Cryptocurrency Exchange Coinbase Acquires Keystone Capital In Bid To List SEC-Regulated Securities

Announcements, News | June 7, 2018 By:

Cryptocurrency exchange Coinbase has acquired California-based securities dealer Keystone Capital in a bid to become a fully-regulated financial business. The terms of the acquisition remain undisclosed.

Keystone is a private equity firm specializing in investments in owner-operator re-capitalizations and family businesses, corporate divestitures, special situations like in publicly traded companies, later stage, mature, industry consolidations and buyouts and acquisition of mid-sized businesses, middle market, and mature companies that are leaders in their niche markets. It is registered with the Financial Industry Regulatory Authority (FINRA) and has licensure to operate as an alternative trading system (ATS).

The acquisition could provide a pathway for Coinbase to offer stocks or other securities in the future. However, Coinbase will still need regulatory approval to operate under the Keystone licenses. In a blog post, Coinbase said it is currently waiting on approval from the US Securities and Exchange Commission (SEC) and FINRA for several forms of licensure.

“This step forward is being made possible by our acquisition of a broker-dealer license (B-D), an alternative trading system license (ATS), and a registered investment advisor (RIA) license,” the company said. “Securing these licenses will bring us a step closer to our goal, which is to be the most trusted way for our customers to buy, sell, and use many different types of crypto assets.”

In addition to Keystone, Conbase also acquired Venovate Marketplace and Digital Wealth. Coinbase said the three acquisition will help the company expand its offerings, and eventually allow them to expand into other 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,” said Coinbase President and Chief Operating Officer Asiff Hirji. “We believe this will democratize access to capital markets for companies and investors alike, lowering costs for all participants and bringing additional transparency and inclusion to the ecosystem.”

Currently, Coinbase allows users to buy and sell bitcoin, Bitcoin Cash, ether and Litecoin. The limited selection reflects the company’s cautious approach at a time when the SEC had indicated it regards most cryptocurrencies as securities that must be registered.

If approved, Coinbase will soon be capable of offering blockchain-based securities, under the oversight of the SEC and FINRA. Adam White, general manager of Coinbase’s institutional arm, said that institutional investors prefer working with firms that are regulated. But, he said, it’s hard to predict how soon authorities might approve the move.

“This is not only a good thing for our company, but a good thing for our industry,” White said. “We’re going to move at pace at which regulators are comfortable.”