Coinbase Eyes UK, Bermuda as CEO Weighs US Exit

Coinbase is looking at Bermuda and the UK as US regulators intensify their scrutiny of the global cryptocurrency exchange.

On Wednesday, Coinbase announced the Bermuda Monetary Authority had granted the firm a license under the Digital Asset Business Act.

The Caribbean nation was one of the first countries globally to pass comprehensive digital asset regulation in 2018. Coinbase praised the region for its "high level of rigor, transparency, compliance, and cooperation."

Coinbase reportedly plans to launch an offshore derivatives exchange in Bermuda as early as next week.

UK plans

Additionally, Coinbase is considering setting up camp in the UK. Speaking in conversation with former UK Chancellor George Osborne at the Innovate Finance Global Summit on Tuesday, CEO Brian Armstrong said: “Silicon Valley has a resource curse.”

Armstrong criticised the US for its approach to crypto regulation. “They have the golden goose … and yet they want to punish these things … they take it for granted and try to extract as much as they can.”

Coinbase is thus looking towards the UK. “The UK is our second largest market. We are not seeing regulatory clarity in the US. We may have to consider investing elsewhere. Anything is on the table, including relocating,” Armstrong said.

The CEO also highlighted how the UK Financial Conduct Authority oversees both commodities and securities, whilst America is caught in a "turf battle" between regulators.

The Commodity Futures Trading Commission (CFTC) believes that Ether and stablecoins should be treated as commodities, whilst the New York Attorney General (NYAG) and the Securities and Exchange Commission (SEC) believe ETH is security.

"You don't have this unfortunate thing happening where the CFTC and the SEC are having a turf battle," he said. "We actually have contradictory statements from the heads of the CFTC and the SEC coming out almost every few weeks. How's a business going to operate in that environment? We just want a clear rulebook."

US exit?

Coinbase's beef with US regulators isn't unfounded either. The company is facing a potential legal battle with the SEC after receiving a Wells Notice. Multiple Coinbase products are coming under regulatory scrutiny, including an unidentified portion of listed digital assets, Coinbase Earn, Coinbase Prime, and Coinbase Wallet.

The SEC told Coinbase that they found potential violations of security laws but when the crypto exchange asked the regulatory body to identify the specific assets in question, the SEC declined.

The SEC previously issued Coinbase a Wells Notice in 2021, claiming that its "lend" product was a security as it allows users to earn interest by lending out their crypto. Coinbase eventually cancelled the launch of the product.

In terms of relocating, Armstrong said in London that "anything is on the table, including relocating or whatever is necessary."

"I think the US has the potential to be an important market for crypto, but right now we are not seeing that regulatory clarity that we need," he said.

"I think in a number of years if we don't see that regulatory clarity emerge in the US we may have to consider investing more elsewhere in the world."

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