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What the Coinbase IPO means for India

Bitcoin took another step closer to universal acceptance last week, as Coinbase completed its first day as a publicly-listed company.  The Nasdaq placed a pre-emptive reference price of $250 per share, but at market close each share was valued at $328. One of the world’s largest crypto-exchanges is now valued in the range of $85 billion.

In Bitcoin terms – that’s about 1.54 million BTC.

The company first announced its intention to go public at the beginning of the month, releasing a statement that it expected its shares to be placed for sale on the Nasdaq Global Select Market under the ticker symbol “COIN” on April 14, 2021.

Bitcoin prices surged, rallying to a new all-time high of ₹4,868,723 ahead of market open on April 14th.

Graph courtesy CoinGecko

Breaking Down the IPO

Okay first off, one important clarification. Coinbase’s listing was not a traditional IPO, but opted for a direct listing instead. 

An initial public offering means Coinbase would issue completely new shares for sale, diluting the value of each individual share. Instead, it listed approximately 114.9 million existing shares, approximately 44% of the company’s equity. 

The company’s SEC filing revealed that the exchange brought in a $322 million profit on revenues of over $1.2 billion in 2020, nearly doubling its performance in 2019. 

Approximately 96% of the company’s revenue came from transaction fees earned from trades on its platform by institutions and individual users. Clearly, Coinbase goes where Bitcoin goes and vice versa.

These remaining revenues is generated via several lines of business:

  • Coinbase Commerce – Solutions that help online retailers accept payments in crypto.
  • Coinbase Card – A relatively new offering, the company offers a physical Visa debit card and partner app to spend crypto in the physical world by converting crypto to U.S. dollars when used.
  • USD Coin (USDC) – Its very own stablecoin, built on Ethereum.

What does this mean for crypto as a whole?

Publicly listed companies are subject to certain regulations and disclosures, increasing trust in what they do, and the sectors in which they operate. 

Coinbase is the first cryptocurrency company to publicly list, which could lead others to follow suit. One successful public offering and massive valuation later, it is that much harder to dismiss cryptocurrencies as fringe investments.

Just as with PayPal accepting crypto, Tesla accepting Bitcoin or Kraken Financial, the Coinbase listing is another major step towards mainstream adoption of cryptocurrency. 

However, there are voices among the community disappointed with the move. They see the listing as a step away from crypto’s original promise – putting people in true control of their money.

The Indian scenario

The regulatory environment for crypto in India has seen massive swings in 2021. February greeted us with news of a bill which sought to prohibit all private cryptocurrencies in India. Finance Minister Nirmala Sitharaman followed with statements promising a “calibrated approach” to cryptocurrency in March.

The listing gives India’s crypto industry another point as it builds its case to the government to reconsider its ban. Coinbase has plans to set up shop in India as well, with ex-Google Pay engineering lead Pankaj Gupta at the helm. Gupta announced plans to acquire startups and  hire ‘hundreds’ of employees, a job-creation angle that the government is sure to assess.

“Pankaj is responsible for building out our team across India. Reporting to me, he starts on April 29th. This announcement is significant because we can now tap into the incredible engineering talent across India. Under Pankaj’s leadership, we plan to aggressively invest in building a technology team in India…Pankaj resides in Bangalore, and we intend to leverage our remote-first strategy and hire top talent from across the country.”

Coinbase EVP of Engineering Manish Gupta in an internal company memo shared with Financial Express.

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