I have recently been asked several times why would Coinbase list Tether. Especially among the revelations of the NYAG and the general controversy surrounding Tether. Fundamentally, what I believe it comes down to is money and knowledge.
The most clear-cut reason why Coinbase would want to list Tether is obviously the fees. Coinbase charges relatively high fees compared to other exchanges, especially on the retail Coinbase application, Coinbase Pro is somewhat more competitive. By listing Tether they are able to earn fees against all of those new pairs, which obviously helps Coinbase. Coinbase is a business with a desire to earn money, and listing Tether seems to potentially allow them to make some ‘easy’ money. This is especially important now that they are a public company.
Besides that it is important to remember that Coinbase has their own competitor to Tether in USDC. This gives them a couple of different potential motivations to list Tether and potentially a couple reasons not to. The clear reason not to list Tether is that listing Tether increases its overall liquidity and strengthens the network effect for Tether. These could help solidify Tether’s position in the marketplace. Besides that listing Tether could potentially help ‘legitimize’ Tether which could potentially make it harder for USDC to compete.
However, there are also competing reasons that would justify its listing. First providing a direct market between Tether and USDC means that if Tether is under duress and starts to break peg again then Coinbase will have ‘evidence’ that the market values USDC greater than Tether.
Listing Tether also provides Coinbase with useful intelligence for their business. They now have information on which entities are depositing Tethers, trading Tethers, and withdrawing Tethers. This additional insight can help the Circle/Centre/Coinbase team determine how to better market and target their own stablecoin. Better understanding the market dynamics behind Tether demand and usage is a very valuable bit of intelligence for another stablecoin issuer to get access to.
Fundamentally I think the reason that people struggled with understanding Coinbase listing Tether is because they saw it as Coinbase falling prey to Tether, but I think it is more useful to try to understand what Coinbase could gain by listing Tether.
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