A semi-common sentiment I see on subreddits for some small-cap coins I follow is that people want to see the project listed on major CEXs, we’ll say Coinbase for example, or why their favorite token doesn’t get listed, but the hottest new ERC20 shitcoin is, or why projects only trade as ERC20 tokens on coinbase.
I’m a law student and I recently learned something in blockchain class that might help explain this behavior from the central exchanges, beyond them just getting big bags of shitcoins for cheap, so I thought I would ~~farm some moons~~ share with you all.
If you live in America, as a crypto enthusiast you might have heard of the [BitLicense]( a license CEXs are required to get to offer services in New York State. Coinbase has two of these, but so do a few other popular CEXs like Gemini, and more are supposedly working on acquiring one, including Crypto.com and Kraken. It’s the first and only state in the US to require this level of regulatory compliance so far, because New York loves to swing its big finance industry dick around.
In order for a CEXs with a Bitlicense to list a token or asset, they have to go through a process with the NYS Department of Financial Services, which you can see in [this flowchart.](
NYDFS requires new coin listings to be certified in various ways to make sure that they are not financial securities, that the network is not vulnerable to known exploits, that there isn’t a centralization problem, etc. NYDFS is also extremely understaffed, so this is not exactly a simple process if CEXs choose to go through the NYDFS channels. CEXs *do* however, have an option to self certify a token if it meets certain requirements, [which you can read here.](
I believe that Coinbase is so willing to list ERC-20 tokens because they are standardized assets on the Ethereum network, and Coinbase can skip all the cybersecurity analysis and just self certify them with minimal paperwork on their end, whereas any new network would require significantly more work on their end, and their certification policy probably doesn’t reach beyond ERC-20 tokens.
TL;DR The reason your favorite smallcap project isn’t on Coinbase is because the government, of New York specifically, makes it a pain for them to list it.
This would explain why some great projects took a long time to be anounced on CB. It will continue to happen as long as there isn’t a 100% DeFi exchange
Me and 5 other devs work relentlessly for the past 6 months building cross chain bridges and defi applications in our dao with little to no recognition from the market, then some absolute trash coin drops and becomes worth billions. Web3 is great.
This is true, but meeting those greenlist criteria isn’t hard (does take a bit of time though)
The real reason is they’d rather list 10 ERC-20s for the same fee and less time than integrating your layer-1, or high-volume meme tokens for free that they can rake in fees for.
None of them have a surplus of devs – and are backlogged with integrations which they pause during spikes and have to pull their devs elsewhere.
As a NY State resident, I can confirm that those regulations are a pain, but might mean well for the average investor.
Thanks for sharing!
Makes sense why VET isn’t listed.
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Coinbase has not approved my account for 4 months this is a strange app
The main reason is many shitcoins are willing to pay the $1mil ++ listing fee that many exchanges demand. They know they can get their money back 10fold as these coins always pump when listed.
Legit projects often don’t want to dump their tokens to cover listing fees and also aren’t that bothered about the price while the coin is still in development, so they simply aren’t going to worry about it.
For a lot of projects it can actually be a negative because if suddenly Binance controls 20% of the supply you can’t claim decentralisation and are often giving up a large chunk of governance.
That’s a good thing for the average investor.
You forgot the most important reason: It increases the CEO’s bonus check.
Coinbase….ok
Makes sense, thanks for sharing
I actually learned something here today.
So… even the government is ok making it easy for the sh!tcoins to come through and keep the real utility aside. What a time to be alive
Any ERC-20 token besides $OMI, apparently. 🙁
The Government looking to screw us in every way possible