giants so they can also launch services that would compete with crypto platforms such as Coinbase.
Coinbase is also headed for more competition in stablecoins, the dollar-pegged tokens that are a relatively buttoned-up area of crypto. Coinbase has a major partnership and revenue-sharing deal with Circle, a top stablecoin issuer, but payments giants including PayPal have been launching their own stablecoins. Trump is now pushing for legislation to clarify stablecoins' regulatory standing, which could encourage more traditional financial firms, such as big banks, to enter the market.
Coinbase, for its part, argues that having more firms trading in crypto boosts the overall market, which is good for Coinbase too. It's also betting that financial firms like banks who lack crypto expertise will need to use Coinbase services such as custody to quickly launch crypto trading.
"I'm hoping they will see us as the most attractive option to jump-start" crypto services, said Brett Tejpaul, who heads Coinbase's institutional business offering services to big traders. "From there, they can build incrementally on top of our platform and services."
Yueqi Yang is a crypto reporter at The Information based in New York City. Send tips, questions, and feedback to her at yueqi@theinformation.com or via Signal (@Yang.12). Follow her tweets on X (@Yueqi_Yang).