Coinbase will charge a fee of 0.1% for converting stablecoin USDC to USD for net conversions exceeding $5 million within a 30-day period, as the cryptocurrency exchange has recently faced difficulties in profitability.
According to a notification shared online, starting from August 13, Coinbase will impose fees on net conversions of USDC (USDC) to USD that exceed $5 million within a rolling 30-day period, with the net amount calculated by deducting USDC purchases from USDC sales.
This move comes after Coinbase's second-quarter performance, shared last week, fell short of revenue and profit expectations, leading to a significant drop in its stock price. However, its revenue related to stablecoins grew by 12% year-on-year, reaching $332 million.
This marks the second consecutive quarter that the company has failed to meet analyst expectations, as its first-quarter revenue also fell below projections.
"I don't like the precedent here," said Ryan Sean Adams, co-founder of Bankless, in a post on X sharing Coinbase's update. "If this drops to $10,000, it feels like bank fees."
Coinbase's Senior Product Manager for Stablecoins, Will McComb, responded to the post, stating that the exchange is experimenting to understand how fees will impact USDC conversions.
"We are experimenting to better understand the impact of fees on USDC conversions, especially since some competitors charge higher fees for converting back to fiat," McComb said.
"Your point about this being a core function has been heard, and we are carefully monitoring all feedback. We are committed to ensuring that Coinbase is the best place to use stablecoins."
Currently, Coinbase does not charge fees for USDC to USD conversions for net amounts not exceeding $40 million within 30 days. The fee is 0.05% for net conversion amounts between $40 million and $100 million; for amounts exceeding $200 million, the maximum fee is 0.2%.
Some commentators believe this move is to cover the related costs of Coinbase managing USDC (the world's second-largest stablecoin).
Others, such as cryptocurrency influencer Jordan Fish, known as "Cobie," suggest that the fee may be aimed at preventing users from converting Tether (USDT) to USDC for free conversions to USD, which reduces the supply of USDC.
"Tether has an exit fee, which means the cheapest actual route is to convert USDT to USDC and then convert USDC to USD, which shrinks the supply of USDC and maintains the supply of USDT. If I had to guess," he said.
Coinbase CEO Brian Armstrong agreed with Fish's comments, simply replying, "Yes."
Tether charges a fee of 0.1% or $1,000 (whichever is higher) for USDT conversions, with a minimum redemption amount of $100,000.
According to DefiLlama data, the market capitalization of USDT has increased by 20% since the beginning of the year, while the market capitalization of USDC has risen by 47% during the same period.
Bloomberg ETF analyst James Seyffart stated that Coinbase may be incurring costs, which the company is now passing on.
"This feels similar to the creation/redemption fees of ETFs. If they actually have to facilitate the creation and redemption of USDC based on someone's one-way flow, they might incur some costs as a result," Seyffart said.
"I think they are passing on this portion of the cost, and possibly even more," he added.
As the new fees are introduced, Coinbase's second-quarter revenue for the period ending in June fell short of analyst expectations. The company's revenue was $1.5 billion, below the analyst forecast range of $1.56 billion to $1.59 billion.
Following the report of its second-quarter earnings, the company's stock price dropped by 8%.
In its first-quarter report, Coinbase's total revenue declined by 10%, and its net income fell by 95% due to unrealized losses reported on the company's cryptocurrency holdings.
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Original article: “Coinbase New Rule: 0.1% Fee for USDC to USD Transactions Over $5 Million”
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