How much of Coinbase’s revenue comes from haram?

Coinbase earns its revenue from the following revenue sources:

  • Transaction Revenue:

Includes transaction fees charged to retail and institutional investors when making purchases of cryptocurrencies.

  • Subscriptions and Services Revenue:

Custodial Fees earned for cold storage solutions to secure cryptocurrencies.

Staking Revenue is derived from participating in proof-of-stake networks by creating or validating blocks on the respective networks.

Earn Campaign Revenue commission from crypto-asset issuers based on the number of crypto assets that are distributed to its users.

Interest Income and Corporate Interest Income earned by funds held at third-party banks.

Other subscription and services Revenue earned from early-stage services.

  • Other Revenues:

Includes crypto assets sales and corporate interest income.

As of Q1, 2021, Coinbase’s revenue breakdown was as follows:

Currently, the majority of Coinbase’s revenue comes from halal.

In Coinbase’s S-1 filing, discussing their subscription products which include their “Borrow & Lend” service, the company said the following:

“We are committed to growing more stable revenue from subscription products and services, and expect they will contribute a larger portion of our total revenue over time as our customers connect with the broader cryptoeconomy.”

Although subscription products are not a material contributor to Coinbase’s overall revenue today, these products saw 126% annual growth in revenue from 2019 to 2020.

Additionally, Coinbase is currently expanding the number of states where its customers can borrow using leverage in exchange for a fixed APR.

Practical Islamic Finance concludes:

The majority of Coinbase’s current revenue is not inherently haram. However, its “Borrow & Lend” service is a material component of its planned business model.

Does Coinbase rely on interest to operate?

According to the company’s annual report for the fiscal year ended December 31, 2020 (Numbers in thousands, U.S. dollars):

Interest Income: $8,200

Interest Expense: $2,600

Total Expenses: $868,530

Total Revenue: $1,277,481

Interest Expense / Total Expense: 0.30%

Interest Income / Revenue: 0.64%

Practical Islamic Finance concludes:

Riba is used but is not relied upon in Coinbase’s operations.

What is Coinbase’s Environmental, Social, and Governance (ESG) impact?

Environment

No notable environmental highlights.

Social

Coinbase has a high Glassdoor rating of 4.4 out of 5.0 from over 200 current and previous employees compared to a 3.3 average for all other Glassdoor rated companies.

Governance

No notable governance highlights.

Practical Islamic Finance concludes:

Coinbase has a net positive ESG impact.

Comfort Rating

From Coinbase’s business, financial, and ESG reviews, Practical Islamic Finance rates Coinbase as:

Uncomfortable to invest in from a Halal perspective.

Justification for our rating

Coinbase’s services are contributing to the infrastructure needed to support cryptocurrencies and their associated blockchains. PIF is a firm believer in the potential good that can come from cryptocurrencies, blockchain technology, and the decentralized applications built on them. However, in the case of Coinbase and as Muslims, we cannot be part of a business in which lending and charging interest is a material component of its business model. Accordingly, we’re uncomfortable investing.

Did we get it right? Let us know in the comments below!

Sources

Regulators propose cryptocurrency rules, Coinbase expands borrowing against bitcoin

Coinbase Form 10-Q

Working at Coinbase 

Authors