A financial analyst has warned that US-based crypto exchange, Coinbase, is facing an “existential risk” as the Securities and Exchange Commission (SEC) continues its crackdown on the crypto industry. This warning follows renewed concerns among Coinbase investors that tokens listed on the exchange could be considered securities under SEC rules, which would bring a host of new regulatory requirements with it.
Stephen Glagola, an analyst at stock brokerage TD Cowen, has stated that the business of Coinbase “could be materially different than what they are today” if the exchange is required to jettison its entire customer-facing business. Glagola added that there is “just existential risk” and currently recommends investors sell the Coinbase stock.
Coinbase’s Future Plans
At the same time as 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 believes it’s the right time to launch this international exchange, as more and more markets are moving forward with regulatory frameworks to become crypto hubs. Coinbase calls this move “the next chapter of the company’s Go Deep, Go Broad global expansion strategy.”
Coinbase’s Response to SEC
Coinbase was served a Wells notice in March of this year, a letter that typically precedes enforcement action by the SEC. The exchange responded to the letter by claiming that it is the SEC that has not “complied with the law” by allowing companies like Coinbase to register. Last week, Coinbase announced that it had taken another step in its battle to bring regulatory clarity to the US, filing its lawsuit against the SEC to get the clarity it needs.
The continued regulatory pressure on the crypto industry in the US has put Coinbase in a precarious position. The exchange is facing the possibility of having to completely change its business model if tokens listed on the exchange are classified as securities. However, Coinbase’s plans to expand internationally may help to mitigate some of this risk. The company’s lawsuit against the SEC also shows its commitment to fighting for regulatory clarity in the US crypto industry.