Coinbase cryptocurrency exchange's path to compliance

In line with the vision of "decentralization", the moment it became a trading product, it formed a currency circle with "exchange as the core". After the barbaric growth in the industry, and because of the lack of supervision, various exchanges are lined up and mixed. Today, when the regulatory stick is about to fall, where should the exchange go? Whether to embrace the supervision and integrate it into the traditional financial system, or to resist and choose to leave again? All this starts with Coinbase's embrace of supervision.

The hottest piece of news recently is that the cryptocurrency exchange Coinbase announced that it will be listed directly on the Nasdaq on April 14. Its stock code is "COIN", and related parties have analyzed that its valuation may exceed 100 billion U.S. dollars. . And behind this, it is Coinbase that demonstrates its real money-making effect as a platform.

In addition to mainstream currencies, exchanges have relatively higher returns in issuing tokens, or listing currencies. In fact, in 2015, there were many similar exchanges in China, and their main business was to list currency. Here I quote Messari's data, and observe and compare the cumulative return rate of each token within 5 days after it is listed on the exchange. It can be clearly found that the average return rate of the coin on Coinbase is the highest, with an average return rate of more than 91%. . However, it is worth noting that Coinbase's income distribution range is the widest, ranging from -32% to 645%. Therefore, although the benefits of buying Coinbase's tokens outweigh the risks, it is not a stable business.

If you are deeply interested in why the rate of return on Coinbase is much higher than that of other platforms, then you have to return to the supervision. According to Coinbase's prospectus, most of Coinbase's revenue comes from transactions between Bitcoin and Ethereum. As we all know, listings are also one of the pillars of revenue sources for other exchanges.

Here is a piece of news about XRP. On December 24, 2020, the U.S. Securities and Exchange Commission (SEC) announced that it had filed a lawsuit against Ripple and its two executives, accusing them of passing an unregistered, ongoing The digital asset securities issuance has raised more than 1.3 billion U.S. dollars. On December 29 of the same year, Coinbase announced that it would suspend XRP trading globally on January 19 of the following year.

Giving up most of the token revenue should be regarded as one of the costs of embracing regulation. Comparing data from various exchanges horizontally, Binance has 948 trading pairs, OKEx has 546 trading pairs, and Coinbase has only 125 trading pairs. There is also an interesting piece of cold knowledge. Currently, the top four derivatives exchanges: Binance, Huobi, OKEx, and Bybit are all established by the founding team from China.

Brad Garlinghouse, the CEO of Ripple, spoke on social platforms after being sued by the SEC: Today, the Securities Regulatory Commission decided to attack encryption technology. In the final resolution of the Chairman of the Securities Regulatory Commission, Jay Clayton, he was picking winners (in the cryptocurrency world) and trying to limit innovation in the U.S. crypto industry to BTC and ETH. This sentence can probably answer the single reason why Coinbase makes money. The only compliant cryptocurrencies in the eyes of the SEC are BTC and ETH, and Coinbase does not actually have many sources of income.

Yang Haipo, the founder of Coinex, once divided the exchange industry into [compliant market] [market outside of compliance] and pointed out the shortcomings of [compliant market]: no matter whether it is listed on the currency or in the way of trading , Are very restrictive. From the perspective of Coinbase's development options, the [Compliance Market] is also taking the traditional old path, and its ultimate goal is to go public.

As for the compliance road explored by Coinbase, it is not worth emulating, and whether it will become the mainstream in the future is still unknown. But at least it is certain that the cryptocurrency exchange, which is the core of the cryptocurrency trading, can eventually develop in the same way as traditional commodity exchanges under compliance, but the commodities are different, nothing more.