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Coinbase IPO: The First Major Cryptocurrency Company to List on US Nasdaq Exchange Today

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Coinbase, an American cryptocurrency exchange platform, will today April 14, 2021 be listed on the Nasdaq exchange, making it the first major cryptocurrency to go public in the United States, a milestone that has generated a buzz across the entire cryptocurrency.

When the nine-year-old start-up lists on the Nasdaq exchange on Wednesday, it will become the first major cryptocurrency company to go public in the US, a milestone that has generated excitement in an already buoyant market for digital assets.

The challenge is that few people know how to value the company, which counts on volatile transactional revenues in lightly regulated markets for the vast majority of its business.

“It’s a bit of a Rorschach test for people’s belief in crypto,” said Tom Loverro, a partner at IVP, which valued the company at $1.6bn when it first invested in 2017. Coinbase operates the largest US cryptocurrency exchange and held funds for 56m retail customers at the end of the first quarter, capitalising on the demand for an easy-to-use storage solution in the early days of bitcoin.

The company’s listing comes during a bull run in the price of cryptocurrencies, with bitcoin more than doubling since January to cross the $60,000 barrier. Investors have also flocked to new technologies, bidding up electric vehicle companies and speculative assets such as non-fungible tokens, or NFTs.

The heady combination could create volatility in Coinbase’s shares, even though the company has opted for a direct listing, an alternative to initial public offerings that usually produces modest price changes on the first day of trading. On private exchanges, shares in Coinbase have traded at prices of between $200 and $375 this year, according to the company’s prospectus.

At the top end of that range, Coinbase would have a market capitalisation of almost $74bn, making it more valuable than the parent company of the New York Stock Exchange. Coinbase’s valuation would be roughly $100bn when including options and other kinds of stock-based awards. Such a valuation would be a rich reward for Coinbase, which private investors previously valued at $8bn in 2018.

It would also cement the company’s co-founders, Brian Armstrong and Fred Ehrsam, as multibillionaires, while providing lucrative returns to early investors such as Andreessen Horowitz and Union Square Ventures. Coinbase has grown into the largest US cryptocurrency company by hewing closely to regulators and maintaining a secure service, avoiding the stumbles that have dogged other trading venues.

The company estimated it oversees about 11 per cent of the total cryptocurrency market, with $90bn in assets at the end of last year. Active cryptocurrency users have said that Coinbase takes advantage of its status as a trusted intermediary, charging high fees for basic functions such as holding and trading digital assets. Coinbase takes an average cut of more than 50 basis points per transaction, according to an analysis of the company’s prospectus.

“The question for consumers, and ultimately for institutions, is how much are you willing to pay to safeguard your assets,” Loverro said. “People generally act rationally, and there’s a reason people pay what appears to be a premium to use Coinbase.” Because of the nature of cryptocurrency markets, Coinbase also has few parallels in traditional finance.

It acts as a broker, such as Charles Schwab; holds assets in custody for large clients, similar to State Street; operates an exchange; and sometimes acts as a market maker. Cryptocurrency investors said Coinbase does not usually provide the best liquidity, or trading prices, and its advantage instead rests in the value of its customer accounts.

“We tend to think of Coinbase as an exchange, because they have an order book, but it is not the most important feature,” said Max Boonen, founder of the market maker B2C2. Coinbase dominates an oligopoly of US-based exchanges because of its close relationship to regulators, high trading volumes and relatively secure reputation, said Carol Alexander, a professor of finance at the University of Sussex, who has studied cryptocurrency markets. “Coinbase is certainly leading,” Alexander said.

“As they expand the coins they can offer, that makes it more difficult for the other exchanges to catch up.” The company’s stature also means its finances have closely followed the swings of bitcoin and other cryptocurrencies.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Cryptocurrency

Nigeria’s SEC to Enforce Weekly, Monthly Reports from Crypto Service Providers

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The Securities and Exchange Commission (SEC) has announced a new regulatory framework requiring Virtual Assets Service Providers (VASPs) to submit weekly and monthly trading statistics.

This move is part of a broader effort to monitor and regulate Nigeria’s burgeoning crypto market, according to a document released by the SEC titled “A Framework on Accelerated Regulatory Incubation Program for the Onboarding of Virtual Assets Service Providers (VASPs) and other Digital Investments Service Providers (DISPs).”

The framework aims to bring more structure to the country’s crypto ecosystem by amending existing rules on digital asset issuance, offering platforms, exchanges, and custodians.

The SEC’s initiative is seen as a significant step toward enhancing oversight and ensuring compliance within the rapidly evolving digital asset space.

Accelerated Regulatory Incubation Program

The Accelerated Regulatory Incubation Program (ARIP) will provide a special window for onboarding VASPs. The SEC has outlined specific reporting requirements for participants in the ARIP, including:

  • Weekly and monthly trading statistics.
  • Quarterly financials.
  • Compliance reports demonstrating adherence to the SEC’s conditions.
  • Reports on key issues such as misconduct, fraud, or operational incidents.
  • Actions taken to address customer complaints and emergent risks.

A Growing Market

Nigeria boasts one of the largest peer-to-peer (P2P) crypto markets globally. According to blockchain analytics firm Chainalysis, crypto transactions in the country amounted to $56.7 billion between July 2022 and June 2023, averaging $1.09 billion weekly.

Industry and Regulatory Insights

Senator Ihenyen, lead partner and head of blockchain and virtual assets practice at Infusion Lawyers, emphasized the importance of regulating digital assets for economic and security reasons.

“Nigeria can no longer afford to keep pushing digital assets underground for obvious economic and security reasons,” Ihenyen said.

