Coinbase eyeing offshore exchange to escape US regulatory pressure Coinbase eyeing offshore exchange to escape US regulatory pressure
Coinbase is subjected to higher standards of regulatory oversight than many of its rivals who are based offshore.
2 min read
Updated: Mar. 17, 2023 at 5:38 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
U.S.-based crypto exchange Coinbase is considering setting up an offshore exchange due to the recent regulatory clampdown on the crypto industry, Bloomberg reported on March 17.
Coinbase reportedly contacted some institutional clients to discuss setting up an alternative marketplace for global users. While the location for this exchange is undecided, Bloomberg reported that the firm is also in contact with market makers about connecting to it.
A Coinbase spokesperson did not confirm if the company had such plans. However, the representative said the exchange continuously assesses options in different regions and meets with government officials to increase global crypto adoption.
Why Coinbase is considering going offshore
Coinbase status as a public company subjects it to higher standards of regulatory oversight than many of its competitors who are based offshore.
For context, rival exchanges like Binance and the bankrupt FTX only have subsidiaries within the U.S., while most of their business operates outside the country’s jurisdiction.
Kraken CEO Jesse Powell pointed out the advantages “offshore exchanges” enjoy. According to Powell, U.S. regulators tend to ignore the illegal activity of these firms because they are outside their jurisdiction.
Although Coinbase operates in over 100 countries, all trades are routed through its U.S. platform. This might change if it establishes an offshore trading platform, enabling it to protect itself from regulatory pressure at home.
US’ lack of crypto regulation hurting firms in the region
Over the years, several crypto stakeholders have criticized the U.S. for its lack of regulatory clarity and the regulation-by-enforcement approach adopted by the U.S. Securities and Exchange Commission (SEC).
More recently, the failures of crypto-friendly banks have further undermined the ease of doing business for firms in the country. Besides that, several stakeholders have alleged that the government was deliberately making life difficult for these firms.
U.S. lawmaker Tom Emmer said President Biden’s administration was weaponizing the market chaos to kill crypto.
Ripple CEO Brad Garlinghouse warned that the lack of regulatory clarity pushed firms to friendlier jurisdictions. Garlinghouse said:
“Crypto moving offshore is not good for American innovation.”
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Oluwapelumi Adejumo
Oluwapelumi values Bitcoin's potential. He imparts insights on a range of topics like DeFi, hacks, mining and culture, underlining transformative power.
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In this article
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Coinbase
Coinbase is a digital currency exchange and wallet service that allows individuals to buy, sell, and store digital currencies, such as Bitcoin, Ethereum, and Litecoin.
Binance
Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies.
FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Kraken
Kraken is a San Francisco-based digital asset exchange in euro volume and liquidity that trades various currencies, including Canadian dollars, US dollars, British pounds, and Japanese yen.
Jesse Powell is an expert in virtual currencies, online/international payments and fraud, as well as co-founder and former CEO of Kraken, one of the most trusted and largest Bitcoin exchanges in the world with number one EUR market share.