Coinbase Brings Stability, Regulation to Bitcoin

Coinbase launches a U.S.-based Bitcoin exchange that the firm believes will "bring stability and trust to the exchange space."


The Bitcoin cryptocurrency is gaining new momentum today, as Coinbase launches the first regulated Bitcoin exchange in the United States.

Coinbase is a Bitcoin services firm that has raised $106 million to date in venture funding from a number of well-known investors, including Andreessen Horowitz and Union Square Ventures, as well as the New York Stock Exchange. Coinbase's most recent funding round was a $75 million Series C round announced on Jan. 20, led by DFJ Growth.

The new Coinbase Exchange offers the promise of being subject to "regular IT security and financial audits," according to its site. Coinbase did not respond to a request for comment from eWEEK by press time.

"We believe Coinbase Exchange will bring stability and trust to the exchange space," Coinbase stated in a blog post. "Coinbase Exchange provides a reliable and secure platform for Bitcoin trading that is backed by investors such as the New York Stock Exchange."

Nick Holland, director of payments at Javelin Strategy & Research, regards the launch of the Coinbase Exchange as a positive development in the Bitcoin space.

"I would hope that this will lay to rest rumors of Bitcoin's untimely demise," Holland told eWEEK. "We've seen plummeting prices over the last month and widespread discussion of whether this is the end of Bitcoin, but I would like to think that this cements some legitimacy back into the existence and longevity of cryptocurrencies."

Bitcoin had a rough 2014, thanks in large part to the collapse of Mt. Gox, which at the time of its failure was the world's largest Bitcoin exchange.

The initial promise of Bitcoin was that it provides regulation-free currency. Holland commented that it is somewhat ironic that something as initially anarchic as Bitcoin is now regulated via Coinbase. For Bitcoin and other cryptocurrencies to stabilize and grow, regulatory oversight is a likely necessity, he added.

"To some extent, there has also been regulatory compliance on many of the exchanges for some time, as they have had to adhere to AML (Anti-Money Laundering) and KYC (Know Your Customer) requirements to disassociate themselves from the bad old days of The Silk Road, etc.," Holland said. "As long as regulatory oversight of cryptocurrencies is not unnecessarily draconian, I perceive the Coinbase news to be net positive and really just the cost of doing business."

Perianne Boring, president of the Chamber of Digital Commerce, is also optimistic about the Coinbase news. Boring said the Coinbase Exchange is a huge step for the industry toward mainstream adoption because U.S. customers now have a more efficient on- and off-ramp.

"However, Coinbase only has licenses to operate in 25 states, leaving half of the country underserved," Boring told eWEEK. "This highlights the need for greater regulatory clarity in money transmission laws and how they should or shouldn't apply to digital currencies."

Looking forward into the rest of 2015, Holland is projecting that Bitcoin will become less volatile and probably stabilize from a pricing standpoint as the market becomes more accustomed to the currency and as initial teething troubles are ironed out. Bitcoin isn't just about the idea of currency, but also as a distributed form of computing transactions with Bitcoin's blockchain, which is a public ledger.

"I also think we are very much on the cusp of a wide variety of innovation based on the blockchain being applicable to myriad other uses," Holland said. "Bitcoin itself may not survive long term, but the groundbreaking concept of shared ledger technology will live on."

Sean Michael Kerner is a senior editor at eWEEK and Follow him on Twitter @TechJournalist.

Sean Michael Kerner

Sean Michael Kerner

Sean Michael Kerner is an Internet consultant, strategist, and contributor to several leading IT business web sites.