Coinbase Global, Inc. Q2 FY2025 Earnings Call

Good afternoon. My name is Kate, and I will be your conference operator today. I would like to welcome everyone to the Coinbase Second Quarter 2025 Earnings Call. Anil Gupta, Vice President of Investor Relations, you may begin your conference.

Good afternoon, and welcome to the Coinbase second quarter 2025 earnings call. Joining me on today's call are Brian Armstrong, Co-Founder and CEO; Emilie Choi, President and COO; Alesia Haas, CFO; and Paul Grewal, Chief Legal Officer. I hope you've all had the opportunity to read our Shareholder Letter, which was published earlier today on our Investor Relations website. During today's call, we may make forward-looking statements, which may vary materially from actual results. Information concerning risks, uncertainties, and other factors that could cause these results to differ is included in our SEC filings. Our discussion today will also include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the Shareholder Letter on our Investor Relations website. Non-GAAP financial measures should be considered in addition to, not as a substitute for, GAAP measures. We'll start today's call with opening comments from Brian and Alesia, and then take questions from retail shareholders and our research analysts. With that, I'll turn it over to Brian for opening comments.

Thanks, Anil. It was another great quarter for Coinbase, and we continue to ship innovative products, drive strong financial performance, and advance regulatory clarity for the industry. Total revenue came in at $1.5 billion, with positive adjusted EBITDA of $512 million. And we now have $9.3 billion in total USD resources, with $1.8 billion in our growing crypto investment portfolio fueled by weekly Bitcoin purchases. I want to give a quick refresher on why we're here and what we're building toward. Our mission is to increase economic freedom for everyone, everywhere. Crypto is eating financial services, and our goal is to be the number one financial services platform in the world across custody, trading, payments, staking, borrowing, lending, and more. Our focus this year is to drive growth in our core businesses: trading and stablecoin payments. And I want to share three key areas that we made progress toward those objectives this quarter. First, on trading. We've always believed that every asset class will move onchain. The customers, technology, and regulatory environment are now finally ready for it. People want to invest capital across all asset types, from stocks to commodities, to real estate, to crypto, including memecoins in the long tail of assets, and even how startups raise money and all capital formation is going to be rebuilt onchain where markets are cheaper, faster, global, and open to everyone. So we've been making investments in this area for some time, and our goal is to build what we're calling the everything exchange: every asset you want to trade in a one-stop shop, all on crypto rails. This means, to start, we're enabling access to millions of spot crypto assets. This is the number one thing our customers want from us. And in Q2, we hit over 300 total assets listed on our exchange. Next week we'll be rolling out the next chapter of our asset addition strategy by integrating decentralized exchanges right into the Coinbase app, which will eventually enable access to millions of tokens. Next, it means offering the most global and compliant suite of perpetual futures and options to meet the needs of advanced traders. And we now have a comprehensive derivatives product suite. We recently launched 24/7 trading of Bitcoin and Ethereum contracts, and we launched perpetual-style futures in the United States, which hit an all-time high in trading volume this week. Finally, we announced our acquisition of Deribit, the world's leading crypto options exchange with over $30 billion of open interest. And now we're currently working towards launching tokenized equities to meet the moment in this new regulatory environment. We've always said we're updating the system and building the bridge to bring equities onto crypto rails is the next phase of our strategy. We may integrate with traditional brokers as a stepping stone towards this vision to provide liquidity, but we believe tokenized equities are more efficient with global coverage, 24/7 trading, instant settlement, and the ability to offer a perpetual future. The total addressable market for this is massive. Capturing just 3% of equities trading would double the current crypto market. Over time, we'll bring all asset classes onchain, including prediction markets, real-world assets, and more. And we're building on the frontier, committed to doing this in a compliant and trusted way which we've done for many years, while making it easily accessible to everyone. So that's the everything exchange. Next, let's touch on how we're accelerating crypto utility with our full-stack payment solutions. We see payments as the next big use case in crypto and believe that the majority of all payments in the economy will eventually run on stablecoin rails, because they are faster, cheaper, and global. The passage of the GENIUS Act will fuel further innovation and adoption of stablecoins, and we are uniquely positioned because we have both the broadest distribution base for USDC and the best rewards program for customers. We're one of the only companies with a vertically integrated payment stack. This includes USDC, the largest regulated dollar stablecoin; Base, the most popular Layer 2 solution on Ethereum; consumer applications and wallets with millions of retail users; and payment APIs to power businesses and developers. Together, these offer a faster, cheaper, and more global payments solution. In Q2, we announced our stablecoin payment APIs, which enable businesses, merchants, and developers to easily accept and pay in stablecoins with partners like Shopify already live in the market now. Finally, I'd like to spotlight how we are leveraging our deep experience in building crypto infrastructure to power the next wave of businesses coming into this space. We now have over 240 businesses using our Crypto-as-a-Service capabilities to power their custody, trading, and payments needs, including BlackRock, PNC, Stripe, and PayPal. We power over 80% of the custody for crypto ETF issuers. And we're a trusted partner to over 150 government agencies and institutions to help manage and safeguard crypto assets with regulated and secure solutions. As the most trusted name in crypto with the longest track record of success, we are the natural partner for any company or government entering this crypto space. So in closing, with regulatory clarity finally emerging, we believe crypto rails are poised to power an increasing share of global GDP and update every aspect of the financial system. And Coinbase is the company best positioned to capitalize on this trend. I'll now turn it over to Alesia.

