|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
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
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
By Olga Kharif
- Transaction revenue accounts for about half of total revenue
- Quarterly spot trading volume fell to $76 billion, CCData says
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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|To: Glenn Petersen who wrote (86)
|1/10/2024 5:27:42 PM
|Regulators Approve New Type of Bitcoin Fund, in Boon for Crypto Industry
The Securities and Exchange Commission authorized financial firms to offer a Bitcoin investment product that some hope will accelerate adoption of the technology.
Federal regulators on Wednesday approved a new financial product that tracks the price of Bitcoin, a landmark moment for the cryptocurrency industry that proponents hope will increase investment in the technology.
The Securities and Exchange Commission authorized 11 applications by financial firms to offer what are known as exchange-traded funds tied to Bitcoin, a potentially simpler way for people to invest in digital assets on traditional platforms like the Nasdaq. Some of the largest financial companies in the world, including the asset managers BlackRock and Fidelity, were approved to offer the products, known as E.T.F.s, which could begin trading as soon as Thursday.
The approval was hailed as a sign that mainstream financial institutions remain willing to use digital currencies even after 18 months of market crashes and high-profile bankruptcies. Since the fall, Bitcoin’s price has surged more than 60 percent, as traders bet that the S.E.C.’s backing of the new crypto products would give the industry an imprimatur of regulatory legitimacy, drawing fresh investment from professional wealth managers and amateur traders.
The price of Bitcoin shot up on Tuesday after a post appeared on the S.E.C.’s official X account announcing the approval of the E.T.F.s, but dropped swiftly when Gary Gensler, the S.E.C. chair, said the agency’s account had been hacked.
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