Coinbase looks to beef up crypto investment, enter Japanese market

Highlights

• Cryptocurrency exchange Coinbase (NASDAQ: COIN) plans to foray into the Japanese market after partnering with Mitsubishi UFJ Financial Group (MUFG).  
• The company plans to allocate 10% of its quarterly net income into crypto assets.
• Coinbase was up 1.38% to US$251.67 at 8:51 am ET after the announcement.

Cryptocurrency exchange Coinbase Global, Inc. (NASDAQ: COIN) plans to earmark 10% of its quarterly net income into crypto assets as it forays into the Japanese digital currency market in partnership with the Mitsubishi UFJ Financial Group (MUFG).  

Coinbase, founded in 2012, said on Friday that it would invest 10% of its quarterly net income into crypto assets. It will also invest US$500 million in cash and cash equivalents into digital coins.

The idea is to hold the cryptocurrencies, DeFi tokens, proof of stake assets, and other holdings as part of the balance sheet. The investments will be made over several years as part of the company’s customer-oriented strategy, Coinbase said in a release.

In addition, all transactions will be made over the counter or away from the exchange to ensure fairness or avoid conflict of interest with clients. It will look for long term investments but will divest only in special cases like asset delisting from the platform, it added.

Coinbase to enter Japanese crypto market

On Aug 19, the company announced plans to foray into the Japanese market, the world’s largest crypto market by trading volume. Coinbase has partnered with the Japanese bank Mitsubishi UFJ Financial Group (MUFG), one of Japan’s largest banks, for crypto trading.

The partnership will allow Coinbase customers in the country to deposit money with the bank, or its Quick Deposit counter, for trading on the Coinbase platform. 

Coinbase plans to launch retail products first, such as a suite of five top assets based on trading volume. Then, it will gradually add more such products and assets. 

Coinbase is committed to providing the best crypto products and making cryptocurrency trading safe and reliable, the company said. Coinbase initially aimed at making Bitcoin trading safe on its platform before offering trading services for other crypto assets.

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What is Coinbase?

Coinbase is one of the popular cryptocurrency exchanges and provides financial and technology infrastructure for crypto trading. It was listed on NASDAQ in April this year. Its current market capitalization is US$52.36 billion, and forward P/E for one year is 18.96.

As of Jun 30, 2021, it had more than 68 million users, with total assets of US$180 billion on its platform. Coinbase has a presence in more than 100 countries with over 2,100 employees.

 Its revenue for the June quarter, 2021, was US$2.23 billion compared to US$186 million in the comparable quarter of 2020. The net income was US$1.6 billion compared to US$32 million in the June quarter of the previous year. 

It had liquidity reserves of US$4.37 billion at the end of the quarter, a considerable growth from US$1.06 billion on Dec 31, 2020.

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Bottomline

Although digital currencies are fast becoming popular, some governments are skeptical whether they can take the place of a mainstream currency due to threats like hacking and volatility. Nevertheless, it is emerging as a strong contender to the existing financial system. Coinbase was up 1.38% to US$251.67 at 8:51 am ET after the announcement. However, any interest in cryptocurrencies should be evaluated further from an investment point of view.