Coinbase's Journey: From Management Oversight to Global Financial Infrastructure

In the development process of the blockchain industry, it is impossible to discuss without addressing the fight against inadequate management. Coinbase started in 2012 as one of Y Combinator’s edge projects, and in just 15 years, it has evolved into a core infrastructure of global cryptocurrency circulation. This evolution involved a series of strategic management decisions and organizational trials, particularly from the organizational reform in 2020 to the regulatory resistance in 2024, which also serve as proof of management innovation and crisis response capabilities.

Starting Point: Strategists Who Chose Compliance Amid Chaos

Coinbase’s success was rooted not in cutting-edge technology but in a management philosophy that went against the times. In 2012, when Brian Armstrong applied to Y Combinator, his vision was to build a bank called “Bitbank.” Leveraging his experience in fraud prevention at Airbnb, Armstrong recognized that while Bitcoin’s technology was excellent, it had an inherently poor user experience.

Overcoming initial rejection, Armstrong’s prototype Android wallet and expertise in payment security convinced Y Combinator partners. More importantly, the participation of Fred Elsam, a former foreign exchange trader at Goldman Sachs, brought a unique blend of Silicon Valley technologists and Wall Street financiers, giving Coinbase a distinctive DNA.

During the chaotic period of cryptocurrency exchanges from 2013 to 2014, with incidents like Mt. Gox’s mismanagement, Coinbase chose a different path—rather than registering offshore to evade regulation, it built a fully compliant system within the United States.

This approach was initially very costly—difficulties in opening bank accounts and obtaining money transfer licenses across all 50 states. However, after Mt. Gox’s collapse in 2014, Coinbase gained market trust. Its transparency and strict management system became advantages that supported the company through years of rapidly changing regulatory environments.

The initial fundraising strategy was similarly strategic. With the participation of Union Square Ventures and Andreessen Horowitz (a16z), and by bringing in traditional financial institutions like NYSE, USAA, and BBVA as strategic investors, Coinbase established a positioning as a “cryptocurrency company within the system.”

Growth Pains: Internal Conflicts and Organizational Rebuilding

As the company rapidly expanded, serious governance issues accumulated within Coinbase. These tensions surfaced amid the heightened social justice movements following the George Floyd incident and Black Lives Matter protests in 2020.

While major Silicon Valley companies publicly supported social justice, Brian Armstrong took a different stance in a company-wide AMA (Ask Me Anything). He emphasized focusing on economic freedom, which sparked significant internal backlash and led to a virtual strike by some employees.

Armstrong’s September 27, 2020, blog post titled “Coinbase is a mission-driven company” clearly defined the company’s cultural direction. It prioritized business mission over political debates or social activism, and proposed that employees who disagreed should consider leaving. Ultimately, about 60 employees (5% of the total workforce) accepted this proposal.

Although criticized as authoritarian at the time, this decision ultimately prevented management lapses within Coinbase and contributed to high execution efficiency during the IPO preparation in 2021. While many tech companies faced internal cultural wars, Coinbase maintained its business focus.

However, more serious issues persisted. By late 2020, journalist Nathaniel Popper of The New York Times was preparing a report on systemic discrimination against Black employees at Coinbase, including mass resignations, wage disparities (7% lower), and specific testimonies of workplace harassment.

Coinbase responded differently from typical corporate reactions—before the article’s publication, it issued a letter to all employees, attempting to frame the narrative beforehand. This “preemptive strike” broke corporate PR norms but demonstrated a tough stance externally.

In 2022, a former product manager, Ishan Wahi, was involved in an insider trading incident using information about token listing schedules. This was not just individual misconduct; the SEC designated it as the first insider trading case involving cryptocurrencies, with related tokens classified as securities in civil litigation. This ruling directly challenged Coinbase’s business model legality and foreshadowed future major lawsuits.

Counterattack: From Regulatory Resistance to Political Influence

Facing pressure from SEC Chair Gary Gensler, Coinbase launched a full-scale counterattack rather than settling. In legal battles, when the SEC refused to establish clear rules for digital assets, Coinbase filed a Writ of Mandamus with the federal appellate court to compel the agency to perform its duties. This unprecedented legal move paid off as, amid shifting political winds in early 2025, the SEC lost multiple key cases and withdrew most of its charges against Coinbase.

Simultaneously, Coinbase focused on building political influence outside the courtroom. The 2024 US presidential election marked a turning point. Senator Sherrod Brown of Ohio, chair of the Senate Banking Committee and a well-known skeptic of cryptocurrencies, was targeted. Coinbase led funding for the super PAC “Fairshake” supporting pro-crypto legislation.

During the 2024 election cycle, over $119 million from the crypto industry was spent, mostly on aggressive advertising, with more than $40 million allocated to Brown’s Senate race. Beyond financial contributions, Coinbase mobilized over 2.6 million crypto holders in a grassroots movement called “Stand With Crypto.” This combined “money + voting” strategy fundamentally altered Washington’s political calculus, and Brown’s defeat sent a clear warning to politicians.

By 2025, Coinbase’s lobbying expenditures reached record levels—about $1 million per quarter—and top lobbyists, including former Obama campaign manager David Plouffe, joined as advisors. The company had transformed from a “tech startup” into a “Washington power player.”

Fundamental Shift in Business Model: From Transaction Fees to Diversified Services

Coinbase’s financial statements reveal that alongside management improvements, its business model was undergoing a fundamental diversification—shifting away from reliance on transaction fees toward a more sustainable revenue base.

In 2020, over 96% of Coinbase’s revenue depended on transaction fees, tying its performance closely to Bitcoin price fluctuations. By 2025, this share is projected to decline to 59%, with subscription and service revenues reaching about 41%.

This transition is clear. During the 2021 bull market, trading revenue peaked at around $6.8 billion, but after the 2023 bear market, subscription and service revenues (~$1.4 billion) nearly matched trading revenue (~$1.5 billion). In the recovery phase from 2024 to 2025, service revenues continued to grow steadily, reaching approximately $2.3 billion.

The core of this structural change is Coinbase’s issuance of USDC. In the context of the Federal Reserve’s interest rate environment, USDC’s reserve assets generate stable interest income similar to bank net interest margin (NIM). The approval of Bitcoin spot ETFs in 2024 marked the peak of this strategy.

By 2025, Coinbase had established itself as the custodian for about 85% of Bitcoin ETF assets, including major products like BlackRock’s iBIT and Grayscale’s GBTC. When investors buy Bitcoin ETFs through Fidelity or BlackRock, their assets are effectively stored in Coinbase’s cold wallets. This monopoly on custody fees signifies Coinbase’s integration into the infrastructure of the global financial system.

Layout for the Web3 Era: Base Chain and the Super App Concept

If the past decade was Coinbase as a Web 2.0 exchange, the future aims for it to evolve into a Web 3.0 operating system.

Launched in 2023, the Base chain is a Layer 2 network based on OP Stack, representing a major strategic shift. Moving from an exchange to a financial infrastructure, and then to a super app, Base holds a key position in this three-stage evolution.

Leveraging Coinbase’s established management system, regulatory compliance, dominant custody market position, and political influence, the company is aiming to build a dominant position within the Web3 ecosystem. If successful, Coinbase could transcend being just an exchange and become a core infrastructure of the entire crypto asset ecosystem.