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Coinbase Listing Notes: Fined $6.5 Million? Then DPO



On March 19, the US compliant cryptocurrency exchange giant Coinbase and the CFTC (US Commodity Futures Trading Commission) reached a settlement on allegations of improper reporting of trading volume and "self-trading", and were fined $6.5 million. At the same time, the company announced that it will postpone the listing until April. Why is Coinbase, which has always been cautious under supervision, able to go public? What impact will the accusation storm have on its listing process and industrial development? Founded in 2012 and headquartered in Delaware, USA, Coinbase is the largest cryptocurrency exchange in the United States. Coinbase is committed to providing encrypted asset trading and custody services. It is said that its stock is currently valued at more than $100 billion in the private market. Following the $5 million Series A investment led by Fred Wilson in May 2013, Coinbase has won the favor of many well-known investment institutions. This is not unrelated to the rich user resources that Coinbase has accumulated over the years. It is understood that so far, Coinbase's cumulative transaction scale has exceeded 450 billion US dollars, and the custody assets have exceeded 90 billion US dollars. The platform has a huge trading group including 43 million retail investors and more than 7,000 institutional users. Since its inception, Coinbase has been setting a benchmark in the industry in terms of compliance. Although you are one of the most well-known cryptocurrency exchanges in the world, there are more than 9,000 cryptocurrencies in the global encryption market, but Coinbase only lists 44 cryptocurrencies. Under the prudent market operation. Compliance is an important advantage of Coinbase's listing, and Coinbase has put a lot of effort into compliance. As early as around 2013, Coinbase began to apply for a money transmitter license (Money Transmitter) in the United States. In 2017, Coinbase became one of the first cryptocurrency exchanges to obtain the BitLicense of the New York Financial Services Department's encryption license, and its business operations in New York State obtained official compliance certification. In March 2018, Coinbase won the e-money license issued by the Financial Conduct Authority (Financial Conduct Authority) in one fell swoop, which also enabled Coinbase to carry out cryptocurrency-related businesses in EU member states towards compliance . Subsequently, Coinbase registered MSB licenses in multiple states through the US Financial Crimes Enforcement Network (FinCEN). ARK Ark Fund increased its holdings of Block and Coinbase: According to news on July 15, ARK Ark Fund increased its holdings of Block and Coinbase. (Golden Ten) [2022/7/15 2:15:01] Coinbase, pursuing compliance, has paved the way for listing for more than two or three days. More than two years ago, rumors about the listing of Coinbase came out frequently. One of Coinbase's original investors, Adam Draper, revealed in October 2018 that Coinbase had confirmed that it was about to launch a $500 million IPO. After the news came out, there was an upsurge of discussion in the cryptocurrency circle. At that time, the cryptocurrency market was in a cold winter, and the COO of Coinbase had to come forward to clarify that there would be no IPO. However, on December 17, 2020, Coinbase announced through its official blog that it has submitted a draft registration statement on Form S-1 to the SEC (United States Securities and Exchange Commission). Whether it's an IPO or a DPO (Direct Public Offering/Direct Listing), this is the way to go. The so-called DPO, also known as DLP (Direct Listing Procedure), means that the issuer of the securities does not rely on or go through an underwriter or an investment banking company to issue listing information on the Internet, transmit issuance documents, and directly issue new shares without issuing new shares. stock. Just five days after the news broke, the cryptocurrency XRP (Ripple) listed on Coinbase was identified by the SEC as an illegal sale of unregistered securities. On the same day, the SEC formally prosecuted Ripple for violating the federal securities laws. This landmark event of US cryptocurrency regulation sounded the alarm for trading platforms such as Coinbase. In order to avoid regulatory risks, Coinbase soon announced that it will suspend XRP trading. Three Arrows Capital transferred $90 million worth of FTT to the Kucoin exchange: On June 15th, Larry Cermak, vice president of research at The Block, tweeted that he did not understand why Three Arrows Capital would send 9,000 USD on KuCoin instead of FTX million dollars in FTT. [2022/6/15 4:29:33] On January 20 this year, Coinbase officially delisted XRP, which ranks high in the market capitalization rankings, but said it would continue to pay attention to legal developments related to XRP. Among all the mainstream encrypted asset exchanges on the market, Coinbase was the first to make the decision to suspend XRP trading. Then OKCoin and Binance US followed suit. However, OKEx and Huobi, which are well-known to domestic users, have not