Good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coinbase Third Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator instructions] Thank you. Anil Gupta, Vice President, Investor Relations, you may begin your conference.

Good afternoon and welcome to the Coinbase third quarter 2022 earnings call. Joining me on today's call are Brian Armstrong, Co-Founder and CEO; Emilie Choi, President and COO; and Alesia Haas, CFO. I hope you've all had the opportunity to read our shareholder letter, which was published on our Investor Relations website earlier today. Before we get started, I'd like to remind you that during today's call, we may make forward-looking statements. Actual results may vary materially from today's statements. Information concerning risks, uncertainties, and other factors that could cause these results to differ is included in our SEC filings. Our discussion today will also include references to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in our shareholder letter on our IR website. Non-GAAP financial measures should be considered in addition to, not as a substitute for, GAAP measures. We are once again using the Say Technologies platform to enable our shareholders to post questions. And in addition, we will take some questions from our research analysts. With that, I'll turn it over to Brian and Alesia for some opening comments.

Thanks, Anil. All right. So as I look back at the quarter, obviously there were some macro headwinds just the macro environment being down and that ties directly into our trading revenue, but I was really excited to see the growth in our subscription and services revenue. This is something where three plus years ago we started planting the seeds of building some of these different product lines with different revenue streams. And we've really started to see that come to fruition, which means the portfolio of products that Coinbase has and works on has started to provide less volatility for the parent company revenue overall. We still have a long ways to go on that, but it's a great trend and it's moving in the right direction. So I just wanted to touch on a few topics. One is I want to touch on our move to a product group structure in the company that I think will help us move even faster. And then I'm going to touch on the regulatory environment and I'll end by sharing a few thoughts about how we're going to continue to lead in this environment. All right, so you may have read the news that our Chief Product Officer is going to be leaving the company. And this kind of accelerated a change that we had been thinking about for a little while, which was the idea of elevating our product group leaders in the org. And so we decided to make that change and they're now going to be reporting directly to me. They'll be on the executive team. And we really have three different customer segments that Coinbase serves. And so we – the product groups cleanly breakdown across those three customer segments, we've got consumers, institutions, and developers. Now…

Thanks, Brian. I’m just going to quickly recap a few key financial highlights in the quarter. Our results are covered in great detail and at length in our shareholder letter. So while our net revenue did decline sequentially to $576 million, our net loss and adjusted EBITDA both improved sequentially to negative $545 million and negative $116 million respectively. And we think this really speaks to the cost management efforts that we took in Q3. Our trading volume declined 44% sequentially driven by ongoing headwinds that we discussed in our letter. Our MTUs declined 6% to 8.5 million as user behaviors continuing to shift from trading to non-trading transactions. And our users are increasingly engaging in staking and reward generating products, amid this massive reduction in prices and lower crypto asset price volatility. We are so pleased, and Brian alluded to this earlier, that our subscription services revenue grew 43% sequentially to $211 million. And importantly, if we hold price constant, so if Q3 prices were the same price they were in Q2, that would’ve grown 82%. The biggest contributor within this line item is interest income, which is benefiting from the rising interest rate environment. We took very decisive action on cost and we were able to reduce our operating expenses by 38% sequentially, or 22% when you back out the impact of non-cash impairment charges on our crypto assets. We are actively updating and evaluating our scenario plans and prepared to reduce operating expenses further as market conditions worsen. We ended the quarter with 5.6 billion in total U.S. dollar resources. In addition, we held a portfolio of $483 million in crypto assets and combined, we believe this puts us in a strong position to manage through these market headwinds we face. So just in closing, I want to touch on our outlook. For 2022, for full year 2022, we remain cautiously optimistic that we will be able to operate within the $500 million adjusted EBITDA loss guardrail that we previously communicated. This is assuming the market cap doesn't go down and deteriorate meaningfully below October, and we don't see any changes in the customer behaviors. As we approach 2023 planning, we're currently preparing with a conservative bias and assuming the current macroeconomic headwinds will persist and potentially intensify. We are not providing a quantitative outlook yet this time. So to conclude, we feel confident that we're in a good position to manage through the stress market and will emerge stronger on the other side. So with that, let's go to questions, Anil.

Great. Thank you both. Before we get into Q&A, I'll quickly reiterate our call principles. So first, we'll answer the most uploaded questions determined by the number of shares and we might group questions together that touch on the same themes. Second, we don't plan to answer questions related to the potential listing of new assets. And third, we'll avoid questions we've answered in the past or issued blog posts about in the past if there are no material updates. So with that, the first question is from Manuel O. who asked what's the prediction for the next five years. Brian?

