Not everyone is excited about the committee's actions.
Written by: Yueqi Yang
Translated by: Block unicorn
On the Friday before Donald Trump was inaugurated as president in January, Coinbase CEO Brian Armstrong attended a crypto gala in Washington with his senior management team, where tech elites celebrated the arrival of the first cryptocurrency-friendly president in the United States.
However, shortly thereafter, Coinbase's Chief Legal Officer Paul Grewal was interrupted during the festivities when Trump unexpectedly posted on X, announcing the launch of a meme coin called $Trump. Meme coins are a controversial topic among many cryptocurrency enthusiasts—some view them as fun, collectible forms of digital currency that capitalize on viral trends, while others see them as problematic blemishes on the entire cryptocurrency category.
As Grewal was enjoying a chicken lettuce wrap, he heard other attendees mention the launch of some token, prompting him to pull out his phone to check X. "Honestly, my first reaction was—Is this real?" Grewal said. "Because I had never experienced a situation where a political figure as significant as Mr. Trump launched a token."
By the next day, some cryptocurrency exchanges had opened trading for the presidential meme coin, including Kraken, Bitget, and KuCoin. But Grewal had discussions with the Coinbase team on Saturday—a publicly traded company that traditionally takes a more cautious approach to listing meme coins and other new tokens—about how they should handle $Trump.
Ultimately, Coinbase listed the token the following Tuesday, but by then, most customers were unable to benefit from the brief hype surrounding the weekend's meme coin launch: the token closed down about 40% from its peak that day.
For Coinbase, this event marked a balancing act for the largest cryptocurrency exchange in the U.S. as it navigated a series of deregulation efforts and other cryptocurrency-friendly policies initiated by the Trump administration. While Coinbase may benefit from these initiatives more than any other company, it still faced the decision of whether to dive headfirst into the more speculative realms of cryptocurrency or to act cautiously to protect its customers and reputation.
It is still too early to say what the election of the most cryptocurrency-supportive president in U.S. history means for Coinbase. Since Trump took office on January 20, the price of Bitcoin—the most widely held cryptocurrency—has dropped 14%, while the S&P 500 and Nasdaq Composite indices have also fallen 4% and 7%, respectively.
Even Trump's announcement on Sunday that he plans to establish a strategic national reserve for Bitcoin, Solana, and other cryptocurrencies only provided a temporary boost to these tokens. Since Trump's inauguration, Coinbase's stock price has fallen nearly 30%.
Despite this, Trump's second term has been a series of victories for Coinbase and CEO Armstrong. Before the election, the company invested over $75 million in the political action committee FairShake and its affiliates, helping to elect nearly 300 pro-cryptocurrency legislators.
After the election, Armstrong personally met with Trump to discuss cryptocurrency issues. Armstrong has become a leading tech voice calling for federal government reforms, including advocating for the closure of the Consumer Financial Protection Bureau and praising Elon Musk's cost-cutting efforts in government efficiency. On March 7, U.S. time, Armstrong will participate in the first-ever White House crypto summit. (According to ProPublica, Armstrong's sister, Katherine Armstrong Loven, works for DOGE.)
At the end of February, the U.S. Securities and Exchange Commission dropped its long-standing lawsuit against Coinbase, which accused the company of operating an unregistered securities exchange, broker, and clearinghouse. This eliminated the biggest regulatory threat facing Coinbase. Other crypto platforms, including Robinhood, Kraken, Gemini, and OpenSea, reported that the SEC also dropped similar investigations or lawsuits against them.
Not everyone is excited about the committee's actions.
"The cryptocurrency industry got what it wanted with the SEC dropping its enforcement actions," said Corey Frayer, director of the nonprofit consumer advocacy organization Consumer Federation of America.
"I think we are entering a period where cryptocurrency scams will surge, and I am very concerned about the investors who enter this market—putting their hard-earned money into it—being scammed because they are isolated," he continued. Frayer had previously advised former SEC Chair Gary Gensler on cryptocurrency issues, and cryptocurrency executives view Gensler as their main adversary in government.
The personal involvement of President Trump and his family in various cryptocurrency projects has also raised concerns that donors may use them as tools to funnel money to the Trump family anonymously.
Meme Coin Frenzy
For Coinbase, the most direct impact of the new Trump era is the listing of tokens on the exchange, which has reduced since the SEC filed its lawsuit in 2023. According to data from analytics firm Kaiko, Coinbase added 10 new tokens in February, while averaging 2.3 new tokens per month in 2023 and 3.4 new tokens per month in 2024.
Meme coins are driving the new listings, accounting for 9 of the 20 new tokens listed by Coinbase since the election.
However, meme coins also have a complicated history.
These tokens have no intrinsic value and are traded purely based on sentiment. They also tend to attract many retail investors dreaming of quick riches—and dubious characters eager to profit from them.
In a high-profile example in 2021, scammers launched a token named squid, named after Netflix's series "Squid Game," which saw its price soar over 40,000% in a few weeks. Ordinary investors later discovered that the team behind the token had set rules allowing the creators to sell their holdings but not ordinary investors. As the creators cashed out, the token's price plummeted.
Last December, internet personality Hailey Welch launched a meme coin called hawk—named after her "hawk tuah" slogan—whose market cap once soared to nearly $500 million. Within hours, its value plummeted over 90%, sparking strong backlash against Welch. (She denies that she or her team sold her holdings after the launch.)
Coinbase did not list the squid or hawk tokens.
