Coinbase Plans First US Crypto Token Sale Since 2018

Coinbase will host the first digital token sale in the United States in seven years.

The company plans to introduce a platform where investors can buy digital tokens before they appear on its exchange. The first sale is set to take place Nov. 17-22, according to a Monday (Nov. 10) company blog post.

“Unlike ‘first-come, first-served’ sales that fail to reach a project’s real community, our token sale design prioritizes the many over the few,” the post said.

Coinbase’s algorithm is designed to promote broader distribution and limit asset concentration among large purchasers, per the post.

“This will typically result in more complete allocation for participants requesting the lowest amounts while progressively filling larger requests until the supply is exhausted,” the post said.

Token sales hosted on Coinbase will be open for a set amount of time, with users able to come in during this window to issue a request for their token. When the window closes, the company’s algorithm determines the final allocation for all participants, according to the post.

“We created a sale design that rewards higher allocation priority to true supporters first,” the post said. “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.”

The platform launch marks the first time since 2018 that retail traders in the U.S. will be allowed to take part in public token sales, otherwise known as initial coin offerings (ICOs).

“From 2016 to 2018, thousands of blockchain-based startups raised money via ICOs, issuing their own tokens to investors without offering equity or much accountability,” PYMNTS wrote earlier this year in a report about crypto-related crime. “In many cases, the tokens were unregistered securities. Others were outright frauds.”

Those fraud cases led to regulatory scrutiny and a decline in ICOs as the years went on.

Scott Shapiro, head of trading at Coinbase, said the platform would offer users a safer and more professional path to purchasing new tokens, The Wall Street Journal reported Monday.

“In 2017, the market was so young that no one really had a deep crypto resume before launching a token,” Shapiro said, per the report. “Now, projects and their teams have more to show than just a white paper.”