| To: Glenn Petersen who wrote (71) | 8/4/2022 3:50:13 PM | | From: Glenn Petersen | | | | Coinbase shares soar in boost from meme traders, BlackRock crypto deal
Published Thu, Aug 4 20229:25 AM EDT
Updated Moments Ago
Tanaya Macheel @tanayamac
CNBC.com
Shares of Coinbase soared Thursday after the crypto exchange announced a partnership with BlackRock that will allow its institutional clients to buy bitcoin.
Coinbase shares were last up by 9%. Earlier in the day they jumped as much as about 40%.
Services in the company's Prime offering will be available to clients of BlackRock's portfolio management platform for institutional investors, Aladdin, the company said on its blog. Coinbase will provide crypto trading, custody, prime brokerage and reporting capabilities. BlackRock is the largest asset manager in the world with more than $8 trillion under management.
The ticker COIN also became one of the most mentioned names Thursday on Reddit's WallStreetBets chat room, topping GameStop's popularity in the online forum, according to alternative data provider Quiver Quantitative.
"Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets," Joseph Chalom, global head of strategic ecosystem partnerships at BlackRock, said in a statement. The partnership will let them "manage their bitcoin exposures directly in their existing portfolio management and trading workflows."
That interest is a beacon in the night for the crypto community. The industry has suffered a slew of hacks and breaches, including attacks on Solana and Nomad this week alone. Crypto has also gone down with the broader sell-off in risk assets and is further handicapped by the financial contagion that stemmed from the Terra collapse in the spring. Many investors maintain that institutional adoption is key to increasing the maturation, stability and price of bitcoin and perhaps the broader crypto market.
Coinbase shares have been on a tear lately and analysts have not been sure why. The stock jumped 20% on Wednesday. The shares were still down nearly 70% for 2022 through Wednesday's close.
The unusual jump in Coinbase this week could be related to investors who were betting against the stock scrambling to cover their short positions, a so-called short squeeze. More than 22% of Coinbase's shares which are available for trading are sold short, according to FactSet. So as the stock has run, these investors have to buy back the shares to cover their losses, further fueling the gains.
Despite the doom in the market and decline in Coinbase's share price, Citi on Thursday called it the "fizzle before the sizzle" and said it's on the lookout for a stock reversal over the next three months.
"There are some good developments brewing," analyst Peter Christiansen said in a note to investors, citing potential stablecoin regulation and Ethereum's long-awaited transition to proof-of-stake.
— CNBC's Yun Li contributed reporting.
cnbc.com |
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| From: Glenn Petersen | 8/6/2022 2:57:40 PM | | | | | | The Humbling of Coinbase
In just over a year, the United States’ largest cryptocurrency exchange went from a triumphant public offering to a “crypto winter” of cost cutting and layoffs.
By David Yaffe-Bellany and Mike Isaac
New York Times
Aug. 5, 2022
Brian Armstrong, the chief executive of the largest cryptocurrency exchange in the United States, traveled across the world to make an announcement in early April: Coinbase was bringing crypto to India.
In an auditorium in Bangalore, Mr. Armstrong, wearing a type of loose buttoned shirt popular in India, said Coinbase planned to set up a hub of 1,000 employees there by the end of 2022. The company was investing in Indian start-ups and allowing local customers to buy and sell digital currencies on its exchange. For Coinbase, it was a chance to transform finance in a country of more than one billion people and lure new customers from across Asia.
“Namaste,” Mr. Armstrong declared. “We come with humility and respect.”
But that week, Coinbase got some bad news. A government-backed group issued a statement suggesting that the company would be unable to use a crucial payments platform — a system that was supposed to allow Coinbase customers to convert their rupees into virtual currencies like Bitcoin and Ether. Not long after its grand opening, Coinbase halted much of its trading service in India.
Coinbase rose to prominence as one of the first major crypto companies, a gateway to the chaotic world of digital assets for amateur investors. But as it has grown from plucky start-up to publicly traded company, its status as an industry leader has been threatened by a series of missteps and a steep decline in the crypto market over the last six months.
Coinbase’s fumbled start in India, a largely untapped market for crypto, was emblematic of failures that have unsettled employees and sent the company’s stock price spiraling. In June, Coinbase laid off 18 percent of its staff.
For years, Coinbase has aspired to become the Google of crypto, as some employees put it, a world-changing business with global reach and a wide range of products. Instead, the company is at risk of squandering its head start, as nimbler competitors like FTX and Binance continue expanding despite the downturn, according to interviews with crypto experts and 23 current and former Coinbase employees.
“It’s become a bit of a chaotic situation for them,” said Dan Dolev, an analyst at the financial firm Mizuho who tracks Coinbase. “It’s the perfect storm.”
Some insiders attribute Coinbase’s problems partly to strategic missteps by executives Mr. Armstrong tapped to turn the company into a crypto juggernaut. As crypto prices surged, Coinbase hired thousands of new employees, which led to overspending and bloat.
Some recruits came from Silicon Valley titans like Google and Meta, including top executives. Now employees say the company is unrecognizable from the one that dominated the early years of crypto, with some leaders who lack deep experience in the industry.
Despite its early start, Coinbase has never had a strong hold over the international market, which is dominated by Binance. The company went into India despite widespread uncertainty about how the government would react, an approach that industry experts considered unwise.
Then, in the spring, Coinbase unveiled its most-hyped product of the year, a marketplace for nonfungible tokens, the digital collectibles known as NFTs. But the marketplace failed to draw much interest and was criticized by NFT aficionados.
