On one side where the financial crisis dissolved several traditional financial institutions in 2007, soon in the following year the release of the Bitcoin whitepaper in September came out as a ray of hope that had the potential to free the people from the vicious high-risk mortgages, over-leverage, and even bankruptcy which the traditional finance sector was verging at.
The release of the Bitcoin whitepaper talked about a technology that singularly aimed at the distribution of the power related to finance. For instance, Satoshi Nakamoto, in the genesis block said, “The Times 03/Jan/2009 Chancellor on the brink of the second bailout for banks.” He further pointed at the freedom from the dependency on bodies who “lend [money] out in waves of credit bubbles with barely a fraction in reserve.”
It has been observed especially this year that the majority of the crypto trading has taken place through centralized exchanges. For instance- OKEx, and IDEX. Currently, these two exchanges are the big names, yet they are following centralization.
Last year, Coinbase’ valuation rose to $8billion, and its customer base swelled up to 25 million customers, thanks to the series E round. Big shots such as Tiger Global Management, Wellington Management, Andreessen Horowitz, Polychain invested in the company. The company’s COO Asiff Hirji said that the funds would be used to create a global structure between fiat and crypto markets, adding custody, using USDC stable coin trading, etc. With such expansions, Brian Armstrong’s vision of “banking empire” looks like it will come true.
The company is licensed under the regulations of NYDFS- the New York Department of Financial Services, as a Qualified Custodian. This license allows Coinbase to store big amounts of crypto in a very secure way, and to list new assets, and explore further options such as staking. Also, last year in June, as per reports “Coinbase acquired Keystone Capital to become a fully SEC-regulated broker-dealer.” On its success, the exchange will get the power to blockchain-based securities, which will be supervised by SEC and FINRA- the Financial Industry Regulatory Authority.
There are reports that Coinbase is trying to establish connections with banks worldwide, and is also trying to get a banking license, and has met with the Office of the Comptroller regarding the same. If Coinbase gets this license, then it will be able to exchange in merchant acquisition, asset management, and trading. Further, the exchange has established an account with Barclays Bank and obtained an e-money license. This encourages the UK-based customers to easily withdraw fiat currency and to use Coinbase.
On this, the co-founder of Nash Exchange- Fabio Canesin said,
“It is much closer than [to a bank] than anything else because it is completely centralized. They even acquired [Neutrino], which means complete de-anonymization of the user. So if it is subject to [banking-like rules], it [is already acting like] a bank.”
The move of Coinbase towards centralization may annoy the left-wing people who fully support decentralization. The other side of the lot, believe that moving towards centralization would be a safer way for the still young crypto-world to establish itself in the finance market. Some think that with time the crypto industry will mature, and until then it can take cues from the traditional centralized structure of the finance market.
The debate between centralization and decentralization has been around since quite some time. We hope this move of Coinbase proves to be the right decision and not another accident that leads to more bubbles in the finance sector. It will be interesting to see crypto exchange to become what initially it was trying to escape.