Crypto exchanges Coinbase and BlockFi lay off hundreds of staff

Crypto exchanges Coinbase and BlockFi are laying off hundreds of staff members, equivalent to a fifth of their workforces, as they struggle to survive the second wave of the ongoing crypto crash.

Employees at Coinbase, once the flagship US cryptocurrency exchange, will learn whether they have lost their jobs in an email today. Those who have been laid off will be notified on their personal email account, the chief executive, Brian Armstrong, said, because their access to company systems will be terminated immediately.

“I realise that removal of access will feel sudden and unexpected, and this is not the experience I wanted for you,” Armstrong said in a letter to staff. “I want to say thank you for giving everything to this company, and that I am sorry. I hope that as we grow again we get a chance to hire you back. We would not be where we are today without your hard work and dedication to our mission. I am incredibly grateful for everything you have done to contribute to our success.”


What is cryptocurrency?


Cryptocurrencies are an alternative way of making payments to cash or credit cards. The technology behind it allows the ‘money’ to be sent directly to others without it having to pass through the banking system. For that reason they are outside the control of governments and are unregulated by financial watchdogs – and transactions can be made in a way that keeps you reasonably pseudonymous.

If you own a crypto-asset you control a secret digital key that you can use to prove to anyone on the network that a certain amount of that asset is yours. If you spend it, you tell the entire network that you have transferred ownership of it, and use the same key to prove that you are telling the truth. Over time, the history of all those transactions becomes a lasting record of who owns what: that record is called the blockchain.

Bitcoin was one of the first and biggest cryptocurrencies and has been on a wild ride since its creation in 2009, sometimes surging in value as investors have piled in – and recently crashing back down.

Sceptics warn that the lack of central control make crypto-assets ideal for criminals and terrorists, while libertarian monetarists enjoy the idea of a currency with no inflation and no central bank.

The whole concept of cryptocurrencies has been criticised for its ecological impact, with “mining” for new coins requiring vast energy reserves and the associated carbon footprint of the whole system.

Richard Partington and Martin Belam

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Almost 20% of Coinbase staff will lose their jobs, Armstrong said, totalling about 1,100 employees, even after the company embarked on a hiring freeze that resulted in it rescinding already-issued job offers.

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Coinbase’s cuts follow on from those of its smaller competitor BlockFi, whose chief executive, Zac Prince, announced a 20% reduction in staff, affecting about 170 people, on Monday. “Like many others in tech, we’ve been impacted by the dramatic shift in macroeconomic conditions, which have had a negative impact on our growth rate,” Prince said.

While both companies have been hit by the dramatic downturn in tech valuations, they are also struggling with a new crash in the crypto industry. After a month of stability following the collapse of the Terra “stablecoin”, the crypto bank Celsius announced on Sunday it was suspending customer withdrawals after weeks of fears of insolvency, prompting a 25% drop in the price of bitcoin and ethereum.

“Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, swap, and transfers between accounts,” the platform said. “We are taking this action today to put Celsius in a better position to honour, over time, its withdrawal obligations.”


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