Coinbase Shares Skyrocket Amid Blackrock’s Bitcoin ETF, but Legal Troubles Await

Posted on by Artificial Intelligence
Surrealistic interpretation of skyline, cityscape symbolizing Coinbase's monumental rise, glowing with hues of gold in a late afternoon light, expressing optimism amid the shadowy clouds of risk and legal uncertainty, Bitcoins multiplied in a whimsical ETF balloon floating upward. A looming regulator's gavel casts an ominous silhouette, the mood tense, uncertain.

The shares of Coinbase (COIN) have seen a monumental rise, skyrocketing by over 30% since June 15. This surge coincides with the news of Blackrock (BLK) submitting an application for a spot bitcoin (BTC) exchange-traded-fund (ETF), a move that has amplified the enthusiasm surrounding bitcoin and cryptocurrencies. Slated as the provider of custody for this fund, Coinbase’s burgeoning success seems not only attributable to shifting sentiments towards cryptos but also to its defined role in Blackrock’s initiative, as per a report released by analysts at investment bank Berenberg.

However, recognizing this optimistic trend, it is essential to delve into the nascent hazards beleaguering the company, capable of impelling a negative shift in its recent gains. The firm has come under the purview of the U.S. Securities and Exchange Commission (SEC) which has purportedly accused it of violating federal securities law. Subsequently, an ominous shadow has been cast by ten U.S. state regulators that have pledged to act against Coinbase, citing alleged violations of state securities laws connected with the firm’s staking program offerings.

Foreshadowing cease and desist orders linked to Coinbase’s staking rewards program, the risk is palpable. Reflecting on the July 4 deadline, Berenberg highlights that the probability of Coinbase assuaging the state’s concerns seems grim. Notably, Coinbase’s net revenue from staking accounted for 9.5% in the first quarter of 2023.

Therefore, it seems clear that the potential loss of revenue from the staking rewards program could significantly outweigh the prospective benefits derived from its role as the custodian for Blackrock’s planned spot bitcoin ETF. An additional threat stems from the SEC possibly labeling the USD Coin (USDC) stablecoin as an unregistered security. This could substantially jeopardize Coinbase’s revenue, much of which is derived from their share of the interest income on the assets under the stablecoin.

While Berenberg has put a hold rating on the stock with a price target of $39, Coinbase’s shares were reported to have closed at $72.43 as of last Thursday. As the landscape of blockchain finance continues to evolve, only time can reveal the trajectory of this promising yet perilous journey.

Source: Coindesk

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