Coinbase’s latest funding deal makes it an $8B company

Coinbase looks to take a lion’s share of the market with a capital investment deal that could value the company at $8 billion.

The cryptocurrency exchange is in talks to finalize a deal with Tiger Global and other shareholders that could generate up to $500 million of investment, Recode reports .

Coinbase was valued at over $1.5 billion last year, and if current talks are successful, the company could realize an $8 billion valuation.

Coinbase expects to generate $250 million from new investments, with a further $250 million expected to come from existing investors. At present, these figures are merely estimates.

The San Francisco-based cryptocurrency exchange is already backed by the likes of Andreessen Horowitz, Greylock Partners, Draper Associates, and several others. Tiger Global seems intent on joining the list.

Tiger Global is a New York-based capital investment firm that is no stranger to investing in tech startups, having previously backed the likes of Airbnb. However, this would be the firm’s first foray into the world of cryptocurrency.

Over the last year, Coinbase has made strides to take cryptocurrency to a wider audience.

In September, it announced “ Coinbase Bundles ” which allows fledgling investors to get a taste of the market without having to worry about what coins to invest in.

With rumors of a Coinbase IPO ever present, one wonders if bringing Tiger Global into the Coinbase investor family is really a way of prepping itself for going public.

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How blockchain is changing the way we invest

Tech has changed the financial services landscape and our exposure to these new technologies is even reshaping the way we think about money and wealth.

Thanks to a whole plethora of cashless payment solutions available, more people are opting to go cashless for their transactions. In the US, a Gallup poll in 2016 showed that only 24 percent, as opposed to 36 percent in 2011, prefer to transact mostly, or exclusively, in cash.

Respondents cite the proliferation of digital and mobile payments as the reason why they’ve been using less bills and coins for purchases.

Other financial activities are heading for a change as well. In investing, new apps and services like Acorns and Robinhood now provide less intimidating means for people to try out stocks through micro investing.

Only 52 percent of Americans own stocks and millennials are found to be less likely to invest. Financial wisdom dictates that people should invest in order to build wealth so it would be a welcome development for tech to influence this segment.

Today, blockchain has taken over financial technology and even banks are aggressively pursuing their own blockchain projects . Other startups are also coming up with innovative uses of the technology. Interestingly, these developments have ushered in new ways people invest and grow their wealth.

Let’s explore some of them.

Cryptocurrencies

Let’s start with the obvious with cryptocurrencies.

There are plenty of people wishing that they had acquired bitcoin when it was just starting out, myself included. Believe it or not, Bitcoin was valued at just $0.07 when it was first made available for trading on Mt. Gox in 2010. As of writing this, bitcoin is worth over $2,700. Those who made early investments and held on to their bitcoins can now enjoy very generous returns.

Other cryptocurrencies are also enjoying growth. Ether, the cryptocurrency from the Ethereum blockchain, trades at over $200 after starting out to trading for just a few dollars. Bitcoin cash, the new fork from the bitcoin blockchain, just became the third top cryptocurrency behind bitcoin and ether just days after the fork.

Investing in cryptocurrencies is now very similar to Forex trading. Exchanges like Poloniex have made it easy for investors to trade cryptocurrencies and even exchange them for fiat currencies.

Token Sales

Blockchain is also enabling startups new ways of securing funding. Token sales and initial coin offerings have become a viable alternative to venture capital and public offerings to acquire startup funding. Just last month, blockchain startup Tezos broke records after raising $232 million in its ICO. Previous records were held by Block.One and Bancor raising $185 million and $153 million respectively.

The introduction of platforms like Ethereum allowed developers to create their own cryptocurrencies. Through a token sale, investors can “buy in” to these startups by investing established coins like bitcoin and ether in the startup. However, instead of stock certificates, they receive the company’s own cryptocurrency tokens.

Anyone interested in investing can readily participate in the token sales as opposed to the traditional means which often involves waiting for a company to be publicly traded or look for means to buy in (mainly through a secondary market) in order to invest in that company.

Tokenized assets

There are also new blockchain startups whose services are aimed at investments. Virtually anything can be “tokenized” through blockchain. Blockchain is essentially a ledger that effectively records all transactions in a system and it has shaped up to be an alternative to paper documentation. One may think of tokenization as creating the digital equivalent to documents such as titles and certificates.

Startups like LAToken aim to create platforms that allow asset owners and investors to trade real-world assets over blockchain . Assets could be anything – real estate, stock options, art, and even antiques. These assets are tokenized and are then traded over the platform much like cryptocurrencies. An added advantage of tokenizing assets is that fractional ownership is possible.

A recent white paper by the company provides much-needed insights into the work tokenized assets.

Other startups are also looking at tokenizing financial instruments. The Hive project looks to provide SMEs liquidity by tokenizing invoices . Even governments are experimenting on similar use. Sweden is testing using blockchain for its land registry and the British Royal Mint is looking into putting gold on blockchain .

Encouraging Investing

What blockchain has essentially done is diversify the means people can invest. People can now invest in cryptocurrencies, startups, and tokenized real-world assets all because of blockchain. The next challenge then is to encourage adoption of these investment vehicles.

Cryptocurrencies are getting the most attention as the value of these coins continue to move up and more countries accept these as legal tenders. ICOs are also generating much interest as startups come up with interesting ideas on using blockchain to drive business. These new blockchain trading platforms, while still unproven, offer much promise.

“My dream is to make NASDAQ on Blockchain with a wider range of tradable assets and a dramatic reduction of listing costs, settlement time, and transaction costs,” said LAToken CEO Valentin Preobrazhenskiy.

It is possible that once these startups hit mainstream that more casual investors would dive into using these blockchain platforms. For example, stock trading app Robinhood has to thank the popularity of Snapchat for the burst in Robinhood’s usage when Snap held its initial public offering.

At least for now, we could thank the technology for creating various ways for people to build and manage their portfolios.

India considers taxing cryptocurrencies instead of banning them

It appears that the government of India is not banning cryptocurrencies, instead contemplating taxing them.

The government is considering a proposal to lay an 18-percent Goods and Services Tax (GST) on the trading of the cryptocurrencies, Bloomberg reports .

The proposal is currently being evaluated by the Central Board of Indirect Taxes and Customs (the national agency responsible for GST), and will be presented to the GST council when the draft has been finalized.

The government may levy the GST on cryptocurrency retrospectively from July 1, 2017 — when GST was implemented.

Government’s choice of GST is particularly interesting. The tax is levied on the sales of goods and services in India at every step in the production and supply chain, but it is only the final customer that bears the cost as all other people in the chain are refunded their tax.

The levying of GST requires classifying cryptocurrencies as goods or commodities rather than currencies or securities, and the cryptocurrency miners, exchanges and wallets will be classified as services facilitating the supply of goods. This allows the government to tax them directly, without having to bring in any changes in the laws.

Nevertheless, if the proposal is passed, this will be a significant shift in the position of the government on cryptocurrencies.

While the government has never taken a defined stance on virtual currencies, RBI — the country’s central banking institution — has been constantly warning users against the risks associated with cryptocurrencies since 2013 .

RBI directed all its affiliate financial institutions to stop dealing with or providing services to any cryptocurrency-related business.

Taxing cryptocurrencies as commodities may prove to be a smart move on the government’s part — it gives them an opportunity to make money off the trading without actually lending them the status of currency or money that most governments in the world shy away from.

If previous attempts, such as the ones made by the Chinese government, are any example — an outright ban doesn’t actually stop people from trading cryptocurrencies.

On the other hand, if the government decides to implement the tax retrospectively, it will mean more than $52 million gains in tax for the country on the trading that has happened since July last year.