As of today, Coinbase has 139 tradable assets. The exchange added a whopping 83 assets to its trading list in 2021, nearly double the number of assets it had accumulated in the eight years since its founding. Is this a cash grab? Is any of this lesser-known tokens or coins securities? Are these irresponsible, or too ambitious? What does Coinbase’s rapid expansion of assets mean?
A money grab? I feel that the answer to the first question was an emphatic “No!” Coinbase makes a lot of money trading fees but it is not about the money. Coinbase started out with a small booth at a conference “just trying to make something that customers wanted,” pitching T-shirts and a hosted Bitcoin (BTC) wallet. Coinbase is now the second largest crypto exchange in the globe.
It’s a common tale that an entrepreneur builds something, finds success, sells and moves on, but Coinbase founder and CEO Bryan Armstrong was manning that small booth eight years ago, and is still at Coinbase today. The exchange remains true to its core values, which Armstrong also believes in: economic freedom, property rights, an efficient global exchange system, and, my opinion, building what customers want.
Back in June of this year, Armstrong posted a series of tweets indicating Coinbase’s change of approach to determining which assets get listed. Coinbase has changed from a merit-based approach that relied on internal criteria to a pragmatic one that is based on externalities. This new approach allows market participants to determine which assets are most valuable. Remember: Always do your own research even if the listing is on Coinbase.
Coinbase acknowledges and accepts its leadership role in shepherding in new regulation that is beneficial to the new economy. The exchange seems to be conscious of its leadership role within the crypto space and is diligent in ensuring compliance. Coinbase wouldn’t list assets that could provoke regulators. In the United States, nonaccredited investors are prohibited from investing in early projects.
While the Securities and Exchange Commission is treating stablecoins as securities, Coinbase’s listing parade has continued almost weekly. The SEC could consider Coinbase’s trade pair assets securities. It is highly probable. The barriers currently in place for investor protection may be falling. Coinbase’s aggressive listing activities are in line with its core values of economic freedom, strong property rights and core values. It may also hint at a private policy being discussed.
As Melissa Strait, chief compliance officer at Coinbase, pointed out:
“We’ve always believed that for crypto to gain the legitimacy needed for mainstream adoption, compliance can’t be an afterthought — it has to be core to the way we operate.”
She also added: “We strongly believe that in order for cryptocurrency to gain widespread acceptance, we must have a constructive relationship with the regulators and agencies that have been charged with oversight of the crypto ecosystem.”
Nearly all the assets listed this year are ERC-20 tokens on the Ethereum network. Why? Because they would be deemed “sufficiently decentralized.” This phrase is taken from a speech that William Hinman (former director of the SEC’s Division of Corporation Finance) made in June 2018. As long as an asset is as distributed as Etherum on the date of that speech, it can be considered informally and tentatively a security. We are grateful to Hinman.
Irresponsible or overly ambitious?
One thing that I’ve noticed while researching this topic is that Coinbase is extremely organized and process-driven. It should be obvious given its success. Coinbase’s team is aware of the legal circumstances in which the exchange operates, and has built decision-making systems designed to keep pace with this breakneck industry. Armstrong stated that he would like to have a billion customers. That’s quite ambitious! Overly, though? If you believe in an open and free financial system that is independent of any central actors, then no.
Coinbase claims it is “agnostic” about listing tokens. Coinbase does not make any judgments about the projects it lists. However, it rewards builders who meet all its listing criteria. It’s interesting to see what projects make it onto Coinbase. A Coinbase listing is almost like getting into the big leagues.
Coinbase listed 16 DeFi projects in 2021. It’s not surprising that decentralized finance is at the top. First-layer projects came in second place with 12 — again not really a surprise, as everyone wants to be the next Ethereum. Eight decentralized exchange tokens ranked third, with NFT gaming and stablecoins tied for fourth, with seven projects each. Fifth place went to layer-two Ethereum projects.
Coinbase really took the leap this year. It could mean many things, depending on who you ask. It is a bullish sign for the industry, in my opinion. Coinbase gives its customers more options and more chances to find the undervalued gem they desire. Each individual must do their research. Access to a reasonable number of assets is what some consider the best platform. The freedom to choose is a responsibility. You may be forced to make a choice by the SEC.
This article does not contain investment advice or recommendations. Each investment and trade involves risk. Readers should do their own research before making any decisions.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Stephen J. Mesa is the unofficial “ambassador” of Cointelegraph Markets Pro. He is a commercial sales manager of lawn and leisure at John Deere Equipment, with 16 years of experience as a real estate market analyst and 10 years designing and installing custom car audio and alarm systems.