Coinbase has been pushing for regulatory clarity for the crypto industry in the United States. The crypto exchange has been in court on allegations of securities laws violations, but insists that regulatory clarity is missing, and so there’s no basis for such allegations.
To prove this, Coinbase has headed to court with a filing that demands the securities and exchange commission (SEC) to create a clear regulatory framework for the industry. In addition, the company has been lobbying congress to pass legislation for regulation of the crypto industry in the country.
However, Berenberg Capital Markets’ Mark Palmer said the recent report on terrorist organization Hamas using cryptocurrencies to finance its activities could be a setback for Coinbase’s cause concerning crypto.
“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.,” Berenberg analyst Mark Palmer said in a research note.
Hamas has reportedly been raising funds through cryptocurrencies weeks before the organization launched an attack on Israel. Last week, Israel froze the account Hamas was using to raise funds, and top crypto exchange Binance also helped to seize Hamas funds coming through its platform.
“While Hamas announced last April that it would no longer use crypto for fundraising due to the ability of authorities to track its movement on blockchain ledgers, we believe the recent headlines are likely to make clarity around the question of crypto’s legal status even more elusive,” Palmer said.
Coinbase’s Legal Struggle
As a result of the crackdown on crypto in the U.S, Coinbase was one of the first crypto exchanges to come under scrutiny, alongside Binance. The SEC filed a lawsuit against the exchange in June and the case has been ongoing since.
The SEC has accused the exchange of violating securities laws by allowing the trading of crypto assets it considers to be securities. The exchange is also accused of failing to register as a securities exchange.
It was as a result of the case that Coinbase filed its own case demanding regulatory clarity from the SEC. SEC has however argued that there’s sufficient regulatory guidance for crypto companies to follow, and there’s no need for any special regulation for the industry.
To further push its cause, Coinbase has been lobbying lawmakers recently with some success. The lawmakers are now working on drafting legislation for the industry with a clear definition of what a security is and what it’s not.
It is probably also because of Coinbase’s efforts that the lawmakers are supporting the approval for a Bitcoin ETF.
Coinbase Shares Exceed Expectations
Coinbase’s attempt to defend itself against the SEC allegations could have positive effects on its price. The company’s share price increased by 4.3% on Tuesday, and according to Palmer, it could do better in the future.
“The company’s defense against the lawsuit that the SEC filed against it appears likely to be an overhang on its share price for some time to come,” Palmer said.
Consequently, the firm raised its estimate of Coinbase’s consumer transaction revenue to $240.8 million from $210 million to reflect “our expectation that its consumer take rate will contract at a slower pace than we had been anticipating.”
