Celo’s token drops as Coinbase skips Layer-2 migration support

Coinbase draws criticism as Tether pledges support for Celo's shift to Ethereum Layer-2.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

Celo, a prominent Layer-1 blockchain, has seen its native token dump 5% after its upcoming transition to an Ethereum Layer-2 network within Optimism’s Superchain ecosystem turned “contentious.”

On Nov. 27, Coinbase, the largest US-based crypto exchange, announced that it would not support Celo’s migration into a Layer 2 network. In contrast, Tether’s CEO Paolo Ardoino confirmed the stablecoin issuer’s continued support for the network post-transition into the Ethereum ecosystem.

Data from CryptoSlate showed that this uncertainty negatively impacted the network’s CELO token, which fell 5% to $0.81039 at press time.

Community reaction

These diverging views sparked mixed reactions within the community, with many criticizing Coinbase’s decision.

Marek Olszewski, CEO of Celo’s developer cLabs, expressed disappointment with Coinbase’s stance. He questioned whether this decision might deter other Ethereum Virtual Machine (EVM)-compatible Layer-1 chains from embracing Ethereum’s Layer-2 scaling solutions.

Meanwhile, the founder of Kraken’s Inkchain, Andrew Koller, assured that his exchange would support the migration into an L2. He stated:

“Kraken and Ink [loves] the superchain and are fully committed to Ethereum scaling and making Kraken work for Celo users. we’ve asked the relevant teams to explore this to see if we can hit everything in time for Jan. 16th.”

Despite the setback, Olszewski suggested the Celo community could consider renaming its existing Layer-1 chain to “Celo Gold (CGLD)” to accommodate Coinbase’s current support framework. He hinted that this might simplify future adoption if Coinbase supports the Layer-2 upgrade.

Community urges Coinbase to rethink

EigenLayer founder Sreeram Kannan speculated that Coinbase’s decision could stem from “an oversight” rather than outright opposition. He encouraged the exchange to revisit its stance, emphasizing the potential benefits of supporting Celo’s integration into the OP Stack.

Kannan stated:

“I think this is likely an oversight internally in Coinbase. There is no chance the company building the leading Ethereum L2 in users and a core contributor to OP public goods will choose to discontinue supporting Celo after it becomes an OP stack based L2.”

On the other hand, Nass Eddequiouaq, the CEO of a16z-funded crypto startup Bastion, highlighted the operational and regulatory complexities exchanges face when adding support for new chains, particularly in the US. He added:

“Exchanges and custodian have usually been waiting to see which branch of the fork picks up the activity before adding support for it and deprecating the other one.”

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