Coinbase has announced the upcoming launch of a new token sales platform that will allow U.S. retail investors to participate in initial coin offerings (ICOs) for the first time since the token sale hysteria of 2017 and 2018, which eventually ended in disaster for many crypto speculators. The move to launch this platform comes just a few weeks after Coinbase acquired the investment platform Echo for $375 million.

ICOs were all the rage in 2017, as the then-relatively-new blockchain platform Ethereum appeared to have found its first major use case. While there are a few projects from this era of crypto that are still around, the hysteria around ICOs eventually turned into marketing-focused teams collecting investment from others, with not much more to show for plans than a whitepaper (if that).

The large amount of outright fraud occurring in the space at the time led to a regulatory backlash from the Biden administration, and Kim Kardashian, Floyd Mayweather, and other celebrities were eventually charged with SEC violations regarding their promotion of dubious crypto tokens.

While the ICO market has been dormant in the United States since that time, there is now a push to bring back this type of activity under the crypto-friendly Trump administration via platforms like the new token offering facility provided by Coinbase.

Coinbase Will Decide Which Projects are Legit

Much of the fraud that was able to proliferate during the 2017 to 2018 ICO bubble came down to the lack of traditional investment standards being followed. To prevent that sort of environment from developing again, Coinbase says it will require projects to meet certain requirements to launch token sales and also use an algorithm to try to put newly-issued tokens in the hands of users who are in it for the long haul.

For example, the platform is intended to promote a wide distribution of the initial tokens and will punish token investors who tend to simply dump their allocations on the market as quickly as possible. Additionally, token issuers will be blocked from selling their allocations for at least six months, and the teams behind the projects will need to follow a disclosure policy regarding tokenomics and other attributes of the project related to credibility and trust.

Coinbase previously attempted to operate under its own token listing standards, but the SEC’s view under chairman Gary Gensler at the time was basically that everything but bitcoin was a security. This eventually led to an SEC enforcement action against Coinbase, which has since been dropped.

They do, that’s a known thing

— Larry Cermak (@lawmaster) December 7, 2020

Whether Coinbase can operate as a credible, neutral authority on new token sales is up to the discretion of its users. However, it should be noted that the crypto exchange previously took tokens from various projects for its Coinbase Earn project, where its users were provided with free tokens in exchange for reading about the associated projects. Put differently, Coinbase was provided with funds from token projects that were then provided to users as an incentive to sign up in exchange for creating promotional content about those same tokens.

Congress is also expected to pass its own standards and form of regulatory clarity to the crypto market in the form of the Clarity Act. That said, the odds of that passage occurring this year have dropped from a high of 87% to 21% since July, according to prediction market Polymarket.

Line Between Crypto and TradFi Continues to Blur

This latest move from Coinbase is yet another example of the lines between crypto and traditional finance becoming increasingly blurred. Under this new structure, ICOs look more like initial public offerings (IPOs) with Coinbase acting as a gatekeeper of sorts in terms of which projects get the stamp of approval.

So, we now have a centralized financial institution operating an initial investment platform built on U.S. dollar-based rails (the platform uses the Coinbase-partnered USDC stablecoin from Circle) for projects that are increasingly looking more like traditional fintech than anything truly decentralized or operating outside of the traditional financial system.

It seems the crypto sector has moved far away from the original ideology Satoshi Nakamoto had when creating Bitcoin, as he pointed to “all the trust that’s required to make it work†as the source of the problems with traditional finance that he intended to solve.