Not all of Coinbase’s recent struggles are of its own making. The steep decline in crypto prices has led to a drop in trading, which accounts for the vast majority of the company’s revenue. As the largest crypto company on the public market, Coinbase bears the brunt of the broader industry’s problems, with its stock price fluctuating in parallel with Bitcoin and other volatile cryptocurrencies. (The company got a boost this week when it announced a partnership with BlackRock, the world’s largest asset manager. Its stock was up almost 5 percent at the close of trading on Thursday.)
Mr. Armstrong declined to be interviewed. But five of his top executives defended the company’s performance. In a series of interviews, they said Coinbase was developing an array of crypto products, some of which may take time to catch on, and emphasized that the company had weathered past downturns.
Emilie Choi, the chief operating officer, said Coinbase’s business model — in which trading fees keep the company running while other projects develop — resembled the approach of major tech companies like Meta, which relies on ad dollars to fund longer-term bets.
“The way that we operate is the way we’re always going to operate,” Ms. Choi said. “A long-term focus on the future.”
Coinbase was founded in 2012 by Mr. Armstrong and Fred Ehrsam, a former Goldman Sachs trader who now runs a crypto investment firm. In an industry rife with fraud, Coinbase established a reputation as a safe, easy-to-use platform for buying and selling crypto. But as the business grew, Mr. Armstrong’s leadership sometimes drew internal dissent: In 2020, Black employees complained about discriminatory treatment.
In April 2021, Coinbase went public at an $86 billion valuation, making Mr. Armstrong one of crypto’s wealthiest executives. The company became a household name, known for its memorable Super Bowl ad featuring a bouncing QR code.
But as Coinbase grew, some employees worried that it wasn’t doing enough to compete with FTX and Binance in the international market, especially with American regulators contemplating a crackdown on the industry.
In 2019 and 2020, Coinbase executives discussed opening an international hub in Singapore, according to three people familiar with the talks. The company recognized the need to compete with Binance by offering a wider array of tokens, as well as derivatives trading products prohibited in the United States, the people said. But the project never came to fruition.
More recent efforts at international expansion have foundered. In India, Coinbase said it would plug into a popular, government-backed payments system called Unified Payments Interface. But shortly after Coinbase’s announcement, the National Payments Corporation of India, a public-private group that runs U.P.I., tweeted that it was “not aware of any crypto exchanges using UPI.”
Soon Coinbase cut off access in India; local customers can still use the exchange to trade one type of crypto for another, but they can’t buy digital assets with traditional currency. In an earnings call in May, Mr. Armstrong said the company had faced “informal pressure” from the Indian authorities.
“Our preference is really just to work with them and focus on relaunching,” he said.
The fanfare of Coinbase’s launch struck others in the crypto industry as foolish. In private discussions with the industry, Indian regulators had suggested that they were cautious about appearing to openly endorse crypto, according to someone involved in the talks, and would prefer for companies to take a more measured approach.
Coinbase “overestimated the government’s potential support,” said Prasanto Roy, a technology policy consultant in India. “It went overboard.”
In an interview, Nana Murugesan, a Coinbase executive who oversees international expansion, said the company had gone into India despite the uncertainty because it wanted to clarify the country’s regulatory posture.
“Action produces information,” Mr. Murugesan said. “We want to learn from this information and drive our decision making and next steps.”
Over the years, Coinbase has tried to expand in other ways, creating a suite of products and services. Still, in the first quarter of 2022, nearly 90 percent of its revenue came from trading fees.
Coinbase started work on the NFT marketplace last year, with a team that eventually grew to about 30 engineers, designers and other employees. Mr. Armstrong hyped the project, saying NFTs “could be as big or bigger” than Coinbase’s cryptocurrency business.
But the development of the marketplace was a painful process, slowed down by disagreements about what the product should look like and what kinds of customers it should target, according to three people familiar with the situation. The project was spearheaded by Sanchan Saxena, a recent recruit from Airbnb, who envisioned an Instagram-style site built to showcase users’ NFT collections. Some employees who worked on the marketplace were skeptical that the idea would catch on, two of the people said, since NFT traders have often treated the items as vehicles for speculative bets rather than as digital art.
Coinbase hoped to unveil the marketplace in the first quarter of 2022, Mr. Saxena said in an interview. But it was delayed until late April. By that point, the broader NFT market had cratered: Sales were down more than 80 percent from the fall.
After its release, the marketplace got scathing reviews. In the last week of July, it generated about $24,000 a day in trades; its main competitor, OpenSea, which serves as a kind of eBay for NFTs, generated 600 times that amount.
Mr. Saxena said the Instagram-style approach was aimed at creating the type of crypto community that exists on sites like Twitter and Discord.
“We are still pursuing this product. We’re not going to throw in the towel,” he said. “We could have done a better job of explaining probably that, ‘hey, our focus is web3 social first and foremost.’”
In the 18 months before the crypto market crash, Coinbase’s staff more than quadrupled in size, to 6,100 from 1,250. (A spokesman said the company had “put a huge emphasis” on hiring employees with strong crypto backgrounds, especially in key product development roles.)
But as Coinbase grew, projects started to feel overstaffed, and the decision-making process slowed amid layers of bureaucracy, according to five people familiar with the company. Longtime employees were concerned that new hires felt “rudderless,” one person said, and joked that you could tell the length of someone’s tenure at Coinbase by the number of times the new recruits came to them asking for help.
