Coinbase has traditionally been extremely selective when it comes to adding new coins on its platform, but it appears things might be about to change: the San Francisco-based company has announced plans to support Ethereum-based ERC20 tokens on its cryptocurrency exchange desk in the near future.
For those unfamiliar, ERC20 is a technical protocol developers can use to create utility-based tokens on the Ethereum network. Among hundreds others, the list of ERC20-powered tokens includes popular currencies like EOS, Golem and QTUM. Indeed, the technical standard has often been employed by fraudulent startups seeking to launch their own tokens in an easy and swift way.
Coinbase took to Medium to reveal its plans to support the ERC20 technical standard, but has so far kept the lid on when the implementation will go live – or which tokens will get listed first.
“This paves the way for supporting ERC20 assets across Coinbase products in the future, though we aren’t announcing support for any specific assets or features at this time,” the company wrote in the blog post.
How will this affect Coinbase?
Coinbase has a number of products this will affect. The first, and potentially the most important for institutional investors is Coinbase Custody. While unfamiliar to many retail investors, Coinbase Custody is a digital asset custody service that provides secure storage and financial controls of large holdings. No one knows how many customers are using custody, but it is seen as the most prominent digital asset custodian in the U.S.
GDAX, Coinbase’s digital asset trading platform, which currently only supports Bitcoin, Ethereum, Litecoin, and Bitcoin Cash will “wait for additional regulatory clarity” before adding more assets. It’s unclear what this means, in what jurisdictions they are seeking more guidance on regulation, or what their legal concerns are.
Coinbase Asset Management, the companies index fund, will include any new assets on a market capitalization basis. I.e. if you invest $100,000 and new ERC 20 Token x has 20% of the market cap of coins on Coinbase, you will own $20,000 of token x.
Coinbase also announced that their payment processing product, Coinbase Commerce, has no plans at all to accept payments in any other cryptocurrencies. This is obviously a blow to all of the coins wishing to be used for real-time transactions but highlights the cautious approach the company is taking.