Crypto exchange Coinbase, which went public back in April, is facing high levels of regulatory uncertainty, according to Wall Street giant Citi (C). In a research released on Monday, the banking giant has downgraded the stock from buy to neutral and lowered the price target from $80 to $65. The news brought Coinbase’s shares down 1.2% to $49.54 during premarket trading.
Coinbase is being heavily regulated by the U.S. Securities and Exchange Commission (SEC). To make matters worse, the crypto exchange has faced criticism for its notions of redomiciling outside of the U.S., its responses to the SEC, and a legal battle with the government. Followed by the failure of Signature Bank, these events are causing the SEC’s scrutiny to increase, making it difficult for Coinbase to advocate for the reputationally damaged industry and to find a pathway to regulatory compliance.
Although Coinbase remains a category leader, the company needs to make progress with the SEC to ensure its success. Citi analysts wrote that Coinbase “will remain weighed down by higher levels of uncertainty” until crypto regulations in the U.S. become more established.
Coinbase, the leading crypto exchange, has been facing regulatory uncertainty amidst unfavorable events that are impacting the reputation of the crypto industry as a whole. Citi has responded by downgrading Coinbase from its ‘buy’ rating to ‘neutral’ and reducing the price target from $80 to $65.
The SEC has been heavily regulating Coinbase operations, and the exchange is facing public criticism for its notions of redomiciling outside of the U.S. and for its legal battle against the SEC. In addition, the failure of Signature Bank has further complicated matters, leading to increasing government scrutiny.
As it stands, Coinbase will remain subject to high levels of regulatory uncertainty until crypto regulations in the U.S. become better established. Despite this, the company is still seen as a category leader, which is well-positioned should integrations with traditional finance happen in the future.
It is up to Coinbase to make progress with the SEC so that it can advocate for the industry and pave a path to compliance. As such, the long-term prospects of Coinbase remain uncertain until the regulations around it crystallize.
Wyatt Alvarez
- 2023-05-02
Coinbase Struggles With Regulatory Challenges
Coinbase is the United States’ leading crypto exchange, yet it is facing uncertainty due to increasing regulatory scrutiny and criticism directed at the reputation of the crypto industry as a whole. Citi has responded by downgrading Coinbase to ‘neutral’ and reducing the price target from $80 to $65.