Even the Super Bowl ad nearly didn’t come together: As the game approached, Coinbase hadn’t settled on an idea, and employees discussed the possibility of selling back the airtime, according to two people familiar with the matter.
The bloat was especially severe on Coinbase’s customer-service team. New staff members often felt that they didn’t have enough to do. “I got maybe four phone calls a day for a while,” said David Visini, a customer-service employee who was laid off. “It was dead, dead, dead.”
Ms. Choi, the chief operating officer, acknowledged that Coinbase had “overhired” during the pandemic and said it was difficult to integrate new recruits in a remote environment.
“I don’t know that we had exactly the right set of tools to set them up for success,” she said.
The crypto market crashed in May, causing Coinbase’s stock price to fall about 60 percent. In the first quarter, Coinbase’s revenue dropped 27 percent from a year earlier, to $1.17 billion, even as its expenses more than doubled, to $1.72 billion.
Its competitors appear to be faring better. Sam Bankman-Fried, chief executive of FTX, said in an email that his financial results had been “ballpark similar” to last year, when the company recorded profits of roughly $350 million. Binance, the largest exchange in the world, declined to reveal revenue figures. But in June, the company’s founder and chief executive, Changpeng Zhao, announced that he was hiring for 2,000 open positions.
That month, Coinbase employees circulated a petition demanding the ouster of several top executives. Mr. Armstrong responded aggressively on Twitter, calling on disgruntled employees to quit. But at a staff meeting, he and other executives struck a more conciliatory note, saying that employees should keep faith in crypto, and that the company would emerge stronger from the tumult, according to two people who attended.
A few days later, the company laid off 1,100 employees.
nytimes.com |
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| From: Glenn Petersen | 8/9/2022 6:41:18 PM | | | | | | Coinbase shares drop on billion-dollar loss in second quarter and revenue miss
Published Tue, Aug 9 20224:25 PM EDT
Updated 1 Min Ago
Jordan Novet @jordannovet
CNBC.com
Key Points
- Coinbase's revenue declined almost 64% in the quarter as cryptocurrency prices fell.
- The exchange operator lowered its full-year forecast for transacting users.
- Coinbase said during the quarter it was trimming 18% of headcount.
Coinbase shares dropped in extended trading on Tuesday after the crypto exchange reported a loss of over $1 billion in the second quarter and missed analysts' estimates for revenue.
Here's how the company did:
- Earnings: Loss of $4.98 per share, vs. loss of $2.65 per share as expected by analysts, according to Refinitiv.
- Revenue: $808.3 million, vs. $832.2 million as expected by analysts, according to Refinitiv.
Coinbase's revenue declined nearly 64% as investors exited the crypto market after last year's dramatic run. Retail transaction revenue came in at $616.2 million, down 66% and below the $667.1 million consensus among analysts polled by StreetAccount.
Coinbase reported a $1.1 billion net loss, compared with $1.59 billion in net income in the same quarter last year, according to a letter to shareholders. One factor was a $377 million non-cash cryptocurrency-related impairment charge. Coinbase's own cryptocurrency assets at the end of June were worth $428 million, down from about $1 billion at the end of March. Over 40% of the cryptocurrency assets were in Bitcoin.
"Q2 was a test of durability for crypto companies and a complex quarter overall," the company said in the letter. "Dramatic market movements shifted user behavior and trading volume, which impacted transaction revenue, but also highlighted the strength of our risk management program."
The company said it had 9 million monthly transacting users during the period, down from 9.2 million in the first quarter but more than the 8.7 million StreetAccount consensus. Macroeconomic and cryptocurrency credit resulted in lower trading volume during the quarter, the company said.
It was a challenging quarter for Coinbase from an operational perspective.
Cryptocurrency controversies helped to push down prices in what some called a "crypto winter." Coinbase's stock tumbled 75% during the second quarter, while the price of Bitcoin plunged by about 59%. Coinbase said it was extending its hiring freeze into the foreseeable future and cutting 18% of headcount. Bitcoin accounted for 31% of transaction revenue in the quarter, the highest level since the first quarter of 2021, while 22% of transaction revenue was associated with Ethereum.
Assets on platform fell quarter over quarter to $96 billion from $256 billion, mostly because of pressure on cryptocurrency prices, Coinbase said.
"While we did see net outflows in Q2, we observed that the majority of this behavior was institutional clients de-risking and selling crypto for fiat as opposed to withdrawing their crypto to another platform," Coinbase said in the shareholder letter. "As a result, our market share of the total crypto market capitalization declined to 9.9% from 11.2% in Q1."
Coinbase updated its outlook for the full year. It now expects 7 million to 9 million monthly transacting users, down from a range of 5 million to 15 million three months ago. Management said it expects average transaction revenue per user in the low $20 range, rather than pre-2021 levels.
To reduce marketing spending, the company is doing less with paid media and incentives, while pursuing ways to attract non-paid traffic. And it reduced its forecast for technology, development and general and administrative expenses to $4.0 billion to $4.25 billion from the $4.25 billion to $5.25 billion range a quarter ago. That includes optimizing infrastructure spending.
"Of course, we don't control the macroeconomic factors or downturn," CEO Brian Armstrong said on a conference call with analysts. "We don't really even control the crypto market more broadly, right. So what do we control? Well, obviously we can focus on building great products for our customers. We can focus on staying on the forefront of crypto technology to make sure that we're creating compelling use cases and making those available to our customers. We can focus on our expense management in down markets and frankly we can ensure that we just don't get distracted or disillusioned by short-term thinking.
