Published: Fri, June 08, 2018
Markets | By Otis Pena

Coinbase Expands With Deal for Broker-Dealer Keystone Capital

Coinbase Expands With Deal for Broker-Dealer Keystone Capital

Two titans of US cryptocurrency trading are in a race to build the nation's first regulated venues for tokens deemed to be securities, potentially appeasing watchdogs threatening to rein in the multibillion-dollar market.

Cryptocurrency industry giant Coinbase on Wednesday announced that it is "on track" to register with the US Securities and Exchange Commission (SEC) as a broker-dealer, a move which would allow it to list cryptoassets that the agency deems to be securities. If U.S. regulators approve, Coinbase will use licenses its obtains to offer customers blockchain-based securities.

Both Coinbase and Boston-based Circle are also reported seeking federal banking charters. Coinbase is already arguably one of the most regulated exchanges in the world with FDIC insurance on fiat deposits and third-party insurance on cryptocurrency deposits. According to the WSJ, Circle is also now seeking a banking license.

More than $13 billion has been raised by startups via so-called initial coin offerings since the beginning of past year - a whopping $6.3 billion of that raised in just the first three months of 2018.

Part of this effort includes Coinbase's acquisitions of Keystone Capital Corp., Venovate Marketplace and Digital Wealth LLC, he wrote. One of the most common exemptions is for firms to qualify as an Alternative Trading System (ATS), which typically requires registering as a broker-dealer. Alternative trading systems operate outside traditional public stock exchanges.

"We believe this is an important moment for the crypto ecosystem, and yet another indication of the maturation of the crypto economy".

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"If approved, these licenses will set Coinbase on a path to offer future services that include crypto securities trading, margin and over-the-counter (OTC) trading, and new market data products", Hiriji said in the post.

In previous statements, Hirji said that the four assets listed on the Coinbase platform - bitcoin, ether, bitcoin cash, and litecoin - were the only ones the company felt comfortable supporting, given the regulatory climate in the US. "That represents a huge opportunity for a company like Coinbase, particularly as more startups submit to regulatory oversight and, as a result, produce what are called "security" tokens".

Asiff Hirji, acting President and Chief Operations Officer (COO) of Coinbase, announced that the leading United States cryptocurrency exchange is on the verge of becoming a broker-dealer capable of offering crypto securities regulated by the SEC.

The transaction would put Coinbase under the oversight of the SEC and Finra. Given the fact that there are numerous digital assets on the market, with quite a lot of them fulfilling the lawful definition of a "security", this could potentially open up the door for serious market expansion.

"This is not only a good thing for our company but a good thing for our industry", he said.

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