Coinbase puts on Big-Coin pants for the SEC as crypto platforms race toward regulation

Coinbase was the latest crypto company to seek out brokerage licenses in order to avoid heat from the SEC and tap into institutional finance.


June 8, 2018

 

Coinbase, the largest cryptocurrency trading platform in the US, just bought 3 traditional securities dealers to use their licenses and become a fully regulated SEC-licensed brokerage.

Coinbase and big crypto competitors like Circle are racing to get regulated — both to appease recently unleashed watchdogs and also to attract institutional investors that have deep pockets, but strict rules.

With great regulation comes great profitability

The acquisition puts Coinbase under the strict supervision of the SEC, which recently appointed a dedicated crypto-tamer named Valerie Szczepanik. Previously, Coinbase was regulated only by a hodgepodge of local authorities — meaning it could essentially do whatever it wanted.

So why would the world’s largest crypto platforms want more oversight? The answer is in the ICO.

ICOs, those bizarre love children of Kickstarters and IPOs, have already raised more than $9B this year. Since the SEC labeled these new coins securities, the only way for Big Crypto to get a slice of this growing pie — without arousing federal fury — is to play by the rules.

Now Coinbase has a license to Coin

Currently, Coinbase — which has 20m customers in 33 countries — only lists 4 coins (Bitcoin, Bitcoin Cash, Ether, and Litecoin) for exchange on its platform. 

But the company’s acquisition of 3 SEC-approved brokerages gives it all the licenses it needs to add any number of new coins to its exchange.

Plus, in addition to allowing crypto companies to list more coins, SEC-recognized licenses will also enable them to offer more services — and expand into the multibillion-dollar world of institutional finance.

Battle of the brokerages

So, to continue to benefit from the crypto community and take Wall Street’s cash, crypto companies are racing to put on their suits and ties. 

Coinbase is doing it by acquiring existing brokerage licenses — while competitor Circle announced earlier this week it would apply for them directly. 

As the race to regulation heats up, Coinbase (which has traded $150B worth of coins on its platform already) has a lead on the competition thanks to its high volume of trades — and expand-at-all-costs M&A strategy. 

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