Coinbase: A Bitcoin-Boom Beneficiary Plots Its Next Move

THE NEW TITANS OF FINANCE prowl a glass fortress 3,000 miles from Wall Street. High above San Francisco’s Market Street, their headquarters take up three floors with sweeping views of the bay and city below. The reception desk bears jars brimming with chocolate coins near a jokey “Initial Chocolate Offering” sign. Beyond it, in an open space with no corner offices, big shots poached from Silicon Valley giants sit beside junior hires clutching free cans of LaCroix. This is the home base of Coinbase, the buzzy startup that wants to rewire the financial system around blockchains and digital currency.

But good luck finding it. There’s no logo outside the building or in the lobby. Nor is there any signage in the hallway outside that reception desk, just fortified metal doors and an intercom. Coinbase employees maintain a low profile, they explain, because most own virtual cryptocurrency, some 
in quantities that make them multimillionaires on paper.
 A kidnapper could capture someone and “pull out their fingernails,” a staffer says, to learn the location of their fortune—as if betting your career and well-being on a volatile, unproven financial technology weren’t stressful enough.

Such is life at Coinbase, a company where the mood alternates between upbeat and under siege. It was founded in 2012 as an exchange that lets individuals and companies easily buy and store digital currencies, most notably Bitcoin. And by 2017, when investor interest in those currencies moved to the mainstream, Coinbase was perfectly positioned to capitalize, becoming a 21st-century Wells Fargo for a new digital gold rush.

In short order, Coinbase became the first U.S. cryptocurrency startup to earn a $1 billion “unicorn” valuation from investors, and the first to bring in $1 billion in annual revenue. (The still-private company is profitable, according to regulatory filings, though it won’t disclose specific earnings.) Coinbase now claims 25 million customer accounts—a five- fold increase from two years ago—putting it on a par with traditional finance giants like Charles Schwab and the brokerage arm of Fidelity. The tech press is buzzing about new, higher-valuation funding rounds and a looming IPO. And the company’s first-mover status has made it something of a home planet for the universe of crypto-oriented business; a surprising number of top industry figures are connected, in one way or another, to Coinbase and its 35-year-old founder and CEO, Brian Armstrong.

Still, life at the top is tense. Coinbase owes its preeminence in part to last year’s unprecedented speculative surge in cryptocurrency investing. Today the buoyant Bitcoin runs of 2017 seem a distant memory, as more investors question the value of assets that have
yet to prove their staying power. Many of the most popular digital currencies trade 80% or even 90% lower than their peaks last December, and the popping of the bubble has erased a staggering $600 billion in market capitalization. The collapse has meant less trading and less commission revenue for Coinbase, even as new low-fee competitors threaten
 to turn the company’s core service into a commodity—and even as the company recovers from self-inflicted problems that alienated customers during the boom.

Presiding over all this is an introverted founder who sees the cryptomania of 2017 as just one chapter in a longer story. Armstrong belongs to a generation of evangelists who view digital currencies, and the blockchain technology on which they’re based, as tools that will make investing, borrowing, and saving money faster, cheaper, and more egalitarian. And he wants Coinbase to become the banking empire that brings those tools to the masses.

Armstrong and his colleagues have laid the groundwork for that future, carefully wooing regulators and investing in new technology. What he hasn’t done yet is convince the wider financial world that crypto is a must-have technology. If Armstrong can’t eventually make a compelling long-term case, it may be not just Coinbase that crumbles, but an entire industry.

THE IDEALIST: Brian Armstrong at Coinbase’s San Francisco headquarters. “I really want to see crypto be used by a billion people in the next five years,” he says.

Winni Wintermeyer for Fortune

GROWING UP IN SAN JOSE, Armstrong often felt bored and confined. His parents, both successful engineers, provided a comfortable upbringing and a brisk intellectual environment. But while Armstrong saw the Internet as a tool to change…

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