Marginal Advantage
“Marginal Advantage” – a cartoon that illustrates how the profits enjoyed by many crypto exchanges is starting to evaporate with the arrival of new competition.
In 2023, Brian Armstrong, the CEO of Coinbase, the crypto exchange, said, “we want to just be treated on a level playing field. Don’t unfairly penalize crypto versus traditional financial services.”
Well, it seems his wish is now coming true with last Friday’s announcement by the Federal Deposit Insurance Corporation (FDIC), the body that supervises banking institutions allowing banks to pursue any permissible crypto-related activity without first seeking approval.
With this change, banks no longer have to ask the regulator to launch a crypto service such as maintaining stablecoin reserves, issuing crypto and other digital currencies, and many other payment or lending services typically only provided by the blockchain incumbents.
This change is good for consumers, since the blockchain incumbents have enjoyed fat margins that made crypto trading a goldmine during peak retail interest, with fees that would be unthinkable in conventional finance.
For example, platforms like Coinbase and Revolut charge up to 4% in fees on crypto transactions – far higher than the 1% or less typically charged by traditional banks for equivalent currency services.
Also, Coinbase charges a 25% fee on staking rewards for assets like Ethereum, whereas traditional banks typically charge no fee at all on interest earned in savings accounts (they simply pay you a low rate).
Perhaps reflective of this anticipated competition, Coinbase’s stock price has sharply underperformed amid recent market volatility.
Since its early December 2024 peak, COIN stock has plunged 42%, far exceeding the more modest declines of 11% for the Nasdaq 100 and 17% for Bitcoin.
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Sources:
Leo Schwartz (Jun 21, 2023) – Watch out, crypto: TradFi is coming for you – Fortune
Roomy Khan (Feb 17, 2025) – Blockchain Rewiring TradFi: A Trillion-Dollar Shift – Forbes
Henry Kanapi (Apr 02, 2025) – Memecoin Collapse Creates Perfect Moment for TradFi To Launch ‘Trusted Assets,’ According to Chris Burniske – The Daily Hodl
