Coinbase Looking to ‘Rapidly Add’ New Assets, Opens Applications
Coinbase has announced a plan to “rapidly add” new assets to its system through open applications. The announcement is seemingly a change in direction for the exchange, which typically takes a methodical approach to adding cryptocurrencies.
Currently, Coinbase supports Bitcoin, Bitcoin Cash, Litecoin, Ethereum and Ethereum Classic. Essentially, they have only supported three cryptocurrencies and the two largest forks of those currencies.
The plan going forward is to add as many cryptocurrencies and tokens as possible, while adhering to a set of guidelines.
“Today we’re announcing a new process that will allow us to rapidly list most digital assets that are compliant with local law, by satisfying listing requests in a jurisdiction-by-jurisdiction manner. [. . .] The new process begins with a form for issuers to submit assets for listing at Coinbase, which we will evaluate against our digital asset framework. The application form and the digital asset framework will be regularly updated, and our form will indicate the latest version of the framework we are evaluating against.”
The form includes what you would typically expect: Not being classified as a security and not preventing Coinbase from performing Anti-Money Laundering checks on their customers. With that in mind, privacy coins are likely not eligible.
But it does seem that ICOs that are not considered securities will be considered. The digital asset framework referenced in the announcement has a whole section dedicated to ICO funded tokens.
It is not immediately clear how strictly Coinbase plans to adhere to their outline. It seems unlikely that every benchmark has to be met. Otherwise, some of the coins already on Coinbase would fail the test. One provision calls for a growing number of nodes under “Network Standards”.
“Growing # of nodes on the underlying blockchain. The project has a globally distributed node network, meaning operating nodes are not contained in a single country or geographic region.”
Bitcoin Cash has been losing nodes since August and while I couldn’t find historical data for Litecoin, it currently has just over 200 nodes worldwide. Ethereum Classic is even worse, with an unclear number of nodes, but seems to be under 20.
So, unless Coinbase plans to remove one of their current coins or “grandfather” them in, it seems unlikely that one failure will disqualify a coin from getting on Coinbase.
It is common to see crypto-only exchanges support hundreds of cryptocurrencies. Coinbase, by contrast has been slow to add currencies. It is one of the few connections between fiat and cryptocurrencies in the United States, so that prudence was warranted. It will be interesting to see how their further acceptance of the altcoin and ICO markets will affect that status and the markets themselves.
This does seem to be something that was at the forefront of the minds of Coinbase’s top brass when crafting the announcement,
“We think of Coinbase as the global bridge from fiat to crypto, from the fragmented financial system of today to the open financial system of the future.” they explained in the release’s conclusion “We believe this new listing process allows us to quickly add assets while remaining compliant with local law and continuing to offer our customers the safe, high-quality experience they have come to expect from Coinbase.”
The application process will be free-of-charge. However, Coinbase warns that could change if demand becomes overwhelming.
Coinbase was accused of insider trading after it added Bitcoin Cash earlier this year. The addition to Coinbase caused the Bitcoin Cash price to skyrocket. Some speculated that Coinbase employees were in a position to profit off of the move. Coinbase’s internal investigation revealed no evidence of insider trading. However, there is an on-going civil lawsuit related to the matter.
Coinbase says that it will no longer announce new asset additions far in advance. It is unclear if this will help or hurt their case when it comes to insider trading. That likely depends on how capable they are at limiting the number of employees who know that information in advance. It is also possible that they plan to add assets so quickly that a lengthy pre-announcement will be impossible.
While the perception may be exaggerated, Coinbase fills a niche as an exchange that only accepts relatively “safe” cryptocurrencies. Adding coins and tokens “rapidly” even with their vetting process will put that reputation at risk. Regardless, the altcoin market looks set for a shakeup.