Is Coinbase Going Bankrupt? | Cryptoglobe
Rumors of Coinbase’s bankruptcy persist, even after the company denied those claims and actively expanded its business overseas.
In July 2022, Coinbase suspended its affiliate program. A month before the shutdown of Coinbase Pro, its advanced trading arm of Coinbase, it announced a similar feature called Advanced Trade. These two announcements, along with the merger of its USD order books with USDC, sparked a whirlwind of rumors about Coinbase’s insolvency.
Additionally, Coinbase’s financial performance in 2022 was a blow to the crypto exchange after a supercharged bull run in 2021 for most of the cryptocurrency market. In its second quarter earnings report, the company described critical losses worth approximately $1.1 billion, a decline of nearly 60% in revenue, primarily due to macroeconomic factors and systemic factors in the cryptocurrency industry, which have led to lower trading volumes on Coinbase.
The crypto community appeared divided; on one side of the spectrum were users claiming Coinbase was on the brink of bankruptcy – claims that Coinbase has repeatedly denied – and on the other side claiming it was just FUD. Rumors and controversy erupted following the collapse of crypto companies like Celsius, Voyager, and Three Arrows Capitals, all of which had direct exposure to Terraform Labs and the failure of UST/LUNA.
“We prioritize risk management,” the company said in its second-quarter shareholder letter, noting that it had never done business with the companies mentioned above. Instead, in its second-quarter earnings report, Coinbase said it invested heavily in developing products with high-quality features and proper risk management for retail users and institutional customers.
‘No risk of bankruptcy,’ says Brian Armstrong
Brian Armstrong said the company was at no risk of bankruptcy, but was working to provide retail users with the same legal protection as Prime and Custody customers in the event of a black swan event.
This comes after Coinbase’s Form 10-Q was submitted to the SEC, which essentially indicates that retailers’ funds are at risk in the event of bankruptcy. The SEC’s SAB 121 would require disclosure for public companies that manage cryptocurrencies for third parties.
What’s next for Coinbase?
Coinbase is currently facing pressure from the SEC. The regulator has sent the exchange multiple subpoenas and requests for documents and all relevant information about its staking program, yield-generating products, and token listing process. The SEC previously confronted the exchange, stating that 9/10 of its cryptocurrency is securities, a claim it has repeatedly denied.
Pressure from US regulators led Coinbase to fight back and support digital asset manager Grayscale in its legal battle with the SEC. The latter is suing the SEC for rejecting a Bitcoin ETF, saying the SEC “fails to apply consistent treatment to similar investment vehicles.”
Besides the political heat in the US, Coinbase has been focused on launching new products and services in the US and abroad, such as a crypto dashboard that lets Coinbase users know the positions of politicians. Americans on cryptocurrencies based on where they live.
Coinbase also recently partnered with Google to allow users to pay for cloud services with cryptocurrency. The two companies said the collaboration will help spread Web3 technology from 2023.
Coinbase generates the majority of its revenue from trading fees on its platform, but is expected to earn a portion of cryptocurrency payments made for Google’s cloud services. The exchange will move its data-linked applications to Google from Amazon Web Services.
The tech giant is also reportedly exploring how it can use Coinbase Prime, a service that securely stores organizations’ cryptocurrencies and allows them to execute transactions. By Zavery, Google will experiment and “see how can we participate” in the management of cryptocurrencies.
Coinbase is also expanding its service to retail investors in Australia, making it easier to buy, sell and trade cryptocurrencies.
The firm will introduce PayID as a form to deposit directly from their bank accounts. This allows deposits and withdrawals in AUD and access to over 200 crypto assets. Additionally, the company said that it will offer its Advanced Trading interface to professional traders.
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