Coinbase, a leading cryptocurrency exchange, has made a strategic decision to establish Ireland as its central operational and regulatory hub within the European Union, as the company reported exclusively to CNBC in an interview.
This move by Coinbase involves the submission of an application for a license under the European Union’s forthcoming Markets in Crypto-Assets (MiCA) regulation, which is set to take effect by December 2024, in collaboration with the Central Bank of Ireland.
Coinbase has maintained an office in Dublin since 2018 and presently employs approximately 100 individuals in Ireland. Upon approval, Coinbase will obtain a universal “MiCA license” in Ireland, allowing it to “passport” its services into various EU member states, including Germany, France, Italy, the Netherlands, and more. This simplifies the process of launching new products in these markets without the need for individual licenses in each country. Coinbase is confident about its ability to secure this license.
The company is poised to be operational with its MiCA license from day one, according to Nana Murugesan, Coinbase’s Vice President of International.
Understanding MiCA
MiCA represents the EU’s endeavor to establish a comprehensive regulatory framework for cryptocurrency companies, providing safeguards for investors involved in buying and selling crypto assets such as Bitcoin and Ethereum. This regulation enables crypto companies to use a single license in one EU country to operate across all 27 EU member states. It also imposes specific requirements on crypto firms, particularly exchanges, including the separation of client funds from their own assets.
Coinbase’s Decision-Making Process
Nana Murugesan noted that Coinbase had been evaluating various EU member states even before the enactment of MiCA. The choice of Ireland was influenced by the country’s attributes as a sophisticated regulator with a wealth of experience in regulating financial services. Ireland was also selected due to its recognition of the significance of Coinbase’s globally integrated business model and the potential of innovative technology.
Coinbase’s Current Licensing
At present, Coinbase holds an electronic money institution license and virtual asset service provider registration in Ireland, a crypto license in Germany, and national registrations in several other EU member states, including Italy, the Netherlands, and Spain.
U.S. Regulatory Challenges
While Coinbase seeks growth in the European Union, it faces regulatory pressures in the United States, particularly from the U.S. Securities and Exchange Commission (SEC), which has accused the company of operating an illegal securities venue. Coinbase is disputing these claims and actively pursuing legal action. However, the company’s ultimate goal is to have formal crypto legislation in place, instead of continually engaging in legal disputes.
Coinbase’s Chief Legal Officer, Paul Grewal, expressed optimism about the future of crypto regulation in the United States, pointing to the evolving legal landscape in court cases that question the SEC’s interpretation of U.S. securities laws. In contrast, MiCA offers a more comprehensive and serious approach to crypto regulation, focusing on consumer and investor protection.
Coinbase’s Growth Prospects
Coinbase is banking on the potential for growth in the European Union, with its considerable population of 450 million people. While the company reports a decline in crypto trading volumes and slower fundraising, it anticipates robust growth in the European market, which has become the second-largest crypto economy in the world, according to Chainalysis data.
Coinbase’s Future Plans
Coinbase also intends to establish Germany as its regional “talent hub” and increase hiring in that market to tailor its product offerings for the German audience.
Innovating in the European Market
Furthermore, Coinbase is considering launching new products in Europe before introducing them in the United States. With MiCA providing regulatory clarity, the company aims to explore “utilitarian” crypto functions, such as payments and transactions for daily use, in the European market. Coinbase is also exploring integrations with other payment providers to enhance user access to digital tokens through its platform.
The future appears promising for Coinbase, with a keen focus on European expansion and innovation in the evolving crypto landscape.
