Coinbase: Tell us why you need your money or can’t have it

It appears that Coinbase (NASDAQ:COIN) has named Trent Reznor as its new chairman, based on its dedication to the cryptocurrency exchange. downward spiral,

After flirting with new record lows this month, Coinbase’s stock price staged a modest rally last week, closing Friday trading at $62.71, though it’s still barely one-way from its 2021 peak. is the sixth. The company reported a staggering $430 million in the first quarter of 2022, which contributed to the recently announced layoffs of 18% of its workforce.

Last week, the Moody’s agency downgraded Coinbase’s credit rating by a peg, citing the exchange’s “significantly weaker revenue and cash flow generation due to a sharp drop in crypto asset prices in recent months and reduced customer trading activity.” done.” Moody’s warned that it expects Coinbase’s ability to return to profitability will remain “challenging” for the foreseeable future.

Complicating matters further, Coinbase rival Binance.US—the Potemkin Village exchange, which acts as a rodeo clown to distract US regulators from ongoing violations of US law by the Binance mothership—announced that This will eliminate fees on BTC trading pairs with so-called stablecoins. , putting pressure on Coinbase to follow suit.

All of this spoiled Coinbase’s efforts to reassure investors that it was determined to squeeze more revenue out of fewer users making fewer trades. This includes the discontinuation of its Coinbase Pro product, which caters to ‘crypto’ whales with low fees and no trading volume limits. While Coinbase has assured whales that its friendly fee structure will survive through its main app and new enhanced trading service within the site, bundling will allow Coinbase to further reduce the workforce of its technical team.

Coinbase also flagged the imminent launch of its derivatives exchange (a rebranded FairX), which will offer ‘nano’ futures contracts from third-party brokers, as Coinbase still does not have a futures license – which holds just 1% of BTC. The /100th part is included. Token. The aim is to entice ‘crypto’ minnows into ‘investments’, avoiding their significantly devalued holdings in the topsy-turvy ‘crypto’ derivatives market, as there are apparently some scraps of wool left visible on these sheep and Coinbase. No, let that opportunity go by hand.

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Dutch Treat

Further worsening Coinbase’s ‘all is well’ narrative is its recent announcement that as of June 27, customers in the Netherlands will be required to provide more details before digital assets can be transferred from the exchange to a private wallet. The required information includes the full name and residential address of the recipient along with the ‘purpose of transfer’. Coinbase helpfully suggests that this latter category could include things like ‘rents’ or ‘dinner’ (but probably not ‘class A drugs’ or ‘ghost guns’).

Coinbase said that “in some cases, we may require you to link the Coinbase Wallet to your main Coinbase account in order to send crypto assets from the Coinbase Platform. This allows us to verify that you are receiving crypto assets.” Coinbase Wallet, which is a requirement under Dutch regulations.”

Coinbase’s announcement appears to be based at least in part on compliance with the Financial Action Task Force’s ‘travel rule’, which aims to reduce money laundering, tax evasion and the like. There is also the fact that the Netherlands Sanctions Act 1977 update placed crypto service providers under the supervision of the Dutch National Bank (DNB), and in February, the DNB’s Financial Stability Board issued an assessment of financial stability risks from crypto-assets. It warned that the sector was “evolving rapidly and could soon represent a threat to global financial stability.”

However, the Netherlands is not the only EU market to have a bearish view of crypto and Coinbase has so far taken a tough stand on why they are so obsessed with knowing how the Dutch pay their rent. Huh. Needless to say, Coinbase’s announcement has angered crypto-anarchists, many of whom are threatening to move their business to other, less-intrusive exchanges.

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(On that note, we now expect Changpeng ‘CZ’ Zhao to issue a statement at some point on how Binance has always adhered to Dutch regulations, seeks to establish a local branch office and is legally compliant in the country) Fully applying for the necessary permits to operate. . CZ will later demonstrate this commitment by posting a selfie with the Nijmegen library card.)

But perhaps Coinbase is ahead of the curve. Tokyo-based exchange BitFlyer adds millions of customers similar information This week, it said June 29 would require “additional information registration requirements for outbound withdrawals of crypto assets” including “withdrawal purposes”. In March, Coinbase imposed similar rules on its Japanese customers.

maybe they don’t have your money

There is another possible motive behind digital currency exchanges implementing new withdrawal requirements that many users may find daunting. In particular, the hope is that higher barriers may deter privacy-focused individuals from taking their money off exchanges, perhaps prompting them to flip one token for another or invest in the exchange’s DeFi yield-based offerings. Is.

Coinbase raised alarm bells when it released its Q1 financial report card in May, as the document included a warning that, in the event of bankruptcy proceedings, customers holding assets on the exchange would be treated as unsecured creditors. Coinbase CEO Brian Armstrong Did Something Frantic twitter damage controlEmphasizing that “we have no bankruptcy risk” while acknowledging that the digital currency’s lack of legal precedent means that “it is possible, though unlikely, that a court will go into bankruptcy proceedings.” The client will decide to consider the asset as part of the company.”

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‘Crypto’ critics like Francis Coppola jumped up quicklynoting that Coinbase’s financial reports listed customer deposits on the company’s balance sheet, despite the fact that “Coinbase’s own terms of legal use state that funds belong to customers and are not loans to customers.” They shouldn’t be on its balance sheet at all.”

Coinbase regularly goes offline for ‘unscheduled maintenance’ during major drops in ‘crypto’ token value – never during periods that don’t have customers Buying– which conjures up images of nervous bank executives closing their doors because they know they lack the liquidity to pay every member of the crowd to withdraw their life savings.

Tokens like BTC and ETH have recently slipped below their peak from previous bubbles – an unprecedented feat in crypto’s relatively short history – and companies whose business models relied solely on the ‘number goes up’ trajectory, found itself unable to meet its obligations to customers. The interconnected nature of crypto meant that a company’s failure to honor its loans triggered a wide range of defaults that could eventually bring this entire house of cards down.

With NFT roses blooming and DeFi making kids’ lemonade stands look like a paradigm of financial accountability, it’s worth noting that the exchange’s VC arm, Coinbase Ventures, holds nearly half of its holdings in those two areas. As the ‘crypto winter’ begins to look like an ice age, perhaps Coinbase’s Dutch customers should swallow their anarchist pride, fill out forms and get their money off the exchange while they still can.

SEE: BSV Global Blockchain Convention Panel, The Future Of Digital Asset Exchanges And Investments

New to bitcoin? Check out CoinGeek bitcoin for beginners section, the ultimate resource guide for learning more about bitcoin – as originally conceived by Satoshi Nakamoto – and the blockchain.

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