Coinbase is one of the world’s largest crypto-currency providers with over 13 million customers. It makes buying Bitcoin and altcoins easier for those without the technical know-how to navigate crypto wallets and advanced trading platforms. The drawback with Coinbase, however, is that it only sells four major assets; Bitcoin, Ethereum, Litecoin and Bitcoin Cash.
This could be about to change with the acquisition of Paradex, a small but growing decentralized exchange. The globe’s major exchanges at the moment are centralized, owned by an entity, and operate for profit that is usually derived from spreads, commissions and exchange fees. Coinbase is one of the more successful companies due to its often high fee structure. The San Francisco-based company is reported to have made over $1 billion last year, half of that in December alone.
The Paradex buyout, as reported by Reuters, could enable Coinbase to launch services outside the US and enable customers to access “hundreds of tokens.”
Co-founder and chief executive Brian Armstrong explained that the move confirmed “Coinbase’s commitment to investing in decentralized infrastructure and participating in the nascent world of wallet-to-wallet trading.” Paradex CEO, Ron Bernstein, said: “Our team couldn’t be more proud of the work we’ve accomplished over the past year, and we couldn’t be more excited about this new chapter under the Coinbase umbrella.”
Paradex does not maintain custody of the crypto-currencies but provides a platform for users to trade them between digital wallets. This could be a way to circumnavigate Securities Exchange Commission regulation, as it enables smart contract trading and has no control over the assets which may or may not be considered as securities.
Currently regulation in the US is vague. If the SEC deems a token to be a commodity the exchange listing it must register with the Commission. With over 1,620 crypto tokens out there, and more arriving every day via initial coin offerings, it has become a gargantuan task to investigate them all. Coinbase could be onto a winner if it can enable the trading of hundreds of crypto-currencies without jumping through regulatory hoops.
Over the coming weeks, Paradex technology will be integrated into the rebranded Coinbase Pro, which is an overhaul of the firm’s current professional trader’s platform GDAX. Customers will be rolled over to the revamped service at the end of June. The rebranding is part of ongoing efforts to attract more institutional investors, including hedge funds and high-frequency trading firms, according to Coinbase.
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