A Financial Empire That Rejected Anarchism: Coinbase's Paradoxical 14-Year Evolution

By early 2026, Coinbase Global, Inc. (NASDAQ: COIN) is no longer just a cryptocurrency trading platform but has become a financial infrastructure integrated into the U.S. regulatory system. However, looking back at the company’s history reveals a profound contradiction. In the libertarian ideals of Bitcoin’s founding era and the crypto-punk culture filled with the spirit of freedom, Coinbase chose the path of suited bankers. This decision created a DNA entirely different from its peers and, after 13 tumultuous years, established its current position.

Compromise in Rebellion: Coinbase’s Break from Anarchism in Its Founding Years

In 2012, amidst Silicon Valley’s libertarian tech culture, Brian Armstrong chose a path counter to that trend. Born out of Y Combinator, this project “Bitbank” aimed not just to develop a wallet but to create a financial institution with full banking functions.

Armstrong was not an anarchist but an entrepreneur. From optimizing payment systems at Airbnb, he realized a fundamental truth: “Trust is a service.” At that time, Bitcoin was technologically revolutionary, but user experience was extremely poor—34-character hash addresses, complex open-source clients, and the risk of losing all assets from a simple mistake—this was reality.

Rejected in the first Y Combinator application, Armstrong presented a prototype Android wallet and proof of secure payments in his second attempt. The participation of co-founder Fred Elsam was decisive. Elsam, a former FX trader at Goldman Sachs, brought Wall Street’s DNA and embodied a “regulatory adaptation strategy” incompatible with the libertarian ideals of crypto-punk.

Between 2013 and 2014, during the wild west of crypto exchanges, most companies avoided regulation by registering offshore. Coinbase took a different route—achieving full compliance within the U.S. It put enormous effort into convincing institutions like Silicon Valley Bank to open accounts and launched a “Long March” by applying for Money Transmitter Licenses in all 50 states.

This decision superficially slowed competition. But in June 2014, when Mt. Gox collapsed after losing 850,000 Bitcoins, Coinbase’s transparent reserve system and high compliance standards proved their worth. Amid market anxiety, institutional and individual investors seeking safety flocked to Coinbase. As a result, Coinbase gained a reputation as a “safe haven for crypto assets,” establishing a solid foundation to survive subsequent regulatory storms.

Power Consolidation: Capital and Connections as Political Legitimacy

Coinbase’s early fundraising was more than just capital injection; it was about gaining political legitimacy. Major investors like Fred Wilson of Union Square Ventures and Marc Andreessen of Andreessen Horowitz provided not only funds but also connections to Washington and Wall Street.

Furthermore, strategic investments by traditional financial institutions such as NYSE, USAA, and BBVA sent a clear external message: Coinbase is a “mainstream” crypto company.

This capital structure proved crucial in later regulatory confrontations. Support from the financial establishment was not just prestige but also direct access to Washington decision-makers.

Internal Divisions: When Business Rationality Overpowered Cultural Ideals

In 2020, nationwide protests over George Floyd’s killing ignited Black Lives Matter. Many Silicon Valley tech firms publicly supported the movement, and employee activism surged.

Within Coinbase, similar pressures mounted. Employees demanded Armstrong publicly support BLM during all-hands Q&A sessions. His response was cold: “The company cares about economic freedom”—that was all.

On September 27, 2020, Armstrong published a blog titled “Coinbase is a Mission-Driven Company.” It drew a clear line: political debates and social justice activism are unrelated to the company’s “core mission,” and internal discussion of such topics is prohibited. Focus on work.

He issued a “last warning”: those who disagreed could resign, with the company offering generous severance of four to six months’ pay. About 60 employees—roughly 5%—accepted and left.

While some outside critics called this “dictatorial,” veteran Silicon Valley investors like Paul Graham supported it. In retrospect, this “housecleaning” saved Coinbase from endless internal culture wars like those at Google or Facebook and enabled high organizational efficiency during IPO preparations.

At the same time, a more serious ethical crisis emerged. The New York Times exposed systemic discrimination against Black employees within Coinbase—lower salaries by 7%, stereotyping, workplace harassment—shocking revelations.

Coinbase’s response broke corporate PR norms. Days before the report, the company sent all employees an open letter published on its blog, forewarning of negative coverage, listing names of former employees cited, and claiming internal investigations found no evidence of misconduct. This “preemptive” tactic drew criticism as “witness intimidation,” but sent a strong signal to investors and staff: Coinbase would not bow to media pressure.

