Coinbase will start levying a 0.1% fee for conversions of the stablecoin USDC to US dollars for net conversions above $5 million, as the crypto exchange has recently struggled with its earnings.

Starting Aug. 13, Coinbase will charge the fee on USDC (USDC) to US dollar conversions exceeding a net of $5 million on a 30-day rolling period, with the net calculated by deducting USDC purchases from USDC sales, according to a notice shared online.

It came after Coinbase’s second-quarter results, shared last week, missed on revenue and earnings, sending its shares tumbling. Its stablecoin-related revenue rose 12% year-on-year to $332 million.

It marked two consecutive quarters that the company had missed analyst expectations, as its Q1 revenue also came in lower than expected.

Coinbase “running an experiment”

“I don’t love the precedent here,” Bankless co-founder Ryan Sean Adams said in an X post sharing Coinbase’s update. “What if this dropped to $10k. Feels like bank fees again.” 

Coinbase’s senior product manager for stablecoins, Will McComb, responded to the post, saying that the exchange is experimenting to understand how fees will impact USDC conversions.

“We’re running an experiment to better understand how fees impact USDC off-ramping, especially as some competitors charge higher fees to off-ramp back to fiat,” McComb said.

“Your point about this being a core feature is heard and we’re carefully monitoring all feedback. We’re committed to making sure Coinbase is the best place to use stablecoins.” 

Currently, Coinbase does not charge a fee for net conversions of USDC to USD up to $40 million in a 30-day period. Fees then kick in at 0.05% for net conversions from $40 million to $100 million and scale up to a maximum of 0.2% for conversions over $200 million.

Fees to stamp out Tether to USDC conversions

Some commentators speculated that the move is likely to cover the costs incurred by the company in managing USDC, the second-largest stablecoin by volume.

Others, such as crypto influencer Jordan Fish, who goes by “Cobie,” said the fee could be to stop the arbitrage of users converting Tether (USDT) to USDC to off-ramp into dollars for free, which is reducing the USDC’s supply.

“Tether has an exit fee, which means the cheapest practical route was to swap USDT to USDC and then off-ramp USDC to USD, which shrinks USDC supply and maintains USDT supply. If I were to guess,” he said.

Coinbase CEO Brian Armstrong agreed with Fish’s comment, replying with a simple, “Yep.”

Tether charges a fee of 0.1% or $1,000, whichever is higher, for converting USDT with a minimum redemption value of $100,000.

USDT’s market capitalization is up 20% from the start of the year, while USDC’s market capitalization is up 47% during the same period, according to DefiLlama.

Bloomberg ETF analyst James Seyffart said that Coinbase was likely incurring a cost, which the company is now passing on.

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“This feels similar to a create/redeem fees for an ETF. If they actually have to facilitate creating and redeeming USDC based on one way flow from someone they are [probably] incurring some sort of cost to do that,” Seyffart said. 

“My guess is they’re offloading that cost … and then some,” he added. 

Coinbase’s earnings miss

The new fees come as Coinbase missed analysts’ revenue estimates for the quarter ended June. The company reported a revenue of $1.5 billion, while analysts were expecting the revenue to range between $1.56 billion and $1.59 billion.

The company’s stock sank 8% after it reported its second-quarter earnings.

In its report for Q1, Coinbase saw its total revenue drop by 10%, while its net income dropped 95% due to unrealized losses the company reported on its crypto holdings.

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