Proof of alignment
What we’ve already done to align ourselves with our customers, and what we’re doing next.
Summary
Coinbase is committed to providing a fair, transparent and equal experience across our suite of trading products. We take a number of steps to ensure this, including:
We do not coordinate asset listing decisions with anyone not directly involved with our review and listing process. This includes members of our management team that do not sit on our asset listing committee (the majority of Coinbase’s leadership team does not sit on our listing committee), our Board of Directors, venture capitalists, or outside investors.
Coinbase Ventures has never sold tokens from investments that it has made, and is staffed by a separate team with no influence over which assets may be supported on Coinbase platforms.
We have no control over, or proprietary information about, the plans of early digital asset backers, including their buying or selling activities for assets we list.
We are continually looking into additional mechanisms to align ourselves even further with our customers, starting with enabling users to track Coinbase’s own portfolio of digital assets for informational purposes.
In Detail
Coinbase’s goal is to provide a fair and efficient marketplace. As mentioned during our launch of Asset Hub, our goal is to list every compliant asset possible. In our ideal world, Coinbase would simply list every asset that met the requisite legal and cybersecurity standards, while giving our customers as much information as possible to make educated investment decisions. Being listed on our exchange would not be considered an endorsement; it would simply be an indication that the asset had met our listing standards.
The issue is that because an asset listing can be time consuming both from a technical and legal perspective, it is still scarce; because it is scarce, it is considered valuable; because it is valuable, it is considered by some to be an endorsement. This is similar to the dynamic that ensued around Twitter verification, where what was initially simply an anti-impersonation measure inadvertently became a status symbol.
As part of our commitment to transparency, we want to shed further light on how our current listing process works, as well as sharing additional information on the steps we take to ensure that our listing and ventures teams are kept completely independent, and, finally, offer some insight into how we think about the crypto assets we share on our corporate balance sheet.
First, as we’ve discussed before, here’s how we operate.
Asset Listing
Coinbase makes listing decisions through a formal process run by a special committee called the Digital Asset Listing Group, which follows regular procedures, which are documented in formal policies, and which applicable regulators must review and approve.
The Digital Asset Listing Group votes on what assets can be listed, informed by a rigorous vetting/review process that evaluates assets for compliance, legal, and information security concerns.
The voting group does not include Coinbase CEO Brian Armstrong or other Coinbase Global Board members.
An example of our disclosure statement
The vote is not impacted by whether Coinbase Ventures or our investors have a stake in the asset, and Coinbase Ventures is transparent in disclosing our interests in projects.
Coinbase has a conflict of interest policy that prevents board members or Coinbase employees from being involved in a listing decision where they have a financial interest.
The majority of assets that the Digital Asset Listing Group reviews are submitted directly by asset issuers through our Asset Hub portal.
This process is strict, and the majority of assets submitted for evaluation are rejected.
Employee Trading
Coinbase restricts all employees from trading the tokens it is considering for listing to make sure no one at Coinbase is front running assets, even if they don’t work on our asset listings team.
Early Backer Trading
Coinbase does not coordinate listing decisions or timing with early backers of a project (including VCs) or in assets being reviewed.
We have no control over or proprietary visibility into the plans of early token backers (VCs, founding team, etc.) on their selling activities.
Because trading typically occurs across many exchanges (not just Coinbase), and because large holders and even asset issuers are often unknown, we do not have the ability to play a role in any lock-up type mechanisms.
Coinbase Ventures
Coinbase Ventures has never sold tokens from investments that it has made, nor does it have any influence over which assets are supported on Coinbase platforms.
We are long term hodlers of our investments. It may make sense to liquidate some of our holdings in the future, but we do not presently have any plans to.
Our Ventures and Listings teams operate completely independently of each other, with no overlap in personnel or shared information.
Corporate Balance Sheet Holdings
Coinbase holds on our balance sheet the majority of the assets that we support on our platforms, which helps ensure that our interests are aligned with those of our customers.
Like our Coinbase Ventures investments, we are also hodling these assets with a long term view, with no present plans to sell.
Though it’s impractical to hold large positions of some lower liquidity assets, we aim to have some corporate exposure across the breadth of our supported assets.
Provable Alignment
With that said, we are always looking at new ways to more clearly show alignment with our customers. While the Coinbase Ventures portfolio is already public, and we’ve also published our material crypto assets held in our 10-Q, we plan to make our holdings even more transparent.
Soon we’ll share more information publicly, with the goal of making our holdings even more obvious, by showing (a) which assets are currently held by Coinbase and (b) which assets were backed by Coinbase Ventures, whether they are currently listed or not.
Now, we don’t claim that our portfolio is the best. Nor do we advise that you buy it. But by making it even more clear in the user interface as to which assets are Coinbase-held and Coinbase-backed, you can decide whether or not to align yourself with Coinbase’s crypto holdings. You can also choose to pursue a completely different strategy. And that is our goal: to provide a fair and efficient marketplace where the participants decide.
About Paul Grewal
Paul Grewal is the Chief Legal Officer of Coinbase where he is responsible for Coinbase’s legal, compliance, global intelligence, risk management and government relations groups. Before joining Coinbase, Paul was Vice President and Deputy General Counsel at Facebook. Prior to Facebook, Paul served as United States Magistrate Judge for the Northern District of California. Paul was previously a partner at Howrey LLP, where his practice focused on intellectual property litigation. Paul served as a law clerk to Federal Circuit Judge Arthur J. Gajarsa and United States District Judge Sam H. Bell. He received his JD from the University of Chicago Law School and his BS in Civil and Environmental Engineering from the Massachusetts Institute of Technology.
