The ties between Coinbase, a VC firm, and a decentralized protocol | Coinbase becomes qualified custodian

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“Blockchain is an interesting technology that would be well worth being observed, but without standardisation and a lot more work, for every use of blockchain that you would consider today there is a better technology” — Peter Alexander, Chief Digital Officer Digital Transformation Agency

The Big Block

Coinbase, the digital asset exchange, has stood out as a trustworthy marketplace among a crowded field of venues. It even calls itself “the most-trusted brand in the space” in its marketing materials. 

That trust has translated into more than 25 million users, according to some estimates, and a potential $8 billion valuation. Still, the Coinbase token listing process has faced deep scrutiny with suspicions of conflicts of interest and rumors of insider trading. With the recent listing of the 0x’s $ZRX token on Coinbase, The Block has unearthed new information that adds weight to arguments that the cryptocurrency exchange is still in the process of shaking off its scrappy startup roots. (0x is pronounced “zero-eks” for those unfamiliar with the project and its token. Some have questioned whether the token is even necessary to support the goals of the project.)

Specifically, The Block can confirm a direct connection between the team that worked on Coinbase’s token listing framework back in 2017 and Scalar Capital, whose founders had invested in the public sale of the $ZRX token. After much speculation that it would join the exchange, $ZRX began trading on Coinbase earlier this month. Scalar Capital is led by former Coinbase employees Linda Xie and Jordan Clifford. Xie is an adviser to the 0x project and is married to the project’s cofounder Will Warren. Furthermore, Maksim Stepanenko, an engineer at Coinbase, advises Scalar Capital. Stepanenko was involved in the development of Coinbase’s listing procedures along with Clifford and Xie in 2017. And it is that relationship that’s the most striking, according to experts. Xie, Clifford, and Stepanenko did not respond to requests for comment.

Read More on The Block (6 Minutes)

Around The Block

Coinbase snags license to operate as a qualified custodian

Coinbase, the cryptocurrency exchange, announced Tuesday that it secured the necessary qualification to operate as a qualified custodian.

In a blog post, Coinbase's Sam McIngvale said the New York Department of Financial Services approved the so-called Limited Purpose Trust Company designation. The firm has been operating its custody business since November, serving mostly small hedge funds. Now, the business will be a standalone entity, McIngvale said. The qualified custodian designation, which firms like Gemini and Paxos also boast, could help Coinbase lure more-established firms to its trading venue. — More

SEC met with SolidX, VanEck, and Cboe to discuss the bitcoin ETF

On October 9, SEC Commissioner Elad Roisman and his counsels met with the representatives of SolidX, VanEck, and Cboe to discuss the prospect of bitcoin ETF. Mr. Roisman and the other parties discussed a pending application of bitcoin ETF VanEck SolidX Bitcoin Trust. The VanEck SolidX ETF's shares would be traded on the Chicago Board Options Exchange (Cboe) and would purchase bitcoin primarily in the OTC markets. The share price would be ~$200,000 (25 bitcoin per share) and the trust would be insured against loss or theft of bitcoin. — More

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