"So I believe that the work we're doing today to develop and innovate new products and tools is going to make us really well situated to capture disproportionate share in the next up cycle."
Coinbase shares declined almost 11% in Tuesday's regular trading session.
cnbc.com |
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| From: Glenn Petersen | 11/20/2022 9:00:39 PM | | | | | | Edward Snowden Calls Coinbase Over-Compliance ‘Toxic and Embarrassing’
The former NSA contractor turned whistleblower criticized the exchange for favoring compliance over its customers' interests.0
By André Beganski
Decrypt
Nov 20, 2022
4 min read
Edward Snowden Talks Tornado Cash Sanctions, Ethereum Merge, DAOs and NFTs at Camp Decrypt 2022In an extensive talk with Decrypt's Dan Roberts at Camp Decrypt in Napa CA in October, Edward Snowden gave his candid views on the Ethereum merge, the sanctioning of Ethereum mixer Tornado Cash by the U.S. government, the privacy shortcomings of Bitcoin and Ethereum, and his view on using DAOs to source tips from whistleblowers.
As society went from dial-up modems to near-constant online presence via smartphones, the ways in which individuals engaged with networks underwent a pivotal shift. The internet became not only a place for people to access vast amounts of information and connect with others, but also an avenue for corporations and governments to harvest swaths of information.
Edward Snowden says that this shift away from the internet’s roots was partly a result of corporations that didn’t put their users first.
“We lost that internet because we onboarded billions of people, and the people who were providing the gateways for that didn’t have their best interests at heart,” he said in an intimate, fireside chat before 75 attendees of Camp Decrypt in Napa Valley last month.
The former NSA contractor turned whistleblower, known for revealing an unlawful mass surveillance program in the U.S. in 2013, said he sees a similar trend emerging when it comes to the adoption of cryptocurrencies.
Snowden compared the way cryptocurrency exchange Coinbase onboards users to the way Facebook became synonymous with social media.
“We’re seeing people exploiting the kind of ignorance that made so many people now think tapping the Facebook app on your phone [is] the internet, and now think crypto is Coinbase or something else equally horrible as that,” he said.
Coinbase is the only publicly listed cryptocurrency exchange in the U.S. and the country’s leading exchange by volume, according to CoinGecko. The company reported it had 8.5 million monthly transacting users on average in its third fiscal quarter of this year, a 16% increase from the same period a year ago.
Snowden told Camp Decrypt attendees that Coinbase has put regulatory compliance over the founding ideals of blockchain-based networks—an innovation that could tilt power back into the hands of internet users.
“To those of you in the room who work for Coinbase, it’s really nothing personal, you’re just an example of [the] overly compliant, overly indulgent,” he said. “Yeah, you guys still get rich, you’ll make a lot of money, but have you actually advanced the interests of society?”
Coinbase claims to have prioritized regulatory compliance since its earliest days, and the company has asserted that working with regulators is key to widespread acceptance for cryptocurrencies as an asset class.
“We’ve always believed that for crypto to gain the legitimacy needed for mainstream adoption, compliance can’t be an afterthought—it has to be core to the way we operate,” the company wrote in a blog post. “Compliance with existing regulatory frameworks isn’t an option—it’s a necessity.”
Snowden went on to compare Coinbase to a company that sells products much in the same way a home improvement retailer like Home Depot does, adding that its commitment to Know-Your-Customer (KYC) procedures—which helps them remain compliant with anti-money laundering regulations—is a drag on the crypto space.
“You're not even building lawn mowers, you're selling them, but great, you've popularized the lawnmower—lawnmowers are important, they're valuable,” he said. “But when I go buy a lawnmower, nobody asks for me to hold up my passport and scan my face, and the fact that you guys go along with that is frankly toxic and embarrassing.”
Snowden said that companies looking to bring individuals into the world of Web3 while also remaining compliant with regulations at the same time should do so in a way that doesn’t compromise the ideals that originally drove people to the industry.
“My plea to those of you who are in that big end of the pool is, if you're going to cave, cave strategically,” Snowden said. “Leave space for the protocol and for the sort of values that we're all supposed to be representing here.”
Coinbase has said that it has the same responsibilities as other large financial institutions when it comes to verifying customers who engage with the company and enforcing policies that prevent money laundering. Many of its compliance programs are modeled on retail banks.
The company explains that its compliance programs—which include monitoring the overall cryptocurrency market and detecting financial crime—are intended to protect its customers.
Snowden broadened his criticism to include any crypto exchange that keeps track of users’ funds.
“You don't want to be in a position where you can check that, because really, that's not your role in society, even if [the] government says it is,” Snowden said. “That's for police, that's for intelligence—that's their job, and their job is supposed to be hard.”
Coinbase did not immediately reply to a request for comment from Decrypt.
Edward Snowden Calls Coinbase Over-Compliance ‘Toxic and Embarrassing’ - Decrypt |
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| From: Glenn Petersen | 1/10/2023 7:28:27 AM | | | | | | Coinbase to slash 20% of workforce in second major round of job cuts
PUBLISHED TUE, JAN 10 20236:42 AM EST
Kate Rooney @KR00NEY
CNBC.co,
KEY POINTS
-- Coinbase is cutting a fifth of its workforce following an 18% staff reduction in June.
-- CEO Brian Armstrong pointed to recent pressure on the crypto sector thanks to “unscrupulous actors in the industry,” referring to bankrupt exchange FTX and its founder Sam Bankman-Fried.
