Coinbase, the biggest and best-known U.S. cryptocurrency exchange, filed its confidential form with the SEC in December to go public. By some measures, the timing looks impeccable: Bitcoin rose 296% in 2020, the overall crypto market topped $1 trillion last week for the first time, and digital assets are back in the conversation on Wall Street.
Whether the Coinbase listing happens as soon as this month, or takes many months (Lyft and Uber filed their confidential forms in December 2018, then took until March and May 2019, respectively, to debut), it is likely to enjoy a big pop, if recent unicorn listings like Airbnb and DoorDash are any indication. The company has 35 million customers, an $8 billion valuation when last reported in 2018 (likely much bigger now; Coinbase pre-IPO shares that trade on crypto exchange FTX have soared), and has been profitable for years, a rarity amid the recent unicorn parade.
But Coinbase will also carry significant controversy for some investors—and not just crypto skeptics.
The SEC is known to move at a glacial pace with approving new listings, and Coinbase, the closest thing to a crypto household name in the U.S., presents a litmus test that regulators will want to get right, since there will be more to come. (Bakkt, the crypto exchange launched by Intercontinental Exchange in 2018, announced this week it will go public via SPAC merger, which means it will likely beat Coinbase to market, but with far less fanfare, attention, and scrutiny.)
Coinbase has already dealt with regulator interference over the years.
As a custodian of customer crypto funds, the site submitted information on 13,000 customers to the IRS in 2018, in compliance with a 2016 request for information on all customers who held more than $20,000 of cryptocurrency between 2013 and 2015.
In 2018, Mashable uncovered more than 115 Coinbase customer complaints filed with the SEC over issues ranging from missing funds to outages to lack of customer service. Over the years, Coinbase has not infrequently suffered website outages during key price rallies or crashes, at times when users were eager to sell or buy, not unlike stocks app Robinhood. The outages have become a reputation hazard for Coinbase.
Given this history, regulators might hold up the Coinbase listing with red tape.
On the other hand, many inside the crypto industry welcome imminent regulation, and some see the Coinbase IPO as a chance to start a new phase of cooperation with regulators.
“There’s been an increased focus on regulators, in terms of looking at this asset class,” says Flori Marquez, founder of crypto lender BlockFi, in which Coinbase is an investor. “To know that you have a crypto company in front of the SEC, having active conversations in terms of thinking, How do we make it easier…