Early Investing

Coinbase to Expand Offerings on State-by-State Basis

Coinbase to Expand Offerings on State-by-State Basis
By Vin Narayanan
Date September 29, 2018

One of the biggest problems people have when they first enter the crypto market is buying crypto. The best place to buy bitcoin in the United States is Coinbase. Unfortunately, Coinbase is not the best place to enter the rest of the crypto market. Why?

You simply can’t buy that many coins there right now. Currently, you can buy only bitcoin, bitcoin cash, ethereum, litecoin and ethereum classic on Coinbase. Of course, you can use the bitcoin you buy on Coinbase to purchase other coins on exchanges like Bittrex and Binance. But it would be so much easier – and convenient – if you could just buy those coins on Coinbase itself.

Coinbase knows this. And this week, it announced a major new initiative to bring new coins aboard its platform… and bring them on quickly (Coinbase blog).

The “quickly” part is critical. It’s why we’re devoting the entire News Fix to it.

Each time Coinbase announces it is considering a coin for its exchange, prices for that coin soar. The more people who can buy and trade a coin – especially with fiat – the more valuable the coin is.

Coinbase is also aware of its position as the leading fiat-to-crypto exchange in the U.S. That’s why it has, at least until this week, added coins to its service at a slow and deliberate pace.

It did this for two reasons.

  1. Coinbase wants to be the place people go to buy and sell crypto. It doesn’t want to be the reason crypto prices go up and down.
  2. The regulatory and compliance issues that come with making a coin available to its entire customer base in the United States at once are complicated. They take time to sort through.

Coinbase is changing this approach now to speed up the process. It wants to make sure its customers don’t have to go to another exchange to buy and sell crypto. Here’s Coinbase’s new approach to listing a coin on its exchange:

Our goal is to rapidly list all assets that meet our standards and are compliant with local law, while providing our customers with the tools to discover, evaluate, trade and use digital assets.

This change is a good thing in terms of bringing coins to market more quickly. But it’s also going to create some unintended consequences.

Let’s think about what this means in practice.

Much like Robinhood, Coinbase is going to bring coins to market on a state-by-state basis. If it has the regulatory approval in California but not New York, California residents will be able to buy and sell the coin. But New York residents won’t.

It’s a little like waiting for a new cable provider to move into your neighborhood. Until they do, you’re stuck with the existing service. Meanwhile, your best friend in the next town over gets to choose from multiple providers – and he gets a better price. And there’s nothing you can do about it.

Rolling out coins on a state-by-state basis creates another complication. Let’s say you live in a state where you can buy monero on Coinbase. And then you move to a state where monero isn’t available for trading. What happens to your monero? Nobody knows the answer to that question for sure. And that’s a problem.

These are exciting times for crypto investors. Institutional money is lining up to enter the market. And Coinbase is getting ready to make it easier for investors to buy and sell a wider variety of coins.

But Coinbase’s approach comes with problems. Let’s hope it figures this out quickly.

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