Yes. Thanks, Anil. So, of course, just to clarify, we always have to say we can't actually predict the future. I don't want to make the lawyers too nervous here on forward-looking statements, but I kind of like this quote. The best way to predict the future is to invent it. So we can certainly do our best to build some of the things that we think have potential, and that's – it's a great way that people can have an impact on the world. So I mean what's going to be different in crypto in five years? Well, look, as I addressed earlier, I think there's going to be more clear regulatory environments across the G20 and really around the world. That's going to unlock a lot more institutional capital. We're seeing that under the surface, even in this challenging market, we're seeing the adoption from [indiscernible] investors that are basically signing up to our Coinbase Prime platform and I like the language that we used in the shareholder letter around the spring is coiling. I think there's a lot of people preparing for when the next upswings happen. I think the scalability of the blockchain will continue to improve. We saw this a little bit with Ethereum's merge this year, but they have a lot more updates there. We're seeing other blockchains continue to scale with Lightning Network and various Layer 2 solutions, which is really exciting. That will just unlock a whole bunch of new use cases and is similar to how the Internet moved from dial-up to broadband. I think decentralized trading with DEXes, decentralized exchanges, will continue to grow as a percentage of all global trading, and we're excited about that. I think you'll see actually more countries in the world adopt cryptocurrency as legal…

Great. Our next question comes from Cordaro S. who asked how does Coinbase plan on surviving the current economic downturn? Brian?

Yes. Well, just one kind of language knit I'll mention there. I don't like the word just surviving in the current economic downturn. I think there is actually opportunities to thrive in this environment. And whether the market is up, there's opportunities. Obviously, we could raise money at higher valuations or whatever, but in down markets, there's also opportunities all around us. There's opportunities to do good M&A deals, and we're looking at a lot of those. We've got dry powder to take advantage of that when prices come down. And there is all kinds – there's opportunities to build, right? If we don't have to focus so much on just scaling in a hyper-growth environment, there's opportunities to help build the future, pay down tech debt. We're seeing a lot of improvements across our technical infrastructure just around tech debt that will help us get to the next order of magnitude in the next run. So there's lots of opportunities to thrive. Of course, subscription and services is another big one that I mentioned, right? We planted those seeds to diversify revenue streams. That's really coming to fruition. And we don't know exactly what will take off in the next cycle. So we've got to continue building and innovating. That's part of why I'm so excited about how we're making Web3 easier to use. There's, I think, a lot of exciting work happening with decentralized social media, Dow's decentralized gaming, all these things we need to make – the Metaverse, right? People want to own digitally native items inside the Metaverse and various games. So we need to make sure all these things get easier and easier to use over time, and we've got opportunities with our products there as well, not just around trading but all these other use cases. Let's see what else. I mean we're continuing to do great partnerships, BlackRock and Meta and Google. As a public company, I think we've been really delighted to see that. Other public companies are willing and excited to work with us and our diligence processes with them has gone even better. And just overall, I think we're going to manage through this the way we've done through the last crypto – the last four crypto cycles that we've been through as a company. So obviously, we have to be rigorous about managing costs and things like that, but there's good revenue growth opportunities in these different areas. And yes, we're going to keep operating efficiently and making some of these changes like around our product groups.

Right. If I could, I'd just like to add on a couple of numbers behind your comments. So just to add on to this question, we did end Q3 with $5.6 billion in total USD resources and $480 million in crypto, so over $6 billion in combined crypto and cash resources. On our operating expense side, as I mentioned earlier, we reduced our operating expense by 22%, excluding impairments. And we're continuing to manage expenses very closely given the macro conditions. And just a final thought for me I think it's important to share how our team thinks about operating through these volatile crypto markets. And as a team, we spend a lot of time thinking through a variety of scenarios and developing contingency plans. We believe we have the balance sheet to weather a multiyear downturn, and we have action plans we would develop to lower our expenses or extend our runway if needed.

We had several questions about competition. I'll summarize them by saying how do you plan to compete with companies that offer zer7 fee trades or other companies that are starting to get into the U.S. market. Emilie?

