Coinbase Looks To Expand With Acquisition Of Broker-Dealer Keystone Capital

Written by Ann Brown



Coinbase is looking to become a fully-regulated broker-dealer with the U.S. Securities and Exchange Commission.

To do so, the U.S. cryptocurrency exchange has announced a bid to acquire securities dealer Keystone Capital. Chicago-based Keystone Capital is a private equity firm specializing in investments in owner-operator recapitalizations and family businesses, and corporate divestitures. As a broker-dealer, it trades equities, options and digital securities, promoting “innovative technology using blockchain ledger for digital securities.”

If approved, Coinbase will soon be capable of offering blockchain-based securities under the oversight of the SEC, according to Coinbase President and Chief Operating Officer Asiff Hirji. “This step forward is being made possible by our acquisition of a broker-dealer license,” Hirji said.

San Francisco-based Coinbase is a digital currency exchange which brokers exchanges of Bitcoin, Bitcoin Cash, Ethereum, and Litecoin with fiat currencies in around 32 countries, and bitcoin transactions and storage in 190 countries.

Coinbase still needs regulatory approval

Coinbase, which landed at the No. 10 spot on the 2018 CNBC Disruptor 50 list, will still need regulatory approval to operate under the Keystone licenses,” CNBC reported.

If Coinbase does acquire Keystone it would help the company expand its offerings, and eventually let them enter dealing with  non-crypto financial products.

“Ultimately, we can envision a world where we may even work with regulators to tokenize existing types of securities, bringing to this space the benefits of cryptocurrency-based markets — like 24/7 trading, real-time settlement, and chain-of-title,” Hirji said.

Coinbase, which claims to have traded $150 billion in assets across more than 20 million customers, has been on a buying spree.

“In April, the company bought for a reported $100 million, which lets users send and receive digital currency for replying to mass-market emails and completing micro tasks. As part of the acquisition, the crypto company will bring on Earn’s founder and CEO, a former Andreessen Horowitz venture capitalist, as its first-ever chief technology officer,” CNBC reported.

According to Coinbase, its value was about $8 billion when it set out to buy, Recode reported. This is a much larger amount than a valuation of $1.6 billion at its last round of venture capital financing in summer 2017.

As part of its expansion efforts, Coinbase announced in May a fleet of products to cater to the institutional investor class.

“Coinbase launched an index fund in March, and a month later launched Coinbase Ventures, an incubator fund for early-stage startups working in cryptocurrencies and blockchain. It has $15 million geared up for investments and recently announced its first deal with startup Compound, which lets you lend or borrow cryptocurrency and earn an interest rate,” CNBC reported.

The terms of the latest deal were not disclosed.

Brian Armstrong is the founder and CEO of the digital currency exchange Coinbase.