Investing.com - Coinbase Global Inc (NASDAQ:COIN), the leading US digital asset trading platform, has reported a reduced first-quarter loss of $79 million, compared to a staggering $429.7 million in the same period last year. Although revenue fell by around 37% to $736 million, it still exceeded Bloomberg's average estimate of $654 million as cryptocurrency prices began bouncing back.
However, despite these improvements and Coinbase Global becoming the first US crypto exchange to go public on Nasdaq – a move that signaled cryptocurrencies were entering mainstream finance with regulatory approval – potential issues remain for the company regarding Securities and Exchange Commission (SEC) regulations.
When going public, Coinbase warned investors about one major risk factor: The SEC might classify some tokens traded on its platform as securities akin to stocks or bonds. This would bring additional regulations and requirements for the company.
Now two years later, this scenario seems increasingly likely as the SEC tightens its grip on an industry plagued by scandals and bankruptcies. As such, legal battles loom over enforcement measures that could significantly alter both Coinbase and other companies operating within ambiguous legal boundaries.
TD Cowen analyst Stephen Glagola believes that "the business could be materially different than what they are today." He also highlights potential consequences like forcing "Coinbase to jettison its entire customer-facing business," emphasizing an underlying "existential risk" for the company due to impending regulation changes from authorities like the SEC.