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Exchanges

Coinbase’s $ZRX listing draws new scrutiny to the company’s token addition process

Quick Take

  • Coinbase recently added the $ZRX token, associated with the 0x project, for trading on the platform
  • The 0x project has close ties to Coinbase, with the company’s co-founder and former product manager on the advisory board
  • Coinbase has listed only six tokens in its history, but many of the listings have been viewed as controversial 

Coinbase new token listings continue to court controversy amidst heightened scrutiny due to previous hiccups and questions surrounding the company’s token listing process and criteria. Coinbase launched trading of $ZRX, the token associated with the 0x project, on Coinbase.com products on October 16, 2018 after launching on Coinbase Pro on October 11, 2018. The token represents the 6th that Coinbase has made available for trading, following $BTC, $ETH, $LTC, $BCH and $ETC.

The $ZRX listing has raised eyebrows on social media. The token has consistently traded outside the Top 25 by market cap over the past year and remains outside the Top 20 by market cap as of publication with a market cap below $500 million. Rather than being associated with a base layer protocol like the other Coinbase-listed tokens, it is actually an ERC-20 token built on top of another protocol, Ethereum. The co-founder of the 0x project, Will Warren, himself tweeted that the project is highly experimental:

The experimental nature and size of the 0x project has led some to look at other connections to explain the token’s listing. Some have highlighted the relationship between 0x project advisors and Coinbase. Both Fred Ehrsam, co-founder of Coinbase, and Linda Xie, a product manager at Coinbase for more than 3 years, are among the project’s five listed advisors. Xie is married to 0x co-founder Warren.

The relationship between Coinbase employees and a Coinbase-listed token echoes the listing of $LTC in April 2017, a project that was developed by former Coinbase Director of Engineering Charlie Lee. The project was both developed by Lee and listed on Coinbase as its 3rd token while he was still with the company. Lee left Coinbase shortly after the listing of $LTC, in June 2017. He later sold his entire position in the cryptocurrency on December 20, 2017, only 9 months after its Coinbase listing, in a move that many in the industry found to be controversial. The sale by Lee happened near $LTC’s all-time high. Lee later said “I think in the long run it was the right move but in the short term while the price is down, below the all-time high, it just feels like it’s not the right decision.”

Coinbase’s listing process previously courted controversy during the December 2017 listing of $BCH. Upon listing on Coinbase, the price of $BCH spiked heavily and was subsequently halted. The listing was further criticized due to allegations of insider trading by Coinbase employees. The company’s subsequent investigation found that no such insider trading occurred.

The historical spotlight around Coinbase’s token listings has led to increased disclosure prior to new token listings. In July 2018, the company pre-announced that they were exploring future token listings, saying “We are making this announcement internally at Coinbase and to the public at the same time to remain transparent with our customers about support for future assets.”  ZRX was among the five tokens listed in that announcement, although it is significantly smaller by market cap than three of the other four named tokens.

Coinbase went even further in September 2018, introducing a new process to list an even larger number of tokens: “Our goal is to rapidly list all assets that meet our standards and are compliant with local law, while providing our customers with the tools to discover, evaluate, trade, and use digital assets.” As of publication of this article, the number of Coinbase-listed tokens rests at six, with two of the six having close historical ties to the company itself.