| 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.”
-------------------------------------
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
----------------------------------------------
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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| To: Glenn Petersen who wrote (81) | 7/31/2023 5:50:29 AM | | From: Glenn Petersen | | | | SEC asked Coinbase to halt trading in everything except bitcoin, CEO says
Request would have meant ‘the end of the crypto industry in the US’, according to Brian Armstrong
Scott Chipolina in London
Financial Times
2 HOURS AGO
The US Securities and Exchange Commission asked Coinbase to halt trading in all cryptocurrencies other than bitcoin prior to suing the exchange, in a sign of the agency’s intent to assert regulatory authority over a broader slice of the market.
Coinbase chief executive Brian Armstrong told the Financial Times that the SEC made the recommendation before launching legal action against the Nasdaq-listed company last month for failing to register as a broker.
The SEC’s case identified 13 mostly lightly traded cryptocurrencies on Coinbase’s platform as securities, asserting that by offering them to customers the exchange fell under the regulator’s remit.
But the prior request for Coinbase to delist every one of the more than 200 tokens it offers — with the exception of flagship token bitcoin — indicates that the SEC, under chair Gary Gensler, has pushed for wider authority over the crypto industry.
“They came back to us, and they said... we believe every asset other than bitcoin is a security,” Armstrong said. “And, we said, well how are you coming to that conclusion, because that’s not our interpretation of the law. And they said, we’re not going to explain it to you, you need to delist every asset other than bitcoin.”
If Coinbase had agreed, that could have set a precedent that would have left the vast majority of the American crypto businesses operating outside the law unless they registered with the commission.
“We really didn’t have a choice at that point, delisting every asset other than bitcoin, which by the way is not what the law says, would have essentially meant the end of the crypto industry in the US,” he said. “It kind of made it an easy choice...let’s go to court and find out what the court says.”
\
According to Brian Armstrong, if Coinbase had agreed, the vast majority of the American crypto businesses would risk operating outside the law unless they registered with the SEC © Reuters
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Oversight of the crypto industry has hitherto been a grey area, with the SEC and the Commodity Futures Trading Commission jockeying for control.
The CFTC sued the largest crypto exchange, Binance, in March of this year, three months before the SEC launched its own legal action against the company.
Gensler has previously said he believes most cryptocurrencies with the exception of bitcoin are securities. However, the recommendation to Coinbase signals that the SEC has adopted this interpretation in its attempts to regulate the industry.
Ether, the second-largest cryptocurrency, which is fundamental to many industry projects, was absent from the regulator’s case against the exchange. It also did not feature in the list of 12 “crypto asset securities” specified in the SEC’s lawsuit against Binance.
The SEC said its enforcement division did not make formal requests for “companies to delist crypto assets”.
“In the course of an investigation, the staff may share its own view as to what conduct may raise questions for the commission under the securities laws,” it added.
Stocks, bonds and other traditional financial instruments fall under the SEC’s remit, but US authorities remain locked in debate as to whether all — or any — crypto tokens should fall under its purview.
Oversight by the SEC would bring far more stringent compliance standards. Crypto exchanges typically also provide custody services, and borrow and lend to customers, a mix of practices that is not possible for SEC-regulated companies.
“There are a bunch of American companies who have built business models on the assumption that these crypto tokens aren’t securities,” said Charley Cooper, former CFTC chief of staff. “If they’re told otherwise, many of them will have to stop operations immediately.”
“It’s very difficult to see how there could be any public offerings or retail trading of tokens without some sort of intervention from Congress,” said Peter Fox, partner at law firm Scoolidge, Peters, Russotti & Fox.
The SEC declined to comment on the implications for the rest of the industry of a settlement involving Coinbase delisting every token other than bitcoin.
SEC asked Coinbase to halt trading in everything except bitcoin, CEO says | Financial Times (archive.ph) |
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| From: Glenn Petersen | 8/6/2023 11:58:44 AM | | | | | | Stablecoins Offering Less Stability for Coinbase
Declining interest revenue from stablecoins is one of many headwinds for the crypto exchange
By Telis Demos
Heard on the Street
Wall Street Journal
Aug. 4, 2023 7:08 am ET
Even the easy part is getting harder for Coinbase Global.
Given the company’s brewing battle with the Securities and Exchange Commission following the regulator’s lawsuit earlier this year, and the broader role of Washington in the future of digital assets, quarterly earnings might seem somewhat beside the point for Coinbase. That is especially the case during the current crypto winter, when little is expected from trading activity.
Still, Coinbase’s stock has found its footing of late, rising more than 150% so far this year, in large part because it has been able to use a surge of interest income—driven by interest earned on customer cash and stablecoin reserves—and a cost-cutting drive to improve profitability measures. The company’s second quarter, reported on Thursday, showed a second consecutive positive reading for adjusted earnings before interest, taxes, depreciation and amortization.
