Coinbase Secures Government Contracts, Prepares for Public Stock Option

By Landon Manning

This month, it has been revealed that major cryptocurrency exchange Coinbase has struck deals with multiple organizations within the U.S. federal government as the company prepares to list its stock publicly.

On July 9, 2020, Reuters reported that Coinbase was preparing to go public on the stock market sometime in the next several months, either in late 2020 or early 2021. The spokesperson for this announcement did so under complete anonymity, and with the proviso that the company as a whole would not comment officially on either this story or any rumors or speculation surrounding it.

This would make sense, as a move like this would be unique in the world of crypto exchanges. Although Coinbase has long been ranked among the highest-trafficked exchanges, with annual revenues passing $1 billion in 2018, it would still mark a major step for the company. By going straight to a direct listing, and not having an initial public offering, Coinbase would both bypass the need to create new shares to sell, and would also be the first cryptocurrency exchange to follow this path.

Meanwhile, since the news of this plan broke, it’s surfaced that Coinbase has been pursuing several large government contracts. On July 11, 2020, news reached The Block that Coinbase had reached a contract agreement to sell its blockchain analytics software to the U.S. Secret Service. The contract is set to last until 2024, and is worth more than $180,000. The company claimed to the press that any “information offered in Coinbase Analytics has always been kept completely separate from Coinbase internal data,” and that the software employs comprehensive analysis of data available from public sources. The article also mentioned that the Drug Enforcement Agency (DEA) has been interested in acquiring this software, but had yet to formalize a deal.

In addition to news of this deal with the Secret Service, on July 15, 2020, Coinbase signed another deal with a major government agency, this time the Internal Revenue Service. Using the same analytics software to track the flow of cryptocurrencies across multiple blockchains, the package sold to the IRS “also provides some enhanced law enforcement sensitive capabilities that are not currently found in other tools on the market.” Unlike the Secret Service’s contract, the IRS is only set to use this software for a trial period of one year, with an option to extend the contract.

The use of these major law enforcement agencies is somewhat ironic, The Block noted, as much of the groundwork for this software was originally developed by alumni of Hacking Team, an Italian spyware company. In an added twist, Coinbase’s Twitter account was caught up in a major hacking attempt to scam BTC.

Nevertheless, these tools will be a powerful arsenal for these law enforcement agencies, and will net Coinbase additional scrutiny as it prepares to take its company public.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.