Coinbase is aiming high and expanding aggressively as the popularity of blockchain and crypto assets soars.
The San Francisco-based cryptocurrency exchange said last week it is its intent to move beyond its current offerings of bitcoin (), bitcoin cash (), ether () and litecoin (). By using the purchase to become a broker-dealer registered with the Securities and Exchange Commission, Coinbase wants to offer other digital tokens -– many of which the SEC regards as securities — without running afoul of regulators. The purchase could also allow Coinbase to sell traditional assets such as equities.
Coinbase simultaneously announced it bought Venovate Marketplace, an SEC-registered broker-dealer, and Digital Wealth, which is a Registered Investment Advisor. Coinbase did not reveal the respective purchase prices. In April, it purchased Earn.com and has also been bolstering its professional trading platform.
“Coinbase now has a unique advantage and responsibility to work closely with regulators and pave the way for other players in the crypto ecosystem,” Kulkarni says.
In a published Wednesday, Asiff Hirji, the company’s president and COO, said that if approved as a regulated broker-dealer, “Coinbase will soon be capable of offering blockchain-based securities, under the oversight of the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).”
The company has a longer-term goal of fusing blockchain with traditional securities. “Ultimately, we can envision a world where we may even work with regulators to tokenize existing types of securities, bringing to this space the benefits of cryptocurrency-based markets, like 24/7 trading, real-time settlement, and chain-of-title,” Hirji said in the post.
Awaiting Regulatory Approval
There are potential obstacles to SEC and Finra approval of the Keystone deal, but many say the acquisition will ultimately pass muster.
“Coinbase has an outstanding record of compliance, so there is a high likelihood that this deal will go through,” says Taylor Monnig, the COO of Texas-based crypto-mining facility TMGcore.
He tells ThirtyK this will not be the first time an exchange has operated as a broker-dealer. Genesis Global Trading, which SecondMarket spun out and sold to Barry Silbert’s Digital Currency Group, is one example.
“The move to acquire Keystone Capital will have a major impact on Coinbase,” Monnig says. “It will allow them to sell any future token that is registered as a security and offer [over the counter] trading, and give their customers access to traditional investment opportunities outside of the cryptocurrency space in the future.”