Coinbase has officially stepped into the stock trading arena, offering shares to a limited group of users. This move puts the Nasdaq-listed crypto platform in direct competition with established brokerages like Charles Schwab and Fidelity, as well as its longtime rival Robinhood, which beat Coinbase to the punch by adding crypto to its stock-trading arsenal back in 2018.
Founded in 2012 by Brian Armstrong, Coinbase is now attempting to expand its business beyond digital assets after more than a decade. However, stocks represent a heavily regulated market where Coinbase has little operating history and faces fierce competition. Armstrong's ambition is to transform the company into an "everything exchange," where clients can trade crypto, stocks, and even participate in prediction markets.
The competition for retail traders is real. Robinhood, which built its brand on commission-free stock trading, saw its shares surge 186% last year. Coinbase, meanwhile, saw its shares fall 12% over the same period, despite a crypto-friendly political backdrop in Washington that many expected to boost its valuation. According to data from S&P Global Market Intelligence, Robinhood trades at a price-to-earnings ratio of 48 based on expected earnings, while Coinbase's ratio stands at 41.
Coinbase's share price had been climbing for much of last year until October, when the crypto market suffered its biggest slump since the FTX collapse in 2022. With the market yet to fully recover, Coinbase's shares remain well below their post-IPO highs.
A key difference in their business models provides Robinhood with a buffer. Crypto accounted for about 20% of Robinhood’s revenue in Q3 of last year, giving it a cushion when digital asset trading cooled. Coinbase, on the other hand, still derives the bulk of its revenue from crypto-related activity, making it more vulnerable during market downturns.
“If there’s a crypto winter, they’re not going to be suffering from it as much as Coinbase will,” said Dan Dolev, equity research senior analyst at Mizuho, who has a buy rating on Robinhood and a neutral rating on Coinbase.
Despite the lag, Armstrong insists Coinbase isn't late to the stocks party. He argues the company is playing a long-term game, betting that traditional finance will eventually meet blockchain technology in the middle. In a recent interview, he propounded that Coinbase’s crypto-first foundation will give it an edge when equities move onchain.
“We have deep crypto expertise. We have the most trusted brand in crypto. We’re storing more crypto assets than any other company. So I think what we’ll be good at is being the bridge between traditional finance and crypto, and then getting tokenized equities to really take off,” the CEO surmised.
While Coinbase's current stock trading functions much like other online brokerages, Armstrong expects stocks will soon be issued natively on blockchains. However, since such tokens often resemble derivatives rather than true equity, several companies are against tokenizing their equities.
“I think the most interesting offering is a tokenized asset, where it’s truly one-to-one represented underneath, and it gives you the rights of that asset, whether it’s dividends or voting,” Armstrong said. “There’s a lot of work to be done to figure out the details of that with the SEC and other people. It’s record keeping, rules.”
Coinbase recently pulled its support for the U.S. Banking Committee’s market legislation proposal, known as the Clarity Act. The bill’s markup was postponed after Coinbase and other crypto firms withdrew their backing due to last-minute changes to the draft. Armstrong stated that Coinbase would withdraw its support for the bill after the changes, which was followed by the cancellation of a planned markup by Republicans on the committee. He noted that many in the crypto industry shared Coinbase’s objections, though it remains unclear if this will permanently damage the bill’s prospects.
