Aug 3, 2023 - Economy

Coinbase boasts boosted cash balance amid regulatory uncertainty

A speaker in a business suit with a projection of himself above him, from a different angle.

Brian Armstrong, chief executive officer of Coinbase Global Inc., in April. Photo: Carlos Jasso/Getty

The U.S.'s largest crypto exchange on Thursday reported earnings, prompting some initial shareholder groans — the numbers were fine, the regulatory uncertainty was less so.

What's happening: Coinbase Global's second quarter ended in June showed what was largely expected out of a crypto exchange doing battle with regulators over how it's running its business — revenue declined as result of sapped trading volumes

Quick take: Expectations weren't very high.

The big picture: Coinbase's earnings almost seems moot given the regulatory overhang of the SEC suing the crypto exchange in June, alleging it was in violation of federal securities laws.

  • Plus, states are homing in on Coinbase's staking service, which was also a part of the SEC's suit.

What they're saying: "...[W]e were deeply disappointed that the SEC brought an unwarranted enforcement against us in June, and that 10 states initiated proceedings about our staking services," the company wrote in its shareholder letter today.

Details: Total revenue for the second quarter was $708 million, down 8% from the prior quarter.

  • Total transaction revenue accounted for $327 million, driven by a 37% quarter-over-quarter decline in trading volume.
  • Recurring operating expenses were $664 million, flat quarter-over-quarter.

The other side: Coinbase isn't the only one taking knocks.

  • Robinhood's crypto unit also showed a decline in trading revenue over the same time period; the stock-trading platform in June delisted a slate of tokens implicated as securities in SEC lawsuits against other crypto firms.
  • And despite Tron's Justin Sun's attempts to revive Huobi, the international exchange reported another quarterly loss.

Of note: Short-sellers, folks who are positioned to profit from Coinbase's stock decline, have crowded in.

  • Short-interest in COIN stood at $3.09 billion as of Thursday afternoon — the second-largest shorted name in the financial sector behind only Visa, according to S3 Partners' Ihor Dusaniwsky.

By the numbers: Shares of Coinbase swung from a 3% drop to moderate gains in after-hours trading Thursday.

Go deeper