Coinbase news: Authorities in four states have ordered Coinbase Global to suspend any further expansion of its interest-bearing service for regular investors, posing a potential risk following months of regulatory pressure on the crypto broker.
The Securities and Exchange Commission and ten states sued Coinbase (COIN) in June for marketing unregistered securities through a staking program that allows clients to earn interest on crypto tokens. The current move by four states, which restricts revenue growth in a critical region for the firm, adds to the regulatory pressure that has lingered over Coinbase for much of this year.
Coinbase stated in a blog post published late Friday that California, New Jersey, South Carolina, and Wisconsin have ordered Coinbase to ban retail customers from staking further assets while their actions are ongoing. The firm has been in active discussions with governmental agencies for several weeks, and “the vast majority” of consumers are not harmed and may continue to stake cryptocurrency.
“We were disappointed to see some state regulators take this path, as we have offered our staking services transparently, safely, and reliably for nearly four years,” Coinbase said in its blog post. “Coinbase will vigorously defend our staking services in all ten states in those proceedings.” The broker had stated that it would continue operating and defend itself in court against the SEC claims.
According to Mark Palmer, an analyst at Berenberg, this is just another indication of the regulatory risk that still exists for Coinbase stock and current Coinbase news, both of which have risen this year. Palmer rated the stock as Hold, with a price objective of $39 set.
Coinbase stock began at $104.57 on Monday, up 1% in morning trade to increase its one-month gain to over 90% as investors remained undeterred by the four state rulings. Despite regulatory scrutiny, the stock has risen alongside crypto values, owing to anticipation about new uses for Bitcoin exchange-traded funds with Coinbase as custodian.
The stock rose last week when a federal court granted Ripple a partial victory in a battle against the SEC, declaring that its XRP coin did not, in and of itself, fit the definition of a security. The decision delivers rare government clarification on whether a digital asset is a security, with ramifications for how tokens — and organizations that issue or facilitate trade in them, such as Coinbase — should be regulated. The Ripple lawsuit might set precedents for Coinbase’s struggle with the SEC.
Nonetheless, the rulings from California and the other states “served as a reminder to investors who may have viewed Coinbase’s risk profile as significantly improved after last week’s court ruling on Ripple,” Palmer said in a note on Friday. “The company’s challenges on the U.S. regulatory front remain significant while appearing far from resolved.”
The Coinbase news is especially alarming because the staking business, Coinbase Earn, is seen as a promising area for development by experts. As trading volumes on exchanges have decreased, the broker’s main crypto trading business has suffered.
“We believe Coinbase Earn…appears particularly vulnerable to being defined as a security within the context of the [Ripple case] judge’s ruling,” Palmer said.