After Brexit, what's next for Coinbase UK?

Coinbase appears to be preparing its U.K. operations for life after the Brexit transition period by relocating to Ireland.

The exchange’s absence from a crucial list of approved crypto companies published this week by the U.K.’s financial regulator raised the question. Now, it appears that the absence was intentional. 

The new list is a temporary stand-in for the Financial Conduct Authority’s (FCA) new crypto-asset register. In January of this year, the FCA took over as the anti-money-laundering and counter-terrorist financing watchdog for crypto companies that operate in the U.K. 

Initially, the regulator had said that companies not included on the register would not be allowed to keep operating in the U.K. after January 10, 2021. But the registration process has been marred by delays. On December 1, The Block reported that more than 150 U.K. crypto firms were still stuck in regulatory limbo.

Then, on December 16, the FCA published an interim list of 90 companies that had applied for registration and would be allowed to continue operating until July 9, 2021. Notably absent from the list was Coinbase U.K.

A person with knowledge of the situation said the company had not applied to be part of the U.K. register because it is aiming for a similar authorization in Ireland. 

There had been signs that the firm was gearing up to leave. In November, the San Francisco-headquartered startup transferred all U.K. and European customers over to its Irish entity — in preparation for the end of the Brexit transition period on December 31.

A spokesperson for Coinbase declined to comment on this and on whether the firm’s U.K. entity would be closed down.

The same spokesperson referred The Block to a recently published page on the Coinbase website, which outlines “recent changes to prepare for the end of the Brexit transition period” made to ensure the company can continue to service its customers.

There would be no change to the services customers receive as a result of the transfer, it stated.

The same post explains that customers in the European Economic Area have had their relationship for the provision of e-money services transferred from Coinbase’s U.K. entity to its Irish equivalent. Similarly, all customers across the U.K. and Europe have had their relationship for the provision of digital currency services and additional services transferred to another Irish entity, Coinbase Europe Limited.

These moves are consistent with plans highlighted in company accounts filed by Coinbase U.K. on December 8, covering the 12 months to December 31, 2019. In the filing, Coinbase directors wrote that the company’s leadership had “agreed to draft a plan to migrate all customers currently supported by Coinbase U.K. to a different entity by 30 September 2020.”

The actions of the FCA may also be a factor in the steps taken by Coinbase. The U.K. watchdog recently banned the sale of crypto derivatives to retail investors, stating that the decision was made in part due to the “inherent nature of the underlying assets, which have no reliable basis for valuation.”

Founded in 2012, Coinbase is one of the largest crypto companies in the world with more than 35 million users, according to its website. On December 18, the company filed a confidential S-1 form with the Securities and Exchange Commission in the U.S. – the first step towards what would be a landmark stock market flotation for the industry.

Were such a company to cease operating in the U.K., it would be a blow to claims that both London and Britain can continue to thrive as global financial and innovation hubs after severing ties from the European Union.