Thanks, Brian. Good afternoon, everyone. We have long said that crypto is not linear on a quarter-to-quarter basis, and Q2 was no exception. Amid lower volatility and non-Bitcoin price headwinds, we were focused on execution. Our business grew stronger as we grew native units across the board in USDC, staking, and custody. We saw all-time highs in derivatives trading volume, quarterly Base transaction volume, and Prime financing average loan balances. And further, we are encouraged by the positive reception for our new products, like Coinbase Card, the Base app, U.S. perpetual futures, and Coinbase business. Total revenue was $1.5 billion. Net income was $1.4 billion. Adjusted EBITDA was $512 million. And adjusted net income was $33 million. Let's dive into these results. As typical, all comparisons I'll share are on a quarter-over-quarter basis unless I note otherwise. Let's start with the market backdrop. Crypto asset volatility declined 16%, despite the average crypto price market cap being roughly flat. We saw shifting macro conditions, including trade policy considerations and recession concerns, impact risk assets broadly, and crypto assets were no exception. We saw a divergence between Bitcoin and everything else as the average Bitcoin price in the quarter was up 6%, whereas non-Bitcoin asset market cap declined 11%. In the second quarter, the U.S. and global spot markets declined 32% and 31%, respectively. Our total trading volume declined 40%. In March, we made an intentional price change to our stablepairs in our advanced product. This was in our control, and we made a decision to focus on revenue over trading volume. Historically, stablepair trading was a largely zero-fee product for us. When you exclude the impact of the lower stablepair volume, our total trading volume was more similar to the overall spot markets. Our consumer spot trading volume was $43 billion, down 45%. And consumer trading revenue was $650 million, down 41%. In the quarter, we saw consumer spot volume shift towards simple as opposed to advanced given the lower volatility environment. Institutional spot trading volume was $194 billion, down 38%. Institutional transaction revenue was $61 million, also down 38%. In the last quarter, I mentioned that we expected $30 million to $40 million of impact in our Q2 institutional transaction revenue due to increased investments in incentives and rebates programs that we intended to drive liquidity and market share in our derivatives products. We did make this Q2 investment. However, this ended up being recorded as a transaction expense due to the incentive programs designed and the client activity mix. Now turning to subscription and services revenues of $656 million. As I mentioned earlier, across the board, we saw native unit balanced growth, including average USDC in our products, growth in staking native units, and custody of assets. We also saw all-time high loan balances in Prime financing. However, underlying asset prices, specifically in Ethereum and Solana, and protocol reward rates headwinds offset this growth quarter-over-quarter. Our total operating expenses were $1.5 billion. Without the previously disclosed May data theft incident and the associated $307 million expense that we recorded in the quarter, our total operating expenses would have declined 9%, alongside the softer market conditions. We ended the quarter with just under 4,300 full-time employees, which was up 8%. I would like to draw your attention to some specific events that materially impacted our GAAP profitability results this quarter. First, a $307 million expense from the data theft incident I just mentioned. Second, a $1.5 billion unrealized gain on our strategic investments. Our strategic investments include our investment in Circle, which is now public. Going forward, this line will fluctuate in line with their stock price. Third, a $362 million gain from the ongoing fair value remeasurements of our crypto investment portfolio. Net income was $1.4 billion, and includes the impact of those three items I just mentioned. Adjusted EBITDA was $512 million, and excludes those three items I just mentioned. Adjusted net income was $33 million. And we have updated our calculation to adjust net income for all gains and losses on both crypto and strategic investments. We believe that adjusted EBITDA and adjusted net income, while no substitute for GAAP measures, are very useful metrics to assess the recurring operating business results, excluding gains and losses from the investment portfolios. Additional detail can be found in our Shareholder Letter. Now let's turn to our Q3 outlook. Q3 is off to a strong start, with higher asset prices and higher volatility. July transaction revenue is approximately $360 million. We expect our Q3 subscription and services revenue to be within the range of $665 million to $745 million or up approximately 8% quarter-over-quarter at the midpoint, driven by higher average crypto prices and stablecoin revenues. On the expense side, we expect technology and development and general and administrative expenses to be between $800 million and $850 million. Opportunities for growth have expanded substantially with increased regulatory clarity. We are leaning into this opportunity with headcount growth. We do expect higher Q3 headcount growth than we saw in Q2. And we are directing this growth into the product areas Brian mentioned earlier. We expect our Q3 sales and marketing to be in the range of $190 million to $290 million. With that, let's go to questions.

