Coinbase seeks Europe licenses in bid to expand growth outside U.S.

Coinbase is seeking licenses with various countries in Europe as part of an aggressive expansion in the region.

The exchange already has an active presence in the U.K., Ireland and Germany, but wants to set up operations in Spain, Italy, France, the Netherlands and Switzerland, according to Nana Murugesan, Coinbase’s vice president of international. Coinbase recently hired its first employee in Switzerland, he says.

The U.S. crypto giant is looking to international markets to drive growth amid fears of a looming “crypto winter.” Earlier this month, Coinbase announced it would lay off 18% of its workforce, while other firms including Gemini and BlockFi haven taken similar steps amid a fall in crypto prices.

Still, Murugesan says Coinbase is planning to hire a regional manager to oversee its European operations. The firm is mainly prioritizing “mission-critical roles” in fields like security and compliance after a period of rapid growth, he added.

“When we entered U.K. and Europe, this was actually during the last big bear market in 2015-2016,” said Murugesan, who joined Coinbase in January 2022.

“But then when you fast forward to 2017-2018, the U.K. is now a massive part of our business, as is Europe,” he added. “We entered, we made bets. I’m sure it was probably a tough time. But it’s paid off, significantly.”

Coinbase is in talks to get approval under anti-money laundering rules in a number of countries, including France, said Katherine Minarik, the company’s vice president of legal.

The company is gearing up for MiCA, or Markets in Crypto-Assets, a landmark piece of legislation from the EU that aims to harmonize the regulation of crypto across the bloc.

Officials from the European Council and Parliament are due to meet Thursday in a bid to reach an agreement on the rules. If all goes smoothly, the expectation is that MiCA will come into force by 2024.

Once approved, it will enable Coinbase to “passport” its services into all 27 EU member states, Minarik said.

While Coinbase is the biggest crypto exchange in the U.S., it’s facing intense competition from newer players like Binance, FTX and Crypto.com. Binance’s U.S. affiliate recently ditched fees for customers trading bitcoin, news that sent shares of Coinbase tumbling.

Coinbase is racing to keep pace with its rivals, which are gaining significant traction in territories outside the U.S.

In the Middle East, for example, both Binance and FTX obtained licenses in Dubai. Binance also secured authorization in France and Italy and is seeking approvals in additional European countries.

“Being a publicly traded company, the bar is very high,” Murugesan said. “Sometimes it may take a bit longer to get some things done. But we want to stay the course.”

At the same, major crypto players — Coinbase included — are reeling from a dramatic plunge in digital currency prices, which some investors believe will be the start of a much longer downturn known as “crypto winter.”

A confluence of factors is weighing on the market, including higher interest rates from the Federal Reserve and the collapse of the UST stablecoin. The slump in token prices has in turn led to solvency issues at investment firms that loaded up with leverage, like Three Arrows Capital.

Coinbase made a sudden U-turn on its cost-cutting strategy this month, announcing plans to cut roughly 1,100 employees globally. Though the cuts affected 18% of Coinbase’s global headcount overall, Murugesan says its U.K. workforce was less impacted with around 7% of roles cut locally.

Coinbase reported a 27% decline in revenues in the first quarter as overall usage of the platform declined. The business is currently heavily reliant on trading fees. But it’s hoping to diversify into new products, including nonfungible tokens and interest-like rewards known as staking.

Coinbase has around 9.2 million monthly transacting users globally but less than 50% of those are using the app for trading, Murugesan said.