But even simply collecting interest is becoming harder. Coinbase has generated a lot of interest revenue from reserves backing the USD Coin stablecoin. That revenue had jumped sharply in recent quarters. But a 28% decrease in average USDC market cap in the second quarter helped drive a 16% quarter-over-quarter drop in interest income, to $201 million. Along with falling transaction revenue, that helped end a two-quarter streak of sequential companywide revenue increases, with net revenue coming in at $663 million, down from $736 million in the first quarter.
The company told analysts on Thursday that it was working with partner Circle Internet Financial to try to increase USDC’s market cap again after the stablecoin broke its $1 peg during the banking crisis earlier this year.
Meanwhile, Coinbase continued to slash expenses, with second-quarter core operating costs down nearly 50% versus a year earlier, and down about 13% from the first quarter. It added $156 million to its cash resources. But against the backdrop of the revenue decline, adjusted Ebitda of $194 million was down from $284 million in the first quarter.
Meanwhile on the trading side, though retail transaction revenue continues to tumble, it at least beat analyst expectations, according to estimates compiled by Visible Alpha—but perhaps for the wrong reasons. As crypto volatility dropped, there was a relative decline in activity among advanced traders, who pay smaller fees. This left a bigger portion of the volume for so-called simple traders that pay higher fees.
Coinbase’s take rate—or transaction revenue as a percentage of volume—for retail trading has remained a lot higher than many investors might have expected a couple of years ago. At the time, that seemed likely to fall as the crypto market matured. In fact, the opposite is happening: In the second quarter it leapt to about 2.2%, nearly a percentage point higher than it was a year ago, at around 1.3%.
Being a go-to for crypto newbies and occasional users can still be a backbone for Coinbase’s business. Coinbase did increase the spread it earns on some retail transactions in the first quarter and said it hadn’t seen an effect on customer behavior. But the question of the stability of these fees remains relevant. For example, though it might no longer have to compete with the likes of FTX for advanced traders, the likelihood of spot bitcoin exchange-traded funds finally being approved means that Coinbase might have to compete with them for more casual ones.
At the same time, Coinbase’s institutional business could be bolstered by the market-making activity that a spot bitcoin ETF would entail. It can also be the crypto custodian to these funds, earning steady fees. But whether those ETFs will happen is a decision that remains in the hands of courts and regulators.
Perhaps Coinbase can help its own case with smart lawyering and lobbying. You just can’t see that in a quarterly report.
Write to Telis Demos at Telis.Demos@wsj.com
Stablecoins Offering Less Stability for Coinbase - WSJ (archive.ph) |
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| To: Glenn Petersen who wrote (83) | 10/13/2023 5:02:12 AM | | From: Glenn Petersen | | | | Coinbase’s Quarterly Crypto Trading Volume Likely Lowest Since Before Public Debut- Transaction revenue accounts for about half of total revenue
- Quarterly spot trading volume fell to $76 billion, CCData says
By Olga Kharif
Bloomberg
October 11, 2023 at 4:12 PM UTC
In yet another example of how swiftly investor interest in crypto has dried up, Coinbase Global Inc.’s spot trading volume likely plummeted by more than half during the recently completed third quarter.
The largest US digital-asset platform registered about $76 billion in spot trading volume, a drop of 52% from the year-ago period, according to data compiled by researcher CCData. The tally is also likely the least since before the company’s much ballyhooed direct listing on the Nasdaq Stock Market in April 2021, or just months before prices of cryptocurrencies peaked.
Trading volume is a key metric for exchanges, with Coinbase deriving the biggest portion of its revenue from trading fees. In the second quarter, Coinbase said so-called transaction revenue accounted for 54% of total revenue. The decline is part of a year-long slide across the crypto industry following a spate of scandals, bankruptcies and regulatory actions.
“Overall it looks like a challenging quarter” for Coinbase, said Owen Lau, an analyst at Oppenheimer & Co., who has a “market perform” rating on the company’s shares.
Coinbase is forecast to post a seventh consecutive quarterly loss when it releases results on Nov. 2, according to analysts surveyed by Bloomberg. A Coinbase spokesperson didn’t return a request for comment.
Even with the decline, Coinbase likely gained market share in the quarter while industry leader Binance came under increased regulatory scrutiny. Coinbase’s percentage of overall spot trading volume likely rose to 5.7%, compared with 4.2% a year earlier, according to CCData.
Mizuho Securities expects Coinbase’s trading volume to be below a consensus estimate of $86 billion, and revenue to be 10% below forecasts. The firm, which has an underperform rating on Coinbase, lowered it estimate for trading volume to $72 billion on Oct. 4, and doesn’t expect the current fourth-quarter to be much better, according to analyst Ryan Coyne.
Trading volume is waning against a backdrop of regulatory issues for Coinbase. The company has been accused by the US Securities and Exchange Commission of running an illegal exchange, among other allegations. Coinbase is fighting the charges in court.
Coinbase’s shares have more than double this year to around $80, after plunging 86% last year. The stock traded at more than $350 following its Nasdaq listing in early 2021.
Coinbase (COIN) Trading Volume is Likely Lowest Since Before Public Debut - Bloomberg (archive.ph) |
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