Coinbase now holds 5% of all Bitcoin.

Coinbase now holds 5% of all Bitcoin.

The Rise of Coinbase: A Goliath in the Blockchain Industry

Blockchain analysis and intelligence platform Arkham Intelligence recently made an astonishing revelation – Coinbase, the major crypto exchange, holds a staggering $25 billion worth of Bitcoin in its reserves, which amounts to approximately 1 million Bitcoin. This revelation has positioned Coinbase as the largest Bitcoin entity in the world, with its reserves constituting almost 5% of all Bitcoin in existence. To put this into perspective, Coinbase’s Bitcoin holdings are nearly as much as Satoshi Nakamoto, the anonymous creator of Bitcoin, is believed to possess.

While CoinGecko data suggests that Coinbase owns only $207.7 million worth of Bitcoin, Nakamoto supposedly possesses between 750,000 and 1,100,000 Bitcoin. At the current price of Bitcoin, Nakamoto’s holdings could exceed $29 billion. Nevertheless, Arkham reported that it identified and tagged 36 million deposit and holding Bitcoin addresses under Coinbase’s control. They also noted that Coinbase likely has additional thousands of Bitcoin that are yet to be labeled.

Coinbase’s influence extends beyond Bitcoin. Arkham reveals that the exchange holds 1.685 million Ether worth $2.68 billion, $233 million worth of USDC, more than $488 million worth of LINK, and over $193 million worth of BNB. Furthermore, earlier this month, Arkham identified the Grayscale Ethereum Trust as the second-largest entity in terms of ETH holdings with $5 billion worth of assets split across more than 500 addresses.

Coinbase Embracing the Bitcoin Lightning Network

Adding to its expanding influence, Coinbase CEO, Brian Armstrong, announced the company’s plan to integrate the Bitcoin Lightning Network. Initially proposed through a whitepaper in January 2016, the Lightning Network is a layer-2 protocol designed to enhance the scalability of the Bitcoin blockchain by enabling cheaper transactions. While Bitfinex integrated the Lightning Network in 2018, and Kraken followed suit in 2020, Coinbase’s delayed adoption drew criticism from the Bitcoin community.

In July, Binance officially announced the completion of its Lightning Network integration, intensifying the pressure on Coinbase. Jack Dorsey, the co-founder of X and a prominent figure in the Bitcoin community, publically questioned Armstrong about Coinbase’s reluctance to embrace the Lightning Network. Similarly, Ark Invest’s Cathie Wood encouraged Armstrong to take this step. Although Armstrong confirmed Coinbase’s plans, he did not provide a specific timeframe for the integration.

Coinbase and the SEC: Regulatory Challenges

While Coinbase continues to make waves with its massive reserves and plans for the Lightning Network integration, it has encountered regulatory challenges from the United States Securities and Exchange Commission (SEC). In July, the SEC accused Coinbase of several violations and brought an indictment against the exchange in a New York Federal Court for operating as an unregistered national securities broker and exchange.

However, Coinbase CEO Armstrong has taken a firm stance against the SEC’s allegations and the agency’s enforcement-focused regulatory approach. He accused the Commission of misleading the exchange and called for more regulatory clarity. Coinbase’s Chief Legal Officer, Paul Grewal, expressed confidence in their ability to win the case while also emphasizing the exchange’s willingness to work with the SEC and lawmakers to establish a clear regulatory framework.

In conclusion, Coinbase has solidified its position as a Goliath in the blockchain industry by amassing significant reserves of Bitcoin and other cryptocurrencies. Its influence reaches beyond the digital realm, as seen in its plan to integrate the Lightning Network, a crucial scalability solution for the Bitcoin network. However, regulatory challenges from the SEC highlight the ongoing struggle to establish a clear and balanced regulatory environment for cryptocurrencies. As Coinbase navigates the blockchain industry’s complex landscape, its actions and decisions will continue to shape and influence the future of digital finance.