Make Kitco Your Homepage

Coinbase and IEX look to launch the first federally regulated U.S. crypto exchange

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) - Amid a crackdown on the crypto industry in the U.S. with a focus on cryptocurrency exchanges, Coinbase is reportedly in talks with stock exchange platform IEX to create a federally approved digital asset marketplace, according to people familiar with the matter.

Fox Business reports that Brad Katsuyama, Chair of IEX, told them that he and his staff are in talks with Coinbase to launch the new venture following recent meetings with officials from the Securities and Exchange Commission (SEC) that centered on gaining SEC Chair Gary Gensler’s approval for such an exchange.

Katsuyama, who is best-known for being the protagonist in the book Flash Boys, previously partnered with former FTX CEO Sam Bankman-Fried (SBF) to launch the new exchange, but that relationship fractured amid the collapse of FTX and the filing of criminal and civil charges against SBF.

Gensler’s public calendar shows that both Bankman-Fried and Katsuyama held proposal meetings with commission officials and the SEC Chair shortly before the November bankruptcy filing by FTX and the subsequent arrest of SBF.

Katsuyama then began to negotiate with the SEC on his own, and it is unclear at what point Coinbase joined the conversation. The IEX Chair declined to comment on the matter.

According to a spokesperson for IEX, the exchange continues to explore ways that they “can help provide a regulatory path for digital asset securities, including conversations with regulators and other market participants, but have not finalized any specific proposal that includes any third parties.”

This possible partnership between IEX and Coinbase comes amid an uptick in enforcement actions against crypto-related companies and while many in the industry have been looking for ways to gain approval from the SEC to create a marketplace where digital assets can be traded without the fear of a regulatory backlash.

Recently, Gensler has brought enforcement actions against multiple crypto exchanges, including Kraken, Gemini, and Binance for alleged SEC rule violations, and also issued a Wells notice to stablecoin issuer Paxos for its issuance of Binance USD (BUSD).

There is also ongoing litigation between the SEC and cross-border payments company Ripple, which has been accused of violating securities laws by failing to register the XRP token before offering it for sale to the public. The outcome of the case is highly anticipated by the crypto community, and it is expected to resolve sometime in 2023.

Coinbase cuts staff by 20%, operating expenses by 25%

The potential IEX-Coinbase partnership comes as the crypto exchange is looking for ways to increase its revenue after over a year of the brutal crypto winter. The recent earnings report from the company showed that it had a fourth-quarter revenue of $605 million, but still lost $557 million over the course of Q4 2022, a significant decline from the $840 million the company earned during the same quarter in 2021.

Select key financial metrics. Source: Coinbase Shareholders’ Letter

All told, Coinbase lost $2.625 billion over the course of 2022 while the wider crypto ecosystem saw its market cap decrease by more than $2 trillion. Coinbase now looks to improve its profitability and outlook by becoming the first federally approved crypto marketplace in the U.S.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.