Thanks for the question. So we are seeing a lot of headlines about zero fees, and I want to make sure we unpack that a little bit. So there's two ways that companies generally generate revenue through trading. There is spread and there is a fee. And companies that say zero fee are still generating a spread or charging a partner. So right now, we are roughly in line with other companies in terms of our total costs. In any case, customers are willing to pay for our premium product, and we talked before about we are not going to compete on price because of the quality of the product. We also offer Coinbase One as subscription product where customers can do zero fee trades. So then now let me move on to how we compete. At the highest level, our goal is to grow the share of users and wallet across our three customer segments: consumer, institutional and developer. We have three major differentiators for value props. One is that we are the most trusted. We've always taken a long-term view on compliance and security, and we're widely viewed as the safest and most compliant player in the space. Ease-of-use, we know that crypto is too complex for the average person, and with Coinbase people can get the utility of crypto technology without having to understand all of the technical details. Finally, we have an integrated product suite. We know that there will be many winners in crypto and there is going to be plenty of opportunities for everyone to extract great TAM. But Coinbase is one of the only places where you can have one crypto account and do every sort of crypto activity. You can trade, stake, pay, borrow, earn, create, et cetera. And we believe that…

Thanks. Our next question comes from Ezra W. who asked what are the ways you can diversify your revenue and profits from crypto prices. Alesia?

Thanks for the question, Ezra. So I think it's important to start with we're a crypto company and we're 100%. We're all in all crypto. So our revenue and profits will be intrinsically tied to the overall crypto market in some form or fashion. However, we can dampen the effect of direct comparison. So today, our largest revenue stream, trading revenues, is directly correlated with crypto prices and crypto price volatility. So we experience that volatility as you can see over the last 18 months as prices were rising in the high volume in 2021, we generated a lot of revenue. As prices have come down and volatility has come down, we've had trading headwinds this year. So we are very proud of our trading platform, and we recognize that there is going to be volatility given how early we are in this industry. But because of that volatility, years ago, we started investing in new revenue streams, specifically our subscription and services revenues. And this has been comments that you've heard from Brian and Emilie earlier that it takes time to build these great products and for them to achieve scale. But we're really proud that we started to planning the seeds back in 2018 with a cofounding center with great USDC. In 2019, we rolled out our first staking asset. And you can now see both of these products generating significant growth within our subscription and services revenue lines. In 2020, I think it's important to note that subscription and services was $45 million in full year revenue, $45 million. In 2021, it grew to over $500 million. And this year, our outlook is now over $700 million, and that's despite the headwinds we talked about in the crypto market and significant price declines. So we're pleased with the progress we're making, and we think that we need to continue to invest here to create the multiproduct strategy and this will diversify the drivers of our revenue and dampen out some of the volatility we see.

Our next question comes from Manuel O. who asked how are you planning to detach the share value from Bitcoin value. Alesia?

All right. Different question, same flavor. So we just talked about diversifying our revenues to reduce P&L volatility from crypto prices. And it's a similar answer on reducing the correlation in our stock coin from Bitcoin. So again, Bitcoin is the largest crypto asset by market cap, and we generate meaningful revenue from Bitcoin trading and test fees. So I think there will always be some element of correlation between our stock and Bitcoin. But I think it's important to note that this has not been a consistent relationship. So interestingly, there's some periods of 80%, 90% correlation between Coin and Bitcoin and in Q3, we have really low correlation. It was approximately 30%. So I don't know how investors are thinking of this, but I think there's a few things that I think are important to note. So one is not all asset managers or large investors actually have the ability to directly invest in spot Bitcoin. And so as the first public company, some investors are gaining access to Bitcoin and crypto broadly via Coin. And so, they're using our stock as a proxy for how they may or may not have traded the underlying spot assets. We believe as ETFs to hopefully get approved and more crypto companies go public, I can see less correlation between Coin and Bitcoin. Further to these trends, we could see less correlation with the development of more institutional trading alongside financing and derivative markets in the U.S. where investors could have more vehicles, easy access to short Bitcoin directly as opposed to Coinbase. Lastly, it comes back to what I said before. The more we can create multiproduct strategies with different revenue drivers and diversify our P&L, I think we'll see less correlation to any single coin or crypto overall. And that is the thing that is most in our control to drive that product strategy, deliver value to our customers and what we are singularly focused on.

Our next question comes from Steven J. who asks what software or technological updates does Coinbase have on the way?

