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Wednesday, January 26, 2022

Coinbase Tests Commission-Free Subscription Trading Service

(Bloomberg) — Coinbase Global Inc. is testing a subscription service that lets customers trade on the biggest U.S. cryptocurrency exchange without paying fees for each trade.

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Customers will still pay so-called spread fees on cryptocurrency sales and purchases made through the service. Currently, Coinbase customers pay a commission and spread fee. Any subscriber costs weren’t disclosed.

“We’re always looking to learn more about how we can best serve our customers in different ways,” Coinbase said in the statement Wednesday. “Right now we are still in early stages so everything about the future product experience will be shaped by the feedback we receive from our users.”

The trading platform is experimenting with its fee structure amid growing pressure from companies such as Robinhood Markets Inc., which are not charging trading fees and gaining users quickly. Crypto now represents more than half of Robinhood’s transaction revenue.

The subscription could also help make Coinbase’s revenues more predictable, said Owen Lau, an analyst at Oppenheimer & Co. Coinbase hasn’t been giving forward guidance because of the unpredictability of its sales, which are tightly linked to interest in and price of Bitcoin and other leading cryptocurrencies.

“That would reduce lots of volatility going forward,” Lau said. “To me that’s a positive to multiples expansion. Trading is just highly unpredictable.” Today, Coinbase makes the bulk of its revenue from trading fees, although it’s been working to diversify its sales.

Coinbase will report its quarterly results on Nov. 9. Analysts are expecting a double-digit sequential decline in third-quarter revenue, due to a decline in trading volume and active users in the wake of a second-quarter slump in Bitcoin that likely weighed on investor optimism early in the third quarter.

Coinbase could offer the subscription to users who trade less first to help blunt any negative impact on revenue, Lau said.

“If you try to ask someone who trades a lot, then you’d lose substantial transaction fees from that,” he said. “I do believe Coinbase would go slowly and try to find a pilot segment first and see whether that makes sense.”

The subscription service test was first reported by the Block.

(Adds analyst comment beginning in the fifth paragraph.)

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