For many within the cryptocurrency space Coinbase has become the principal go-to service for converting one’s fiat into crypto. It isn’t difficult to understand why this happened, Coinbase is one of the few services authorized to sell bitcoin for fiat within the United States, and its sleek UI, accessibility, name recognition, and ease of use make it more appealing to many users than other US based services like Gemini. It is undeniable that Coinbase has played a vital role in making bitcoin and other cryptocurrencies more accessible to a larger segment of the population. That being said some of Coinbase’s recent actions seem to be at odds with the principles behind bitcoin. From censorship to allegations of insider trading, Coinbase seems more and more like a legacy bank every single day.
Perhaps the most shocking of Coinbase’s recent actions was the banning of Wikileaks from the platform. Wikileaks were one of the first organizations to accept bitcoin, having started to accept the cryptocurrency all the way back in 2011, after suffering a pay blockade by companies like Visa, Mastercard, and Paypal. Bitcoin’s ability to serve as money for Wikileaks when the world’s major payment processors blacklisted them, was perhaps the first major public display of bitcoin’s value, and now it seems Coinbase is attempting to undo that. The censorship of Wikileaks is a clear example of Coinbase cracking to political pressure, a trend that seems to be continuing.
More recently, in April, after a demand for user data was issued by New York Attorney General Eric Schneiderman (yes, that Eric Schneiderman) to major crypto exchanges, Coinbase not only immediately complied, they bragged about it. This response by Coinbase is a stark contrast to the defiant response from rival exchange Kraken. Obviously some degree of regulatory compliance is always going to be necessary if we want to further mainstream adoption, however, if exchanges and services roll over at every government whim, bitcoin’s resistance to government influence is greatly lessened and thereby so is its decentralization.
One might ask why this matters, particularly to an individual only interested in bitcoin from an investment standpoint as opposed to and ideological one. It is important to remember however, that bitcoin’s value as an investment has always stemmed from its ideological underpinnings. Decentralization, immutability, trustlessness, and sound monetary policy are the reasons bitcoin has value, and even if you don’t care about these things on an ideological level, as an investor you should realize that they are bitcoin’s main value propositions and as such need to be protected. If we allow the bitcoin ecosystem to become dependent on a single corporate entity or group of corporate entities, especially those like Coinbase who have illustrated willingness to bend to government demands, then we risk being complicit in a massive detraction from bitcoin’s value.
As time goes on and the space grows, so too will Coinbase’s customer base, as well as those of other centralized services who may have similar leanings to Coinbase. So what can we do? How do we fight this seemingly inevitable centralization. While it is likely impossible to stop this phenomenon there are a couple of ways individuals can help. Firstly, next time you want to buy bitcoin, instead of using a service like Coinbase or Gemini, consider using a decentralized exchange like HODLHODL or BISQ. These decentralized exchanges have a steeper learning curve than their centralized counterparts, and can often seem more inconvenient, however it is essential that any one who cares about bitcoin’s decentralization vote with their dollar in favor of decentralized services that cannot be compromised by political decisions. Setting up and running your own full Bitcoin node also helps to keep the network decentralized and fight against the centralizing nature of entities like Coinbase. Coinbase and their will happily take full control of bitcoin if we allow it to, and it is in the interest of any hodlers to try and stop that.
