THELOGICALINDIAN - n-a
Bitcoin’s birth was a absolute acknowledgment to the banks which precipitated the banking crisis in 2007. These banking institutions issued high-risk sub-prime mortgages to individuals clumsy to accomplish constant account payments, used fractional assets lending for acute over-leverage, and facilitated a all-around crisis afterward the Lehman Brothers bankruptcy.
Lehman Brothers collapsed on September 15th, 2008, six weeks afore the Bitcoin whitepaper was released. This new technology was absolutely targeted at the administration of banking power; in the alpha block, Satoshi embedded a code that apprehend “The Times 03/Jan/2009 Chancellor on border of additional bailout for banks.”
According to Nakamoto, by removing a centralized authority, the broader all-around abridgement would become beneath abased on entities that “lend [money] out in after-effects of acclaim bubbles with almost a atom in reserve.”
Exchanges chase in cyberbanking footsteps
In 2019, the majority of cryptocurrency trading (and authorization on-ramping) occurs via centralized exchanges, such as OKEx. At the time of writing, OKEx had a 24-hour trading aggregate of US $3.3 billion. On the added hand, the better decentralized exchange, IDEX, had a 24-hour aggregate of alone US $2.2 million.
These exchanges are a key allotment of the crypto ecosystem, but they additionally acquaint centralization. What if one of the better exchanges became too big to fail?
In October 2018, Coinbase aloft $300 actor in a Series E round, which added the company’s appraisal to $8 billion. Investors included “Tiger Global Management, with accord from Y Combinator Continuity, Wellington Management, Andreessen Horowitz, Polychain and others.”
In the announcement, Coinbase admiral and COO Asiff Hirji said the costs would be acclimated to body a all-around basement amid authorization and crypto markets, apparatus USDC stablecoin trading, and add a Custody alms to onboard institutional funds.
Around this aforementioned time, Coinbase had about 25 actor customers, a amazing amount that is commensurable to traditional accounts giants like Charles Schwab.
These are aloof the latest accomplish in Brian Armstrong’s ambition of bringing accustomed barter to invest, borrow, and save, architecture what Fortune describes as a “banking empire.”
Is Coinbase acceptable a bank?
Coinbase is accountant as a Qualified Custodian beneath the regulations of the New York Department of Financial Services (NYDFS). This careful acceding allows the aggregation to “store ample amounts of cryptocurrency in a awful defended way.” Further, the authorization accustomed Coinbase to account new assets, and analyze features such as staking.
In June 2018, Coinbase acquired Keystone Capital to become a absolutely SEC-regulated broker-dealer. If approved, Coinbase would be able to offer blockchain-based securities, beneath the blank of the Balance and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Further amalgam itself into acceptable finance, Coinbase is purportedly seeking a cyberbanking license, and has met with the Office of the Comptroller of the Currency in aboriginal 2018 to altercate what that ability entail.
A general coffer license would acquiesce Coinbase to barter in merchant acquisition, asset management, and trading. However, the barter has already amorphous establishing relationships with acceptable banks at an all-embracing level.
Coinbase has chip itself into the banking markets as well, by establishing an annual with Barclays Bank, as able-bodied as obtaining an e-money license. This move makes it easier for UK-based barter to use the cryptocurrency barter and abjure authorization currency.
These appearance beggarly that “Coinbase has become a crypto bank,” says Nash Exchange co-founder Fabio Canesin.
“It’s abundant afterpiece than [to a bank] than annihilation abroad because it is absolutely centralized,” Canesin told Crypto Briefing. “They alike acquired [Neutrino], which agency complete de-anonymization of the user. So if it’s it’s accountable to [banking-like rules], it [is already acting like] a bank.”
Is that necessarily a bad thing?
The autograph is on the wall: a arch cryptocurrency barter is blame appear acceptable a acceptable banking institution. That anticipation ability alarm some decentralized die-hards, but compared to the brand of Lehman Brothers and Goldman Sachs, it may be beneath of a adversity than it seems.
Blockchain and cryptocurrency companies accept to angle in advanced of the mirror and ask themselves a adamantine question: can businesses and practitioners who fabricated their affluence from broadcast balance technology additionally advice ameliorate the banking elite?
Or will these new cryptocurrency banks account their own “waves of acclaim bubbles?” That charcoal to be seen, but there’s a audible achievability that crypto institutions could become the actual affair they’re meant to replace.
