Popular crypto exchange Coinbase is laying off a fifth of its employees as the company prepares for what CEO Brian Armstrong believes is an incoming "crypto winter".
The decision to cut staff by 18% aims to "ensure we stay healthy during this economic downturn," he said in a company-wide message that was later shared on Medium. He added that "several realities" had dawned on him after a series of discussions with the management team.
Armstrong forecasts a recession
Armstrong noted how business conditions were changing rapidly for the crypto space. "We appear to be entering a recession after a 10-plus-year economic boom. A recession could lead to another crypto winter, and could last for an extended period," he said.
Trading revenue, which is the largest revenue source for Coinbase, has reportedly declined. The company is planning for the worst in an attempt to stay operational "through any environment," he said.
While Coinbase has survived through four crypto winters, the company is tightening its belt and managing spending with "a different mindset".
A bloated workforce
Apart from overall crypto market conditions, however, Armstrong also pointed to the company's purportedly bloated workforce as a reason for downsizing. In the past 18 months, staff size grew by more than four times amid growing pressure to scale operations. But the company eventually "over-hired," the CEO said, adding that he holds himself accountable for this.
"Our employee costs are too high to effectively manage this uncertain market," he added.
"For the past few months, adding new employees has made us less efficient, not more."
Severance pay for affected Coinbase employees
Affected staff members are invited to consult with their HR business partner or senior leader. However, to minimise potential backlash from disgruntled employees, the company decided to cut laid-off staff members' access to Coinbase systems.
With some employees holding access to sensitive customer information, the closure of access was to "ensure not even a single person made a rash decision that harmed the business or themselves," Armstrong said.
Coinbase said it would guarantee 14 weeks' worth of pay for affected employees, with additional two weeks of pay for every year of service rendered. They would also have access to health insurance and mental health support for four months, as part of the severance package.