American cryptocurrency exchange giant Coinbase has started plans for an Initial Product Offering (IPO) that might happen before 2021 – which would make it the first major cryptocurrency exchange do a public sale. The story was scooped via anonymous sources by Anirban Sen, Joshua Franklin and Anna Irrera at Reuters on July 9, 2020.
If successful, this application would be the first globally listed cryptocurrency company and mark an enormous milestone for the industry, which has just recently gained traction from enterprise and institutional audiences and according to Reuters:
“The listing would need the U.S. Securities and Exchange Commission’s (SEC) blessing. Were the watchdog to greenlight it, it would represent a landmark victory for cryptocurrency advocates vying for mainstream endorsement.
“Coinbase could pursue the listing later this year or early next year, the sources said, cautioning that the plans are still subject to change. The company has not yet registered its intention to go public with the SEC, but has been in talks to hire investment banks and law firms, the sources added.”
“The sources requested anonymity because the listing preparations are confidential. A Coinbase spokesman said the company does not comment on rumours or speculation. The SEC declined to comment.”
Philippe Bekhazi, CEO of Stablehouse, a leading payment and FX exchange platform serving stablecoin issuers, merchants, end-users, and traders, told Blockchain News:
“Coinbase’s IPO, if successful, will be the first US public listing of a crypto-related company with a meaningful and active business. This will be an important milestone that will set a valuation benchmark for the space — however, it will certainly not be a simple journey. Coinbase is not the first global crypto giant rumoured to consider an IPO, and others have tried and failed in the past. The most notable was perhaps the application by Bitmain Technologies in China, which was later shelved in 2019. I anticipate that the majority of issues that Coinbase may face will come from auditing. What’s important to remember is that when reviewing an IPO application, the SEC will examine Coinbase first and foremost as a company, rather than the activities of the crypto industry as a whole. In this sense, a potential green light for a Coinbase IPO will be more a symbolic move, rather than a ringing endorsement of cryptocurrencies from the SEC.”
Ashish Singhal, CEO and Co-founder of CRUXPay and Coinswitch.co, added:
“While the journey toward approval for this IPO will be difficult, if any crypto company in the US has a chance of getting approval then Coinbase tops the list, primarily because the exchange is very cautious of regulatory standards. One major obstacle will likely be the regulation of cryptocurrencies overall in the US. The SEC has said in the past that while some cryptocurrencies can be classified as securities and be regulated, it has no clear idea on how to regulate most cryptocurrencies.”
“If Coinbase can overcome these obstacles and prove successful, it will have a significant impact. It will bring legitimacy, adoption and awareness to the industry. This will also force regulators across the world to take a more serious look at crypto regulations and not just keep delaying it. This will be a historical moment and could very well pave a bright future for the crypto ecosystem not just in the US but all over the world.”
Adam Traidman, CEO of BRD, the most secure mobile cryptocurrency wallet, told Blockchain News that it’s all good news, even though Coinbase is a direct competitor:
“Coinbase has been a competitor of ours for quite some time, and we’ve been head to head with them as a leading wallet. With that said, they do keep the industry competitive with great products. And if they do become a publicly-traded company, it would validate the entire industry more than we can imagine. If such an event should happen, it should be celebrated by the entire industry. The impact can very well drive another large influx of retail demand, which in turn will further increase demand from the institutional ecosystem.”
Dave Hodgson, Chief Investment Officer of NEM Group & Managing Director of NEM Ventures, commented:
“It is positive news to see one of the larger regulated institutions in crypto filing for a public listing. It will certainly put crypto into the mainstream press which always helps adoption. Coinbase now has a strong mix of retail and institutional client bases, so a listing would also give retail investors a way to gain exposure to both of these markets, beyond simply holding tokens. Coinbase has already been making good ground recently in retail with its issuance of debit cards and dollar-cost averaging.”
“The regulator in my view shouldn’t have an issue with the listing: they are regulated and hold relevant licenses in operational jurisdictions, as far as I’m aware. They are a financial services company, similar to any other digital bank. However, time will tell if that assumption holds true and if the listing is even real–until it is confirmed by the company and the details are known it is very hard to speculate on the likelihood of approval.”