made business adjustments for XRP. On February 25, Coinbase officially announced the S-1 document, and its Class A shares will be DPO on the Nasdaq Global Select Market, under the code "COIN". Judging from the information disclosed in the S-1 document, Coinbase’s business situation is generally improving. Affected by the rise in the price of cryptocurrencies such as Bitcoin, Coinbase, as an intermediary in cryptocurrency transactions, saw a sharp increase in transaction volume and active-zce users, and a steady increase in the number of authenticated users. In 2020, the transaction volume of Coinbase will be approximately US$193.1 billion, an increase of 141.7% over the previous year. The number of certified users exceeded 43 million, a year-on-year increase of 34.4%, and the monthly transaction users were about 2.8 million, a year-on-year increase of up to 180%. Table 1 Overview of platform scale (source: S-1 file submitted by Coinbase) Filecoin Foundation opens the 13th round of developer grant applications: On November 14th, the Filecoin Foundation opened the 13th round of developer grant applications. [2021/11/15 21:51:04] Unit: Million In terms of profitability, Coinbase will turn losses into profits in 2020. According to its disclosed data, Coinbase's total revenue in 2020 will be approximately US$1.277 billion, a year-on-year increase of 139%, and its net profit will be US$322 million, reversing the net loss in 2019. From the perspective of cost control, operating expenses, which account for the largest cost, will account for 68% of total revenue in 2020, a significant decrease from 109% in the previous year, and the cost structure optimization effect is remarkable. Table 2 Consolidated operating statement (source: S-1 file submitted by Coinbase) Unit: US$1,000 In the past two years, DPO has been increasingly favored by technology start-ups. Following the successful DPO of enterprise software Slack and music platform Spotify through the New York Stock Exchange, Coinbase DPO has also been selected this time and will become the first cryptocurrency company to be directly listed on Nasdaq. Compared with IPO, DPO saves underwriting fees, reduces listing costs, and has no lock-up period restrictions. There is no problem of equity dilution. The interests of shareholders are guaranteed and can be cashed out directly. After the US stock market opened, mining companies generally fell, and Coinbase rose against the trend: After the US stock market opened, mining companies listed generally fell, and Coinbase rose against the trend. At the time of writing, Jianan Zhizhi's stock price fell to $7.72, a drop of 3.39%, with a market value of about $1.22 billion; Yibang International's stock price fell to $2.57, a drop of 2.46%, with a market value of about $477.6 million; To $9.45, a drop of 3.08%, with a market value of about $538.59 million. However, Coinbase's stock price has risen, currently at $228.85, an increase of 1.76%, and its market value is about $47.78 billion. [2021/5/24 22:39:46] Table 3 Differences between IPO and DPO On March 24, Brian Armstrong, CEO and co-founder of Coinbase, said in the road show on the listing line, "Direct listing can make all Investors, institutions, retail investors and anyone in between participate in our opening order on the Nasdaq platform...this is a step towards our mission as an open financial system as everyone can participate in our direct Listing. It creates all the transparency that we want Coinbase to have.” Following the listing of Canaan Technology (CAN.O), the "first stock in the blockchain" mining machine manufacturer, the listing of Coinbase has truly connected encrypted assets and traditional finance, and has become another milestone event that cannot be ignored in the development of the encrypted market. This listing has naturally benefited Coinbase itself a lot. Under the general trend of gradually strengthening regulatory constraints on encrypted assets, Coinbase has opened up the traditional financial financing channel of mainstream institutional funds through listing. The data shows that the proportion of institutional user trading volume on the Coinbase trading platform has increased from 20% in Q1 2018 to 64% in Q4 2020, while the proportion of individual user trading volume on the platform has dropped from 80% to 36% over the same period . News| Coinbase cancels FPS deposit support for British customers: Coinbase posted an article on its blog that starting from 12:01 U.S. central time on July 31, it will cancel FPS for British customers (fast payment channel) deposit support, as well as withdrawal services during the transition period, and reduce transaction fees affected by transfers during the period from August 1 to 15. Coinbase Pro customers are not affected. But the blog post does not say whether FPS will be restored on August 15th, it only says that it will share information about the restoration of FPS in time in the next few weeks. [2019/7/26] Under the background that institutional users have become mainstream users, allowing mainstream institutional funds in the traditional capital market to enter is undoubtedly the only choice to take advantage of the good wind of the