The Securities and Exchange Commission (SEC) could take enforcement action against Coinbase. This is similar to its actions against Bittrex and Kraken, according to a research report by Berenberg.

The report comes in response to Coinbase’s legal manoeuvre to compel the SEC to establish cryptocurrency issuance and trading rules.

Coinbase to pivot away from the U.S. would be challenging

Berenberg highlighted that Coinbase’s reported revenue for the first quarter accounted for approximately 37% of the total. It amounts to $736 million, coming from transaction fees, spreads, staking services, interest income related to USD Coin, and custody fees.

Additionally, the report cautioned investors about the potential impact of the SEC’s scrutiny on revenue streams related to crypto tokens. It highlighted the SEC’s view that most crypto tokens, excluding Bitcoin, are considered unregistered securities. It makes trading platforms vulnerable to enforcement actions.

Berenberg’s senior equity research analyst, Malk Palmer, emphasised that Coinbase’s ability to pivot away from the U.S. would be challenging. Further, around 86% of its revenue over the past year was generated from its U.S. operations.

Cryptocurrencies bought and sold on Coinbase exchange

The SEC responded strongly to Coinbase’s request for clarity on crypto rulemaking. Moreover, it firmly stated that Coinbase’s desire for expedited regulatory action did not entitle it to exceptional relief from the court.

In turn, Coinbase’s Chief Legal Officer, Paul Grewal, expressed the company’s concern about the lack of jurisdictional clarity and changing positions of the SEC.

Seeking legal clarity for projects in the U.S challenging due to the SEC’s approach

Legal experts noted that the SEC intends to delay making a decision on Coinbase’s petition. It will continue suing crypto companies without establishing new rules. Some industry professionals warned that seeking legal clarity for projects in the U.S might be challenging due to the SEC’s approach.

Additionally, the SEC’s response has raised concerns within the crypto industry. In addition, it indicates the lack of a clear and reasonable legal framework.

This uncertainty may impact the SEC’s position in court cases if there are no explicit rules to base judgments upon. Moreover, the delay tactic employed by the SEC could potentially have consequences in the future. However, it may take a considerable amount of time to materialise.

These developments highlight the challenges faced by Coinbase and the broader crypto industry in navigating regulatory uncertainties and seeking clarity in the U.S. market.

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Tanishi is an established writer in the realm of cryptocurrency and blockchain, renowned for her expertise and insightful analysis. With a deep-rooted passion for the dynamic world of digital finance, Tanishi delivers compelling news and articles that captivate a wide-ranging audience.