Great. So we received a few different questions on tokenization. How does Coinbase plan to implement tokenized securities and compete for market share as demand increases? How can Coinbase ensure risk management compared to traditional finance in tokenized securities? Is there a time line for stock tokenization or real-world assets? Brian?

Yes. We are very excited about tokenized securities, similar to how the digital dollar works. Having $1 in a bank account allows you to mint a token that is equivalent to that dollar. Initially, there were questions about the practical use of these tokens, but just as cryptocurrencies have the potential to transform the financial system, so too can tokenized securities. The future is uncertain, but there are promising opportunities for wider global distribution of these securities. There's a high demand for U.S. assets across the globe, where access to brokerage accounts can be challenging. We see potential in new markets like perpetual futures related to tokenized securities. Benefits may include real-time settlements, round-the-clock trading, fractional shares, and innovative on-chain voting and governance mechanisms. While the direction of these developments is hard to predict, we believe that tokenizing these assets on-chain will unlock significant value. Achieving this will involve several steps, including possible integration with traditional brokers, and effective custody solutions of the underlying assets. For customers interested in trading with margin or using specific products, risk management will be critical. Our expertise lies in assembling the right talent from various tech and finance backgrounds to create these systems. Over the past 12 years, Coinbase has focused on building trusted and compliant products that are user-friendly, regardless of an individual's understanding of on-chain technology. Our goal is to enable trading of these assets and provide exposure without requiring users to engage with the underlying technology. We are committed to this effort and will keep you updated on our progress in the coming quarters. That is our current plan.

Thanks, Brian. Next question. What's the projected growth in terms of revenue as well as usage for the Base app? What's being done to push for a massive adoption of blockchain-based ID on Base for the general public so that Coinbase will compete with more mainstream tech companies like TikTok and Meta? Brian?

