Coinbase's earnings report comes with dose of crypto anarchism

There's a showdown brewing between the U.S.'s largest crypto exchange and its main regulator, the Securities and Exchange Commission (SEC).

Driving the news: Coinbase Global's earnings report Tuesday night delivered what was largely expected—revenue eroded by crypto winter and net profit losses. The surprise was buried in the exchange's annual filing, and it signals that it's digging in for a fight.

• "We may determine not to remove a particular crypto asset from Coinbase Spot Market even if the SEC or another regulator alleges that the crypto asset is a security," reads a newly added line to the risk disclosures section.

State of play: There is a regulatory crackdown underway in the U.S. And Wells notices and lawsuits against major crypto firms have hung a big question mark over Coinbase's similar offerings, namely staking and stablecoins.

• The exchange has already said it's received investigative subpoenas and requests from the SEC regarding its processes for "listing assets, the classification of certain listed assets, its staking programs, and its stablecoin and yield-generating products."

Zoom in: Coinbase Tuesday said it won't delist anything "pending a final judicial determination as to that crypto asset’s proper characterization."

• Between the lines: They're prepared to go to court.

What they're saying: "I'm spending more time in D.C.," Coinbase CEO Brian Armstrong said during a conference call Tuesday, during which he was peppered with questions about trying new jurisdictions, like China, or taking the business offshore.

The big picture: The regulatory uncertainty is somewhat existential for Coinbase, which has been leaning into its staking business and more recently, its budding partnership with stablecoin issuer Circle as customers trade less on the platform.

• The staking business was supposed to help make up for sapped transaction revenue, which declined to $2.4 billion last year from $6.8 billion at the end of 2021.
• Interest income from Circle's USDC chipped in $327 million last year, compared to $25.8 million the year before.

Catch up fast: When the SEC issued a Wells notice to Coinbase in 2021 over the intended launch of a lending product, the crypto exchange shut it down.

• Earlier this year, the company settled with the New York Department of Financial Services over compliance shortcomings.
• Of note: Coinbase currently lists six of the nine crypto tokens that the SEC alleged were securities last year—AMP, RLY, DDX, XYO, LCX, POWR.

The bottom line: "Our goal is to list *every* asset where it is legal to do so," Armstrong said in a Twitter thread in June 2021.

Our thought bubble: That's an impossible goal if every asset is deemed a security.

Editors note: This article was corrected to reflect that Coinbase currently lists six of the nine crypto tokens that the SEC alleged were securities last year, not seven.