Waiting Game? Why Coinbase Won’t Add New Cryptos Anytime Soon
Originally published on: CoinDesk
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March 26, 2018
Supporting new crypto assets may be a “top priority” for Coinbase, but any such additions to its order books might not be close on the horizon.
According to Coinbase general manager Dan Romero, the San Francisco-based exchange wants to add several new cryptocurrencies in line with customer feedback, but it’s treading cautiously as U.S. regulators deliberate on how they might treat certain uses of the technology.
“The reality of the regulatory situation keeps us from going and doing that right away,” he said.
Specifically, Romero mentioned the Securities and Exchange Commission (SEC), which is rumored to have dozens of investigations ongoing concerning initial coin offerings (ICOs) – fundraising efforts that involve the creation of custom cryptocurrencies. While speculation is ongoing about the nature of the investigations, the regulator seems to be gathering information in an effort to make a ruling on when a crypto token is a security.
But since Coinbase is not a licensed broker, at least not yet, it cannot trade instruments that qualify as securities.
And what the firm doesn’t want to deal with is adding crypto assets to its platform and then being ordered to remove them again, as several exchanges in Hong Kong had to do when crypto tokens were retroactively deemed securities in February.
“When we get to a point that we know which digital currencies and assets are securities, which ones are commodities, money or currency, it would be immensely helpful,” Romero said, adding:
“If the regulatory environment gets clearer, I think you will see Coinbase adding many new assets to our platform.”
The conversation comes days after the company published two blog posts on March 16, outlining its process for adding new crypto assets and how it approaches newer forked and airdropped cryptocurrencies created by way of changes and splits in already active softwares.
Specifically, the two posts mention Coinbase’s Digital Asset Framework, unveiled in November, which provides a checklist for helping the company decide what qualifies as a healthy cryptocurrency. The checklist includes things like governance, protection against double-spending and engineering track record.
That said, some in the industry see the decisions of the market-leading exchange as random, if not altogether dubious.
For instance, Coinbase has not embraced ethereum classic, a cryptocurrency created out of an ethereum hard fork in June 2016. But it did add bitcoin cash, the cryptocurrency that hard forked off bitcoin in December in an attempt to provide an alternative.
Depending on who you ask, such choices even have an air of conspiracy to them, a sentiment that was on display last week at the MIT Bitcoin Expo.
“Christmas, the time when the conversation around the table is crypto,” Nick Ayton, founder of Chainstarter, a platform for launching ICOs, said on a panel addressing token sales. “Everyone downloads the app. All of a sudden, you see bitcoin cash appear.”
“No announcement. There’s a lot of funny business going on.”
Indeed, the move was seen as having a partisan bent.
Firstly, while company leadership had initially been on the side of those who wanted to increase the bitcoin block size, Coinbase didn’t support the asset from the outset, angering plenty of bitcoin holders on the platform, who were to receive an equivalent amount of bitcoin cash.
Then, shortly after adding support for the coin, Coinbase suddenly disabled trading of bitcoin cash, eventually announcing that massive buy demand had caused insufficient liquidity. As Coinbase worked to reinstate trading, bitcoin cash hit all-time-highs, and some pointed to insider trading, which the company said it was looking into but has yet to make any determination on.
On the subject, Romero briefly commented, “If you run bitcoin cash through the Digital Assets Framework, it passes that framework.”
‘All about the customers’
The framework, though, isn’t the only guide for Coinbase’s decision-making on new crypto assets.
According to Romero, a committee of roughly eight people – the committee isn’t their main job – evaluate which crypto assets to add based on customer demand (bitcoin cash was a very popular choice, for instance).
Romero wouldn’t divulge many details about the committee, but he did say that there is currently no standard for collecting customer feedback and confirmed that Coinbase CEO Brian Armstrong is not on the committee.
While Romero declined to comment on which assets are currently being considered, nevertheless, the fact that Coinbase is gauging popular demand might provide insight into what cryptocurrency assets might be next.
Coinbase currently supports bitcoin, bitcoin cash, ethereum and litecoin. But, for some time, there have been rumors about the exchange adding Ripple Inc’s native cryptocurrency, XRP.
So far, Coinbase has denied all rumors related to XRP support. But the cryptocurrency has seen a whirlwind of attention since its price started rising in December – hitting a $3.82 all-time-high, according to CoinDesk’s Price Index – and more than 26,000 people have signed a petition asking Coinbase to add the asset.
Speaking to the startup’s interest in serving its customers, Romero said:
“The top thing, assuming you’ve passed the framework, is customer demand. Our customers. Not what social media wants. Not what CNBC wants. Our customers. We keep track of constant feedback from our customers.”
Dan Romero image via Coinbase
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