Itrs time for a stunning confession: I am a Coinbase customer, and have been, off and on, for many years. For crypto veterans, this may come as a shock: I have an S-tier public track record as a Coinbase critic.

Most notably, I was instrumental in triggering a boycott against the exchange in early 2019 under the hashtag #deletecoinbase. The hashtag emerged largely in response to a piece I wrote for the late, lamented Breaker Magazine about Coinbase hiring several former leaders of a black hat organization known as Hacking Team. Ultimately, in response to public pressure, Coinbase fired its questionable new hires, and execs admitted to a failure of due diligence.

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Tuesday, Coinbase announced the opening of its offshore cryptocurrency derivatives exchange. Normally Ird be poised to excoriate that move, too, because it may make the Coinbase U.S. product less trustworthy.

But this isnrt something Coinbase is doing particularly of its own free will. Instead, the move is seemingly in reaction to U.S. Securities and Exchange Commission Chair Gary Genslerrs ongoing crypto crackdown. That shambolic campaign, from where Irm standing, is frantically trying to close the gates on fundamentally good actors such as Coinbase, well after Gensler and Co. let the likes of Celsius Network and FTX ransack the whole ranch.

Irm suddenly being reminded, not of Coinbasers missteps, but of the good times. The boring times. The times when Coinbase did absolutely nothing.

The times when, for instance, CEO Brian Armstrong didnrt secretly send my money to an affiliated hedge fund. Or the time he didnrt gamble my funds away on his own exchange, then go to India and die in possession of the only keys to what was left over. Or the time he didnrt lie about Coinbasers finances. Or the time his entire system didnrt collapse and he didnrt flee to Serbia.

In short, whatever the missteps as Coinbase found its way, Brian Armstrong never stole from me. That should be a very low bar, but apparently not. I was busy demanding Coinbase become an exemplary company when it seems I should have settled for being able to trust it with a tiny sliver of my assets.

Hopefully I've made clear that I'm not here to praise Coinbase as a pack of angels. On the question of theft, they're only virtuous by comparison. In March of 2021, the CFTC slapped Coinbase with a $6.5 million penalty for flaws in its BTC price data and wash trading activities attributed to an employee. That could have meant customers paying more for certain assets. But at least it apparently didn't last long? So, again, we thank Brian for small mercies.

Now, though, Coinbase looks a little bit more like its less-trustworthy competition. So far, its offshore leverage trading offering seems nominal at best n Coinbase International Exchange doesnrt even have an app or website, operating strictly through an API. That could be the foundation for a more robust product, or it might just be the bare minimum required to make a theatrical political statement. While I doubt Gary Gensler cares much, threatening to take its toys and go overseas is one way Coinbase can rally support for a pushback against the crypto crackdown.

Itrs unclear whether Coinbasers international ambitions extend beyond that rhetorical threat. As a customer, I hope not. Therers little real chance it will shut down U.S. services, but simply adding a less-regulated and more-volatile international product will in and of itself harm the trustworthiness that makes Coinbasers higher fees worth paying for users like me.

Thatrs because there is, inevitably, shared risk between the U.S. Coinbase product and the new international offering. Those new risks for Coinbase U.S. users include both financial stability and, ironically, regulatory oversight. In a worst-case scenario, an international entity could become financially entangled with the U.S. entity in ways that make the whole more fragile.

See also: Coinbase Grew Quickly by Working With U.S. Regulators. Will It Expand Even More by Disregarding the SEC? | Opinion

More concretely, launching an international exchange could be painting a bigger target on Coinbasers back for the hostile SEC. Werve already seen the SEC cite the use of international exchanges by U.S. customers via VPNs and false identities in a variety of enforcement actions. Thatrs difficult for an international exchange to entirely prevent though, again, I would bet on Coinbase being exceedingly careful here.

Still, the shadow of uncertainty looms larger. Thatrs not because Coinbase has chosen to betray my trust. Itrs because Gary Gensler thinks hers protecting me, when in fact hers doing the exact opposite.

Update May 4 2023: Adds additional context on the CFTC's 2021 fine against Coinbase.

Edited by Ben Schiller and Daniel Kuhn.