Coinbase Acquires Financial Services Firm to Become SEC-Regulated Broker Dealer

Leading US cryptocurrency trading platform Coinbase initiated the process to become a fully regulated broker dealer by the US Securities and Exchange Commission (SEC). According to an announcement published June 6, this is made possible by the acquisition of securities dealer Keystone Capital Corp. in addition to Venovate Marketplace, Inc., and Digital Wealth LLC.

The acquisition could help the San Francisco-based exchange extend its offerings and subsequently expand into non-crypto financial products. In the announcement, the company said it’s looking to “work with regulators to tokenize existing types of securities,” which the exchange believes will “democratize access to capital markets” for companies and investors in the industry. Asiff Hirji, President and Chief Operating Officer of the exchange, said:

"If approved, Coinbase will soon be capable of offering blockchain-based securities, under the oversight of the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). This step forward is being made possible by our acquisition of a broker-dealer license."

Coinbase, which has reportedly traded $150 bln in assets with over 20 mln customers, announced it is “on track” to listing SEC-regulated crypto securities:

Today we’re excited to announce that we’re on track to become a US-regulated blockchain securities trading venue. We believe this is an important moment not only for Coinbase, but the entire crypto ecosystem. https://t.co/3grNDa6l9Z

With this move, Coinbase joins other platforms that are looking to trade blockchain-based securities under the regulatory purview of the SEC. Pennsylvania-Based Susquehanna recently amended their broker dealer license to trade cryptocurrencies and Bitcoin futures. The firm plans to offer digital currencies to a small group of clients, and aims to expand the service in the future.

Peer-to-peer payments platform Circle Internet Financial Ltd., is seeking a banking license and registration as brokerage and trading venue with the SEC. This would allow the platform to sell tokens that are considered securities. COO Robert Bench said that a banking license would cut down the number of regulators the platform needed to work with, “You’re able to have a single conversation. It’s hard to have 50 conversations.”

Earlier this week, Coinbase revealed plans to move into the Japanese crypto market, and that it intends to apply for a license with the country’s financial regulator, the Financial Services Agency. Coinbase is said to be working with Mitsubishi UFJ Financial Group (MUFG) on its expansion into Japan. MUFG has invested over 1 bln yen in Coinbase since 2004 through Mitsubishi UFJ Bank and Mitsubishi UFJ Capital.

While Japan is the world’s largest market for cryptocurrencies, with 3.5 mln crypto traders, Coinbase could face stiff competition. There are currently 16 registered crypto exchanges in Japan. Coincheck, which used to be the largest in the country, allegedly generated $150 mln in quarterly profit.