Coinbase is cutting about a fifth of its workforce as it looks to preserve cash during the crypto market downturn.
The exchange plans to cut 950 jobs, according to a blog post published Tuesday morning. Coinbase, which had roughly 4,700 employees as of the end of September, already slashed 18% of its workforce in June citing a need to manage costs and growing “too quickly” during the bull market.
“With perfect hindsight, looking back, we should have done more,” CEO Brian Armstrong told CNBC in a phone interview. “The best you can do is react quickly once information becomes available, and that’s what we’re doing in this case.”
Coinbase said the move would result in new expenses of between $149 million and $163 million for the first quarter. The layoffs, along with other restructuring measures, will bring Coinbase’s operating expenses down by 25% for the quarter ending in March, according to a new regulatory filing. The crypto firm also said it expects adjusted EBITDA losses for the full year to be within a prior $500 million “guardrail” set last year.
After looking at various stress tests for Coinbase’s annual revenue, Armstrong said “it became clear that we would need to reduce expenses to increase our chances of doing well in every scenario” and there was “no way” to do so without reducing headcount. The company will also be shutting down several projects with a “lower probability of success.”
Cryptocurrency markets have been rocked in recent months following the collapse of one of the industry’s biggest players, FTX. Armstrong pointed to that fallout, and increasing pressure on the sector thanks to “unscrupulous actors in the industry” referring to FTX and its founder Sam Bankman-Fried.
“The FTX collapse and the resulting contagion has created a black eye for the industry,” he said, adding that there’s likely more “shoes to drop.”
“We may not have seen the last of it -- there will be increased scrutiny on various companies in the space to make sure that they’re following the rules,” Armstrong said. “Long term that’s a good thing. But short term, there’s still a lot of market fear.”
Cryptocurrencies have suffered alongside technology stocks as investors flee riskier assets amid a broader economic downturn. Bitcoin is down 58% in the past year, while Coinbase shares are off by more than 83%
End of a growth era
Coinbase joins a chorus of other tech companies cutting jobs after going on a hiring binge during the pandemic. Last week, Amazon said it would cut 18,000 jobs, more than the online retailer initially estimated last year, while Salesforce reduced its headcount by more than 7,000, or 10%. Elon Musk slashed about half of Twitter’s workforce after taking the helm as CEO last year, and Meta cut more than 11,000 jobs, or 13%. Crypto companies Genesis, Gemini, and Kraken have also reduced their workforces.
“Every company in Silicon Valley felt like we were just focused on growth, growth, growth, and people were almost using their headcount number as a symbol of how much progress they were making,” Armstrong said. “The focus now is on operational efficiency -- it’s a healthy thing for the ecosystem and the industry to focus more on those things.”
Early last year, Coinbase had said it planned to add 2,000 jobs across product, engineering and design. Armstrong said he’s now trying to shift the culture at Coinbase to “get back to its start-up roots” of smaller teams that can move quickly.
Coinbase went public in April 2021 and has seen its share price plummet since. The stock is trading below $40 after surging to $341 on its public debut. Coinbase debt that’s maturing in 2031 continues to trade at roughly 50 cents on the dollar. The company still had cash and equivalents of roughly $5 billion as of the end of September.
Coinbase said it would email affected employees on their personal accounts, and revoke access to company systems. Armstrong acknowledged the latter “feels sudden and harsh” but “it’s the only prudent choice given our responsibility to protect customer information.”
Despite the industry’s domino effect of bankruptcies and a marked drop in trading volume, Armstrong was steadfast in arguing that the industry isn’t going away. He said the demise of FTX would ultimately benefit Coinbase, as their largest competitor is now wiped out. Regulatory clarity may also emerge, and Armstrong said it “validates” the company’s decision of building and going public in the U.S. The CEO likened the current environment to the dot-com boom and bust.
“If you look at the internet era, the best companies got even stronger by having rigorous cost management,” he said. “That’s what’s going to happen here."
Coinbase to slash 20% of workforce in second major round of job cuts (cnbc.com) |
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| From: Glenn Petersen | 2/16/2023 6:06:33 PM | | | | | | Coinbase Says Client Assets Are 'Segregated and Secure' Following Proposed SEC Rule Change
Coinbase says it already provides the protections available to the clients of qualified custodians and supports the SEC’s proposal to require such protections.
By Will McCurdy
Decrypt
Feb 16, 2023
2 min read
Coinbase is confident that its Coinbase Custody Trust Co. (CCTC) will remain a qualified custodian even if new rules proposed by the SEC come into play, according the company's chief legal officer Paul Grewal.
Coinbase Custody Trust is a New York-based business that provides cold storage for third-party investors' digital assets. The SEC on Wednesday published a rule-change proposal that seeks to enforce much stricter provisions governing where registered investment advisers can custody cryptocurrency on behalf of their investors, limiting such investments to what are known as “qualified custodians.”
These custodians must adhere to a stricter set of regulations, including keeping funds in a siloed account, unmixed with their own funds or those of other organizations.
Coinbase’s Grewal told Decrypt that his firm supports the SEC's proposal and fully agrees that “investors deserve to feel confident their assets are safe.” Grewal added that its custodial clients' assets “are segregated and secured.”
“We commend the SEC for recognizing Coinbase Custody Trust Co. (CCTC) is a qualified custodian, and after today’s SEC proposed rulemaking, we are confident that it will remain a qualified custodian,” said Grewal.