Yes. I'm very excited about Base. This is our attempt to really build on the frontier with crypto utility, where lots of these building blocks have come together over the last really 10 years. Some of them we helped build, others, the rest of the industry really helped build. And these are things like a decentralized identity that uses a standard called ENS. You can have a trusted stablecoin like USDC. We now have a scalable blockchain with Base. There's decentralized messaging protocols, ways for people to build applications, and decentralized social media protocols. So this is kind of a super app that we've put out there. It's in beta. There's actually 700,000 people on the wait list already. And so there's been a ton of demand for it and excitement about it. I think people are the most excited about this idea that, as a content creator, whether you produce a podcast or art or video like YouTube, or just text like on X, people can put out this content and earn directly from their audience. That's a big deal. It kind of changes the traditional business model of the Internet that was more ad-based because now the Internet has a native money layer. And so our goal is to get eventually 1 billion people onchain. I think self-custodial wallets like Base and these new applications we're building on top of it can really help us achieve that goal. But it's going to be a long journey. And blockchain-based IDs like a Base name, which every user who signs up gets a fee-based name using the ENS protocol, they control that name, they control all the data and information associated with it. It's not controlled by a big tech company. And so that is a new model that I think a lot of consumers out there are interested in and content creators as well.

Okay. And then final question, what are Coinbase's strategic goals behind the partnership with PNC Bank? And are there other plans to partner with other banks in the future? Brian?

The overall goal is to expand the market. Many companies are entering the crypto space and they often do not want to build the necessary infrastructure themselves. Storing private keys securely and integrating with various blockchains is complex, as is executing trades and on-chain payments. Therefore, many are turning to Coinbase. We have a long history in this area and previously decided to offer the services we developed for our own needs to third parties, similar to what Amazon did with AWS. We refer to this as Crypto-as-a-Service or CaaS. Currently, around 240 institutions are using these Coinbase solutions in different ways. We recently announced a partnership with PNC, which has been going well, and we are also working with several others like JPMorgan, eToro, Revolut, and Webull, with more partnerships in the works. We believe that most Fortune 500 companies will eventually integrate crypto just as they have with the Internet. For those looking to explore this further, they can search for Coinbase Crypto-as-a-Service to find our offerings.

All right. So Kate, let's switch gears and take our first question from the line, please. Kate, let's take our first question, please.

While we're waiting for the operator to join, Brian, maybe I could ask you another question.

Sounds good. Let's do it.

Brian, I think that probably our investors are really curious about stablecoins and our payment stack given the Clarity Act, given the number of new market participants. Share with me who we think the target customers are, how we think we will differentiate in the market. And are we looking to disrupt Western Union? Are we looking to disrupt Visa? Are we looking to disrupt the bank? Like how do you want to think about our product stack going against other payment products in the market?

Payments encompass a wide range of categories, including merchant payments, e-commerce, and peer-to-peer transactions. Our primary focus is on B2B payments, particularly in the cross-border space, which we believe represents a $40 trillion opportunity, with B2B making up 75% of that. Stablecoins have begun to gain traction, with current annual volume reaching around $100 billion, up significantly from nearly zero two years ago, indicating rapid growth. As we enter the market, we are leveraging the comprehensive framework we have developed. We have Base, which is the leading Layer 2 solution allowing for near-instant payments anywhere globally for less than a cent. Additionally, our partnership with Circle provides USDC, the most reliable regulated U.S. stablecoin. We have also created payment APIs for businesses and developers, alongside consumer options for those holding crypto who wish to spend it via the Coinbase app, the Base app, or Coinbase Card. We believe that we are among the few companies globally offering such a complete payment stack. Many businesses are reaching out to us interested in enhancing their B2B payment processes to make them faster, more affordable, and accessible worldwide. We’ve already announced partnerships with companies like Shopify, with more to follow, underscoring our commitment to this significant growth area.

