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Coinbase’s 2023: A Year Of Growth, $1B in Earnings

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Coinbase Global, Inc. today announced the publication of its shareholder letter for the fourth quarter and full year. The letter underlines that 2023 was a very important year for the company since they showed strong financial results that were registered, launched many product innovations, and generally devoted to regulatory clarity within the cryptocurrency space, mostly in the United States.

Throughout the year, the company demonstrated the aforementioned operational excellence, which resulted in a net income of $95 million for the full year and positive Adjusted EBITDA in all four quarters totaling almost $1 billion. The company’s diversification of revenue streams in subscription and services revenue of $1.4 billion attributed to a total revenue base of $3.1 billion by the close of 2023. Also, taking into account the balance sheet of Coinbase, it held total USD resources at $5.7 billion and managed to decrease total debt by 12% in a year, which overall shows healthy financials.

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On the innovation side of products, the company speeded its product velocity and launched new offerings, including Coinbase International Exchange, derivative products through Coinbase Financial Markets, Base, a layer-2 network that is designed to improve the transaction speed and reduce the cost. Additionally, the company expanded its operations globally, obtaining licenses or registrations in six new markets.

Coinbase Strategic Priorities for 2024

Looking to 2024, Coinbase has put forward three key areas in which it will focus. First, driving up revenue is through improved core trading capabilities and increased utility of USDC. Lastly, it will work on the possibility of crypto usage in payments using USDC and Base. Lastly, the company will always keep on fighting for regulatory clarity within the industry.

Challenges in the United States, however, remain despite advances worldwide in regulatory clarity. Coinbase has supported legislative efforts and initiatives to enhance crypto-friendly policies alongside other industry participants.

For example, it contributed to Fairshake Super PAC and also helped found Stand With Crypto—a grassroots movement pushing for pro-crypto policies. Another source of regulatory clarity comes from the ongoing legal battle with the U.S. Securities and Exchange Commission (SEC). Though uncertain, yet the company is determined to get a positive ruling.

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Coinbase: Optimistic Outlook For Bitcoin & other Tokens In Q2 2024

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Coinbase analysts have observed a significant reduction in downward pressure on Bitcoin as the FTX bankruptcy estate sold off its large GBTC holdings. The anticipated Fed’s monetary easing cycle starting on May 1 and the conclusion of the balance sheet reduction program initiated in June are expected to provide support for Bitcoin and other tokens in the second quarter of 2024.

Coinbase’s Predictions and Analysis

The recent Coinbase Weekly Market report indicates that downside pressures on Bitcoin and the wider cryptocurrency market are diminishing, potentially paving the way for a more supportive trading environment. Technical factors influencing crypto performance negatively are reaching exhaustion, suggesting a shift in the trading landscape in the coming weeks.

Several key takeaways from the report highlight the potential for a more favorable environment for cryptocurrencies. The expectation of rate cuts in the US starting in May, coupled with the tapering of quantitative tightening, aligns with events like the Bitcoin halving, creating a positive setup for the asset class.

The report also emphasizes the stronger macro backdrop, pointing out that technical factors pressuring Bitcoin and crypto more broadly are showing signs of exhaustion. Net inflows into US spot Bitcoin ETFs have been robust, with a daily average of over $200 million and a total of $1.46 billion since January 11. This, coupled with a widening US budget deficit and a cooling labor market, suggests a slowdown in the economy.

Furthermore, the report touches upon the Federal Reserve’s interpretation of the current economic scenario, indicating a likely easing cycle starting on May 1, coinciding with potential rate cuts and the end of the balance sheet reduction plans. The report predicts a 100bps rate cut by the Fed this year.

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In the realm of cryptocurrencies, Solana’s airdrop season continues with Jupiter, Solana’s leading decentralized exchange aggregator, launching its first of four airdrops on January 31. The trend of major Solana ecosystem protocols launching tokens is expected to persist, contributing to the ecosystem’s attractiveness to developers.

The article concludes with insights from Coinbase Exchange and CES, noting that traders are becoming more constructive on the market. BTC has found support at its 100D MA, and ETF flows have been positive, with over $600 million entering the products in the past week. Despite positive sentiment, ETH seems to lack interest compared to other assets, falling from the second to the third most traded asset on the exchange.

