The chief executive officer (CEO) for major crypto exchange Coinbase recently explained how his company decides which altcoins to add to the platform.
Speaking in an interview with computer scientist Lex Fridman, Coinbase CEO Brian Armstrong said that the company begins by evaluating an altcoin’s status as a security:
“We basically have a test of legality. We check: ‘Do we believe this is a security?’ If so, it can’t be listed on Coinbase. And there’s a very rigorous process we go through for that.
“Just currently the way the laws are in the US, you can’t do that. We acquired a broker-dealer license from the SEC. We’re trying to work with them to get that operational and hopefully one day, we can trade real crypto securities but today, that’s not possible in the US.“
Next on Armstrong’s list of evaluation criteria was security:
“Then we look at the cybersecurity of the crypto asset. Do we think there’s some flaw in the smart contract, or a way that somebody could manipulate it without the customers’ permission?
“We look at some compliance pieces to it as well, like the actors behind it and any kind of criminal history and things like that. If we believe it meets our listing standards, basically this test of legality and everything for customer protection, then we want to list it because we want the market at that point to decide...
“It’s kind of like Amazon or something like that where a product might have three stars or it might have five stars, but if it starts to get one star consistently, it’s probably fraudulent or defective or something and maybe Amazon will remove it. Otherwise, you want to let the market decide what these things are.”