Coinbase CEO Brian Armstrong published a new Medium article explaining that Coinbase is not a wallet, and that their goal moving forward will be to focus on building a retail exchange.
This may have a few of you scratching your head as Coinbase has always provided both wallet and exchange services to bitcoin customers.
— Brian Armstrong (@brian_armstrong) February 25, 2016
Armstrong in his article reveals that while Coinbase started out as being a wallet service, their focus was to also provide users with a frictionless experience of getting into and out of bitcoin. This meant that Coinbase proceeded to run an exchange while having a wallet service; this eventually turned into Coinbase wanting to be a fully compliant and regulated bitcoin exchange. Armstrong explains that while providing wallet services and being an exchange at the same time has created frustrations for customers, due to Coinbase’s strict terms and compliance in being a regulated exchange.
He said in his article about customer frustrations:
You start to see complaints about accounts being shut down, transaction monitoring, and identity verification (all the same complaints you might hear about other financial institutions). These controls are all required to successfully operate an exchange business with convenient funding mechanisms. But they are not necessary for an open source wallet where the user is in full control of the funds; in this case neither the software developer nor the user is regulated like a bank.
What the future holds for Coinbase
Since Coinbase is going to be focusing solely on being a regulated bitcoin exchange, Armstrong says they will be doing a bit of re-branding, and will be “unbundling” their wallet services from their exchange platform. Armstrong also said they will be working toward being an institutional exchange, which more than likely means they are going to try to attract institutional traders, such as competing bitcoin exchange Gemini.
We may even see that Coinbase eventually sunsets their Multisig Wallet, as to not further contribute to any user confusion over being a wallet or an exchange. The Coinbase CEO also mentions that he thinks other exchange/wallet services will follow suit, and will unbundle as well to diverge from running both kinds of services. This may happen but we’ve actually seen the opposite in the market recently, where some wallets are attempting to run “universal” services where they offer exchange services within the wallet to have more robust features to attract new users looking for an all-in-one experience.