The SEC will soon bring enforcement action against Coinbase similar to Bittrex and Kraken, Berenberg says
The Securities and Exchange Commission (SEC) will soon bring an enforcement action against Coinbase (COIN) and this action is likely to mirror those that the regulator brought against rival crypto exchanges Bittrex and Kraken, CoinDesk reported, citing a Monday research report from Berenberg.
According to Berenberg, the crypto exchange would face significant challenges in successfully transitioning away from the United States, as about 86% of the net revenue that Coinbase generated in the 12 months ended March 31 came from its U.S. operations, CoinDesk wrote.
The report comes a month after Coinbase CEO Brian Armstrong says threatened to move out of the US market if no regulatory clarity emerges from the SEC. In an interview with CNBC, Armstrong said the company is preparing for a years-long court battle with the SEC after the regulator warned the crypto exchange of potential violations of securities law.
Last week, Bittrex filed for bankruptcy protection following allegations from the SEC that the Seattle-based crypto exchange operated an unregistered securities exchange. The news makes Bittrex the second exchange to shut down this week. The same week, the SEC also shut down the Beaxy crypto exchange and also sued its founder for SEC violations.
Berenberg estimated in its report that a substantial portion of Coinbase’s first quarter net revenue, around 37% of $736 million, came from transaction fees and spreads generated by trading cryptocurrencies other than bitcoin (BTC), as well as fees from its staking services.
Meanwhile, earlier this month, Wall Street giant Citi downgraded its rating on Coinbase from “buy” to “neutral” and significantly reduced its price target for the crypto exchange from $80 to $65. Citi’s decision was primarily influenced by regulatory uncertainty in the industry.
The exchange has been in a legal tussle with the U.S. Securities and Exchange Commission (SEC) since last year. But after months of silence from the federal regulator, Coinbase decided to take legal action against the agency.
In late April, Coinbase filed a lawsuit against the SEC and asked a federal judge to force the SEC to share its answer on the company’s July 2022 petition on “whether existing securities rule-making processes could be extended to the crypto industry,” CNBC reported.
Cooinbase was founded in 2012 by Brian Armstrong and Fred Ehrsam. The San Francisco, California-based Coinbase is a digital currency wallet and platform where merchants and consumers can transact with new digital currencies like Bitcoin, Ethereum, and Litecoin.