Coinbase just can’t seem to get any luck.
When founder and CEO Brian Armstrong gave 2% of the company’s stock in October, I conducted a thorough analysis of the struggling cryptocurrency exchange. But since then, things have only gotten worse.
Six months after cutting 18% of its workforce, it cut 20% of its workforce in January (I analyzed what this meant for the corporation right here). In January, it also stopped operating in Japan, citing “market circumstances.”
Despite this, the inventory had been increasing in 2023 as the IT industry benefited greatly from a weaker prediction of the longer-term trend of interest rates. The SEC then entered to wrap up this week’s festivities.
The SEC claims that Coinbase is breaking securities laws.
The SEC sent Coinbase a Wells find, alerting it to the possibility that it was breaking US securities law. The following two days saw a 24% decline in the share price.
According to a regulatory filing by Coinbase, “primarily based on discussions with the Employees, the Firm believes these potential enforcement actions would relate to aspects of the Firm’s spot market, staking service Coinbase Earn, Coinbase Prime, and Coinbase Pockets.” The potential civil motion might examine civil penalties, disgorgement, and injunctive reduction.
The market is currently awaiting the precise costs since, as Armstrong noted in his tweet above, a Wells discovery occasionally comes before legal action.
Paul Grewal, the chief legal officer of Coinbase, also weighed in, saying that the company was secure despite the charges.
The post read, “Though we don’t take this expansion lightly, we’re quite confident in the way we conduct our business – the same business we submitted to the SEC to ensure that we become a public company in 2021.
The regulatory environment for cryptocurrencies keeps getting worse
Despite Coinbase’s apparent defiance, this is only the latest move by US regulators to crack down on cryptocurrencies. At least publicly.
A high 10 cryptocurrency, the Binance-branded stablecoin BUSD, was abruptly shut down in recent months. Main trading Kraken received praise for its disclosures about its staking issue, and now Coinbase is the target of a Wells Research investigation.
The banking turmoil is another factor. The closure of SVB, Silvergate, and Signature means the first cryptocurrency banks have vanished into thin air, while not being related to cryptocurrencies. That denies the industry a sizable fiat on-ramp and is unquestionably a hindrance moving forward.
Whether or not you think any of the aforementioned statements are unfair, the fact remains that the USA, where Coinbase is based, is a far more hostile environment for the cryptocurrency industry than it was a few months ago.
What happens after that?
Knowing what will happen in the future is difficult. However, it appears that officials are determined to control cryptocurrency following the slew of scandals that rocked the market (and cost investors billions of dollars) last year, including LUNA, Celsius, and most recently FTX.
Before this most recent transaction, the value of the Coinbase share had been benefiting from a recovery in the price of Bitcoin, which is currently trading at $28,000, roughly doubling what it was in the days following the FTX collapse in November.
That comes after the broader tech upswing because the market believes that the Federal Reserve has effectively stopped raising interest rates and tightening financial regulation during the past year.
Finally, because it always is, the fate of Coinbase will depend on these macro circumstances in addition to the price of Bitcoin. However, it will also depend on regulators reversing their recent punitive posture, which currently doesn’t appear to be doable.
