I owe Coinbase (COIN) CEO Brian Armstrong an apology

It’s time for an awesome confession: I’m a Coinbase customer and have been, on and off, for years. For crypto veterans, this may come as a shock: I have an S-tier public track record as a Coinbase critic.

Most notably, I was instrumental in triggering a boycott of the stock exchange in early 2019 under the hashtag #deletecoinbase. The hashtag emerged mainly in response to a piece I wrote for the late, lamented Breaker Magazine about Coinbase hiring several former executives of a black hat organization known as Hacking Team. Ultimately, in response to public pressure, Coinbase fired its questionable new hires and executives admitted to failing due diligence.

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But this is not something Coinbase does specifically of its own free will. Instead, the move is apparently a reaction to US Securities and Exchange Commission Chairman Gary Gensler’s ongoing crypto crackdown. The shambolic campaign, where I stand, is frantically trying to close the gates to fundamentally good actors like Coinbase, well after Gensler and Co. had the likes of Celsius Network and FTX ransack the entire ranch.

I am suddenly reminded, not of Coinbase’s missteps, but of the good times. The boring times. Those times Coinbase did absolutely nothing.

In short, regardless of the missteps when Coinbase found its way, Brian Armstrong never stole from me. That should be a very low bar, but apparently not. I was busy demanding that Coinbase be an exemplary company when it seems I should have been content to be able to trust it with a tiny bit of my assets.

Now, however, Coinbase looks a little more like the less reliable competitor. So far, the offshore leverage trading offering seems nominal at best – Coinbase International Exchange doesn’t even have an app or website, operating strictly through an API. It could be the basis for a more robust product, or it could just be the bare minimum required to make a theatrical political statement. While I doubt Gary Gensler cares much, threatening to take his toys and travel overseas is one way Coinbase can rally support for a pushback against the crypto crash.

It is unclear whether Coinbase’s international ambitions extend beyond the rhetorical threat. As a customer, I hope not. There is little real chance that it will shut down US services, but just adding a less regulated and more volatile international product will in itself damage the reliability that makes Coinbase’s higher fees worth paying for users like me.

That’s because there is inevitably shared risk between the US Coinbase product and the new international offering. The new risks for Coinbase US users include both financial stability and, ironically, regulatory oversight. At worst, an international entity can become financially entangled with the US entity in ways that make the whole more fragile.

More concretely, launching an international exchange could paint a bigger target on Coinbase’s back for the hostile SEC. We have already seen the SEC cite the use of international exchanges by US customers via VPNs and false identities in a number of enforcement actions. It’s hard for an international exchange to prevent completely, but again, I’d bet that Coinbase is being extremely careful here.

Nevertheless, the shadow of uncertainty is greater. It is not because Coinbase has chosen to betray my trust. It’s because Gary Gensler thinks he’s protecting me, when in fact he’s doing the exact opposite.