He noted that the Central Bank of Nigeria’s (CBN) recognition of the SEC’s regulatory role marks a positive shift for the sector, with regulators now working together to ensure consumer protection and investor safety.

Comparisons have been drawn with regulatory practices in South Africa, where a similar approach has been adopted to meet Financial Action Task Force (FATF) standards on anti-money laundering and counter-terrorism financing for digital assets.

“Execution is what will make the difference,” said an industry expert. “We’ve never been lacking in regulations.”

Government and Industry Reactions

Earlier in July, Wale Edun, Nigeria’s minister of finance and coordinating minister of the economy, urged the SEC to address the complexities of crypto regulation.

“The SEC board should be willing to accept the challenge of regulating these new areas, particularly crypto, as they are fast-moving complex areas,” Edun stated.

The Senate Committee on Capital Markets also emphasized the need for crypto regulation to ensure accountability and protect investors’ funds.

Osita Izunaso, chairman of the committee, pointed out, “The issue of cryptocurrency must be regulated because Nigerians are trading in crypto. Since Nigerians are trading in crypto, why are we not regulating it? Where is the money going if we don’t regulate activities in the crypto market?”

Compliance and Challenges

The new regulatory framework aims to facilitate the onboarding of entities willing to engage in virtual asset activities and enhance the SEC’s understanding of digital asset business models.

However, some industry insiders have raised concerns about the practicality of certain requirements, such as the need for a physical presence for crypto companies.

Chimezie Chuta, founder and coordinator of the Blockchain Nigeria User Group, highlighted the potential benefits of regulation for tax revenues.

However, others worry about over-regulation. “We are now like banks that are over-regulated. Between 2020 and now, we have had new regulations and changes to existing rules, but where has that taken us to?” questioned a Lagos-based crypto player.

As Nigeria’s crypto market continues to evolve, the SEC’s new regulatory framework represents a crucial step towards ensuring transparency, accountability, and consumer protection in the digital assets space.

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KuCoin Announces New 7.5% VAT on Transaction Fees for Nigerian Customers

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KuCoin has announced the implementation of a 7.5% Value-Added Tax (VAT) on transaction fees.

This new regulation will take effect on July 8th, 2024, impacting all users whose Know Your Customer (KYC) information is registered in Nigeria.

KuCoin, one of the world’s leading cryptocurrency exchange platforms, revealed this update in a statement addressed to its Nigerian users.

The tax will be applied exclusively to transaction fees, not the overall transaction amount.

For example, a user buying 1,000 USDT worth of Bitcoin will incur a fee of 1 USDT at the standard 0.1% fee rate.

The new VAT at 7.5% will apply to this fee, resulting in an additional charge of 0.075 USDT.

Consequently, the net amount available for the transaction will be 998.925 USDT.

KuCoin clarified that the VAT would cover all types of transactions on its platform. The move aligns with recent regulatory updates and demonstrates the company’s commitment to complying with local tax laws.

The announcement has garnered mixed reactions from the Nigerian cryptocurrency community. Some users express concern over the added cost to their transactions, while others recognize it as a necessary step towards greater regulatory compliance and legitimacy for cryptocurrency trading in Nigeria.

KuCoin encourages affected users to seek assistance through their Telegram group or by contacting the online support team for further guidance on the new tax regulations.

As Nigeria continues to evolve its regulatory framework for digital assets, this development underscores the importance for traders to stay informed about local laws and their potential impacts on trading activities.

The KuCoin team expressed their gratitude for users’ cooperation and understanding, reiterating their commitment to providing a secure and compliant trading environment.

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Bitcoin Eyes Gains with Seasonal July Boost After Slump

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After several months of declines and rangebound trading, Bitcoin (BTC) bulls have reason to cheer as the largest cryptocurrency is poised for a potential seasonal upswing this July.

Historical data and recent market movements suggest a positive outlook for Bitcoin, following a period marked by billions in sales, upcoming selling pressure, and outflows from exchange-traded funds (ETFs).

Since April, Bitcoin has been trading within a narrow band of $59,000 to $74,000, weighed down by market dynamics and peak negative sentiment among retail traders.

However, July has historically been a bullish month for Bitcoin, and early indicators show a possible reversal of recent trends.

On the first day of July, U.S.-listed ETFs recorded nearly $130 million in inflows, their highest since early June.

This influx comes after a significant $900 million outflow in the previous month, signaling renewed investor confidence in the cryptocurrency.

“Bitcoin has a median return of 9.6% in July and tends to bounce back strongly, especially after a negative June,” said Singapore-based QCP Capital in a recent Telegram broadcast.

“Our options desk saw flows positioning for an upside move last Friday into the month-end, possibly in anticipation of the ETH spot ETF launch. Many signs point to a bullish July.”

Historical data supports this optimistic outlook. Over the past decade, Bitcoin has gained an average of more than 11% in July, with positive returns in seven out of the ten months.

A 2023 report by crypto fund Matrixport highlighted significant July returns in recent years, with gains of around 27% in 2019, 20% in 2020, and 24% in 2021.

Seasonality, the tendency of assets to experience regular and predictable changes that recur annually, appears to be a driving factor.

These seasonal cycles can be influenced by various factors, such as profit-taking around tax season in April and May, leading to drawdowns, and the generally bullish “Santa Claus” rally in December, which reflects increased demand.

As the cryptocurrency market enters July, Bitcoin traders and investors are optimistic about a potential rally. While the market remains cautious of underlying pressures, the historical trends and recent inflows suggest a favorable environment for Bitcoin’s resurgence.

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