Nevertheless, meme coins have an appeal to a segment of the online crowd and can be an important way for exchanges like Coinbase to attract new customers. They also received significant regulatory momentum last month when the SEC issued a statement declaring that meme coins are not securities, meaning that issuers or promoters of meme coins do not need to register with the agency. (This also means that investors are not protected by federal securities laws.)
However, Coinbase appears to have some ambivalence about them. Last month, Armstrong himself wrote in a lengthy post on X that he personally does not trade meme coins but stated, "We should keep an open mind about the future of meme coins, even if some today are silly, offensive, or even fraudulent."
"If our customers want it, and it is legal, our goal is to let them make their own choices," he added. "But our job is to provide them with the best information we can find so they can make informed choices. If a token is a scam or fraudulent, we would want to remove it."
According to a former employee, there has been internal debate among staff about how to embrace meme coins. Supporters argue that they are an obvious way to increase Coinbase's trading volume, while skeptics worry that they distract from Coinbase's focus on developing products with real-world utility, such as payment and lending products.
Grewal stated that such discussions are healthy and reflect "the debate outside of Coinbase and across the cryptocurrency space." "We rarely can accurately predict which tokens will have real utility and ultimately impact the economy in meaningful ways."
Before listing new tokens, Coinbase conducts a review process to assess tokens against the company's legal, compliance, and technical security standards. The goal is to root out tokens that regulators might consider unregistered securities, scams, or vulnerable to hacking.
In the past, Coinbase has had to retract some of its descriptions of meme coins. In 2023, it issued a newsletter noting that some people consider Pepe the Frog (a cartoon frog that inspired a meme coin called pepe) to be a hate symbol popular among far-right groups. Supporters of pepe were outraged, prompting Grewal to apologize on X for oversimplifying the meme's history.
Coinbase ultimately listed pepe in the fourth quarter of 2024. In a letter to Coinbase investors in February, the company attributed the growth in its consumer trading revenue to the listing of pepe and wif (another meme coin based on a dog wearing a hat).
However, critics of meme coins argue that despite consumer enthusiasm for these tokens, Coinbase will regret supporting them. Frayer stated that if Coinbase wants to build a legitimate cryptocurrency market, listing $Trump is "short-sighted" as it undermines investor confidence in the market.
"Protecting the investors who use your platform and maintaining the integrity of your business means that sometimes you don't offer a product just because there is demand," he said.
Embracing Leverage
As regulatory barriers to Coinbase's business in the U.S. gradually ease, the company is also seeking to delve further into other areas of cryptocurrency that have long been dominated by overseas free trading exchanges.
This includes a form of derivative trading called perpetual futures, which dominates global cryptocurrency trading volume. The Commodity Futures Trading Commission classifies it as a type of contract known as a swap, which can only be legally offered by trading firms registered with the agency.
Perpetual futures are popular among both offshore retail and institutional investors, driving the rise of U.S.-based exchanges, including Binance, Bybit, and the now-defunct FTX, founded by Sam Bankman-Fried.
Coinbase started late in the perpetual futures space, only launching after obtaining a Bermuda license in 2023, which allows it to serve customers outside the U.S. It now holds a small but growing market share in that business. However, Coinbase has also taken a more cautious approach than its competitors: it only offers up to 20 times leverage on Bitcoin perpetual futures, far below the 100 times or more leverage offered by other exchanges.
"We take a conservative approach to leverage levels," said Greg Tusar, head of institutional products at Coinbase. "We try to be competitive among retail users, but we won't take excessive risks."
Under the leadership of the new government in the U.S., Coinbase executives hope they can offer perpetual futures to domestic customers. Armstrong stated in last month's earnings call that this could bring significant trading volume to the U.S. market.
"We are excited about how the new regulatory landscape will drive innovation and bring new products to market in the U.S.," Tusar said.
Hedging Bets
By delving deeper into some of the wilder areas of the cryptocurrency market, Coinbase is protecting itself from losing control over its relatively stable core business: providing a way for small investors to buy and sell cryptocurrencies (especially Bitcoin and Ethereum).
A more favorable regulatory environment in the U.S. could bring fierce competition to Coinbase's core business. Smaller U.S. cryptocurrency exchange competitors Kraken and Gemini are both preparing for potential public listings, which could give them the same legitimacy that Coinbase boasts. Meanwhile, overseas exchanges like Crypto.com, based in Singapore, are also seeking to capture market share in the U.S.
Top Wall Street firms are equally eager to get involved. The two largest retail brokerage firms in the U.S., Charles Schwab and Morgan Stanley's E-Trade, are among the stock trading giants planning to offer cryptocurrency trading, potentially starting with Bitcoin and Ethereum. Nasdaq recently petitioned the SEC to create a "level playing field" for traditional exchange giants so they can also launch services that compete with crypto platforms like Coinbase.
Coinbase will also face more competition in the stablecoin space, which consists of tokens pegged to the U.S. dollar and is a relatively conservative area within cryptocurrency. Coinbase has significant partnerships and revenue-sharing agreements with top stablecoin issuer Circle, but payment giants like PayPal have been launching their own stablecoins. Trump is now pushing for legislation to clarify the regulatory status of stablecoins, which could encourage more traditional financial institutions (like major banks) to enter the market.
Coinbase believes that having more companies involved in cryptocurrency trading will enhance the overall market, which is beneficial for Coinbase as well. It also bets that financial institutions lacking cryptocurrency expertise, like banks, will need to use services like Coinbase's custody to quickly launch cryptocurrency trading.
"I hope they will see us as the most attractive option for launching cryptocurrency services," said Brett Tejpaul, head of Coinbase's institutional business serving large traders. "From there, they can gradually build on our platform and services."
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