The coin base model: benefit from the crypto-assets listed therein

In December, the value of a cryptocurrency published by the social networking start-up Decentralized Social Nut in the leap, after Coinbase had allowed her to trade on the company's stock exchange.

The listing gave the start-up a jerk because the token price briefly doubled to a maximum of $ 187. It also increased the assets of another important partner, Coinbase, who supported the start-up as part of a round of financing announced three months earlier.

DESO, as the token is called, is one of at least 20 cryptocurrencies that Coinbase has listed for trade while it keeps an investment in a related project, according to an analysis of the financial time of disclosures, pitchbook data and public announcements of the company.

The results show that Coinbase of these 20 projects only performed 12 as participations on the website of his in -house investment argument Coinbase Ventures this week.

Andreessen Horowitz, one of the leading risk capital groups of the Silicon Valley, invested early in Coinbase and has a seat on the company's board. The VC company also invested in at least a dozen projects, the tokens of which later received approval for trading on Coinbase.

The analysis shows how free -running cryptocurrency exchanges blur splitting that are enforced more strictly on traditional capital markets. Coinbase is the largest cryptocurrency exchange in the United States and thus an important player in the past year of booming in the trade in digital assets with more than 7 million users who perform transactions every month.

After the FT had sent a detailed questionnaire to Coinbase last week, the company published a blog post on Saturday, in which it promised to make its stocks "even more transparent".

Coinbase said that the notation decisions were not coordinated with its board or external investors. The company added that Coinbase Ventures, his 2018 start-up investment arm, had "no influence" on decisions about the listing of assets.

After the FT had then sent a list of eight projects this week, of which it was not known that they were supported by Coinbase Ventures and write down their tokens on the stock exchange, Coinbase seven added to its website, including Decentralized Social.

"In the world of securities, conflicts of interest must be identified, disclosed and handled," said Tyler Gellasch, Executive Director of the Investor Trade Group Healthy Markets. "In crypto it seems to be a free-for all."

A spokesman for Coinbase said that the company entertained guidelines for reducing conflicts of interest and all assets in which it maintains financial participation would "assess exactly the same criteria as all other assets".

The investments of Coinbase could be examined more closely, since the company pursues Chief Executive Brian Armstrong to become the "Amazon of Values".

The Coinbase shares have fallen by more than half since the company was listed on the NASDAQ exchange in April and have cut its market value by $ 50 billion. The slide has increased the pressure on Coinbase to list new digital assets, the dealers who are hungry to bet on speculative cryptocurrency projects.

managers of the company have accelerated the pace of new investments from Coinbase Ventures. At the end of the third quarter, Coinbase held $ 280 million in strategic investments, more than ten times the amount at the end of the previous year.

In announcements for new token listings, Coinbase contains a declaration of disclosure that says that Coinbase Ventures "may be an investor in the crypto projects mentioned here", which points to a website that shows the investments of the venture arm.

At the beginning of this week, the website listed less than 90 investments without giving precise information about whether Coinbase had shares or tokens in each of the projects. The website has added more investments to the website by Friday. Coinbase said publicly that it made more than 200 investments via the arm.

A spokesman for Coinbase said that it was "actively" to update the website, but not all investments would be published, citing "common practice within the risk capital community".

Coinbase followed a conservative approach to listing new cryptocurrencies for years and only offered less than half a dozen for retail in 2018.

The boom in decentralized financial apps and other cryptocurrency projects has produced a lot of new digital assets that force coin base to listen to software programs such as z uniswap that enable everyone to list to tokens without permission from the central authorities. Offshore exchanges like Binance and FTX also moved quickly to list the new tokens.

Last year, Coinbase began to automate parts of the listing process, to reduce its legal checks and to develop a so -called "experiment zone" in order to "adequately disclose risks to customers and enable them to make sound decisions about new tokens".

Coinbase listed 59 new assets until September last year, and at least dozens of others in the fourth quarter, as can be seen from documents and company announcements.

The series alerted some lawyers and cryptocurrency guards, the saying that the notations could attract the attention of the financial supervisory authorities. The chairman of the Securities and Exchange Commission, Gary Gensler, said last year that several US cryptocurrency exchanges apparently offer trade with non-registered securities.

"I think there will be millions of crypto-assets at some point," said Armstrong on a call, which was about the winnings of Coinbase in the second quarter of August.

While some tokens that are supported by Coinbase and Andreessen have achieved large returns for dealers who bought on the Börsentag, they remained on average behind Bitcoin and Ethereum after joining the stock exchange, according to Faisal Khan, an independent cryptocurrency analysts.

cryptocurrencies that Coinbase listed before 2020 but did not approved, on average, developed better than those who wanted to list it, he said.

"I think that raises many questions as to whether insiders unload small investors, as well as conflicts of interest between VCS and stock exchanges that work together without supervision," said Khan.

Coinbase said the company has not sold any of its token stocks since they were listed on the stock exchange. Andreessen refused to comment.

Marco di Maggio, an extraordinary professor at Harvard Business School, who wrote a case study on Coinbase, said that the company's disclosure practice surprised him because dealers normally reacted to perceived interest conflicts.

"Since the crypto community is not particularly open to such things," said di Maggio, "I would have expected that they are very careful in this regard."