Coinbase plans to cut 950 jobs, or about 20% of its workforce, and shut down "several" projects as the U.S. crypto exchange giant looks to reduce its expenses to increase its "chances of doing well in every scenario."
This is the second round of major layoffs at the crypto exchange, which eliminated 18% of its workforce, or nearly 1,100 jobs last June, but there was "no way to reduce our expenses significantly enough, without considering changes to headcount," Coinbase co-founder and chief executive Brian Armstrong wrote in a blog post Tuesday.
The moves are part of the company's efforts to cut its operating expenses by about 25% quarter over quarter, he said. The company estimates that it will incur approximately $149 million to $163 million in total restructuring expenses, consisting of approximately $58 million to $68 million in cash charges related to employee severance and other termination benefits, it disclosed (PDF) in an 8K filing with the SEC Tuesday.
In the filing, Coinbase also disclosed that it expects its adjusted EBIDTA losses for the year ending in December 31, 2022 to be within "the negative $500 million loss guardrail" it set last year.
As with firms in other industries, crypto firms are aggressively undertaking major decisions to survive the downturn in the broader market, which has reversed much of the gains from the 13-year bull run. Kraken said in November that it plans to lay off 1,100 people, or 30% of its workforce.
Armstrong said the crypto industry is reeling from the fallout from "unscrupulous actors," likely referring to Sam Bankman-Fried, the founder of the collapsed crypto exchange FTX (which stole billions of dollars of customer funds), and disgraced crypto hedge fund Three Arrows Capital founders Kyle Davies and Su Zhu, and warned that "there could still be further contagion."
"As we examined our 2023 scenarios, it became clear that we would need to reduce expenses to increase our chances of doing well in every scenario. While it is always painful to part ways with our fellow colleagues, there was no way to reduce our expenses significantly enough, without considering changes to headcount," he wrote.
"Dark times also weed out bad companies, as we’re seeing right now. But those of us who believe in crypto will keep building great products and increasing economic freedom in the world. Better days are ahead, and when they arrive, we’ll be ready. Thank you for everything you’ve done to get us this far, and everything you will do to carry us forward."
Shares of Coinbase are down 83% in the past year.
Armstrong did not specify which projects the firm plans to shut down, but said those projects had a "lower probability of success."