Coinbase Initiated at Hold, Likely To Face Enforcement Action From SEC: Berenberg

Executing a successful pivot away from the U.S. would be a tall order for the crypto exchange, Berenberg said.

AccessTimeIconMay 16, 2023 at 7:05 a.m. UTC

The Securities and Exchange Commission (SEC) will soon bring enforcement action against Coinbase (COIN) and this action is likely to mirror those that the regulator brought against rival crypto exchanges Bittrex and Kraken, Berenberg said in a research report on Monday.

The bank initiated coverage of the stock with a hold rating and a price target of $55. On Monday, Coinbase shares closed 6% higher at $60.77.

Berenberg estimates that at least 37% of the $736 million of Coinbase’s first quarter net revenue came from the transaction fees and spreads it posted by trading crypto tokens other than bitcoin (BTC) as well as from fees from its staking services.“

At a minimum, these revenue sources likely would be targeted by the SEC in the enforcement action that we expect the commission to file soon,” analyst Mark Palmer wrote, adding that some of Coinbase’s other revenue streams, such as interest income from USD Coin (USDC) and custody, may also “get caught up in the SEC’s crypto-industry dragnet in the near future.”

Successfully pivoting away from the U.S. would be a tall order for the crypto exchange, as about 86% of net revenue that Coinbase generated in the the 12 months ended March 31 came from its U.S. operations, the note said.

Shorting Coinbase shares is too risky a trade, Berenberg said, especially as around 23% of its free float is already sold short. Shorting is a way of betting that a price will decline. An investor borrows a security and sells it in the hope that the price will drop. They then repurchase the security and return it to the lender. The borrower can then pocket the difference if they are right or fork out the difference if wrong.

Wall Street giant Citi cut its rating on Coinbase to neutral from buy earlier this month and slashed its price target for the crypto exchange to $65 from $80, also citing regulatory uncertainty.

Edited by Parikshit Mishra.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Author placeholder image

Will Canny is CoinDesk's finance reporter.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.

Read more about