Yes, I can take that one. So well, first of all, I don't want to preannounce anything that's coming down the pipe here, but I just can talk generally about what technology updates, I think, that we have in the process or we have already live that are really powerful for us. So one of them, I think, is sort of underappreciated is actually our MPC or multiparty competition tech stack. For those who aren't familiar, MPC is a way that you can store crypto securely using different keys in different secure environment. Without getting into the technical details of it, what it does is it allows us to store crypto more securely in our hot wallet and things like that. It also enables functionality like in our app, we have something called Adapt Wallet, which allows customers even using our core retail app to go access Web3 apps and decentralized apps. Sorry, if this is too much technical jargon, but basically it allows the customers to go access these third-party apps and participate just like they would with a self-custodial wallet, but they have all the security and protection that they normally rely on in Coinbase. This was a core piece of technology that we developed in-house. We got a lot of key talent came in through the acquisition of Unbound, some real cryptography and the cybersecurity experts that made this work in practice. And I think this is going to be actually a really a core differentiator for us over time. Other core technology updates, I mean, we acquired FairX, our derivatives exchange, and that has allowed us to have some really best-in-class IP in-house to make the most reliable and scalable exchange over time, both on spot and derivatives. I think Coinbase NFT had a really cool…

Okay. Great. We'll take one more question before switching over to the analysts. So Michael T. asked, will my money ever be backed by funds on your Exchange in case of theft and what are your procedures for taking – you are taking to ensure safety? Emilie?

Thanks for the question, Michael. So we have invested over the history of the company and being the most trusted player in the space, and we take the responsibility of securing customer funds very seriously. I would add that we're proud that we've never had an event where the systems have been materially compromised in any way. And this is because of all of the things that we have invested in since 2012. We have an industry-leading insurance policy for the hot wallet. We have $1 million account protection for our Coinbase One subscribers. We've invested in best-in-class AI and machine learning fraud detection. We have a 200-plus person security team and live phone support and in-app chat and we'll continue to invest in these things and more. So it is important to know that crypto is a nascent technology. And like many new technologies, scammers will always seek to take advantage of users. So we also invest heavily in educating our users about how to keep their credentials and account safe, for example, using user keys and other things.

Great. So with that, Abby, why don't we turn it over to the analysts for questions?

Your first question comes from the line of Lisa Ellis from MoffettNathanson.

Hi, good afternoon. Thanks for taking my questions and good stuff here. I wanted to follow up, Brian, on the international strategy. You had highlighted it, I think, in the shareholder letter that crypto trading volumes have been moving offshore over the course of this year. And I noticed you guys recently added Singapore and the Netherlands, and then you also added zero commission trading for fiat to USDC Coin. Can you just kind of tie all of that together for us and holistically talk about how Coinbase is thinking about capturing some of that offshore volume and continuing to expand outside of the U.S.? Thank you.

Yes, sure. So international expansion is really core to our mission of increasing economic freedom in the world. We want to make sure that we’re doing that with a global mindset and we have seen really good progress on the regulatory front acquiring licenses in a variety of different locations. I’m in Singapore right now and we just got our in principal approval for - to hopefully end up with a license here from the Monetary Authority of Singapore which has been a great step in that direction as well. I think that we have seen the percentage of U.S. spot trading has shrunk from the beginning of this year as we’ve seen more of it go over overseas and that’s – I don’t know the exact reason for that. I think the chilling effect that some of the regulatory environment and the rhetoric there may not have helped. So it is causing us to make sure we have our international markets served even more fully. And I don’t want to share anything too much beyond that at this point, but it’s important for us to make sure we have global coverage and we are serving customers from the best jurisdictions that we can globally and we need to see the regulatory environment evolve and get to that clarity both in the U.S. and in other markets where we’ll continue to invest. Emilie, Alesia, anything you want to add?

No, that covers it.

The next question comes from the line of Owen Lau from Oppenheimer.

Thank you for taking my question. So based on my math Coinbase has a loss of about $247 million [ph] in adjusted EBITDA year-to-date. If trading volume or if trading revenue stayed at October level and you continue to benefit from rising rates, is there any reason why you have a loss of over $250 million in EBITDA in the fourth quarter? And then without getting any – into any specific guidance your adjusted EBITDA – your adjusted EBITDA loss has been shrinking. Could you please talk about if you have any aspirational goal of achieving positive adjusted EBITDA in the near term? Thank you.

