Berenberg Analysts Express Concerns Over Coinbase’s Regulatory Challenges
Financial analysts at Berenberg believe that recent reports of Hamas using cryptocurrency for donations pose a significant obstacle to positive crypto regulations worldwide. In a research document, lead analyst Mark Palmer stated that the firm’s cautious stance towards Coinbase is not due to its operational performance but rather the legal hurdles imposed by regulatory bodies such as the SEC.
“The primary driver of our cautious stance toward Coinbase Global is not our concern about the company’s operating performance during the next couple of quarters, but rather on the threats to its business from the various regulatory actions and litigation that it faces in the U.S.”
Despite these challenges, Coinbase remains committed to advocating for regulatory clarity in the market and plans to influence Congress through lobby campaigns. However, recent incidents involving Hamas could hinder these efforts by providing anti-crypto lawmakers with ammunition to delay or impose stricter regulations.
Hamas Crypto Funding Raises Concerns
Reports have emerged regarding Hamas receiving funding through cryptocurrencies, leading to increased scrutiny and seizures. Israeli authorities recently seized cryptocurrency linked to Hamas donations, stating that the organization initiated a fundraising campaign urging the public to deposit cryptocurrencies into their accounts. The police and defense ministry worked with Binance to divert these assets into state control. Additionally, Tether froze 32 wallets believed to be linked to funding wars in Ukraine and Israel.
Berenberg analysts commented that while Hamas had previously announced it would no longer use crypto for fundraising due to traceability concerns, these recent headlines make it even more difficult to determine the legal status of cryptocurrencies.
Operational Challenges for Coinbase
The research paper also highlighted declining trading volumes for Coinbase as the wider crypto market experiences a downturn. In its Q3 2022 financials, Coinbase reported a 52% drop in trading volumes and a 17% decline from the previous quarter, marking its lowest growth point since going public. Various factors contribute to these plunging figures, including regulatory lawsuits, decreasing trader confidence, and macroeconomic conditions.
Berenberg analysts expressed concerns about Coinbase’s consumer take rate, as competition for market share within a lower volume crypto space could compress its profitability.
Hot Take: Regulatory Challenges Pose Risks for Coinbase
The recent reports of Hamas using cryptocurrency for donations have raised concerns among financial analysts at Berenberg. They caution that these incidents could hinder Coinbase’s lobbying efforts for regulatory clarity, as anti-crypto lawmakers may seize the opportunity to delay or impose stricter regulations on the industry. In addition to the legal hurdles faced by Coinbase, the exchange is also experiencing operational challenges with declining trading volumes. These factors pose risks to Coinbase’s future success and highlight the need for clearer regulations in the crypto market.
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