Coinbase CFO on Ethereum ($ETH) Staking for Institutional Investors

Coinbase CFO on Ethereum ($ETH) Staking for Institutional Investors

August 10, 2022

On Tuesday (August 9), Coinbase CFO Alesia Haas talked about the present and future of Ethereum ($ETH) staking by institutions.

Yesterday, Coinbase published its Q2 2022 Shareholder Letter. During the company’s Q2 2022 Analysts Call, Vice President of Investor Relations Anil Gupta and Chief Financial Officer Alesia Haas answered questions from analysts.

One of the most interesting questions came from Christopher Brendle, senior research analyst at D.A. Davidson, who asked:

Hi, thanks for taking my question. Alesia, I wanted to ask on the institutional side, it’s pretty exciting to see the staking opportunity unfolding there. I think we saw some interesting growth potential from Prime this quarter. But still pretty small at least from a revenue perspective relative to retail. Does that change in the future? I think if you just talk about like the gross profit or the EBITDA profile of the institutional business versus retail would be very helpful. Thanks.

The Coinbase CFO replied:

Sure, so we just rolled out staking for institutions in Q2. This is the first time we had the products available. Previously the way that institutions could have access in staking is via Coinbase Cloud and so they could have used our service to run their own node. But offering it as the delegated staking service similar to what we have for retail customers, we just onboarded institutional clients. It’s very into Q2. So what I would share with you is it’s early days. We do see a lot of institutions holding Ethereum as an example as a stakable asset.

However what I would comment there is we haven’t yet rolled out a truly liquid staking option for ETH2. So when you stake ETH2 you are locking your assets into Ethereum until the Merge and then some period after. For some institutions, that liquidity lock up is not palatable to them. And so, while they may be interested in staking, they want to have staking on a liquid asset. And that’s something we are looking to solve for them. And I think that once we have liquid staking available for the assets that institutions pooled in higher proportions, that’s when we’ll see the real material impact of institutional revenue. So I think it’s further out, not a near-term phenomenon.

Later in the call, Ken Worthington, Financial Analyst at J.P. Morgan, asked for more details on liquid staking of Ethereum:

I wanted to flush out liquid staking. I think the first question here on the call was on the institutional side. Any help you can give us on how it works? And is it available right now on the retail side? And if not, is it something that might be available near term. Is this aspirational in like five years? Could this be in two quarters? Any help on how it works and when it might reach retail would be great?

Haas replied:

Sure. So there are products in the market today that provide liquid staking for retail. They aren’t directly available on the Coinbase platform. But it’s something that we’re actively exploring, because we do believe that there could be more user adoption of Etherum in particular, which has a very long lockup period, if we could find a way to offer a liquid staking. Something we’re actively exploring and evaluating, and hope to be able to launch something in coming quarters.

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