Thank you, Brian. We're experiencing a technical issue, so I ask that analysts who have questions email us directly, and we'll read them on your behalf. The first question is from Ken Worthington at JPMorgan, who is interested in exploring the role Coinbase envisions for itself in payments. He notes the big announcements with Shopify and Commerce. Are we aiming to develop an alternative network to Visa and Mastercard that is accessible to everyone, or are we focused on creating use cases for Coinbase customers like the Coinbase credit card? Is it viable to pursue both options? Ultimately, which aspect are we prioritizing: monetization through transaction fees for payments, USDC payments from Circle, or can Coinbase manage to gather revenue from both avenues?

That's a great follow-on to Alesia's question, which she partially asked but I didn't fully answer. Yes, I think Coinbase isn't really in competition with Visa and Mastercard; we actually partner with them in many ways through the cards we offer. However, I believe that decentralized protocols are competing with them. An open standard can be more efficient and equitable, similar to how the Internet works. Anyone can build on it, which has reduced prices and democratized the flow of information globally, resulting in fewer gatekeepers. Visa and Mastercard are aware of this and are actively engaging with stablecoins and crypto through various innovative projects, some in collaboration with us. I think the most successful companies will adapt to this significant shift. We want to cater to consumers who have crypto to spend and desire better rewards, as well as merchants and businesses looking to accept payments without incurring high fees. For instance, with the Shopify deal, since merchants saved 200 or 300 basis points that they usually pay, there was a conversation about how to share those savings. Consequently, merchants decided to offer 1% cash-back rewards to customers shopping with USDC. This approach enhances market efficiency, and every company will need to adjust accordingly. Coinbase is developing strong infrastructure for others while also creating first-party products. Emilie, would you like to add something?

No, great point. The only other thing I wanted to mention is that stablecoins might take the place of some of these networks, but those companies also operate nodes and can generate revenue from them. Therefore, I believe there will be plenty of opportunities for companies to grow over time if they embrace the future of digital assets.

All right. I think our technical issue might have been fixed. So operator, let's take our next question, please.

Owen Lau with Oppenheimer.

I do want to follow up on the Base app question. Earlier today...

Anil, maybe you should ask the questions again.

Yes. I do want to go back to e-mail.

Can you hear me? Sorry.

We can hear the question, Owen. Please continue.

Okay. So earlier today, the SEC Chair announced the launch of Project Crypto, which allows the innovation with a super app with a single license. Could you please talk about that potential license? Why there isn't a super app in the U.S.? And why you think Base can do it?

Yes. So the question, for those who may or may not have been able to hear, was earlier today, Chair Atkins of the SEC announced a single license. Why do we think that license could be attractive in the U.S.? Why have we not seen that before? Paul, maybe you can talk a little bit about Chair Atkins' announcement today and what we think the opportunity is.

Sure. Well, just to take a step back, I think Chair Atkins' speech was remarkable for many reasons. I'd just encourage everyone listening to read it, and to understand that we have a very different environment, not only at the SEC, but across the U.S. federal government in ways that were largely unimaginable just a short while ago. On the issue of licensure, I think the advantages for many companies, not just Coinbase, are fairly straightforward. First and foremost, a single license obviously limits the compliance costs and operational costs associated with a myriad of licenses, particularly in terms of supervisory examinations and oversight that come with a portfolio of licenses would otherwise be required. But I think the second reason is also worth noting, why we see great reason for hope in what Chair Atkins rolled out and announced. There is a commitment to follow up and follow through, through formal rulemaking and other official activity at the SEC, the commitments and the vision that was set forth by the President's Working Group in the most recent report. And so I think that between the specific benefits of the license itself and the tone and tenor that was set by the chairman's remarks, we see good reason for optimism and hope. And we think this will continue going forward as the SEC continues to implement, through the Crypto Project and the Crypto Task Force, President Trump's and Chairman Atkins' vision.

