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Coinbase continues to execute at a world-class level.

The company announced yesterday they will be drastically increasing the number of digital assets they support in the coming months. The plan is to begin listing digital assets on a jurisdiction-by-jurisdiction basis. This means tokens available for trading in one country may or may not be available in another country.

The logic here is that Coinbase will be able to list tokens compliantly in one jurisdiction that may not be legal according to a separate jurisdiction’s securities law. If executed correctly, the company will have found a way to expand the supply side of their exchange business, without exposing themselves to additional regulatory risk.

The downside to the jurisdiction-by-jurisdiction compliance strategy is that it is more expensive and time-consuming. Today there are 1,800+ tokens in existence, with thousands more estimated to launch in the coming years, so the work could become quite tedious to vet and approve/disprove such a large number of applications across 100+ jurisdictions.

In an attempt to remove bias and create efficiency, Coinbase announced three criteria for approving a digital asset application:

1. Is the digital asset legally compliant in this jurisdiction?

2. Is it technically secure and innovative?

3. Do our customers want it?

These three questions are relatively straightforward but they highlight an interesting point — Coinbase appears to be following the platform strategy that Facebook previously implemented so effectively.

In the crucial years of Facebook, the social network was able to build a two-sided marketplace between content creators and content consumers (and eventually between advertisers and users). This platform strategy paid off in the long run because it allowed Facebook to benefit from each business, game, ad, and content creator who built something on top of Facebook’s platform. For instance, instead of focusing on building each game themselves, Facebook gave game developers the tools necessary to create, launch, scale, and monetize their own games on Facebook. This strategy led to faster growth and more profitability.

Two-sided marketplaces scale easily, are highly profitable, and create significant network effects that make the marketplace defendable. If Coinbase is working towards a true platform strategy, it wouldn’t surprise me to see them scale their ~$1 billion in 2017 revenue to $10+ billion within 24-36 months. This estimation does not include the impact of including tokenized securities on the Coinbase platform in the future.

There are still many unanswered questions during this important time for the company though. Are they growing frustrated with US securities law and using this strategy to scale faster internationally? If they find success outside the US, would Coinbase ever move their headquarters out of North America? How do they ensure that US investors are not participating in non-compliant trading in other jurisdictions? And if the platform strategy resonates with digital asset teams, will Coinbase accelerate their move to support tokenized securities?

It is unlikely that we will have answers to these questions in the short term, but that is okay. We are watching one of the most talented teams in crypto move from startup phase to scaling phase. If Coinbase successfully pulls this off, they have a chance to become the biggest threat to the traditional financial system in decades.

If Wall Street won’t adopt digital assets, people will find a way to fire Wall Street. Remember, the larger they are, the harder they fall.

-Pomp

The “Off The Chain” podcast has been downloaded 65,000+ times in 120 countries. You can listen to the latest episode with Jake Chervinsky now: Click here for Off The Chain podcast

THE RUNDOWN:

Tokyo whale sells $230 million of Bitcoin in Mt. Gox wind-down: The trustee liquidating cryptocurrencies on behalf of defunct exchange Mt. Gox has offloaded another 25.98 billion yen ($230 million) of Bitcoin and Bitcoin Cash. The disposals were made in the period since the 10th creditors meeting was held on March 7. The total compares with 43 billion yen in the prior round of sales, which the bankruptcy attorney announced six months ago. Read more.

Early execs leave Block.one: Four early employees and two contractors have resigned from the Hong Kong cryptocurrency company Block.one to start up StrongBlock, a new blockchain project backed by Peter Thiel that is currently under wraps. David Moss, Thomas Cox, Brian Abramson and Corey J. Lederer were the second, third, fourth and fifth employees to be hired by the corporate parent that created EOS, a decentralized operating system and application environment today valued at more than $5 billion. Read more.

Google to reverse crypto ad ban for exchanges advertising in U.S., Japan: The U.S. tech giant Google is set to update its ad policy in October, re-allowing some crypto businesses to advertise on its platform. According to the official announcement, starting in October Google will allow registered cryptocurrency exchanges to advertise on its Google Adwords platform, targeting the U.S. and Japanese audiences. Read more.

Andreessen Horowitz invests $15 million in stablecoin firm MakerDAO: American venture capital fund Andreessen Horowitz has invested $15 million into blockchain startup MakerDAO. MakerDAO is the firm which stands behind Ethereum-based stablecoin Dai and its accompanying decentralized credit system. DAI is pledged to U.S. dollars but collateralized by Ethereum. Read more.

Wallet provider blockchain sues crypto startup days before ICO: Luxembourg-based cryptocurrency wallet provider Blockchain has filed a lawsuit against a startup with a similar name. Blockchain – formerly known as Blockchain.info – is suing Blockchain.io just days in advance of the latter's initial coin offering over concerns that investors may believe they are buying tokens distributed by the wallet distributor. Read more.

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Nothing in this email is intended to serve as financial advice. Do your own research.