Coinbase has been the go-to centralized exchange for most U.S. citizens looking to get into crypto for some time, having replaced Binance from its perch. Even without having fully revealed its plans, Coinbase is positioned to become one of the leaders of NFTs given its prominence and accessibility. Last week, the Company opened a waitlist for registration, which exploded to over 2 million signups quickly, completely dwarfing the number of active OpenSea users (~roughly 10,000 active wallets per week at the time of publication). Despite a relatively low number of users, Opensea continues to experience huge trading volumes and break its own records.
We just announced the upcoming launch of Coinbase NFT (https://t.co/U1ymWieRT3). We are getting a LOT of signups - so grateful for all your interest 🙏🙏.— Sanchan S Saxena (@sanchans) October 12, 2021
We are seeing insane loads on our servers and our team is working hard to get this resolved. Check back soon! #Coinbase
The move by Coinbase is spearheaded by its vice president of product, Sanchan Saxena, who aims to highlight simplicity and the user experience as the focal point of the NFT product offering. Although most Coinbase users currently interact with the basic exchange for trading, an integrated NFT marketplace may boost user adoption of both the exchange and NFTs, cementing digital art and collectibles as a new crypto asset class for the masses. Coinbase recently stated: “Our ambition with Coinbase NFT is to allow everyone to benefit from their creative spark; to contribute to a future where the 'creator economy' isn’t a small subset of the 'real' economy, but a central drive.”The platform will utilize self-custody wallets and, as a result, will not require users to go through KYC checks with the exchange in the same way that its brokerage clients need to trade cryptocurrencies. Market fees and the creator royalty structure will be announced closer to the launch of the platform. Given that Coinbase Ventures, the investment arm of Coinbase, is a notable investor in OpenSea, we may see considerable improvements given the Company’s familiarity with that platform.
There are two notable points to keep in mind when assessing the impact of Coinbase’s entry into the NFT market. First, Coinbase is deeply integrated within the US legal and regulatory regime. Since the federal government and states began seriously enforcing securities and banking regulations on cryptocurrency-focused companies a few years ago, Coinbase has sought compliance with applicable rules for both its day-to-day operations and as a public company listed on Nasdaq. Coinbase is keenly aware that its actions are closely monitored by various governmental agencies and so it behaves accordingly—the Company (i) carefully vets new offerings (such as its long-planned crypto lending service, which was recently halted following action by the Securities and Exchange Commission), (ii) is fully integrated into the U.S. tax reporting regime and (iii) strictly enforces KYC/AML rules. Coinbase understands that there are certain corporate “costs” to do business in the United States as a centralized exchange, and it chooses to comply, irrespective of what that means in terms of hopes for greater decentralization under Web 3.0 standards.
Second, because Coinbase attempts to be fully compliant, it receives either explicit or tacit approval by regulatory agencies of its offerings. The practical effect of this is that Coinbase is positioned to become the leader of the NFT space by virtue of the fact that it is the leader of the cryptocurrency exchange space in the United States. Taking it one step further, Coinbase may come to monopolize the NFT market through its ability to attract creators and sellers based on the potential number of digital asset buyers converted from basic Coinbase exchange users.
We’ll be keeping a close eye on Coinbase NFT and will provide our thoughts as we learn more. The one thing that we know for certain is that millions of users are about to be onboarded into the world of NFTs and its implications will be felt throughout every aspect of the space.