Thanks, Paul. The next question comes from Devin Ryan at JMP. Brian, the everything exchange is a significant concept as more assets become tokenized. Can you help us understand the market for assets that are currently trading and the potential for new types of illiquid assets? Do you envision Coinbase serving both as a liquidity hub and as a brokerage for these assets? Additionally, could you elaborate on how you might assist product manufacturers in tokenization, custody, lending, and other areas? What revenue streams do you foresee for Coinbase, and when do you anticipate being operational with tokenized equities?

Thank you for your interest in the everything exchange. We're excited about the vision we are pursuing. Coinbase can operate in several areas of this ecosystem. One key component is managing the brokerage front-end relationship directly with customers, whether they are retail traders, advanced traders, institutions using Coinbase Prime, or people connecting through APIs and third-party platforms. We also operate centralized exchanges, and trades will occur on both centralized and decentralized exchanges. Customers generally do not need to know which exchange is being used; they just want their orders executed in the best possible venue. We have investments in decentralized exchanges and run our own centralized exchange as well. Additionally, we are seeing a significant number of companies reaching out to us for assistance with primary offerings or fundraising efforts, whether for investment funds, real estate projects, tech startups, or films. There's substantial inbound interest right now. Collaborating with the SEC's Crypto Task Force and taking advantage of the current regulatory landscape presents an opportunity for us to help clients raise capital in a more efficient and crypto-native manner. We are looking into all of these areas. Regarding the timeline, we are working diligently and aim to proceed in a trustworthy way. No one has successfully launched tokenized securities yet, and there is much work ahead to do it properly, but that is our reputation. We will keep you informed about our progress in the upcoming quarters.

All right. Next question is from John Todaro at Needham. So drilling more into the USDC, specifically USDC on the Coinbase platform, where do you see potential upside? Beyond retail and institutional holdings of USDC on the platform, do you see banks, neobanks, remittance company integrations? And would those count as USDC on the Coinbase platform?

I'll start by explaining that we generate revenue from USDC through balances on our platform and by participating in the wider ecosystem. In our Shareholder Letter, we included a detailed breakdown of revenue related to our involvement with USDC. Our aim is to increase the number of distribution partners, including banks, neobanks, remittance companies, fintechs, and corporations, which in turn drives greater adoption of USDC. This fosters interoperability and enhances the overall network effect. Both we and Circle have incentives to onboard more partners. Some of the balances will remain on our platform, allowing us to monetize them directly. However, an increase in USDC also opens up opportunities for off-platform USDC, from which we earn 50% of the revenue. We believe in enabling widespread economic participation, so we offer rewards programs for companies that engage with our platform. We see this as an appealing way to attract more distribution partners and share in the economic benefits.

Yes, I believe stablecoins have a network effect. People might keep a $1 balance in their brokerage account to earn rewards, which is great. However, as payment usage increases, it's clear that payments function as a network effect business. It's beneficial when both the sender and recipient use the same stablecoin and the same underlying payment system, whether it's Base or another option. While instant exchanges, similar to foreign exchange transactions, have always been theoretically possible, the user interface tends to be more complicated, and customers often hesitate to pay the small foreign exchange fee. Therefore, we see a network effect leading to consolidation. USDC is the largest regulated stablecoin backed by dollars, and currently, most stablecoins are dollar-backed. It enables economic sharing with new partners entering the market, giving USDC a strong chance to leverage that network effect.

Next question is from Ben Budish at Barclays. Can you talk more about the payments monetization model? Is this just about proliferating stablecoins? Or are there other transaction-based fees, like on Base, are there subscription fees, etc.?

