Coinbase Acquires Liquifi to Expand Token Management Capabilities

Coinbase, the leading cryptocurrency exchange in the United States, has made a significant move in the crypto market by acquiring Liquifi, a token management platform. This acquisition is part of a broader trend of mergers and acquisitions in the crypto industry, with Coinbase already having acquired four companies this year. The terms of the deal were not disclosed, but the acquisition was announced on Wednesday.

Liquifi, which last raised $5 million in a 2022 seed round led by Dragonfly, is used by prominent crypto companies such as the Uniswap Foundation, OP Labs, Ethena, and Zora. These companies utilize Liquifi to track ownership stakes in cryptocurrencies, distribute tokens after vesting periods, and manage tax withholdings. Aklil Ibssa, head of corporate development at Coinbase, emphasized the importance of simplifying the process of token creation and cap table management, stating that this is crucial for bringing a billion people onto the blockchain.

Coinbase’s acquisition of Liquifi is seen as a strategic move to enhance its capabilities in token management and bring it closer to competitors like Binance and OKX, which offer launchpads for new cryptocurrencies. While Liquifi is not a launchpad, it expands Coinbase's services beyond just listing tokens, moving it towards an end-to-end platform. This acquisition is part of a series of moves by Coinbase to strengthen its position in the crypto market, including the acquisition of Spindl, a crypto-based advertisement company, and the team behind Iron Fish, a privacy-focused blockchain. In May, Coinbase announced the acquisition of the crypto derivatives company Deribit for $2.9 billion, marking the largest purchase of a crypto company in the industry's history.

Coinbase's acquisition of Liquifi also comes at a time when the regulatory environment for cryptocurrencies is evolving. As a publicly traded company in the U.S., Coinbase is regulated by the Securities and Exchange Commission (SEC). Under the leadership of Gary Gensler, the former SEC chair, the agency has argued that most cryptocurrencies are akin to securities, requiring registration with the agency. Ibssa noted that Coinbase would have acquired Liquifi even under Gensler's leadership, but the current pro-crypto administration allows for more ambitious moves. He stated that regulatory clarity enables Coinbase to take bigger risks and make more significant acquisitions.

The acquisition of Liquifi by Coinbase is not an isolated event. Other major players in the fintech industry, such as Stripe, have also been active in the crypto market. In February, Stripe acquired the stablecoin startup Bridge for $1.1 billion, and in June, it announced the purchase of the crypto wallet firm Privy for an undisclosed price. These acquisitions reflect a broader trend of consolidation in the crypto industry, as companies seek to expand their capabilities and strengthen their market positions.

Liquifi has compared itself to the private equity-management platform Carta, which lets investors manage stakes in traditional equity deals. In December, a competitor Toku sued Liquifi for allegedly conspiring with an ex-employee for stealing confidential business documents. Liquifi has denied any wrongdoing, and Coinbase has said it will help the firm in its defense. “We’re ten toes deep with Liquifi and in their corner,” said Ibssa. “We’ve done rigorous diligence on this.”

Coinbase’s decision to acquire Liquifi puts the crypto exchange the closest it’s been to competitors like Binance and OKX, which have what they call “launchpads,” or platforms that let projects easily launch their own cryptocurrencies. Rather than collect fees simply after a token is listed, Binance earns money earlier on in a cryptocurrency’s life cycle. Liquifi isn’t a launchpad, but it expands Coinbase’s repertoire beyond merely listing tokens. “It gets us one step closer to that end-to-end platform,” said Ibssa.