Crypto industry cautious over custody
SEC Chair Gary Gensler didn’t mince words when it came to criticizing the practices of some crypto custodians.
In the proposal, Gensler said that “though some crypto trading and lending platforms may claim to custody investors’ crypto, that does not mean they are qualified custodians.”
Gensler said that certain platforms have commingled investor assets with both their own or other investors in the past, leaving these “investors in line at the bankruptcy court” when such platforms have gone bankrupt.
In the wake of FTX's high-profile collapse last November, which saw the crypto exchange mix user funds with its sister trading firm Alameda Research, investors have been on high alert regarding how trading platforms custody their assets.
One such development to cool investors' nerves has been the rise of reserve reports, with exchanges like Binance, KuCoin, ByBit, and others providing users with attestations as to how they manage their reserves.
Coinbase Says Client Assets Are 'Segregated and Secure' Following Proposed SEC Rule Change - Decrypt |
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| From: Glenn Petersen | 2/21/2023 5:49:16 PM | | | | | | Coinbase beats on revenue and earnings, but usage continues to decline
PUBLISHED TUE, FEB 21 20234:25 PM EST
UPDATED 18 MIN AGO
MacKenzie Sigalos @KENZIESIGALOS
CNBC.com
KEY POINTS
-- Coinbase reported fourth-quarter earnings after the bell on Tuesday.
-- The crypto exchange reported $629 million in revenue, vs. $590 million as expected by Refinitiv analysts.
-- The company said it had 8.3 million monthly transacting users (MTUs) during the fourth quarter, down from 8.5 million the prior period.
Coinbase reported user numbers that fell short of analysts’ estimates even as fourth-quarter earnings and revenue beat projections. The stock rose more than 2% in extended trading after dropping 4.8% during the day.
Here’s how the company did:
Earnings: Loss of $2.46 per share, vs. loss of $2.55 per share as expected by analysts, according to Refinitiv.
Revenue: $629 million, vs. $590 million as expected by analysts, according to Refinitiv.
Revenue plunged nearly 75% from a year earlier as the so-called crypto winter continued to drag on the price of cryptocurrencies. The company also reported a (non-adjusted) net loss of $557 million, a year after Coinbase generated net income of $840 million during the peak of crypto adoption.
Coinbase’s user base continues to shrink. The company said it had 8.3 million monthly transacting users (MTUs) during the fourth quarter, down from 8.5 million the prior period. Analysts were expecting 8.22 million, according to StreetAccount. Trading volume fell 9% to $145 billion from the previous quarter.
Transaction revenue fell 12% to $322 million from the previous quarter, which was below the $327 million consensus among analysts polled by StreetAccount.
For Q1 2023, the company projected subscription and services revenue of $300 million to $325 million, as well as restructuring expenses of about $150 million. Diversifying its revenue streams away from just trading fees has been a big priority for the company, with subscription and services taking center stage. Traction in products such as Staking, Earn, and Custody generated over $200 million in the fourth quarter.
Coinbase has gone through two major rounds of layoffs since June 2022 in an effort to pare back spending to preserve cash. The exchange cut 20% of its staff last month, following an 18% reduction of its workforce in 2022.
Prior to Tuesday’s after-hours moves, the stock was up more than 75% in 2023, following 2022's plunge in crypto prices coupled with a retreat from the riskiest equities. This year bitcoin, the most popular cryptocurrency, has risen more than 48%.
Coinbase Chief Financial Officer Alesia told CNBC that markets have rebounded in the current quarter compared to Q4 2022, and that “market conditions have really evolved, even in a single month.” Haas noted that Coinbase generated $120 million in transaction fee revenue in January, adding that retail has come back to the market.
“We’re seeing what we’ve seen always in crypto,” Haas said in a call with CNBC. “It’s overall volatility and market conditions that drive trading activity and that these idiosyncratic events have changed that longer-term dynamic that we’ve seen.”
Coinbase’s business could also be impacted by possible SEC actions that would govern certain types of cryptocurrency tokens and crypto services as securities. Tweets by CEO Brian Armstrong and Chief Legal Officer Paul Grewal have suggested the company would fight any such action in court.
Crypto exchange Kraken, for example, recently ended its staking services as part of a settlement with the SEC over allegations that the platform sold unregistered securities.
Many centralized exchanges like Kraken and Gemini offer customers the option to stake their tokens in order to earn yield on their digital assets that would otherwise sit idle on the platform. With crypto staking, investors typically vault their crypto assets with a blockchain validator, which verifies the accuracy of transactions on the blockchain. Investors can receive additional crypto tokens as a reward for locking away those assets.
But on a call with CNBC, Haas insisted that Coinbase’s staking product was “not a security.” Haas added that staking was less than 3% of net revenue, so it was not material source of net revenue at this time — but an “important part of the ecosystem” that the platform plans to grow.
Executives will discuss the results on a conference call starting at 5:30 p.m. ET.
Coinbase (COIN) earnings Q4 2022 (cnbc.com) |
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| From: Glenn Petersen | 3/23/2023 3:20:58 AM | | | | | | Coinbase warned by SEC of potential securities charges
PUBLISHED WED, MAR 22 20235:28 PM EDT
UPDATED WED, MAR 22 20236:10 PM EDT
Rohan Goswami @ROGOSWAMI
MacKenzie Sigalos @KENZIESIGALOS
CNBC.com
KEY POINTS
-- The SEC issued crypto exchange Coinbase a Wells notice, warning the exchange that it identified potential violations of U.S. securities law.
-- Coinbase said the warning wouldn’t mean any changes to the exchange’s current products or services.
-- The notice is the second warning from the SEC to a crypto entity after a February notice to stablecoin issuer Paxos.
The Securities and Exchange Commission issued crypto exchange Coinbase a Wells notice, warning the company that it identified potential violations of U.S. securities law.
Coinbase shares fell nearly 12% in extended trading after the news broke on Wednesday, adding to an 8.16% drop during regular traidng hours.
“Based on discussions with the Staff, the Company believes these potential enforcement actions would relate to aspects of the Company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet,” Coinbase said in a regulatory filing. “The potential civil action may seek injunctive relief, disgorgement, and civil penalties.”
The SEC has ramped up its enforcement of the crypto industry, bearing down on companies and projects that the regulator alleges were hawking unregistered securities. Reports first surfaced of an SEC probe into Coinbase in mid-2022.
Months before the collapse of FTX in November, crypto markets were roiled by rising interest rates and a broad move out of risk, which contributed to the collapse of stablecoin Terra and the demise of crypto hedge fund Three Arrows Capital and exchanges Celsius and Voyager.
A Wells notice is typically one of the final steps before the SEC formally issues charges. It generally lays out the framework of the regulatory argument and offers the potentially accused an opportunity to rebut the SEC’s claims.
Coinbase described the investigation as “cursory,” and said the Wells notice provided relatively little information about potential violations.
“Although we don’t take this development lightly, we are very confident in the way we run our business – the same business we presented to the SEC in order for us to become a public company in 2021,” Coinbase Chief Legal Officer Paul Grewal said in a blog post.
The company said that until the resolution of any legal processes, the exchange’s offerings would continue to operate as usual.
Coinbase executives, including founder and CEO Brian Armstrong, have pushed back against perceived overreach by the SEC, which has moved aggressively against the crypto industry since the collapse of FTX. At the direction of SEC chair Gary Gensler, the regulator has issued enforcement actions against multiple heavyweights, including Gemini, Genesis, TRON executive Justin Sun, Do Kwon, and crypto exchange Kraken.
“We are prepared for this disappointing outcome and confident in the legality of our assets and services,” Grewal said in a statement. “If needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets.”
The SEC sent a Wells notice to stablecoin issuer Paxos in February. “We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary,” a Paxos spokesperson told CNBC at the time.
Grewal said Coinbase is looking for more regulatory clarity.
“Tell us the rules and we will follow them,” he said. “Give us an actual path to register, and we will register the parts of our business that need registering.”
Coinbase warned by SEC of potential securities charges (cnbc.com) |
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| From: Glenn Petersen | 6/6/2023 9:15:21 PM | | | | | | Coinbase Is Facing a ‘Life or Death’ Battle With the SEC
-- Revenue at risk could be over 50%, Oppenheimer analyst says
-- Customers may be due restitution, ex-SEC official Stark says
By Michael P. Regan, Muyao Shen and Yueqi Yang
Bloomberg
June 6, 2023, 10:13 PM UTC
Coinbase Global Inc. knew all along that it could be courting trouble with regulators.
More than two years ago, when the crypto exchange filed with the US Securities and Exchange Commission to start publicly trading its shares, it said there was a “high degree of uncertainty” regarding the legality of its operations, warning that “regulators may disagree” with the company’s view that it wasn’t covered by their rules.
That possibility became reality on Tuesday, when the SEC sued Coinbase for failing to register with the agency as a broker, an exchange or a clearing firm — all roles that the company plays in a cryptocurrency market where many tokens are, according to the agency, actually unregistered securities. The regulator also alleged that Coinbase’s staking program, which allows customers to lock up their coins in return for a share of rewards offered by various blockchains, violates securities laws, as well.
The charges came a day after the SEC brought a similar case against rival Binance Holdings Ltd., marking a sharp escalation of its efforts to rein in a shadowy industry that burned investors with blowups like the collapse of FTX last year. The SEC’s push is particularly fraught for Coinbase, which generated over 80% of its revenue in the US last year and is now facing a near existential threat to its business model.
“For Coinbase, this case is life or death since it is more concentrated on the US market,” said Ashok Ayyar, counsel at Ashbury Legal. “Expect Coinbase to litigate this vigorously — it is alleged that virtually their entire US business is illegal.”
Chairman and Chief Executive Officer Brian Armstrong responded to the suit on Twitter, saying he’s proud to represent the industry in court. He repeated his defense that the SEC had reviewed its business and allowed Coinbase to become a public company when it registered the stock. Yet the regulator made it clear in its complaint that approving the company’s plan to go public was not the equivalent of giving its business model a green light: “Declaring effective a Form S-1 registration statement does not constitute an SEC or staff opinion on, or endorsement of, the legality of an issuer’s underlying business.”
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Regarding the SEC complaint against us today, we're proud to represent the industry in court to finally get some clarity around crypto rules.
Remember:
1. The SEC reviewed our business and allowed us to become a public company in 2021.
2. There is no path to "come in and…
— Brian Armstrong (@brian_armstrong) June 6, 2023
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Legal experts are inclined to agree.
“Coinbase has publicly asserted that going public means the SEC has somehow approved their business or its legality — that is mistaken,” said Ayyar. “Going public just means the SEC reviews the offering prospectus and that the document meets the filing requirements. It is not a stamp of approval for the company, its products or businesses.”
