Coinbase’s new venture capital fund has announced a strategic investment in Compound, a startup that is building money market accounts for cryptocurrency investors.
Compound is the first project to receive venture funding from Coinbase as part of the company’s new efforts for fostering blockchain innovation. As CCN reported, Coinbase announced the new venture fund to incubate early-stage startups in the exploding industry.
Coinbase’s funding is part of a larger $8.2 million seed funding round, which pools other backers including Bain Capital Ventures, Andreessen Horowitz and Polychain Capital, with participation from Transmedia Capital, Compound Ventures, Abstract Ventures, Danhua Capital.
While other coin and token projects have debated ways to generate interest or dividend income, Compound has run with the idea. In a blog update, Salil Deshpande, Managing Director at Bain Capital Ventures, he states that current lending solutions for cryptoassets “are not good enough: they are either centralized and have substantial counterpart risk, or require robust order books for each type of cryptoasset, which generally do not exist.”
Compound’s mission is to put cryptoassets to work that now “sit idle on exchanges and in wallets, yielding no interest,” according Founder Robert Leshner in a blog update about the funding announcement.
“…when Compound launches it’s [sic] first money markets on the Ethereum blockchain, individuals, institutions and applications will earn interest on Ether, stablecoins and utility tokens, with complete liquidity — similar to the overnight rate for dollars and government currencies.”
The core technology behind Compound is a decentralized blockchain infrastructure that is centered around a series of open-source smart contracts. As part of the smart contracts, the interest rates for each asset adjust dynamically in response to the borrowing demand for that asset. An algorithm makes these adjustments in real time, according to the project’s whitepaper.
Compound hopes to attract borrowers such as hedge funds, sophisticated speculators, and other Ethereum applications.
As Compound’s technology aligns closely with Coinbase’s entrenched status as a company that is revolutionizing traditional finance, it is no small wonder why it has received the firm’s backing. The company’s target market of institutional investors is in line with Coinbase’s recent rolling out of a suite of tools for only these clients, as CCN reported on May 15.
Compound’s core technology also eases reporting, since each money market is transparent, auditable, and completely predictable. Coinbase itself has also worked hard on institutional-grade reporting as part of efforts for becoming an SEC-regulated brokerage.
Coinbase ads back on Google – All set to reach billions of new potential users
Coinbase, one of the biggest cryptocurrency exchange platforms is back on Google ads. The news comes in the limelight after the CEO of Coinbase, Brian Armstrong, announced that the exchange platform was whitelisted for Facebook ads earlier this week.
Google, the biggest search engine platform in the world, had published a new financial services policy which stated that the advertising of cryptocurrency is banned on the platform. This included Initial Coin Offering [ICO], cryptocurrency exchanges, cryptocurrency wallets and trading advice. The new policy has been in effect since June 2018.
Google said:“Our policies are designed to give users information to weigh the costs associated with financial products and services and to protect users from harmful or deceitful practices. For the purposes of this policy, we consider financial products and services to be those related to the management or investment of money and cryptocurrencies, including personalized advice.”
In order to be approved by Google for advertising, the company has to be licensed by the financial authority of their respective country. The ads and the landing page should comply with all the AdWord policies and necessary legal requirements.
The Director of Sustainable ads of Google, Scott Spencer had earlier stated that they have seen enough consumer harm or potential consumer harm with cryptocurrencies and since they do not know the future of cryptocurrencies, it is an area they want to approach with extreme caution.
When Coinbase was whitelisted on Facebook, the Co-Founder and the CEO, Brian Armstrong had announced that they are back to introducing more people to the financial system. The approval to advertise on Google would mean that the biggest exchange platform has access to billions of people and the exposure of Bitcoin and cryptocurrency would be double.
Steven81, a Redditor says:
“After Facebook, Google does too. Bull is prepped :p Seriously though, even google search trends (for bitcoin) seems to have bottomed, finally, after months and months of falling. Manipulation or not, the way this bear started (ads ban, Korea ban) may also be the one to end it (restart of ads, Korea is back)”
SoberJohnDaly, another Redditor says:
“Crypto advertising was put on the back burner by most websites. This is them now allowing coinbase to advertise again. I really doubt coinbase would ever pull the plug on advertising on the largest search engine in the world.”
