Berenberg Analyst Predicts SEC Enforcement Action Against Coinbase

The cryptocurrency industry has been buzzing with speculation after Berenberg analyst Mark Palmer released a research report on Monday, suggesting that Coinbase (COIN) could soon face enforcement action from the Securities and Exchange Commission (SEC). Palmer anticipates that the SEC will sue Coinbase for its trading and staking services related to tokens other than bitcoin (BTC), as well as for earning interest on USD Coin (USDC).

SEC’s Potential Lawsuit and Revenue Streams

Palmer estimates that a significant portion of Coinbase’s first-quarter net revenue, approximately 37%, is derived from these activities. Considering this, he believes the SEC is likely to target these revenue streams in its enforcement action. Furthermore, Palmer suggests that Coinbase’s other revenue streams, including custody and interest income from other cryptocurrencies, may also be ensnared in the SEC’s forthcoming crypto-industry dragnet.

Coinbase has refrained from commenting on Berenberg’s report, leaving the industry and investors eagerly awaiting an official response.

The SEC’s Recent Crackdown on the Crypto Industry

The SEC’s regulatory efforts within the cryptocurrency space have intensified in recent months. In December 2022, the regulatory body charged both Bittrex and Kraken with operating unregistered exchanges. Additionally, Bittrex faced charges for failing to register as a securities broker-dealer.

Despite the absence of any charges against Coinbase thus far, Palmer suggests that it is only a matter of time before the SEC takes action against the cryptocurrency giant.

Potential Impact on Coinbase’s Business

If the SEC does file charges against Coinbase, the repercussions for the company could be significant. Coinbase may be compelled to pay substantial fines, and there is a possibility that it could be restricted from offering certain services. Moreover, the SEC’s enforcement action could tarnish Coinbase’s reputation, making it more challenging for the platform to attract new customers.

Uncertain Future for Coinbase

While it remains uncertain whether the SEC will proceed with charges against Coinbase, Palmer’s report underscores the potential risks and vulnerabilities the company faces in terms of regulatory compliance. The crypto community and investors are keenly observing how the situation unfolds, with Coinbase’s future hanging in the balance.


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