Possible projection of events for Coinbase

Maybe Coinbase will end up having to turn into a Marketplace like Uniswap.

Back in Sept '22, Citadel, Fidelity and Schwab, in a joint move, announced a new Crypto Exchange called EDX.

As of now, EDX markets has begun executing trades (only in BTC, ETH, LTC, and Bitcoin Cash). EDX tells wall street that it runs different from Crypto exchanges because it "draws on standard practices in traditional, regulated markets." EDX is "noncustodial." The article says it doesn't handle it's clients' digital assets.

EDX only runs a marketplace (think NYSE or NASDAQ, where firms execute trades of coins and dollars, using the platform to agree on prices.

Later this year, EDX also plans to launch a clearinghouse to facilitate the process of settling trades. At that point, it will use third party banks and a crypto custodian to hold customer assets.

Note: Crypto exchanges are known for requiring customers to park their money in wallets controlled by the exchange. Currently Binance and FTX are under fire for this exact issue.

EDX does not expect to interact with individual investors. Instead, the individual's brokerage (Schwab, Citadel, Fidelity...) will send the buy and sell orders to the marketplace.

The stock market currently operates this way. Individuals don't access the NYSE or NASDAQ directly. Instead they go through these brokerages.

Notably, Citadel (Despite CEO Ken Griffin's strong anti-crypto statements) has been researching crypto trading since March 2021 and made its first systemic crypto trade in March 2022.

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So what does this mean for Coinbase? There's the first fight of what is and isn't a security. But after that, there will be the fight for: Are they an Exchange, a Clearinghouse, or a Brokerage. And I don't think the SEC is gonna let them be all 3 without some major re-structuring of the company.