📈Coinbase Valued at $8bn 🍫Maltese Security Tokens

📈Coinbase Valued at $8bn

What’s the Story?
Coinbase is reportedly in talks with Tiger Global for a $500 million investment. Coinbase is one of the largest cryptocurrency exchanges. Tiger Global is a hedge fund that invests in both public and private companies. The investment values Coinbase at $8 billion, up from it’s $1.6 billion valuation in April 2017 on a $100 million round.

Why the Investment?
Coinbase makes money on every single transaction through their exchange and is profitable. As such, shareholders are reportedly concerned that there would be no further rounds. This would deprive them of the chance to divest and realise their profits.

This round seems designed to allow existing shareholders to divest. Half of the proceeds are to buy out these shareholders while the other half is going to the company. Presumably, this capital is for growth. The company has launched many new products recently, including those for institutional investors.

Why Should I Care?
During the bull market, there was a lot of interest in the company from investors. Coinbase had to issue a warning to shareholders not to sell their shares without authorisation. But, since the market has cooled, they appear to have found it harder to find a deal in the secondary market. This round has taken all year to finalise.

While the markets remain depressed, this may signify stabilisation. Traditional capital coming from firms like Tiger Global also show continued interest in the industry.

🍫 Maltese Security Tokens

What’s the Story?
Binance has announced that they will open a security token exchange in Malta. Binance is the worlds largest cryptocurrency exchange. They recently moved its operations to Malta which has been attracting cryptocurrency firms. They recently amended their regulations to encourage the growth of the industry.

What’s a Security Token?
Most cryptocurrencies are utility tokens. If you hold the token, it entitles you the use of a particular service. Like a membership to a club, ownership of the token permits you use of the club facilities. However, it does not entitle you to the financial proceeds of the club. Speculation occurs because there is scarcity in the token. If the club becomes more popular there is more demand for the membership. This drives the value of the token higher.

A security token, though, gives holders participation in the profits of the company. Since a landmark US legal precedent in 1934, the definition of a security is an ‘investment contracts’. This means;

  1. It is an investment of money
  2. There is an expectation of profits from the investment
  3. The investment of money is in a common enterprise
  4. Any profit comes from the efforts of a promoter or third party

Many tokens are security tokens calling themselves utility tokens. Security tokens embrace the regulation and operate as such.

Why Should I Care?
Security tokens are likely to form the next wave of ICOs. Unlike most of the speculative projects to date, these are usually asset and/or cashflow backed. Security token exchanges have a higher regulatory hurdle to operating. Malta embraces this and Binance are positioning themselves for this next wave with them