institutional bull market to expand business lines and scale . Moreover, for its existing investors, since DPO does not issue new shares and has no lock-up period, they can cash out their shares at any time, which reduces the holding risk of institutional investors and will further increase the attractiveness of Coinbase listing . In addition, given that slack surged 48% on the first day of DPO, this is a good example for a well-known mainstream company in the industry like Coinbase, which can maintain stability when it goes public without borrowing from underwriters. share price and successfully raised funds. For the entire cryptocurrency circle, the direct listing of Coinbase is a first for other encryption companies and provides a model. Brian Armstrong said, "We want to make security tokens available, not just for Coinbase, but for anyone in the future who wants to integrate security tokens, raise funds, build their own equity structure tables, and eventually list in this way. Encrypted companies. I think there will be companies listed in this way in the future. Hopefully we can help build some infrastructure in the future that doesn’t exist yet.” Although the encrypted asset industry has been developing at a high speed and gradually gaining recognition, due to compliance Insufficient degree of modernization, as well as existing regulatory loopholes, are still not generally recognized by the mainstream traditional market, and there are still great controversies and uncertainties. Coinbase chose to put compliance first, go public directly and accept supervision, which has deepened the affirmation of traditional financial practitioners on encrypted exchanges. The journey of Coinbase since its inception has also paved the way for other encrypted transactions. If DPO is successful, it will be much easier for the latecomers to follow the example of the former under the inspiration of the predecessors. This move will also bring higher attention to the entire encryption circle, as well as capital inflows following the popularity. Who will be the next to Coinbase? Previously, the two major exchanges in China, Huobi and OKEx, both opened up the traditional capital market by listing on the Hong Kong stock market through backdoor listings. However, since both have issued platform tokens, it is very difficult to list in the United States. Recently, Robinhood, a retail trading platform, is also seeking to go public. Robinhood's zero commission and low threshold for allowing "fractional shares" make it popular among retail investors. On March 23, Robinhood said it had confidentially filed with the U.S. Securities and Exchange Commission a draft registration statement (Form S-1) for its common stock IPO. It is said that Robinhood will also choose Nasdaq as the listing place, and the company is continuing to advance the IPO preparation plan in March under the leadership of Goldman Sachs. In addition, the local encryption exchanges Gemini and Kraken in the United States may also become the successors of Coinbase. These platforms comply with regulatory requirements, have not issued platform coins, and hold regulatory licenses from various states. Just when everything was going as expected, an accusation from the CFTC disrupted Coinbase's DPO plan. Recently, the CFTC's order stated that between January 2015 and September 2018, Coinbase operated two automated trading programs, Hedger and Replicator. While Coinbase disclosed the use of the trading program, they did not reveal that they were using two programs that often matched transactions. "Reporting false, misleading, or inaccurate transaction information undermines the integrity of digital asset pricing. This enforcement action sends a message that the CFTC will act to safeguard the integrity of such information," said Vincent McGonagle, Acting Director of the Enforcement Division. In addition, the announcement also stated that an employee deliberately conducted matching LTC/BTC transactions for six weeks in 2016 to create the illusion of liquidity and demand for LTC. The CFTC determined that Coinbase had "vicarious liability" for these fraudulent transactions. At present, the U.S. Commodity Futures Trading Commission announced that it has reached a settlement with Coinbase, and Coinbase has also accepted a total fine of 6.5 million US dollars, and its original listing plan in March has also been postponed to April. This reconciliation shows that the regulatory framework for encrypted assets is accelerating innovation, and the compliance rules for this new type of industry are gradually becoming clear. This matter also sounded the alarm for Coinbase and its latecomers. If they want to integrate the traditional capital market, they must accept strict supervision from the public and relevant departments. With the gradual standardization of these difficult-to-determined trading behaviors in the encryption circle and the gradual improvement of the listing process, the recognition of encrypted asset-related companies in the traditional market will further increase. 01 Blockchain will also continue to pay attention to the latest listing news of Coinbase.


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