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Brooks in, Lempres out: Political infighting creates divisions at Coinbase

Exclusion of No. 2 XRP spotlights growing pains as exchange speeds toward IPO

Mike Lempres

Mike Lempres resigned as chief legal officer at Coinbase less than two months after taking the job.

WASHINGTON—For the last year or so, people who follow digital currency have been wondering why Coinbase, the largest American digital currency exchange, doesn’t list the XRP token.  And now that XRP has cemented its place as the world’s No. 2 digital currency, its absence on Coinbase is even more eyebrow-raising. With the departure of a key executive, gossip has begun to swirl, with at least one Coinbase insider speculating that the omission is based on crypto politics more than business.

The crypto world has begun to wonder if the reason for XRP’s omission has been driven by personal politics rather than business prudence.

Let’s review a bit.

For almost all of the past several years, XRP was in third place—the three biggest currencies by market capitalization have been bitcoin, ether, and XRP, in that order. So if it was odd that Coinbase only listed two of “the big three,” at least it had the top two. It also listed litecoin, which was founded by Charles Lee who left Google to become Coinbase’s third employee, and bitcoin cash, which, as a fork of bitcoin, was automatically placed in the accounts of those who held bitcoin. OK, so that’s a few tokens.

But then in July, Coinbase announced a dramatic expansion of its roster. Tokens such as cardano and BAT were mentioned by the company as potential additions. This made the omission of XRP even more egregious —how could the ninth and 29th most valuable token merit inclusion but not the third most?

The inclusion of Stellar’s XLM token among the July group made the decision especially puzzling because Stellar token is a fork of XRP. That means that the reason behind Coinbase’s reluctance to list XRP couldn’t have anything to do with regulatory fears. Since XRP and XLM use precisely the same consensus mechanisms, they will surely be treated the same by government regulators.

Now that XRP has seemingly cemented its place as the world’s No. 2 digital currency, its absence on Coinbase is even more eyebrow-raising. Insiders in the crypto world had already begun to wonder if the reason for XRP’s omission owed more to politics and personality than business. That explanation gained more steam last week.

On Tuesday, Michael Lempres, the chief policy officer for Coinbase, announced his resignation. Lempres, who formerly served as the Mayor of Silicon Valley town Atherton, CA, is regarded as an early champion of the crypto world, making the professional jump from the brick and mortar banking world to the emerging world of crypto over six years ago.

The announcement came as a surprise. Bloomberg reported that Lempres will be leaving to take on a role at venture capital firm Andreessen Horowitz, an early Coinbase investor. However, behind-the-scenes gossip is buzzing about what really caused Lempres to depart after just two months after being named the exchange’s Chief Policy Officer. He exits at a time when, as Bloomberg put it, “communication between Washington and the digital money sector may never be more important.”

As former general counsel for a Silicon Valley bank, Lempres’ resumé preceded him, but the world of conventional banking didn’t provide the level of risk that he was eager to tackle. His experience on the Atherton town council put him on the front lines of the emergence of crypto in the heart of Silicon Valley, and provided access to help develop and influence the regulations and legal paradigms for the crypto companies he worked for. Perhaps most importantly, Lempres knows how politics work.

When Coinbase brought in Brian Brooks as its new chief legal officer, Lempres’ role as the company’s legal chief was marginalized. Coinbase CEO Brian Armstrong issued an odd press release that lauded Brooks to the moon for three paragraphs and then faintly praised Lempres with the strangely bloodless phrase, “Mike Lempres successfully led our legal function through an important chapter of the company’s history.”

Indeed, now that Lempres is out, Brooks will be “taking over most of Lempres’ responsibilities,” according to Bloomberg, which sourced the ol’ “people familiar with the matter” in its story.

As a close confidante of Treasury Secretary Steven Mnuchin, Brooks has Washington cred. His name was even floated—some would say by Brooks himself—as a possible successor to White House counsel Don McGahn. President Trump allegedly shot down Mnuchin’s suggestion, apparently irked that Brooks had so aggressively led the whisper campaign on his own behalf.

A source inside Coinbase told Modern Consensus that after news of his departure became public, Lempres said something to the effect of “I’ve been the mayor of a California town, but I’ve never seen a place as political as Coinbase.”

If this is the case, is it possible that politics is also behind Coinbase’s reluctance to list XRP?

Over the past year, the crypto world has been abuzz over the possibility of Coinbase finally listing XRP. The value of XRP spiked in late September, following the announcement of a listing process overhaul by Coinbase, and the company’s announcement in late October that it would provide custodial services only added fuel to the fire.

Coinbase insiders contacted by Modern Consensus, including CTO Balaji Srinivasan, who would play a key role in adding new tokens, declined to speak with Modern Consensus. Lempres also declined to reply to emails; this story will updated to reflect his comments, if he chooses to respond.

Speculation about Coinbase’s reasons for excluding XRP is hardly new. In July, Twitter user @dakisan earned some notoriety by actually squeezing a response out of FINRA to his tweet: “if @coinbase, the biggest #crypto exchange in the US, elects not to list the #3 crypto, but lists 1,2,4,5…16, this seems like an abuse of market power. Straight manipulation.” Then in August, BitcoinExchangeGuide ran a story simply headlined, “Why Won’t The Popular Crypto Exchange Add XRP Coin?

With XRP now ensconced in second place, the pressure on Coinbase can only be expected to grow. As rumors about an impending IPO build to a crescendo, Coinbase will presumably look with favor at the trade volume of XRP—about $1 billion yesterday, for example. Politics has divided this country into red and blue but the one color a pre-IPO unicorn surely understands is green.

Candice Greaux is a strategic public affairs and communications specialist in Washington. Her writing has appeared in the New York Observer and elsewhere.