Coinbase (NASDAQ: COIN) is celebrating a new deal with Google (NASDAQ: GOOGL) that appears a lot less than it seems, while critics are savaging a self-financed documentary on the cryptocurrency exchange’s founder Brian Armstrong.
On Tuesday, Coinbase announced a deal with the Google Cloud platform that the exchange framed as “a strategic web3 partnership.” Coinbase claims the deal reflects the Google Cloud team’s recognition of “the importance of expanding crypto services and building in web3.”
The deal has four components, including Google Cloud, allowing “select customers” to pay their cloud service bills via “select cryptocurrencies.” These payments will be handled by Coinbase Commerce, the exchange’s effort to expand non-crypto firms’ capacity to accept “crypto” based payments from their customers. This feature is expected to be rolled out early next year.
The thing is, Google is highly unlikely to be accepting payment in actual crypto, given the fiat price volatility of “select” tokens – Coinbase Commerce supports BTC, ETH, BCH, LTC, and DOGE, among others—which could leave the company taking a serious revenue haircut when said tokens lose 10% of their value in an hour before Google can unload them on some other poor sucker.
No, Google is almost certainly requiring Coinbase to perform the conversion to fiat (and eat the associated transaction fees) before forwarding the actual cash to Google. (Much like those Visa and Mastercard branded “crypto” debit cards largely eliminate the “crypto” portion before it gets anywhere near the merchant.) Coinbase will earn a cut of transactions processed in this fashion, but the exchange appears to be treating this more as a loss-leader to promote increased adoption of Coinbase Commerce.
The second plank of the deal will offer web3 developers access to blockchain data from Google’s BigQuery data warehouse, an offering that will be “powered” by Coinbase Cloud’s Node service.
The third plank will see Google use Coinbase Prime for institutional crypto services such as custody and reporting. However, Google Cloud vice president Amit Zavery suggested a far less concrete commitment in this area, telling attendees of the Cloud Next conference only that Google will “see how we can participate” in the asset-managing business.
The final plank of this “partnership”—tellingly listed last on Coinbase’s announcement—is that the exchange will move its data-related applications from their current home on the Amazon Web Services cloud to Google. So, while Coinbase is pitching this deal as great for itself, its customers, and developers, Google appears to be the primary beneficiary.
Coinbase shares enjoyed a minor bump on Tuesday following its announcement, although the price closed Wednesday essentially flat at just under $70, below the nearly $75 price they enjoyed just last week. For the year-to-date, Coinbase shares remain down more than 70%.
And while Coinbase is making nice with Google, its Coinbase Ventures division just ponied up cash to Sridhar Ramaswamy, Google’s former advertising chief, and his new web3 company, nxyz. An offshoot of Ramaswamy’s Neeva search engine, nxyz trawls blockchains for data on what assets are held in which wallets, what non-fungible tokens (NFTs) these wallets might be buying, etc., then sells access to this data to blockchain developers. (Nobody told Coinbase, but Ramaswamy recently told CNBC that Google’s “growth at all costs” mindset “produces a bad outcome.”)
In other Coinbase news, the company is celebrating having received In-Principle Approval as a Major Payments Institution licensee of the Monetary Authority of Singapore (MAS). Assuming this in-principle nod is followed by a formal license approval, Coinbase will be clear to offer locally approved tokens and services to Singapore residents.
The MAS has been ratcheting up its oversight of crypto firms following this summer’s collapse of lending firms Hodlnaut and Vauld, as well as the Zipmex exchange. All three firms suffered from the collapse of the Singapore-registered crypto hedge fund Three Arrows Capital, which created a cascade of insolvencies across the digital asset space.
The MAS almost-diploma follows the recently incorporated Coinbase Australia unit registering as a digital currency exchange with the Australian Transaction Reports and Analysis Centre (AUSTRAC), the country’s financial criminality watchdog. Coinbase Australia is also introducing PayID as an option for Aussie traders to transfer funds to and from the exchange via their bank accounts.
A Brian for all seasons
Finally, we can’t leave without offering our critique of the new “COIN: A Founder’s Story” documentary that debuted last week on Amazon Prime, iTunes, and other platforms (can’t forget Google Play). For those of you uninterested in ponying up the $12.99 price of admission, here’s what you missed (spoiler alert: you’re the lucky ones).
In announcing the project last week, Armstrong tweeted that the documentary reflected his desire to “demystify what it takes to build a tech startup.” Armstrong further claimed that, while he was paying ($2 million) for the film, director Greg Kohs was given final cut because it was “important to me that it was authentic” and showed “the good, bad and ugly.” Well, like the song says, two out of three ain’t bad.
Kohs reportedly began filming in 2019, long before the current “crypto winter” froze so many Coinbase customers’ dreams of financial security, which could account for much of the relentless positivity that courses throughout the proceedings. (We fervently anticipate word of the off-Broadway debut of Brian! The Musical featuring a shaven-head Hugh Jackman in the lead role.)
COIN tracks Armstrong from a fresh-faced tyke growing up in sunny California through his horrified discovery that fiat currencies in unstable countries occasionally crash to his eye-opening discovery of Bitcoin in 2010. We see Armstrong co-found Coinbase with Fred Ehrsam, who has since abandoned his executive position to start the Paradigm venture capital firm. The film bends over backward to emphasize how buddy-buddy the pair remain, despite neither appearing all that comfortable dealing than with other humans. (Armstrong, at one point, suggests he “probably has a little Asperger’s” while Ehrsam copes to dealing with ADHD.)
The film does touch on some of Armstrong’s blunders, including acquiring a firm linked to the infamous Hacking Team and his infamous directive to staff to stop engaging in “political and social distractions” even as Coinbase rolls out a “scorecard” ranking U.S. politicians based on how willing they are to let the company break the law.
There’s a definite “you can’t make an omelette without breaking a few eggs” vibe to Armstrong’s reflections on these missteps, and the filmmakers swiftly get back to painting Armstrong as a visionary that everyone just needs to stop constraining already if the world wants to be a better place. Basically, as far as bald public figures go, Kohs wants you to see Armstrong as less Voldemort, and more Jean-Luc Picard. Engage!
The film concludes with Coinbase’s 2021 listing on the Nasdaq, during which company insiders dumped billions on retail investors who believed the hype that the company was going to the moon, baby. Never mind that anyone who bought at the nearly $370 peak following the listing is currently down about $300 per share. That inconvenient truth is handled in a series of pre-credits blink-and-you-missed-it title cards about crashing share prices and massive layoffs.
As with most self-funded vanity projects, the net result here is likely the exact opposite of what Armstrong intended. We suppose Coinbase’s senior management is relieved that this documentary wasn’t released in theaters, otherwise, they’d still be trying to convince Brian that viewers weren’t booing his opus, they were saying “Boo-Armstrong.”
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