Coinbase submits IPO application, cryptocurrency listing boom may begin

Coinbase Global Inc., the largest U.S. cryptocurrency exchange, said it has filed with the Securities and Exchange Commission for an initial public offering, the first major company to test bitcoin’s potential for major public markets.

The company disclosed the news in a blog post Thursday afternoon.

The filing positions San Francisco-based Coinbase for one of the first big IPOs of 2021, which is expected to be another big year for companies going public.

While there are a handful of smaller cryptocurrency companies that have gone public in the U.S. and abroad, none are as big as Coinbase, which was last valued at about $8 billion. It is the largest cryptocurrency exchange in the U.S. and one of the largest in the world by trading volume.

Coinbase’s IPO filing came a day after Bitcoin surpassed $20,000 for the first time in its 12-year history. The digital currency has nearly tripled in value in 2020.

The company said in a brief blog post that it had confidentially filed a draft registration statement with the SEC that would become effective after the commissioner reviews it. It also said the offering would depend on market conditions and other considerations.

Bitcoin has begun to win mainstream acceptance this year. Prominent investors including Paul Tudor Jones and Stanley Druckenmiller and companies such as Massachusetts Mutual Co. have disclosed their bitcoin holdings in recent months. Others including Square Inc., PayPal Holdings Inc. and Robinhood Markets Inc. have opened their platforms to crypto trading.

Despite still being relatively small, Bitcoin has emerged as one of the best performing assets of 2020.

Indeed, Coinbase is cashing in on another hot trend in capital markets: U.S. exchange IPOs have raised more than $160 billion this year, surpassing the peak of the 1999 dot-com bubble. Investors are grabbing hot stocks: DoorDash Inc. shares surged 86% on their first day of trading earlier this month. Airbnb Inc. shares more than doubled a day later.

Coinbase declined to comment.

Coinbase’s filing is the culmination of years of evolution for crypto companies and the cryptocurrency industry, transitioning from anarchic experiments in alternative currencies to a mainstream asset class that has attracted hedge funds, mobile money providers and insurance companies.

Coinbase, founded in 2012 by Brian Armstrong and Fred Ehrsam, has grown into one of the most recognizable brands in the cryptocurrency industry. It currently has about 35 million users, more than Charles Schwab Corp.’s platform.

Coinbase founder and CEO Brian Armstrong

From the beginning, the company’s focus has been on reaching the small group of enthusiasts who are involved in Bitcoin. Where most people want to build a platform that can avoid banks and government control, Coinbase has consciously tried to build a company that can attract mainstream investors and integrate with the existing financial system.

Another goal of Coinbase is to make Bitcoin accessible to both non-coders and those with a more technical inclination. The platform has a simple user interface, but more importantly handles the work of being a custodian of the assets. This is a key point for Bitcoin, whose history is littered with stories of individual investors losing the “private keys” to their digital wallets and permanently losing access to their Bitcoins.

While Coinbase is generally considered a profitable company, it has never disclosed any profit or revenue figures. Public filings should shed light on the company’s operations and the extent to which Bitcoin is profitable for the companies that provide it with support services.

For the company’s founders and owners, a public IPO could involve a ton of money. Coinbase has raised $547 million in private markets and was valued at $7.7 billion in 2018, according to Crunchbase data. Its investors include Andreessen Horowitz, Union Square Ventures, BBVA Ventures and USAA.

Early on, Coinbase sought to work with regulators. In 2017, it received a "BitLicense" from the New York Department of Financial Services, allowing it to trade in New York. It is licensed to operate in 44 U.S. states and the District of Columbia. Its platform is available in more than 100 countries outside the United States.

That choice helped the company grow, but it was a double-edged sword: Coinbase engaged in a year-long battle with the Internal Revenue Service, which demanded access to every Coinbase user account in 2016. After two years of court battles, Coinbase ultimately provided access to a small number of accounts in 2018.

The company has found itself embroiled in other controversies this year. Last September, amid nationwide protests against police brutality and institutionalized racism, CEO Armstrong published a blog post saying the company would not engage in social or political issues and would simply focus on making products. It offered contract buyouts to employees who disagreed with those values; about 60 people left the company afterward.