Crypto exchange Coinbase’s stock price seems to be under constant pressure as the regulatory roadmap in the United States remains uncertain. Notably, investment analysts from Citi have downgraded shares of Coinbase from “Buy” to “Neutral” and reduced their price target, reportedly due to “too many unknowns” given the exchange’s ongoing struggles with regulators.
Earlier in March, Coinbase revealed that it had received a Wells notice from the Securities and Exchange Commission (SEC), indicating possible violations of securities laws and potential enforcement action in the future. In response, Coinbase took legal action against the SEC in April, seeking clarity on the regulatory treatment of specific digital assets. Coinbase CEO Brian Armstrong and Chief Legal Officer Paul Grewal publicly addressed the Wells notice issue later that month on YouTube.
Citi analyst Peter Christiansen highlighted the importance of resolving Coinbase’s regulatory predicament, as it is central to both long and short debates. He stated that regulatory clarity could emerge through several means, such as an extended legal process against the SEC, legislative movement amid a difficult legislative calendar and an impending election year, or even Ripple’s ongoing legal process which may set a precedent for the industry.
However, recent developments at the SEC do not imply that a resolution between the parties is near. As a result, Coinbase’s stock price is expected to remain weighed down until regulators formulate and establish the legal “rules of the road.”
At the time of writing, Coinbase’s stock was trading at $51.32, down 58.5% over the past year. The stock price sunk approximately 16% on March 22, following the disclosure of the Wells notice. Additionally, the company is facing two proposed class action lawsuits – one accusing Coinbase of breaching privacy laws in Illinois by collecting customer biometrics, and another alleging certain executives capitalized on insider information.
In conclusion, the future of Coinbase’s stock price depends on how the regulatory landscape evolves in the United States. While the ongoing debate between Coinbase and regulators may make investors wary, establishing clear legal guidelines has the potential to benefit not only Coinbase, but also the broader crypto industry.