From Courtroom to Politics: Full-Scale Confrontation with Regulatory Power

In 2022, another crisis struck Coinbase’s core business. Product manager Ishan Wahi used inside information about token listings to profit illegally—conspiring with his brother Nikhil Wahi and friend Sameer Ramani, earning over $1.5 million from at least 25 token trades. Wahi was sentenced to two years in prison.

But the real threat came afterward. The SEC filed a civil suit explicitly defining nine involved tokens as securities—effectively claiming Coinbase was operating an unregistered securities exchange.

While Kraken and others sought settlement, Coinbase took a different route. In early 2025, they filed a Writ of Mandamus with the federal appellate court, seeking to force SEC Chair Gary Gensler to perform his duties. This “public prosecutor” stance was highly aggressive.

Then, the political tide shifted. In February 2025, the SEC announced it would withdraw most charges against Coinbase—an outright legal victory.

Yet, a deeper transformation was happening in Washington’s power map. During the 2024 U.S. presidential election, the crypto industry spent over $119 million, mostly supporting regulation skeptics. Coinbase and Ripple jointly funded the super PAC “Fairshake,” pouring over $40 million to defeat Senator Sherrod Brown of Ohio, the industry’s biggest political opponent.

Moreover, Coinbase launched the grassroots movement “Stand With Crypto,” organizing over 2.6 million crypto holders into a voting bloc. They evaluated politicians (A to F) and mobilized voters in swing states. This “money plus votes” dual pressure fundamentally altered Washington’s political calculus. Brown’s defeat sent a chilling warning: opposing crypto could end a political career.

In 2025, Coinbase’s lobbying expenditures reached about $1 million per quarter, with top lobbyists including former Obama campaign manager David Plouffe. It marked the moment tech startups became key power players in Washington.

Fundamental Business Transformation: From Transaction Fees to Financial Infrastructure

Coinbase’s financial statements reveal a profound structural shift. Moving away from dependence on retail trading volume, the company is transitioning toward stable revenue streams like subscriptions, staking, and custody.

In 2020, over 96% of Coinbase’s revenue came from trading fees. By 2025, this had fallen to 59%, with subscription and services revenue nearly halving that share. This is not just a number change but an essential transformation of the business.

In the severely downturn year of 2023, net revenue was about $2.9 billion, with trading revenue around $1.5 billion and subscription & services about $1.4 billion—almost evenly split. Even if trading froze, service revenue could sustain the bottom line.

At the core of this shift is Coinbase’s joint issuance of the stablecoin USDC with Circle. As the Federal Reserve maintained interest rates, the interest income from USDC’s reserve assets became a robust revenue source. Coinbase effectively earned a stable net interest margin (NIM) akin to a bank.

In 2024, the approval of spot Bitcoin ETFs completed this business transformation. By 2025, Coinbase held about 85% of Bitcoin ETF assets—via BlackRock’s IBIT, Grayscale’s GBTC, Fidelity funds—all essentially stored in Coinbase’s cold wallets.

This dominant position is significant. Ongoing custody fees and the fact that major institutional investors—those buying Bitcoin ETFs through Fidelity or BlackRock—are ultimately relying on Coinbase’s infrastructure underscore its central role in the crypto financial system.

Re-emergence in the Web3 Era: Super Apps and the Return of Anarchism

If Coinbase’s past 13 years were defined by Web 2.0 exchanges, the future points toward becoming the operating system of Web 3.0.

In 2023, Coinbase launched the Layer 2 network “Base” built on OP Stack. This marks a major strategic shift—no longer just a token trading intermediary but aiming to be the backbone of decentralized finance.

Interestingly, through Base, Coinbase may be partially returning to the spirit of libertarianism. As a neutral, tokenless L2 infrastructure, Base echoes the crypto-punk ideals of avoiding centralization and building an open, transparent financial system.

However, Coinbase’s goal is not merely an anarchist utopia. It is building a “super app” ecosystem to secure its dominant position—integrating custody, payments, and other financial functions within Base, fully embedding users into the Coinbase platform.

Conclusion: From Libertarianism to Realism, and Back to Anarchism

Coinbase’s 14-year history can be summarized as a paradoxical story. Starting from choices incompatible with libertarian anarchist ideals, it became an industry leader precisely because of those choices, then fought fierce regulatory battles, and now seeks to return to Web3 ideals.

The core of the company remains unchanged. The “conservative and regulation-compliant” DNA that Brian Armstrong and Fred Elsam chose in 2012 still exists. But simultaneously, a return to community-driven projects around Base, the community surrounding it, and the philosophy of individual sovereignty is underway.

By 2026, Coinbase aims to coexist with Washington’s regulators while building a decentralized Web3 future. Abandoning anarchism to reach it—within this contradiction and paradox lies Coinbase’s true story.