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Abu Dhabi, UAEMonday 25 June 2018

Coinbase launching venture arm to invest in crypto start-ups

Coinbase Ventures to make seed investments in the $100,000 to $200,000 range, company says

US-based cryptocurrency exchange Coinbase is forming Coinbase Ventures to provide seed capital to crypto and fintech startups. Mary Turner/Bloomberg
US-based cryptocurrency exchange Coinbase is forming Coinbase Ventures to provide seed capital to crypto and fintech startups. Mary Turner/Bloomberg

Coinbase has capital, and it’s ready to spend it.

The best-known US cryptocurrency exchange is forming Coinbase Ventures, a team that will focus on providing funding to crypto and fintech startups as the San Francisco-based company seeks to build out its business offerings.

“We’re not wedded to any verticals,” Emilie Choi, Coinbase’s vice-president of corporate and business development, said in an interview. “We’re going to try to identify pockets of interesting opportunity early on in the life cycle - we’re talking literally at seed stage - and see how they blossom.”

Coinbase is interested in areas including decentralised exchanges, which seek to give investors more control over their funds, and “stablecoins,” or less-volatile cryptocurrencies, she said.

The company, which helps investors buy and sell Bitcoin and other major virtual currencies, expects individual investments to be in the $100,000 to $200,000 range, said Choi, adding that the firm doesn’t plan be a major holder in any of the companies in the near term.

“You may also see us invest in companies that ostensibly look competitive with Coinbase,” the company said in a statement on Thursday. “There may be nuances to the way these start-ups are building out their products.”

Coinbase could eventually buy another crypto exchange, said Choi, who is also in charge of mergers and acquisitions. She joined the company in March from LinkedIn, where she oversaw more than 40 deals.

Coinbase is considering transactions including large strategic acquisitions and deals related to traditional financial services and asset custody, she said.

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“Please note that we are not offering favoured asset status to any companies we’ll invest in,” Coinbase said in the statement. “Also, for the time being, our Ventures efforts will not be focused on security tokens.”

The US Securities and Exchange Commission (SEC) has said platforms serving as trading venues for digital assets deemed to be securities will need to register with the agency as a national exchange, or qualify for an exemption.

Coinbase is not federally licensed with the SEC or the Commodity Futures Trading Commission, the most vocal financial watchdogs on cryptocurrencies, but instead is regulated by numerous states through a patchwork system.

Choi said there will be a “church-and-state separation” between any token companies Coinbase invests in and the coins it lists on its marketplace.

The firm may also invest in companies started by former employees, it said in the statement. Notable alumni include Charlie Lee, who created Litecoin, and Olaf Carlson-Wee, who founded crypto hedge fund Polychain Capital.