Coinbase, Also Facing Charges, Could See Revenue Hit

Coinbase, Also Facing Charges, Could See Revenue Hit

Coinbase Global has been charged with securities violations by the Securities and Exchange Commission, which could make the U.S. crypto exchange vulnerable to a revenue hit of more than 30%. The SEC accusations challenge core elements of its business, analysts said.

• Shares of Coinbase sank 12% in Tuesday trading after shedding 9% on Monday, when the SEC sued crypto exchange rival Binance and its founder—also for securities violations. Coinbase had received a warning in March that charges could be coming.
• The SEC said Coinbase had unlawfully acted as an exchange, broker, and clearing agency of crypto-asset securities, and that its interest-bearing “staking-as-a-service” program represented the sale of unregistered securities. Coinbase didn’t respond to a Barron’s request for comment.
• The company depends on token trading and staking as sources of revenue and future growth, and the SEC charges represent an existential threat to its revenue, analysts said. Berenberg analyst Mark Palmer figures 37% of Coinbase’s revenue is at risk if the SEC goes after token trading and staking.
• Crypto-related stocks were holding up. Robinhood Markets rose 1%, Block rose 3.8%, and PayPal 0.8%. Bitcoin rallied 5.5%, to $27,158, while Ethereum rose 4%. Robinhood had $38 million in crypto-related transaction revenue in the first quarter, less than 10% of its total net revenue.

What’s Next: Sotheby’s is selling 37 works of digital art once owned by the defunct Singapore cryptocurrency hedge fund Three Arrows Capital in a live auction next week in New York. The collection, entitled “Grails,” is expected to bring in $5 million.

—Jack Denton and Liz Moyer