Coinbase Launches New Exchange – The Cryptonomist

The news is official: yesterday, Coinbase announced that it has launched a new international exchange. 

It is simply called Coinbase International Exchange and can be reached at this address.

However, it is not a copy of the existing historical exchange, but something different.

Coinbase and the U.S. Pitfalls

Coinbase is a US company listed on the Nasdaq stock exchange. As such, it must strictly adhere to strict U.S. regulations, which limits its ability to expand. 

In addition, the SEC has recently been investigating Coinbase, specifically whether it allowed the exchange of unregistered securities. 

In other words, the U.S. company’s current relationship with U.S. authorities is problematic, so much so that it has even threatened to leave the United States. 

It is therefore no coincidence that the new Coinbase International Exchange appears to be regulated not by the SEC, but by the Bermuda Monetary Authority (BMA), which the exchange describes as “a highly respected and experienced financial regulator, led by an exceptional executive team and board of directors. 

The company also says that Bermuda’s regulatory environment is nevertheless known for high levels of transparency, compliance and cooperation, and that the BMA is a member of several international organizations and maintains close relationships with other regulators around the world. 

Therefore, this is not a flight from the United States, but a first step towards internationalization, which includes opening up to foreign jurisdictions.

The new exchange

However, the new exchange is by no means an identical version of the historical exchange dedicated to non-U.S. markets. 

For now, the Coinbase International Exchange only allows trading of perpetual futures, which are financial products not found on the traditional version. 

It is also currently only open to financial institutions by special request, although access is open to all. 

Accounts already registered with Coinbase can already log in to the new exchange using the same credentials, but unless they have requested and been activated, they will be redirected to the old version when they log in to the new exchange. 

These are therefore two separate and non-competing exchanges. 

Spot markets and retail customers can continue to use the old version, while non-U.S. institutional customers wishing to trade BTC and ETH futures must use the new platform. Additionally, on the Coinbase International Exchange, all trades are in USDC and it still does not support fiat currencies.

Future development

However, this initiative looks like a first step towards the concrete threat of leaving the US. 

It must be said that several exchanges have separate platforms for the US and the rest of the world, such as Binance or the failed FTX. 

For now, Coinbase’s spot markets and retail customers continue to operate on one platform, the historical one, but it cannot be ruled out that in time, the new international version will also open spot markets dedicated to non-U.S. retail customers. 

On the other hand, FTX was also a U.S. exchange, but it had opened its headquarters in the Bahamas and from there operated different platforms targeting different markets. 

Since US regulations are in many cases more stringent, it makes little sense to force foreign customers to be subject to such restrictions. Therefore, it makes more sense for crypto exchanges that serve both U.S. and foreign customers to have multiple platforms, each with only the limits imposed by the specific jurisdictions they are dedicated to. 

Thus, while the Coinbase International Exchange is currently a niche platform dedicated to a specific market and customers, it is not certain that it will not become the company’s full platform dedicated only to non-U.S. customers in the future. 

It is true that the U.S. market is Coinbase’s primary market, but the U.S. exchange is also widely used abroad.

Coinbase on the stock market

Yesterday, Coinbase’s stock rose 2.3% on the Nasdaq, roughly the same as Bitcoin‘s price at the close of U.S. exchanges. 

However, if we extend the analysis to all of 2023, we see that Coinbase’s stock has risen much less than bitcoin, accumulating a total gain of just under 54 percent in just over four months. 

While this may seem like a significant gain for a publicly traded stock, it must be said that bitcoin rose 72 percent over the same period, and over the course of 2022, the percentage loss in value for Coinbase was 86 percent. 

So in 2022, Coinbase’s share price lost more than bitcoin’s share price, and in 2023, it gained less. 

In other words, despite the +54% in 2023, the company’s stock is not doing particularly well on the stock market. Suffice it to say that it has fallen from its initial listing price of $380 in April 2021 to around $51 yesterday. Its medium/long term trend has so far been consistently down, except for a few instances when it has shown a tentative rebound. 

Moreover, it is down nearly 29 percent from its mid-April peak, while bitcoin is down only 8 percent. 

Such data shows that the company’s strategy does not seem to be very effective at the moment.