Coinbase overhauls cryptocurrency listing practises
Coinbase's cryptocurrency listings will probably be exploding in the near future.
"Satoshi and Vitalik were not Coinbase customers. But all future and current asset creators and developers are," said Coinbase CTO Balaji Srinivasan to CoinDesk. "So it's like we're becoming a two-sided marketplace."
He's referring to the common practice of charging fees for listings, which has just become part of Coinbase's overhauled cryptocurrency listings process. One of the top customer requests, he says, is wider support for a wider range of assets, and Coinbase has spent a while thinking on how to best meet this need.
It's easier said than done.
The main problem might be that there's a lot of dross out there, which far outweighs the solid and genuine projects. Any exchange which commits to listing everything under the sun will end up spending a lot of time and effort on adding the new listings, only to open up potential security issues, struggle with liquidity issues for low-demand assets and get a reputation as the dollar store of the cryptocurrency world.
It takes a brave exchange to commit to that kind of struggle, and Coinbase understandably has no interest in walking over those coals.
There are plenty of good projects too though, and a laggardly listings process often won't meet customer demand, especially with newer coins often being in relatively high demand in the aftermath of an ICO.
Part of the solution is to charge a listing fee. Coinbase hasn't given any concrete amounts, but Srinivasan said it wouldn't be prohibitive. It's mostly meant to deter spam and cover the cost of due diligence, he says.
"We do not want that [fee] to be a burden that deters people from listing new assets with us.
"Every major exchange of financial instruments — such as the equities industry — charges listing fees. It is extremely costly for an exchange to onboard a new instrument, and there is no way to avoid that cost," Srinivasan adds. "Every new blockchain adds risk to an exchange's operations. I'm wholly in favor of an exchange charging a listing fee, and I don't see any ethical or other issues with doing so. Whether they let the market decide the fee, or set a flat fee, or some other reasonable arrangement is completely appropriate."
This is the same conclusion which Binance and most other exchanges reached – that listing fees are necessary and any real form is appropriate. Although in the case of Binance, listing fees will actually vary widely from coin to coin. As Binance CEO Changpeng Zhao said, he prefers to let projects propose their own fees. The best projects can get on for free ("exchanges should pay the coin team to list them"), and acceptable costs will continue to grow based on declining project quality and increasing risks.
Also like Binance, the best way to get on Coinbase will be through the online application.
"The new process begins with a form for issuers to submit assets for listing at Coinbase, which we will evaluate against our digital asset framework," Coinbase says. The form itself says a coin needs to pass a legal and security review before one can apply, so it's a little bit unclear.
Still, the initial vetting will look at three main factors, Srinivasan say.
- Is the coin legally compliant?
- Is it technically secure and innovative?
- Do customers want it?
Free for a limited time only
The fee won't be coming in until later, Coinbase says.
It's probably going to be free to apply for a limited time. Coinbase also notes that it might be choosing to list some assets on the basis of its own evaluations, even without an application.
After reviewing an application, Coinbase will attempt to give quick, specific reasons for the approval or rejection of the application.
It will also be looking at these on a jurisdiction-by-jurisdiction basis in order to comply with local laws.
"In practice, this means some new assets listed on our platform may only be available to customers in select jurisdictions for a period of time," Coinbase says.
The new framework and free applications process means there's almost certainly a mountain of applications rolling in to Coinbase at this very moment. It's probably going to find a lot of promising additions going forwards, so it's safe to assume that Coinbase's variety will be exploding in the near future.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.