Coinbase’s Acquisition of Keystone Capital

Posted by on June 07, 2018

Coinbase’s acquisition of Keystone Capital- Today is a special LawCast reporting on Coinbase’s acquisition of Keystone Capital. As reported by the Wall Street Journal, Coinbase, one of the leading cryptocurreny trading platforms, has entered into an agreement to acquire Keystone Capital Corp, a FINRA registered and licensed broker dealer. Keystone has licenses to operate as a registered investment advisor and to run an alternative trading system, or ATS.

As the SEC has pointed out many times, only a securities licensed trading platform, could legally operate as an exchange for securities tokens. The SEC also believes that most tokens issued in ICO’s are securities tokens. Coinbase’s new ATS could be that platform.

Moreover, many companies are now issuing or exploring the issuance of securities tokens to take the place of or supplement other forms of equity in the company. The Coinbase/Keystone ATS and brokerage firm could act as the platform for these securities ICO’s. Coin offerings have raised more than $13 billion since the start of 2017. Being first to offer a licensed platform for the launch and subsequent trading of coin offerings would be a huge win for Coinbase.

Even before there is an operational securities token ATS, just having securities licenses will add legitimacy to Coinbase, which is already set the standard by becoming one of the first crypto trading platforms with money transmitter licenses from every state in which it operates. Coinbase is one of the largest in the business as of today with over 20 million customers and operating in 33 countries. Coinbase has stayed on the right side of regulators, only trading the largest cryptocurrencies, such as bitcoin, ether and litecoin.

The Wall Street Journal article reports that Coinbase has said it will wind down Keystone’s other operations and integrate its business and licenses into the Coinbase platform. Coinbase has said it will keep most of the Keystone staff.

In addition to the optics of keeping existing Keystone personnel, it will probably make the process of completing the transaction and launching, much smoother. FINRA must approve all changes of control of a broker dealer, including this one. The FINRA approval process will be quicker and easier if existing licensed and experienced management and personnel continue with the company.

Interestingly, Keystone is the same broker dealer that T-Zero had planned to partner with to launch its ATS. It is reported that the T-Zero – Keystone deal will be wound down. T-Zero is now working with a different company, the TMX Group out of Canada, to build an exchange for securities tokens.