As if Coinbase’s (NASDAQ:COIN) shares weren’t already in a bind, today’s report highlights how vulnerable the business is to regulatory action. One of the biggest cryptocurrency exchanges in the world, Coinbase, is poised to take dramatic action if authorities try to undercut its core use cases. This week, CEO Brian Armstrong made remarks outlining exactly what would happen if the firm is threatened by the government.
In the cryptocurrency sector, Coinbase is a dominant force. It’s a household name at this time; almost everyone who has even a basic grasp of crypto is aware of it. Even among stock investors who are uninterested in cryptocurrencies, COIN is still the only exchange stock that is openly traded. Many cryptocurrency investors, both experienced and novice, use Coinbase to execute transactions. Coinbase is still seeing $1.4 billion in assets exchanged on its floor today, despite the bear market’s potential to continue.
However, Coinbase is a top target as the US government begins to exercise its power against this mostly unregulated sector. The corporation has experienced a spate of terrible news during the last several months. First off, the market collapse resulted in some subpar results. The company’s $1.1 billion second-quarter net loss was highlighted by a significant layoff; Coinbase reduced 18% of its personnel. Losses in earnings per share (EPS) were also far worse than anticipated, ending in at $4.98 vs estimates of $2.65.
Naturally, Coinbase isn’t the only company suffering from these profits; businesses all throughout the cryptocurrency ecosystem are as well. However, the many investigations by the U.S. Securities & Exchange Commission are not being felt by them (SEC). Whether Coinbase performed nine distinct unregistered securities offers is the subject of the first inquiry. The second, more recent investigation examines the business’s staking system.
In response to regulatory scrutiny, Coinbase threatens to ban staking.
Brian Armstrong, CEO of Coinbase, is expressing his feelings to the business community while the SEC investigates Coinbase. Recently, the CEO made some remarks on certain other recent actions taken by the US government. According to Armstrong, he would rather stop certain goods than restrict consumers’ liberties.
The U.S. Treasury’s move to penalize cryptocurrency mixing provider Tornado Cash is a significant piece of recent news making the rounds in the crypto community. In addition, a project developer was detained in the Netherlands. The Treasury claims that the main reason for this punishment is the fact that Tornado Cash made it possible to launder money. Authorities find it far more difficult to follow the transfer of digital assets when cryptocurrency is mixed from a variety of sources and redistributed.
Armstrong is plainly tired of the investigations into his own business. Additionally, he views the most recent penalties as a blatant instance of government suppression. Some have already started to point out that Treasury rules created by the sanctions would significantly impede the validation process on the upgraded network as the Ethereum (ETH-USD) Merge upgrade draws near.
The CEO is now commenting on the prospect that authorities may order Coinbase to forego validating transactions with Tornado Cash. If it comes to it, Armstrong said he will shut down Coinbase’s Ethereum staking service rather than submit to authorities.
This is a significant assertion. Coinbase has received a significant upgrade by JPMorgan, as Decrypt notes. But a lot of the argument for the upgrading depends on the Merge earning a lot of money through staking. Consequently, although investors applaud Armstrong’s remarks, the declaration also offers a significant potential harm to Coinbase’s financial sheet at a time when things are already challenging.