Related Reading | Coinbase CEO Leads Crypto’s Political Push With $85 Million PAC

Coinbase CEO Leads Crypto’s Political Push With $85 Million PAC

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As the US election season kicks off, the crypto industry is gearing up for a political fight with a new weapon: a super PAC funded by Coinbase and its CEO Brian Armstrong. The Fairshake PAC, which aims to support pro-crypto candidates from both parties, has raised $85 million so far, with about one-third coming from Armstrong and his company.

Coinbase, the largest US crypto exchange, is facing a legal challenge from the Securities and Exchange Commission (SEC), which accused it of operating an unregistered securities exchange, broker-dealer, and clearinghouse for certain tokens last year. Coinbase has denied the charges and argued that the SEC is overreaching its authority.

The SEC’s crackdown on crypto intensified when it sued several prominent players in the industry, including FTX, Voyager, and Genesis. Some of them have settled with the regulator, while others are still fighting in court. Coinbase, however, has refused to back down and has vowed to defend its business and the crypto community.

FTX, Voyager, Genesis went down — many of Coinbase’s peers actually went down, […] Coinbase is still standing and fighting for the industry. He needs to get this done, said Owen Lau, analyst at Oppenheimer & Co.

Armstrong has emerged as one of the most influential and affluent leaders in the crypto space. His net worth soared to an estimated $5.8 billion last year, thanks to the rebound in Coinbase’s stock price, which increased by about 300% from the beginning of 2023, according to the Bloomberg Billionaires Index. He also sold $78 million worth of shares in the company last year, according to data from InsiderInsights.com.

Armstrong has used some of his wealth to support the crypto cause, donating $1 million to the Fairshake PAC and convincing Coinbase to contribute another $24.5 million. He has also hired former UK Chancellor George Osborne as an advisor and launched a crypto advocacy group called Crypto Council for Innovation.

Coinbase-backed Fairshake’s Political Impact

Fairshake describes itself as “the first super-PAC dedicated to advancing the crypto economy and protecting the rights of crypto users.” The PAC’s strategy is to leverage the “crypto’s superpower of grassroots support” and spend big to elect crypto-friendly lawmakers and defeat crypto-hostile ones. It also plans to educate voters and policymakers about the benefits of crypto and the risks of overregulation.

So far, the PAC has spent more than $10 million on various candidates and causes, according to data from OpenSecrets. Its biggest beneficiary has been Representative Patrick McHenry, a North Carolina Republican and a vocal supporter of crypto, who received $4.5 million from the PAC. McHenry has announced that he will not run for re-election in 2024.

Other recipients of Fairshake’s funds include Representatives Dusty Johnson, a South Dakota Republican; Josh Gottheimer, a New Jersey Democrat; and Tom Emmer, a Minnesota Republican, who are all members of the Congressional Blockchain Caucus. The PAC has also donated to several state and local candidates and initiatives that are aligned with its mission.

Moreover, the political landscape is fluid and unpredictable, and the crypto community is not monolithic or unified on every issue. Therefore, the outcome of the 2024 election and the role of the Fairshake PAC remain to be seen. But one thing is clear: Coinbase and its CEO are not afraid to take a stand and make a difference for crypto.

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Coinbase Enforces Fees on USDC to USD Conversions Exceeding $75 Million Mark

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Coinbase, a prominent cryptocurrency exchange, recently announced a new fee structure for institutional clients engaging in USDC to USD net conversions exceeding $75 million. Effective immediately, a fee of 0.1% will be levied on such transactions. However, there are exemptions in place: clients holding assets exceeding $500 million with this exchange or maintaining an average balance of $100 million in USD or USDC over a calendar month will not be subject to this fee.

Coinbase Implements Fees for Converting USDC to USD

This fee policy, outlined by Coinbase on Monday, applies to institutional clients conducting USDC to USD net conversions surpassing $75 million within a rolling 30-day period. Transactions falling within the range of $75 million to $150 million will incur a 0.1% fee, while those between $150 million and $500 million will face a slightly higher fee of 0.15%. For conversions exceeding $500 million, the fee escalates to 0.2%.

It’s worth noting that USDC, the stablecoin in question, is issued by Circle, though it was surpassed by Tether’s USDT token in market capitalization last year. To provide further clarity, Coinbase Prime clients with assets exceeding $500 million on the platform or maintaining an average balance of $100 million in USD/USDC over a calendar month will be exempt from these USDC Conversion Fees.