Coinbase Forms Political Action Committee Amid Uncertain Regulatory Climate
Coinbase has become the first crypto industry organisation in the USA to form a Political Action Committee (PAC). This was revealed on July 20 in a filing by the United States Federal Election Commission (FEC). The move is the latest in a series of bold moves by the crypto exchange and wallet provider as it looks to secure its long term future.
Much Ado About PACs
Under American federal law, an organization is classified as a PAC if it collects donations worth more than $1,000 from its members and channels them into campaign funds with the intention of influencing an electoral process. Such organizations must register with the FEC under the provisions of the Federal Election Campaign Act 1974.
Political Action Committees are formed to support election candidates whose policies or ideological viewpoints tie in with the objectives of PAC members. They also exist to provide a platform for dialogue between social, political or economic interests and political office holders in order to establish points of understanding and cooperation.
What’s in It For Coinbase
The biggest motive for Coinbase is of course access to the politicians that have substantial influence over financial regulatory policy. The American political and financial establishment has historically viewed cryptocurrency with suspicion, and so it could be useful to establish dialogue with politicians and support candidates with a “light touch” regulatory ideology.
At a time when there is a substantial amount of uncertainty in the crypto market because of regulatory attention, a crypto industry PAC could effectively go over the regulators’ heads to engage with the politicians that influence policy.
Some key points of agreement resulting from such dialogue could include regulatory clarity, protection of the crypto industry as a job creator and promotion of blockchain technology solutions to public service challenges.
While forming a PAC is an industry first, Coinbase is no stranger to the strategy of political engagement and donations in furtherance of a pro-business agenda. Co-founder Fred Ehrsam has a well documented Republican leaning, donating a total of $12,800 to Republican candidates over the years. Notably, he made multiple donations to former Republican presidential candidate Mitt Romney between 2007 and 2011.
In April, CCN reported that Coinbase was engaging with the SEC about becoming a regulated brokerage firm and trading platform. The company recently signed up a $20 billion hedge fund for its institutional brokerage service, which counts as a major win.
Carrying out brokerage services alongside its crypto exchange services could be seen by SEC as a possible conflict of interest, and this could potentially be yet another area of dialogue to be facilitated by the PAC.
Coinbase Gets $20 Billion Prime Client, Ads Back on Facebook
Coinbase, the San Francisco-based cryptocurrency exchange already valued as high as $8 billion by itself, had a couple more additional positive developments recently. The company reportedly landed a $20 billion prime client and got its ads reinstated on Facebook.
$20 Billion Hedge Fund
Coinbase has been focusing on big institutional money recently, launching a custodial service this month and, earlier this year, establishing Coinbase Prime, a suite of tools specifically designed for institutions, along with an institutional coverage group headquartered in New York City to provide a higher level of service to these type of clients. And the strategy has apparently now started to bear fruit.
A $20 billion hedge fund has already signed up for the prime business according to “people familiar with the matter” cited by Business Insider. And additional massive hedge funds are being worked on by the Coinbase Prime team to possibly join the trading venue too. The lack of a prime brokerage to use is seen as the main hurdle for getting big money trading crypto as institutional players don’t like to risk it with a direct exposure to an exchange. Coinbase may have solved the issue by launching its own prime service, something that on Wall Street is usually reserved for mega-banks. The company is also reportedly planning to offer margin finance as early as the end of the year, allowing institutional investors to trade on borrowed capital for increased leverage.
Coinbase Ads Back on Facebook
The company also got good news on its retail side of the business, with its promotional posts allowed back on Facebook. CEO Brian Armstrong announced on social media that: “Facebook banned ads for crypto earlier this year. Proud to say we’ve now been whitelisted and are back introducing more people to an open financial system.”
After banning all crypto ads in January, Facebook has updated its policy in June to allow promotional content from “pre-approved advertisers.” With its position in the US market, and the money it can afford to spend on lawyers, its little surprise that Coinbase made it on the list.