Crypto exchange giant Coinbase has cited a “fast and furious” downturn of the crypto markets as the reasons behind a staggering $1.1 billion net loss in the second quarter of 2022, which also saw trading volume and transaction revenue tumbling.
It’s the second consecutive quarter of loss for the crypto company and the largest loss since its listing on the Nasdaq Stock Exchange (Nasdaq) in April 2021.
The results, which also missed analyst expectations, were shared in a Q2 2022 Shareholder Letter from Coinbase on Tuesday, stating:
“The current downturn came fast and furious, and we are seeing customer behavior mirror that of past down markets.”
Coinbase said that Q2 was a “tough quarter” with trading volume falling 30% and transaction revenue down 35% sequentially.
“Both metrics were influenced by a shift in customer and market activity, driven by macroeconomic and crypto credit factors alike,” it wrote.
Despite the drop in transaction revenue, Morningstar equity analyst Michael Miller told Reuters in a report that while “Coinbase did not see a mass migration off its platform [...], its users are becoming more passive in their cryptocurrency investing.”
The crypto exchange reported $802.6 million in revenue, which was a 45.1% drop from the preceding quarter and a staggering 153.1% drop from the prior-year quarter. Its net loss, which amounted to $1.1 billion, was mainly driven by $446 million in non-cash impairment charges caused by lower crypto asset prices in Q2.
However, Coinbase wrote that despite the economic downfall, the company is doing its best to adjust to fluctuating market conditions.
In order to cut expenses and improve profit margins, Coinbase cut 18% of employees in June, and has also taken a “pause, maintain and prioritize” approach toward product development:
“Overall, it will take some time to fully realize the financial impact of our actions, but we have lowered our full-year expense range for Technology & Development and General & Administrative expenses.”
Among those products being prioritized include Coinbase’s Retail App, Coinbase Prime, Staking, Coinbase Cloud and other Web3 applications.
Miller however said noted that the “reduction is unlikely to restore profitability at current revenue generation levels.”
Looking ahead, Coinbase said it expects the “soft crypto market conditions” from the second quarter to continue into Q3 2022. The company said it expects a further fall in total trading volume and average transaction revenue per user, though it said it may see some revenue growth from subscription and service fees.
The pilot project will last a year, and the details for potential participants will be published in the next few months.
The Reserve Bank of Australia weighs in the central bank digital currencies (CBDCs) race to explore use cases for a CBDC in the country. It will collaborate with the Digital Finance Cooperative Research Centre (DFCRC) on a respective research project.
As stated in an announcement on Tuesday, the joint project of the Reserve Bank and DFCRC will focus on “innovative use cases and business models” that could be supported by the issuance of a CBDC. The technological, legal and regulatory considerations will also be assessed in the project’s course.
The pilot will last about a year and take the form of the CBDC operating in a ring-fenced environment. Industry stakeholders will be invited to develop specific use cases, which The Bank and the DFCRC will then evaluate. The selected cases will participate in the pilot, resulting in a special report.
The Reserve Bank intends to publish the paper with further details on the project in the next few months. As Michele Bullock, the deputy governor of the Reserve Bank, stated:
“This project is an important next step in our research on CBDC. We are looking forward to engaging with a wide range of industry participants to better understand the potential benefits a CBDC could bring to Australia.”
The DFCRC is a $180 million research program funded by industry partners, universities and the Australian Government, which aims to bring together stakeholders in the finance industry, academia and regulatory sectors to develop the opportunities arising from the next transformation of financial markets.
On Friday, the Bank of Thailand announced the two-year pilot of retail CBDC testing, which should start by the end of 2022.
Prolonged economic sanctions against the Islamic state have forced Iran to start using crypto as a medium of exchange for international trade deals.
Struggling through decades of economic sanctions, Iran has placed its first international import order using $10 million worth of cryptocurrency, according to a senior government trade official.
News that the Islamic republic placed its first import order using crypto was shared by Iran’s Deputy Minister of Industry, Mine & Trade Alireza Peyman-Pak in a Twitter post on Tuesday.
While the official did not disclose any details about the cryptocurrency used or the imported goods involved, Peyman-Pak said that the $10 million order represents the first of many international trades to be settled with crypto, with plans to ramp this up over the next month, noting:
“By the end of September, the use of cryptocurrencies and smart contracts will be widely used in foreign trade with target countries.”
Iran was, up until February this year, the most sanctioned country in the world. Iran gets most of its imports from China, the United Arab Emirates (UAE), India, and Turkey, according to Trading Economics.
However, Russia now takes the top spot as the most sanctioned nation in the world following its invasion of Ukraine earlier this year.
The Islamic nation has been positioned to embrace cryptocurrencies as early as 2017. In October 2020, it amended previously issued legislation to allow cryptocurrency to be used for funding imports.
In June 2021, the Iranian Trade Ministry issued 30 operating licenses to Irani miners to mine cryptocurrencies, which then must be sold to Iran’s central bank. Iran is now using those mined coins for import payments.
In February, Iran was also looking at a central bank digital currency (CBDC) built on the Hyperledger Fabric protocol as a means to improve its existing financial infrastructure.
This Daily Dose was brought to you by Cointelegraph.