Coinbase’s earnings report comes with a dose of crypto-anarchism

It is a showdown between America’s largest crypto exchange and its main regulator, the Securities and Exchange Commission (SEC).

Driving the news: Coinbase Global’s earnings report on Tuesday night delivered what was largely expected — revenue eroded by crypto winters and net profit losses. The surprise was buried in the stock exchange’s annual archive, and it signals that it is digging in for a fight.

• “We may decide not to remove a particular crypto-asset from the Coinbase Spot Market even if the SEC or another regulator asserts that the crypto-asset is a value,” reads a newly added risk disclosure section.

Status: There is a regulatory crackdown in the US, and Wells warnings and lawsuits against major crypto firms have put a big question mark over Coinbase’s similar offerings, namely staking and stablecoins.

• The exchange has already said it has received investigative subpoenas and requests from the SEC regarding its “asset listing processes, the classification of certain listed assets, staking programs and its stablecoin and return-generating products.”

Zoom in: Coinbase on Tuesday said it will not remove anything “pending a final legal decision on the correct characterization of the crypto-asset.”

What they say: “I’m spending more time in DC,” Coinbase CEO Brian Armstrong said during a conference call Tuesday, where he was peppered with questions about trying new jurisdictions, such as China, or taking the business offshore.

The big picture: The regulatory uncertainty is somewhat existential for Coinbase, which has been leaning into its betting business and, more recently, its burgeoning partnership with stablecoin issuer Circle as customers trade less on the platform.

• The effort should help offset lost transaction revenue, which fell to $2.4 billion last year from $6.8 billion at the end of 2021.
• Interest income from Circle’s USDC broke in $327 million last year, compared to $25.8 million the year before.

Catch up quickly: When the SEC issued a Wells notice to Coinbase in 2021 about the intended launch of a lending product, the crypto exchange shut it down.

• Earlier this year, the company settled with the New York Department of Financial Services regarding compliance deficiencies.
• Of the note: Coinbase currently lists six of the nine crypto tokens that the SEC claimed were securities last year – AMP, RLY, DDX, XYO, LCX, POWR.

Bottom line: “Our goal is to list *all* assets where it is legal to do so,” Armstrong said in a June 2021 Twitter thread.

Our thought bubble: It is an impossible goal if every asset is considered a security.

Editor’s note: This article was corrected to reflect that Coinbase currently lists six of the nine crypto tokens that the SEC alleged were securities last year, not seven.