Moreover, members enrolled in the Coinbase Exchange Liquidity Program, specifically those who qualify for Tier 1 or Tier 2, will also be spared from USDC conversion fees upon meeting their monthly eligibility criteria. A spokesperson from Coinbase emphasized the company’s commitment to innovation and responsiveness to user feedback in shaping their product offerings. The aim, the spokesperson stated, is to consistently deliver a premium user experience while aligning with the company’s broader business objectives.

In summary, Coinbase’s decision to implement fees on USDC to USD conversions over $75 million reflects its efforts to balance revenue generation with client satisfaction and market dynamics. Through exemptions and considerations for various client segments, Coinbase seeks to maintain its position as a leading cryptocurrency exchange while accommodating the needs of its institutional clientele.

Crypto Exchanges Binance And Coinbase Challenge SEC’s Authority

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The Securities and Exchange Commission (SEC) is facing two lawsuits from cryptocurrency exchanges, Binance and Coinbase, who are challenging the agency’s authority to regulate the crypto industry, according to Bloomberg. The exchanges claim that the SEC is overreaching its jurisdiction and applying outdated laws to new and innovative technology.

The SEC has accused Binance and Coinbase of violating securities laws and engaging in various misconducts, such as facilitating trading of unregistered securities, manipulating prices, and failing to protect customers. The agency has filed lawsuits against both exchanges in federal courts in New York and Washington, D.C.

Binance and Coinbase have moved to dismiss the SEC’s suits, arguing that the agency has no legal basis to regulate crypto assets as securities. They have also raised constitutional issues, invoking the major questions doctrine, which limits the scope of administrative agencies to regulate matters of great economic and political significance without clear congressional authorization.

The exchanges have presented various arguments to support their positions, such as comparing crypto assets to collectibles like Beanie Babies and challenging the SEC’s interpretation of the term “investment contract”, which is used to define securities under the 1933 and 1934 Acts.

The judges presiding over the cases, Amy Berman Jackson and Katherine Polk Failla, have not been convinced by the exchanges’ use of the major questions doctrine. They have expressed doubts about the applicability and relevance of the doctrine, which originated from a 2022 Supreme Court case to the crypto cases.

If the judges can dismiss some of the SEC claims without reaching the MQD, as I think they will do, I think that would be their preference since they generally prefer to avoid constitutional issues if they can, Stein said.

Supreme Court’s Crypto Dilemma

The crypto cases come at a time when the Supreme Court is reviewing the extent of administrative power in the U.S. government. The court is considering whether to overturn Chevron deference, a 40-year-old precedent that grants agencies like the SEC the authority to interpret ambiguous statutes as long as their interpretation is reasonable.

Some experts believe that Chevron’s deference may be in jeopardy, as the court has shown signs of skepticism towards the doctrine. In a recent oral argument, attorney Paul Clement cited the SEC’s crypto cases as an example of how agencies can abuse their power and regulate new and complex issues without proper guidance from Congress.

The outcome of the Supreme Court’s decision could have significant implications for the crypto industry, as well as other sectors that are subject to administrative regulation. It could also affect the fate of the SEC’s suits against Binance and Coinbase, potentially setting a precedent for future crypto cases.

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Coinbase’s Crypto Roadmap Expands: AERO and VELO Join the Fold

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Coinbase, a leading cryptocurrency exchange, has unveiled its latest additions to the coin listing roadmap. In an official blog post, the company announced the inclusion of Aerodrome Finance (AERO) and Velodrome Finance (VELO). The former operates on the Base blockchain as an ERC-20 token, while the latter functions on the Optimism blockchain.

The announcement emphasized Coinbase’s commitment to transparency in its listing process. The blog post outlined the criteria for listing assets, citing legal, compliance, and technical security standards. Notably, the post clarified that transfers and trading for these assets would only commence after an official listing announcement, cautioning users against depositing them prematurely to avoid potential loss.

Coinbase’s decision-making process involves evaluating assets based on their adherence to minimum listing standards, availability of information, technical integration requirements, and compliance with the review process outlined by the exchange.

Additionally, the exchange introduced an Experimental label for newly listed assets, indicating a testing phase for selected tokens. This aligns with Coinbase’s overarching goal, as expressed during the launch of Asset Hub, to list assets meeting the platform’s stringent standards without consideration for market cap or project popularity.

Coinbase’s Global Expansion

In a broader context, the exchange reflected on the transformative year 2023 and outlined its ambitious plans for 2024. The company highlighted its global progress in various markets, both existing and new, across product development, regulatory compliance, and institutional functions.

