Jeff Roberts: 3 Ways Coinbase Could Lose Its Crypto Crown

In 2012, Coinbase consisted of two guys in a San Francisco apartment. Today, it is a behemoth that dominates the cryptocurrency business in the United States and also boasts a thriving exchange for professional traders.

Coinbase has also acquired or invested in dozens of other cryptocurrency companies, and thanks to one of those acquisitions, it now stores around 5% of all bitcoin in the world. So it’s no wonder that if you ask ordinary people to name a cryptocurrency company, they will say Coinbase.

This domain is why I titled my new book on Coinbase “Kings of Crypto”. Like Apple is to mobile phones or Nike is to shoes, Coinbase is to cryptocurrencies. The company’s history, filled with drama and infighting, is a compelling startup yarn, but it also shows how a company can change an industry. It is thanks, in part, to Coinbase that bitcoin has entered the mainstream and why crypto is becoming such a force in the wider financial world.

Coinbase’s rise to the pinnacle of the cryptocurrency world is no coincidence. From his humble beginnings, founder Brian Armstrong has relentlessly focused on two things: making his products easy to use and staying on the right side of regulators. This ensured that Coinbase became the first stop for millions of inexperienced bitcoin buyers, while also avoiding the legal scratches that have set competitors aside.

After being slow to add more cryptocurrencies – a situation that sparked a civil war between former Coinbase executives Asiff Hirji and Balaji Srinivasan – the company is now offering nearly two dozen coins. And when it adds a coin, its influence is such that it still generates a brief price increase known as the “Coinbase effect”. Meanwhile, Coinbase last month launched a cryptographic debit card in the United States that allows users to earn commission-free bitcoin rewards when paying with a stablecoin, finally providing a practical reason to use one.

Coinbase still has formidable rivals, of course. Also, there is no shortage of haters. From the start, critics have mocked Coinbase with insults of “not your keys, not your coins” – a blow to Coinbase’s practice of holding its customers’ funds, which Bitcoin purists consider a betrayal of the ideals of Satoshi. Today, some crypto cryptocurrencies make fun of the company as boring and corporate compared to more free-wheeling competitors like Kraken and Binance.

For Coinbase, this is all just noise. The company is valued north of $ 12 billion and, backed by blue-chip investors, is poised to be the first cryptocurrency firm to go public, a process that could bring blockchain tokens to public securities markets for the first time.

See also: 5% of Coinbase employees accept layoff offer with respect to “non-political” position

Meanwhile, the company is quietly expanding its ties to the Wall Street banking world. These ties include a relationship with JPMorgan, which occurred after a secret meeting in 2019 between Armstrong and the bank’s powerful CEO, Jamie Dimon, who was once the most eminent critic of Bitcoin.

In short, Coinbase is at the top. The question is whether it will stay there and, for now, there are three obstacles that could counter it.

The first is the regulation. While Coinbase has done a better job than any other in complying with Washington’s rules, many in the federal government still have relentless – and often irrational – hostility towards cryptocurrencies. This could lead Coinbase to get involved in costly and annoying investigations, which could damage its attention and open the door for competitors.

And while the company is learning to play the lobbying game, it can’t compete with the big banks, which have had their tentacles in lawmakers for decades and may be pushing for rules governing cryptocurrency in favor of financial incumbents. There is no sign that this is still happening but, as cryptocurrency baron Barry Silbert of parent of CoinDesk DCG told me, “In the long run, it’s not Coinbase against Binance. It’s Coinbase versus JPMorgan. “In that case, Coinbase’s current alliance with the big bank could turn into a strategic rivalry where the latter has the advantage of making regulators work.

The second thing that could dethrone Coinbase is the big, well-funded adversaries. While industry giant Binance is seen as Coinbase’s main rival, its quick and loose style has made it radioactive for regulators and is unlikely to last in the long term. Crypo OG Wences Casares told me that Binance will likely follow the path of the once giants Mt. Gox and Poloniex. Instead, Coinbase’s most dangerous competitors will likely be banks or fintech giants like Square and PayPal, which are moving into the realm of cryptocurrencies with the force of a freight train. Then there’s Facebook, which is already offering a global cryptocurrency offering, and Apple, whose huge user base and privacy-conscious values ​​make it a likely candidate to offer their own crypto wallets. If these tech titans turn into cryptocurrencies, Coinbase could clean up by offering them its expertise or it could just be eaten.

See also: Emily Parker – Coinbase’s “mission” violates the spirit of Bitcoin

Regulation and competition are external threats. The third and perhaps the biggest threat to Coinbase’s long-term dominance is internal: its culture. That culture was on display this summer when Armstrong posted a blog post declaring Coinbase to be an apolitical company, a decision that has led to numerous employees resigning and the media to mock the CEO as insensitive. While some praised Armstrong for telling truths other CEOs wouldn’t tell, more people saw his blog post as a reflection of the crypto-believer’s narrow worldview – a worldview that considers itself apolitical but is actually a silo ideology shared by a handful of wealthy, mostly white men. This ideology is a problem for the cryptocurrency industry as a whole, which has done a terrible job of welcoming women and people concerned about diversity, but especially Coinbase.

Big companies create cultures to which people from all walks of life can belong, even those led by ruthless and combative leaders like Steve Jobs or Elon Musk. Armstrong has long displayed the same kind of original thinking as Jobs and Musk, but he has yet to prove he can attract the same kind of unwavering loyalty. To do this, and for Coinbase to be successful in the long term, it will need to improve the company’s corporate culture.

These three obstacles – regulation, competition and corporate culture – pose serious long-term challenges to Coinbase’s current dominance. But at least for now, no one is ready to take Coinbase’s crypto crown.