Coinbase Global said it would launch a new platform allowing individuals to buy digital tokens before they are listed on the cryptocurrency exchange. This led the company’s shares to go up by 4% in morning trading.
Coinbase plans to host about one token sale a month, using an algorithm to determine how tokens are allocated to investors. Investors will be able to submit purchase requests during a one-week window.
“Token issuers coming to market today struggle to get their tokens into the hands of real users while building deep exchange liquidity. Coinbase is changing that,” the company said in a blog post. It also says that the platform launch will be the first broad opportunity for U.S. users to take part in public token sales since 2018.
Coinbase said in a blog post that the platform’s algorithm is designed to promote broader distribution and limit asset concentration among large purchasers. This will typically result in more complete allocation for participants requesting the lowest amounts while progressively filling larger requests until the supply is exhausted.
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The token sales on Coinbase will be open for a finite amount of time such as for a week. Users can come in at any point during this window to submit their request for tokens. Once the window closes, the algorithm determines the final allocation for everyone.
Coinbase also states that the company has created a sale design that rewards higher allocation priority to true supporters first. Users that sell their tokens shortly after they get listed (less than 30 days) may receive smaller allocations in subsequent sales. This is designed to prioritize access to a project’s real users.
According to Reuters, growing interest from retail and institutional investors have boosted trading in digital assets, resulting in established players in the sector looking to expand their services to tap the multi-trillion-dollar market.
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Initial coin offerings were a popular fundraising method during the 2017 crypto boom. This allowed companies to sell new tokens to investors, however, the trend slowed down after regulators raised concerns about investor protection and disclosure.
Coinbase plans to add features to the token sales platform in the coming months, including limit orders and higher allocations for issuers’ target user bases. Investors’ purchases of tokens will be paid in USD coin, a dollar pegged stablecoin issued by Circle Internet Group. According to a Wall Street Journal report, blockchain startup Monad will be the first project to offer its token through the platform next week.
Earlier this year, Coinbase had agreed to acquire Dubai-based Deribit, a major crypto derivatives exchange for $2.9 billion. This was one of the largest acquisitions till date in the crypto industry.