On May 23, the largest U.S. digital currency exchange Coinbase announced that it has acquired the decentralized exchange Paradex as part of Coinbase’s commitment to investing in decentralized infrastructure and its focus on international traders.
Paradex is a decentralized exchange that enables traders to transact directly with each other through the use of smart contracts on the Ethereum blockchain. Paradex built its platform on the 0x protocol and allows users to trade ERC20 tokens directly from their wallets with one another. This eliminates the risks of holding cryptocurrency on a hot wallet on a centralized exchange.
Coinbase is thus expanding its offering beyond bitcoin (BTC), litecoin (LTC), ether (ETH), and bitcoin cash (BCH) to include all Ethereum-based tokens without having to add them onto its popular Coinbase trading application. That means Coinbase will also be able to cash in on the boom in initial coin offerings (ICOs) as its users will be able to trade Ethereum blockchain-based ICO tokens on the Paradex platform. Coinbase is reportedly still mulling over how or whether it will implement a fee structure on Paradex.
Speaking to CNBC Fast Money, Coinbase’s president and chief operating officer, Asiff Hirji, said: “This will significantly enhance the proposition for our customers in terms of what they want to trade and how they want to trade it.”
In its acquisition announcement on the Coinbase blog, the company said that it aims to make enhancements to the Paradex trading platform and roll it out to international (non-U.S.) investors first before eventually launching it in the U.S. due to the unclear legal framework covering ICO tokens. Until it is clear whether ICO tokens will be classified as securities or not, U.S.-based Coinbase users will have to wait to trade on the Paradex platform.
“As soon as we can we’re going to turn [Paradex] on in the U.S. We’re greatly increasing the number of things you can trade and we’re doing it in a compliant way,” Hirji added.
Coinbase’s Acquisition Spree Continues
The acquisition of Paradex comes only a month after Coinbase purchased Earn.com for over $100 million. Earn.com is a platform that allows users to receive digital currency payments for answering unsolicited emails and for completing tasks.
As part of the acquisition, former Earn.com CEO Balaji Srinivasan was integrated into the Coinbase C-level team as the company’s new Chief Technology Officer. This is a big win for the company, which has been suffering from a talent void.
Coinbase’s acquisition efforts are being led by former LinkedIn M&A head, Emilie Choi, who completed over 40 deals during her time at the social networking platform. Choi joined the bitcoin startups because she believes that “Coinbase […] is in a position to do a lot of M&A.”
Choi said that Coinbase will initially focus on “acqhires”, meaning that it wants to purchase companies in order to acquire the people who run them.
“It definitely seems as the №1 priority right now is getting in as much talent as possible,” she said.
GDAX is Now Coinbase Pro
Coinbase is looking to attract more investors to its digital assets trading service. To aid these efforts, Coinbase has rebranded its flagship exchange for professional investors, GDAX, to Coinbase Pro and has upgraded the platform to make it more user-friendly for experienced traders.
In the company announcement, Coinbase stated: “Coinbase Pro is an evolution of GDAX, specifically designed for individual crypto traders. When we launched GDAX three years ago, we envisioned a product that would help institutions enter the crypto space. It did this — and more. GDAX helped us discover the active crypto trader, and realize that this new type of customer requires a platform tailored to their needs.”
Furthermore, Coinbase wants Coinbase Pro to be more than just an exchange. The long-term vision for Coinbase Pro is to also “give customers the ability to participate in services like staking and protocol voting that are distinct to crypto.” In other words, Coinbase wants to expand its business beyond the pure buying and selling of cryptocurrency to become an integral part of the wider cryptocurrency ecosystem in the future.
GDAX and Coinbase Pro will operate side-by-side until June 29, 2018, after which all customers accounts will be migrated over to Coinbase Pro and GDAX will cease to operate. Existing GDAX users will find their funds on the new Coinbase Pro platform upon logging in.
Coinbase Aims to Boost its Institutional Investor Base
In the week prior to the Paradex acquisition, Coinbase announces its plans to attract more institutional investors through the introduction of a suite of new products targeted exclusively at institutional investors.
In a blog post, Coinbase announced that it will offer a custody service, a new electronic marketplace, over-the-counter (OTC) trading and cryptocurrency research for institutional clients.
“As institutions continue to enter the cryptocurrency market, we are committed to building the products and services that uniquely meet their needs. We believe our suite of products and dedicated Institutional Coverage group will accelerate the rate of institutional adoption and create a more mature and diverse market,” Coinbase stated.
Adam White, Vice President and General Manager of Coinbase, said on Fortune’s ‘Balancing the Ledger’: “We want to be the Google of crypto. We are spending much of our time and resources now to build up the infrastructure. The ability to safely store cryptocurrency, to safely trade it.”
In light of Coinbase’s strong financial backing, billion dollar valuation, ongoing acquisition spree, and growing user base, the San Francisco-based startup is well-positioned to achieve this goal.