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Coinbase CEO Brian Armstrong expects the company’s non-trading businesses to grow substantially in the long term.

In an interview with CNBC on Wednesday, Armstrong said, businesses like Coinbase Earn, debit cards, staking, and institutional custody could account for 50% or more in the next five or ten years.

At present, Coinbase’s exchange business is its main revenue contributor. Last year, for instance, trading fees accounted for 86% of Coinbase’s total revenue.

Armstrong said Coinbase hasn’t seen any margin compression yet, and he wouldn’t expect it to in the short term. “I don’t expect fee compression in the short and medium-term, but longer-term, yes, I do think there could be compression, just like every other asset class out there.”

To that end, Coinbase has started to invest in non-trading revenue streams and expects them to provide “steady” and “predictable” revenue in the future, said Armstrong.

Coinbase is getting listed on Nasdaq today. On that, Armstrong said he hopes the company’s direct listing will be viewed as a “landmark moment” for the crypto space. “It’s creating a ton of value in the world,” he said.

Armstrong further said that investing in both bitcoin and Coinbase stock could be a good bet because both are “great ideas.”

Making a case for investing in Coinbase, Armstrong said, “we are not tied to any particular crypto asset, we’re adding support for over 100 crypto-assets now, and there’ll be more and more in the future.”

“And we are also kind of what you might call an indexed bet or a levered bet on the crypto space more broadly because we are selling picks and shovels,” Armstrong continued. “We are helping people access and use this new technology. So I think we’re going to grow along with the crypto space.”

As for how investors should value Coinbase, Armstrong said, “you could think of us as the first fintech that’s vertically integrated.”

“We own the customer relationship all the way down to integrating with the underlying rails themselves,” he said.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• Decision-making in crypto protocols has primarily been done via democratic token voting (with the added ability to delegate to others).
• Voter apathy and a large concentration of tokens lead to a handful (or even a single) voters being able to push decisions through unilaterally.
• For functions that are not automatable, protocols are moving towards dedicated teams/committees that are responsible for specific functions. Tooling is being built with that in mind.

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Crypto exchange Coinbase’s long-in-the-making, history-making stock market debut is finally here.

The exchange’s stock is set to begin trading under the ticker COIN in one of the most hotly anticipated market launches in not just the fast-growing crypto market, but for the technology and financial services sectors as well.

Uniquely, the crypto-exchange operator is going public through a direct listing—an alternative to the more commonplace initial public offering (IPO) process that allows a firm to trade publicly without having to offer a specific amount of shares to the public.

In other words, a direct listing allows a company to tap the public market without having to raise capital from the deal. Furthermore, that company doesn’t have to team up with bulge-bracket investment banks to underwrite and woo interest from large investors. The exchange venue—in this case, Nasdaq—plays a bigger role in the direct listing process. 

Jay Heller, who has been with Nasdaq for over a decade, has overseen thousands of transactions during his time at its Time Square MarketSite. In an interview with The Block, Heller broke down the seemingly complicated process into a few steps. 

In a direct listing, Nasdaq works with a company’s financial advisors to determine the reference price for the stock to trade. As revealed on Tuesday, Nasdaq, along with Goldman Sachs, determined the stock’s reference price would be $250—way lower than many shares had traded in private markets ahead of the direct listing day.

That number is more than half the price at which synthetic shares of Coinbase on FTX are trading. 

“We will be communicating to the Street throughout the process: There are no underwriters, you have what are deemed advisors. There is no offering, no distribution,” Heller said. “With an IPO you have an offering price. Here, without that occurring, we are providing some clarity in after-hours to publish the reference price.”

A market source suggested that Goldman Sachs likely set the reference price low to cover themselves and is expecting a big pop in tomorrow’s debut.

Indeed, market expectations predict a lively day with interest from the retail segment of the market as well. A source at Robinhood said that it will offer trading in Coinbase’s stock on day one. TDAmeritrade declined to comment specifically, noting: “I can tell you that at TD Ameritrade we’re accustomed to navigating market-moving events. We have to be prepared for the busiest moment of any given day.”

So when will trading begin exactly? That’s not 100% clear. Heller said that Nasdaq typically leaves time between the market open and when they commence trading for a direct listing. This, he said, allows Wall Street to digest as much information as possible. 

“Tomorrow morning the team will work to set up the security for trading,” Heller said. “There is a lot of activity that happens at 9:30 so we let investors clear their pallet. It could start as early as 9:50. That’s still to be finalized.”

That said, trading will likely commence in the early afternoon. 

Still, Nasdaq won’t rush on figuring out what price the stock will trade at, according to Heller. Since there won’t be an offering of stock, the market won’t have a set supply of shares being issued—a state of affairs that contributes to volatility and complicates the work of finding equilibrium between supply and demand. There’s also the added crypto element, which adds an additional layer of volatility to the debut. 

“You have to ensure there is ample supply coming in,” Heller said. “That’s why the process can take so much time. We won’t rush it. It’s about getting to the right point: when you open the security for trading you’re trying to mitigate volatility. But make no mistake about it, larger-scale IPOs also take a lot of time.”

As for how much interest there will be in the stock, Heller pointed to past debuts in an email to The Block. The first trade size for Palantir, which webr public via a direct listing,topped 58 million shares. Slack, another direct listing, topped 45 million. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto exchange Binance is set to list rival Coinbase’s stock token today.

The listing will take place when Coinbase goes public on Nasdaq. It will allow Binance users to trade Coinbase stock in fractions.

Binance started trading in tokenized stock trading earlier this week, beginning with Tesla. At the time, the exchange said it would list more stock tokens based on market demand.

The Tesla stock token has seen a trading volume of $6.7 million within three days of its listing on Binance.

Binance’s stock tokens are priced and settled in BUSD, meaning users can buy and redeem them via the exchange’s stablecoin. 

Interested traders are required to pass know-your-customer and other relevant compliance measures. Residents of the U.S., mainland China, Turkey, and other restricted jurisdictions are barred from buying stock tokens on Binance.

Since Binance follows traditional market hours for tokenized stock trading, the Coinbase stock token will follow Nasdaq hours.

It is not clear who will help Binance settle the Coinbase stock token. The Block has reached out to Binance and will update this story should we hear back.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Filmmaker Kevin Smith is releasing his latest horror anthology “Killroy Was Here” as a non-fungible token (NFT). 

As first reported by Deadline, Smith will auction off his work on Jay and Silent Bob’s Crypto Studio, an independent crypto gallery with its own dedicated Web address. The buyer will obtain the rights to showcase, distribute and stream the work. 

“As an indie artist, I’m always looking for a new platform through which to tell a story,” Smith said in an interview with Deadline. “If this works, we suddenly have a new stage on which I and other, better artists than me can tell our stories.”

Smith rose to prominence in the film world for his low-budget film Clerks, in which he wrote, directed, produced, and performed. Smith’s independent studio will host what it calls “Regular Drops” which are built around “Smokin’ Tokens.” Each token will commemorate a different Jay and Silent Bob movie, referring to characters that appear across his cinematic universe. 

Smith is collaborating with media and technology company Semkhor to produce and distribute the NFTs. 

“This allows us to shine a spotlight on artists we love and introduce the community to their style by way of our characters. We provide the Jay and Silent Bob, you provide the art, our partner Semkhor mints the NFT, and we split the profits,” Smith said. “I’ve earned money off of Jay and Silent Bob for years now, so it’s nice to provide a licensed place where others can do the same.”

Image Credit: Sterling Munksgard / Shutterstock.com

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Hester Peirce, the crypto-friendly commissioner at the Securities and Exchange Commission (SEC), has formally unveiled an updated version of her proposed regulatory safe harbor for token sales.

In a public statement, Peirce said that the proposal “seeks to provide network developers with a three-year grace period within which, under certain conditions, they can facilitate participation in and the development of a functional or decentralized network, exempted from the registration provisions of the federal securities laws.”

The updated version comes more than a year after Peirce originally put forward a proposed three-year safe harbor period for token sales, as previously reported. The update was also published on GitHub.

Peirce’s statement highlights the change made the proposal: updated token purchaser protections requiring “semi-annual updates to the plan of development disclosure and a block explorer”; an “exit report requirement” that “would include either an analysis by outside counsel explaining why the network is decentralized or functional, or an announcement that the tokens will be registered under the Securities Exchange Act of 1934”; and lastly, that exit report requirement “provides guidance on what outside counsel’s analysis should address when explaining why the network is decentralized.”

“The guidance is not a bright-line test, but rather attempts to strike a balance between providing a manageable number of useful guideposts while maintaining sufficient flexibility for the facts and circumstances of each network to be considered in the analysis,” Peirce went on to say.

In past statements and public appearances, Peirce has long lamented what she has described as inadequate regulatory clarity for companies and developers operating in the crypto space. That said, she expressed hope in a speech last month that 2021 would mark a “turning point” for the regulatory environment in the United States. 

