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Crypto Staking, Regulatory Hurdles to Hurt Coinbase Earnings?

  • If regulation issues remain, Coinbase's earnings may suffer after Kraken said its cryptocurrency staking operation would terminate.

  • Binance, the other significant cryptocurrency exchange, is likewise worried as it seeks a banking partner to support its US Dollar operations.

19 Feb 2023 By: Rohit Khandelwal
Crypto Staking, Regu

Given the recent revelation that Kraken would be ending its cryptocurrency staking business, Coinbase's earnings may suffer if regulation problems persist.

The recent measures taken by the US Securities and Exchange Commission (SEC) against numerous participants in the cryptocurrency business may have a long-term effect on huge companies like Coinbase. If the regulatory action spreads to other participants, the SEC's restrictions on Kraken's staking programme may certainly have an impact on its revenue streams. Or did the SEC seek to warn the cryptocurrency companies? Gary Gensler, the agency's chair, recently stated that the only way the crypto businesses would survive is if they strictly adhere to the pertinent regulations.

The other big cryptocurrency exchange, Binance, is also concerned as it tries to secure a banking partner to back its US Dollar operations. Because of this, Binance has temporarily suspended withdrawals and transactions in US dollars.

Coinbase Profits - Crypto Staking

On Tuesday, February 21, 2023, Coinbase is expected to release financial results for the quarter ending in December 2022. The FTX collapse, which caused the market to plummet and left all exchanges, including Coinbase, with a significant decline in transaction volume, ruined the quarter. Even though user trading accounts for a substantial portion of Coinbase's revenue, the current crypto winter reduced that amount. As a result, exchanges frequently concentrate on maximising the revenue from other sources, such as cryptocurrency staking. If regulatory worries intensify, this could result in Coinbase losing part of these revenues.

Based on user rewards from staking, Coinbase charges a commission. For instance, the commission on Cardano (ADA) and Solana (SOL) is 35%, compared to 25% on Ethereum (ETH). Coinbase earned $175 million from its staking, custody, and interest income services in the most recent quarter. The SEC's new proposed requirements will be stiffer for companies that secure assets for fund managers in addition to the problems with staking.