Yes. Part of our stablecoin business benefits from the on-platform USDC balances that generate revenue for us. That's positive. I also believe that payments will have direct monetization opportunities. Businesses typically pay high fees for these transactions, which allows us to come in with significantly lower fees while maintaining a strong business model. Additionally, for any transactions occurring on Base, we will earn a small sequencer fee. As Base moves towards decentralization, any partner interested in running a Base validator will also benefit from sequencer fees. Overall, I think there are straightforward monetization opportunities within the payment business model. However, I believe the costs associated with these payments could decrease significantly, by one or two orders of magnitude, resulting in much lower friction in the economy.

Next question is from Alex Markgraff at KeyBanc. There's been some key bank partnerships, PNC and JPMorgan. How do we think about the economics and the revenue generation here? Can you discuss a bit about which party ultimately controls the user experience, and the scope of Coinbase services, the accessibility of that? And then just any thoughts on timing of ramp for these types of services?

I can discuss the user experience, but I don’t think we have specifically shared any details about monetization. The user experience is entirely in the hands of the customers, specifically PNC or JPMorgan. Our goal is to provide a fully white-labeled solution, serving as infrastructure similar to how they use AWS to build in the cloud. This approach is a solid subscription revenue model for us, but we don’t aim to incorporate the Coinbase brand into their products. Thus, they will have complete control over the user experience. On our own platform, we manage it directly, but these partnerships present exciting opportunities for growth. There’s potential for more collaboration with these partners as time goes on. Often, they might start with a request for payouts to developers or content creators globally, to which we can respond positively. Later, they may seek additional services like custody, wallet creation for their users, or enabling them to earn rewards on their USDC balances and hold a variety of cryptocurrencies. We envision this as a comprehensive solution, our Crypto-as-a-Service offering, allowing them to pick and choose the components they need, much like selecting from a menu, similar to AWS. Alesia, do you have any insights on monetization related to these services?

The only thing I'll add is that you'll see these monetized mostly through our existing products. And so we expect over time, as these integrations are established, that could lead to more trading volume in our institutional business. It could lead to more assets under custody. And so there won't be a unique line item that you'll see in our P&L; it will be growth in existing line items.

We'll take the next question from James Yaro at Goldman Sachs. Could you help us think about the interest-bearing dynamics within stablecoins? The GENIUS Act does not permit it, but rewards appear permitted. How do you think about the evolution of yield on stablecoins? And then do you expect users to prefer products like tokenized money funds instead of stablecoins, or perhaps switching between the two?

I'll start. So the rewards program that we offer for Coinbase holders who use USDC on our platform is integrated for the value that customer brings to our platform. When users hold USDC, we see that they tend to trade more. We see them engage with other products and services. So the programs that we offer are similar to marketing programs or loyalty programs for engagement and use of all of our products and services. When we then talk about how does a stablecoin differ from a tokenized money market or a tokenized deposit account, I do believe over time that if the utility is equal, users will not be as tied to what the nature of the asset is. What they want is utility. They want the network effect. They want to find the asset that most merchants will accept and that most of the payment parties which they engage with will accept. And that is why we are so focused, as Brian has mentioned in his previous comments, of driving adoption of USDC, driving network effect, bringing on more distribution partners, to provide the highest level of utility for our users.

Yes. Just to reinforce that. In the GENIUS Act, there is a prohibition by the issuer of stablecoins on paying interest and yield. First, we are not the issuer; and second, we don't pay interest in yield, we pay rewards, as Alesia mentioned. And so long story short is we plan to continue to pay rewards to our customers, which are very competitive. We think it's a differentiated product, and it's a major reason that people come and store their funds with Coinbase.

Next question is from Patrick Moley at Piper Sandler. Can you discuss the economics behind adding decentralized exchanges to the platform? How will you monetize this? And what's the risk that adding these linkages will cannibalize your own retail exchange volumes?