Thanks for the questions Owen. So as we articulated in our outlook right now, we are just really focused on operating to the guardrail metric that we set forth. And we are being prudent in our expense management. We are prudently trying to grow our subscription services, but we are facing headwinds on trading. So there’s nothing that I have to specifically talk about that could be a one time loss at this time in Q4. But our focus is just managing towards that 500. And specifically, no, we are thinking about investing as much as we can for growth. As Brian said, there’s a lot of exciting areas that we can invest in the crypto market and we want to ensure that we are investing through the cycle that we are opportunistically reserving dry powder from M&A opportunities. And so we’re not immediately focused on getting to EBITDA profitable. We are trying to manage to profitability across a cycle as we set forth in our S-1 [ph] public about 18 months ago, that when we’re in bull runs, we’re going to make profits when we’re in downturns, we’re going to take prudent losses and we do those in the construct of the overall balance sheet capacity that we have. So it is not a near-term goal of ours or focus of ours to drive the EBITDA positive in the near term. However, if markets – the couple, as Brian said is a possibility, we could see ourselves retraining EBITDA, but it’s not an intentional goal that the management team is setting forth with.

Yes, similar to what Alesia said, I think it’s important just to kind of touch on it and reiterate this point about managing through cycles, right? So last year in 2021, we did roughly 7 billion of revenue and 4 billion of positive EBITDA. And so this year we’re going to – we’re targeting this negative 500 million EBITDA as our guardrail. So you can see that in up markets we will do quite a lot of positive EBITDA and in down market we don’t want it to be excessive, but I think it’s reasonable to have some moderate amount of negative EBITDA and burn there just to continue to invest through cycles, especially given the strength of our balance sheet. So hopefully that gives you a little bit of a sense of how we’re thinking about it.

The next question comes from a line of Kenneth Worthington from JPMorgan Securities.

Good afternoon, Thanks for taking my questions. I have two on the competitive environment, I’m going to try to wrap together. So first we see Binance offering a number of, I’ll say pricing concessions or promotions. Does the pricing seem to be having an impact on retail behavior that you see as sort of persistent or sustainable? And if so, is it impacting the type of customer that you want on the Coinbase platform? And then second, I know it’s still early days for Coinbase One, but it is up and running. How effective is Coinbase One a response for free trading offerings elsewhere? And can you walk us through the characteristic of a target Coinbase One customer and how the transition impacts the overall economics of Coinbase?

Yes, I think this from a couple directions. Yes, go ahead, Emilie.

Sure. Why don’t I start and Brian and Alesia, please jump in. I think that to your first question, we do clearly some competitors can kind of drive market share with zero fees in certain parts of the market. And I just want to reiterate my point about the fact that there’s still spread in, there still a fee and that companies that say zero fee are still generating a spread. We’ve found that when we benchmark, we’re roughly in line with other companies and we are not going to compete on price because of the premium nature of our offering. I can’t speak to the percentage of users that might kind of go for zero fees on a competitor site. I can say that the nature of the users that we have is one where they tend to be fairly stickier during these crypto winters. They tend to be huddlers and hold on to their holdings and are less active but then come back as the market comes back a bit. Whereas, there are other behaviors where very active traders might be trading in long tail assets and potentially are more price sensitive and go to those other platforms during these times. Alesia, do you want to add on?

Yes, there’s a couple things I’d like to add on. Thanks, Emilie. The first is, and we shared this in our shareholder letter, that even though our retail investors and Emilie alluded to this, are not trading as much, we do not see them leading our platform. And so when we look at our retention rates of those customers, IED, holdings in their wallets, it’s very high retention rates and it’s very comparable to the same behaviors we saw in the 2018, 2019 time period. And so what we see is that our retail investors just go into huddling mode. They seek out yield, they seek out other activities they can do at their crypto, but they’re not converting it to fiat and leaving the platform. They’re not sending their crypto to competitors and then trading on those platforms. They may indeed have other accounts away from Coinbase, which we can’t see, but we don’t see behavior of our customers leaving our platform. I want to touch on the Coinbase One question though, because we really are excited about this product offering. So the purpose of Coinbase One is to be a product for all of our users if we think it offers a series of benefits that can enable everybody to have $1 million of account protection and produced by its premium customer service. It provides low monthly fee to be able to get unlimited trading in just other perks and access to our platform. So we’ve seen really good both paid and total subscriber based growth quarter-over-quarter, and we have not made these numbers public. It’s in our other subscription and services revenue within the breakout of our revenue on our P&L. But we’re seeing good behavior and we’re seeing the ARPU of these customers is higher than our other users once they’re engaged with Coinbase One.