The expansion strategy, coined as ‘Go Broad, Go Deep,’ saw Coinbase securing licenses in Spain, France, Singapore, and Bermuda. The exchange expanded its operations to Canada and Brazil, providing local fiat on and off ramps. Notable achievements included the extension of Coinbase One to 38 countries, the availability of staking in 110+ countries, and the introduction of USDC in the same number of countries.

Furthermore, the exchange introduced on and off-ramps for Coinbase Wallet in 130+ countries and launched an International Exchange, attracting over 100 institutions and surpassing $30 billion in trading volumes in 2023. The exchange emphasized its commitment to economic freedom, aiming to address financial inefficiencies globally, particularly in regions with limited access to traditional banking.

Related Reading | Ethereum Faces Impending Drop To $2,000 As Critical Support Falters

BlackRock Bitcoin ETF Boosts Holdings To $1.59B With Coinbase Transfer

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In a recent development, BlackRock’s iShares Bitcoin Trust successfully acquired a significant amount of Bitcoin from Coinbase Prime. According to information shared on Lookonchain’s Twitter account, the trust received a noteworthy transfer of 6,495 BTC valued at approximately $254.7 million from Coinbase Prime just seven hours ago.

This acquisition has notably increased the total Bitcoin holdings of the trust to 39,925 BTC, equivalent to an estimated value of $1.59 billion. Meanwhile, the cryptocurrency market is witnessing a period of volatility, with BTC being particularly affected.

In the midst of these market fluctuations, Grayscale, a key player in the industry, reported substantial outflows of funds. According to James Butterfill, Grayscale experienced outflows totaling around $505 million yesterday, although this was partially offset by inflows into newer ETFs amounting to approximately $396 million.

Bitcoin’s Volatility Amid Grayscale Outflows And ETF Efforts

The persistent outflows from Grayscale continue to serve as a significant bearish factor for the cryptocurrency sector, and despite efforts by ETFs like BlackRock’s iShares Bitcoin Trust to attract funds, they are currently grappling to surpass these outflows.

Industry experts, including Fidelity Executive Director Jurrien Timmer, anticipate ongoing volatility in the BTC price amid these market dynamics. Timmer’s analysis, characterized by cautious optimism, suggests that the recent approval of BTC ETFs by the SEC represents a notable milestone in the cryptocurrency’s maturation. 

However, he also highlights that this approval introduces increased volatility. Consequently, the future trajectory of Bitcoin’s value is closely intertwined with the performance of these ETFs.

Coinbase Challenges U.S. Treasury’s Crypto Mixing Rule: Calls For Balanced Approach

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Coinbase, a prominent player in the cryptocurrency space, has criticized the U.S. Treasury’s proposed rulemaking on cryptocurrency mixing, stating that it falls short of addressing regulatory gaps while imposing unnecessary data and resource demands on crypto platforms. Paul Grewal, Coinbase’s chief legal officer, took to the X platform to express the company’s concerns, emphasizing that while the exchange supports effective regulations, the proposed rule mandates bulk data collection and reporting for all transactions involving crypto mixing, even those with no indication of suspicious activity.

Grewal argued that there is no apparent regulatory gap to be filled, as exchanges like Coinbase are already obligated to investigate and report suspicious mixing activities. He questioned the logic behind requiring reporting of non-suspicious activity and highlighted the absence of a minimum threshold in the proposed rule. According to the exchange, the rule’s lack of a monetary threshold would lead to the bulk reporting of insignificant transactions, a practice Congress has explicitly discouraged.

Coinbase’s Concerns

The comment filed by Coinbase with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) emphasized that if new rules are necessary, they should include a monetary threshold, focus on recordkeeping rather than reporting, and provide an extended implementation period. Additionally, Coinbase recommended that FinCEN assist virtual asset service providers (VASPs) in fulfilling their existing obligations to report suspicious activity related to crypto mixing.

Furthermore, Coinbase criticized the proposed rule for not considering less restrictive regulatory alternatives and violating the Administrative Procedures Act. The company argued that the NPRM’s broad definitions and suspicionless reporting mandates may overwhelm businesses and lead to de-risking practices, contradicting FinCEN’s technology-neutral approach and privacy directives.

Coinbase urged FinCEN to focus on targeted alerts and guidance, leverage existing suspicious activity reporting procedures, and address privacy and security risks associated with extensive customer data reporting. The company called for a clear roadmap for industry feedback before implementing any part of the proposed rule, emphasizing the importance of industry input and compliance steps to be laid out by FinCEN.

