Embrace AI or get left behind: Job cuts sweep through crypto firms
Bitcoin is down about one-third since hitting a peak in October
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[LONDON/PORTLAND] A spate of AI-tinged job cuts at crypto and payments companies has brought up a curious question for analysts and investors: how does one assess whether the artificial intelligence part is real?
The debate started in February after Block, the owner of Square and Cash App, announced it would cut a whopping 50 per cent of staff, citing a secular change in how AI affects its operations. Gemini Space Station and Crypto.com made similar announcements, followed by Coinbase Global and PayPal Holdings this week.
“The biggest risk now is not taking action,” Coinbase CEO Brian Armstrong posted online on Tuesday (May 5). “We are adjusting early and deliberately to rebuild Coinbase to be lean, fast, and AI-native.”
However, just like Block’s Jack Dorsey faced near-immediate accusations of “AI washing”, a trendy term that suggests forward-thinking and hide more serious business issues, industry observers were wondering how anyone can tell what’s really going on inside these firms.
Bitcoin is down about one-third since hitting a peak in October, crypto trading volumes are low and the payments industry is more competitive than ever, making it harder to earn. Companies also have their own idiosyncratic issues that a sweeping job cut announcement might help paper over.
Block, for instance, went on a hiring frenzy during boom times, while PayPal has a new CEO orchestrating a turnaround.
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On the other hand, AI has truly been transforming the way the corporate world works, so it’s not unreasonable to believe the technology could make a big chunk of a company’s staff irrelevant overnight, especially if it had bloated staff levels in the first place.
“It’s probably an 80/20 split across the industry right now between real AI efficiency gains versus trimming down from the last bull run,” said Raman Shalupau, founder of CryptoJobsList, which recently conducted a study on the topic.
Shalupau’s team found that not only is AI replacing workers, but remaining workers must have serious AI bona fides to continue being employed. That’s especially true of managers, who are being particularly targeted by recent staff cuts and expected to use AI to do more with less, he said.
“It’s not a blanket rule, and you have to look under the hood of each restructuring. But the advancements of AI cannot be denied when wielded by skilled talent.”
For investors, job cuts can add an immediate jolt to a stock. But parsing the real impact of those attributed to AI can be difficult, partly because of widespread scepticism related to AI-washing.
Block shares are up about 38 per cent since Dorsey outlined painful staff reductions. PayPal fell as much as 12 per cent on Tuesday, while Coinbase was down nearly 4 per cent at one point.
Coinbase’s Armstrong said that the company is flattening its structure so that there are no more than five layers of managers below him and his operating chief. Every manager also has to contribute in a “player-coach” model, he said, alongside teams stocked with AI agents taking on more work.
PayPal CEO Enrique Lores outlined a plan to save US$1.5 billion over the next two to three years, with an “AI transformation and simplification team” assisting in that effort. The plan entails cutting 20 per cent of the company’s workforce, Bloomberg reported.
Block and Crypto.com leaders emphasised that they needed to embrace AI to make drastic changes, or else get left behind.
0G Labs, which develops blockchain systems for AI agents, decided to slash 25 per cent of its headcount in late April, according to an internal memo viewed by Bloomberg and confirmed by a spokesperson.
“As a company building AI infrastructure, we believe in using our own technology internally,” CEO Michael Heinrich said. “The efficiencies we have seen are real, and this shift reflects how AI is already reshaping how modern companies operate.”
Mark Ma, associate professor of business administration at the University of Pittsburgh, has been tracking AI-related layoffs in recent months. Although he and his colleagues have attempted to classify the layoffs as either AI-washing or real job displacements, he said it is almost impossible to determine from the outside.
John Todaro, a Needham analyst who covers crypto firms, is inclined to believe the recent staff cuts are more attributable to a months-long business downturn than modern-day efficiency tropes.
“Whenever I see these layoffs and AI is part of the reason, I step back and ask, do we see this from companies where the market is super hot?” he said. “I am not sure I buy that AI angle.” BLOOMBERG
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