Seamus Donoghue, VP Sales and Business Development at METACO, also piped in with his views.
“For the crypto industry as a whole, the listing is another sign that crypto markets are no longer “the wild west”. They are coming of age and their main participants, of which in the context of regulated retail markets Coinbase is one of the largest, are maturing into mainstream financial institutions. The higher level of regulatory compliance required of public companies would enable Coinbase to build more institutional partnerships such as the recently announced banking partnership with JP Morgan and will ultimately drive broader acceptance of, and access to crypto markets.”
“In terms of regulation, a listing would bring significantly more transparency and disclosure requirements for Coinbase, which would certainly be a strong value proposition for clients that are uncomfortable about the counterpart risk they are taking when they leave their funds on an exchange. If the listing results in strong client inflows for Coinbase, then others both in the US and globally will undoubtedly take note that it is a path to build trust in their marketplaces and public listings could become popular for other major exchanges.”
“In the approval process, I don’t expect there would be any concerns from the SEC, as this is a growing and key industry player moving from the less regulated private markets to the highly regulated public markets–I expect the SEC would be a strong champion of such a move.”
Nick Cowan, out of Gibraltar and CEO of the Global Stock Exchange (GSX) Group, noted:
“Any advances towards crypto business IPOs makes for very interesting analysis, and in particular, adds a new layer of legitimacy to the sector. Some bitcoin mining companies made similar announcements last year, and some crypto asset exchanges have made parallel inroads this year, pointing to the ongoing maturation of the crypto space. Given the fact that Bitcoin was born on the back of the previous 2008 financial crisis, it seems as though the timing of this news, given the economic impact of COVID-19, is interesting to say the least. Many of the most prominent blockchain projects are now moving into the next stages of development and further fundraising will go a long way to ensure further innovation.”
More from Kristen Stone, Business Development at Blockdaemon and previous Product Manager at Coinbase:
“This is an opportunity for the mainstream to be involved in crypto in a clear and direct way, which fits their model of doing business. On IPO, we are expecting a lot of demand which was previously latent to come flooding in and institutions that were previously gated from participating in the ecosystem will be able to signal their interest in this technology through a traditional market. In this way, Coinbase is bridging the gap between the traditional markets and the future of finance. As a result, the underlying assets and the adoption of those assets will continue to gain traction.
“When considering the implications of the news around global regulation around crypto assets this is not particularly pertinent. Regulation is a recurring topic of conversation in crypto, but I don’t think it’s a relevant question to discuss broadly as it varies largely across jurisdictions. Much like the internet, there will be waves of regulation in crypto but the momentum and interest are substantial and unlikely, if not impossible, to derail the adoption curve we are seeing.”
“Regarding the approval process – Coinbase is the most trusted company in the crypto space. It set the precedent to meet regulatory requirements across the board; at the federal level becoming registered as a money service business and at the state level obtaining and maintaining licenses where applicable. By putting regulatory requirements first, Coinbase became the most trusted company in this space. I expect it has done the same in this situation, implying there will be limited pushback from the SEC.”
Erick Pinos, Ontology America’s Ecosystem Lead, said:
“Reports of a planned Coinbase IPO have resulted in some community backlash because of the notion that a cryptocurrency exchange would go public through the same regulatory system that it arguably aims to upend.”
“{Still, a Coinbase IPO would no doubt be a symbolic achievement of regulatory acceptance and a step towards legitimizing Bitcoin and cryptocurrency in the public’s eye. Approval of the IPO application is likely, given Coinbase’s careful consideration to US regulation, particularly in relation to KYC and only listing assets following intense legal scrutiny and due diligence.”
“Coinbase has long been an industry leader, so we are likely to begin to see other exchanges follow suit. However, the more tokens an exchange supports, or the more an exchange’s operations are conducted outside of the US, the more difficult it’ll be for IPO applications to be approved. Coinbase is in its own league in terms of public reputation and avoiding regulatory grey areas, followed only by other leading exchanges like Gemini or Circle.”
One of the sources at Reuters said that Coinbase, which was valued at more than $8 billion in its latest private fundraising round in 2018, is exploring going public via a direct listing instead of a traditional initial public offering (IPO).