I can address that, and anyone is welcome to chime in. The first method of monetization is similar to what occurs on centralized exchanges, where there is a trading fee associated with the brokerage layer. I anticipate that these fees will be comparable to, or sometimes slightly higher than, those we currently have. Instead of routing orders to a centralized exchange, they will be directed to a decentralized exchange. We have investments in several of these decentralized exchanges, which, as the name implies, are not owned by a single entity. We wouldn't want to own an entire decentralized exchange, as that would contradict its decentralized nature. In some situations where a decentralized exchange operates on Base, we may receive a sequencer fee as well. However, I believe most of our monetization will likely come from the brokerage layer. Alesia, do you have anything to add?

No, I think that's exactly right.

Our next question is from Bo Pei at U.S. Tiger. You launched the broadest suite of CFTC-regulated crypto perpetuals in the U.S. What does the early traction look like? And when do you expect this business to become a material revenue contributor?

I'll begin, and then Brian can share additional insights. We are very enthusiastic about our derivatives strategy. Recently, we launched U.S. perpetual futures, which is a unique offering for our retail customers. It's essential to recognize that derivatives trading constitutes 75% of the total market, with over 90% occurring offshore. Therefore, introducing this product in the U.S. represents a significant innovation. Additionally, we have made Bitcoin and Ethereum contracts available in 24/7 markets. Although we are still in the early stages with these products, it's noteworthy that our trading volumes have doubled on a weekly basis, indicating strong initial momentum. Our primary aim is to enhance market share, liquidity, and engagement rather than focusing on immediate monetization and margins. As we build traction in the coming quarters, we will provide more insights about how this will contribute to our revenue.

Yes. I mean just to underscore it, I think perpetual futures are incredibly exciting. They've been the vast majority of all trading volume in crypto offshore, until we launched this in the U.S. really a week or two ago. And that obviously took a ton of hard work, not just on the technology side, but on the regulatory side, the policy side, getting the right approvals in place. And that's kind of what we do best, is I think we try to marry these different skill sets around understanding the cryptography and the policy environment and bringing these together to get work done. I think it's really starting to work in the U.S. I think we saw over $1 trillion in derivatives volume in Q2, for instance. And then we hit an all-time high of open interest as well of $1 billion. So really great progress on that front.

All right. Our final question we'll take from Pete Christiansen at Citi. Getting customer service right has been a challenge for fast-growing fintechs in the past. In light of the data breach incident this quarter, how is Coinbase now thinking about its customer service strategy? And to what degree do you believe Coinbase efforts can help drive improvements in user satisfaction levels?

I can start, and Alesia and Brian can jump in. Specifically, I think as you're asking related to the data breach, I think one of the things we've learned is that the BPO strategy is something that we have to make sure we have our arms around as the world gets more and more complicated with very sophisticated hacking. And so as such, we have to think about bringing a lot of this machinery in-house. We are focused on automating as much as we can and moving this world into one of AI and automation, and at the same time, figuring out how to maintain CSAT scores. So one of the biggest areas of improvement I think we have to do is on the social and chat side of this. I think we actually do a really good job in terms of response times. The inquiries tend to be quite complex, which is why we're in that early stage of making sure the automation actually produces a delightful result for the user. But I'd say the big takeaway I would have from the data breach was how can we make sure that we have quality checks, making sure that there's somebody ensuring that the CX agents aren't able to be approached in a way that they were with the BPOs. Alesia, anything to add on that?

No. I would say that we are hardening our systems. We are making large investments in our platform to continue to be driving value to our customers in terms of security of their data and their assets.

Yes. The only thing I'll add too is we did just open an office in Charlotte, North Carolina to expand our onshore customer support facilities, which was great. And we also put out a $25 million balance sheet for information leading to the arrest of these threat actors. So that's been a great experience kind of working with law enforcement, which will hopefully produce some results in this case and a deterrent for future cases.

All right. Well, I just want to thank everybody for bearing with us with our technical issues that we had this evening. So thank you so much. I also want to share that Brian and I will be on X on Friday at 10:00 Pacific. So please join us for additional Q&A on that call. And we look forward to speaking with you next quarter.