Initial coin offerings (ICOs) were all the rage during the 2017 cryptoeconomy bull run. Similarly, initial exchange offerings (IEOs) have surged in popularity in 2019 as bullish momentum has returned to the ecosystem once more.
Now, U.S. cryptocurrency exchange giant Coinbase is admittedly interested on capitalizing on the new trend.
That’s per Kayvon Pirestani, the unicorn startup’s director of institutional sales. Speaking at the Invest: Asia conference on September 11th, Pirestani confirmed that the exchange was considering whether to embrace alternative kinds of cryptocurrency alternative like IEOs.
“We think there’s a really interesting opportunity there for Coinbase […] in a nutshell, Coinbase is carefully exploring not only the IEO space but also STOs,” Pirestani said, with STOs being “security token offerings” — much like the securities seen in mainstream markets, except deployed on blockchain tech.
“But I can’t make any formal announcements right now,” Pirestani added.
What Is an IEO & Why All the Fuss This Year?
An IEO is a cryptocurrency offering wherein a public sale of tokens is facilitated by an exchange on behalf of a token project.
Malta-based cryptocurrency exchange kicked off the IEO trend when it launched its redesigned Binance Launchpad platform at the beginning of the year. The platform’s first offering, the Tron-backed BitTorrent (BTT) token, enjoyed an “overwhelming response” from investors and pointed the way for other exchanges to move toward IEOs.
And move they did — now at least a dozen exchanges have launched their own IEO platforms, with some 40 projects having already relied on these services for their token offerings.
In theory, it’s supposed to be a win-win for the two sides: IEOs gives investors yet another reason to use a participating exchange (many of which are currently trying to become one-stop crypto hubs to attract more users), and investors have a streamlined and more reputable means of buying into new projects.
For Coinbase then, it makes sense that they would want to further position themselves to be a central player in America’s nook of the cryptoeconomy — particularly as Binance is opening up an exchange in the U.S. and as fellow American exchange Bittrex has already unveiled its own IEO arm.
What isn’t clear is what kind of demand Coinbase would receive if it were to actualize an IEO service. Cryptocurrency projects eligible for the platform would have to have clear regulatory approval from U.S. authorities, and such projects aren’t necessarily abundant at the moment due to country’s currency regulatory thicket when it comes to crypto.
In the least, the interest in IEOs suggests where the vision of Coinbase is heading. The company’s former president and chief operating officer Asiff Hirji and its former chief technology officer Balaji Srinivasan both departed the exchange within weeks of each other earlier this year.
Among other things, the departures came after Hirji and Srinivasan allegedly clashed on which direction Coinbase should head as a company. According to The Information, Hirji — previously a top executive at online broker powerhouse TD Ameritrade — wanted Coinbase to pivot toward mainstream finance, while Srinivasan reportedly wanted the exchange to cast a wide net and list considerably more cryptocurrency projects.
Though both men are now out at company, it likes like Srinivasan’s view may have won out generally if the IEO platform consideration is any indication.
STOs in Due Time
The revelation that Coinbase is interested in STOs isn’t surprising.
That’s because last summer the exchange acquired a trio of firms that already had broker-dealer licenses. That led to speculation that the company was imminently going to pivot toward offering security tokens.
Of course, demand for STOs are low at this point in the fledgling cryptoeconomy’s trajectory, so the aforementioned Pirestani said Coinbase would be keen on getting involved in the arena once demand around tokenization improves.