Coinbase (COIN) shares have been under significant selling pressure due to the regulatory crackdowns by the U.S. Securities and Exchange Commission (SEC). The ongoing discussions between Coinbase CEO Brian Armstrong and the SEC have added to the uncertainty surrounding the company. The lack of clear regulatory clarity has led to Armstrong considering leaving the U.S.
Despite an impressive rally earlier in the year, with COIN shares surging over 100% from an all-time low of $33 to $84, the stock continues to face pressure from a range of factors, including downgrades, quarterly losses, and regulatory scrutiny. In the last month alone, COIN stock has fallen by over 15%, including a 4.19% decline on Wednesday, closing at $64.44.
Coinbase’s offshore expansion plan spurs investor concerns
Coinbase’s offshore expansion plan to Bermuda and Abu Dhabi has only added to investors’ fears, with analysts downgrading COIN stock due to a decline in trading volumes despite the recovery in Bitcoin price and increasing operating expenses. The crypto exchange relied on layoffs to decrease its operating expenses, and traders anticipate further downfall in the stock price amid current market conditions.
Investors were also disappointed after Coinbase announced that it had received a license in Bermuda. While the tax havens offered by Bermuda will increase profits, moving out of the U.S. will be difficult for the firm. Coinbase Bermuda Ltd obtained a Class F License under the Digital Asset Business Act from the Bermuda Monetary Authority (BMA). The company also seeks a license from the Financial Services Regulatory Authority (FSRA) in Abu Dhabi Global Market (ADGM) as part of its global expansion plan.
Coinbase’s regulatory issues spark questions about its public listing
Investors question why Coinbase was approved to go public in the U.S. if the SEC believes the exchange is operating illegally. The SEC believes all crypto are securities, adding to the uncertainty surrounding Coinbase’s regulatory issues. Coinbase is actively expanding in Europe ahead of the passing of MiCA regulation by the European Parliament. The company’s regulatory issues have become a point of concern for investors, with some questioning the sustainability of its business model.
The current regulatory issues faced by Coinbase have sparked concerns among investors about the long-term sustainability of the company’s business model. The uncertainty surrounding the regulatory landscape for cryptocurrencies has made it challenging for Coinbase to operate with clarity and confidence, leading to fears of further declines in its stock price.
However, company is actively pursuing expansion plans in Europe, with its move to Bermuda and Abu Dhabi aimed at offering tax havens and increasing its profits. The company’s efforts to secure licenses in these jurisdictions suggest it is committed to complying with regulations and operating legally.
Furthermore, Coinbase’s plans to expand its operations in Europe ahead of the MiCA regulation’s passing by the European Parliament demonstrate its proactive approach to regulatory compliance. The company is positioning itself to be able to operate legally in various jurisdictions, which should help to restore confidence in the company among investors.
Conclusion
While the current regulatory issues faced by Coinbase have put significant pressure on the company’s stock price, its proactive efforts to expand its operations globally and comply with upcoming regulations may help to restore investor confidence in the company in the long term. However, the uncertainty surrounding the regulatory landscape for cryptocurrencies remains a point of concern for investors and may continue to impact Coinbase’s stock price in the short term.
