Coinbase preps ‘crypto index’ derivative, denies token-listing fees

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The Coinbase (NASDAQ: COIN) digital asset exchange is basking in a post-election glow and prepping a brave new world of speculative ‘crypto’ products.

One week after Donald Trump was re-elected to the U.S. presidency, Coinbase’s share price came within a hair of its all-time high (set not long after the exchange went public in April 2021). The surge mirrored the equally elevated prices of BTC and other prominent tokens, all based on the expectation that Trump is preparing to loosen regulatory restrictions on all things’ crypto.’

The hype machine—and if the trading volume of certain stablecoins is any guide, wash trading galore—is definitely in full gear. On November 12, Coinbase’s app leaped into the #1 spot in the App Store’s finance category (the top five also include Robinhood, Cash App, and Crypto.com). Just a few days before the U.S. election, Coinbase wasn’t in the top 100. Time to capitalize on this bubble before it bursts.

Last year, Coinbase launched a Bermuda-based derivatives platform to offer heavily leveraged products that it knew wouldn’t garner regulatory approval stateside. However, with Trump set to gut America’s financial regulatory oversight, Coinbase is preparing new speculative products to flog to American’ investors.’

First up is the Coinbase 50 Index (COIN50), a self-described “global crypto benchmark” representing the top 50 digital assets on the exchange that “meet the index’s fundamental criteria for inclusion.” The product is being pitched as akin to the S&P 500, which tracks the performance of the 500 largest publicly traded companies on U.S. stock exchanges.

Half of COIN50 is weighted towards BTC, with smaller allocations for ETH (28.8%), SOL (6.4%), XRP (2.9%), DOGE (1.4%), and 10.4% for the other 45 tokens. As some have noted, this appears to be a shrewd way of getting unsophisticated traders to buy indirect stakes in tokens they’ve never heard of and likely would never directly invest in if they did. Presumably, some token-happy venture capital groups are clinking champagne glasses.

As for what tokens won’t be included in COIN50, they include stablecoins and any digital assets pegged to other assets, as well as tokens that don’t have most of their token supply in public circulation. Also ineligible are tokens with “known security vulnerabilities,” including “undue exposure to 51% [attacks],” and tokens must “fulfill the availability of custodians approved by the Index Owner.”

Coinbase also offers a perpetual future contract (COIN50-PERP) that allows you to bet on the index’s performance, with the ability to leverage 20x your original stake. For the time being this sketchy speculation is available only on the Bermuda exchange, meaning no U.S., U.K. or Canadian customers. However, with Trump currently stocking the Securities and Exchange Commission (SEC) hallways with matches and oily rags, the PERP’s stateside access appears to be just a matter of time.

Coinbase’s announcement made it clear that COIN50 “is just the beginning,” citing plans to “launch a significantly broader index, to align with the growing size and diversity of the crypto market.” This will presumably include memecoins and other dubious utility-free tokens, possibly even those in which Coinbase’s venture capital unit has a stake.

And make no mistake, the world is about to be deluged with speculative tokens. A new blog post from the tech-focused a16z venture capital group claims the second Trump administration will “enable the crypto ecosystem to thrive in the U.S.” (Brief reminder: a16z co-founder Marc Andreessen serves on Coinbase’s board of directors and somehow manages to get lots of a16z-supported tokens listed on Coinbase only to see those tokens dramatically underperform post-listing.)

a16z previously advised ‘crypto’ founders against issuing tokens in the U.S., noting that “many of you have delayed using tokens to distribute control of your project and build community due to fears of regulatory overreach.” However, a16z believes “that you should now have greater confidence in your project’s use of tokens as a legitimate and lawful tool.” In other words, get in, losers; we’re going from FOMO to FAFO to FML.

Pay to play?

Even as it pimps its new ‘crypto casino’ games, Coinbase has been forced to defend itself against claims that the exchange has been putting the squeeze on projects hoping to list their tokens on Coinbase (but lacking Andreessen’s access).

Earlier this month, Coinbase CEO Brian Armstrong responded to an online comment by Moonrock Capital CEO Simon Dedic regarding a “tier 1” crypto project’s claim that it received a “listing offer” from the Binance exchange, which wanted 15% of the project’s token supply in order to have said token listed on Binance.

Armstrong replied that “asset listings on Coinbase are free,” prompting a reply from decentralized finance mainstay Andre Cronje (Yearn, Fantom, Sonic Labs), who claimed, “This is simply not true.” Cronje claimed that Binance “charged us $0” to list a token, while “Coinbase has asked us for; $300m, $50m, $30m, and more recently $60m.”

Tron founder/attention whore Justin Sun couldn’t resist weighing in, tweeting that “Binance charged us $0. Coinbase required us to pay 500 million TRX (worth $80 million) and demanded a $250 million BTC deposit in Coinbase Custody to boost their performance.”

Other observers suggested Cronje had actually been conversing with “fake Coinbase listing agents” or that the Coinbase critics were confusing its listing process with its Earn program, which offers projects (for a fee) the option of ‘educating’ consumers regarding a project’s game-changing innovation and/or the shocking lack thereof.

Cronje rejected this explanation, saying Coinbase “can argue it isn’t a ‘listing fee,’ but it is a[n] ‘earn fee’ which still translates into cost to be listed’.” Cronje also claimed to be “very happy to provide proof of the requests” for money based on conversations with “multiple CB Employees / divisions over multiple years, on email, telegram and slack).”

Meanwhile, Binance co-founder Yi He tweeted that Binance refuses to list any token that “does not pass the screening process, no matter how much money or how many coins.” She also praised Cronje as deserving of respect for having “the courage to speak the truth through the noise.”

Binance’s other co-founder, Changpeng ‘CZ’ Zhao, who is not supposed to have any role in the exchange’s operations following his release from prison for violating America’s money laundering laws, tweeted that “Bitcoin never paid any listing fees. Work on the project, not the exchange.”

Your call is important to us

The back-and-forth debate prompted the official account of the Kaspa Industrial Initiative blockchain to tweet an open letter to Coinbase’s chief legal officer, Paul Grewal. The letter sought an update on the status of Kaspa’s application to list its KAS token—currently ranked #35 on Coingecko’s market cap chart—on Coinbase.

KAS has been listed on exchanges such as Gate.io, MEXC, Bybit, Kucoin, and others, but the letter cites Kaspa’s two-years-and-counting “attempts to engage with Coinbase” about getting KAS listed.

The letter notes that Kaspa’s “truly decentralized” nature makes it incapable of supplying certain information regarding its “organizational structure.” This requirement—which Kaspa notes could also apply to Bitcoin—”creates an uneven playing field” and “risks inadvertently favoring venture-capital-backed initiatives, potentially stifling innovation, limiting consumer choice and raising legitimate antitrust concerns.”

Grewal responded to Kaspa’s letter by tweeting that he would put them “in touch directly with our listings team so they can share further insight into your case.” Kaspa thanked Grewal, saying they were looking forward to “a productive dialogue” with the exchange on “an efficient listing process for Kaspa.” But several days later, Kaspa tweeted simply that “our original letter stands,” suggesting they didn’t like what Coinbase had to say.

Just a thought, but has Kaspa tried upping its offer?

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