Your next question comes from the line of Benjamin Budish from Barclays.

Hi guys. Thanks so much for taking my question. I wanted to ask about USDC obviously kind of the biggest driver of your interest income in the quarter. Can you maybe talk about, I know it’s a little bit hard to as Brian said, you can’t predict the future, but what’s sort of your kind of near to medium term outlook? And maybe can you talk about the things that are within your control? Perhaps, the – your expectations for Coinbase generated issuance of USDC where do you see the biggest opportunities? Is it retail users looking to use it to engage in DeFi? Is it institutional customers? That would be helpful.

Maybe I’ll start with this one and feel free to add on Brian and Emilie. So we’ve made a series of announcements recently around USDC that we think can really help drive adoption. So, for example, we want to make USDC more accessible to our global customer base. We have now made the fees commensurate with our U.S. customers in Europe. So customers who want to buy USDC with euros or GDP do not have any fees to do so. We think this will really generate growth for non-U.S. holders of this asset. We’ve also started to pay out yield on USDC, the word technically. And we made announcement with MakerDAO, which is a large D5 protocol, where they’re going to bring 1.6 billion of USDC to our platform, and we’re going to pay them a 1.5% reward rate. So we think continuing to make USDC, frankly a better dollar, meaning it’s faster, it’s 24/7/365, and now it pays an attractive reward rate, will help with adoption not only for us, for folks who are looking to have a stable crypto as they think about trading and moving to other assets, but getting access to a U.S. dollar exposure and non – in countries that don’t have easy access. So those are some of the growth initiatives that we have within our product control that we’re starting to experiment with and roll out. And with regards to our partnership with Circle, we make money in two ways. One is just with regards to the USDC we hold in our platform. So a lot of these initiatives that I spoke to will hopefully grow assets on our platform and that we would generate revenues through that behavior. And then there’s another prong that the revenue share that’s based on the percent that we distribute of USDC into the ecosystem. Growth in market cap, growth in our behavior and then interest rates are the three drivers of that revenue.

Yes, and I think your question touched on sort of the different use cases across different customer segments and USDC has applicability across many different customer segments. So obviously it’s used in trading pairs quite a bit, right, both in DeFi and with centralized exchanges. So traders use it quite a bit. It’s also used by businesses. We’re seeing some businesses make intercompany payments that way or B2B payments. It’s just faster than getting a wire, it’ll arrive in a few seconds and with less fees than sending wires. So for B2B payments, I think it’s useful. We’re seeing some people do payroll in USDC. We’re seeing venture investments happen with USDC and then retail customers use it as well. I mean, not just to earn yield on their dollars that Alesia mentioned. But there’s many people in the world who would like to have a U.S. bank account, but they can’t actually access it. But through a self custodial wallet or something like that, they can actually hold U.S. dollars through USD coins. So it’s applicable across a wide variety of use cases. And as I said in the opening remarks, I think the – USDC will probably end up being kind of like a defacto central bank digital currency for the U.S. which is a little different than some other countries that are trying to really create it themselves. So yes, I think the use cases are many.

The next question comes to the line of Will Nance from Goldman Sachs.

Hey, guys. Appreciate you taking the question. I guess I just want to understand, how important do you think it is for Coinbase to be a U.S. domicile company? If we see so much crypto activity moving overseas, I mean, do you guys ever make the decision or that, you need to be more active in international markets to protect or potentially even primarily in international markets in order to compete with all that’s happening at outside of the U.S. in the ecosystem?

It’s a good question. Just zooming out, I mean, look, I think it’s the right long-term choice to be have the parent company based in the U.S. and of course we have entities in a variety of countries around the world. So we can serve. I don’t think we’re especially hindered in that regard in the sense that we can spin up an entity and in another region that serves non-U.S. customers. And I think our hands are not necessarily tied in that regard. But look, this was a big decision even going back to the very founding of the company. I didn’t really know, this was back in 2012. I didn’t really know how the ready for landscape would evolve in the U.S. and I did – the thought did cross my mind, at that time was like, should I go create company in Hong Kong or Singapore or somewhere, Switzerland or something like that. But I made the decision back then to actually build the company in the U.S. and I felt like, look, it may be a bit difficult, it might be a bit more difficult because the U.S. doesn’t always act as quickly or nimbly as some kind of like a special economic zone as like Hong Kong or Singapore, but I think it’s the right bet long term, right? In the sense that can read Ray Dalio’s changing world order, who knows what’ll happen in 50 years. But at least for today, the United States is kind of the leading economy and it’s the best place with rule of law and strong property rights and everything to build a global company that can reach the rest of the world. So yes, I would say sometimes it’s felt like we’re actually at a disadvantage and it’s caused us to move more slowly than foreign competitors. Some of that by the way, is just our own execution that’s fully in our control, but other times it’s the regulatory environment. It does feel like we’re almost facing unnecessary headwinds given – trying to do the right thing, right, which is definitely frustrating. But I think it’s the right long term bet and it’s going to allow us to prevail as a like company that stands the test of time globally. And regulators don’t always act quickly, but they do eventually act. And so we’ll see that regulatory clarity here in the U.S. and we’ll see hopefully a more level playing field emerge globally over time.

