On December 21, 2022, Max Branzburg, Coinbase’s VP of Product, Will Robinson, Coinbase’s VP of Engineering, and Greg Tusar, Coinbase’s Head of Institutional Product, explained how Coinbase supports Web3.

In a blog post published on December 21, 2022, they wrote:

“We have invested heavily in Coinbase Wallet because there is no web3 without self-custody. Over the past five years, Coinbase Wallet has been the most downloaded mobile self-custody wallet and dapp browser in the United States…

“NFTs provide an easy way to prove ownership of digital assets. A thriving web3 builder economy depends on NFTs being simple, useful, and widely accessible… Today, Coinbase Wallet users can buy, sell, and manage collections of NFTs and dapps on Ethereum, Polygon Solana, and Gnosis Chain . You can also access all the major NFT marketplaces in the app’s browser, directly view the offers on your NFTs, and in the future, accept an offer on your NFTs, all without leaving Coinbase Wallet…

“Coinbase NFT is a web3 marketplace that helps collectors find the best deals from their favorite creators, all with the simplicity and security of Coinbase. Today, you can see Ethereum-based NFTs from LooksRare, OpenSea, and others, along with listings for Coinbase NFTs…

“To build for web3 builders, we made the company-wide mindset shift to be API first. As we innovate and build new web3 technologies and infrastructure, we will also make them available to developers. By providing all-in-one access on every primitive, Coinbase Cloud’s goal is to help web3 developers build a better, more secure, and decentralized internet…

“As institutions have become increasingly familiar with cryptocurrencies, their investment strategies have evolved to include native cryptocurrency activities such as staking, governance, NFTs, and DeFi participation… Earlier this year, we launched our solution Institutional grade NFT custody*** where clients can store NFTs in segregated cold wallets.”

In a blog post published on December 19, 2022, Coinbase co-founder and CEO Brian Armstrong said that following the collapse of cryptocurrency exchange FTX, the US and other major jurisdictions needed to take the aforementioned steps. to “restore trust”:

• “Create regulatory clarity for centralized players“
• “Enforce a level playing field“
• “Let innovation happen in decentralized crypto“

Regarding the issue of regulatory clarity, Armstrong stated:

“Perhaps the most complex point that needs clarity is which crypto assets are commodities and which are securities. The CFTC and SEC have been debating this issue in the US for several years, but unfortunately have not provided any clarity to the market. At this point, it seems clear that Congress must step in and pass legislation. This can be done with an updated version of the Howey test that is applied to cryptographic tokens that may be included in the definition of an investment contract.“

Here is the Coinbase CEO’s proposal for a modern version of the Howey test that could help determine whether a particular crypto asset is a commodity or a security:

“Was there an investment of money? If the issuer of the crypto asset has not sold the asset for money in order to build a project, it is not a security.

“Is the investment in a common company? For a crypto asset to be a security, it must be controlled and operated by a centralized organization such as a company. If a project has been decentralized enough, it is not a security.

“Is there an expectation of profit? If the primary purpose of the crypto asset is some other form of utility (voting, governance, community incentive shares, etc.), it is highly unlikely that it would be considered a security.

“Will the benefits derive primarily from the efforts of others? If the expectation of earnings comes primarily from participants who are not affiliated with the issuance of the asset, then the project is sufficiently decentralized and would not be considered a security.“

He then noted that “all four points must be met for the asset to be considered a security” and “if you only have a few of them, it’s not enough.”