Bye Bye Sandler: As Coinbase's Wall Street talent flees, the exchange is looking toward these opportunities

This post first appeared in Frank Chaparro's weekly column "Mad Crypto," which is sent to Genesis subscribers' inbox every Monday morning. 

Christine Sandler's exit from Coinbase’s institutional team grants us the latest piece of evidence that the firm, which once had lofty ambitions to become the Goldman Sachs of crypto, is taking a different path to digital asset domination.

Sandler, who first joined the San Francisco-based exchange from Barclays in 2018, is starting at Fidelity Digital Assets next week to take on a marketing and sales position, as The Block reported on Friday. If I were a bolder man, I could have predicted this exit, but since I didn’t, allow me to opine on how this is connected to recent happenings at the firm and outline what it means for Coinbase’s institutional strategy.

Sandler’s exit from Coinbase is intimately tied to an identity crisis within the firm’s institutional business. Since last summer, executives at the firm have squabbled over the type of clients it should focus its energies on.

Originally, the plan was to go after Wall Street firms, including large hedge funds, with a full-scale prime broker. As part of those efforts, Coinbase hired Sandler, Oputa Ezediaro, an 11-year veteran of JPMorgan, and the firm was also set to bring on Jonathan Kellner from Instinet. Kellner would have applied his market structure and electronic trading know-how to Coinbase.

But those plans were scrapped by executives who felt the firm was better positioned to go after West Coast crypto-natives — the Polychains and Multicoins of the world, not the Point72s.

For some employees, this transition was confusing and irritating. It also led to two key employees leaving the firm, including Hunter Merghart and Adam White, who joined Bakkt as its chief operating officer. “It is very much a cultural battleground,” one source said describing the divergence between the two factions at Coinbase.

Well, we’ve already seen some of the fruits of the transition. Coinbase has moved forward to list more assets, including XRP, and it is aggressively expanding into Asia, targeting crypto native firms and investors there. Last week, the firm also announced its custody business would support so-called “staking” services to allow investors to tap into rewards offered by certain types of digital assets running on proof-of-stake networks.

Sandler now follows; having resigned her fight to see Coinbase drive the next phase of institutional uptake. As a traditional Wall Streeter, whose expertise and approach is tailored towards the big banks, being headhunted by Fidelity would have been a no-brainer.

So what's next?

Here’s what the team at The Block expects to happen at Coinbase in the coming months as it attempts to position itself as the crypto world’s top exchange:

• List more tokens with a focus on proof-of-stake coins; expanding governance and staking services for those coins.
• Expand its custody business to cover more tokens.
• Attempt to eat into Binance’s trading volumes internationally
  (it's already rolled out over-the-counter trading business into Asia, the UK, and Europe.)
• VERY LOW LIKELIHOOD: It may try to get into the initial exchange offering (IEO) market with its own platform to rival Binance, Huobi, and Bittrex.