Armstrong indicated that the company plans to challenge the SEC to get more legal clarity for his industry. One major issue will be which of the thousands of cryptocurrencies on the market are considered securities. Altcoins — tokens other than Bitcoin and Ether — made up almost half of Coinbase’s trading revenue in the first quarter of this year, according to a letter to shareholders. In its lawsuit, the SEC said several such coins are securities.
Oppenheimer & Co. analyst Owen Lau anticipates a long-term legal battle. While the company may operate normally in the short term, he said, the potential reputational damage caused by the SEC’s claims could lead users to pull their money from the platform. During the first quarter, Coinbase’s revenue was already less than a third of its late 2021 peak. Over the past two days, its shares have tumbled 20%.
In the longer term, Coinbase is facing a bigger hit should the SEC’s lawsuit prevail. The case could force the company to stop providing custody and trading of coins considered securities, threatening a big chunk of its business.
“If the SEC stops Coinbase from trading some tokens they deemed securities, that could have a huge impact on Coinbase’s financial health,” Lau said. “I would say the revenue at risk could be over 50%.”
But, he added, it’s possible the SEC may not prevail on all of the charges: “The caveat is the probability to lose everything could be very low.”
The SEC also may seek to compensate customers who traded unregistered securities on Coinbase, according to John Reed Stark, a consultant and former chief of the SEC’s Office of Internet Enforcement.
“The SEC would figure out an amount of penalty and an amount of disgorgement and find a distribution agent to distribute the funds to aggrieved investors,” he said.
— With assistance by Olga Kharif and Emily Nicolle
Coinbase (COIN) SEC Crypto Charges Pose Threat as Altcoins Deemed Securities - Bloomberg (archive.ph) |
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| From: Glenn Petersen | 7/14/2023 8:44:09 AM | | | | | | COIN was up 21% yesterday.
'I think we will win’: Coinbase buoyed in case against SEC after landmark Ripple XRP decision0
PUBLISHED FRI, JUL 14 20238:21 AM EDT
Arjun Kharpal @ARJUNKHARPAL
CNBC.com
KEY POINTS
-- On Thursday, a U.S. judge ruled that XRP token purchases via exchanges were not securities transactions.
-- Coinbase’s arguments in its legal case against the U.S. Securities and Exchange Commission have been strengthened as a result, Paul Grewal, chief legal officer at Coinbase, told CNBC.
-- The SEC sued Coinbase in June, alleging it was operating an unregistered exchange and broker.
Coinbase’s arguments in its legal case against the U.S. Securities and Exchange Commission have been strengthened after a key court ruling went partially in favour of cryptocurrency firm Ripple, the U.S. exchange’s legal chief told CNBC on Friday.
On Thursday, a U.S. judge ruled that XRP token purchases via exchanges were not securities transactions. The SEC sued Ripple, the company behind the XRP token, in 2020, alleging that the company broke securities laws.
The ruling was cheered by the cryptocurrency community and particularly by exchanges, which feel the outcome will help create some more regulatory clarity.
One such exchange is Coinbase, which was sued in June by the SEC on charges of operating an unregistered exchange and broker.
But the latest XRP court opinion has given confidence to Coinbase in its case against the SEC.
“For exchanges, for tokens that are listed on exchanges, for regular investors, there’s no question that this ruling strikes a blow to the idea that somehow securities are being traded when people go onto exchanges and trade the assets,” Paul Grewal, chief legal officer at Coinbase, told CNBC in a TV interview on Friday.
“I think we will win. Now, I thought we would win before this decision. We think this decision has only further strengthened the case,” he added.
Part of Coinbase’s optimism stems from the decision regarding XRP not being a security. If XRP isn’t designated such, there is hope that hundreds of other cryptocurrencies will also not be subject to security laws.
“I think it would be a mistake to assume that, in every instance, and in every transaction, the securities laws do not apply. That’s never been Coinbase’s position, I don’t think it should be anyone’s reasonable position. But if you literally replaced the letters XRP with the letters for any other token, in this decision, the logic still holds,” Grewal said.
However, another part of the judgement actually deemed it a securities transaction to sell XRP specifically to sophisticated investors or institutional clients.
Coinbase has been trying to grow its own institutional trading platform. Grewal shrugged off this part of the case, because it related exactly to how Ripple sold XRP to institutional clients.
“I think all investors, institutional and retail, can take great comfort from the fact that, when it comes to exchange trading, where there is arm’s length dealing, the court has made it very clear, these tokens are not being traded as securities,” Grewal said.
SEC slammed
Whether or not cryptoassets are securities is an important question with several implications. If they are deemed securities, then they would need to register with the SEC and would have strict disclosure requirements. It would also give the SEC the power to oversee these assets and related firms, such as cryptocurrency exchanges.
The SEC has maintained that most cryptocurrencies are securities — but the decision on XRP appeared to weaken its argument.
The crypto industry has had heated words for the SEC over the past month, accusing the agency of regulating by enforcing, rather than by working with the industry.
Tyler Winklevoss, the co-founder of cryptocurrency exchange Gemini that is also subject to a SEC lawsuit, called the regulator a “failed institution.”
Coinbase’s Grewal said he did not think the SEC was waging an ideological battle against the cryptocurrency industry, but that all actions were done in “good faith.” However, he added, “they’ve been wrong.”
“What there has been I think, is a failure of leadership to follow reasonable engagement with the industry and with other stakeholders, rather than resorting to court,” Grewal said, calling for “new rules to deal with a new technology.”
Coinbase buoyed in case against SEC after landmark Ripple XRP decision (cnbc.com) |
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