This week will see not one but two flagship American crypto brands open exchanges offshore. Coinbase confirmed that institutional users will begin trading on its new Bermuda-based operation today, while Fortune Crypto’s Leo Schwartz had the exclusive this morning that the Winklevoss twins are opening up shop in Singapore. This is big news for the crypto world, so it’s worth assessing what it means—and what it doesn’t.
What the launch of the offshore operations does not mean is that Coinbase and Gemini, which have been fixtures of the crypto scene for a decade, are turning their back on the U.S. Yes, the decision to open overseas came partly in response to the hostile regulatory climate at home, but neither company has taken any serious steps to pull up stakes altogether. And why would they? Most of their customers are here, and the vast majority of their revenue comes from the U.S., which remains—for now at least—the most important financial center in the world. Things would have to get much, much worse to make the likes of Coinbase quit the country altogether.
What the overseas offices do represent is the opportunity for a new revenue stream, which both Coinbase and Gemini badly need. Their new platforms, which are largely off-limits to U.S. players, will let the companies offer exotic derivatives products like perpetual futures for Bitcoin and Ethereum while allowing customers to leverage their positions up to 100x. The market for this stuff is large, and there is certainly money to be made. But the two U.S. brands will still have to persuade customers to leave Binance and other global competitors that have been in this game for years and are presumably very good at it. The upshot is that Coinbase and Gemini can build it, but there is no guarantee anyone will come.
A final observation is that the new offshore endeavors feel very far from what the U.S. companies originally set out to do—bring the promise of cryptocurrency to ordinary people. Instead, the new offshore operations are built for the benefit of hedge funds and cowboy traders whose idea of a good time is to sling millions of dollars around on scary derivatives. Seriously, unless you are a quant or a bored trust fund baby, stay the hell away from this stuff. You will get eaten alive.
Meanwhile, the U.S. operations of Coinbase and, to a lesser extent, Gemini will continue to plod along. It will be interesting to see if the retail customers who use those services will remain the companies’ top priority, or if they become an afterthought as the country’s most familiar crypto brands chase overseas wealth.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