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Coinbase Exec Slams Flawed Crypto Report On Evading Sanctions

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The US Government Accountability Office (GAO) recently released a report on the risks of digital assets for evading US sanctions. However, the report has been criticized by Coinbase’s chief legal officer, Paul Grewal, who accused the GAO of doing no analysis and unfairly targeting the crypto industry.

The GAO report, followed by a federal response on Jan. 17, 2024, stated that some foreign actors facing US sanctions have used cryptocurrencies like Bitcoin to circumvent the restrictions. The report cited the example of a Chinese national who allegedly used Bitcoin to purchase software from a US company in violation of US export controls.

The report also claimed that digital assets pose challenges for implementing and enforcing US sanctions due to their ability to facilitate cross-border transfers of value. However, the report acknowledged that some factors partially mitigate these risks, such as the decentralized nature and public ledger of cryptocurrencies, which could be used to trace transactions and potentially identify illicit actors.

Coinbase Exec Defends Crypto Industry

In response to the GAO report, Coinbase’s chief legal officer, Paul Grewal, posted a scathing critique on Jan. 22, 2024. Grewal said that the GAO did zero comparative analysis and only harangued an industry that spends millions and millions to follow the law. He pointed out that the report itself admitted that digital assets are a relatively poor way to circumvent sanctions and that the use of digital assets as a means of payment is limited.

Grewal also criticized Senator Elizabeth Warren, who used the report to push for more crypto industry regulation. Warren, known for her anti-crypto stance, is sponsoring a bill requiring crypto companies to comply with the same anti-money laundering (AML) regulations as other financial institutions. Grewal argued that the crypto industry already follows AML rules and cooperates with law enforcement agencies.

The GAO report and the Warren bill are the latest examples of the regulatory uncertainty the crypto industry faces in the US. While some policymakers have called for clear and consistent rules for digital currencies, others have expressed concerns about the potential risks of digital assets for national security, consumer protection, and financial stability.

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XRP Advocate Slams SEC Over Bitcoin Analogy In Coinbase Lawsuit

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In a pivotal move, renowned attorney and XRP advocate John Deaton has launched a scathing critique against the United States Securities and Exchange Commission’s (SEC’s) legal representatives. XRP advocate Deaton expressed his disapproval following a recent statement by SEC lawyers during the ongoing lawsuit involving Coinbase Global Inc.

While Bitcoin (BTC) is not the primary focus of the litigation, the SEC lawyers drew attention to the coin’s security status in a statement that has stirred controversy. In a notable revelation, the SEC attorneys asserted that Bitcoin (BTC) should not be classified as a security due to the absence of an ecosystem surrounding it.

XRP Advocates Challenge SEC’s Security Criteria

Critiquing this standpoint, esteemed crypto lawyer MetaLawMan highlighted a fundamental flaw in the SEC’s analogy. The SEC contends that a centralized body, a development team, or a DAO (Decentralized Autonomous Organization) is crucial for determining a coin’s security status, as it establishes a common interest responsible for safeguarding investor funds.

However Deaton and MetaLawMan refuted the SEC’s argument, emphasizing the inherent decentralization of cryptosystems and the on-chain operations of specific coins. While acknowledging that many blockchain-based projects have dedicated development teams, these teams typically operate based on the broader interests of the community rather than exerting control over it.

MetaLawMan pointed to Bitcoin’s substantial community support, exemplified by its record-breaking hashrate reaching an All-Time High (ATH) of 500 exahashes. Achieving this milestone underscores the decentralized and autonomous nature of the Bitcoin network, where computers worldwide contribute independently to maintain the network’s integrity.

Despite previous legal battles and discussions on the security status of digital currencies, the SEC persisted in its contentious stance regarding Bitcoin (BTC). The regulatory body faced a significant setback when Judge Analisa Torres ruled in July of the previous year that XRP, the digital asset at the center of a separate lawsuit against Ripple Labs Inc., is not inherently a security.

Rather than adapting its approach based on this precedent, the SEC continued its legal pursuit, targeting prominent cryptocurrency exchanges like Coinbase and Binance. In a controversial move, the regulator classified additional assets, including Cardano (ADA), Solana (SOL), and Polygon (MATIC), as securities.

As the legal battle unfolds with Coinbase, industry analysts are speculating a 70% probability of success for the cryptocurrency exchange. The outcome of this case is anticipated to have broader implications for the crypto industry and the regulatory landscape.