The new Coinbase and Gemini offshore exchanges and what they mean for crypto

What the launch of the offshore operations does not mean is that Coinbase and Gemini, which have been fixtures of the crypto scene for a decade, are turning their back on the U.S. Yes, the decision to open overseas came partly in response to the hostile regulatory climate at home, but neither company has taken any serious steps to pull up stakes altogether. And why would they? Most of their customers are here, and the vast majority of their revenue comes from the U.S., which remains—for now at least—the most important financial center in the world. Things would have to get much, much worse to make the likes of Coinbase quit the country altogether.

What the overseas offices do represent is the opportunity for a new revenue stream, which both Coinbase and Gemini badly need. Their new platforms, which are largely off-limits to U.S. players, will let the companies offer exotic derivatives products like perpetual futures for Bitcoin and Ethereum while allowing customers to leverage their positions up to 100x. The market for this stuff is large, and there is certainly money to be made. But the two U.S. brands will still have to persuade customers to leave Binance and other global competitors that have been in this game for years and are presumably very good at it. The upshot is that Coinbase and Gemini can build it, but there is no guarantee anyone will come.

A final observation is that the new offshore endeavors feel very far from what the U.S. companies originally set out to do—bring the promise of cryptocurrency to ordinary people. Instead, the new offshore operations are built for the benefit of hedge funds and cowboy traders whose idea of a good time is to sling millions of dollars around on scary derivatives. Seriously, unless you are a quant or a bored trust fund baby, stay the hell away from this stuff. You will get eaten alive.

Meanwhile, the U.S. operations of Coinbase and, to a lesser extent, Gemini will continue to plod along. It will be interesting to see if the retail customers who use those services will remain the companies’ top priority, or if they become an afterthought as the country’s most familiar crypto brands chase overseas wealth.

Jeff John Roberts
[email protected]
@jeffjohnroberts

DECENTRALIZED NEWS

MicroStrategy, whose share price is up 120% this year, revealed the company bought $179 million of Bitcoin in Q1 while making a modest profit. (WSJ)

Coinbase’s top executives and early investors, including Fred Wilson, are being sued by a plaintiffs’ firm for allegedly dumping shares prior to bad news. (Semafor)

Microsoft will let Teams users, including small businesses, collect payments during meetings by means of PayPal, Stripe, and GoDaddy—but not crypto for now. (The Verge) 

Auction house Sotheby’s is launching a curated peer-to-peer marketplace for NFTs. (CoinDesk)

The Himalayan kingdom of Bhutan has been quietly using its hydroelectric resources to mine Bitcoin for years. (Forbes)

MEME O’ THE MOMENT

Bitcoiners mourn Vice’s bankruptcy: