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Coinbase CEO cuts 1,100 jobs, warns of 'crypto winter'
The buck stops with me, says Armstrong, but I still have a job
Coinbase has axed 1,100 employees, cutting its workforce by 18 per cent, while the value of digital assets including Bitcoin plummet amid rising inflation rates in the US.
CEO Brian Armstrong announced on Tuesday he was "making the difficult decision to reduce the size of [the] team ... to stay healthy during this economic downturn." As the largest US cryptocurrency exchange, Coinbase employed about 1,250 employees at the start of 2021, when novel blockchain-based technologies such as NFTs and stablecoins exploded, launching the current Web3 hype to new heights.
But the glowing promise of getting rich from trading cryptocurrencies or cartoon apes is losing its shine, spelling bad news for Coinbase. Armstrong warned of a "crypto winter" as America looks set to enter a recession.
"In past crypto winters, trading revenue (our largest revenue source) has declined significantly. While it's hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment," he said.
"I am the CEO, and the buck stops with me," he added. Armstrong is keeping his job however.
Coinbase staff swelled 4X in the past 18 months as business was booming, but has now paused hiring and laid off nearly a fifth of its workforce, he said. The biz also spent at least $10m, it's estimated, on a 60-second Superbowl ad at the start of the year that was a QR code bouncing around the screen.
"Our employee costs are too high to effectively manage this uncertain market," Armstrong opined.
"We have now exceeded the limit of how many new employees we can integrate while growing our productivity…We believe the targeted resourcing changes we are making today will allow our organization to become more efficient."
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Workers received a note directed to their personal accounts detailing whether their jobs were safe or not. But some may have had an inkling they were going to be canned, considering Coinbase preemptively shut down access to work-related accounts.
"If you are affected, you will receive this notification in your personal email, because we made the decision to cut access to Coinbase systems for affected employees. I realize that removal of access will feel sudden and unexpected, and this is not the experience I wanted for you," he lamented. "Given the number of employees who have access to sensitive customer information, it was unfortunately the only practical choice, to ensure not even a single person made a rash decision that harmed the business or themselves."
The axed 1,100 employees will receive a minimum of 14 weeks of severance pay plus an extra 2 weeks for every year they have worked at Coinbase beyond their first year. They can also expect to hang onto health insurance for four months, and will have access to a platform where Coinbase can help connect them to other crypto-related jobs at other firms. The company said it is expecting to spend about $40 million to $45 million in restructuring costs.
The decision to downsize the biz isn't surprising. It was criticized earlier this month for rescinding job offers to those who had already accepted and had quit their current jobs.
The latest layoffs come just as cryptocurrency projects fail. Celsius Network, a cryptocurrency lending scheme, is melting down and froze all withdrawals, swaps, and transfers on its platform this week. Last month, the value of the stablecoin TerraUSD and its corresponding token, Luna, crashed.
Coinbase's share price was $51.48, down 1.03 per cent as of writing. ®