Coinbase to expand its Canadian crypto operations

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Crypto firm Coinbase Global Inc. COIN-Q is expanding its Canadian operations even as cryptocurrencies have sunk to near multiyear lows and the nascent sector faces broad-based volatility.

Lucas Matheson has been hired as the new head of Canada for Coinbase, the company told The Globe and Mail. He most recently worked as a senior director at Shopify Inc. and previously held other leadership roles at Deloitte and Toronto-Dominion Bank.

Coinbase was founded more than a decade ago in San Francisco. It is publicly listed on Nasdaq and is widely considered the largest crypto exchange in the United States for its trading volume of digital assets.

Two years ago, when its shares were soaring, Coinbase shut down its California headquarters and switched to a remote-work model. Since then, crypto as a whole has been marred by scandals that have led to high-profile bankruptcies and collapses of key industry players, such as FTX Trading Ltd. and Celsius Network LLC.

Nearly US$2-trillion in value has been wiped out from the crypto sector this year, according to recent estimates. This has affected Coinbase, too. Its shares have tumbled by more than 85 per cent since 2021. The company laid off more than 18 per cent of its work force – roughly 1,200 people – in 2022. And executives say Coinbase is planning to face financial headwinds in 2023 as well.

In an interview, Mr. Matheson said he is ready to navigate the tough conditions for crypto, representing as the face of Coinbase in Canada. He first opened a personal Coinbase account in 2014 and is “excited to now work with such a world-class team at the intersection of technology and finance,” he said.

A large part of Mr. Matheson’s new role will include working with Canadian regulatory officials to formally enter the country’s markets. Coinbase is not registered as a restricted dealer in Canada.

This is despite a requirement in guidelines from the Canadian Securities Administrators, an umbrella group for all 13 provincial and territorial securities commissions. Under those guidelines issued in early 2021, which largely remain a patchwork across Canada, crypto companies must apply to a regulator to become restricted dealers, allowing them to conduct trades and earn a fee from each transaction.

Mr. Matheson said Coinbase is seeking to obtain this status. However, Coinbase had already been operating in Canada prior to his hiring. The company’s website states it accepts customers from this country. It also provides payment methods such as debit cards for Canadian customers to purchase cryptocurrencies.

Earlier this month, in the wake of the spectacular implosion of FTX, which has led to criminal charges for its founder, the CSA announced new oversight that requires all crypto-trading platforms seeking registration to sign undertakings agreeing to comply with investor protection rules before they are formally under regulatory watch. The undertakings state that Canadian customers’ assets must be held with an appropriate custodian and be segregated from the platform’s proprietary business.

The watchdog said crypto platforms outside Canada but operating here will be treated the same as Canadian companies for enforcement of these regulations, adding that if they don’t comply, they will face legal action. That would include Coinbase, which states it has long segregated customer assets, keeping them separated from the company’s property and not available to its creditors.

Recently, Coinbase also signed an agreement with Vancouver-based Peoples Trust Co. to enable what it described as “fiat money movement for Canadian users.”

“We have an ambitious plan and a mission statement of increasing economic freedom around the world, and so we want to be able to provide our services in Canada as well,” Nana Murugesan, vice-president of international business at Coinbase, said in an interview. “Canadians are historically a bit more conservative than other countries when investing in crypto, but we’re seeing that many people are diversifying their portfolios.”