Analysis of the Reasons Behind Coinbase's KYC Opening in China

Trying to answer, but it may not be correct:

1. One of Coinbase's principles is that it cannot provide services to countries and regions prohibited by the U.S. OFAC, and since China is not on the list, providing services to Chinese users is not illegal in the U.S., even though it is a country that prohibits cryptocurrency.

2. China does not have a cryptocurrency license, and while cryptocurrency trading is considered illegal, from China's perspective, Coinbase is indeed violating Chinese laws. However, Coinbase has no physical presence in China, and it is also difficult for China to exert long-arm jurisdiction over Coinbase.

3. Intercontinental investment in OKX shows that the U.S. capital market has seen the development of cryptocurrencies in the Asian market, especially the Chinese market. Just as Chinese companies find it difficult to enter Europe and America, the best way for European and American companies to gain customers in Asia, including China, is still through localization strategies.

4. Coinbase has acquired Deribit, and a high proportion of Deribit's clients are from Asia and Chinese-speaking regions, although it has never published data on this. Not to mention that Deribit itself also serves Chinese clients, and Coinbase has valued Deribit's customer relationships at approximately $1.059 billion in SEC filings, which represents user value.

5. Coinbase has now clearly advanced the integration of Deribit accounts and KYC. When international exchange clients migrate to Deribit, they do not need to complete KYC again, and in the future, they can trade options provided by Deribit directly in the Coinbase app. Thus, providing KYC to Chinese users can be seen as an extension of Deribit.

6. Currently, Deribit remains the best option trading platform, and after integrating with Coinbase, promoting "Coinbase Options" actually represents a differentiated competition with exchanges like Binance and OKX. It can attract Chinese users through options and also improve the conversion of options users to contracts and spot trades through subsidies and activities.

7. Recently, according to financial reports, Coinbase's development has been severely restricted by the cyclical limitations of cryptocurrency, and although there is still room for growth among European and American users, imagination is limited. With intercontinental investment in OKX and Nasdaq possibly entering cryptocurrency trading, these are burdens for Coinbase's growth. However, suddenly opening up such a large cryptocurrency market in China would unleash the imagination of the stock market.

So, in summary, Deribit has shown Coinbase the potential of the Chinese market, and acquiring Deribit is an opportunity for Coinbase to integrate Chinese users. Coinbase's biggest advantage is sufficient compliance in the U.S., which is very attractive for users, especially for exchanges that often face negative news.

But of course, after the FTX incident, it needs to be clear that although Coinbase is sufficiently compliant in the U.S., it is not compliant in China. If any problems arise on the platform or if Chinese users need to defend their rights, the difficulty remains very high.

The compensation for FTX's Chinese clients has been extremely arduous.

@Gate Crypto, U.S. stocks, Hong Kong stocks, Korean stocks, gold, CFD, predictive markets one-stop trading

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