One of the world’s largest cryptocurrency platform has had a great week, as positive news floods in regarding the platform’s expansive development plans.
Coinbase’s Custody Service Secures The Business Of A $30 Billion Hedge Fund
Institutional investment seems to be all the rage in cryptocurrency circles, with many citing this form of investment as the next step for the cryptocurrency market. Some have even gone on to say that an influx of institutional investors will welcome in new all-time highs, with Bitcoin easily surpassing $20,000 as the industry sees rapid growth as well as development.
However, in the industry’s current state, there isn’t enough infrastructure to support many institutional firms, with these investors citing security and regulatory risks as the main reasons why they have been slow to enter the market. But this is quickly changing, with firms like Coinbase, Blockchain, and Circle all opening cutting-edge services aimed at institutional clients.
According to a recent report from Business Insider, institutional investors have begun to flock to Coinbase’s institutional-focused service. Individuals who are familiar with the matter stated that the firm had already taken on an unnamed $20 billion hedge fund through its Prime service, which intends to provide custodial, trading and management support for clients from legacy markets.
Colleen Sullivan, who heads a cryptocurrency-centric venture capitalist firm CMT Digital, commented on the need for prime brokers in this industry, stating:
“Without a prime broker, trading firms are directly subject to events that an exchange may suffer such as hacks, regulatory issues, operational issues, tech issues (and much more) — all of which may lead to loss of the trading firm’s cash and coins.”
It is clear that this is just the beginning with other industry leaders and firms pointing out that an influx of institutional clients may arrive within the near future.
Facebook Restores Cryptocurrency Advertisements, Noting It Has No Intent To Block Legitimate Firms
As reported at an earlier date, Brian Armstrong, Coinbase’s CEO, announced that Facebook had approved the platform’s request to post advertisements.
These advertisements come after an almost six-month hiatus in cryptocurrency-related Facebook ads, as the world’s largest social media platform temporarily banned that variety of ads citing the consumer protection risks in the ICO sub-industry.
As a result of a revamped system for prospective cryptocurrency-related advertisers, Coinbase was required to submit relevant licenses and background info pertaining to the product that the firm wished to advertise, ensuring that scams are not seen by any Facebook consumer. The social media platform’s approval essentially endorses Coinbase as a bona fide company, not affiliated with any cryptocurrency scams or malpractices.
Many cryptocurrency personalities and consumers see this as a large step towards adoption, with the arrival of Coinbase ads reaching millions of consumers who have not received a taste of what this industry has to offer.
Coinbase Moves One Step Closer To Listing Securities Crypto Assets
The SEC has had its eye on the cryptocurrency industry for months, as many regulators like to bring attention to the multiple risk factors involved in investing in this industry. Additionally, the U.S. regulatory body has pointed out that some cryptocurrencies may be considered a security in the future, resulting in stricter regulatory oversight. This has led firms like Coinbase to stray away from listing and/or endorsing cryptocurrency securities due to the potential regulatory risk involved.
However, as of early June, Coinbase has been working to list SEC-regulated crypto securities as revealed by Asiff Hirji, the President and COO Of Coinbase. Hirji wrote:
“Today, we’re announcing that Coinbase is on track to operate a regulated broker-dealer, pending approval by federal authorities. If approved, Coinbase will soon be able to be offering blockchain-based securities, under the oversight of the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA)… This is all being enabled by our acquisition of Venovate Marketplace, Inc., Keystone Capital Corp., and Digital Wealth LLC.”
Early last week, a Coinbase representative told Bloomberg that it had received the green light from the SEC and the Financial Industry Regulatory Authority (FINRA) to acquire the three aforementioned firms.
The acquisition of these three companies will allow Coinbase to facilitate a variety of services for cryptocurrency securities, as the firm will receive the licenses required to be classified as a broker-dealer, an alternative trading system and a registered investment adviser all at once. These new licenses given to the platform will allow Coinbase to allow its customers to eventually trade for tokenized securities, ICOs, along with also permitting the firm to offer margin as well as over-the-counter services.
However, reports later noted that the firm had not received explicit approval from the SEC to acquire Keystone.
Coinbase spokeswoman Rachael Horwitz stated:
“The SEC’s approval is not required for the change of control application. Coinbase has discussed aspects of its proposed operations, including the acquisition of the Keystone Entity, on an informal basis with several members of SEC staff.”
Despite the setback, it is likely that it is only a matter of time before Coinbase receives regulatory approval to acquire the aforementioned firms, and subsequently list cryptocurrencies deemed securities by regulatory bodies.
Coinbase Forms A So-Called “Political Action Committee” aka PAC
As mentioned, cryptocurrencies are often on thin ice when it comes to regulation as many governmental figures are skeptical of the industry (at best). Speaking on the “challenging” side of cryptocurrencies, the chairman of the U.S. Federal Reserve stated:
“They (cryptocurrencies) are very challenging. Cryptocurrencies are great if you are trying to hide money or if you are trying to launder money. So we (regulators) have to be very cautious as well as conscious of that.”
But as divulged by Politico, Coinbase has plans to the change governmental sentiment regarding this nascent industry, aiming to lobby for more regulatory leniency and acceptance through a recently established political action committee (PAC). For those who are unaware PACs are organizations that raise funds and subsequently donate capital to political campaigns that it supports, hoping to influence certain decisions made in government.
It is likely that Coinbase has plans to reach governmental figures involved in financial regulation, donating to these figures to help create a more accepting environment for the cryptocurrency industry.
What Does This All Mean?
Many have seen the recent news regarding the platform as a bullish sign for the industry overall, as these developments indicate that sentiment regarding the industry will only improve moving forward. Additionally, news like the reintroduction of Coinbase advertisements, along with Coinbase’s Prime service taking on a $30 billion client, signify that retail and institutional adoption is set to see rapid growth in the near future.
The Washington Post put it best when it called Coinbase a “cryptocurrency empire,” as many users and industry onlookers would agree, due to the fact that Coinbase has become a multi-faceted giant in this ever-growing industry.