Her updated proposal comes as former CFTC chairman Gary Gensler awaits final confirmation as chairman of the SEC by the Senate, an action that is expected in the coming days. Indeed, Peirce referenced the forthcoming leadership change in her statement.

“Now, as a new Chairman is coming into the SEC with a new agenda, is the perfect time for the Commission to consider afresh how our rules can be modified to accommodate this new technology in a responsible manner,” Peirce concluded. “I invite the public to provide feedback on the updated proposal and look forward to the continued honest and open debate on how to address the issue.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Enso Finance, a project aimed at creating a dedicated social trading platform on the Ethereum network, has raised $5 million.

Leading the round were VC firm Polychain Capital and the Dfinity Beacon Fund. The funding round involved participation from companies like Multicoin Capital, P2P Capital, and Spartan Group, as well as angel investors from Synthetix, Messari, Aave and others, according to an announcement post.

“Enso was created with the conviction that decentralized finance should not be constricted to whitelisted integrations but should remain completely open,” the project team said in its post on Medium. 

The news represents the latest DeFi-focused project to attract interest from industry sources, including those that already operate in the DeFi space such as Aave and Synthetix. 

Earlier this month, Polychain led a funding round for Greenwood, a decentralized finance lending protocol that brought in $2 million in seed funding. 

Other DeFi-centric funding rounds in the past month include Element Finance ($4.4 million), Liquity ($6 million) and Vega ($5 million). 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Coinbase’s stock has been given a reference price of $250 ahead of Wednesday’s direct listing on the Nasdaq stock exchange.

The reference price is established in consultation with financial advisors with the listing firm as well as private transactions for that stock. In this case, $COIN was pegged to the $250 mark for its Nasdaq debut.

As explained in the notice:

“As a Direct Listing, COIN will be in a regulatory halt until Nasdaq opens trading pursuant to the procedures described in Rules 4120(c)(8) and (9) and 4753. Because COIN has not had recent sustained trading in a private placement market, Nasdaq is required to determine the price to use for purposes of Rule 4753(a)(3)(A)(iv)(b) and 4753(b)(2)(D)(ii). That reference price is $250.00.”

In the notice, Nasdaq stressed that the reference price is distinct from whatever price $COIN may open at when it begins trading.

“Please note that the reference price is NOT an offering price and nobody has purchased or sold shares at that price. The opening public price will be determined based on buy and sell orders in the opening auction on Nasdaq,” the notice stated. 

The price chosen is notable, given the prices reported from secondary transactions on Nasdaq Private Market as well as the price for FTX’s pre-IPO futures contracts. FTX’s market is currently trading at about $607 per share.

The reference price gives Coinbase a rough valuation of $63.7 billion, based on the estimated 255 million shares cited by FTX.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Internal Revenue Service (IRS) Commissioner Charles Rettig says reporting requirements for cryptocurrency could be a significant help in closing the tax gap.

Rettig’s comments came during a Senate Finance Committee hearing Tuesday. During the hearing, Sen. Rob Portman (R-OH) sought Rettig’s feedback on the subject, saying he’s drafting a bill that would establish crypto tax reporting requirements.

“We’re working on a cryptocurrency bill that would define cryptocurrency for tax purposes and try to provide appropriate reporting rules,” said Portman.

Rettig said standard crypto reporting rules would “absolutely” help in closing the tax gap, or the amount of U.S. taxes owed that have yet to be paid to the IRS. The most recent tax gap estimate covered the years 2011, 2012 and 2013, accounting for a net gap of nearly $400 billion after enforcement actions and late payments.

Much of the problem, Rettig said, is visibility. He referenced the crypto question at the top of Form 1040 as a meaningful change so far. The crypto space is developing so quickly that there are a number of areas Portman’s bill would have to touch on, according to Rettig.

“We could give you a lot of guidance with areas we see in respect to the crypto world, it’s replicating itself constantly,” he said.

Portman’s bill appears to be in the early stages of development. However, Portman did say during the hearing that the intention is for the legislation to be bipartisan in scope, drawing input from both Republicans and Democrats.

Portman wouldn’t be the first to attempt to set crypto tax standards in Congress. In 2020, members of the Blockchain Caucus introduced the Virtual Currency Tax Fairness Act of 2020, which sought a de minimus exemption for gains of less than $200. That measure closely resembled a 2017 tax exemption bill, though ultimately neither piece of legislation gained traction. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• People’s Daily, the mouthpiece of the Chinese Communist Party, recently praised decentralized data storage protocol IPFS by name.
• Some government officials have also been touting IPFS and its complementary protocol, Filecoin.
• What’s behind the hype?

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