Chesnot | Getty Images News | Getty Images
Cryptocurrency exchange Coinbase has chosen Ireland as its main operational and regulatory center in the European Union, the company told CNBC in an exclusive interview.
Coinbase has submitted its application to the Central Bank of Ireland for a license under the new EU Markets in Crypto Assets Regulation (MiCA), which is due to come into force by December 2024.
Since 2018, Coinbase has had an office in Dublin. The company employs around 100 people in Ireland.
If approved, Coinbase will have a universal “MiCA license” in Ireland, which will then allow it to “customize” its services in Germany, France, Italy, the Netherlands and other EU countries.
This makes it easier for Coinbase to launch new products in these markets without having to apply for individual licenses in each country. Coinbase is confident that it will be able to obtain this license.
The company plans to be operational from day one with its MiCA license, said Nana Murugesan, vice president of international at Coinbase, in an interview with CNBC earlier this week.
MiCA is the EU’s attempt to introduce a pan-European regulatory framework for crypto companies. The aim is to introduce protection measures for investors who buy and sell crypto assets such as Bitcoin and Ethereum.
The rules allow crypto companies to use a license in one country to operate in all 27 EU member states.
The regulation imposes a number of requirements on crypto firms, particularly exchanges, including the requirement that they not commingle customer funds with their own assets.
“Even after the adoption of MiCA and even before that, we considered a number of member states,” Murugesan said. “It was a long decision-making process and we were very impressed by Ireland’s overall commitment.”
“It was really important for us to choose a member state that not only has a sophisticated regulator with extensive experience in regulating financial services, but also the importance of a globally integrated business model, the way we are structured as a company , recognizes the potential of this innovative new technology.”
Currently, Coinbase has an electronic money institution license and registration as a virtual asset provider in Ireland. a crypto license in Germany; and national approvals in other EU member states, including Italy, the Netherlands and Spain.
The company, headquartered in San Francisco, is one of the largest crypto trading venues in the world.
The expansion move comes at a difficult time for the crypto industry. Crypto company volumes have declined while fundraising has slowed as macroeconomic conditions have become more difficult and regulatory scrutiny has increased.
Coinbase is betting on growth in the European Union, a continent with a total population of 450 million, and other international centers as it faces regulatory pressure in its home country – not least from the U.S. Securities and Exchange Commission, which accuses the company of operating a company in an illegal securities trading venue.
Coinbase denies the SEC’s claims and is fighting the case. However, the goal is for there to be formal crypto legislation and not constant litigation in court.
Paul Grewal, Coinbase’s chief legal officer, said progress toward achieving crypto regulation in the US is “slower” than he would like. However, he hopes for more regulatory clarity in the future.
“We are now seeing real questions being asked in court cases about the U.S. approach to crypto regulation and securities regulation in particular,” he said. “One judge after another is raising serious questions about the SEC’s interpretation of our U.S. securities laws and, frankly, challenging some fundamental points the SEC has made regarding whether tokens are securities at all.”
“MiCA, on the other hand, offers, in my opinion… a more substantive and serious approach to crypto regulation because it is not tied to the jurisdictional disputes and turf wars in the United States over specific transactions or securities transactions or commodity transactions. Instead, the focus is on consumer and investor safety.
As a cryptocurrency market, the use of digital assets is less widespread than in the United States. According to Chainalysis data, Central, Northern and Western Europe is the second largest cryptocurrency economy in the world after North America. However, Coinbase expects strong growth in the region.
“In recent quarters, Coinbase has generated up to 15% or even 20% of its revenue across Europe,” Grewal told CNBC’s Arjun Kharpal – the company reported global revenue of $808.3 million in the second quarter of 2023 to its latest earnings report.
“But for us we will approach the opportunity responsibly and measuredly, we will let our customers drive our investments and focus on the opportunities we want to pursue. It’s an exciting future.”
Coinbase has also decided to make Germany its regional “talent hub” and will look to increase the number of employees in this market to localize and adapt its product specifically for Germany.
“We are very grateful to Germany for all the support it has provided,” Murugesan told CNBC. “Our German branch has grown steadily and has more than doubled the number of employees.”
Coinbase could even look to launch new products in Europe first before launching them in the U.S., Murugesan said.
The EU will be a “testing ground” for Coinbase to think about “utilitarian” features of crypto that people need in their daily lives, such as payments and transactions rather than trading, he told CNBC.
“MiCA and the clarity it provides enables us to innovate,” he added. “And hopefully some of these everyday use cases will be rolled out in the EU first.”
Coinbase EMEA Vice President Daniel Seifert said the company is also looking to launch integrations with other payment providers to make it easier for users to access digital tokens through Coinbase.
“There are many exciting plans for the region that we will see in the coming weeks and months,” said Seifert.
— CNBC’s Arjun Kharpal contributed to this report