Coinbase’s Existential Risk: SEC Tightens Crypto Regulations

Overview

• US-based crypto exchange Coinbase is facing an “existential risk” as the Securities and Exchange Commission (SEC) continues its crackdown on the crypto industry.
• Concerns among Coinbase investors that tokens listed on the exchange could be considered securities under SEC rules, a change in classification that would bring a host of new regulatory requirements with it.
• At the same time, Coinbase has announced ambitious plans to expand internationally with an international derivatives exchange registered in Bermuda.

Coinbase Under Scrutiny from SEC

The US-based crypto exchange Coinbase is facing an “existential risk” as the Securities and Exchange Commission (SEC) continues its crackdown on the crypto industry, a financial analyst has warned. The warning from the analyst followed renewed concerns among Coinbase investors that tokens listed on the exchange could be considered securities under SEC rules, a change in classification that would bring a host of new regulatory requirements with it, Bloomberg reported on Thursday.

Stephen Glagola, an analyst at stock brokerage TD Cowen was cited by Bloomberg as saying “the business could be materially different than what they are today” and that there is “just existential risk” for Coinbase if such changes were to be enforced. Coinbase trades on the Nasdaq exchange under ticker COIN and ended Thursday’s trading session higher after seeing heavy selling earlier in the week – but still remains up by about 46% year-to-date.

International Expansion Plans

At the same time as the regulatory pressure is heating up at home, Coinbase has announced ambitious plans to expand internationally, starting with an international derivatives exchange registered in Bermuda. The company stated “as more and more markets are moving forward with regulatory frameworks to become crypto hubs, we believe now is right time to launch this international exchange” – signaling their Go Deep, Go Broad global expansion strategy into motion.

SEC Wells Notice

In March 2021 however, Coinbase received a Wells notice from SEC – typically preceding enforcement action – sparking speculation regarding their future business operations should they fail to comply with regulations set forth by authorities.. In response to this letter issued by SEC, Coinbase claimed it was actually SEC who had not “complied with law” by allowing companies like them register; this point of view led them to take yet another step towards resolution of this issue through filing lawsuit against SEC itself last week for necessary clarity needed for their businesses operations going forward.

Conclusion

Coinbase faces potential risks due to increased scrutiny from US regulator Securities & Exchange Commission (SEC). If tokens listed on their platform were classified as securities under SEC rules then entire customer-facing business may need to be jettisoned according to one analyst which would result in material changes for company’s business operations altogether. At same time though company has announced plans for international expansion including launching derivatives exchanges outside US thus giving access more customers worldwide while simultaneously attempting litigation against SEC itself for necessary clarity going forward over businesses operations within borders US itself.