Goldman On Coinbase: Investors Likely Concerned Over Potential for Elevated Compliance Costs
2022.07.28 03:58
Goldman On Coinbase: Investors Likely Concerned Over Potential for Elevated Compliance Costs
By Sam Boughedda
In a note to investors Wednesday, a Goldman Sachs analyst provided commentary on Coinbase (NASDAQ:COIN) and the recent regulatory action in the cryptocurrency industry.
The note follows news the SEC and DOJ brought crypto-related insider trading charges against multiple people, including a former COIN product manager, who regulators believe passed along information about which crypto assets were going to be listed on the exchange.
While Coinbase has not been charged, reports indicate that the SEC is investigating the crypto exchange for listing unregistered securities on its platform.
The analyst, who has a $45 price target on Coinbase, explained that the nine coins mentioned in the insider trading case represent less than $1 billion in market cap, or under 1% of the overall crypto markets cap.
“While the trading in these securities is likely not material, the results of the insider trading cases could set a precedent over which cryptocurrencies are deemed securities, and thus whether or not COIN and other digital asset exchanges should obtain necessary regulatory licenses,” said the analyst. “We would note that the public statements of SEC Chair Gensler have argued that most, if not all, cryptocurrencies other than Bitcoin are in fact, unregistered securities, and also that there is a significant amount of noncompliance at digital asset exchanges for failing to register with the SEC.”
The analyst continued that this is not the first time Coinbase has faced regulatory pushback on the issue of unregistered securities, but the latest charge would represent furtherance of this issue.
“The outcomes of the insider trading cases could have broad implications for the regulatory treatment of crypto. However, given the amount of uncertainty and general lack of agreement even among various regulatory bodies, we believe it is difficult to draw definitive conclusions,” he added.
“In terms of a reported possible SEC investigation into COIN, we believe this would not be a surprise to the market given the insider trading case filed last week. However, we believe investors will likely be concerned over the potential for elevated regulatory /compliance costs, potential fines and/or legal settlements, and COIN’s ability to continue to offer services to retail investors without the licenses the SEC deems are necessary.’
