For all those true Bitcoin believers who survived the crypto winter of 2017-2020 with their holdings intact, the list from digital currency exchange service Coinbase must have been a rationale.
Not only his list of $ 75.9 billion on Nasdaq marks the biggest pullback in crypto history, many would say it unequivocally established digital currencies as a force to be reckoned with on Wall Street. For crypto boosters around the world, put simply, this marked the day they were finally right.
“It sounds like a change in legitimacy not just for Coinbase but for the industry as a whole. Crypto has a chance to be a major force in the financial world, ”observed Coinbase CEO Brian Armstrong.
The group’s valuation came on the heels of a stellar set of first quarter results. The group achieved a turnover of 1.8 billion dollars over the period compared to 191 million dollars last year. He made a net profit of $ 800 million. This, according to The Street, made him worthy of being compared to New York Stock Exchange parent company ICE, which has a valuation of around $ 67 billion.
A more objective analysis would note that this is not a fair comparison. Yes, ICE reported $ 1.6 billion in revenue in the first quarter of 2020, putting Coinbase in the same situation. But Coinbase is a very different beast from the Wall Street establishment that ICE is.
Coinbase is very sensitive to ultra-volatile crypto valuations. A strong bull market performance in the first quarter of 2021, when bitcoin surpassed $ 60,000, should be compared to the fact that Coinbase recorded an annual net loss of $ 30 million in 2019, a year when bitcoin was on average. between 5,000 and 6,000 USD.
As it stands, Coinbase is also regulated and licensed under the US Money Services Legislative Framework, and not as a premier exchange or brokerage for services such as credit for trading. This gives Coinbase a big advantage over its more heavily regulated counterparts like ICE or CME.
If that changes, there could be big consequences. If it were effectively regulated like a stock exchange, its ability to generate profits from blue chip brokerage, OTC brokerage and principal would be greatly reduced. If he was supervised as a prime broker or bank, his capital charge would be significantly increased.
While the IPO may validate the importance of cryptocurrencies as a speculative asset, it’s worth noting that so-called bitcoin maximalists also view the platform as a cheeky sell-off. They think he ditched the real principles of crypto for the golden goose offered by Wall Street. This is a fair argument.
Bitcoin entered the market with promises of ‘no trust’ banking, cheaper payments, privacy, and – most famously of all – ending the public’s reliance on financial intermediaries. But both by wooing Wall Street and passing regulation, particularly know-your-customer and anti-money laundering rules, Coinbase has not only abandoned the role of challenging the traditional fiat money system controlled by the ‘State, but also the confidentiality of the cryptographic transactions envisaged by the inventor. Satoshi Nakamoto.
The transmutation of the group into another intermediary operator has been fascinating to watch. It is not known whether the platform’s 56 million users understand or even worry that they don’t hold Coins but Coinbase IOUs, or that most transactions on the platform are not. not even settled via a public blockchain.
The IPO comes at a time when the original vision of Nakamoto’s challenger is shaken in other ways. Last week, a former deputy director of the CIA, Michael Morrell, approved the Bitcoin network, arguing that “blockchain analysis is a very effective crime-fighting and intelligence-gathering tool.” It was also a week when the famous libertarian Peter Thiel warned that China, a state of mass surveillance with great ambitions of digital currency, was using bitcoin as a financial weapon against the United States.
If that signals anything, it’s that the state, not the crypto, has won the day in terms of controlling the financial system. Rather than celebrating Coinbase’s listing, those who thought crypto would end the public’s dependence on central banks or financiers, should lament it. All indicators imply that the crypto has acted less like a liberator and more like a honeypot designed to lure users into more scrutiny and not less.
izabella.kaminska@ft.com