We are aware that the "Coinbase Effect" has become an industry-wide phenomenon. This is due to the fact that any token's listing on an exchange is known to increase its value.

However, according to a recent Financial Times report, Coinbase is profiting from its listing. For example, last month, crypto-startup Decentralised Social launched its DESO token, which was later listed on Coinbase. Soon after, the value of the token increased by 100 percent, benefiting the venture.

According to the Financial Times, Coinbase's venture arm is a venture capital (VC) firm that is supporting Decentralised Social. While it raises concerns about major conflicts of interest, DESO is only one of at least 20 such Coinbase listings, according to the report.

It is also worth noting that Jack Dorsey, former CEO of Twitter, previously dismissed Web3 as a VC playing field.

In this regard, Faisal Khan, a crypto-analyst, explained how VCs sell crypto to retail investors. He stated,

"If coins, particularly VC-backed coins, consistently underperformed Bitcoin or and Ethereum after listing on Coinbase, it suggests to me that insiders were waiting for a large, dollar-based exchange to list so they could sell – VCs profiting at the expense of retail."

Furthermore, FT's research discovered that Coinbase's token listings have benefited more than just the company as a whole. Andreessen Horowitz and other leading venture capitalists who serve on Coinbase's board of directors benefit as well.

However, Coinbase responded shortly after the report, stating that Coinbase Ventures and Coinbase Exchange are separate entities that are staffed separately. It went on to say,

"We do not coordinate asset listing decisions with anyone who is not a direct participant in our review and listing process."

However, experts argue that such rules are strictly enforced in the stock market. Tyler Gellasch, Executive Director of the investor advocacy group Healthy Markets, told the Financial Times,

"Conflicts of interest must be identified, disclosed, and managed in the securities industry." It appears to be a free for all in the crypto world."

According to Khan's research, the phenomenon is not limited to Coinbase Ventures. He contended,

"Other exchanges, such as Kraken, FTX, and Gemini, are also active in venture capital and have listed their own investments."

As a result, the question arises as to whether disclosure standards alone will be sufficient to protect retail investors in an environment where the VC pool is clearly deep.

Support us!