Coinbase acquisition is a bet on easing crypto regulation
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Coinbase just made a bet on the future of new tokens with its acquisition of Liquifi, a platform for small startups to distribute and manage new tokens.
Why it matters: It's a sign the U.S.'s biggest crypto exchange is betting that regulators will soon ease restrictions on releasing and selling digital assets.
How it works: Liquifi is a platform that manages all facets of how a new token enters the world.
- Everything from automatically distributing tokens to investors and team members per the vesting schedule to facilitating the public launch distribution, whether it's a sale or a giveaway.
- It's the tokenized version of Carta, which early companies use to distribute equity shares.
What they're saying: "Launching a token today is too hard," Greg Tusar, from Coinbase's product team, wrote in Wednesday's acquisition announcement.
- "We want to remove these barriers by providing both the product and the expertise to make token launches simple, compliant, and scalable."
Zoom out: Millions and millions of dollars have flowed through other token launchpads, most particularly at Binance, the world's largest crypto exchange.
- But for several years now, any exchange doing its best to stay on the good side of U.S. regulators has had to steer clear of getting involved in this early action.
- In 2017, companies raised several billion dollars selling tokens to the public in what's known as initial coin offerings (ICOs), until the SEC cracked down in early 2018.
The impact: The real value for exchanges is in the long tail of these new offerings, with folks trading new tokens they missed buying: All that trading is the real revenue driver for crypto exchanges.
Yes, but: U.S. regulators are now approaching the crypto industry — and the token issuance question — in a whole different way.
- The SEC has held a series of hearing about how to change regulations to fit the new landscape of blockchain technology.
- One of the most immediate questions for the agency will be how to launch and distribute new tokens.
💭 Our thought bubble: If Coinbase were to use this acquisition to build some kind of launchpad, then a U.S.-based startup will be able to build up a bunch of excitement and users for its product.
- Then when it's ready to go live with a token, it can just tell followers to register for it on Coinbase.
- No weird wallets or strange on-chain song and dances (no VPNs to fake not being in the U.S.). Just log in, click and buy.
The big picture: A variety of moves out there suggest that companies expect clearer rules for crypto business across the board.
- Circle applied for a bank charter with the Office of the Comptroller of the Currency.
- And Kraken, another major US-based exchange that previously settled with the SEC over staking, brought the product back just as Donald Trump took office.
The bottom line: All signs suggest rules are coming for new offerings, whether the SEC writes them itself or Congress passes a new law.
