Coinbase targets financially vulnerable young adults

New advertisements by Coinbase, a cryptocurrency exchange, prey on the financial anxieties of Gen Z and other young adults. The ads, which are on heavy rotation on cable television, depict the modern economic system as rigged. In one of the ads, a young woman gets good grades, goes to college, and ends up saddled with debt. After she enters the workforce, it becomes impossible for her to afford to buy a house or start a family. She can't even afford to rent an apartment or buy a used car. 

"Breaking news: Everything is terrible," a fictional TV anchor declares. 

The ad identifies real issues in the modern economy around college debt, housing affordability, and the rising cost of raising a family. Today, the median age of first-time home buyers is 35, compared to 29 in 1981. Part of this has to do with the ongoing surge of student debt: the Federal Reserve said last month that student debt has tripled from $619 billion in 2008 to more than $1.77 trillion. Compared to previous generations at the same ages, younger American families also have lower family wealth on average. 

But the ad also presents a simple solution: a new "permissionless" system with "no waiting" and "less paperwork." In other words, crypto, which you can buy from Coinbase. "Just because you were born into a system doesn't mean you have to live with it," the ad concludes. "Gen Z has 86% less purchasing power than Boomers did in their 20s, and parents are right to worry their kids may be the first generation to not surpass them financially," Coinbase's marketing director, Wes Janisen, posted on X. "But there's still time to change it and #UpdateTheSystem."

It's actually a lot easier and faster to buy things with cash or a credit card than crypto. And even if it were easier to buy things with crypto, the structural differences between crypto and the U.S. dollar would not make it easier to afford a house or a car. The only way that crypto will increase the purchasing power of Gen Z is as a speculative investment. In other words, Coinbase is targeting young people with limited resources and implying they should use whatever cash they have to buy crypto on its exchange. 

The current price of Bitcoin is about $42,000. If someone sends Coinbase $100 to buy a fraction of a Bitcoin and the price goes up, they could end up making money. But Bitcoin, like most crypto, is highly volatile. Within the last year, it has traded for less than $17,000. If the price dips again, young people convinced by Coinbase's ad could take a huge loss.

Even if the price of Bitcoin or another cryptocurrency goes up, Coinbase users could still take a loss. While Coinbase says there is "less paperwork" to buy crypto than to invest in stocks or open a savings account, it does not claim there are fewer fees. That is because the fees on Coinbase can be very high. 

Users who purchase $10 or less of crypto are charged a flat fee of $0.99. That's a fee of 10% or more. (These fees go down as the amount of crypto purchased increases.) But regardless of how much crypto is being purchased, users are typically charged an additional "spread fee"of 0.5%. That means that Coinbase purchases the crypto for less than it sells it to you, and then pockets the difference. There are also fees linked to how the crypto is purchased. Purchasing crypto on Coinbase with a debit card triggers an additional fee of 3.99%. Funding your purchase with your bank account comes with a 1.49% fee. If you ever want to sell your crypto, you may incur additional fees. 

A spokesman for Coinbase told Popular Information that the company "does not give financial advice." The ads, Coinbase says, aim "to showcase the challenges that many young people face today, including those from underserved communities, when following the traditional path — and despite what stands in their way, how they’re taking steps to build their way out." Coinbase says the campaign has already racked up millions of views on social media and the company is "proud that this campaign is resonating." 

Paris Marx, an author and journalist who has regularly covered the crypto industry, had a different perspective. "Fixing unaffordable housing, job security, low wages, and the other problems in the financial system requires political action, not a new tech product," Marx said. He described Coinbase's ads as "tak[ing] advantage of people's desperation" by making them think that crypto currency "will deliver economic empowerment and financial security." According to Marx, the premise of the ads are "a blatant lie." 

The crypto industry's history of exploitative ads

Coinbase’s ad is not the first time that a crypto company has aired ads focused on exploiting economic insecurities. In 2022, FTX launched a Super Bowl ad starring actor Larry David. The ad shows David expressing skepticism about famous inventions throughout history, such as the wheel and the lightbulb, and arguing that they would not catch on. At the end of the ad, someone tells David about investing in crypto through FTX. “I don’t think so, and I’m never wrong about this stuff. Never,” David responds. The tagline of the video, “Don’t Miss Out,” insinuates that the invention of crypto investments is akin to the invention of coffee, forks, and toilets and that people who do not invest will miss out on a lucrative opportunity. 

FTX’s ad with David had immediate results, with the FTX app “jump[ing] up the App Store’s download rankings right after the Super Bowl, and eventually surpass[ing] Coinbase in Bitcoin trading volume three months later,” according to Slate. Customers who bought Bitcoin after watching the FTX ad with David, however, would have seen their holdings “dip[] by 48 percent” in the following year. 

In November 2022, FTX collapsed. The company filed for bankruptcy, and CEO Sam Bankman-Fried resigned. The collapse left “more than an estimated 1 million customers potentially facing losses.” In November, Bankman-Fried was found guilty of “stealing from customers… in one of the biggest financial frauds on record.” 

Crypto.com has also used a similar advertising strategy. In October 2021, Crypto.com launched an ad starring actor Matt Damon. The tagline of the ad, “fortune favors the brave,” implies that those who “embrace the moment and commit” to crypto will be rewarded. If people who saw the Crypto.com ad featuring Damon the day it premiered invested $1,000 in Bitcoin, it would have been worth just $369.80 eight months later.

The politics of Coinbase

In its statement to Popular Information, Coinbase positions the ad as a way to empower people who lack bank accounts, a condition that "disproportionately impacts communities of color." Coinbase says that when "unbanked rates skew higher among low-income households, less-educated households, Black households, and Hispanic households – that means too many Americans are locked out or underserved by the current traditional financial system."

But there are questions about Coinbase's commitment to racial justice. 

The company has come under scrutiny for its treatment of Black employees. In November 2020, a New York Times investigation found that roughly three-quarters of the company’s Black employees had left the company. Many of these workers previously “informed the human resources department or their managers about what they said was racist or discriminatory treatment.” One Black employee, cited in the report, said that “her manager suggested in front of colleagues that she was dealing drugs and carrying a gun.” Another Black employee said that a co-worker “broadly described Black employees as less capable” during a recruiting meeting. The company told employees that the story painted "an inaccurate picture.” 

While the current ad campaign links Coinbase to a broader political agenda, the company has a history of eschewing political issues. In September 2020, CEO Brian Armstrong declared that discussion of broader societal issues and political causes, including racial justice, distract from the company’s mission. Armstrong announced that employees could no longer “[d]ebate causes or political candidates internally that are unrelated to work.” He said he wanted to create an "apolitical culture." Employees who were “uncomfortable” were offered a severance package. In response, about 5% of the company's workforce quit.