And Brian, I would just also add to reiterate this is, I think when you see the data so starkly that the volumes are moving offshore, we’re optimistic that us lawmakers, legislators and regulators understand that now is the time to act on very sensible regulation so that innovation and technology and tax sellers can actually happen in the U.S.

Yes, I think that’s right. I mean, that’s the message that we deliver a lot in meetings with policy makers is by pushing so hard on the local companies, you’re not actually protecting investors. You’re just encouraging them to move offshore to even less regulated options, right? So that’s an important message I think for all regulators to hear. And even here in Singapore, I’ve been not meeting with MAS and Temasek and GIC and various parties and there’s a similar message here, which is that Singapore – current Singapore regulators are some of the most sophisticated in the world. They’ve been very open to having institutions, crypto institutions operate here and stablecoin, but they were a little hesitant recently on retail trading and self hosted wallets. And I kind of made the point to them like, it’s incompatible. If you want to be a Web3 hub, which Singapore has come out and said, you can’t actually prevent retail trading. You can’t prevent self hosted wallets like the – only way to access Web3 in many cases is through self hosted wallets. So they were very receptive to that conversation. They were eager to work with us. And I think it actually created a much more, I hope we had a positive out outcome there. So yes, I think these regulatory conversations are really important globally to make sure things head in the right direction that protects investors, but also preserve the innovation potential of this technology. We have time for one final question.

Our final question will come from the line of Rich Repetto from Piper Sandler.

Yes. Good evening, Brian and Alesia. I guess my – I want to be respectful. I am respectful. You’ve been through a crypto winner and – but you have acknowledged, I think Brian and Alesia that this you haven’t been through one with interest rates rising like we have. So I guess my question, I looked at the head count, your head count is down 5% quarter-over-quarter and it’s actually up 25% from year end. And I’m just trying to understand, and you got expenses increasing in the fourth quarter. So just trying to see how you sort of felt like your right size, given the sort of the risk and the potential for loss. If we stay in this crypto went to – and it looks like trading volumes are flat, they’re a little bit down to start. So how do you feel, how did you justify that you right size a company given this volatility?

Emilie, I will start and you can add.

Okay.

Yes, I’ll start. You feel free to jump in. I mean, so as Alesia mentioned, we targeted this negative 500 million for the year, and at least so far we seem to be on track for that. I do think it’s reasonable to given the positive 4 billion of EBITDA last year to sort of have some kind of moderate negative EBITDA in this down environment. So it’s about investing in the future and we’re so far capitalized well enough to do that, which I think makes sense. Now, of course, we’re just going to continue to monitor the market conditions. I think, it’s very plausible that we’ll see a further down trend in the market in next year. And if we feel that we’re not on track to meet our goals in terms of EBITDA, we’re happy to react to that in that kind of environment. But I think right now we’re basically monitoring the situation and we’re going to see what happens over the coming quarters. Alesia, what do you want to add?

No, I think that’s right. I just wanted to reiterate, Rich, that in our outlook, we speak to 2023 as that we’re taking a conservative bias towards the year and that we think that these headwinds could persist and possibly intensify. And so as we do that, we’re doing a lot of scenario planning and understanding what that may mean. We’re not prepared to offer quantitative outlook today, however, I just want to let everyone know that we’re committed to managing our expenses prudently and watching the macro conditions and the business performance closely, and that we’ll continue to update all of our scenarios as conditions involved, and we would take additional actions to further manage our expenses if we deemed that warranted.

Great. Thank you all for joining us today, and we look forward to speaking to you again in our next call.

This concludes today’s call. You may now disconnect.