Coinbase Buys Decentralized Crypto Trading Platform Paradex
The US cryptocurrency exchange also announced the rebranding of its GDAX platform to Coinbase Pro
San Francisco-based cryptocurrency exchange Coinbase said on Wednesday it is buying decentralized cryptocurrency trading platform Paradex in a move that will allow it to add hundreds of tokens to its offering.
The terms of the deal were not disclosed.
Paradex is developed using the 0x protocol, which enables investors to trade ERC20 tokens directly from their digital token wallets without the need of third-party custodianship. For customers, the peer-to-peer transactions may mitigate some of the security risks associated with centralized exchanges, which can be vulnerable to large-scale hacker attacks. At the same time, the responsibility of keeping the funds safe shifts to the individual, as warned by Paradex on its website: “Paradex will not be responsible for any losses of any kind whatsoever.”
The addition of the relatively small service, which currently employs only 10 people, will increase the number of cryptocurrencies that Coinbase’s over 20 million users can access. Until now, the exchange has limited itself to offering only four coins: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH).
Coinbase customers have been urging the exchange to add more coins, but the company has held off due to a lack of regulatory clarity about which tokens are securities. In March, the US Securities and Exchange Commission (SEC) warned investors that platforms offering trading of digital assets that are securities and operating as exchanges must register with regulators. The Paradex deal may allow Coinbase to satisfy customer demand to trade ERC20 tokens while sidestepping a regulatory burden since the exchange never takes possession of the tokens.
In March, Coinbase said it plans to list for trading tokens based on the Ethereum ERC20 standard, but will wait for additional regulatory clarity before deciding on adding new assets.
Coinbase will make some product enhancements and integrate Paradex support over the next few weeks, initially only for investors outside the US, CEO and founder Brian Armstrong said in a blog post. The exchange will “eventually” offer access to Paradex services to its US customers after it implements changes for compliance purposes.
Armstrong noted that the acquisition reinforces “Coinbase’s commitment to investing in decentralized infrastructure and participating in the nascent world of wallet-to-wallet trading.”
This is the sixth acquisition Coinbase has made to date and the third since poaching LinkedIn’s mergers and acquisitions boss Emilie Choi in March.
On Wednesday, Coinbase also announced the rebranding of its GDAX trading platform that services advanced and professional traders. The revamped platform, Coinbase Pro, will host several new features, including a new chart system which provides streamlined access to historical data and a consolidated portfolio view. Coinbase Pro also seeks to “make the trading experience easier and more intuitive” with simplified deposit and withdrawal processes.
Till June 29, Coinbase Pro and GDAX will operate in parallel, after which all customers will be rolled into the new platform.
Launched in 2012, Coinbase has traded USD 150 billion in assets and had a reported revenue of USD 1 billion last year. While the company is already recognized as the leading US cryptocurrency trading platform, Coinbase has been stepping up its efforts to stay ahead in the fast-growing cryptocurrency economy.
Earlier this month, Coinbase bought blockchain application Earn.com. Last week, the exchange announced the introduction of four new services aimed at institutional investors, while reports revealed that Coinbase is exploring the possibility of obtaining a federal banking license as a way to broaden its product line and customer base.
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